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What changed in ConnectOne Bancorp, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of ConnectOne Bancorp, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+262 added−236 removedSource: 10-K (2025-02-21) vs 10-K (2024-02-23)

Top changes in ConnectOne Bancorp, Inc.'s 2024 10-K

262 paragraphs added · 236 removed · 187 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

37 edited+8 added−10 removed127 unchanged
Biggest changeDemographics : As of December 31, 2023, we had 487 full-time employees and 12 part-time and temporary employees. The employees are not represented by a collective bargaining unit.
Biggest changeDemographics : As of December 31, 2024, we had 489 full-time employees and 4 part-time and temporary employees. The employees are not represented by a collective bargaining unit. Education : We encourage and support the growth and development of our employees and, wherever possible, seek to fill positions by promotion and transfer from within the organization.
In addition, the Bank generates additional noninterest revenue associated with residential, commercial and Small Business Administration (“SBA”) loan originations and sales, loan servicing, late fees and merchant services.
In addition, the Bank generates additional noninterest revenue associated with residential, commercial and Small Business Administration (“SBA”) loan originations, sales, loan servicing, late fees and merchant services.
The following discussion is not intended to be a complete list of all the activities regulated by the banking laws or of the impact of such laws and regulations on the Company or the Bank. It is intended only to briefly summarize some material provisions.
The following discussion is not intended to be a complete list of all the activities regulated by banking laws or of the impact of such laws and regulations on the Company or the Bank. It is intended only to briefly summarize some material provisions.
In addition, the Bank’s Board of Directors must approve all extensions of credit to insiders. Dividend Restrictions The Parent Corporation is a legal entity separate and distinct from the Bank. Virtually all the revenue of the Parent Corporation available for payment of dividends on its capital stock will result from amounts paid to the Parent Corporation by the Bank.
In addition, the Bank’s Board of Directors must approve all extensions of credit to insiders. Dividend Restrictions The Parent Corporation is a legal entity separate and distinct from the Bank. Virtually all the revenue of the Parent Corporation available for payment of dividends on its capital stock will result from the amounts paid to the Parent Corporation by the Bank.
While the New Rules generally require the phase-out of non-qualifying capital instruments such as trust preferred securities and cumulative perpetual preferred stock, holding companies with less than $15 billion in total consolidated assets as of December 31, 2009, such as the Company, may permanently include non-qualifying instruments that were issued and included in Tier 1 or Tier 2 capital prior to May 19, 2010 in Additional Tier 1 or Tier 2 capital until they redeem such instruments or until the instruments mature. -15- Table of Contents The New Rules prescribe a standardized approach for calculating risk-weighted assets.
While the New Rules generally require the phase-out of non-qualifying capital instruments such as trust preferred securities and cumulative perpetual preferred stock, holding companies with less than $15 billion in total consolidated assets as of December 31, 2009, such as the Company, may permanently include non-qualifying instruments that were issued and included in Tier 1 or Tier 2 capital prior to May 19, 2010 in Additional Tier 1 or Tier 2 capital until they redeem such instruments or until the instruments mature. -16- Table of Contents The New Rules prescribe a standardized approach for calculating risk-weighted assets.
Under federal law, a bank subsidiary may only make loans or extensions of credit to, or invest in the securities of, its parent or the non-bank subsidiaries of its parent (other than direct subsidiaries of such bank which are not financial subsidiaries) or to any affiliate, or take their securities as collateral for loans to any borrower, upon satisfaction of various regulatory criteria, including specific collateral loan to value requirements. -11- Table of Contents The Dodd-Frank Act The Dodd-Frank Act, adopted in 2010, will continue to have a broad impact on the financial services industry as a result of the significant regulatory and compliance changes made by the Dodd-Frank Act, including, among other things, (i) enhanced resolution authority over troubled and failing banks and their holding companies; (ii) increased capital and liquidity requirements; (iii) increased regulatory examination fees; (iv) changes to assessments to be paid to the FDIC for federal deposit insurance; and (v) numerous other provisions designed to improve supervision and oversight of, and strengthening safety and soundness for, the financial services sector.
Under federal law, a bank subsidiary may only make loans or extensions of credit to, or invest in the securities of, its parent or the non-bank subsidiaries of its parent (other than direct subsidiaries of such bank which are not financial subsidiaries) or to any affiliate, or take their securities as collateral for loans to any borrower, upon satisfaction of various regulatory criteria, including specific collateral loan to value requirements. -12- Table of Contents The Dodd-Frank Act The Dodd-Frank Act, adopted in 2010, will continue to have a broad impact on the financial services industry as a result of the significant regulatory and compliance changes made by the Dodd-Frank Act, including, among other things, (i) enhanced resolution authority over troubled and failing banks and their holding companies; (ii) increased capital and liquidity requirements; (iii) increased regulatory examination fees; (iv) changes to assessments to be paid to the FDIC for federal deposit insurance; and (v) numerous other provisions designed to improve supervision and oversight of, and strengthening safety and soundness for, the financial services sector.
Because the estimated loss pursuant to the systemic risk determination will be periodically adjusted, the FDIC could: ● Cease collection early, if it has collected enough to recover actual or estimated losses; ● Extend the special assessment collection period one or more quarters beyond the initial eight-quarter collection period, if actual or estimated losses exceed the amounts collected; and ● Impose a final shortfall special assessment on a one-time basis after the receiverships for Silicon Valley Bank and Signature Bank terminate, if actual losses exceed the amounts collected. -17- Table of Contents The Gramm-Leach-Bliley Financial Services Modernization Act of 1999 The Gramm-Leach-Bliley Financial Services Modernization Act of 1999 (the “Modernization Act”): ● allows bank holding companies meeting management, capital, and Community Reinvestment Act standards to engage in a substantially broader range of non-banking activities than previously was permissible, including insurance underwriting and making merchant banking investments in commercial and financial companies, if the bank holding company elects to become a financial holding company.
Because the estimated loss pursuant to the systemic risk determination will be periodically adjusted, the FDIC could: ● Cease collection early, if it has collected enough to recover actual or estimated losses; ● Extend the special assessment collection period one or more quarters beyond the initial eight-quarter collection period, if actual or estimated losses exceed the amounts collected; and ● Impose a final shortfall special assessment on a one-time basis after the receiverships for Silicon Valley Bank and Signature Bank terminate, if actual losses exceed the amounts collected. -18- Table of Contents The Gramm-Leach-Bliley Financial Services Modernization Act of 1999 The Gramm-Leach-Bliley Financial Services Modernization Act of 1999 (the “Modernization Act”): ● allows bank holding companies meeting management, capital, and Community Reinvestment Act standards to engage in a substantially broader range of non-banking activities than previously was permissible, including insurance underwriting and making merchant banking investments in commercial and financial companies, if the bank holding company elects to become a financial holding company.
Among other things, the EGRRCPA increased the asset threshold for depository institutions and holding companies to perform stress tests required under Dodd Frank from $10 billion to $250 billion, exempted institutions with less than $10 billion in consolidated assets from the Volcker Rule, raised the threshold for the requirement that publicly traded holding companies have a risk committee from $10 billion in consolidated assets to $50 billion in consolidated assets, directed the federal banking agencies to adopt a “community bank leverage ratio”, applicable to institutions and holding companies with less than $10 billion in assets, and to provide that compliance with the new ratio would be deemed compliance with all capital requirements applicable to the institution or holding company (See “-Capital Adequacy Guidelines”), and provided that residential mortgage loans meeting certain criteria and originated by institutions with less than $10 billion in total assets will be deemed to meet the “ability to repay rule” under the Truth in Lending Act.
Among other things, the EGRRCPA increased the asset threshold for depository institutions and holding companies to perform stress tests required under Dodd Frank from $10 billion to $250 billion, exempted institutions with less than $10 billion in consolidated assets from the Volcker Rule, raised the threshold for the requirement that publicly traded holding companies have a risk committee from $10 billion in consolidated assets to $50 billion in consolidated assets, directed the federal banking agencies to adopt a “community bank leverage ratio”, applicable to institutions and holding companies with less than $10 billion in assets, and to provide that compliance with the new ratio would be deemed compliance with all capital requirements applicable to the institution or holding company (See “Capital Adequacy Guidelines”), and provided that residential mortgage loans meeting certain criteria and originated by institutions with less than $10 billion in total assets will be deemed to meet the “ability to repay rule” under the Truth in Lending Act.
In addition, significant provisions of FDICIA required federal banking regulators to impose standards in a number of other important areas to assure bank safety and soundness, including internal controls, information systems and internal audit systems, credit underwriting, asset growth, compensation, loan documentation and interest rate exposure. -14- Table of Contents Capital Adequacy Guidelines In December 2010 and January 2011, the Basel Committee on Banking Supervision (the “Basel Committee”) published the final texts of reforms on capital and liquidity generally referred to as “Basel III.” In July 2013, the FRB, the FDIC and the Comptroller of the Currency adopted final rules (the “New Rules”), which implement certain provisions of Basel III and the Dodd-Frank Act.
In addition, significant provisions of FDICIA required federal banking regulators to impose standards in a number of other important areas to assure bank safety and soundness, including internal controls, information systems and internal audit systems, credit underwriting, asset growth, compensation, loan documentation and interest rate exposure. -15- Table of Contents Capital Adequacy Guidelines In December 2010 and January 2011, the Basel Committee on Banking Supervision (the “Basel Committee”) published the final texts of reforms on capital and liquidity generally referred to as “Basel III.” In July 2013, the FRB, the FDIC and the Comptroller of the Currency adopted final rules (the “New Rules”), which implement certain provisions of Basel III and the Dodd-Frank Act.
A “covered transaction” includes: • a loan or extension of credit to an affiliate; • a purchase of, or an investment in, securities issued by an affiliate; • a purchase of assets from an affiliate, with some exceptions; • the acceptance of securities issued by an affiliate as collateral for a loan or extension of credit to any party; and • the issuance of a guarantee, acceptance or letter of credit on behalf of an affiliate. -13- Table of Contents Further, under Regulation W: • a bank and its subsidiaries may not purchase a low-quality asset from an affiliate; • covered transactions and other specified transactions between a bank or its subsidiaries and an affiliate must be on terms and conditions that are consistent with safe and sound banking practices; and • with some exceptions, each loan or extension of credit by a bank to an affiliate must be secured by certain types of collateral with a market value ranging from 100% to 130% of the loan value, depending on the type of collateral.
A “covered transaction” includes: • a loan or extension of credit to an affiliate; • a purchase of, or an investment in, securities issued by an affiliate; • a purchase of assets from an affiliate, with some exceptions; • the acceptance of securities issued by an affiliate as collateral for a loan or extension of credit to any party; and • the issuance of a guarantee, acceptance or letter of credit on behalf of an affiliate. -14- Table of Contents Further, under Regulation W: • a bank and its subsidiaries may not purchase a low-quality asset from an affiliate; • covered transactions and other specified transactions between a bank or its subsidiaries and an affiliate must be on terms and conditions that are consistent with safe and sound banking practices; and • with some exceptions, each loan or extension of credit by a bank to an affiliate must be secured by certain types of collateral with a market value ranging from 100% to 130% of the loan value, depending on the type of collateral.
Classes include an ABA approved curriculum as well as other third party and Company proprietary courses; ● May take classes to attain job specific certifications to help with career development; ● May take continuing education classes related to other positions and operations at the Company; ● May take business related continuing education classes at partner community colleges and other institutions through a New Jersey State grant program; ● May participate in career mentoring programs in which employees meet with senior officers of the Company to discuss career development; and ● May participate in a tuition reimbursement program under which the Company will reimburse employees for up to $5,250 in tuition expense related to approved business-related course work at any school.
Classes include an ABA approved curriculum as well as other third party and Company proprietary courses; ● May take classes to attain job specific certifications to help with career development; ● May take continuing education classes related to other positions and operations at the Company; ● May take business related continuing education classes at partner community colleges and other institutions through a New Jersey State grant program; ● May participate in career mentoring programs in which employees meet with senior officers of the Company to discuss career development; and ● May participate in a tuition reimbursement program under which the Company will reimburse employees for up to $5,250 in tuition expenses related to approved business-related course work at any school.
These regulations impose obligations on financial institutions to maintain appropriate policies, procedures and controls to detect, prevent and report money laundering and terrorist financing and to verify the identity of their clients. -19- Table of Contents Loans to Related Parties The Company’s authority to extend credit to its directors and executive officers, as well as to entities controlled by such persons, is currently governed by the requirements of the Sarbanes-Oxley Act of 2002 and Regulation O promulgated by the FRB.
These regulations impose obligations on financial institutions to maintain appropriate policies, procedures and controls to detect, prevent and report money laundering and terrorist financing and to verify the identity of their clients. -20- Table of Contents Loans to Related Parties The Company’s authority to extend credit to its directors and executive officers, as well as to entities controlled by such persons, is currently governed by the requirements of the Sarbanes-Oxley Act of 2002 and Regulation O promulgated by the FRB.
The Management Credit Committee is comprised of six members of senior management, the Bank President, Chief Credit Officer, Chief Lending Officer, two Senior Credit Officers and one Managing Director. The officers are comprised of the Chief Executive Officer, Bank President, Chief Credit Officer, Chief Lending Officer, Senior Credit Officers, Managing Directors, Team Leaders and the Consumer Loan Officers.
The Management Credit Committee is comprised of six members of senior management, including the Bank President, Chief Credit Officer, Chief Lending Officer, two Senior Credit Officers and one Managing Director. The officers are comprised of the Chief Executive Officer, Bank President, Chief Credit Officer, Chief Lending Officer, Senior Credit Officers, Managing Directors, Team Leaders and the Consumer Loan Officers.
The Dodd-Frank Act also authorizes the SEC to promulgate rules that would allow shareholders to nominate their own candidates using a company’s proxy materials, which the SEC has adopted. -12- Table of Contents Although a significant number of the rules and regulations mandated by the Dodd-Frank Act have been finalized, many of the requirements called for have yet to be fully implemented and will likely be subject to implementing regulations over the course of several years.
The Dodd-Frank Act also authorizes the SEC to promulgate rules that would allow shareholders to nominate their own candidates using a company’s proxy materials, which the SEC has adopted. -13- Table of Contents Although a significant number of the rules and regulations mandated by the Dodd-Frank Act have been finalized, many of the requirements called for have yet to be fully implemented and will likely be subject to implementing regulations over the course of several years.
The Company is studying the revisions to determine the impact on its operations, which is uncertain at this time. -18- Table of Contents USA PATRIOT Act The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the “USA PATRIOT Act”) gives the federal government powers to address terrorist threats through domestic security measures, surveillance powers, information sharing, and anti-money laundering requirements.
The Company is studying the revisions to determine the impact on its operations, which is uncertain at this time. -19- Table of Contents USA PATRIOT Act The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the “USA PATRIOT Act”) gives the federal government powers to address terrorist threats through domestic security measures, surveillance powers, information sharing, and anti-money laundering requirements.
BoeFly, a wholly owned subsidiary of ConnectOne Bank, is a fintech marketplace that connects borrowers in the franchise space with funding solutions through a network of partner banks, including the Bank. -6- Table of Contents Our Market Area ConnectOne Bank's offices are located primarily in the New York metro market and span New Jersey, New York City, Long Island, and the Hudson Valley, including Rockland, Orange, and Westchester counties.
BoeFly, a wholly owned subsidiary of ConnectOne Bank, is a fintech marketplace that connects borrowers in the franchise space with funding solutions through a network of partner banks, including the Bank. -7- Table of Contents Our Market Area ConnectOne Bank's offices are located primarily in the New York metro market and span New Jersey, New York City, Long Island, and the Hudson Valley, including Rockland, Orange, and Westchester counties.
We continuously assess any skill gaps and are gearing learning for the banking positions of the future. -10- Table of Contents SUPERVISION AND REGULATION The banking industry is highly regulated. Statutory and regulatory controls increase a bank holding company’s cost of doing business and limit the options of its management to deploy assets and maximize income.
We continuously assess any skill gaps and are gearing learning for the banking positions of the future. -11- Table of Contents SUPERVISION AND REGULATION The banking industry is highly regulated. Statutory and regulatory controls increase a bank holding company’s cost of doing business and limit the options of its management to deploy assets and maximize income.
The Bank has established wellness programs that include a Preventative Care Incentive Program, flu shot vaccination time-off, as well as health programs & service discounts. -9- Table of Contents Benefits & Employee Retention : We offer a wide variety of benefits and incentive rewards to attract, engage, retain and motivate talent.
The Bank has established wellness programs that include a Preventative Care Incentive Program, flu shot vaccination time-off, as well as health programs & service discounts. -10- Table of Contents Benefits & Employee Retention : We offer a wide variety of benefits and incentive rewards to attract, engage, retain and motivate talent.
We seek to hire and retain quality employees who desire greater responsibility than may be available working for a larger employer. -8- Table of Contents Human Capital The Company strives to be an employer of choice by creating a working environment that fosters excellence, creativity and professional growth.
We seek to hire and retain quality employees who desire greater responsibility than may be available working for a larger employer. -9- Table of Contents Human Capital The Company strives to be an employer of choice by creating a working environment that fosters excellence, creativity and professional growth.
See Note 9 of the Notes to Consolidated Financial Statements. Except as described above, the Company’s direct and indirect subsidiaries are all included in the Company’s consolidated financial statements. These subsidiaries include BoeFly, an advertising subsidiary, a financial services company, and various investment subsidiaries which hold, maintain and manage investment assets for the Company.
See Note 10 of the Notes to Consolidated Financial Statements. Except as described above, the Company’s direct and indirect subsidiaries are all included in the Company’s consolidated financial statements. These subsidiaries include BoeFly, an advertising subsidiary, a financial services company, and various investment subsidiaries which hold, maintain and manage investment assets for the Company.
Consumer loans are made to individuals who qualify for auto loans, cash reserve, credit cards and installment loans. -7- Table of Contents The Board of Directors has approved a credit policy granting designated lending authorities to the Management Credit Committee and specific officers of the Bank.
Consumer loans are made to individuals who qualify for auto loans, cash reserve, credit cards and installment loans. -8- Table of Contents The Board of Directors has approved a credit policy granting designated lending authorities to the Management Credit Committee and specific officers of the Bank.
The Company will provide, without charge, a copy of its Annual Report on Form 10-K to any shareholder by mail. Requests should be sent to: ConnectOne Bancorp, Inc. Attention: Investor Relations 301 Sylvan Avenue Englewood Cliffs, New Jersey 07632 Narrative Description of the Business ConnectOne Bancorp, Inc. is a modern financial services company with over $9.856 billion in assets.
The Company will provide, without charge, a copy of its Annual Report on Form 10-K to any shareholder by mail. Requests should be sent to: ConnectOne Bancorp, Inc. Attention: Investor Relations 301 Sylvan Avenue Englewood Cliffs, New Jersey 07632 Narrative Description of the Business ConnectOne Bancorp, Inc. is a modern financial services company with $9.880 billion in assets.
Through high tech tools and service, the Bank is able to extend its reach supporting clients as they move into new markets, such as South Florida where we opened an office in West Palm Beach in August 2022. Our market area includes some of the most robust markets in the United States.
Through high tech tools and services, the Bank is able to extend its reach by supporting clients as they move into new markets, such as South Florida where we opened an office in West Palm Beach in August 2022. Our market area includes some of the most robust markets in the United States.
These subordinated debentures and the related income effects are not eliminated in the consolidated financial statements as the statutory business trust is not consolidated in accordance with Financial Accounting Standards Board (“FASB”) ASC 810-10 “Consolidation of Variable Interest Entities.” Distributions on the subordinated debentures owned by the subsidiary trust have been classified as interest expense in the Consolidated Statements of Income.
These subordinated debentures and the related income effects are not eliminated in the consolidated financial statements as the statutory business trust is not consolidated in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810-10 “Consolidation of Variable Interest Entities.” Distributions on the subordinated debentures owned by the subsidiary trust have been classified as interest expense in the Consolidated Statements of Income.
In December 2018, the OCC, the Board of Governors of the Federal Reserve System, and the FDIC approved a final rule to address changes to credit loss accounting under GAAP, including banking organizations’ implementation of ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“CECL”).
In December 2018, the OCC, the Board of Governors of the Federal Reserve System, and the FDIC approved a final rule to address changes to credit loss accounting under GAAP, including banking organizations’ implementation of ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“CECL”).
Factors that might cause such a difference include, but are not limited to: (1) the impact of the COVID-19 pandemic and the government’s response to the pandemic on our operations as well as those of our clients and on the economy generally and in our market area specifically, (2) competitive pressures among depository institutions may increase significantly; (3) changes in the interest rate environment may reduce interest margins; (4) prepayment speeds, loan origination and sale volumes, charge-offs and loan loss provisions may vary substantially from period to period; (5) general economic conditions may be less favorable than expected; (6) political developments, wars or other hostilities may disrupt or increase volatility in securities markets or other economic conditions; (7) legislative or regulatory changes or actions may adversely affect the businesses in which ConnectOne Bancorp, Inc. is engaged; (8) changes and trends in the securities markets may adversely impact ConnectOne Bancorp, Inc.; (9) a delayed or incomplete resolution of regulatory issues could adversely impact our planning; (10) difficulties in integrating any businesses that we may acquire, which may increase our expenses and delay the achievement of any benefits that we may expect from such acquisitions; (11) the impact of reputation risk created by the developments discussed above on such matters as business generation and retention, funding and liquidity could be significant; and (12) the outcome of any future regulatory and legal investigations and proceedings may not be anticipated.
Factors that might cause such a difference include, but are not limited to: (1) the impact of the health emergencies, including pandemics, and natural disasters, such as flood or fires, and the government’s response on our operations as well as those of our clients and on the economy generally and in our market area specifically, (2) competitive pressures among depository institutions may increase significantly; (3) changes in the interest rate environment may reduce interest margins; (4) prepayment speeds, loan origination and sale volumes, charge-offs and loan loss provisions may vary substantially from period to period; (5) general economic conditions may be less favorable than expected; (6) political developments, wars or other hostilities may disrupt or increase volatility in securities markets or other economic conditions; (7) legislative or regulatory changes or actions may adversely affect the businesses in which ConnectOne Bancorp, Inc. is engaged; (8) changes and trends in the securities markets may adversely impact ConnectOne Bancorp, Inc.; (9) a delayed or incomplete resolution of regulatory issues could adversely impact our planning; (10) difficulties in integrating any businesses that we may acquire, which may increase our expenses and delay the achievement of any benefits that we may expect from such acquisitions; (11) the impact of reputation risk created by the developments discussed above on such matters as business generation and retention, funding and liquidity could be significant; and (12) the outcome of any future regulatory and legal investigations and proceedings may not be anticipated.
In connection with adopting this assessment base calculation, the FDIC lowered total base assessment rates to between 2.5 and 9 basis points for banks in the lowest risk category, and 30 to 45 basis points for banks in the highest risk category. The Company paid $5.7 million and $2.8 million in total FDIC assessments in 2023 and 2022, respectively.
In connection with adopting this assessment base calculation, the FDIC lowered total base assessment rates to between 2.5 and 9 basis points for banks in the lowest risk category, and 30 to 45 basis points for banks in the highest risk category. The Company paid $7.2 million and $5.7 million in total FDIC assessments in 2024 and 2023, respectively.
The Bank encourages a work/life balance by offering hybrid scheduling that combines working remotely, as well as the ability to work out of our offices. Promotions: We focus on promoting employees from within and leveraging their knowledge of the organization as we continue to grow our Bank. In 2023, 58 employees were promoted into new roles.
The Bank encourages a work/life balance by offering hybrid scheduling that combines working remotely, as well as the ability to work out of our offices. Promotions: We focus on promoting employees from within and leveraging their knowledge of the organization as we continue to grow our Bank. In 2024, 71 employees were promoted into new roles.
These regulatory policies could affect the ability of the Company to pay dividends or otherwise engage in capital distributions. -20- Table of Contents
These regulatory policies could affect the ability of the Company to pay dividends or otherwise engage in capital distributions. -21- Table of Contents
The Bank’s legal lending limit to any one borrower is 15% of the Bank’s capital base (defined as tangible equity plus the allowance for credit losses) for most loans ($168.2 million) and 25% of the capital base for loans secured by readily marketable collateral ($280.3 million).
The Bank’s legal lending limit to any one borrower is 15% of the Bank’s capital base (defined as tangible equity plus the allowance for credit losses) for most loans ($172.0 million) and 25% of the capital base for loans secured by readily marketable collateral ($286.7 million).
Although the Bank currently has less than $10 billion in assets, and so is not subject to examination by the Bureau, it is likely that the Bank will exceed $10 billion in total assets in the foreseeable future, and so will become subject to examination by the Bureau. • Deposit Insurance.
Although the Bank currently has less than $10 billion in assets and so is not subject to examination by the Bureau, the Bank will exceed $10 billion in assets upon consummation of its merger with The First National Bank of Long Island, and even without the merger it is likely that the Bank will exceed $10 billion in total assets in the foreseeable future, and so will become subject to examination by the Bureau. • Deposit Insurance.
The Company’s primary activity, at this time, is to act as a holding company for the Bank and its other subsidiaries. As used herein, the term “Parent Corporation” shall refer to the Company on an unconsolidated basis. The Company owns 100% of the voting shares of Center Bancorp, Inc. Statutory Trust II, through which it issued trust preferred securities.
As used herein, the term “Parent Corporation” shall refer to the Company on an unconsolidated basis. The Company owns 100% of the voting shares of Center Bancorp, Inc. Statutory Trust II, through which it issued trust preferred securities.
SEC Reports and Corporate Governance The Company makes its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K and amendments thereto available on its website at https://www.connectonebank.com without charge as soon as reasonably practicable after filing or furnishing them to the SEC.
The REIT has issued less than 20% of its outstanding non-voting preferred stock to individuals, primarily Bank personnel and directors. -6- Table of Contents SEC Reports and Corporate Governance The Company makes its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K and amendments thereto available on its website at https://www.connectonebank.com without charge as soon as reasonably practicable after filing or furnishing them to the SEC.
Through ConnectOne University, employees: ● Receive and complete required job training related to their position with the Company, such as compliance and ethics training and position specific training.
We have formalized our commitment to training, education and mentoring through our ConnectOne University program. ConnectOne University houses our training, leadership development, continuing education and mentorship programs. Through ConnectOne University, employees: ● Receive and complete required job training related to their position with the Company, such as compliance and ethics training and position specific training.
Other competitors include money market mutual funds, mortgage bankers, insurance companies, stock brokerage firms, regulated small loan companies, credit unions and issuers of commercial paper and other securities.
We compete with numerous commercial banks, savings banks and savings and loan associations, many of which have assets, capital and lending limits larger than those that we have. Other competitors include money market mutual funds, mortgage bankers, insurance companies, stock brokerage firms, regulated small loan companies, credit unions and issuers of commercial paper and other securities.
The increase from 2023 was attributable to balance sheet growth and a two-basis point increase in the Bank’s initial base rate. -16- Table of Contents The FDIC has a designated reserve ratio (DRR), that is, the ratio of the DIF to insured deposits, of 1.35%.
The increase in 2024 was attributable to additional premiums paid in 2024 related to the FDIC special assessment. -17- Table of Contents The FDIC has a designated reserve ratio (DRR), that is, the ratio of the DIF to insured deposits, of 1.35%.
The implementation of the capital conservation buffer began on January 1, 2016 and was fully phased in on January 1, 2019. The New Rules provide for several deductions from and adjustments to CET1.
The New Rules provide for several deductions from and adjustments to CET1.
Removed
A REIT must have 100 or more individual shareholders. The REIT has issued less than 20% of its outstanding non-voting preferred stock to individuals, primarily Bank personnel and directors.
Added
On September 4, 2024, the Company entered into an Agreement and Plan of Merger with The First of Long Island Corporation (“FLIC"), the holding company for the First National Bank of Long Island (“FNBLI”).
Removed
As of December 31, 2023, the Bank’s largest committed relationship (to several affiliated borrowers) was $173.6 million, and the single largest loan outstanding was $60.0 million. Our business model includes using industry best practices for community banks, including personalized service, state-of-the-art technology, and extended hours.
Added
Under the agreement, FLIC will merge with and into the Company, with the Company as the surviving entity, and FNBLI will merge with and into ConnectOne Bank, with ConnectOne Bank as the surviving bank. FNBLI is a Melville, New York headquartered national bank serving Nassau and Suffolk Counties on Long Island and New York City through 37 branches.
Removed
We believe that this will generate deposit accounts with somewhat larger average balances than are found at many other financial institutions. We also use pricing techniques in our efforts to attract banking relationships having larger than average balances. Competition The banking business is highly competitive.
Added
On February 14, 2025, at separate special meetings, the shareholders of both companies approved proposals relating to the pending merger of the Company and FLIC. As of December 31, 2024, FLIC had total assets of $4.1 billion and total deposits of $3.3 billion.
Removed
We face substantial immediate competition and potential future competition both in attracting deposits and in originating loans. We compete with numerous commercial banks, savings banks and savings and loan associations, many of which have assets, capital and lending limits larger than those that we have.
Added
The merger, which is subject to receipt of all required regulatory approvals, is expected to close during the first or second calendar quarter of 2025. The Company’s primary activity, at this time, is to act as a holding company for the Bank and its other subsidiaries.
Removed
Diversity, Equity, & Inclusion : In 2022, we appointed our first Chief Diversity, Equity & Inclusion Officer, with a mandate to focus on workforce diversity, vendor/supplier diversity and cultivating more diverse leadership, among other vital issues. Employee resource groups (“ERG”) further support this overall commitment and vision, as well as Diversity, Equity, Inclusion, and Belonging in the workplace.
Added
A REIT must have 100 or more individual shareholders.
Removed
Our first ERG, WomenConnect , was established in January 2023 and follows a mission to empower and foster an inclusive environment where all individuals feel connected and make an impact through: mentorship, leadership, teamwork in the community, and both professional and personal growth opportunities.
Added
As of December 31, 2024, the Bank’s largest committed relationship (to several affiliated borrowers) was $212.7 million, and the single largest loan outstanding was $64.0 million. Competition The banking business is highly competitive. We face substantial immediate competition and potential future competition both in attracting deposits and in originating loans.
Removed
Education : We encourage and support the growth and development of our employees and, wherever possible, seek to fill positions by promotion and transfer from within the organization. We have formalized our commitment to training, education and mentoring through our ConnectOne University program. ConnectOne University houses our training, leadership development, continuing education and mentorship programs.
Added
During 2024, ConnectOne University continued to drive professional development and growth across the organization. Key achievements included delivering comprehensive job skills and cybersecurity training, advancing leadership skills for 125 managers, and sponsoring professional certifications and graduate-level education for employees through programs like the ABA Stonier Graduate School of Banking and the ABA Commercial Lending School.
Removed
During 2023, 289 employees participated in our leadership and mentoring programs within ConnectOne University. Additionally, in 2023 we identified two individuals and placed them into a credit rotation program enabling them to move from their current position into a new career path. We also sponsored two employees to attend the Stonier Graduate School of Banking.
Added
Additionally, approximately 300 employees participated in culture programs, reinforcing our shared values, while the Company supported advanced education through tuition reimbursement for eligible coursework. These efforts reflect our commitment to fostering a culture of continuous learning and development. Health and Safety : The safety, health and well-being of our employees is a top priority.
Removed
We sponsor employees on an annual basis. This is a competitive process requiring an employee to be nominated by the employee’s manager and then participate in a panel interview. We continuously assess any skill gaps and are gearing learning for the banking positions of the future.
Removed
Health and Safety : The safety, health and wellness of our employees is a top priority.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

21 edited+48 added−14 removed96 unchanged
Biggest changeThe small-to medium-sized businesses that the Bank lends to may have fewer resources to weather a downturn in the economy, which may impair a borrower ’ s ability to repay a loan to the Bank that could materially harm our operating results.
Biggest changeAny increase in late payments or defaults by our borrowers due to increases in the interest rates applicable to their loans could adversely affect our asset quality and results of operations. -24- Table of Contents The small-to medium-sized businesses that the Bank lends to may have fewer resources to weather a downturn in the economy, which may impair a borrower ’ s ability to repay a loan to the Bank that could materially harm our operating results.
We expect that other banking and financial service companies, many of which have significantly greater resources than us, will compete with us in acquiring other target companies if we pursue such acquisitions. This competition could increase prices for potential acquisitions that we believe are attractive. Also, acquisitions are subject to various regulatory approvals.
We expect that other banking and financial service companies, many of which have significantly greater resources than us, will compete with us in acquiring other target companies if we seek to pursue such acquisitions. This competition could increase prices for potential acquisitions that we believe are attractive. Also, acquisitions are subject to various regulatory approvals.
We may be required to record an allowance for credit on our investment securities if they suffer a decline in value below their amortized cost basis that is considered credit related.
We may be required to record an allowance for credit losses on our investment securities if they suffer a decline in value below their amortized cost basis that is considered credit related.
Therefore, unless all dividends due on our outstanding preferred stock have been declared and paid for the most recent dividend period provided for under the terms of the preferred stock, we may not pay a dividend on our common stock or repurchase shares of our common stock during that period. -25- Table of Contents We may incur impairment to goodwill.
Therefore, unless all dividends due on our outstanding preferred stock have been declared and paid for the most recent dividend period provided for under the terms of the preferred stock, we may not pay a dividend on our common stock or repurchase shares of our common stock during that period. -27- Table of Contents We may incur impairment to goodwill.
However, if the program significantly tightens the nation’s money supply, it may adversely affect our results of operations and financial performance. -28- Table of Contents The banking business is subject to significant government regulations. We are subject to extensive governmental supervision, regulation and control.
However, if the program significantly tightens the nation’s money supply, it may adversely affect our results of operations and financial performance. -33- Table of Contents The banking business is subject to significant government regulations. We are subject to extensive governmental supervision, regulation and control.
Any of these events could increase our costs, require management time and attention, and materially and adversely affect us. -22- Table of Contents Federal banking agencies have issued guidance regarding high concentrations of commercial real estate loans within bank loan portfolios.
Any of these events could increase our costs, require management time and attention, and materially and adversely affect us. -23- Table of Contents Federal banking agencies have issued guidance regarding high concentrations of commercial real estate loans within bank loan portfolios.
The ultimate effect of certain of these changes on the financial services industry in general, and us in particular, is uncertain at this time. -29- Table of Contents The laws that regulate our operations are designed for the protection of depositors and the public, not our shareholders.
The ultimate effect of certain of these changes on the financial services industry in general, and us in particular, is uncertain at this time. -34- Table of Contents The laws that regulate our operations are designed for the protection of depositors and the public, not our shareholders.
Consequently, it may be difficult and expensive for our stockholders to remove current management, even if current management is not performing adequately. -23- Table of Contents Competition in originating loans and attracting deposits may adversely affect our profitability. We face substantial competition in originating loans.
Consequently, it may be difficult and expensive for our stockholders to remove current management, even if current management is not performing adequately. -25- Table of Contents Competition in originating loans and attracting deposits may adversely affect our profitability. We face substantial competition in originating loans.
No assurance can be given that we will be able to raise any required capital, or that we will be able to raise capital on terms that are beneficial to stockholders. -26- Table of Contents Attractive acquisition opportunities may not be available to us in the future.
No assurance can be given that we will be able to raise any required capital, or that we will be able to raise capital on terms that are beneficial to stockholders. -28- Table of Contents Attractive acquisition opportunities may not be available to us in the future.
As the Company approaches $10 billion in total consolidated assets, additional costs have been incurred to prepare for the implementation of these imposed requirements. The Company may be required to invest more significant management attention and resources to evaluate and continue to make any changes necessary to comply with the new statutory and regulatory requirements under the Dodd-Frank Act.
As the Company has approached $10 billion in total consolidated assets, additional costs have been incurred to prepare for the implementation of these imposed requirements. The Company may be required to invest more significant management attention and resources to evaluate and continue to make any changes necessary to comply with the new statutory and regulatory requirements under the Dodd-Frank Act.
In addition, in recent periods we have substantially increased our use of alternate deposit origination channels, such as brokered deposits, including reciprocal deposit services, and internet listing services. -24- Table of Contents Our access to funding sources in amounts adequate to finance our activities could be impaired by factors that affect us specifically or the financial services industry in general.
In addition, in recent periods we have substantially increased our use of alternative deposit origination channels, such as brokered deposits, including reciprocal deposit services, and internet listing services. -26- Table of Contents Our access to funding sources in amounts adequate to finance our activities could be impaired by factors that affect us specifically or the financial services industry in general.
Based on this regulatory definition, our commercial real estate loans represented 463% of the Bank’s Tier 1 capital plus the allowance for credit losses on loans.
Based on this regulatory definition, our commercial real estate loans represented 435% of the Bank’s Tier 1 capital plus the allowance for credit losses on loans.
Finally, health related events, such as a viral pandemic, could adversely affect the business of our clients and our local economies, thereby adversely affecting our results of operations. The Company will be subject to heightened regulatory requirements when total assets exceed $10 billion. The Company’s total assets were $9.856 billion as of December 31, 2023.
Finally, health related events, such as a viral pandemic, could adversely affect the business of our clients and our local economies, thereby adversely affecting our results of operations. The Company will be subject to heightened regulatory requirements when total assets exceed $10 billion. The Company’s total assets were $9.880 billion as of December 31, 2024.
The impact of the COVID-19 pandemic and the development of remote work or hybrid work models on the metropolitan New York area commercial real estate market is uncertain, causing volatility in rents in certain core urban markets.
The impact of the development of remote work or hybrid work models on the metropolitan New York area commercial real estate market is uncertain, causing volatility in rents in certain core urban markets.
Any significant failure to pay on time by our clients or a significant default by our clients would materially and adversely affect us. As of December 31, 2023, we had $6.5 billion of commercial real estate loans (nonowner-occupied, owner-occupied multifamily and land), including construction loans, which represented 78.1% of loans receivable.
Any significant failure to pay on time by our clients or a significant default by our clients would materially and adversely affect us. As of December 31, 2024, we had $6.3 billion of commercial real estate loans (nonowner-occupied, owner-occupied, multifamily and land), including construction loans, which represented 76.2% of loans receivable.
Although this proposal is in the very early stages, should this proposal be adopted and a state-owned bank formed, it could impede our ability to attract and retain governmental and municipal deposits. Increased deposit competition could adversely affect our ability to generate the funds necessary for lending operations, which may increase our cost of funds.
Although this proposal has not advanced, should this proposal be adopted and a state-owned bank formed, it could impede our ability to attract and retain governmental and municipal deposits. Increased deposit competition could adversely affect our ability to generate the funds necessary for lending operations, which may increase our cost of funds.
Declines in the value of our investment securities portfolio may adversely impact our results. As of December 31, 2023, we had approximately $617.2 million in fair value of investment securities, all of which are classified as available-for-sale.
Declines in the value of our investment securities portfolio may adversely impact our results. As of December 31, 2024, we had approximately $612.8 million in fair value of investment securities, all of which are classified as available-for-sale.
A sustained increase in market interest rates, such as has been in effect since the first half of 2023, could adversely affect our earnings if our cost of funds increases more rapidly than our yield on our earning assets and compresses our net interest margin. In addition, the economic value of portfolio equity would decline as interest rates increase.
A period of sustained high market interest rates could adversely affect our earnings if our cost of funds increases more rapidly than our yield on our earning assets and compresses our net interest margin. In addition, the economic value of portfolio equity would decline as interest rates increase.
We have also been active in competing for New York and New Jersey governmental and municipal deposits. As of December 31, 2023, governmental and municipal deposits accounted for approximately $745.0 million in deposits.
We have also been active in competing for New York and New Jersey governmental and municipal deposits. As of December 31, 2024, governmental and municipal deposits accounted for approximately $1.1 billion in deposits.
Any such charge could have a material adverse effect on our results of operations. We have grown and may continue to grow through acquisitions. Since January 1, 2019, we have acquired GHB, BoeFly and BNJ.
Any such charge could have a material adverse effect on our results of operations. We have grown and may continue to grow through acquisitions. Since January 1, 2019, we have acquired GHB, BoeFly and BNJ and entered into an agreement to acquire FLIC (First of Long Island Corp.), the consummation of which is pending regulatory approval.
The extent of such an impact will depend on future developments, which are highly uncertain. -21- Table of Contents Our growth-oriented business strategy could be adversely affected if we are not able to attract and retain skilled employees or if we lose the services of our senior management team.
In that case, the trading price of our securities may decline, and stockholders may lose part or all of their investment in our securities. -22- Table of Contents Risks Applicable to Our Business: Our growth-oriented business strategy could be adversely affected if we are not able to attract and retain skilled employees or if we lose the services of our senior management team.
Removed
In that case, the trading price of our securities may decline, and stockholders may lose part or all of their investment in our securities.
Added
Our New York State multifamily loan portfolio could be adversely impacted by changes in legislation or regulation which, in turn, could have a material adverse effect on our financial condition and results of operations. We have a significant portfolio of loans secured by multi family properties located in New York.
Removed
Risks Applicable to Our Business: The ongoing COVID-19 pandemic and measures intended to prevent its spread could have a material adverse effect on our business, results of operations and financial condition, and such effects will depend on future developments, which are highly uncertain and are difficult to predict.
Added
On June 14, 2019, the New York State legislature passed the New York Housing Stability and Tenant Protection Act of 2019.
Removed
Global health concerns relating to the COVID-19 outbreak and its variants and related government actions taken to reduce the spread of the virus and changes in customer, employer and employee behavior have weighed on and may continue to effect the macroeconomic environment in our New Jersey/New York metropolitan market trade area and have caused economic uncertainty and reduced economic activity.
Added
This legislation represents the most extensive reform of New York State’s rent laws in several decades and generally limits a landlord’s ability to increase rents on rent regulated apartments and makes it more difficult to convert rent regulated apartments to market rate apartments.
Removed
Given the ongoing and dynamic nature of the pandemic, it is difficult to predict the full impact of the COVID-19 pandemic on our business and that of our clients, employees and third-party service providers.
Added
As a result, the value of the collateral located in New York State securing the Company’s multi family loans or the future net operating income of such properties could potentially become impaired which, in turn, could have a material adverse effect on our financial condition and results of operations.
Removed
The nature and growth rate of our commercial loan portfolio may expose us to increased lending risks. Given the significant growth in our loan portfolio, many of our commercial real estate loans are unseasoned, meaning that they originated relatively recently. As of December 31, 2023, we had $5.9 billion in commercial real estate loans outstanding.
Added
A significant portion of our loan portfolio has interest rates that will reset over the next 24 months. In addition, a significant portion of our portfolio will mature over the next 24 months. Applicable increases in interest rates could harm our borrowers ’ abilities to repay their loans.
Removed
Approximately 64.5% of the loans, or $3.8 billion, were originated in the past three years. As a result, it may be difficult to predict the future performance of our loan portfolio. These loans may have delinquency or charge-off levels above our expectations, which could negatively affect our performance.
Added
As of December 31, 2024, a significant portion of our loan portfolio bears interest at rates that will reset during 2025 and 2026.
Removed
Further, Federal financial regulators may require accelerated actions and investments to prepare for compliance before $10 billion in total consolidated assets is exceeded, and may suspend or delay certain regulatory actions, such as approving a proposed merger, if preparations are deemed inadequate.
Added
Generally, these loans currently bear interest at rates that are lower than current market rates, as these loans were predominately originated in 2020 and 2021, and so these borrowers will experience an increase in the interest rates applicable to their loans, which in some cases will be significant.
Removed
Upon reaching this threshold, the Company faces the risk of failing to meet these requirements, which may negatively impact results of operations and financial condition. Risks Applicable to the Banking Industry Generally: Recent events impacting the financial services industry.
Added
In addition, a significant portion of our loan portfolio matures in 2025 and 2026. For loans that are maturing, borrowers will either need to refinance these loans, with the Bank or with another financial institution, or pay these loans off using other sources of funds.
Removed
Recent events impacting the financial services industry, including the failures of Silicon Valley Bank, Signature Bank and First Republic Bank, have resulted in increased volatility and reduced valuations of equity and other securities of banks in the capital markets.
Added
Borrowers refinancing loans will likely experience an increase in the interest rates applicable to their loans, which in some cases will be significant. An increase in interest rates applicable to their loans may negatively impact our borrowers, increasing their costs and potentially making it more difficult for them to continue to perform under their loan agreements.
Removed
In addition, the Federal Reserve, in order to combat inflation, has employed quantitative tightening in order to reduce the size of its balance sheet, resulting in increased competition and costs for bank deposits and an increased risk of an economic recession.
Added
Any increase in late payments or defaults by our borrowers due to increases in the interest rates applicable to their loans could adversely affect our asset quality and results of operations.
Removed
These recent events have, and could continue to, increase competition for deposits and adversely impact the market price and volatility of the Company’s common stock.
Added
An increase in interest rates applicable to their loans may negatively impact our borrowers, increasing their costs and potentially making it more difficult for them to continue to perform under their loan agreements.
Removed
These recent events may also result in potentially adverse changes to laws or regulations governing banks and bank holding companies or result in the impositions of restrictions through supervisory or enforcement activities, including higher capital requirements, which could have a material impact on our business.
Added
Upon consummation of the FLIC merger, our assets will be substantially in excess of $10 billion.
Removed
We may be impacted by concerns regarding the soundness or creditworthiness of other financial institutions, which can cause substantial disruption within the financial markets and increased expenses.
Added
Any failure of the Company to meet these requirements may negatively impact results of operations and financial condition. Risks Applicable to our Proposed Merger with FLIC Shareholders of ConnectOne will have less influence as shareholders of the combined company than as a shareholder of ConnectOne prior to the completion of the merger.
Removed
The cost of resolving the recent bank failures has caused the FDIC to issue additional special assessments and could cause the FDIC to increase premiums or issue additional special assessments in the future. -27- Table of Contents Our allowance for credit losses may not be adequate to cover actual losses.
Added
The shareholders of ConnectOne will experience a decline in their influence over the resulting entity in the merger. Presently, ConnectOne shareholders have the right to control ConnectOne through their ability to elect the board of directors of ConnectOne and to vote on other matters affecting ConnectOne.
Added
As a result of the merger, the existing shareholders of ConnectOne will own approximately 76% of the combined company’s outstanding common stock.
Added
Consequently, while the existing shareholders of ConnectOne will continue to own a majority of the outstanding shares of the combined company and thus will continue to have the ability to control the vote on most matters submitted to the shareholders of the combined company, the extent of the existing ConnectOne shareholders’ influence over the management and policies of the combined company will be less than their current influence over the management and policies of ConnectOne. -29- Table of Contents Regulatory approvals may not be received, may take longer than expected or may impose conditions that are not presently anticipated or that could have an adverse effect on the combined company following the Merger.
Added
Before the merger and the bank merger may be completed, ConnectOne and FLIC must obtain approvals from, or provide notice to, the Federal Reserve Board, the FDIC and the New Jersey Department of Banking and Insurance. Other approvals, waivers or consents from regulators may also be required.
Added
In determining whether to grant these approvals the regulators consider a variety of factors. An adverse development in either party’s regulatory standing or these factors could result in an inability to obtain approvals or delay their receipt.
Added
These regulators may impose conditions on the completion of the holding company merger or the bank merger or require changes to the terms of the merger or the bank merger.
Added
Such conditions or changes could have the effect of delaying or preventing completion of the merger or the bank merger or imposing additional costs on or limiting the revenues of the combined company following the merger and the bank merger, any of which might have an adverse effect on the combined company following the merger.
Added
ConnectOne may need to raise additional capital in connection with the merger. In order to further support the capital ratios of the combined entity, ConnectOne expects that it will raise additional capital as part of the transaction.
Added
Under the terms of the merger agreement, ConnectOne has agreed that it would raise up to $200 million in new capital if required to obtain any necessary regulatory approval. The actual amount of capital to be raised, the timing, and the type of securities to be issued by ConnectOne to raise such capital, have not yet been determined.
Added
We can offer you no assurances that ConnectOne will be able to raise additional capital in connection with the merger. If ConnectOne is unable to raise additional capital, it may negatively impact ConnectOne’s ability to obtain necessary regulatory approvals for the merger. Failure to complete the merger could severely disadvantage ConnectOne.
Added
Completion of the merger is subject to the satisfaction or waiver of a number of conditions. ConnectOne or FLIC cannot guarantee when or if these conditions will be satisfied or that the merger will be successfully completed.
Added
The consummation of the merger may be delayed, the merger may be consummated on terms different than those contemplated by the merger agreement, or the merger may not be consummated at all.
Added
If the merger is not completed, the ongoing business of ConnectOne may be adversely affected, and ConnectOne will be subject to several risks, including the following: ● ConnectOne could incur substantial costs relating to the proposed merger, such as legal, accounting, financial advisor, filing, printing and mailing fees; and ● ConnectOne’s management’s and employees’ attention may be diverted from their day-to-day business and operational matters as a result of efforts relating to the attempt to consummate the merger.
Added
In addition, if the merger is not completed, ConnectOne may experience negative reactions from the financial markets and from its customers and employees. ConnectOne also could be subject to litigation related to any failure to complete the merger or to enforcement proceedings commenced against ConnectOne to perform its obligations under the merger agreement.
Added
If the merger is not completed, ConnectOne cannot assure shareholders that the risks described above will not materialize and will not materially affect the stock price and business and financial results of ConnectOne. The expected benefits of the merger may not be realized if the combined company does not achieve cost savings and other benefits.
Added
The expectation by the management teams of ConnectOne and FLIC that cost savings and revenue enhancements are achievable is a forward-looking statement that is inherently uncertain. The combined company’s actual cost savings and revenue enhancements, if any, cannot be quantified at this time.
Added
Any actual cost savings or revenue enhancements will depend on future expense levels and operating results, the timing of certain events and general industry, regulatory and business conditions. Many of these events will be beyond the control of the combined company. -30- Table of Contents ConnectOne will be subject to business uncertainties and contractual restrictions, while the merger is pending.
Added
Uncertainty about the effect of the merger on employees and customers may have an adverse effect on ConnectOne. These uncertainties may impair ConnectOne’s ability to attract, retain and motivate key personnel until the merger is completed, and could cause customers and others that deal with ConnectOne to seek to change existing business relationships with ConnectOne.
Added
Retention of certain employees by ConnectOne may be challenging while the merger is pending, as certain employees may experience uncertainty about their future roles with ConnectOne. If key employees depart because of issues relating to the uncertainty and difficulty of integration or a desire not to remain with ConnectOne, ConnectOne’s business could be harmed.
Added
In addition, subject to certain exceptions, ConnectOne has agreed to operate its business in the ordinary course, consistent with past practices, prior to closing. This could prohibit ConnectOne from taking advantage of a new business opportunity prior to consummation of the merger.
Added
Shareholder litigation could prevent or delay the completion of the merger or otherwise negatively impact the business and operations of ConnectOne. ConnectOne shareholders and/or FLIC shareholders may file lawsuits against ConnectOne, FLIC and/or the directors and officers of either company in connection with the merger.
Added
If any plaintiff were successful in obtaining an injunction prohibiting ConnectOne or FLIC from completing the merger or any of the other transactions contemplated by the merger agreement, then such injunction may delay or prevent the effectiveness of the merger and could result in significant costs to ConnectOne, including any cost associated with the indemnification of directors and officers or the defense or settlement of any shareholder lawsuits filed in connection with the merger.
Added
Such litigation could have an adverse effect on the consolidated financial condition and consolidated results of operations of ConnectOne and could prevent or delay the completion of the merger. The combined company may be unable to retain ConnectOne and/or FLIC personnel successfully after the merger is completed.
Added
The success of the merger will depend in part on the combined company’s ability to retain the talents and dedication of key employees currently employed by ConnectOne and FLIC.
Added
It is possible that these employees may decide not to remain with ConnectOne or FLIC, as applicable, while the merger is pending or with the combined company after the merger is consummated.
Added
If ConnectOne is unable to retain key employees, including management, who are critical to the successful integration and future operations of the companies, ConnectOne could face disruptions in their operations, loss of existing customers, loss of key information, expertise or know-how and unanticipated additional recruitment costs.
Added
In addition, following the merger, if key employees terminate their employment, the combined company’s business activities may be adversely affected, and management’s attention may be diverted from successfully hiring suitable replacements, all of which may cause the combined company’s business to suffer.
Added
ConnectOne also may not be able to locate or retain suitable replacements for any key employees who leave the company. Unanticipated costs relating to the merger could reduce ConnectOne ’ s future earnings per share.
Added
ConnectOne has incurred substantial legal, accounting, financial advisory and other merger-related costs, and ConnectOne’s management has devoted considerable time and effort in connection with the merger. If the merger is not completed, ConnectOne will bear certain fees and expenses associated with the merger without realizing the benefits of the merger.
Added
If the merger is completed, ConnectOne expects to incur substantial expenses in connection with integrating the business, operations, network, systems, technologies, policies and procedures of the two companies.
Added
The fees and expenses may be significant and could have an adverse impact on ConnectOne’s results of operations. -31- Table of Contents ConnectOne believes that it has reasonably estimated the likely costs of integrating the operations of ConnectOne and FLIC, and the incremental costs of operating as a combined company.
Added
However, it is possible that unexpected transaction costs such as taxes, fees or professional expenses or unexpected future operating expenses such as increased personnel costs or increased taxes, as well as other types of unanticipated adverse developments, could have a material adverse effect on the results of operations and financial condition of the combined company.

… 3 more changes not shown on this page.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

6 edited+0 added−1 removed9 unchanged
Biggest changeThe ERMC consists of the Company’s Chief Risk Officer, Chairman & CEO, President, Chief Financial Officer, Treasurer, Chief Compliance Officer, Chief Technology Officer, Chief Strategic Operations Officer and Chief Credit Officer. In addition, the Company’s Chief Technology Officer attends Company Board of Directors meetings and provides an information technology ("IT") report at each meeting.
Biggest changeThe ERMC consists of the Company’s Chief Risk Officer, Chairman & CEO, President, Chief Financial Officer, Treasurer, Chief Compliance Officer, Chief Technology Officer and Chief Credit Officer. In addition, the Company’s Chief Technology Officer attends Company Board of Directors meetings and provides an information technology ("IT") report at each meeting.
In addition to the members above, Frank Sorrentino III, Chairman & Chief Executive Officer and Siya Vansia, Chief Brand & Innovation Officer are also members of the ITC due to their roles in overseeing entity-wide management. -31- Table of Contents In order to ensure that cybersecurity risk management is integrated into the Company’s overall risk management plans, systems and processes, members of the ITC, along with other lines of business heads, report to the management Enterprise Risk Management Committee (the “ERMC”), which in turn reports to the Board Audit and Risk Committee quarterly.
In addition to the members above, Frank Sorrentino III, Chairman & Chief Executive Officer and Siya Vansia, Chief Brand & Innovation Officer are also members of the ITC due to their roles in overseeing entity-wide management. -36- Table of Contents In order to ensure that cybersecurity risk management is integrated into the Company’s overall risk management plans, systems and processes, members of the ITC, along with other lines of business heads, report to the management Enterprise Risk Management Committee (the “ERMC”), which in turn reports to the Board Audit and Risk Committee quarterly.
Matera is a technology subject matter expert with over 13 years of IT leadership and over 18 years of financial service experience. In her career she has been responsible for technology/digital strategy, enterprise program management, data analytics and IT service management at other financial institutions.
Mattera is a technology subject matter expert with over 13 years of IT leadership and over 18 years of financial service experience. In her career she has been responsible for technology/digital strategy, enterprise program management, data analytics and IT service management at other financial institutions.
The members of this committee include, as co-chairs, the Chief Compliance Officer and the Chief Technology Officer. Additional members are our Information Security Officer, Information Technology (“IT”) Manager, Chief Risk Officer, Chairman & Chief Executive Officer, Chief Strategic Operations Officer, Chief Digital Officer and Chief Brand and Innovation Officer. ● Tarak Patel, Information Security Officer - Mr.
The members of this committee include, as co-chairs, the Chief Compliance Officer and the Chief Technology Officer. Additional members are our Information Security Officer, Information Technology (“IT”) Manager, Chief Risk Officer, Chairman & Chief Executive Officer, Chief Digital Officer and Chief Brand and Innovation Officer. ● Tarak Patel, Information Security Officer - Mr.
The Company also maintains insurance which may provide coverage for expenses and certain losses incurred in connection with a cybersecurity incident. -32- Table of Contents
The Company also maintains insurance which may provide coverage for expenses and certain losses incurred in connection with a cybersecurity incident. -37- Table of Contents
Dwaileebe has over 20 years of IT experience, is a current member of Infragard, and holds multiple industry recognized certifications. ● Michael O’Malley, Chief Risk Officer – Mr. O’Malley oversees entity-wide risk management, including cybersecurity related risk. ● Dana Zeller, Chief Strategic Operations Officer – Ms.
Dwaileebe has over 20 years of IT experience, is a current member of Infragard, and holds multiple industry recognized certifications. ● Michael O’Malley, Chief Risk Officer – Mr. O’Malley oversees entity-wide risk management, including cybersecurity related risk. ● Ali Mattera, Chief Digital Officer – Ms.
Removed
Zeller’s career has been primarily in bank operations, in which she has participated in end-to-end implementations and upgrades of core banking technology, from selecting a vendor to managing implementations, to leading enhancement and efficiency initiatives throughout the life of the application. ● Ali Matera, Chief Digital Officer – Ms.

Item 2. Properties

Properties — owned and leased real estate

2 edited+0 added−0 removed1 unchanged
Biggest changeBanking Office Location Term 301 Sylvan Avenue, Englewood Cliffs, NJ Term expires November 2028 1 Union Ave, Cresskill, NJ Term expires January 2038 142 John Street, Hackensack, NJ Term expires December 2026 171 East Ridgewood Avenue, Ridgewood, NJ Term expires April 2029 71 East Allendale Road, Saddle River, NJ Term expires May 2032 356 Chestnut Street, Union, NJ Term expires May 2027 545 Morris Avenue, Summit, NJ Term expires January 2034 217 Chestnut Street, Newark, NJ Term expires December 2024 5914 Park Avenue, West New York, NJ Term expires September 2028 963 Holmdel Road, Holmdel, NJ Term expires September 2026 551 Madison Avenue, Suite 201, NY, NY Term expires May 2032 551 Madison Avenue, Suite 202, NY, NY Term expires October 2028 48 South Service Rd, 2nd Fl, Melville, NY Term expires June 2025 36-19 Broadway, Astoria, NY Term expires August 2028 485 Schutt Rd, Middletown, NY Term expires October 2025 715 Route 304, Bardonia NY Term expires August 2028 567 North Broadway, White Plains NY Term expires September 2028 155 White Plains Rd., Tarrytown NY Term expires December 2026 170 East Erie St, Blauvelt NY Term expires February 2028 625 N Flagler Dr Ste 1002, West Palm Beach, FL Term expires June 2027 78B Park Place, East Hampton, NY Term expires January 2029
Biggest changeBanking Office Location Term 301 Sylvan Avenue, Englewood Cliffs, NJ Term expires November 2028 1 Union Ave, Cresskill, NJ Term expires January 2038 142 John Street, Hackensack, NJ Term expires December 2026 171 East Ridgewood Avenue, Ridgewood, NJ Term expires April 2029 71 East Allendale Road, Saddle River, NJ Term expires May 2032 356 Chestnut Street, Union, NJ Term expires May 2027 545 Morris Avenue, Summit, NJ Term expires January 2034 217 Chestnut Street, Newark, NJ Term expires December 2034 5914 Park Avenue, West New York, NJ Term expires September 2028 963 Holmdel Road, Holmdel, NJ Term expires September 2026 551 Madison Avenue, Suite 201, NY, NY Term expires May 2032 551 Madison Avenue, Suite 202, NY, NY Term expires October 2028 48 South Service Rd, 2nd Fl, Melville, NY Term expires June 2025 36-19 Broadway, Astoria, NY Term expires August 2028 485 Schutt Rd, Middletown, NY Term expires October 2025 715 Route 304, Bardonia NY Term expires August 2028 567 North Broadway, White Plains NY Term expires September 2028 155 White Plains Rd., Tarrytown NY Term expires December 2026 170 East Erie St, Blauvelt NY Term expires February 2028 625 N Flagler Dr Ste 1002, West Palm Beach, FL Term expires June 2027 78B Park Place, East Hampton, NY Term expires January 2029 4175 Veterans Memorial Highway, Ste 100, Ronkonkoma, NY Term expires August 2034
Properties The Bank operates six banking offices in Bergen County, NJ, in Fort Lee, Englewood Cliffs, Hackensack, Cresskill, Ridgewood and Saddle River; four banking offices in Union County, NJ, consisting of two offices in Union Township, and one office each in Springfield Township, and Summit; one banking office in Morristown in Morris County, NJ; one office in Newark in Essex County, NJ; one office in West New York in Hudson County, NJ; one office in Holmdel in Monmouth County, NJ; one banking office in the borough of Manhattan in New York City, one office in Melville, Nassau County and one financial center in East Hampton, Suffolk County in Long Island, one in Astoria, Queens and five branches in the Hudson Valley, including in White Plains and Tarrytown, in Westchester County, NY, Bardonia and Blauvelt, in Rockland County, NY and in Middletown, in Orange County, NY, and one financial center in West Palm Beach in Palm Beach County, FL.
Properties The Bank operates six banking offices in Bergen County, NJ, in Fort Lee, Englewood Cliffs, Hackensack, Cresskill, Ridgewood and Saddle River; four banking offices in Union County, NJ, consisting of two offices in Union Township, and one office each in Springfield Township, and Summit; one banking office in Morristown in Morris County, NJ; one office in Newark in Essex County, NJ; one office in West New York in Hudson County, NJ; one office in Holmdel in Monmouth County, NJ; one banking office in the borough of Manhattan in New York City, one office in Melville, Nassau County and one office in East Hampton, Suffolk County in Long Island, one in Astoria, Queens and five branches in the Hudson Valley, including in White Plains and Tarrytown, in Westchester County, NY, Bardonia and Blauvelt, in Rockland County, NY and in Middletown, in Orange County, NY, and one financial center in West Palm Beach in Palm Beach County, FL.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

5 edited+0 added−0 removed2 unchanged
Biggest changeNASDAQ AND KBW BANK INDEX Assumes $100 Invested on December 31, 2018, with Dividends Reinvested Year Ended December 31, 2023 COMPARISON OF CUMULATIVE TOTAL RETURN OF ONE OR MORE COMPANIES, PEER GROUPS, INDUSTRY INDEXES AND/OR BROAD MARKETS Fiscal Year Ending Company/Index/Market 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 ConnectOne Bancorp, Inc. 100.00 141.36 100.11 186.70 147.11 138.50 NASDAQ 100.00 123.87 113.11 154.57 143.87 143.31 KBW Bank Index 100.00 136.73 198.33 242.38 163.58 236.70 -35- Table of Contents
Biggest changeNASDAQ AND KBW BANK INDEX Assumes $100 Invested on December 31, 2019, with Dividends Reinvested Year Ended December 31, 2024 COMPARISON OF CUMULATIVE TOTAL RETURN OF ONE OR MORE COMPANIES, PEER GROUPS, INDUSTRY INDEXES AND/OR BROAD MARKETS Fiscal Year Ending Company/Index/Market 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 12/31/2024 ConnectOne Bancorp, Inc. $ 100.00 $ 78.59 $ 131.92 $ 99.76 $ 97.86 $ 101.06 KBW Bank Index 100.00 91.32 124.79 116.15 115.69 130.96 Nasdaq 100.00 145.05 177.27 119.63 173.11 224.34 -40- Table of Contents
As of December 31, 2023, the Company had 697 stockholders of record, excluding beneficial owners for whom Cede & Company or others act as nominees. Share Repurchase Program Historically, repurchases have been made from time to time as, in the opinion of management, market conditions warranted, in the open market or in privately negotiated transactions.
As of December 31, 2024, the Company had 678 stockholders of record, excluding beneficial owners for whom Cede & Company or others act as nominees. Share Repurchase Program Historically, repurchases have been made from time to time as, in the opinion of management, market conditions warranted, in the open market or in privately negotiated transactions.
For information regarding restrictions on dividends, see Part I, Item 1, “Business” and Part II, Item 8, “Financial Statements and Supplementary Data”, Note 18 and Note 21 of the Notes to Consolidated Financial Statements.” Stockholders Return Comparison Set forth on the following page is a line graph presentation comparing the cumulative stockholder return on the Parent Corporation’s common stock, on a dividend reinvested basis, against the cumulative total returns of the NASDAQ Composite and the KBW Bank Index for the period from December 31, 2018 through December 31, 2023. -34- Table of Contents COMPARATIVE SIX-YEAR CUMULATIVE TOTAL RETURN AMONG CONNECTONE BANCORP INC.
For information regarding restrictions on dividends, see Part I, Item 1, “Business” and Part II, Item 8, “Financial Statements and Supplementary Data”, Note 19 and Note 22 of the Notes to Consolidated Financial Statements.” Stockholders Return Comparison Set forth on the following page is a line graph presentation comparing the cumulative stockholder return on the Parent Corporation’s common stock, on a dividend reinvested basis, against the cumulative total returns of the NASDAQ Composite and the KBW Bank Index for the period from December 31, 2019 through December 31, 2024. -39- Table of Contents COMPARATIVE SIX-YEAR CUMULATIVE TOTAL RETURN AMONG CONNECTONE BANCORP INC.
The share repurchase plan does not obligate the Company to acquire any particular amount of common stock, and it may be modified or suspended at any time at the Company's discretion. During the year ended December 31, 2023, the Company repurchased a total of 904,152 shares. As of December 31, 2023, shares remaining for repurchase under the program were 933,488.
The share repurchase plan does not obligate the Company to acquire any particular amount of common stock, and it may be modified or suspended at any time at the Company's discretion. During the year ended December 31, 2024, the Company repurchased a total of 282,370 shares. As of December 31, 2024, shares remaining for repurchase under the program were 641,118.
The following table details share repurchases for the year 2023: Cumulative Total Number of Shares Maximum Number Purchased of Shares as Part of Publicly that May Yet Total Number Announced Be Purchased Shares of Shares Average Price Plans or Under the Plans Authorized Purchased Paid per Share Programs or Programs 1,827,640 First quarter 2023 - 205,163 $ 22.52 215,163 1,622,477 Second quarter 2023 - 270,000 15.29 485,163 1,352,477 Third quarter 2023 - 316,789 19.45 801,952 1,035,688 Fourth quarter 2023 - 102,200 21.17 904,152 933,488 Dividends Federal laws and regulations contain restrictions on the ability of the Parent Corporation and the Bank to pay dividends.
The following table details share repurchases for the year 2024: Cumulative Total Number of Shares Maximum Number Purchased of Shares as Part of Publicly that May Yet Total Number Announced Be Purchased Shares of Shares Average Price Plans or Under the Plans Authorized Purchased Paid per Share Programs or Programs 923,488 First Quarter 2024 - 282,370 $ 20.27 282,370 641,118 Second Quarter 2024 - - - 282,370 641,118 Third Quarter 2024 - - - 282,370 641,118 Fourth Quarter 2024 - - - 282,370 641,118 Dividends Federal laws and regulations contain restrictions on the ability of the Parent Corporation and the Bank to pay dividends.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

115 edited+19 added−24 removed80 unchanged
Biggest changeAdditionally, there were increases in acquisition expenses related to BoeFly of $1.5 million, other expenses of $1.1 million, marketing and advertising of $0.4 million, and FDIC insurance of $0.2 million, partially offset by decreases in occupancy and equipment of $1.8 million, amortization of core deposit intangibles of $0.3 million, professional and consulting of $0.2 million and information technology and communication of $0.2 million. ● Decrease in noninterest income of $2.4 million, primarily due to decreases in net gains on loans-held-for-sale of $2.1 million, gains on sales of branches of $0.7 million in 2021, decreases in net gains on sale/redemption of investment securities of $0.2 million and an increase in net losses on equity securities of $1.1 million, partially offset by increases in deposit, loan and other income of $0.9 million and income on bank owned life insurance of $0.8 million. ● Increase in income tax expense of $1.3 million resulting primarily from higher state tax rates and a slightly higher percentage of income being derived from taxable sources. ● Increase in preferred dividends of $4.3 million. -39- Table of Contents Net Interest Income Fully taxable equivalent net interest income for 2023 totaled $258.3 million, a decrease of $46.3 million, or 15.2%, from 2022.
Biggest changeThe increase reflected an increase in the individually evaluated allowance, partially offset by a decrease in the level of collectively evaluated allowance. ● Increase in noninterest income of $2.7 million, primarily due to increases in net gains on sale of loans held-for-sale of $1.0 million, income on bank owned life insurance of $0.8 million, deposit, loan and other income of $0.8 million, and net losses on equity securities of $0.1 million. ● Decrease in income tax expense of $5.3 million resulting primarily from lower taxable income.
Additionally, there were increases in FDIC insurance of $5.5 million, which included a $2.1 million FDIC special assessment recognized in 2023. Excluding the $2.1 million special assessment, the increase in FDIC insurance from the prior year of $3.4 million was attributable to balance sheet growth and a two-basis point increase in the Bank’s initial base rate.
Additionally, there were increases in FDIC insurance of $5.5 million, which included a $2.1 million FDIC special assessment recognized in 2023. Excluding the $2.1 million special assessment, the increase in FDIC insurance from the prior year of $3.4 million was attributable to balance sheet growth and a two-basis point increase in the Bank’s initial base rate.
Finally, there were increases in information technology and communications of $3.2 million, other expenses of $2.3 million, occupancy and equipment of $1.0 million and marketing and advertising of $0.3 million, partially offset by decreases in professional and consulting of $0.5 million, BoeFly acquisition of $0.5 million and amortization of core deposit intangibles of $0.2 million.
Finally, there were increases in information technology and communications of $3.2 million, other expenses of $2.3 million, occupancy and equipment of $1.0 million and marketing and advertising of $0.3 million, partially offset by decreases in professional and consulting of $0.5 million, BoeFly acquisition of $0.5 million and amortization of core deposit intangibles of $0.2 million.
The methodology for determining the allowance for credit losses is considered a critical accounting policy by management because of the high degree of judgment involved, the subjectivity of the assumptions used, and the potential for changes in the forecasted economic environment that could result in changes to the amount of the recorded allowance for credit losses.
The methodology for determining the allowance for credit losses is considered a critical accounting policy by management because of the high degree of judgment involved, the subjectivity of the assumptions used, and the potential for changes in the forecasted economic environment that could result in changes to the amount of the recorded allowance for credit losses.
From and including September 15, 2025 through maturity or earlier redemption, the interest rate shall reset quarterly to an interest rate per annum equal to a benchmark rate, which is expected to be Three-Month Term SOFR (as defined in the Second Supplemental Indenture), plus 560.5 basis points, payable quarterly in arrears on March 15, June 15, September 15 and December 15 of each year, commencing on September 15, 2025.
From and including June 15, 2025 through maturity or earlier redemption, the interest rate shall reset quarterly to an interest rate per annum equal to a benchmark rate, which is expected to be Three-Month Term SOFR (as defined in the Second Supplemental Indenture), plus 560.5 basis points, payable quarterly in arrears on March 15, June 15, September 15 and December 15 of each year, commencing on June 15, 2025.
Loan Portfolio The Bank’s lending activities are generally oriented to small-to-medium sized businesses, high net worth individuals, professional practices and consumer and retail clients living and working in the Bank’s metropolitan, New York market area, consisting of Bergen, Union, Morris, Essex, Hudson, Mercer and Monmouth counties, New Jersey, as well as NYC’s five boroughs, Nassau, Rockland, Orange and Westchester counties, in New York and businesses and individuals living and working in the communities served by the Bank's West Palm Beach, Florida office.
Loan Portfolio The Bank’s lending activities are generally oriented to small-to-medium sized businesses, high net worth individuals, professional practices and consumer and retail clients living and working in the Bank’s metropolitan, New York market area, consisting of Bergen, Union, Morris, Essex, Hudson, Mercer and Monmouth counties, New Jersey, as well as NYC’s five boroughs, Nassau, Rockland, Orange, Suffolk and Westchester counties, in New York and businesses and individuals living and working in the communities served by the Bank's West Palm Beach, Florida office.
These subordinated debentures and the related income effects are not eliminated in the consolidated financial statements, as the statutory business trust is not consolidated in accordance with FASB ASC 810-10. Distributions on the subordinated debentures owned by the subsidiary trust have been classified as interest expense in the Consolidated Statements of Income.
These subordinated debentures and the related income effects are not eliminated in the consolidated financial statements, as the statutory business trust is not consolidated in accordance with FASB ASC 810-10. "Consolidation" Distributions on the subordinated debentures owned by the subsidiary trust have been classified as interest expense in the Consolidated Statements of Income.
Capital amounts and classifications are also subject to qualitative judgments by the bank regulators regarding capital components, risk weightings, and other factors. -64- Table of Contents Subordinated Debentures During 2003, the Company formed a statutory business trust, which exists for the exclusive purpose of (i) issuing Trust Securities representing undivided beneficial interests in the assets of the Trust; (ii) investing the gross proceeds of the Trust securities in junior subordinated deferrable interest debentures (subordinated debentures) of the Company; and (iii) engaging in only those activities necessary or incidental thereto.
Capital amounts and classifications are also subject to qualitative judgments by the bank regulators regarding capital components, risk weightings, and other factors. -69- Table of Contents Subordinated Debentures During 2003, the Company formed a statutory business trust, which exists for the exclusive purpose of (i) issuing Trust Securities representing undivided beneficial interests in the assets of the Trust; (ii) investing the gross proceeds of the Trust securities in junior subordinated deferrable interest debentures (subordinated debentures) of the Company; and (iii) engaging in only those activities necessary or incidental thereto.
Securities available-for-sale are a part of the Company’s interest rate risk management strategy and may be sold in response to changes in interest rates, changes in prepayment risk, liquidity management and other factors.
Investment securities available-for-sale are a part of the Company’s interest rate risk management strategy and may be sold in response to changes in interest rates, changes in prepayment risk, liquidity management and other factors.
Changes in assumptions could significantly affect the estimates. -57- Table of Contents Impact of Inflation and Changing Prices The financial statements and notes thereto presented elsewhere herein have been prepared in accordance with generally accepted accounting principles, which require the measurement of financial position and operating results in terms of historical dollars without considering the change in the relative purchasing power of money over time due to inflation.
Changes in assumptions could significantly affect the estimates. -63- Table of Contents Impact of Inflation and Changing Prices The financial statements and notes thereto presented elsewhere herein have been prepared in accordance with generally accepted accounting principles, which require the measurement of financial position and operating results in terms of historical dollars without considering the change in the relative purchasing power of money over time due to inflation.
If model results were to fall outside prescribed ranges, action, including additional monitoring and reporting to the Board, would be required by the ALCO and Bank’s management. -55- Table of Contents The net interest income simulation model attempts to measure the change in net interest income over the next one-year period, and over the next three-year period on a cumulative basis, assuming certain changes in the general level of interest rates.
If model results were to fall outside prescribed ranges, action, including additional monitoring and reporting to the Board, would be required by the ALCO and Bank’s management. -61- Table of Contents The net interest income simulation model attempts to measure the change in net interest income over the next one-year period, and over the next three-year period on a cumulative basis, assuming certain changes in the general level of interest rates.
The net interest margin contraction was due to a 199-basis point increase in the average cost of deposits, including noninterest-bearing demand, to 2.74%, and was partially offset by a 77 basis-point increase in the loan portfolio yield to 5.57%. Average total loans, which includes loans held-for-sale, increased by 10.8% to $8.2 billion in 2023 from $7.4 billion in 2022.
The net interest margin contraction was due to a 199-basis point increase in the average cost of deposits, including noninterest-bearing demand, to 2.74%, and was partially offset by a 77 basis-point increase in the loan portfolio yield to 5.57%. Average total loans, which include loans held-for-sale, increased by 10.8% to $8.2 billion in 2023 from $7.4 billion in 2022.
The Bank believes that its strategy of high-quality client service, competitive rate structures and selective marketing have enabled it to gain market share. -44- Table of Contents Commercial loans are loans made for business purposes and are primarily secured by collateral such as business assets including accounts receivable, inventory and equipment.
The Bank believes that its strategy of high-quality client service, competitive rate structures and selective marketing have enabled it to gain market share. -50- Table of Contents Commercial loans are loans made for business purposes and are primarily secured by collateral such as business assets including accounts receivable, inventory and equipment.
The decrease in unrealized losses is predominately attributable to changes in market conditions and interest rates. Unrealized losses have not been recognized into income because the issuers are of high credit quality, we do not intend to sell, and it is likely that we will not be required to sell the securities prior to their anticipated recovery.
The increase in unrealized losses is predominately attributable to changes in market conditions and interest rates. Unrealized losses have not been recognized into income because the issuers are of high credit quality, we do not intend to sell, and it is likely that we will not be required to sell the securities prior to their anticipated recovery.
Generally, the policy statement recommends that institutions have effective systems and controls to identify, monitor and address asset quality problems; that management analyze all significant factors that affect the collectability of the portfolio in a reasonable manner; and that management establish acceptable allowance evaluation processes that meet the objectives set forth in the policy statement.
Generally, the policy statement requires that institutions have effective systems and controls to identify, monitor and address asset quality problems; that management analyze all significant factors that affect the collectability of the portfolio in a reasonable manner; and that management establish acceptable allowance evaluation processes that meet the objectives set forth in the policy statement.
If quoted market prices are not available, fair values are based on judgments regarding future expected loss experience, current economic condition risk characteristics of various financial instruments, and other factors. See Note 20 of the Notes to Consolidated Financial Statements for additional discussion.
If quoted market prices are not available, fair values are based on judgments regarding future expected loss experience, current economic condition risk characteristics of various financial instruments, and other factors. See Note 21 of the Notes to Consolidated Financial Statements for additional discussion.
We currently utilize net interest income simulation and economic value of equity (“EVE”) models to measure the potential impact to the Bank of future changes in interest rates. As of December 31, 2023, and December 31, 2022, the results of the models are monitored by guidelines prescribed by our Board of Directors.
We currently utilize net interest income simulation and economic value of equity (“EVE”) models to measure the potential impact to the Bank of future changes in interest rates. As of December 31, 2024, and December 31, 2023, the results of the models are monitored by guidelines prescribed by our Board of Directors.
As of December 31, 2023, the amount of liquid assets remained at a level management deemed adequate to ensure that, on a short and long-term basis, contractual liabilities, depositors’ withdrawal requirements, and other operational and client credit needs could be satisfied.
As of December 31, 2024, the amount of liquid assets remained at a level management deemed adequate to ensure that, on a short and long-term basis, contractual liabilities, depositors’ withdrawal requirements, and other operational and client credit needs could be satisfied.
(6) Represents net interest income on a tax equivalent basis divided by average total interest-earning assets. -41- Table of Contents Rate/Volume Analysis The following table presents, by category, the major factors that contributed to the changes in net interest income.
(6) Represents net interest income on a tax equivalent basis divided by average total interest-earning assets. -47- Table of Contents Rate/Volume Analysis The following table presents, by category, the major factors that contributed to the changes in net interest income.
The 2020 Notes bear interest at 5.75% annually from, and including, the date of initial issuance to, but excluding, September 15, 2025 or the date of earlier redemption, payable semi-annually in arrears on September 15 and December 15 of each year, commencing December 15, 2020.
The 2020 Notes bear interest at 5.75% annually from, and including, the date of initial issuance to, but excluding, June 15, 2025 or the date of earlier redemption, payable semi-annually in arrears on June 15 and December 15 of each year, commencing December 15, 2020.
The Company considers charging off loans, or a portion thereof, at the time the Company deems it has exhausted all means of collection. For additional information regarding loans, see Note 4 of the Notes to the Consolidated Financial Statements.
The Company considers charging off loans, or a portion thereof, at the time the Company deems it has exhausted all means of collection. For additional information regarding loans, see Note 5 of the Notes to the Consolidated Financial Statements.
As of December 31, 2023, the principal components of the investment portfolio are U.S. Treasury and Government Agency Obligations, Federal Agency Obligations including mortgage-backed securities, Obligations of U.S. States and Political Subdivisions, Corporate Bonds and other debt and equity securities.
As of December 31, 2024, the principal components of the investment portfolio are U.S. Treasury and Government Agency Obligations, Federal Agency Obligations including mortgage-backed securities, Obligations of U.S. States and Political Subdivisions, Corporate Bonds and other debt and equity securities.
General The following discussion and analysis present the more significant factors affecting the Company’s financial condition as of December 31, 2023 and 2022 and results of operations for each of the years in the three-year period ended December 31, 2023.
General The following discussion and analysis present the more significant factors affecting the Company’s financial condition as of December 31, 2024 and 2023 and results of operations for each of the years in the three-year period ended December 31, 2024.
Contractual Obligations and Other Commitments The following table summarizes contractual obligations as of December 31, 2023 and the effect such obligations are expected to have on liquidity and cash flows in future periods.
Contractual Obligations and Other Commitments The following table summarizes contractual obligations as of December 31, 2024 and the effect such obligations are expected to have on liquidity and cash flows in future periods.
The change in interest rate sensitivity was impacted by changes in overall market interest rates, updates to certain model assumptions, changes in short and intermediate-term fixed rate funding and by the deposit mix shift into certificates of deposit, from both noninterest-bearing and interest-bearing non-maturity deposits. -56- Table of Contents The following table illustrates the most recent results for EVE and NII as of December 31, 2023.
The change in interest rate sensitivity was impacted by changes in overall market interest rates, updates to certain model assumptions, changes in short and intermediate-term fixed rate funding and by the deposit mix shift into certificates of deposit, from both noninterest-bearing and interest-bearing non-maturity deposits. -62- Table of Contents The following table illustrates the most recent results for EVE and NII as of December 31, 2024.
Noninterest Expense Noninterest expenses for the full-year 2023 increased by $17.6 million, primarily due to increases in salaries and employee benefits of $7.0 million attributable to increased staff in both the revenue and back-office areas of the Bank, base salary increases and incentive compensation accruals.
Noninterest expenses for 2023 increased by $17.6 million, primarily due to increases in salaries and employee benefits of $7.0 million attributable to increased staff in both the revenue and back-office areas of the Bank, base salary increases and incentive compensation accruals.
Interest on the 2018 Notes was to be paid on February 1, May 1, August 1, and November 1, of each year to but excluding the stated maturity date, unless in any case previously redeemed. The 2018 Notes were redeemed in full on February 1, 2023.
Interest on the 2018 Notes was to be paid on February 1, May 1, August 1, and November 1, of each year to but excluding the stated maturity date, unless in any case previously redeemed.
There were no municipal securities, or corporate securities, of any single issuer exceeding 10% of stockholders’ equity as of December 31, 2023.
There were no municipal securities, or corporate securities, of any single issuer exceeding 10% of stockholders’ equity as of December 31, 2024.
The increase in average total loans is primarily attributable to higher loan originations. -40- Table of Contents Average Balance Sheets The following table sets forth certain information relating to our average assets and liabilities for the years ended December 31, 2023, 2022 and 2021 and reflects the average yield on assets and average cost of liabilities for the periods indicated.
The increase in average total loans is attributable to higher loan originations. -46- Table of Contents Average Balance Sheets The following table sets forth certain information relating to our average assets and liabilities for the years ended December 31, 2024, 2023 and 2022 and reflects the average yield on assets and average cost of liabilities for the periods indicated.
The issuers continue to make timely principal and interest payments on the securities. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income, net of applicable taxes. For additional information regarding the Company’s investment portfolio, see Note 3, Note 15 and Note 20 of the Notes to the Consolidated Financial Statements.
The issuers continue to make timely principal and interest payments on the securities. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income, net of applicable taxes. For additional information regarding the Company’s investment portfolio, see Note 4, Note 16 and Note 21 of the Notes to the Consolidated Financial Statements.
As of December 31, 2023, on a weighted average basis the most severe historical loss rate for our commercial and commercial real estate loans were 2.33% and 1.88%, respectively. -37- Table of Contents The Company’s quantitative component of allowance for credit losses for collectively evaluated loans is calculated with an economic forecast sourced from Moody’s.
As of December 31, 2024, on a weighted average basis the most severe historical loss rate for our commercial and commercial real estate loans were 2.37% and 1.96%, respectively. -42- Table of Contents The Company’s quantitative component of allowance for credit losses for collectively evaluated loans is calculated with an economic forecast sourced from Moody’s.
Based on our model, which was run as of December 31, 2023, we estimated that over the next three years, on a cumulative basis, a 200 basis-point instantaneous increase in the general level of interest rates would decrease our net interest income by 5.68%, while a 100 basis-point instantaneous decrease in interest rates would increase net interest income by 4.29%.
As of December 31, 2023, we estimated that over the next three years, on a cumulative basis, a 200 basis-point instantaneous increase in the general level of interest rates would decrease our net interest income by 5.68%, while a 100 basis-point instantaneous decrease in interest rates would increase net interest income by 4.29%.
Diluted earnings per share were $2.07 for 2023, a 31.2% decrease from $3.01 for 2022. The change in net income from 2022 to 2023 was attributable to the following: ● Decrease in net interest income of $47.0 million.
Diluted earnings per share were $2.07 for 2023, a 31.2% decrease from $3.01 for 2022. -44- Table of Contents The change in net income from 2022 to 2023 was primarily attributable to the following: ● Decrease in net interest income of $47.0 million.
As of December 31, 2023, net unrealized losses on securities available-for-sale, which are carried as a component of accumulated other comprehensive loss and included in stockholders’ equity, net of tax, amounted to $57.8 million as compared with net unrealized losses of $61.8 million as of December 31, 2022.
As of December 31, 2024, net unrealized losses on securities available-for-sale, which are carried as a component of accumulated other comprehensive loss and included in stockholders’ equity, net of tax, amounted to $69.6 million as compared with net unrealized losses of $57.8 million as of December 31, 2023.
Deposits were $7.5 billion, an increase of $0.2 billion from December 31, 2022. As of December 31, 2022, the Company’s total assets were $9.645 billion, an increase of $1.5 billion from December 31, 2021. Total loans (including loans held-for-sale) were $8.1 billion, an increase of $1.3 billion from December 31, 2021.
As of December 31, 2023, the Company’s total assets were $9.9 billion, an increase of $0.2 billion from December 31, 2022. Total loans (including loans held-for-sale) were $8.3 billion, an increase of $0.2 billion from December 31, 2022. Deposits were $7.5 billion, an increase of $0.2 billion from December 31, 2022.
Based on our model, which was run as of December 31, 2023, we estimated that over the next one-year period a 200 basis-point instantaneous increase in the general level of interest rates would decrease our net interest income by 9.25%, while a 100 basis-point instantaneous decrease in interest rates would increase net interest income by 5.34%.
As of December 31, 2023, we estimated that over the next one-year period a 200 basis-point instantaneous increase in the general level of interest rates would decrease our net interest income by 9.25%, while a 100 basis-point instantaneous decrease in interest rates would increase net interest income by 5.34%.
Within the various economic scenarios considered for this hypothetical sensitivity analysis, as of December 31, 2023, the quantitative estimate of the allowance for credit loss for collectively evaluated loans would increase by approximately $39.4 million under sole consideration of an adverse Moody’s economic forecast.
Within the various economic scenarios considered for this hypothetical sensitivity analysis, as of December 31, 2024, the quantitative estimate of the allowance for credit loss for collectively evaluated loans would increase by approximately $47.2 million under sole consideration of an adverse Moody’s economic forecast.
Therefore, effective for quarterly interest rate resets after July 3, 2023 the subordinated debentures’ floating rate will be three-month CME Term SOFR plus 2.85% plus a tenor spread adjust of 0.26161%. The rate as of December 31, 2023 was 8.50%.
Therefore, effective for quarterly interest rate resets after July 3, 2023 the subordinated debentures’ floating rate will be three-month CME Term SOFR plus 2.85% plus a tenor spread of 0.26161%. The rate as of December 31, 2024 was 7.70%.
As of December 31, 2023, liquid assets (cash and due from banks, interest-bearing deposits with banks and unencumbered investment securities) were $516.3 million, which represented 5.2% of total assets and 6.1% of total deposits and borrowings, compared to $760.0 million as of December 31, 2022, which represented 7.9% of total assets and 9.3% of total deposits and borrowings on such date.
As of December 31, 2024, liquid assets (cash and due from banks, interest-bearing deposits with banks and unencumbered investment securities) were $799.7 million, which represented 8.1% of total assets and 9.4% of total deposits and borrowings, compared to $516.3 million as of December 31, 2023, which represented 5.2% of total assets and 6.1% of total deposits and borrowings on such date.
As of December 31, 2023, the Bank had aggregate available and unused credit of approximately $3.3 billion, which represents the aforementioned facilities totaling $4.8 billion net of $1.5 billion in outstanding borrowings and letters of credit. As of December 31, 2023, outstanding commitments for the Bank to extend credit were approximately $1.2 billion.
As of December 31, 2024, the Bank had aggregate available and unused credit of approximately $3.0 billion, which represents the aforementioned facilities totaling $4.4 billion net of $1.4 billion in outstanding borrowings and letters of credit. As of December 31, 2024, outstanding commitments for the Bank to extend credit were approximately $1.1 billion.
For loans designated as nonaccrual with balances of less than $250,000, these loans are collectively evaluated, and, accordingly, are not separately identified for analysis or disclosures. Instruments will not be included in either collective or individual analysis. Individual analysis will establish a specific reserve for instruments in scope. -49- Table of Contents Asset Classification.
For loans designated as nonaccrual with balances of less than $250,000, these loans are collectively evaluated, and, accordingly, are not separately identified for analysis or disclosures. Instruments will not be included in either collective or individual analysis. Individual analysis will establish an individually evaluated allowance for instruments in scope. -55- Table of Contents Asset Classification.
The beta, which is the measurement of deposit rate sensitivity in response to market rate changes, on nonreciprocal brokered deposits tends to be higher than that of ICS and CDARS reciprocal deposits, as nonreciprocal brokered time deposits are more directly correlated to prevailing market rates of interest, while ICS and CDARs reciprocal deposits reflect the Bank’s relationship with reciprocal deposit clients and are more driven by a desire for FDIC insurance coverage than market leading rates. -60- Table of Contents The following table sets forth the year-to-date average balances and weighted average rates of our deposits for the periods indicated.
The beta, which is the measurement of deposit rate sensitivity in response to market rate changes, on nonreciprocal brokered deposits tends to be higher than that of ICS and CDARS reciprocal deposits, as nonreciprocal brokered time deposits are more directly correlated to prevailing market rates of interest, while ICS and CDARs reciprocal deposits reflect the Bank’s relationship with reciprocal deposit clients and are more driven by a desire for FDIC insurance coverage than market leading rates. -66- Table of Contents The following table sets forth information related to the uninsured deposit balances of the Bank.
Loans 90 days or greater past due and still accruing represent loans that are both well-secured and in the process of collection, as well as any purchased credit-deteriorated loans, net of fair value marks, which accrete income per the valuation at date of acquisition.
OREO represents property acquired through foreclosure in partial or full satisfaction of loans. Loans 90 days or greater past due and still accruing represent loans that are both well-secured and in the process of collection, as well as any purchased credit-deteriorated loans, net of fair value marks, which accrete income per the valuation at the date of acquisition.
Total Commercial Residential Real Estate Consumer Amount of % of Total Amount of % of Total Amount of % of Total Total Allowance Allowance Allowance Allowance Allowance Allowance Allowance (dollars in thousands) 2023 $ 77,649 94.7 % $ 4,320 5.2 % $ 5 0.1 % $ 81,974 2022 86,363 95.4 % 4,143 4.6 % 7 0.1 % 90,513 2021 75,138 95.4 % 3,628 4.6 % 7 0.1 % 78,773 -52- Table of Contents Investments For the year ended December 31, 2023, the amortized cost of investment securities, including equity securities, increased by $65.7 million to approximately $726.5 million or 7.9% of average earning assets, from $660.8 million, or 8.0% of average earning assets, for the year ended December 31, 2022.
Total Commercial Residential Real Estate Consumer Amount of % of Total Amount of % of Total Amount of % of Total Total Allowance Allowance Allowance Allowance Allowance Allowance Allowance (dollars in thousands) 2024 $ 78,119 94.5 % $ 4,561 5.5 % $ 5 0.0 % $ 82,685 2023 77,649 94.7 % 4,320 5.2 % 5 0.1 % 81,974 2022 86,363 95.4 % 4,143 4.6 % 7 0.1 % 90,513 -58- Table of Contents Investments For the year ended December 31, 2024, the average amortized cost of investment securities, including equity securities, increased by $6.8 million to approximately $733.3 million or 8.0% of average earning assets, from $726.5 million, or 7.9% of average earning assets, for the year ended December 31, 2023.
During the year ended December 31, 2023, rate related factors increased investment revenue by $2.9 million and volume related factors increased investment revenue by $2.0 million. The tax-equivalent yield on investments increased by 43 basis points to 3.10% from a yield of 2.67% during the year ended December 31, 2022.
During the year ended December 31, 2024, rate related factors increased investment revenue by $1.5 million and volume related factors increased investment revenue by $0.2 million. The tax-equivalent yield on investments increased by 21 basis points to 3.31% from a yield of 3.10% during the year ended December 31, 2023.
The MD&A should be read in conjunction with the consolidated financial statements, notes to consolidated financial statements and other information contained in this report. -38- Table of Contents Operating Results Overview 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.
The MD&A should be read in conjunction with the consolidated financial statements, notes to consolidated financial statements and other information contained in this report. -43- Table of Contents Operating Results Overview Net income available to common stockholders for the year ended December 31, 2024 was $67.8 million, a decrease of $13.2 million, or 16.3%, compared to net income of $81.0 million for 2023.
The decrease in income tax expense in 2023 when compared to 2022 was primarily the result of lower taxable income. The increase in income tax expense in 2022 when compared to 2021 was also primarily the result of higher taxable income. The effective tax rates were 25.6% in 2023, 26.9% in 2022 and 25.5% for 2021.
The decrease in income tax expense in 2024 when compared to 2023 and 2022 was primarily the result of lower taxable income. The effective tax rates were 25.1% in 2024, 25.6% in 2023 and 26.9% for 2022.
The following table sets forth, as of the dates indicated, the amount of the Company’s nonaccrual loans, other real estate owned (“OREO”), and loans past due 90 days or greater and still accruing: December 31, December 31, December 31, 2023 2022 2021 Nonaccrual loans $ 52,524 $ 44,454 $ 61,700 OREO - 264 - Total nonperforming assets $ 52,524 $ 44,718 $ 61,700 Loans 90 days or greater past due and still accruing (PCD) $ - $ 5,591 $ 13,531 Nonaccrual loans to loans receivable 0.63 % 0.55 % 0.90 % Nonperforming assets to total assets 0.53 0.46 0.76 Allowance for Credit Losses and Related Provision The allowance for credit losses is an estimate of current expected credit losses considering available information relevant to assessing collectability of cash flows over the contractual term of the financial assets necessary to cover lifetime expected credit losses inherent in financial assets at the balance sheet date.
The following table sets forth, as of the dates indicated, the amount of the Company’s nonaccrual loans, other real estate owned (“OREO”), and loans past due 90 days or greater and still accruing: December 31, December 31, 2024 2023 Nonaccrual loans $ 57,310 $ 52,524 OREO - - Total nonperforming assets $ 57,310 $ 52,524 Loans 90 days or greater past due and still accruing $ - $ - Nonaccrual loans to loans receivable 0.69 % 0.63 % Nonperforming assets to total assets 0.58 0.53 Allowance for Credit Losses and Related Provision The allowance for credit losses is an estimate of current expected credit losses considering available information relevant to assessing collectability of cash flows over the contractual term of the financial assets necessary to cover lifetime expected credit losses inherent in financial assets at the balance sheet date.
The Company’s allowance for credit losses for collectively evaluated loans totaled $80.6 million as of December 31, 2023, which included $71.6 million of allowance related to commercial and commercial real estate loans. Of the $71.6 million allowance related to commercial and commercial real estate loans, $24.1 million was attributable to qualitative loss factors.
The Company’s allowance for credit losses for collectively evaluated loans totaled $81.2 million as of December 31, 2024, which included $71.6 million of allowance related to commercial and commercial real estate loans. Of the $71.6 million allowance related to commercial and commercial real estate loans, $32.0 million was attributable to qualitative loss factors.
The table below sets forth information on our classified loans and loans designated as special mention (excluding loans held-for-sale) as of the dates presented: 2023 2022 (dollars in thousands) Classified Loans: Substandard $ 58,509 $ 120,330 Doubtful - - Loss - - Total classified loans 58,509 120,330 Special Mention Loans 54,168 62,105 Total classified and special mention loans $ 112,677 $ 182,435 During the year ended December 31, 2023, “substandard” loans and “doubtful” loans, which include lower credit quality loans which possess higher risk characteristics than “special mention” loans, decreased to $58.5 million, or 0.7% of loans receivable, as of December 31, 2023 from $120.3 million, or 1.5% of loans receivable, as of December 31, 2022.
The table below sets forth information on our classified loans and loans designated as special mention (excluding loans held-for-sale) as of the dates presented: 2024 2023 (dollars in thousands) Classified Loans: Substandard $ 72,399 $ 58,509 Doubtful - - Loss - - Total classified loans 72,399 58,509 Special Mention Loans 149,375 54,168 Total classified and special mention loans $ 221,774 $ 112,677 During the year ended December 31, 2024, “substandard” loans and “doubtful” loans, which include lower credit quality loans which possess higher risk characteristics than “special mention” loans, increased to $72.4 million, or 0.9% of loans receivable, as of December 31, 2024 from $58.5 million, or 0.7% of loans receivable, as of December 31, 2023.
The expected credit loss for unfunded loan commitments is reported on the Consolidated Statement of Financial Condition in “Other Liabilities”. As of December 31, 2023, the allowance for credit losses for loans was $82.0 million, a decrease of $8.5 million, or 9.4%, from $90.5 million as of December 31, 2022.
The expected credit loss for unfunded loan commitments is reported on the Consolidated Statement of Financial Condition in “Other Liabilities”. As of December 31, 2024, the allowance for credit losses for loans was $82.7 million, an increase of $0.7 million, or 0.9%, from $82.0 million as of December 31, 2023.
As of December 31, 2023 As of December 31, 2022 Balance Balance (dollars in thousands) As stated in FFIEC 041-Consolidated Report of Condition, schedule RC-O: Total Bank unconsolidated deposits (including affiliate and subsidiary accounts) $ 11,243,254 $ 10,670,491 Estimated uninsured deposits 6,152,454 6,533,537 The Bank, on a consolidated basis: Total deposits $ 7,536,202 $ 7,356,622 Estimated uninsured deposits (excluding affiliate and subsidiary accounts) 2,388,545 3,148,407 -61- Table of Contents The following table sets forth the distribution of total actual deposit accounts, by account types for the periods indicated.
As of December 31, 2024 As of December 31, 2023 Balance Balance (dollars in thousands) As stated in FFIEC 041-Consolidated Report of Condition, schedule RC-O: Total Bank unconsolidated deposits (including affiliate and subsidiary accounts) $ 11,196,115 $ 11,243,254 Estimated uninsured deposits 7,536,202 6,152,454 The Bank, on a consolidated basis: Total deposits $ 6,883,241 $ 7,536,202 Estimated uninsured deposits (excluding affiliate and subsidiary accounts) 2,712,798 2,388,545 The following table sets forth the distribution of total actual deposit accounts, by account types for the periods indicated.
The decrease was primarily due to changes in forecasted macroeconomic conditions. ● Increase in noninterest income of $0.7 million, primarily due to decreases in net losses on equity securities of $1.4 million and income on bank owned life insurance of $0.7 million, partially offset by decreases in deposit, loan and other income of $1.4 million. ● Decrease in income tax expense of $16.1 million resulting primarily from lower taxable income.
The decrease was primarily due to changes in forecasted macroeconomic conditions. ● Increase in noninterest income of $0.7 million, primarily due to decreases in net losses on equity securities of $1.4 million and income on bank owned life insurance of $0.7 million, partially offset by decreases in deposit, loan and other income of $1.4 million. ● Decrease in income tax expense of $16.1 million resulting primarily from lower taxable income. -45- Table of Contents Net Interest Income Fully taxable equivalent net interest income for 2024 totaled $250.7 million, a decrease of $7.6 million, or 2.9%, from 2023.
The quantitative component of our ACL for loans on collectively evaluated loans, which is largely based on a selection of various economic forecasts, increased by $3.4 million as of December 31, 2023 when compared to December 31, 2022. This increase was primarily attributable to organic growth of $0.3 billion in collectively evaluated loans.
The quantitative component of our ACL for collectively evaluated loans, which is largely based on a selection of various economic forecasts, decreased by $7.4 million as of December 31, 2024 when compared to December 31, 2023. This decrease was primarily attributable to a decrease in collectively evaluated loans of $54.4 million.
As of December 31, 2023, not included in the above liquid assets were securities with a market value of $276.0 million which were pledged to either the Federal Reserve Bank’s Bank Term Funding Program (“BTFP”), or the Federal Home Loan Bank, which support aggregate unutilized borrowing capacity of $300.5 million as of December 31, 2023. -58- Table of Contents The Bank is a member of the Federal Home Loan Bank of New York and, based on available qualified collateral as of December 31, 2023, had the ability to borrow $2.8 billion.
As of December 31, 2024, not included in the above liquid assets were securities with a market value of $102.5 million which were pledged to the Federal Home Loan Bank, which support aggregate unutilized borrowing capacity of $95.2 million as of December 31, 2024. -64- Table of Contents The Bank is a member of the Federal Home Loan Bank of New York and, based on available qualified collateral as of December 31, 2024, had the ability to borrow $2.5 billion.
Other securities do not have a contractual maturity and are included in the “Due in 1 year or less” maturity in the table above. -54- Table of Contents The following table sets forth the carrying value of the Company’s investment securities, as of December 31 for each of the last three years. 2023 2022 2021 (dollars in thousands) Investment Securities Available-for-Sale: Federal agency obligations $ 45,326 $ 44,450 $ 50,360 Residential mortgage pass-through securities 411,191 417,578 316,095 Commercial mortgage pass-through securities 21,564 21,104 10,469 Obligations of U.S.
Other securities do not have a contractual maturity and are included in the “Due in 1 year or less” maturity in the table above. -60- Table of Contents The following table sets forth the carrying value of the Company’s investment securities, as of December 31, for each of the last three years. 2024 2023 (dollars in thousands) Investment Securities Available-for-Sale: Federal agency obligations $ 84,670 $ 45,326 Residential mortgage pass-through securities 378,838 411,191 Commercial mortgage pass-through securities 20,892 21,564 Obligations of U.S.
As of December 31, 2022, we estimated that over the next three years, on a cumulative basis, a 200 basis-point instantaneous increase in the general level of interest rates would decrease our net interest income by 2.66%, while a 100 basis-point instantaneous decrease in interest rates would decrease net interest income by 3.99%.
Based on our model, which was run as of December 31, 2024, we estimated that over the next three years, on a cumulative basis, a 200 basis-point instantaneous increase in the general level of interest rates would decrease our net interest income by 2.08%, while a 100 basis-point instantaneous decrease in interest rates would increase net interest income by 0.37%.
As of December 31, 2022, the Company had a gross carrying value of $857.6 million, excluding a net fair value discount of $80 thousand, in notes outstanding at a weighted average interest rate of 4.32%.
As of December 31, 2024, the Company had a gross carrying value of $688.1 million, excluding a net fair value discount of $36 thousand, in notes outstanding at a weighted average interest rate of 4.49%.
The increase in provision for credit losses for the year ended December 31, 2022 reflected strong organic loan growth and changes in forecasted macroeconomic conditions. -42- Table of Contents Noninterest Income Noninterest income for the full-year 2023 increased by $0.7 million, or 5.7%, to $14.0 million from $13.2 million in 2022.
The decrease in provision for credit losses for the year ended December 31, 2024 reflected changes in forecasted macroeconomic conditions, partially offset by organic loan growth. -48- Table of Contents Noninterest Income Noninterest income for 2024 increased by $2.7 million, or 19.5%, to $16.7 million from $14.0 million in 2023.
Our EVE as of December 31, 2022, would decrease by 10.51% with an instantaneous rate shock of up 200 basis points, and decrease by 1.13% with an instantaneous rate shock of down 100 basis points.
Our EVE as of December 31, 2024, would decrease by 7.87% with an instantaneous rate shock of up 200 basis points, and increase by 1.67% with an instantaneous rate shock of down 100 basis points.
The Bank also has two credit facilities established with the Federal Reserve Bank of New York for direct discount window borrowings and BTFP capacity based on pledged collateral and had the ability to borrow $1.6 billion as of December 31, 2023. The BTFP is scheduled to cease making new loans on March 11, 2024.
The Bank also has a credit facility established with the Federal Reserve Bank of New York for direct discount window borrowings based on pledged collateral and had the ability to borrow $1.6 billion as of December 31, 2024.
Total demand deposits as of December 31, 2023 include $1.1 billion in ICS reciprocal deposits, compared to $272 million as of December 31, 2022. Total time deposits as of December 31, 2023 include $96 million in CDARS, compared to $3 million as of December 31, 2022.
Total interest-bearing demand deposits as of both December 31, 2024 and December 31, 2023 include $1.0 billion in ICS reciprocal deposits. Total time deposits as of December 31, 2024 include $60.3 million in CDARS, compared to $96.0 million as of December 31, 2023.
Clients, who are Federal Deposit Insurance Corporation (“FDIC”) insurance sensitive, are able to place large dollar deposits with the Company and the Company utilizes ICS and CDARS, under which the Bank receives a reciprocal deposit back in return to place those funds into non-maturity accounts, or certificates of deposit, issued by other banks in the IntraFi Network.
Clients, who are Federal Deposit Insurance Corporation (“FDIC”) insurance sensitive, are able to place large dollar deposits with the Company and the Company utilizes CDARS to place those funds into certificates of deposit issued by other banks in the Network.
As of December 31, 2020, the variable interest rate was 4.16%, all costs related to 2015 issuance had been amortized and the 2015 Notes were redeemed in full on January 1, 2021. -65- Table of Contents Preferred Stock On August 19, 2021, the Company completed an underwritten public offering of 115,000 shares, or $115 million in aggregate liquidation preference, of its depositary shares, each representing a 1/40th interest in a share of the Company’s 5.25% Fixed-Rate Non-Cumulative Perpetual Preferred Stock, Series A, no par value, with a liquidation preference of $1,000 per share.
The 2018 Notes were redeemed in full on February 1, 2023. -70- Table of Contents Preferred Stock On August 19, 2021, the Company completed an underwritten public offering of 115,000 shares, or $115 million in aggregate liquidation preference, of its depositary shares, each representing a 1/40th interest in a share of the Company’s 5.25% Fixed-Rate Non-Cumulative Perpetual Preferred Stock, Series A, no par value, with a liquidation preference of $1,000 per share.
The loan portfolio also represents the largest asset type on the Company’s Consolidated Statements of Condition. Management believes the following information may enable investors to better understand the changes in our allowance for credit losses for loans. The Company’s allowance for credit losses ("ACL") for loans totaled $82.0 million and $90.5 million as of December 31, 2023 and 2022, respectively.
The loan portfolio also represents the largest asset type on the Company’s Consolidated Statements of Financial Condition. Management believes the following information may enable investors to better understand the changes in our allowance for credit losses for loans.
The decrease in the allowance for credit losses was primarily driven by net charge-offs of $17.0 million, partially offset by $8.4 million in provision for credit losses. -51- Table of Contents The allowance for credit losses for loans as a percentage of loans receivable was 0.98% as of December 31, 2023 and 1.12% as of December 31, 2022.
The increase in the allowance for credit losses was primarily driven by $14.0 million in provision for credit losses on loans, partially offset by net charge-offs of $13.3 million. -57- Table of Contents The allowance for credit losses for loans as a percentage of loans receivable was 1.00% as of December 31, 2024 and 0.98% as of December 31, 2023.
As of December 31, 2022, we estimated that over the next one-year period a 200 basis-point instantaneous increase in the general level of interest rates would decrease our net interest income by 2.22%, while a 100 basis-point instantaneous decrease in interest rates would decrease net interest income by 2.01%.
Based on our model, which was run as of December 31, 2024, we estimated that over the next one-year period a 200 basis-point instantaneous increase in the general level of interest rates would decrease our net interest income by 8.02%, while a 100 basis-point instantaneous decrease in interest rates would increase net interest income by 3.56%.
December 31, December 31, December 31, 2023 2022 2021 Balance as of January 1, $ 90,513 $ 78,773 $ 79,226 CECL Day 1 Adjustment - - 6,557 Balance as of January 1, as adjusted for changes in accounting principal 90,513 78,773 85,783 Charge-offs: Commercial 14,888 2,612 382 Commercial real estate 2,142 2,819 1,780 Residential real estate 18 9 235 Consumer 1 3 - Total charge-offs 17,049 5,443 2,397 Recoveries: Commercial 10 54 289 Commercial real estate - - 85 Residential real estate 68 63 20 Consumer 8 - 11 Total recoveries 86 117 405 Net charge-offs 16,963 5,326 1,992 Provision for (reversal of) credit losses for loans 8,424 17,066 (5,018 ) Balance at end of year $ 81,974 $ 90,513 $ 78,773 Ratio of net charge-offs during the year to average loans receivable outstanding during the year 0.23 % 0.07 % 0.03 % Allowance for credit losses for loans as a percentage of loans receivable 0.98 1.12 1.15 For additional information regarding loans, see Note 4 of the Notes to the Consolidated Financial Statements.
December 31, December 31, December 31, 2024 2023 2022 Balance as of January 1, $ 81,974 $ 90,513 $ 78,773 Charge-offs: Commercial 3,286 14,888 2,612 Commercial real estate 10,416 2,142 2,819 Residential real estate - 18 9 Consumer - 1 3 Total charge-offs 13,702 17,049 5,443 Recoveries: Commercial 392 10 54 Commercial real estate 31 - - Residential real estate 6 68 63 Consumer - 8 - Total recoveries 429 86 117 Net charge-offs 13,273 16,963 5,326 Provision for credit losses for loans 13,984 8,424 17,066 Balance at end of year $ 82,685 $ 81,974 $ 90,513 Ratio of net charge-offs during the year to average loans receivable outstanding during the year 0.16 % 0.23 % 0.07 % Allowance for credit losses for loans as a percentage of loans receivable 1.00 0.98 1.12 For additional information regarding loans, see Note 5 of the Notes to the Consolidated Financial Statements.
Our results of operations depend primarily on our net interest income, which is the difference between the interest earned on our interest-earning assets and the interest paid on funds borrowed to support those assets, primarily deposits.
We believe that the Bank’s continued growth and profitability demonstrate the need for and success of our brand of banking. Our results of operations depend primarily on our net interest income, which is the difference between the interest earned on our interest-earning assets and the interest paid on funds borrowed to support those assets, primarily deposits.
During 2023, 2022 and 2021, there were no sales from the Company’s available-for-sale portfolio. The Company had a $195 thousand gain on the redemption of available-for-sale securities during 2021. The Company had no impairment charges in 2023, 2022 and 2021.
During 2024, 2023 and 2022, there were no sales from the Company’s available-for-sale portfolio. The Company had no impairment charges in 2024, 2023 and 2022.
Years Ended December 31, 2023 2022 2021 Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/ (Tax-Equivalent Basis) Balance Expense Rate Balance Expense Rate Balance Expense Rate (dollars in thousands) ASSETS Interest-earning assets: Investment securities (1) (2) $ 726,487 $ 22,541 3.10 % $ 660,760 $ 17,640 2.67 % $ 464,342 $ 7,455 1.61 % Loans receivable and loans held-for-sale (2) (3) (4) 8,179,853 455,940 5.57 % 7,380,584 354,450 4.80 % 6,419,610 294,686 4.59 % Federal funds sold and interest-earning deposits with banks 220,143 11,104 5.04 % 186,205 2,493 1.34 % 322,692 405 0.13 % Restricted investment in bank stocks 44,389 3,662 8.25 % 36,744 1,655 4.50 % 20,797 971 4.67 % Total interest-earning assets 9,170,872 493,247 5.38 % 8,264,293 376,238 4.55 % 7,227,441 303,517 4.20 % Noninterest-earning assets: Allowance for credit losses (89,119 ) (84,209 ) (79,863 ) Noninterest-earning assets 613,642 602,657 587,650 Total assets $ 9,695,395 $ 8,782,741 $ 7,735,228 LIABILITIES & STOCKHOLDERS’ EQUITY Interest-bearing liabilities: Time deposits $ 2,529,892 $ 92,969 3.67 % $ 1,449,826 $ 21,331 1.47 % $ 1,300,270 $ 14,813 1.14 % Other interest-bearing deposits 3,667,096 113,207 3.09 % 3,702,773 29,230 0.79 % 3,451,765 9,955 0.29 % Total interest-bearing deposits 6,196,988 206,176 3.33 % 5,152,599 50,561 0.98 % 4,752,035 24,768 0.52 % Borrowings 792,239 22,453 2.83 % 661,729 12,188 1.84 % 318,700 5,300 1.66 % Subordinated debentures 85,249 6,234 7.31 % 153,092 8,759 5.72 % 153,199 8,669 5.66 % Finance obligation 1,630 96 5.89 % 1,838 119 6.47 % 2,041 123 6.03 % Total interest-bearing liabilities 7,076,106 234,959 3.32 % 5,969,258 71,627 1.20 % 5,225,975 38,860 0.74 % Noninterest-bearing deposits 1,332,809 1,612,040 1,454,148 Other liabilities 89,122 51,048 48,082 Stockholders’ equity 1,197,358 1,150,395 1,007,023 Total liabilities and stockholders’ equity $ 9,695,395 $ 8,782,741 $ 7,735,228 Net interest income/interest rate spread (5) 258,288 2.06 % 304,611 3.35 % 264,657 3.46 % Tax-equivalent adjustment (3,182 ) (2,492 ) (1,779 ) Net interest income as reported $ 255,106 $ 302,119 $ 262,878 Net interest margin (6) 2.82 % 3.69 % 3.66 % (1) Average balances are based on amortized cost.
Years Ended December 31, 2024 2023 2022 Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/ (Tax-Equivalent Basis) Balance Expense Rate Balance Expense Rate Balance Expense Rate (dollars in thousands) ASSETS Interest-earning assets: Investment securities (1) (2) $ 733,261 $ 24,261 3.31 % $ 726,487 $ 22,541 3.10 % $ 660,760 $ 17,640 2.67 % Loans receivable and loans held-for-sale (2) (3) (4) 8,192,738 479,994 5.86 % 8,179,853 455,940 5.57 % 7,380,584 354,450 4.80 % Federal funds sold and interest-earning deposits with banks 243,650 12,617 5.18 % 220,143 11,104 5.04 % 186,205 2,493 1.34 % Restricted investment in bank stocks 44,209 4,349 9.84 % 44,389 3,662 8.25 % 36,744 1,655 4.50 % Total interest-earning assets 9,213,858 521,221 5.66 % 9,170,872 493,247 5.38 % 8,264,293 376,238 4.55 % Noninterest-earning assets: Allowance for credit losses (83,993 ) (89,119 ) (84,209 ) Noninterest-earning assets 620,574 613,642 602,657 Total assets $ 9,750,439 $ 9,695,395 $ 8,782,741 LIABILITIES & STOCKHOLDERS’ EQUITY Interest-bearing liabilities: Time deposits $ 2,564,670 $ 114,555 4.47 % $ 2,529,892 $ 92,969 3.67 % $ 1,449,826 $ 21,331 1.47 % Other interest-bearing deposits 3,751,117 130,291 3.47 % 3,667,096 113,207 3.09 % 3,702,773 29,230 0.79 % Total interest-bearing deposits 6,315,787 244,846 3.88 % 6,196,988 206,176 3.33 % 5,152,599 50,561 0.98 % Borrowings 774,533 20,386 2.63 % 792,239 22,453 2.83 % 661,729 12,188 1.84 % Subordinated debentures 79,673 5,239 6.58 % 85,249 6,234 7.31 % 153,092 8,759 5.72 % Finance lease 1,382 81 5.86 % 1,630 96 5.89 % 1,838 119 6.47 % Total interest-bearing liabilities 7,171,375 270,552 3.77 % 7,076,106 234,959 3.32 % 5,969,258 71,627 1.20 % Noninterest-bearing deposits 1,268,839 1,332,809 1,612,040 Other liabilities 80,702 89,122 51,048 Stockholders’ equity 1,229,523 1,197,358 1,150,395 Total liabilities and stockholders’ equity $ 9,750,439 $ 9,695,395 $ 8,782,741 Net interest income/interest rate spread (5) 250,669 1.88 % 258,288 2.06 % 304,611 3.35 % Tax-equivalent adjustment (3,332 ) (3,182 ) (2,492 ) Net interest income as reported $ 247,337 $ 255,106 $ 302,119 Net interest margin (6) 2.72 % 2.82 % 3.69 % (1) Average balances are based on amortized cost.
Changes due to both volume and rate have been allocated in proportion to the relationship of the dollar amount change in each. 2023/2022 2022/2021 Increase (Decrease) Increase (Decrease) Due to Change in: Due to Change in: Average Average Net Average Average Net Volume Rate Change Volume Rate Change (dollars in thousands) Interest income: Investment securities: $ 2,039 $ 2,862 $ 4,901 $ 5,244 $ 4,941 $ 10,185 Loans receivable and loans held-for-sale 44,551 56,939 101,490 46,150 13,614 59,764 Federal funds sold and interest-earnings deposits with banks 1,712 6,899 8,611 (1,827 ) 3,915 2,088 Restricted investment in bank stocks 631 1,376 2,007 718 (34 ) 684 Total interest income: $ 48,933 $ 68,076 $ 117,009 $ 50,285 $ 22,436 $ 72,721 Interest expense: Savings, NOW, money market, interest checking $ (1,101 ) $ 85,078 $ 83,977 $ 1,981 $ 17,294 $ 19,275 Time deposits 39,690 31,949 71,639 2,200 4,317 6,517 Borrowings and subordinated debentures (1,262 ) 9,001 7,739 6,312 667 6,979 Finance obligation (12 ) (11 ) (23 ) (13 ) 9 (4 ) Total interest expense: $ 37,315 $ 126,017 $ 163,332 $ 10,480 $ 22,287 $ 32,767 Net interest income: $ 11,618 $ (57,941 ) $ (46,323 ) $ 39,805 $ 149 $ 39,954 Provision for (Reversal of) Credit Losses In determining the provision for credit losses, management considers national and local economic trends and conditions; trends in the portfolio including orientation to specific loan types or industries; experience, ability and depth of lending management in relation to the complexity of the portfolio; effects of changes in lending policies, trends in volume and terms of loans; levels and trends in delinquencies, individually analyzed loans and net charge-offs and the results of independent third party loan reviews.
Changes due to both volume and rate have been allocated in proportion to the relationship of the dollar amount change in each. 2024/2023 2023/2022 Increase (Decrease) Increase (Decrease) Due to Change in: Due to Change in: Average Average Net Average Average Net Volume Rate Change Volume Rate Change (dollars in thousands) Interest income: Investment securities: $ 224 $ 1,496 $ 1,720 $ 2,039 $ 2,862 $ 4,901 Loans receivable and loans held-for-sale 755 23,299 24,054 44,551 56,939 101,490 Federal funds sold and interest-earnings deposits with banks 1,217 296 1,513 1,712 6,899 8,611 Restricted investment in bank stocks (18 ) 705 687 631 1,376 2,007 Total interest income: $ 2,178 $ 25,796 $ 27,974 $ 48,933 $ 68,076 $ 117,009 Interest expense: Savings, NOW, money market, interest checking $ 2,918 $ 14,166 $ 17,084 $ (1,101 ) $ 85,078 $ 83,977 Time deposits 1,553 20,033 21,586 39,690 31,949 71,639 Borrowings and subordinated debentures (833 ) (2,229 ) (3,062 ) (1,262 ) 9,001 7,739 Finance obligation (15 ) - (15 ) (12 ) (11 ) (23 ) Total interest expense: $ 3,623 $ 31,970 $ 35,593 $ 37,315 $ 126,017 $ 163,332 Net interest income: $ (1,445 ) $ (6,174 ) $ (7,619 ) $ 11,618 $ (57,941 ) $ (46,323 ) Provision for Credit Losses In determining the provision for credit losses, management considers national and local economic trends and conditions; trends in the portfolio including orientation to specific loan types or industries; experience, ability and depth of lending management in relation to the complexity of the portfolio; effects of changes in lending policies, trends in volume and terms of loans; levels and trends in delinquencies, individually analyzed loans and net charge-offs and the results of independent third party loan reviews.
The qualitative component of our ACL for loans, which is largely based on management’s judgment of qualitative loss factors, was relatively unchanged, on an absolute basis, over the same period-of-time, as qualitative factor trends slightly improved over 2023, or largely remained unchanged.
The qualitative component of our ACL for loans, which is largely based on management’s judgment of qualitative loss factors, increased by $8.0 million on an absolute basis, over the same period-of-time, as qualitative factor trends increased over 2024.
The decrease was primarily due to decreases in net gains on loans held for sale of $2.1 million, gains on sale of branches of $0.7 million, net gains on sale/redemption of investment securities of $0.2 million and an increase in net losses on equity securities of $1.1 million, partially offset by increases in deposit, loan and other income of $0.9 million and income on bank owned life insurance of $0.8 million.
The increase was primarily due to increases in net gains on sale of loans held-for-sale of $1.0 million, bank owned life insurance of $0.8 million, deposit, loan and other income of $0.8 million and net gains on equity securities of $0.1 million. Noninterest income for 2023 increased by $0.7 million, or 5.7%, to $14.0 million from $13.2 million in 2022.
The following table sets forth the classification of our loans by loan portfolio segment for the periods presented.
Consumer loans remained essentially flat when compared to the prior year. The following table sets forth the classification of our loans by loan portfolio segment for the periods presented.
For information on risk-based capital and regulatory guidelines for the Parent Corporation and its bank subsidiary, see Note 15 to the Consolidated Financial Statements. The foregoing capital ratios are based in part on specific quantitative measures of assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices.
The foregoing capital ratios are based in part on specific quantitative measures of assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices.
December 31, 2023 December 31, 2022 Amount % of total Amount % of total (dollars in thousands) Demand, noninterest-bearing $ 1,259,364 16.7 % $ 1,501,614 20.4 % Demand, interest-bearing & NOW 3,326,989 44.1 3,085,613 41.9 Savings 418,478 5.6 375,205 5.1 Time 2,531,371 33.6 2,394,190 32.6 Total Deposits $ 7,536,202 100.0 % $ 7,356,622 100.0 % Total deposits increased by $180 million, or 2.4%, to $7.5 billion in 2023 from $7.4 billion in 2022.
December 31, 2024 December 31, 2023 Amount % of total Amount % of total (dollars in thousands) Demand, noninterest-bearing $ 1,422,044 18.2 % $ 1,259,364 16.7 % Demand, interest-bearing & NOW 3,248,731 41.5 3,326,989 44.1 Savings 592,139 7.6 418,478 5.6 Time 2,557,200 32.7 2,531,371 33.6 Total Deposits $ 7,820,114 100.0 % $ 7,536,202 100.0 % Total deposits increased by $283.9 million, or 3.8%, to $7.8 billion as of December 31, 2024 from $7.5 billion as of December 31, 2023.
This occurs in increments of less than the Federal Deposit Insurance Corporation (“FDIC”) insurance limits so that both the principal and interest are eligible for FDIC insurance coverage in amounts larger than the insured dollar amount.
This occurs in increments of less than the FDIC insurance limits so that both the principal and interest are eligible for FDIC insurance coverage in amounts larger than the insured dollar amount. Unless certain conditions are satisfied, the FDIC considers these funds as brokered deposits for certain reporting requirements.
December 31, 2023 December 31, 2022 Balance Percent of Total Balance Percent of Total (dollars in thousands) Owner-occupied Retail $ 208,685 22.4 % $ 204,581 23.2 % Office 102,886 11.1 113,901 12.9 Warehouse/Industrial 249,557 26.8 247,875 28.1 Mixed Use 116,046 12.5 129,371 14.7 Other 253,145 27.2 186,614 21.1 Total owner-occupied $ 930,319 100.0 % $ 882,342 100.0 % December 31, 2023 December 31, 2022 Balance Percent of Total Balance Percent of Total (dollars in thousands) Nonowner-occupied Retail $ 637,211 29.3 % $ 680,733 31.9 % Office 424,479 19.5 384,820 18.0 Warehouse/Industrial 233,518 10.7 233,266 10.9 Mixed Use 192,617 8.8 150,090 7.0 Other 689,760 31.7 687,982 32.2 Total nonowner-occupied $ 2,177,585 100.0 % $ 2,136,891 100.0 % -47- Table of Contents The following table sets forth the classification of our gross loans by loan portfolio segment and by fixed and adjustable-rate loans as of December 31, 2023 by remaining contractual maturity.
December 31, 2024 December 31, 2023 Balance Percent of Total Balance Percent of Total (dollars in thousands) Owner-occupied Retail $ 203,119 18.4 % $ 208,685 22.4 % Office 94,821 8.6 102,886 11.1 Warehouse/Industrial 247,413 22.5 249,557 26.8 Mixed Use 126,783 11.5 116,046 12.5 Other 428,898 39.0 253,145 27.2 Total owner-occupied $ 1,101,034 100.0 % $ 930,319 100.0 % December 31, 2024 December 31, 2023 Balance Percent of Total Balance Percent of Total (dollars in thousands) Nonowner-occupied Retail $ 612,431 31.1 % $ 637,211 29.3 % Office 420,059 21.4 424,479 19.5 Warehouse/Industrial 213,842 10.9 233,518 10.7 Mixed Use 127,604 6.5 192,617 8.8 Other 591,108 30.1 689,760 31.7 Total nonowner-occupied $ 1,965,044 100.0 % $ 2,177,585 100.0 % -53- Table of Contents The following table sets forth the classification of our gross loans by loan portfolio segment and by fixed and adjustable-rate loans as of December 31, 2024 by remaining contractual maturity.
December 31, 2023 December 31, 2022 Balance Loan-to-Value Balance Loan-to-Value (dollars in thousands) Commercial real estate loans Multifamily $ 2,553,401 61 % $ 2,618,087 62 % Nonowner-occupied 2,177,585 54 2,136,891 59 Owner-occupied 930,319 53 882,342 43 Land loans 234,563 45 160,125 38 Total commercial real estate loans (before discount) 5,895,868 56 % 5,797,445 57 % Fair value discount (323 ) (2,217 ) Total commercial real estate loans $ 5,895,545 $ 5,795,228 The table above is further broken down in the following table by geography: December 31, 2023 December 31, 2022 Balance Percent of Total Balance Percent of Total (dollars in thousands) Multifamily loans New Jersey $ 1,623,666 63.6 % $ 1,664,795 63.6 % New York 789,065 30.9 827,172 31.6 Florida 7,828 0.3 7,874 0.3 Connecticut 36,761 1.4 18,585 0.7 All Other States 96,081 3.8 99,661 3.8 Total multifamily loans $ 2,553,401 100.0 % $ 2,618,087 100.0 % December 31, 2023 December 31, 2022 Balance Percent of Total Balance Percent of Total (dollars in thousands) Nonowner-occupied New Jersey $ 972,907 44.7 % $ 901,823 42.2 % New York 778,842 35.8 815,905 38.2 Florida 205,178 9.4 204,029 9.5 Connecticut 80,067 3.7 86,205 4.0 All Other States 140,592 6.4 128,929 6.1 Total nonowner occupied $ 2,177,585 100.0 % $ 2,136,891 100.0 % December 31, 2023 December 31, 2022 Balance Percent of Total Balance Percent of Total (dollars in thousands) Owner-occupied New Jersey $ 474,905 51.1 % $ 486,483 55.1 % New York 267,990 28.8 251,870 28.5 Florida 69,989 7.5 55,593 6.3 Connecticut 5,887 0.6 4,991 0.6 All Other States 111,548 12.0 83,405 9.5 Total owner-occupied $ 930,319 100.0 % $ 882,342 100.0 % -46- Table of Contents December 31, 2023 December 31, 2022 Balance Percent of Total Balance Percent of Total (dollars in thousands) Land loans New Jersey $ 106,884 45.6 % $ 101,179 63.2 % New York 77,767 33.1 55,458 34.6 Florida 48,807 20.8 3,488 2.2 Connecticut - - - - All Other States 1,105 0.5 - - Total land $ 234,563 100.0 % $ 160,125 100.0 % In addition, the following tables presents further detail with respect to our owner-occupied and nonowner-occupied borrower concentrations included in the commercial real estate segment.
December 31, 2024 December 31, 2023 Balance Loan-to-Value Balance Loan-to-Value (dollars in thousands) Commercial real estate loans Multifamily $ 2,496,508 61 % $ 2,553,401 61 % Nonowner-occupied 1,965,044 53 2,177,585 54 Owner-occupied 1,101,034 52 930,319 53 Land loans 317,524 45 234,563 45 Total commercial real estate loans (before fair value adjustment) 5,880,110 56 % 5,895,868 56 % Fair value premium (discount) 569 (323 ) Total commercial real estate loans $ 5,880,679 $ 5,895,545 The table above is further broken down in the following table by geography: December 31, 2024 December 31, 2023 Balance Percent of Total Balance Percent of Total (dollars in thousands) Multifamily loans New Jersey $ 1,588,891 63.6 % $ 1,623,666 63.6 % New York 713,651 28.6 789,065 30.9 Florida 7,732 0.3 7,828 0.3 Connecticut 36,486 1.5 36,761 1.4 All Other States 149,748 6.0 96,081 3.8 Total multifamily loans $ 2,496,508 100.0 % $ 2,553,401 100.0 % December 31, 2024 December 31, 2023 Balance Percent of Total Balance Percent of Total (dollars in thousands) Nonowner-occupied New Jersey $ 796,785 40.5 % $ 972,907 44.7 % New York 730,145 37.2 778,842 35.8 Florida 162,184 8.3 205,178 9.4 Connecticut 47,083 2.4 80,067 3.7 All Other States 228,847 11.6 140,592 6.4 Total nonowner occupied $ 1,965,044 100.0 % $ 2,177,585 100.0 % December 31, 2024 December 31, 2023 Balance Percent of Total Balance Percent of Total (dollars in thousands) Owner-occupied New Jersey $ 509,151 46.3 % $ 474,905 51.1 % New York 312,514 28.4 267,990 28.8 Florida 46,540 4.2 69,989 7.5 Connecticut 36,636 3.3 5,887 0.6 All Other States 196,193 17.8 111,548 12.0 Total owner-occupied $ 1,101,034 100.0 % $ 930,319 100.0 % -52- Table of Contents December 31, 2024 December 31, 2023 Balance Percent of Total Balance Percent of Total (dollars in thousands) Land loans New Jersey $ 78,429 24.7 % $ 106,884 45.6 % New York 110,967 35.0 77,767 33.1 Florida 125,523 39.5 48,807 20.8 Connecticut - - - - All Other States 2,605 0.8 1,105 0.5 Total land $ 317,524 100.0 % $ 234,563 100.0 % In addition, the following tables present further detail with respect to our owner-occupied and nonowner-occupied borrower concentrations included in the commercial real estate segment.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeItem 7A. Quantitative and Qualitative Disclosures about Market Risk Interest Sensitivity Market Risk Interest rate risk management is our primary market risk. See “Item 7- Management’s Discussion and Analysis of Financial Condition and Results of Operation- Interest Rate Sensitivity Analysis” herein for a discussion of our management of our interest rate risk. -66- Table of Contents PART II
Biggest changeItem 7A. Quantitative and Qualitative Disclosures about Market Risk Interest Sensitivity Market Risk Interest rate risk management is our primary market risk. See “Item 7- Management’s Discussion and Analysis of Financial Condition and Results of Operation- Interest Rate Sensitivity Analysis” herein for a discussion of our management of our interest rate risk. -71- Table of Contents PART II

Other CNOB 10-K year-over-year comparisons