ConnectOne Bancorp, Inc. (CNOB): 5 FORCES Analysis [Nov-2025 Updated]

You're digging into ConnectOne Bancorp, Inc. (CNOB) now that they've closed the First of Long Island Bank deal, wanting to know if this $14 billion institution can truly thrive in the tough NY/NJ banking scene. As someone who's spent two decades in this game, I've mapped out Porter's Five Forces using their latest Q3 2025 figures, and the picture is clear: rivalry is intense, but their 3.11% Net Interest Margin suggests they're holding their own against customer power. We'll look closely at how their strong core deposit base-over 21% noninterest-bearing in Q2 2025-keeps supplier power in check, and why the high capital barrier, reflected in their 8.36% Tangible Common Equity ratio, still keeps most new entrants out. Keep reading to see the full strategic breakdown.

ConnectOne Bancorp, Inc. (CNOB) - Porter's Five Forces: Bargaining power of suppliers

When you look at ConnectOne Bancorp, Inc. (CNOB), the primary suppliers aren't widget makers; they are the entities providing the bank with its essential raw material: money. This means the suppliers are mainly depositors, who provide core funding, and the providers of wholesale funding, like the Federal Home Loan Bank or the market for debt instruments.

Honestly, the bargaining power of these suppliers is kept in check because ConnectOne Bancorp has been successfully strengthening its core deposit base. This is a big deal for managing funding costs. You see, the more sticky, low-cost deposits you have, the less you need to rely on more expensive, rate-sensitive wholesale sources. The data from the second quarter of 2025 really highlights this positive shift in the funding mix.

Here's a quick look at the deposit metrics that show how ConnectOne Bancorp is moderating supplier power:

The reduction in brokered deposits by $200 million in Q2 2025 is a clear action to cut reliance on expensive funding. That move, coupled with a reduction in wholesale Federal Home Loan Bank borrowings by about $200 million in the same period, shows ConnectOne Bancorp actively managing down the power of its more volatile, rate-sensitive funding suppliers. Still, competition for deposits remains high across the industry, so managing deposit costs carefully is definitely a near-term focus for the management team.

On the wholesale side, ConnectOne Bancorp took a step to reduce future interest expense pressure by redeeming $75 million in high-rate subordinated debentures. This specific redemption occurred on September 15, 2025, which falls into the third quarter of 2025. These debentures carried a high rate of 9.92%, so removing that cost stream directly lowers the expense associated with that segment of funding suppliers, even though the margin was temporarily impacted by them being outstanding during part of Q3 2025.

The strength in the core deposit base, evidenced by DDA exceeding 21% of total deposits in Q2 2025, gives ConnectOne Bancorp a structural advantage against deposit suppliers. It means a larger portion of their funding is less sensitive to immediate rate hikes, which helps keep overall funding costs down. You want more of that noninterest-bearing money; it's the cheapest funding available.

ConnectOne Bancorp, Inc. (CNOB) - Porter's Five Forces: Bargaining power of customers

You're looking at ConnectOne Bancorp, Inc. (CNOB) through the lens of customer power, and honestly, in the regional banking space, that power is always a factor. ConnectOne Bank's core client base is the small to middle-market businesses. These clients definitely have options, given that ConnectOne Bancorp, post-merger, is now a $14 billion regional financial institution with 61 locations. That scale still places them among many regional competitors where a client can shop around for standard commercial loans.

When loan products become standard fare, they get commoditized, which naturally lowers the cost for the customer to walk away. For basic commercial lending, switching costs aren't prohibitive, so ConnectOne Bancorp has to earn the business continually. This pressure is evident in the fact that the weighted average rate on their current loan pipeline is sitting at 6.77%.

To fight this commoditization, ConnectOne Bancorp leans hard into its relationship-based model. They actively cultivate sticky business by focusing on specialized lending niches. This includes their Small Business Administration (SBA) programs and franchise financing, which they facilitate through their fintech subsidiary, BoeFly, Inc., a marketplace connecting franchise borrowers with funding. This specialization creates a stickier relationship than a simple transactional loan.

The funding structure, which directly impacts how desperate a bank is to deploy capital, looks quite balanced as of mid-2025. The loan-to-deposit ratio improved significantly to 99% as of June 30, 2025, down from 106% on March 31, 2025. This suggests ConnectOne Bancorp isn't in a position where it has to lend at any cost to cover funding gaps. Also, the quality of their deposits has improved, which is a key indicator of relationship strength.

Here's a quick look at the balance sheet shift following the First of Long Island Bank merger, which speaks to their funding stability:

The improvement in core funding is a direct countermeasure to customer power. When you see this trend, you know management is focused on retaining high-quality, low-cost funding sources. The mitigation strategy is visible in the deposit mix:

• Noninterest-bearing demand deposits composition is now over 21%.
• Brokered deposits declined by about $200 million since March 31, 2025.
• Total deposits grew at an annualized rate of 8% in Q2 2025.
• The bank is actively reducing wholesale funding, with Federal Home Loan Bank borrowings down by about $200 million.

ConnectOne Bancorp, Inc. (CNOB) - Porter's Five Forces: Competitive rivalry

You're looking at the competitive landscape for ConnectOne Bancorp, Inc. (CNOB) right after a major consolidation move. The rivalry in the New Jersey and Long Island banking markets is definitely fierce; you're facing down large regional and national players who have deep roots and massive scale.

The recent merger with The First of Long Island Corporation (FLIC), which closed on June 1, 2025, was a direct response to this pressure. This move was about gaining the necessary scale to go toe-to-toe with the bigger banks. The combined entity now operates under the ConnectOne brand, creating a regional institution with approximately $14 billion in total assets as of the third quarter of 2025. Honestly, leaping over the $10 billion asset threshold was a strategic necessity, not just a nice-to-have.

This improved scale translates directly into competitive positioning. ConnectOne now offers a retail network of over 60+ branches across New York, New Jersey, and Southeast Florida. Specifically on Long Island, where FLIC had a strong presence, the combination is projected to establish ConnectOne Bancorp, Inc. as one of the top 5 community banks based on deposit market share. That's a tangible shift in local rivalry.

Still, competing effectively means running a tight ship. ConnectOne Bancorp, Inc. has managed to maintain a peer-leading efficient operating model, even after integrating FLIC. As of Q3 2025, with a staff size grown to about 750 employees, the firm reported roughly $19 million in assets per employee. That efficiency helps keep costs down while you fight for market share.

The Net Interest Margin (NIM) is another critical battleground metric in this rate environment. For the third quarter of 2025, the NIM widened to 3.11%, up from 2.67% a year prior. The 'spot' margin at the end of Q3 2025 was already above 3.20%, and the Chief Financial Officer expects the Q4 margin to hit 3.25% or even higher. That margin performance is what funds the growth and allows for competitive pricing.

Here's a quick look at the post-merger scale you're operating with:

The competitive advantages gained from the FLIC acquisition are centered on several key areas:

• Achieved scale crossing the $10 billion asset mark.
• Established a top 5 deposit market share position on Long Island.
• Reported Q3 2025 NIM of 3.11%, showing margin momentum.
• Maintained high efficiency with $19 million in assets per employee.

The rivalry is less about who has the best technology and more about who can deploy capital most effectively across the New York metro area. Finance: draft the Q4 2025 expense forecast incorporating the expected $1 million in annual merger cost savings by next Tuesday.

ConnectOne Bancorp, Inc. (CNOB) - Porter's Five Forces: Threat of substitutes

The threat of substitutes for ConnectOne Bancorp, Inc. remains significant, stemming from non-bank entities offering similar financial products. You see this pressure across both the lending and deposit-taking sides of the business.

High threat from non-bank financial institutions and specialized fintech lenders targeting specific loan segments.

Fintech lenders and non-bank originators chip away at market share, especially in areas where ConnectOne Bancorp has a focus. For instance, in franchise lending, the digital marketplace BoeFly, Inc., which ConnectOne Bancorp owns, historically supported over $5 billion of financing transactions. This shows the scale of the digital lending ecosystem ConnectOne Bancorp is operating within and competing against. As of the third quarter of 2025, BoeFly represented some over 250 national franchise brands across the nation, which is an all-time high for the platform.

Capital markets and private credit funds are substitutes for large commercial real estate and C&I loans.

For the larger commercial and industrial (C&I) and commercial real estate (CRE) segments, private credit funds and capital markets are ready substitutes, particularly when traditional bank lending standards tighten. ConnectOne Bancorp reported gross loans totaling $11.3 billion as of the third quarter of 2025. This portfolio size places it directly in the path of these alternative capital sources. Market surveys from late 2024 indicated that banks generally reported tighter lending standards for CRE loans and C&I loans to large and middle-market firms.

Digital-only banks and money market funds substitute for traditional deposit accounts.

Deposits, the lifeblood of ConnectOne Bancorp, face substitution from digital banks and high-yield money market funds. ConnectOne Bancorp's total deposits surged to $11.36 billion as of the third quarter of 2025, a 45.4% increase compared to December 31, 2024, largely due to the merger with The First of Long Island Corporation. The net interest margin (NIM) for the third quarter of 2025 widened to 3.11%. This NIM reflects the cost of funds ConnectOne Bancorp must manage while competing for deposits against non-bank alternatives.

You can see the scale of ConnectOne Bancorp's operations, which are the targets of these substitutes, in the table below:

ConnectOne Bancorp's ownership of the BoeFly fintech platform acts as a defensive strategy against substitution in the franchise lending space.

ConnectOne Bancorp is actively using its own technology to counter substitution. The BoeFly platform connects borrowers in the franchise space with funding solutions through a network of partner banks. ConnectOne Bancorp has focused on driving opportunities from BoeFly into its growing SBA platform, expecting this to translate into increased SBA revenue, which was reflected in the third quarter of 2025 earnings. The recurring level of noninterest income for ConnectOne Bancorp is currently about $7 million per quarter, with expectations for growth, especially in gains on sales from SBA and residential mortgage activities.

ConnectOne Bancorp, Inc. (CNOB) - Porter's Five Forces: Threat of new entrants

You're assessing the competitive landscape for ConnectOne Bancorp, Inc. (CNOB) as of late 2025, and the threat from new entrants into full-service commercial banking is structurally low. Honestly, this is less about CNOB's specific strategy and more about the sheer weight of the industry's entry barriers.

The primary challenge for any new player trying to launch a full-service commercial bank in the US is the regulatory gauntlet and the massive capital needed to even start the conversation. These hurdles keep the field relatively clear for established players like ConnectOne Bancorp, Inc.

Consider the capital base required. New entrants must meet stringent capital requirements set by bodies like the Federal Reserve and the FDIC. ConnectOne Bancorp, Inc. itself is well-capitalized following its recent growth. As of the third quarter of 2025, the Company's tangible common equity ratio stood at a solid 8.36%. That's a strong buffer against unexpected shocks, and it represents the kind of financial muscle a startup simply cannot match on day one.

Building a physical and brand presence in the dense New York/New Jersey market is another major obstacle. You can't just open a few online portals and expect to capture commercial relationships. ConnectOne Bancorp, Inc. now operates with significant scale after its merger with The First of Long Island Corporation, which closed on June 1, 2025. This created a regional institution with approximately $14 billion in total assets.

The resulting physical footprint is substantial, which is tough to replicate quickly:

• Post-merger physical footprint: 61 locations.
• Primary trade area: NY/NJ metro region.
• Scale achieved: $14 billion in total assets.
• Deposit franchise depth: Top five community bank on Long Island by deposit market share.

Here's a quick look at the scale ConnectOne Bancorp, Inc. achieved, which acts as a deterrent:

The most credible threat comes from financial technology firms, or Fintechs. Still, these entities generally target specific, often transactional, parts of the financial chain. They focus on niche products, like streamlined small-dollar lending or specific payment processing, rather than the complex, full-relationship commercial banking that ConnectOne Bancorp, Inc. specializes in. They don't typically seek to replace the entire suite of services a business needs, so they don't directly challenge the core business model.

Finance: draft a memo by next Tuesday detailing the top three non-bank competitors by loan volume in Bergen County, NJ.