ConnectOne Bancorp, Inc. Stock Compensation Disclosure

Note 18 – Stock Based Compensation

 

The Company’s stockholders approved the 2017 Equity Compensation Plan (“the Plan”) on May 23, 2017. The Plan eliminates all remaining issuable shares under previous plans and is the only outstanding plan as of December 31, 2025. On May 30, 2023, the Company's stockholders approved an amendment to the Plan that increased the maximum number of shares issuable to 1,200,000. Grants under the Plan can be in the form of stock options (qualified or non-qualified), restricted shares, deferred stock units or performance units. Shares available for grant and issuance under the Plan as of December 31, 2025 are approximately 169,899. The Company intends to issue all shares under the Plan in the form of newly issued shares.

 

As of both December 31, 2025 and December 31, 2024, the Company did not have any outstanding stock options. Restricted stock and deferred stock units typically have a three-year vesting period starting one year after the date of grant with one-third vesting each year. Restricted stock granted to new employees and board members may be granted with shorter vesting periods. Grants of performance units typically have a cliff vesting after three years or upon a change of control. All issuances are subject to forfeiture if the recipient leaves or is terminated prior to the awards vesting. Restricted shares have the same dividend and voting rights as common stock, while options, performance units and deferred stock units do not.

 

All awards are issued at the fair value of the underlying shares at the grant date. The Company expenses the cost of the awards, which is determined to be the fair market value of the awards at the date of grant, ratably over the vesting period. Forfeiture rates are not estimated but are recorded as incurred. Stock-based compensation expense was $4.6 million, $4.6 million and $4.9 million for the years ended December 31, 2025, 2024 and 2023, respectively.

 

Activity under the Company’s restricted shares for year ended December 31, 2025 was as follows:

 

						Weighted-
						Average
		Nonvested				Grant Date
		Shares				Fair Value
Nonvested as of December 31, 2024			110,340			$	18.26
Granted			75,525				23.50
Vested			(71,642	)			20.61
Forfeited			(3,874	)			20.40
Nonvested December 31, 2025			110,349				20.25

 

 

As of December 31, 2025, there was approximately $0.9 million of total unrecognized compensation cost related to nonvested restricted shares granted. The cost is expected to be recognized over a weighted average period of 1.1 years.

 

A summary of the status of unearned performance unit awards and the change during the period is presented in the table below:

 

										Weighted
										Average Grant
		Units				Units				Date Fair
		(expected)				(maximum)				Value
Unearned as of December 31, 2024			189,672							$	21.52
Awarded			88,681								24.01
Change in estimate (decrease)			(19,616	)							17.93
Change in estimate (increase)			4,197								32.80
Vested shares			(43,331	)							32.80
Forfeited/cancelled/expired			(3,452	)							19.01
Unearned as of December 31, 2025			216,151				371,976				20.87

 

As of December 31, 2025, the specific number of shares related to performance units that were expected to vest was 216,151, determined by actual performance in consideration of the established range of the performance targets, which is consistent with the level of expense currently being recognized over the vesting period. Should this expectation change, additional compensation expense could be recorded in future periods or previously recognized expense could be reversed. As of December 31, 2025, the maximum number of performance units that ultimately could vest if performance targets were exceeded is 371,976. During the year ended December 31, 2025, 43,331 shares vested. A total of 23,754 shares were netted from the vested shares to satisfy employee tax obligations. The net shares issued from vesting of performance units during the year ended December 31, 2025 were 19,577 shares. As of December 31, 2025, compensation cost of approximately $2.0 million related to non-vested performance units not yet recognized is expected to be recognized over a weighted-average period of 1.7 years.

 

A summary of the status of unearned deferred stock units and the changes in deferred stock units during the period is presented in the table below:

 

						Weighted
						Average Grant
		Units				Date Fair
		(expected)				Value
Unearned as of December 31, 2024			181,836			$	20.32
Awarded			80,010				24.01
Vested shares			(91,364	)			21.35
Unearned as of December 31, 2025			170,482			$	21.50

 

Any shares cancelled would result in previously recognized expense being reversed. A portion of the shares that vest will be netted out to satisfy the tax obligations of the recipient. During the year ended December 31, 2025, 91,364 shares vested. A total of 48,743 shares were netted from the vested shares to satisfy employee tax obligations. The net shares issued from vesting of deferred stock units during the year ended December 31, 2025 were 42,621 shares. As of December 31, 2025, compensation cost of approximately $1.2 million related to non-vested deferred stock units, not yet recognized, is expected to be recognized over a weighted-average period of 1.4 years.