ConnectOne Bancorp Inc.

Company Overview

Business Model: ConnectOne Bancorp, Inc. operates as a one-bank holding company, with its primary asset and sole operating subsidiary being ConnectOne Bank. ConnectOne Bank is a commercial bank providing a comprehensive suite of deposit and loan products and services. Its core clientele includes small and mid-sized businesses, local professionals, and individuals within the New York Metropolitan area and the Florida market. The Bank employs a "branch-lite" model, leveraging continuous investments in technology and top talent for efficient operations. Revenue is primarily generated from net interest income, supplemented by noninterest income from various fees (e.g., insufficient funds, wire transfers, debit card income, loan originations/sales/servicing, merchant services). The Bank offers a diverse range of lending products, including commercial, commercial real estate, commercial construction, residential real estate, home equity, and consumer loans, with a stated policy of not participating in the sub-prime lending market. Deposits serve as the primary funding source for its interest-earning assets. The Company also owns BoeFly, Inc., a fintech subsidiary of ConnectOne Bank, which operates a business-to-business marketplace connecting franchisors, franchisees, and lenders, utilizing proprietary technology for applicant vetting and capital access.

Market Position: As of December 31, 2025, ConnectOne Bancorp, Inc. is a modern financial services company with $14.0 billion in total assets. Its market presence is concentrated in the robust New York Metropolitan area, encompassing New Jersey (Bergen, Essex, Hudson, Monmouth, Morris, Union Counties), New York City (Manhattan, Queens), Long Island (Nassau, Suffolk Counties), and the Hudson Valley (Rockland, Orange, Westchester Counties). The Company has strategically expanded its geographic footprint into Florida, with an office in West Palm Beach opened in August 2022 and a loan production office in Orlando established in 2025. BoeFly, Inc. extends the Company's reach with a nationwide digital business marketplace. The Company competes by offering high-quality personalized service, direct access to decision-makers, and competitive interest rates and fees, focusing on attracting skilled business relationship officers. A significant characteristic of its loan portfolio is a concentration in commercial real estate loans, which constituted 70.3% of loans receivable ($8.1 billion) as of December 31, 2025. Under regulatory definitions (excluding owner-occupied), these commercial real estate loans represented 434% of the Bank’s Tier 1 capital plus the allowance for credit losses on loans at the same date.

Recent Strategic Developments:

• Acquisition of The First of Long Island Corporation: On June 1, 2025, the Company completed the acquisition of The First of Long Island Corporation, including its bank subsidiary, The First National Bank of Long Island. This merger significantly expanded the Company's branch network by 36 offices across Long Island and New York City boroughs, contributing substantially to asset and deposit growth in 2025. The total transaction consideration was approximately $270.8 million, comprising stock and cash.
• Subordinated Debt Issuance: To support its growth strategy, the Company issued $200 million in fixed-to-floating rate subordinated notes on May 15, 2025.
• Residential Portfolio Growth Initiative: ConnectOne Bank is actively building an enhanced lending team and investing in technology to increase its volume of loan originations secured by 1-4 family properties.
• Freezing of Legacy FLIC Plan: Effective September 30, 2025, the Company froze benefit accruals under the defined benefit pension plan acquired from The First of Long Island Corporation, resulting in a curtailment gain of $3.5 million recognized in noninterest income.
• Technology Investments: The Company continues to invest in technology to support its "branch-lite" operating model and enhance client service delivery channels.

Geographic Footprint:

• Primary Operational Regions: New York Metropolitan area, including Bergen, Essex, Hudson, Monmouth, Morris, and Union Counties in New Jersey; the Boroughs of Manhattan and Queens in New York City; Nassau, Orange, Rockland, Suffolk, and Westchester Counties in New York State.
• Key Markets: New York Metropolitan area and Florida.
• International Exposure: The Company does not make loans to borrowers outside of the United States. BoeFly, Inc. operates with a nationwide digital presence.

Financial Performance

Revenue Analysis

Profitability Metrics:

• Net Interest Margin (Tax-Equivalent Basis): 3.11% (2025), 2.72% (2024)
• Net Income Margin (Net Income Available to Common Stockholders / Total Revenue): 19.16% (2025), 25.67% (2024)
• Effective Tax Rate: 28.6% (2025), 25.1% (2024)

Investment in Growth:

• R&D Expenditure: Not explicitly stated. Information Technology and Communications expense was $20.0 million in 2025 (5.1% of total revenue) and $17.6 million in 2024 (6.7% of total revenue).
• Capital Expenditures: Purchases of premises and equipment were $5.4 million in 2025 and $3.8 million in 2024.
• Strategic Investments:
  • Acquisition of The First of Long Island Corporation for approximately $270.8 million (stock and cash) on June 1, 2025.
  • Issuance of $200 million in fixed-to-floating rate subordinated notes on May 15, 2025.
  • Building an enhanced lending team and investing in technology to support residential portfolio growth.

Business Segment Analysis

ConnectOne Bank (Community Bank Segment)

Financial Performance:

• Interest Income: $644.9 million (2025), $517.9 million (2024), $490.1 million (2023)
• Noninterest Income: $33.4 million (2025), $16.6 million (2024), $14.1 million (2023)
• Total Segment Income: $678.2 million (2025), $534.5 million (2024), $504.2 million (2023)
• Interest Expense: $276.8 million (2025), $265.3 million (2024), $229.8 million (2023)
• Provision for Credit Losses: $47.0 million (2025), $13.8 million (2024), $8.2 million (2023)
• Salaries and Employee Benefits: $111.4 million (2025), $90.1 million (2024), $88.2 million (2023)
• Segment Consolidated Net Income: $94.2 million (2025), $79.0 million (2024), $92.4 million (2023)
• Segment Assets: $13,993.8 million (2025), $9,870.8 million (2024), $9,848.5 million (2023)

Key Growth Drivers:

• The acquisition of The First of Long Island Corporation significantly contributed to the increase in assets and deposits in 2025.
• Loan growth, particularly in commercial real estate and residential real estate, is a key focus.
• Strategic emphasis on expanding core commercial operating accounts.
• Client acquisition and retention driven by quality business relationship officers and cross-selling of products.

Product Portfolio:

• Deposit Products: Personal and business checking accounts ("Totally Free Checking," "Simply Better Checking," "Small Business Checking," "Analysis Checking"), interest-bearing checking accounts ("Consumer Interest Checking," "Business Interest Checking"), money market accounts, time and savings accounts, retirement accounts.
• Cash Management Services: TreasuryDirect, Automated Clearing House origination, Remote Deposit Capture, digital invoicing.
• Lending Products: Commercial loans (secured/unsecured), revolving lines of credit, commercial mortgage loans, residential mortgages (1-4 family, 1-4 family investment properties, condominium, cooperative), home equity loans and lines of credit, bridge loans, and other personal purpose loans.
• Other Banking Services: Credit cards, wire transfers, safe deposit boxes, automated teller services, telephone, internet, and mobile banking.

Market Dynamics:

• Operates in a highly competitive banking environment, facing numerous commercial banks, savings institutions, mortgage bankers, credit unions, and non-bank financial service providers, including fintech companies.
• The Bank's strategy focuses on providing high-quality personal service, direct access to decision-makers, and competitive pricing to differentiate itself.
• Loan portfolio has a significant concentration in commercial real estate, which is subject to regulatory scrutiny and market fluctuations, particularly in the metropolitan New York area.
• The New York State multifamily loan portfolio is exposed to risks from changes in legislation and regulation, such as the New York Housing Stability and Tenant Protection Act of 2019.

BoeFly, Inc.

Financial Performance: Not separately disclosed; its performance is integrated into the overall ConnectOne Bank segment. Product Portfolio:

• A business-to-business fintech marketplace that connects franchisors and franchisees with funding solutions.
• Utilizes proprietary technology for franchisee applicant vetting.
• Facilitates efficient access to capital by referring qualified loan opportunities to ConnectOne Bank and an expanded network of external referral partners. Market Dynamics:
• Operates with a nationwide presence through its digital business marketplace.

Capital Allocation Strategy

Shareholder Returns:

• Share Repurchases: The Company did not repurchase any shares during 2025. In 2024, 283,270 shares were repurchased for $5.8 million. As of December 31, 2025, 641,118 shares remained authorized for repurchase under the September 2021 program.
• Dividend Payments:
  • Preferred Dividends: $6.0 million in 2025, 2024, and 2023.
  • Common Dividends: $32.0 million in 2025, $27.3 million in 2024, and $25.9 million in 2023.
• Future Capital Return Commitments: The Board of Directors authorized the repurchase of up to 2,000,000 shares in September 2021, with 641,118 shares remaining as of December 31, 2025.

Balance Sheet Position:

• Cash and Equivalents: $380.9 million (2025), $356.5 million (2024).
• Total Debt: $1,105.4 million (2025), $768.0 million (2024), comprising borrowings and subordinated debentures.
• Net Cash Position: -$724.5 million (Net Debt) as of December 31, 2025.
• Debt Maturity Profile:
  • Subordinated Debentures: $5.0 million due January 23, 2034 (floating rate: 3-month CME Term SOFR + 2.85% + 0.26161% tenor spread, 6.95% as of Dec 31, 2025). $200 million (2025 Notes) due June 1, 2030 (fixed 8.125% until June 1, 2030, then floating 3-month Term SOFR + 441.5 bps). $75 million (2020 Notes) were redeemed on September 15, 2025.
  • Federal Home Loan Bank Advances: $903.5 million (2025) at a weighted average interest rate of 3.97%. Maturities include $878.1 million in less than 1 year, $25.0 million in 2-3 years, and $0.2 million after 5 years.

Cash Flow Generation:

• Operating Cash Flow: $106.4 million (2025), $60.7 million (2024), $92.9 million (2023).

Operational Excellence

Production & Service Model: ConnectOne Bank operates a "branch-lite" model, emphasizing high-tech tools and services to expand its market reach and support client needs. The operational philosophy centers on attracting and retaining high-quality business relationship officers who proactively engage with clients. The Bank offers a full range of deposit and loan products, along with extensive banking services, to small and mid-sized businesses, local professionals, and individuals. Lending activities are primarily focused on secured loans, though short-term unsecured loans are offered to high-net-worth borrowers. A key operational practice is requiring loan clients to maintain deposit accounts with the Bank.

Supply Chain Architecture: Key Suppliers & Partners:

• Reciprocal Deposit Networks: IntraFi Network LLC and NBID network (operated by ModernFi) are utilized for reciprocal deposit services, enabling clients to place large deposits with extended FDIC insurance coverage.
• Economic Forecasting: Moody’s provides economic forecasts that are a key input for the Company's allowance for credit losses calculations.
• Credit Quality Validation: A third-party loan review firm is engaged for periodic validation of loan portfolio credit quality.
• Cybersecurity Services: A third-party vendor conducts annual penetration and vulnerability testing for cybersecurity.
• Internal Audit: The Bank's cybersecurity compliance program is audited by an outsourced internal auditor.

Facility Network:

• Manufacturing: Not applicable to the Company's banking services model.
• Research & Development: While not explicitly detailed as separate facilities, the Company makes continuous investments in technology and operates ConnectOne University for employee development, which includes training on new tools and services. BoeFly, Inc. develops and utilizes proprietary technology.
• Distribution:
  • Banking Offices: 59 banking offices across New Jersey (Bergen, Essex, Hudson, Monmouth, Morris, Union Counties), New York City (Manhattan, Queens), Long Island (Nassau, Suffolk Counties), Hudson Valley (Rockland, Orange, Westchester Counties), and one office in West Palm Beach, Florida.
  • Loan Production Office: One loan production office in Orlando, Florida.
  • Fintech Operations: BoeFly, Inc. operates from main offices in Boston, Massachusetts, and New York, with a nationwide digital business marketplace.

Operational Metrics:

• The "branch-lite" model is designed for a highly efficient operating environment.
• Maintaining a high level of asset quality is a key objective, with continuous monitoring of credit quality indicators and periodic third-party loan reviews.

Market Access & Customer Relationships

Go-to-Market Strategy: Distribution Channels:

• Direct Sales: The Company employs a strategy centered on quality business relationship officers who frequently engage with clients directly, rather than relying solely on branch visits.
• Channel Partners: Participation in the IntraFi Network LLC and NBID network facilitates reciprocal deposits for large-dollar clients. The Company also uses internet listing services (e.g., Rateline, QwickRate) for targeted deposit acquisition.
• Digital Platforms: ConnectOne Bank offers extensive electronic banking services, including internet and mobile banking, for both consumer and business clients via its website. BoeFly, Inc. operates a nationwide digital business marketplace.

Customer Portfolio:

• Enterprise Customers: The primary target market includes small to mid-sized businesses and local professionals.
• Strategic Partnerships: BoeFly, Inc. acts as a marketplace, connecting franchisors and franchisees with a network of partner banks, including ConnectOne Bank.
• Customer Concentration: The Company's strategy involves cross-selling products to grow existing client relationships, though specific concentration metrics are not detailed.

Geographic Revenue Distribution:

• New Jersey: 47.3% of multifamily loans, 35.6% of owner-occupied commercial real estate loans, 28.2% of nonowner-occupied commercial real estate loans, and 35.4% of land loans (before fair value adjustments) as of December 31, 2025.
• New York: 43.1% of multifamily loans, 38.6% of owner-occupied commercial real estate loans, 58.9% of nonowner-occupied commercial real estate loans, and 12.4% of land loans (before fair value adjustments) as of December 31, 2025.
• Florida: 1.3% of multifamily loans, 6.0% of owner-occupied commercial real estate loans, 6.5% of nonowner-occupied commercial real estate loans, and 36.8% of land loans (before fair value adjustments) as of December 31, 2025.
• Connecticut: 1.1% of multifamily loans, 3.8% of owner-occupied commercial real estate loans, and 1.3% of nonowner-occupied commercial real estate loans (before fair value adjustments) as of December 31, 2025.
• All Other States: 7.2% of multifamily loans, 16.0% of owner-occupied commercial real estate loans, 5.1% of nonowner-occupied commercial real estate loans, and 15.4% of land loans (before fair value adjustments) as of December 31, 2025.
• Growth Markets: The Company is actively expanding its presence in Florida.

Competitive Intelligence

Market Structure & Dynamics

Industry Characteristics: The banking industry is highly competitive and subject to extensive governmental supervision and regulation. The financial services market is increasingly influenced by rapid technological advancements, including telecommunications, data processing, automation, internet-based banking, debit cards, remote deposit capture, Artificial Intelligence (AI), Cryptocurrency, Blockchain, and Stablecoins. Competitive Positioning Matrix:

Direct Competitors

Primary Competitors: The Company faces substantial competition from numerous commercial banks, savings institutions, mortgage banking companies, credit unions, and other lenders. Many of these competitors possess greater financial resources, higher lending limits, wider geographic presence, more accessible branch locations, and the ability to offer a broader array of services or more favorable pricing. Emerging Competitive Threats: The banking industry also faces competition from non-bank technology firms, or fintech companies, which may offer products independently or through partnerships with insured depository institutions.

Competitive Response Strategy: ConnectOne Bancorp, Inc. aims to maintain its competitive advantage by providing superior personal service, ensuring client access to decision-makers, and offering competitive interest rates and fees. The Company focuses on hiring and retaining high-quality employees who seek greater responsibility. Strategic acquisitions, such as The First of Long Island Corporation, are utilized to expand market presence and asset base. The Company is also investing in technology and building specialized lending teams to drive growth in specific areas like the residential portfolio.

Risk Assessment Framework

Strategic & Market Risks

Market Dynamics:

• Interest Rate Risk: Changes in the interest rate environment can significantly impact net interest margins, loan prepayment speeds, origination/sale volumes, charge-offs, and loan loss provisions. Rapid shifts in interest rates could adversely affect net interest income and the economic value of equity.
• Economic Conditions: General economic downturns can impair the ability of borrowers, particularly small to medium-sized businesses, to repay loans, leading to increased credit losses.
• Commercial Real Estate Market Volatility: The Company has a significant concentration in commercial real estate loans (70.3% of loans receivable). The impact of remote or hybrid work models on the metropolitan New York area commercial real estate market is uncertain, potentially causing rent volatility and increasing default risk.
• New York State Multifamily Loan Portfolio: Changes in New York State legislation or regulation, such as the New York Housing Stability and Tenant Protection Act of 2019, could adversely affect the value of collateral and future net operating income of multifamily properties, impacting loan performance.
• Geopolitical Events: Political developments, wars, or other hostilities may disrupt or increase volatility in securities markets and broader economic conditions.

Technology Disruption:

• Technological Obsolescence: The Company's ability to compete depends on its capacity to anticipate and respond to rapid technological changes in financial services.
• Cybersecurity Risks: Increased reliance on electronic banking creates vulnerabilities to service interruptions or security breaches, potentially leading to client claims, reputational damage, and adverse effects on business operations.
• Artificial Intelligence (AI) Risks: The development and use of AI present challenges, including an uncertain and rapidly evolving legal/regulatory environment, potential for incorrect or biased output, risks of disclosing private/confidential information, intellectual property infringement, and limited transparency of AI models.

Operational & Execution Risks

Supply Chain Vulnerabilities:

• Supplier Dependency: Reliance on third-party vendors for critical services, such as cybersecurity testing and economic forecasts, introduces dependency risks.
• Geographic Concentration: A substantial portion of the loan portfolio is secured by real estate in New Jersey and New York, making it susceptible to localized real estate market downturns.
• Acquisition Integration: The Company has a history of growth through acquisitions (e.g., The First of Long Island Corporation, Bancorp of New Jersey, Inc., Greater Hudson Bank, BoeFly, LLC). Challenges include effectively integrating operations, retaining clients, attracting and retaining management for larger operations, and controlling costs. Failure to successfully integrate could adversely affect results.

Financial & Regulatory Risks

Market & Financial Risks:

• Liquidity Risk: Potential inability to meet obligations, fund growth opportunities, or pay dividends due to difficulties in liquidating assets or obtaining adequate funding. Access to funding sources could be impaired by market factors, adverse regulatory actions, or broader financial market disruptions.
• Investment Securities Value Declines: Declines in the fair value of available-for-sale investment securities, if credit-related, could require recording an allowance for credit losses, impacting earnings and regulatory capital.
• Goodwill Impairment: Significant negative industry or economic trends, reduced future cash flow estimates, or business disruptions could necessitate a non-cash charge to earnings for goodwill impairment.
• Dividend Restrictions: The Bank's ability to pay dividends to the Parent Corporation, and the Parent Corporation's ability to pay dividends to shareholders, is subject to regulatory limitations and capital requirements.
• Subordinated Debt: The Company has outstanding subordinated debentures with specific interest rates and maturity profiles, which contribute to its financial leverage.

Regulatory & Compliance Risks:

• Extensive Regulation: The Company is subject to comprehensive supervision, regulation, and control by federal (FRB, FDIC) and state (New Jersey Department of Banking and Insurance) authorities.
• Regulatory Changes: Future legislative or regulatory changes (e.g., Dodd-Frank Act, EGRRCPA, CRA revisions, USA PATRIOT Act) could increase compliance costs, restrict business activities, or require significant management resources.
• Capital Adequacy: Failure to maintain minimum regulatory capital ratios (Common Equity Tier 1, Tier 1, Total Capital, Leverage) and the capital conservation buffer could trigger regulatory actions, including constraints on dividends and equity repurchases.
• FDIC Assessments: Subject to deposit insurance assessments, including special assessments to cover losses to the Deposit Insurance Fund.
• Affiliate Transactions: Regulation W imposes restrictions on transactions with affiliates.
• Legal Proceedings: The Company is involved in a lawsuit claiming $11.1 million in damages related to suspicious wire transfer activity, which it intends to vigorously defend.

Geopolitical & External Risks

Geopolitical Exposure: The Company's operations are concentrated in specific geographic regions (New York Metropolitan area, Florida), making it susceptible to regional economic and political conditions. Natural Disasters & Health Emergencies: Events such as hurricanes, adverse weather, or health emergencies (e.g., pandemics) could disrupt operations, damage properties securing loans, negatively affect local economies, and increase loan delinquencies and credit losses.

Innovation & Technology Leadership

Research & Development Focus:

• Core Technology Areas: The Company makes continuous investments in technology to support its "branch-lite" operating model, enhance service delivery, and expand digital capabilities.
• Innovation Pipeline: BoeFly, Inc., a fintech subsidiary, utilizes proprietary technology for franchisee applicant vetting and capital access. The Company is also selectively incorporating Artificial Intelligence (AI) technology into various business processes, including fraud detection, services, and products.

Intellectual Property Portfolio: The filing does not provide specific details on the Company's intellectual property portfolio, patent strategy, or licensing programs.

Technology Partnerships: The filing does not explicitly detail specific technology partnerships beyond the general use of third-party vendors for services like cybersecurity testing.

Leadership & Governance

Executive Leadership Team

Leadership Continuity: The Company emphasizes internal talent development and promotion, with ConnectOne University offering leadership development and mentoring programs.

Board Composition: The filing lists the names of the Directors but does not provide details on their independence, expertise areas, or committee structure.

Human Capital Strategy

Workforce Composition:

• Total Employees: As of December 31, 2025, the Company had 750 full-time employees and 6 part-time and temporary employees.
• Geographic Distribution: Employees are located across the Company's operational regions in New Jersey, New York, and Florida.
• Skill Mix: The Company aims to build a team of financial experts and relationship specialists with diverse experience.

Talent Management: Acquisition & Retention:

• Hiring Strategy: The Company strives to be an employer of choice, fostering excellence, creativity, and professional growth. It seeks to hire and retain quality employees who desire greater responsibility.
• Retention Metrics: Employee retention is considered crucial for efficient operations and competitive positioning.
• Employee Value Proposition: Offers competitive wages, performance-based bonuses, incentive-based compensation, stock awards, a 401(k) Plan with a 100% match up to 5% of employee salaries, comprehensive medical/dental/vision plans, various insurance and voluntary benefits, commuter benefits, health savings accounts, flexible spending accounts, tuition reimbursement, paid time-off, disability, and sick/family leave. Employee appreciation events and hybrid scheduling options are also provided.

Diversity & Development:

• Development Programs: ConnectOne University offers formalized training, leadership development, continuing education, and mentorship programs. In 2025, 210 employees participated in leadership and mentoring programs. The Company sponsors two employees annually to attend the Stonier Graduate School of Banking and offers a tuition reimbursement program.
• Culture & Engagement: Employee feedback and concerns are solicited through surveys.
• Promotions: In 2025, 96 employees were promoted into new roles, reflecting a focus on internal advancement.
• FLIC Employee Integration: Following the merger with The First of Long Island Corporation on June 1, 2025, 206 former FLIC employees joined the Company, increasing the employee base by approximately 28%. Extensive efforts were undertaken for their integration, including education, training, mentorship, and pairing with CNOB navigators.

Environmental & Social Impact

Social Impact Initiatives:

• Community Investment: The Company strives to be an integral part of the communities it serves.

Business Cyclicality & Seasonality

Demand Patterns:

• Economic Sensitivity: The Company's business is sensitive to economic conditions, particularly given its focus on small to medium-sized businesses, which may be more vulnerable to economic downturns. The collectability of a substantial portion of the loan portfolio is susceptible to changes in the metropolitan New York real estate market.

Regulatory Environment & Compliance

Regulatory Framework: Industry-Specific Regulations:

• Supervisory Bodies: ConnectOne Bancorp, Inc. is supervised by the Board of Governors of the Federal Reserve System (FRB) as a bank holding company. ConnectOne Bank is regulated by the New Jersey Department of Banking and Insurance and the Federal Deposit Insurance Corporation (FDIC).
• Key Regulations: The Company and its subsidiaries are subject to the Bank Holding Company Act of 1956, Sections 23A and 23B of the Federal Reserve Act, the Gramm-Leach-Bliley Financial Services Modernization Act of 1999, the Community Reinvestment Act (CRA), the USA PATRIOT Act, the Dodd-Frank Act, and the Economic Growth, Regulatory Relief and Consumer Protection Act (EGRRCPA).
• Compliance Requirements: These regulations impose requirements related to capital maintenance, deposit reserves, loan types and amounts, investment limitations, consumer protection, anti-money laundering, and affiliate transactions.
• CRA Revisions: Regulations implementing the CRA were substantially revised in 2023, with changes becoming effective over the next several years. The Company is assessing the impact on its operations.

Legal Proceedings:

• On January 22, 2025, a client filed a lawsuit against The First of Long Island Corporation and The First National Bank of Long Island (now ConnectOne Bank) claiming approximately $11.1 million in damages related to suspicious wire transfer activity in July 2024. The Company vehemently disagrees with the allegations and intends to vigorously defend these claims.

Tax Strategy & Considerations

Tax Profile:

• Effective Tax Rate: 28.6% in 2025, 25.1% in 2024, and 25.6% in 2023.
• Geographic Tax Planning: Pretax income and income tax expense are derived solely from domestic operations. State taxes in New York and New Jersey constitute the majority of the state and local tax effect.
• Tax Reform Impact: The Inflation Reduction Act of 2022 imposes a 1% excise tax on certain stock repurchases by publicly traded corporations, effective after December 31, 2022. The Company had no accruals related to this excise tax as of December 31, 2025.
• State Net Operating Loss Carryforwards: Approximately $134 million, expiring between 2041 and 2045.
• Recognized Built-In Losses (RBILs): $26.5 million, with an indefinite federal carryforward period and state expiration in 2045.
• Federal Interest Expense Disallowance Carryforwards: Approximately $24.9 million, which may be carried forward indefinitely.
• Section 382 Limitations: Acquired tax attributes are subject to utilization limits of $9.7 million under Internal Revenue Code Section 382.
• Valuation Allowance: A valuation allowance of $10.9 million has been established against certain state net operating loss and state RBIL carryforwards due to Section 382 limitations from the FLIC acquisition.
• Uncertain Tax Positions: The Company has no unrecognized tax benefits as of December 31, 2025, and 2024.

Insurance & Risk Transfer

Risk Management Framework:

• Insurance Coverage: The Company maintains insurance that may provide coverage for expenses and certain losses incurred in connection with cybersecurity incidents.
• Risk Transfer Mechanisms: The Company utilizes derivative instruments, including interest rate swaps and cap agreements, as part of its asset and liability management strategy to manage interest rate risk. These include thirteen pay fixed-rate interest rate swaps with a total notional amount of $700 million, designated as cash flow hedges of Federal Home Loan Bank advances.