ConnectOne Bancorp, Inc. (CNOB): SWOT Analysis [Nov-2025 Updated]

ConnectOne Bancorp (CNOB) is a fascinating case study in post-merger integration and strategic risk management right now. They've successfully scaled up to nearly $14.0 billion in total assets and posted a strong Q3 2025 net income of $39.5 million, but that growth comes with a clear trade-off: a Commercial Real Estate (CRE) concentration ratio sitting at a high 438%, well above regulatory comfort. You need to know how they plan to expand their Net Interest Margin (NIM) to the projected 3.25% or above while defintely navigating the pressure to reduce that CRE exposure. Let's dive into the full 2025 SWOT to map out the real risks and opportunities.

ConnectOne Bancorp, Inc. (CNOB) - SWOT Analysis: Strengths

Post-Merger Scale with Total Assets of Nearly $14.0 Billion as of Q3 2025

The successful integration of The First of Long Island Corporation (FLIC) on June 1, 2025, has fundamentally reshaped ConnectOne Bancorp, Inc.'s (CNOB) balance sheet and market position. This merger immediately boosted the company's scale, moving it into a new tier of regional banking.

As of September 30, 2025, the company's total assets stood at a substantial $14.0 billion, up significantly from $9.9 billion at the end of 2024. This expanded footprint, particularly in the attractive New York/New Jersey/Long Island markets, gives ConnectOne a stronger platform for commercial and industrial (C&I) lending and deposit gathering. It's a game-changer for market reach and operational efficiency.

Exceptional Credit Quality with Nonperforming Assets at Just 0.28% of Total Assets

Despite the broader economic concerns and the integration of a new loan portfolio, ConnectOne has maintained exceptional asset quality, which is a core strength for any bank. The nonperforming assets (NPA) ratio is notably low, indicating disciplined underwriting and effective risk management.

As of Q3 2025, nonperforming assets as a percentage of total assets were just 0.28%. This is an historical low for the company and compares very favorably to many peers, suggesting a well-managed credit book. Additionally, annualized net charge-offs were below 0.20% for the quarter, further underscoring the stability of the loan portfolio.

Strong Profitability Turnaround, with Q3 2025 Net Income of $39.5 Million

The third quarter of 2025 marked a powerful return to profitability, demonstrating the earnings power of the combined entity following the merger-related expenses and initial credit provisioning in Q2 2025. The turnaround was driven by higher net interest income (NII) and a significant reduction in the provision for credit losses.

Net income available to common stockholders for Q3 2025 was $39.5 million, a sharp reversal from the net loss of $(21.8) million in the prior quarter. This performance was supported by a net interest margin (NIM) that widened by 5 basis points to 3.11%, a clear sign that the merger synergies are starting to flow through to the bottom line.

Robust Core Deposit Growth, Increasing at an Annualized Rate of 17% in Q2 2025

The ability to attract and retain core client deposits is a critical, low-cost funding advantage. ConnectOne showed significant success in this area, particularly in the quarter immediately following the merger closing.

In Q2 2025, true core client balances-which excludes volatile brokered deposits-increased by more than $500 million, reflecting a robust 17% annualized growth rate. This strong organic growth allowed the company to reduce its reliance on wholesale funding, specifically cutting Federal Home Loan Bank borrowings by about $200 million. That's a huge win for funding stability.

Return on Average Tangible Common Equity Reached 14.74% in Q3 2025

The Return on Average Tangible Common Equity (ROATCE) is a key measure of how effectively a bank is generating profit from shareholder capital, excluding intangible assets (like goodwill). The Q3 2025 result highlights the high-performing nature of the enlarged franchise.

The ROATCE reached an impressive 14.74% for the third quarter of 2025. This is a top-tier return metric for a regional bank and signals that the combined business model is highly accretive to shareholder value, even as the company continues to integrate the merger. Operating ROATCE, which excludes non-recurring items, was also strong at 12.55%.

Here is a quick snapshot of the key financial strengths driving the business:

The core strengths are clear: scale, pristine credit quality, and high returns on equity. The merger has defintely created a more formidable, high-performing regional bank.

ConnectOne Bancorp, Inc. (CNOB) - SWOT Analysis: Weaknesses

Commercial Real Estate (CRE) concentration ratio was 438% in Q2 2025, above regulatory guidance.

ConnectOne Bancorp's heavy exposure to Commercial Real Estate (CRE) is a clear vulnerability, especially in a rising rate environment. The bank's CRE concentration ratio stood at a high of 438% of its Tier 1 capital as of Q2 2025. This is significantly above the informal supervisory guidance of 300% for construction and land development loans, and even the broader 300% to 400% range that regulators flag for general CRE concentration.

This level of concentration means that a downturn in the regional real estate market, particularly in the New York metropolitan area where CNOB operates, could disproportionately impact the bank's asset quality and capital reserves. It's a classic risk-reward trade-off, but the risk profile here is elevated.

Here's the quick math on the exposure:

• Total CRE Loans (Q2 2025): Approximately $6.13 billion (based on the 438% ratio).
• Tier 1 Capital (Q2 2025): Approximately $1.40 billion.

Tangible Common Equity (TCE) ratio is relatively low at 8.36%, below the internal 9% goal.

The Tangible Common Equity (TCE) ratio, which measures a bank's core capital against its tangible assets, is a key indicator of its ability to absorb unexpected losses. CNOB's TCE ratio of 8.36% in Q2 2025 is a weakness because it sits below the bank's own internal target of 9% and is on the lower end compared to many of its regional banking peers. This ratio is a defintely a focus point for investors and analysts.

A lower TCE ratio limits the bank's flexibility for growth, share buybacks, or navigating economic stress without needing to raise additional capital, which can be dilutive. It's a tight capital cushion.

Q2 2025 reported a net loss of $21.8 million due to merger-related expenses and provisions.

The second quarter of 2025 saw ConnectOne Bancorp report a net loss of $21.8 million. This loss was primarily driven by two factors: significant merger-related expenses and elevated loan loss provisions (money set aside for potential bad loans). While merger costs are one-time in nature, they still impact near-term profitability and investor sentiment.

The increased provisions, however, signal management's conservative view on future credit quality, especially given the high CRE concentration. This quarterly loss breaks the bank's recent trend of consistent profitability, raising questions about the immediate earnings power of the combined entity.

The key components of the Q2 2025 net loss:

Loan-to-Deposit ratio of 99% remains near the 100% threshold, limiting funding flexibility.

ConnectOne Bancorp's Loan-to-Deposit (LTD) ratio of 99% as of Q2 2025 is a structural weakness. This ratio indicates that for nearly every dollar of deposits the bank holds, it has lent out 99 cents. While a high LTD ratio suggests efficient use of funds, being so close to the 100% mark limits the bank's capacity to fund new loan growth purely through its core deposit base.

To support further loan growth, the bank must rely more heavily on wholesale funding (like brokered deposits or Federal Home Loan Bank advances), which are typically more expensive and less stable than core customer deposits. This increases the bank's overall cost of funds and introduces greater liquidity risk, especially if market conditions tighten. They simply don't have much slack in their funding.

ConnectOne Bancorp, Inc. (CNOB) - SWOT Analysis: Opportunities

The biggest opportunity for ConnectOne Bancorp, Inc. right now stems directly from the successful integration of the First of Long Island Corporation (FLIC) merger, which is already driving margin expansion and a stronger commercial pipeline. You should expect this momentum to translate into significant earnings growth as the full benefits of the deal materialize through 2025 and into 2026.

Net Interest Margin (NIM) is projected to expand to 3.25% or above by Q4 2025.

The trajectory for your Net Interest Margin (NIM) is a clear tailwind. The merger with FLIC has been instrumental in optimizing the deposit mix, helping to lower the average cost of deposits. This is why the NIM already widened to 3.11% in the third quarter of 2025, up from 3.06% in the second quarter of 2025.

Management is defintely confident, projecting the NIM to be at 3.25% or even above for the fourth quarter of 2025. The spot margin at the end of Q3 2025 was already higher than 3.20%, which gives that Q4 projection a lot of credibility. What this estimate hides is the underlying margin potential, which management estimates could be materially higher, potentially over 3.50%, by excluding temporary drags like a redeemed subordinated note and excess cash.

The FLIC merger is projected to deliver approximately $9.8 million in quarterly earnings accretion for 2025.

The financial rationale for the FLIC merger is strong and is already delivering value. The transaction is projected to provide earnings accretion of approximately $9.8 million per quarter in 2025. This immediate boost is a result of cost synergies and the enhanced revenue-generating capacity of the combined entity.

Here's the quick math: the merger, completed on June 1, 2025, created a combined institution with approximately $14 billion in total assets, $11 billion in total deposits, and $11 billion in total loans. That scale alone makes ConnectOne Bancorp a much more formidable competitor in the New York Metro area. The successful integration, including a swift systems conversion, is already driving this financial momentum.

Leverage the expanded geographic footprint into the Long Island and New York Metro markets for new client acquisition.

The merger has fundamentally changed the geographic reach of ConnectOne Bancorp, solidifying its position as a premier New York-metro community bank. The branch network has expanded to over 60 locations across New York, New Jersey, and Southeast Florida.

The most important strategic gain is the material enhancement of the Long Island presence. The merger established ConnectOne as one of the top 5 banks on Long Island in terms of deposit market share. This expanded footprint is a direct opportunity for new client acquisition, particularly with small to middle-market businesses in:

• Nassau County, New York
• Suffolk County, New York
• The broader New York Metro area

Approximately 30% of the pro forma deposit franchise is now located in Nassau and Suffolk Counties, giving you a deep, local base to cross-sell commercial lending products.

Strong loan pipeline with a weighted average rate of 6.77%, supporting future net interest income.

A healthy loan pipeline is the engine of future Net Interest Income (NII) growth, and ConnectOne Bancorp's pipeline is robust. The weighted average rate on new loans in the pipeline stands at an attractive 6.77%. This high rate locks in strong future interest income, which is crucial in the current rate environment.

Loan originations were strong, totaling over $465 million in the third quarter of 2025. Looking ahead, management expects loan growth to accelerate in Q4 2025, with average loans increasing by more than 2% quarter-over-quarter, and could easily see growth in the 5% plus range in 2026. This pipeline is also highly diversified, which mitigates concentration risk:

The composition includes Commercial and Industrial (C&I), Commercial Real Estate (CRE), construction, SBA, and residential lending, ensuring a broad base for growth. The opportunity here is to execute on this pipeline and capture the high-rate income it promises.

ConnectOne Bancorp, Inc. (CNOB) - SWOT Analysis: Threats

The core threats to ConnectOne Bancorp, Inc. (CNOB) stem from the macro-economic environment and the inherent risks tied to its commercial lending focus. While the recent merger with The First of Long Island Corporation has boosted scale, it also amplifies exposure to systemic risks, particularly those affecting the New York metro area real estate market.

Sustained high interest rates could pressure deposit costs, despite recent NIM expansion.

You might look at ConnectOne Bancorp's recent Net Interest Margin (NIM) expansion and feel comfortable, but the threat of sustained high interest rates is real. The NIM widened to 3.11% in the third quarter of 2025, up from 3.06% in the sequential quarter. This was helped by a 12 basis-point decrease in the average cost of deposits in Q3 2025. Still, a prolonged 'higher-for-longer' rate environment means clients will keep demanding higher yields on their deposits, forcing the bank to pay more to retain its funding base.

The bank did redeem $75 million of high-rate subordinated debentures at a costly 9.92% in September 2025, which is a positive step. But, the competition for deposits is fierce, and that cost relief could be short-lived if the Federal Reserve doesn't start easing rates. We have to be defintely realistic about the upward pressure on the cost of funds.

Regulatory scrutiny on the high CRE concentration ratio, which must fall below 400%.

ConnectOne Bancorp's high concentration in Commercial Real Estate (CRE) loans is a constant source of regulatory attention. The regulatory guidance is clear: a bank's CRE concentration ratio-CRE loans to total risk-based capital-should ideally remain below 300%, and certainly not exceed 400% without robust risk management and capital buffers.

As of the second quarter of 2025, the bank's CRE concentration ratio stood at 438%, a direct result of the recent merger. Management is working to reduce this, projecting the ratio will fall below 400% by the end of 2025 through organic loan origination and capital accretion. Still, until that target is met, the high ratio exposes the bank to intense scrutiny, which can restrict future loan growth and require higher capital reserves, essentially slowing down the business.

Operating expenses are projected to rise to $56 million to $57 million per quarter in 2026.

While the merger with The First of Long Island Corporation is expected to generate long-term efficiencies, the near-term reality is higher operating costs. Noninterest expenses for Q3 2025 were $58.7 million, though the recurring run rate, excluding one-time charges, was closer to $55.8 million.

The threat here is expense creep, even after the merger integration dust settles. Management is guiding for recurring operating expenses to be approximately $55 million to $56 million for Q4 2025, then rising to between $56 million and $57 million per quarter during the first half of 2026. This increase, even if modest, puts pressure on earnings-per-share growth, forcing the bank to rely heavily on continued NIM expansion and loan growth to maintain profitability targets.

• Q3 2025 Operating Expenses (GAAP): $58.7 million
• Q4 2025 Expense Guidance (Recurring): $55 million to $56 million per quarter
• H1 2026 Expense Guidance (Recurring): $56 million to $57 million per quarter

Potential economic slowdown could impact the ability of CRE borrowers to service their loans.

The biggest unknown is the health of the economy, especially in the New York metropolitan area where ConnectOne Bancorp has significant exposure. While the current credit quality metrics are strong-nonperforming assets were low at 0.28% and annualized net charge-offs were below 0.20% in Q3 2025-a recession would stress the CRE portfolio. A downturn could impair the cash flow of commercial tenants and property owners, leading to higher delinquencies and loan losses.

The bank's provision for credit losses was $5.5 million in Q3 2025, which reflects a steady, healthy environment. However, the provision spiked to $35.7 million in Q2 2025, largely due to a one-time $27.4 million provision related to the merger. This shows how quickly the provision can jump when risk is re-evaluated. If the economy weakens, that provision number will rise again, directly hitting earnings. Management itself has caveated its projected 2026 loan growth of 5% plus on the state of the economy and loan demand.