What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2026-02-24 compared with 2025-02-21 · 192 added, 130 removed, 524 unchanged (38% of the section changed)

8 unchanged sentences

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.

The Company did not repurchase any shares during 2025.

As of December 31, 2025, shares remaining for repurchase under the program were 641,118.

The following table details share repurchases for the year 2024:

Cumulative Total

Number of Shares

Maximum Number

as Part of Publicly

Average Price

Under the Plans

Paid per Share

First Quarter 2024

Second Quarter 2024

Third Quarter 2024

Fourth Quarter 2024

Federal laws and regulations contain restrictions on the ability of the Parent Corporation and the Bank to pay dividends.

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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, 2020 through December 31, 2025.

COMPARATIVE SIX-YEAR CUMULATIVE TOTAL RETURN

COMPARATIVE FIVE-YEAR CUMULATIVE TOTAL RETURN

AMONG CONNECTONE BANCORP INC.

NASDAQ AND KBW BANK INDEX

Assumes $100 Invested on December 31, 2019, with Dividends Reinvested

NASDAQ COMPOSITE AND KBW BANK INDEX

Assumes $100 invested on January 1, 2021

Assumes dividends reinvested

Year Ended December 31, 2025

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The Company’s allowance for credit losses ("ACL") for loans totaled $154.3 million and $82.7 million as of December 31, 2025 and 2024, respectively.

The $0.7 million increase in the allowance for credit losses for loans was primarily due to increases in individually evaluated allowance, partially offset by a decrease in the level of collectively evaluated allowance.

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.

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 $71.6 million increase in the ACL for loans was primarily due to the FLIC merger with $43.3 million of allowance being recorded through goodwill related to the purchased credit-deteriorated loans and $27.3 million reflecting the initial provision for credit losses.

The quantitative component of our ACL for collectively evaluated loans increased by $13.4 million as of December 31, 2025 when compared to December 31, 2024.

This increase was primarily attributable to an increase in collectively evaluated loans of $3.0 billion due to the FLIC merger.

The qualitative component of our ACL for loans, which is largely based on management’s judgment of qualitative loss factors, increased by $17.2 million on an absolute basis, over the same period-of-time.

In addition, qualitative risk factor trends generally increased over 2025.

The Company’s allowance for credit losses for collectively evaluated loans totaled $111.8 million as of December 31, 2025, which included $94.4 million of allowance related to commercial and commercial real estate loans.

Of the $94.4 million allowance related to commercial and commercial real estate loans, $47.9 million was attributable to qualitative loss factors.

Changes in managements’ judgement of qualitative loss factors could result in a significant change to the allowance for credit losses for loans.

Changes in management's judgment of qualitative loss factors could result in a significant change to the ACL for loans.

As described in Note 1a to our financial statements filed as part of this Annual Report on Form 10-K, qualitative loss factors are applied to each portfolio segment with the amounts judgmentally determined by the relative risk to the most severe loss periods identified in the historical loan charge-offs of a peer group of similar-sized regional banks.

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Our allowance for credit losses for individually analyzed loans is determined on an individual basis using the present value of expected cash flows discounted using the loan’s effective interest rate or, for collateral-dependent loans, the fair value of the collateral, less estimated selling costs, as applicable.

As of December 31, 2024, the Company’s allowance for credit losses on individually analyzed loans was relatively flat when compared to December 31, 2023.

As of December 31, 2025, the Company’s allowance for credit losses on individually analyzed loans decreased by approximately $0.8 million when compared to December 31, 2024.

Fair Value of Loans Acquired in a Business Combination

On June 1, 2025, the Company completed the acquisition of FLIC, which was accounted for as a business combination using the acquisition method of accounting.

As a result of the merger, the Company recorded the acquired loans at their estimated fair value.

The fair value of acquired loans is based on a discounted cash flow methodology that considers factors such as the specific type of loan and related collateral.

This process requires management’s judgment regarding several key estimates, including:

Discount Rates:

Selection of market-based rates that reflect current interest rates and the specific risk profile of the FLIC portfolio.

Expected Future Cash Flows:

Projections of principal and interest payments, including expectations for prepayments and defaults.

Market Conditions:

Evaluation of current economic factors in the Nassau, Suffolk, and New York City markets where the 36 acquired branches operate.

Uncertainties Regarding Estimates :

Management relies on economic forecasts, internal valuations, and other relevant factors available at the time of the merger to determine the assumptions used to calculate the fair value of the acquired loans.

These estimates—specifically those regarding discount rates and future cash flows—are inherently subjective.

Actual results may differ from these estimates if economic conditions in the Long Island and New York City regions deviate from management's original projections.

Impact on Financial Condition and Results of Operations :

The estimate of fair value for acquired loans is one of the primary components in determining the $11.9 million in goodwill recorded from the FLIC merger.

In future income statement periods, the Company’s results of operations will be impacted by the following:

Interest Income:

The difference between the initial fair value and the unpaid principal balance is recognized as interest income over the lives of the related loans using a level-yield method.

Accretion and Amortization:

Reported interest income will include the accretion of any purchase discounts or the amortization of any premiums resulting from the fair value adjustment.

Credit Loss Provision:

For loans identified as having experienced credit deterioration (PCD), the provision for credit losses may be impacted in future periods by changes in the assumptions used to calculate expected cash flows.

Overview and Strategy

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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.

Net income available to common stockholders for the year ended December 31, 2025 was $74.4 million, an increase of $6.7 million, or 9.8%, compared to net income of $67.8 million for 2024.

Diluted earnings per share were $1.63 for 2025, a 7.4% decrease from $1.76 for 2024.

The change in net income from 2024 to 2025 was attributable to the following:

Increase in net interest income of $105.9 million, primarily due to a 39 basis-point expansion in the net interest margin to 3.11% from 2.72% and by a $2.3 billion, or 24.9%, increase in average interest-earning assets primarily due to the FLIC merger.

Increase in noninterest expenses of $76.8 million, primarily due to an increase of $32.9 million in merger-related expenses and a $21.4 million increase in salaries and employee benefits.

Other notable increases included $6.7 million in amortization of core deposit intangibles and $4.9 million in occupancy and equipment expense.

Information technology and communications, professional and consulting, and other expenses increased by $2.4 million, $2.4 million, and $1.9 million, respectively.

The remaining increase was attributable to a $1.4 million increase in FDIC insurance, $1.0 million in restructuring and exit charges, $0.8 million increase in both branch closing and marketing expenses, and a $0.3 million restructuring charge for bank-owned life insurance.

Increase in provision for credit losses of $33.2 million, which was primarily driven by an initial $27.4 million provision for credit losses associated with the FLIC merger.

Increase in noninterest income of $18.3 million, primarily due to a $6.6 million one-time benefit from the Employee Retention Tax Credit, a federal program under the CARES Act and a $3.5 million gain related to the curtailment of the FLIC defined benefit pension plan, which was frozen on September 30, 2025.

Further contributing to the increase were a $4.8 million increase in deposit, loan and other income, a $2.4 million increase in income on bank owned life insurance and a $1.7 million increase in net gains (losses) on equity securities.

These were partially offset by a $0.7 million decrease in net gains on sale of loans held-for-sale.

Increase in income tax expense of $7.6 million resulting primarily from higher taxable income and tax rates, due to the FLIC merger.

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.

Diluted earnings per share were $1.76 for 2024, a 15.0% decrease from $2.07 for 2023.

The change in net income from 2023 to 2024 was primarily attributable to the following:

Decrease in net interest income of $7.8 million.

The decrease was primarily due to an 10 basis-point contraction in the net interest margin to 2.72% from 2.82%, partially offset by a $43.0 million, or 0.5%, increase in average interest-earning assets.

The decrease was primarily due to a 10 basis-point contraction in the net interest margin to 2.72% from 2.82%, partially offset by a $43.0 million, or 0.5%, increase in average interest-earning assets.

Increase in noninterest expenses of $7.8 million.

The increase is primarily due to increases in information technology and communications expenses of $3.2 million, attributable to additional investments in technology, equipment and software.

Ad ditionally, there were increases in salaries and employee benefits of $1.8 million, attributable to an increase in incentive compensation accruals and an increase in expenses related to the Bank’s Supplemental Executive Retirement Plan.

Finally, there were increases in merger expenses of $1.6 million, due to the planned merger with The First of Long Island Corporation, professional and consulting expenses of $0.9 million, occupancy and equipment of $0.7 million, branch closing expenses of $0.5 million, and marketing and advertising of $0.5 million, partially offset by decreases in FDIC insurance of $1.2 million, due to an FDIC special assessment charge in 2023, and amortization of core deposit intangible of $0.2 million.

Additionally, there were increases in salaries and employee benefits of $1.8 million, attributable to an increase in incentive compensation accruals and an increase in expenses related to the Bank’s Supplemental Executive Retirement Plan.

Finally, there were increases in merger expenses of $1.6 million, due to the planned merger with FLIC, professional and consulting expenses of $0.9 million, occupancy and equipment of $0.7 million, branch closing expenses of $0.5 million, and marketing and advertising of $0.5 million, partially offset by decreases in FDIC insurance of $1.2 million, due to an FDIC special assessment charge in 2023, and amortization of core deposit intangible of $0.2 million.

Increase in provision for credit losses of $5.6 million.

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Decrease in income tax expense of $5.3 million resulting primarily from lower taxable income.

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.

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 primarily attributable to the following:

Decrease in net interest income of $47.0 million.

The decrease was primarily due to an 87 basis-point contraction in the net interest margin to 2.82% from 3.69%, partially offset by a $0.9 billion, or 11.0%, increase in average interest-earning assets.

Increase in noninterest expenses of $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.

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.

The increase in information technology and communications was primarily attributable to additional investments in technology, equipment and software.

Decrease in provision for credit losses of $9.6 million.

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.

Net Interest Income

Fully taxable equivalent net interest income for 2025 totaled $357.3 million, an increase of $106.6 million, or 42.5%, from 2024.

The increase in net interest income was due to a 39 basis-point widening of the net interest margin to 3.11% from 2.72%.

The margin benefitted from stable rates on interest-earning assets, despite a declining rate environment, combined with a 58 basis-point decrease in the average cost of deposits, including noninterest-bearing deposits, and a 43 basis-point decrease in the average cost of borrowings.

These were partially offset by an increase in both the cost and average balance of outstanding subordinated debt.

Fully taxable equivalent net interest income for 2024 totaled $250.7 million, a decrease of $7.6 million, or 2.9%, from 2023.

The decrease in net interest income was due to a 10 basis-point contraction in the net interest margin to 2.72% from 2.82%, partially offset by a $43.0 million, or 0.5%, increase in average interest-earning assets.

The net interest margin contraction was due to a 49-basis point increase in the average cost of deposits, including noninterest-bearing demand, to 3.23%, and was partially offset by a 29 basis-point increase in the loan portfolio yield to 5.86%.

Fully taxable equivalent net interest income for 2023 totaled $258.3 million, a decrease of $46.3 million, or 15.2%, from 2022.

The decrease in net interest income was due to an 87 basis-point contraction in the net interest margin to 2.82% from 3.69%, partially offset by a $0.9 billion, or 11.0%, increase in average interest-earning assets.

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 increase in average total loans is attributable to higher loan originations.

The net interest margin contraction was due to a 49-basis point increase in the average cost of deposits, including noninterest-bearing demand deposits, to 3.23%, and was partially offset by a 29 basis-point increase in the loan portfolio yield to 5.86%.

Average Balance Sheets

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levels and trends in delinquencies, individually analyzed loans and net charge-offs and the results of independent third party loan reviews.

For the year ended December 31, 2024, the provision for credit losses was $13.8 million, an increase of $5.6 million, compared to the provision for credit losses of $8.2 million for the year ended December 31, 2023.

The increase in provision for credit losses for the year ended December 31, 2024 was due to increases in individually evaluated allowance, partially offset by a decrease in the level of collectively evaluated allowance.

For the year ended December 31, 2023, the provision for credit losses was $8.2 million, a decrease of $9.6 million, compared to the provision for credit losses of $17.8 million for the year ended December 31, 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.

The provision for credit losses was $47.0 million for the year ended December 31, 2025, an increase of $33.2 million from $13.8 million in 2024.

This increase was primarily driven by an initial $27.4 million provision for credit losses associated with the FLIC merger.

The provision for credit losses was $13.8 million for the year ended December 31, 2024, an increase of $5.6 million from $8.2 million in 2023.

This increase was due to increases in individually evaluated allowance, partially offset by a decrease in the level of collectively evaluated allowance.

Noninterest Income

Noninterest income for 2025 increased by $18.3 million, or 109.6%, to $35.1 million for the year ended December 31, 2025, compared to $16.7 million in 2024.

The growth was primarily driven by a $6.6 million one-time benefit from the Employee Retention Tax Credit, a federal program under the CARES Act and a $3.5 million gain related to the curtailment of the FLIC defined benefit pension plan, which was frozen on September 30, 2025.

These were partially offset by a $0.7 million decrease in net gains on sale of loans held-for-sale.

Noninterest income for 2024 increased by $2.7 million, or 19.5%, to $16.7 million from $14.0 million in 2023.

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 increase was primarily due to decreases in net losses on equity securities of $1.4 million and increases in income on bank owned life insurance of $0.7 million, partially offset by decreases in deposit, loan and other income of $1.4 million.

Noninterest Expense

Noninterest expenses increased $76.8 million in 2025, driven primarily by $32.9 million increase in merger-related expenses and a $21.4 million increase in salaries and employee benefits.

Other notable increases included $6.7 million in amortization of core deposit intangibles and $4.9 million in occupancy and equipment expense.

Information technology and communications, professional and consulting, and other expenses increased by $2.4 million, $2.4 million, and $1.9 million, respectively.

Noninterest expenses for 2024 increased by $7.8 million, primarily due to increases in information technology and communications expenses of $3.2 million, attributable to additional investments in technology, equipment and software.

Additionally, there were increases in salaries and employee benefits of $1.8 million, attributable to an increase in incentive compensation accruals and an increase in expenses related to the Bank’s Supplemental Executive Retirement Plan.

Finally, there were increases in merger expenses of $1.6 million, due to the planned merger with The First of Long Island Corporation, professional and consulting expenses of $0.9 million, occupancy and equipment of $0.7 million, branch closing expenses of $0.5 million, and marketing and advertising of $0.5 million, partially offset by decreases in FDIC insurance of $1.2 million, due to FDIC special assessment charge in 2023, and amortization of core deposit intangible of $0.2 million.

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.

Additionally, there were increases in FDIC insurance of $5.5 million, which included a $2.1 million FDIC special assessment recognized in 2023.

The increase in information technology and communications was primarily attributable to additional investments in technology, equipment and software.

Finally, there were increases in merger expenses of $1.6 million, due to the planned merger with FLIC, professional and consulting expenses of $0.9 million, occupancy and equipment of $0.7 million, branch closing expenses of $0.5 million, and marketing and advertising of $0.5 million, partially offset by decreases in FDIC insurance of $1.2 million, due to FDIC special assessment charge in 2023, and amortization of core deposit intangible of $0.2 million.

Income tax expense was $32.3 million for 2025 compared to $24.7 million for 2024 and $30.0 million for 2023.

The decrease in income tax expense in 2024 when compared to 2023 and 2022 was primarily the result of lower taxable income.

The increase in income tax expense in 2025 when compared to 2024 and 2023 was primarily the result of higher taxable income and higher statutory tax rates due to the FLIC merger.

The effective tax rates were 28.6% in 2025, 25.1% in 2024 and 25.6% for 2023.

The lower effective tax rate during 2024 when compared to 2023 and 2022, was the result of a lower percentage of income being derived from taxable sources.

For a more detailed description of income taxes see Note 11 of the Notes to Consolidated Financial Statements.

Financial Condition Overview

As of December 31, 2024, the Company’s total assets were $9.9 billion, an increase of $24 million from December 31, 2023.

Total loans (including loans held-for-sale) were $8.3 billion, a decrease of $70 million from December 31, 2023.

Deposits were $7.8 billion, an increase of $284 million from December 31, 2023.

As of December 31, 2025, the Company’s total assets were $14.0 billion, an increase of $4.1 billion from December 31, 2024.

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Deposits were $11.2 billion, an increase of $3.4 billion from December 31, 2024.

As of December 31, 2024, the Company’s total assets were $9.9 billion, an increase of $24 million from December 31, 2023.

Total loans (including loans held-for-sale) were $8.3 billion, a decrease of $70 million from December 31, 2023.

Deposits were $7.8 billion, an increase of $284 million from December 31, 2023.

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.

The Bank has also recently established a loan production office in Orlando, in central Florida.

The Bank has not made loans to borrowers outside of the United States.

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Consumer loans are made to individuals who qualify for auto loans, cash reserve, credit cards and installment loans.

The largest component of the gross loan portfolio as of December 31, 2024 and December 31, 2023 was commercial real estate loans.

Commercial real estate loans decreased $14.9 million, or 0.3%, to $5.9 billion as of December 31, 2024 from December 31, 2023.

See the tables below for more detailed information on our commercial real estate portfolio.

Commercial loans decreased $46.0 million, or 2.9%, to $1.5 billion as of December 31, 2024 from December 31, 2023.

Commercial construction loans decreased $4.3 million, or 0.7%, as of December 31, 2024 from December 31, 2023.

Residential real estate loans decreased $6.4 million, or 2.5%, to $0.2 billion as of December 31, 2024 from December 31, 2023.

Consumer loans remained essentially flat when compared to the prior year.

Commercial real estate loans remained the largest component of our gross loan portfolio, totaling $8.1 billion at December 31, 2025.

This represents an increase of $2.2 billion, or 37%, from the prior year-end, primarily driven by assets acquired in the FLIC merger.

Similarly, residential real estate loans saw a substantial increase of $961.3 million, or 385%, ending the year at $1.2 billion, largely reflecting the integration of FLIC’s residential portfolio.

Other segments showed more moderate growth:

commercial loans rose $33.2 million 2.2% to $1.6 billion, and commercial construction grew by $7.7 million or 1.2%.

Consumer loans increased $0.9 million or 77.6%, primarily due to the FLIC merger.

The following table sets forth the classification of our loans by loan portfolio segment for the periods presented.

(dollars in thousands)

Commercial real estate

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Net loans receivable

While the previous table reflects the classification of our loans by loan portfolio segment, the following tables present further disaggregation of our commercial real estate portfolio along with loan-to-value ("LTV") percentages.

While the previous table reflects the classification of our loans by loan portfolio segment, the following table presents further disaggregation of our commercial real estate portfolio along with loan-to-value ("LTV") percentages.

December 31, 2025

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Total commercial real estate loans

The table above is further broken down in the following table by geography:

The table above is further broken down in the following tables by geography:

The values below are shown before fair value adjustments.

December 31, 2025

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(dollars in thousands)

Nonowner-occupied

Owner-occupied

All Other States

Total nonowner occupied

Total owner-occupied

December 31, 2025

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(dollars in thousands)

Owner-occupied

Nonowner-occupied

All Other States

Total owner-occupied

Total nonowner-occupied

December 31, 2025

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All Other States

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.

Total land loans

In addition, the following tables present further details with respect to our owner-occupied and nonowner-occupied borrower concentrations included in the commercial real estate segment.

The values below are before fair value adjustments.

December 31, 2025

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As of December 31, 2025 Maturing:

(dollars in thousands)

Fifteen Years

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Variable rates

Loan Portfolio Repricing

A significant portion of our loan portfolio, approximately $2.4 billion, primarily originated during the low-interest-rate environment of 2021 and 2022, is scheduled to contractually reprice during 2026 and 2027.

As these loans transition to future current market rates over the next 2 years, we anticipate a favorable impact on our net interest income, net interest margin, and earnings per share.

While these anticipated increased rates will benefit our results, the increased rates may also, in certain instances, place financial pressure on certain borrowers and potentially lead to elevated levels of stress, such as late payments or defaults.

For additional information regarding loans, see Note 5 of the Notes to the Consolidated Financial Statements.

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Factors considered by the Company in determining individual analysis include payment status and the probability of collecting scheduled principal and interest payments when due.

Nonaccrual loans that are $250,000 or higher and all purchased credit-deteriorated (PCD) loans are individually analyzed.

Nonaccrual loans with balances of $250,000 or greater and all purchased credit-deteriorated ("PCD") loans are individually analyzed.

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.

Each financial asset is subject to either a collective or an individual loss analysis;

no single instrument will be included in both calculations simultaneously.

Individual analysis will establish an individually evaluated allowance for instruments in scope.

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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:

December 31, 2025

December 31, 2024

(dollars in thousands)

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During the year ended December 31, 2025, “substandard” loans and “doubtful” loans, which include lower credit quality loans which possess higher risk characteristics than “special mention” loans, increased to $156.2 million, or 1.4% of loans receivable, as of December 31, 2025 from $72.4 million, or 0.9% of loans receivable, as of December 31, 2024.

The increase in substandard loans from the prior year was primarily due to the addition of PCD loans associated with the FLIC merger, in addition to a net increase in loans migrating to nonaccrual during the year ended December 31, 2025.

During the year ended December 31, 2024, “substandard” loans and “doubtful” 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 increase in substandard loans from the prior year was primarily due to a net increase in loans migrating to nonaccrual during the year ended December 31, 2024.

During the year ended December 31, 2024, “special mention” loans were $149.4 million, or 1.8% of loans receivable, while “special mention” loans as of December 31, 2023 were $54.2 million, or 0.8% of loans receivable.

The increase in special mention loans from the prior year was primarily attributable to a loan modification of one commercial real estate relationship of $48.7 million and one commercial real estate relationship of $31.2 million.

As of December 31, 2024, these relationships are paying as agreed and are all current.

Nonaccrual Loans, OREO and Loans 90 Days or Greater Past Due and Still Accruing

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For additional information regarding loans, see Note 5 of the Notes to the Consolidated Financial Statements.

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:

The following table sets forth, as of the dates indicated, the amount of the Company’s nonaccrual loans, OREO, and loans past due 90 days or greater and still accruing:

(dollars in thousands)

Nonaccrual loans

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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 ACL 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 measurement of expected credit losses is applicable to loans receivable and investment securities measured at amortized cost.

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As of December 31, 2025, the allowance for credit losses for loans was $154.3 million, an increase of $71.6 million, or 86.6%, from $82.7 million as of December 31, 2024.

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.

The increase in the allowance for credit losses was primarily driven by the FLIC merger with $42.0 million of allowance being recorded through goodwill related to the purchased credit-deteriorated loans and $27.3 million reflecting the initial provision for credit losses.

In addition, there was a $20.5 million provision in credit losses on loans, partially offset by net charge-offs of $18.2 million.

The allowance for credit losses for loans as a percentage of loans receivable was 1.35% as of December 31, 2025 and 1.00% as of December 31, 2024.

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The following table reflects the relationship of loan volume, the provision and allowance for credit losses for loans and net charge-offs for the periods presented.

(dollars in thousands)

Balance as of January 1,

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Provision for credit losses for loans

Initial provision related to acquisition – loans

Operating provision for credit losses

Nonaccretable credit marks on PCD loans

Balance at end of year

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(dollars in thousands)

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.

For the year ended December 31, 2025, the average amortized cost of investment securities, including equity securities, increased by $360.8 million to approximately $1.1 billion, or 9.5% of average interest earning-assets, from $733.3 million, or 8.0% of average interest-earning assets, for the year ended December 31, 2024.

As of December 31, 2025, the principal components of the investment portfolio are U.S.

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As of December 31, 2025, 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 $40.7 million as compared with net unrealized losses of $69.6 million as of December 31, 2024.

The increase in unrealized losses is predominately attributable to changes in market conditions and interest rates.

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.

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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.

During 2024, 2023 and 2022, there were no sales from the Company’s available-for-sale portfolio.

During 2025, 2024 and 2023, there were gains/losses from the sales from the Company’s available-for-sale portfolio.

The Company had no impairment charges in 2025, 2024 and 2023.

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Other securities do not have a contractual maturity and are included in the “Due in 1 year or less” maturity in the table above.

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.

The following table sets forth the carrying value of the Company’s investment securities, as of December 31, for each of the last two years.

(dollars in thousands)

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Asset-backed securities

Certificates of deposit

Other securities

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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.

The following table illustrates the most recent results for EVE and NII as of December 31, 2024.

The following table illustrates the estimates of net interest income for the year ending December 31, 2026 and the calculations of EVE at December 31, 2025 assuming rate changes of plus and minus 100, 200 and 300 bps.

Interest Rates

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Accordingly, although the above measurements provide an indication of the Company’s interest rate risk exposure at a particular point in time, such measurements are not intended to provide a precise forecast of the effect of changes in market interest rates.

Given the unique nature of the post-pandemic interest rate environment, and the speed with which interest rates have been changing, the projections noted above on the Company’s EVE and net interest income and can be expected to differ from actual results.

Estimates of Fair Value

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As of December 31, 2025, liquid assets (cash and due from banks, interest-bearing deposits with banks and unencumbered investment securities) were $874.4 million, which represented 6.2% of total assets and 7.2% of total deposits and borrowings, compared to $799.7 million as of December 31, 2024, which represented 8.1% of total assets and 9.4% of total deposits and borrowings on such date.

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.

As of December 31, 2025, not included in the above liquid assets were securities with a market value of $97.7 million which were pledged to the Federal Home Loan Bank and securities with a market value of $137.6 million which were pledged to the Federal Reserve Bank of New York, which supported aggregate unutilized borrowing capacity of $223.3 million as of December 31, 2025.

The Bank is a member of the Federal Home Loan Bank of New York and, based on available qualified collateral as of December 31, 2025, had the ability to borrow $3.9 billion.

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Operating activities provided $106.4 million in net cash.

Investing activities provided $55.2 million in net cash, primarily reflecting a decrease in loans.

Financing activities used $2.1 million in net cash, primarily reflecting a net increase in deposits of $284.0 million, partially offset by a decrease in net borrowings of $245.5 million and $33.3 million in cash dividends paid.

Deposits are our primary source of funds.

Noninterest bearing demand deposit products include “Totally Free Checking” and “Simply Better Checking” for consumer clients and “Small Business Checking” and “Analysis Checking” for commercial clients.

Interest-bearing checking accounts require minimum balances for both consumer and commercial clients and include “Consumer Interest Checking” and “Business Interest Checking”.

Money market accounts consist of products that provide a market rate of interest to depositors.

Our savings accounts offer paper and/or electronic statements.

Time deposits ("TD") are for non-retirement and IRA accounts, generally with initial maturities ranging from 31 days to 60 months, and brokered TDs, which we use for asset liability management purposes and to supplement other sources of funding.

Many of our deposit products can be accessed through both our branches and online to provide ease of access to our clients and communities.

CDARS/ICS reciprocal deposits are offered based on the Bank’s participation in the IntraFi Network LLC ("the 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.

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.

The Bank also utilizes internet listing services deposits which are obtained through the use of websites such as Rateline or QwickRate.

The following table sets forth the year-to-date average balances and weighted average rates of our deposits for the periods indicated.

Investing activities used $186.2 million in net cash, primarily due to purchases of securities and funding of loans.

Financing activities provided $104.2 million in net cash, primarily reflecting an increase in deposits and proceeds from the issuance of subordinated debt, partially offset by net repayment of borrowings.

Deposits serve as the Bank’s primary source of funding.

Our deposit portfolio is comprised of a diversified range of products designed to meet the needs of both consumer and commercial clients while supporting our liquidity and asset-liability management goals.

Noninterest-Bearing Demand Deposits:

We offer several noninterest-bearing solutions, including "Totally Free Checking" and "Simply Better Checking" for consumers, as well as "Small Business Checking" and "Analysis Checking" for commercial clients.

Interest-Bearing Deposits:

These accounts, which generally require minimum balances, include "Consumer Interest Checking," "Business Interest Checking," and money market accounts that provide market-competitive interest rates.

Our savings products are available with both paper and electronic statement options.

Time Deposits:

We offer non-retirement and IRA time deposits with initial maturities typically ranging from 31 days to 60 months.

We also utilize brokered certificates of deposit to supplement funding and support our asset-liability management strategy.

Digital and Branch Access:

To ensure ease of access for our clients and communities, substantially all deposit products are accessible through both our physical branch network and our online and mobile banking platforms.

Reciprocal and Specialized Deposits Through our participation in the IntraFi Network LLC and, to a lesser extent, the NBID network, we provide reciprocal deposits.

These products allow clients with large-dollar balances—who are sensitive to deposit insurance limits—to place funds with the Bank.

The Bank utilizes the IntraFi Network to place these funds into certificates of deposit or demand accounts issued by other participating banks in increments below the FDIC insurance limit ($250,000).

This structure ensures that both principal and interest are eligible for full FDIC insurance coverage while maintaining a single relationship with the Bank.

For certain regulatory reporting purposes, these funds may be classified as brokered deposits unless specific conditions are met.

Additionally, the Bank utilizes internet listing services, such as Rateline or QwickRate, to supplement our funding through targeted deposit acquisition.

The following table presents the average balances of our deposit portfolios along with the associated weighted average interest rates for the periods indicated.

Year-to-Date Average December 31, 2025

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Average Total Deposits

Average total deposits increased by $54.8 million, or 0.7%, during the year ended December 31, 2024 when compared to the year ended December 31, 2023.

The increase in total average deposits was primarily due to increases in savings deposits of $123.6 million and time deposits of $34.9 million, partially offset by decreases in noninterest-bearing demand deposits of $64.0 million and interest-bearing demand deposits of $39.5 million.

The increase in average time deposits of $34.9 million during the year ended December 31, 2024 was attributed to increases in retail time deposits of $117.9 million and internet listing services of $3.0 million, partially offset by decreases in CDARs of $39.9 million and nonreciprocal brokered time deposits of $46.0 million.

The decrease in year-to-date average noninterest-bearing demand deposits was consistent with industry trends reflecting higher levels of interest rates which resulted in migration of noninterest-bearing deposits to interest-bearing transaction deposits.

Average demand deposits (including interest-bearing and noninterest-bearing) during the year ended December 31, 2024 included $1.1 billion in ICS reciprocal deposits, compared to $0.9 billion during the year ended December 31, 2023.

Average time deposits during the year ended December 31, 2023 included $71.0 million in CDARS, compared to $110.9 million during the year ended December 31, 2023.

The decrease in CDARS was attributed to maturities that did not renew.

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.

The following table sets forth information related to the uninsured deposit balances of the Bank.

As of December 31, 2024

As of December 31, 2023

Average total deposits increased by $2.2 billion, or 29.4%, for the year ended December 31, 2025, compared to the prior year.

This growth was primarily attributable to the merger with FLIC, which impacted all deposit categories.

On a segment basis, the increase was driven by:

Interest-bearing demand deposits:

Increased $941.1 million

Noninterest-bearing demand deposits:

Increased $722.5 million

Savings deposits:

Increased $352.8 million

Time deposits:

Increased $214.7 million

Noninterest-bearing demand deposits represented 20.3% of total average deposits for the year ended December 31, 2025, compared to 16.7% for the year ended December 31, 2024.

This shift in the deposit mix along with declines in rates improved our overall cost of funds and reflects our strategic focus on growing core commercial operating accounts following the FLIC merger.

The $ 214.7 million increase in average time deposits included growth in retail time deposits of $200.9 million, nonreciprocal brokered time deposits of $31.3 million, and internet listing services of $6.3 million.

These increases were partially offset by a $23.1 million decrease in CDARS balances.

Average demand deposits (including interest-bearing and noninterest-bearing) for both 2025 and 2024 included $1.1 billion in ICS reciprocal deposits.

Average CDARS within the time deposit portfolio were $47.9 million for the year ended December 31, 2025, a decrease from $71.0 million in 2024.

This decline was primarily attributed to maturities that were not renewed.

The Bank monitors its deposit beta, which measures the sensitivity of deposit costs to market rate changes.

Nonreciprocal brokered deposits generally exhibit a higher beta, as they are more directly correlated to prevailing market interest rates.

Conversely, ICS and CDARS reciprocal deposits typically reflect the Bank’s core relationship with clients;

these balances are primarily driven by a desire for FDIC insurance coverage rather than market-leading rates, resulting in lower price sensitivity.

The following table sets forth information related to the uninsured deposit balances of the Bank for the periods presented.

December 31, 2025

December 31, 2024

(dollars in thousands)

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Estimated uninsured deposits (excluding affiliate and subsidiary accounts)

The following table sets forth the distribution of total actual deposit accounts, by account types for the periods indicated.

The following table sets forth the mix of our deposit accounts and their respective percentages of total deposits for the periods presented.

December 31, 2025

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Total Deposits

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.

The increase in total deposits was primarily due to an increase in savings deposits of $173.7 million, an increase in noninterest-bearing demand of $162.7 million and an increase in time deposits of $25.9 million, partially offset by a decrease in interest-bearing demand of $78.3 million.

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.

Included in time deposits were nonreciprocal brokered deposits of $907.2 million as of December 31, 2024, which decreased from $915.5 million as of December 31, 2023.

Total deposits increased by $3.4 billion, or 43.7%, to $11.2 billion as of December 31, 2025, compared to $7.8 billion at year-end 2024.

This significant growth was primarily driven by the merger with FLIC.

The increase in the deposit base was reflected across the following categories:

Interest-bearing demand deposits:

Increased $1.7 billion

Noninterest-bearing demand deposits:

Increased $1.0 billion

Savings deposits:

Increased $438.5 million

Time deposits:

Increased $239.7 million

The Bank continues to utilize reciprocal deposit programs to manage large-dollar client relationships.

Total interest-bearing demand deposits included $1.2 billion in ICS reciprocal deposits as of December 31, 2025 and $1.1 billion as of December 31, 2024.

Within the time deposit portfolio, CDARS balances were $43.3 million at year-end 2025, compared to $60.3 million at year-end 2024.

Additionally, time deposits included $723.4 million in nonreciprocal brokered deposits as of December 31, 2025.

This represents a decrease from $907.2 million at the prior year-end, reflecting a strategic shift toward core retail deposits following the merger.

As of December 31, 2025, we held $948.9 million of time deposits balances greater than $250,000.

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The rate as of December 31, 2025 was 6.95%.

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.

During June 2020, the Parent Corporation issued $75 million in aggregate principal amount of fixed-to-floating rate subordinated notes (the “2020 Notes”).

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.

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.

Distributions on the subordinated debentures owned by the subsidiary trust have been classified as interest expense in the Consolidated Statements of Income.

On May 15, 2025, the Parent Corporation issued $200 million in aggregate principal amount of fixed-to-floating rate subordinated notes (the "2025 Notes").

The 2025 Notes bear interest at 8.125% annually from, and including, the date of initial issuance up to but excluding June 1, 2030 or the date of earlier redemption, payable semi-annually in arrears on June 1 and December 1 of each year, commencing December 1, 2025.

From and including June 1, 2030 through maturity or earlier redemption, the interest rate shall reset quarterly to an interest rate per annum equal to a benchmark rate, which is Three-Month Term SOFR:

(as defined in the Prospectus Supplement), plus 441.5 basis points, payable quarterly in arrears on March 1, June 1, September 1 and December 1 of each year, commencing on September 1, 2030.

Notwithstanding the foregoing, if the benchmark rate is less than zero, then the benchmark rate shall be deemed to be zero.

During June 2020, the Parent Corporation issued $75 million in aggregate principal amount of fixed-to-floating rate subordinated notes (the “2020 Notes”).

The 2020 Notes which were redeemed in full on September 15, 2025, bore interest, since June 15, 2025, at a variable rate equal to the then benchmark rate, which is Three-Month Term SOFR (as defined in the Second Supplemental Indenture), plus 560.5 basis points.

During January 2018, the Parent Corporation issued $75 million in aggregate principal amount of fixed-to-floating rate subordinated notes (the “2018 Notes”).

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity