What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2026-02-24 compared with 2025-02-21 · 711 added, 201 removed, 2307 unchanged (28% of the section changed)

42 unchanged sentences

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which they relates.

Allowance for Credit Losses – Qualitative Loss Factors on Commercial and Commercial Real Estate Loans

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The quantitative factors are also supplemented by certain qualitative loss factors reflecting management’s view of how losses may vary from those represented by quantitative loss rates.

Qualitative loss factors, for each loan segment within the portfolio, incorporate consideration for a minimum to maximum range for qualitative loss factor derived from either the Company’s historical loss experience of peer group historical loss experience.

Changes in these assumptions could have a material effect on the Company’s financial results.

2 unchanged sentences

The primary procedures we performed to address this critical audit matter included:

Testing the effective of controls over the evaluation of the ACL on pooled loans, including controls addressing:

Testing the effectiveness of controls over the evaluation of the ACL on pooled loans, including controls addressing:

Methodology and accounting policies.

7 unchanged sentences

Evaluating the reasonableness of management’s judgments related to qualitative loss factors to determine if they are calculated to conform with management’s policies and were consistently applied period over period.

Business Combination – Fair Value of Acquired Loans

As described in Note 2 to the consolidated financial statements, on June 1, 2025, the Company completed the acquisition of The First of Long Island Corporation for stock and cash consideration totaling $270,828,000.

The acquisition was accounted for using the acquisition method of accounting, which requires management to record the assets and liabilities assumed at fair value on the acquisition date.

The estimation of fair values related to acquired loans required management to make significant judgments and assumptions.

The acquired loans were initially recorded at $2,882,951,000.

The fair value of the acquired loan portfolio was calculated on a pooled loan basis using discounted cash flow analysis for accruing loans and on an individual basis for nonaccrual loans.

This analysis took into consideration the contractual terms of the loans and assumptions related to the credit risk, expected lifetime losses, qualitative factors, collateral values, discount rates, and other liquidity considerations to estimate projected cash flows.

Acquired loans were evaluated to determine whether they met the definition of purchased credit deteriorated (“PCD”) based on indicators of more-than-insignificant credit deterioration since origination.

For PCD loans, an allowance for credit losses (“ACL”) was established at acquisition date through a gross-up of amortized cost, with no provision for credit losses recognized at acquisition, and the remaining difference between amortized cost, net of ACL and fair value allocated to the loans on the acquisition date is recorded as a non-credit-related discount to be accreted into interest income over the life of the loans.

We identified auditing the fair value of acquired loans as a critical audit matter because it involved a high degree of auditor judgment and significant audit effort to evaluate the significant judgments made by management, including expected lifetime losses, discount rates, projected cash flows and PCD loan criteria, and the need to involve more experienced audit personnel including the use of internal specialists.

The primary procedures we performed to address this critical audit matter included:

Testing the effectiveness of controls over the evaluation of the fair value of acquired loans, including controls addressing the evaluation of the:

Appropriateness of methods and significant assumptions applied in the estimate of fair value over the acquired loans

Relevance and reliability of data used in the fair value of acquired loans.

Criteria used to identify purchase credit deteriorated loan population and completeness of the population.

Completeness and accuracy of loan data used in the calculation

Substantively, testing management’s process, for establishing the fair value of acquired loans, which included:

Evaluation of, with the assistance of our internal specialists, the appropriateness, from a market-participant viewpoint, of the methods and significant assumptions applied in the estimate of the fair value of acquired loans, including the application of the expected lifetime losses, discount rates, projected cash flows used in the calculation.

Evaluation of the relevance and reliability of data used in the valuation of acquired loans.

Evaluation of criteria used to identify purchase credit deteriorated loan population and completeness of the population.

Testing the completeness and accuracy of loan data used in the calculation.

/s/ Crowe LLP

69 unchanged sentences

673,897 631,446

Treasury stock, at cost 3,885,548 shares as of December 31, 2024 and 3,603,178 shares as of December 31, 2023

Treasury stock, at cost:

3,885,548 common shares as of December 31, 2025 and December 31, 2024

( 76,116 ) ( 76,116 )

13 unchanged sentences

Interest and fees on loans

$ 581,136 $ 477,859 $ 453,992

Interest and dividends on investment securities:

36,085 18,561 16,666

6,525 4,503 4,641

3,694 4,349 3,662

Interest on federal funds sold and other short-term investments

17,428 12,617 11,104

Total interest income

644,868 517,889 490,065

Interest expense:

260,294 244,846 206,176

31,323 25,706 28,783

Total interest expense

291,617 270,552 234,959

Net interest income

353,251 247,337 255,106

Provision for credit losses

47,000 13,800 8,200

Net interest income after provision for credit losses

306,251 233,537 246,906

Noninterest income:

Deposit, loan and other income

11,701 6,861 6,098

Defined benefit pension plan curtailment gain

Employee retention tax credit

Income on bank owned life insurance

9,548 7,142 6,316

Net gains on sale of loans held-for-sale

2,003 2,723 1,704

Net gains (losses) on equity securities

1,704 2 ( 117 )

Total noninterest income

35,065 16,728 14,001

Noninterest expense:

Salaries and employee benefits

111,423 90,053 88,223

Occupancy and equipment

16,545 11,615 10,884

FDIC insurance

8,600 7,200 8,365

Professional and consulting

10,801 8,447 7,547

Marketing and advertising

3,180 2,420 1,965

Information technology and communications

20,005 17,574 14,340

Restructuring and exit charges

Merger expenses

34,461 1,605 -

Branch closing expenses

Bank owned life insurance restructuring charge

Amortization of core deposit intangible

Increase in value of acquisition price

7,922 1,235 1,438

Other expenses

13,040 11,172 11,187

Total noninterest expenses

228,573 151,798 143,949

Income before income tax expense

112,743 98,467 116,958

Income tax expense

32,300 24,674 29,955

80,443 73,793 87,003

Preferred dividends

6,036 6,036 6,036

Net income available to common stockholders

$ 74,407 $ 67,757 $ 80,967

Earnings per common share:

$ 1.64 $ 1.77 $ 2.08

1.63 1.76 2.07

See the accompanying notes to the consolidated financial statements.

4 unchanged sentences

(dollars in thousands)

$ 80,443 $ 73,793 $ 87,003

Other comprehensive income (loss), net of tax:

Net unrealized holding (losses) gains on available-for-sale-securities arising during period

Net unrealized (losses) gains on cash flow hedges

Net unrealized holding gains (losses) on available-for-sale-securities arising during period

28,980 ( 11,856 ) 3,940

Net unrealized losses on cash flow hedges

( 14,577 ) ( 2,329 ) ( 7,550 )

Pension plan adjustments

Total other comprehensive loss, net of tax

1,547 1,448 865

Total other comprehensive income (loss), net of tax

15,950 ( 12,737 ) ( 2,745 )

Total comprehensive income

$ 96,393 $ 61,056 $ 84,258

See the accompanying notes to the consolidated financial statements.

7 unchanged sentences

Treasury Stock

Income (Loss)

(in thousands, except share and per share data)

(Loss) Income

(dollars in thousands, except share and per share data)

Balance as of January 1, 2023

19 unchanged sentences

- - ( 1,900 ) - - - ( 1,900 )

Repurchase of stock ( 447,108 shares)

Repurchase of stock ( 904,152 shares including 1% excise tax)

- - - - ( 17,497 ) - ( 17,497 )

10 unchanged sentences

- - - ( 27,281 ) - - ( 27,281 )

Exercise of stock options ( 7,388 shares)

- - 96 - - - 96

Restricted stock grants, net of forfeitures ( 69,772 shares)

8 unchanged sentences

- - ( 1,403 ) - - - ( 1,403 )

Repurchase of stock ( 904,152 shares, including 1% excise tax)

Repurchase of stock ( 282,370 shares)

- - - - ( 5,820 ) - ( 5,820 )

4 unchanged sentences

- - - 80,443 - - 80,443

Other comprehensive loss, net of tax

Other comprehensive income, net of tax

- - - - - 15,950 15,950

Cash dividends declared on preferred stock ($ 1.3125 per share)

Cash dividends paid on preferred stock ($ 1.312500 per depositary share)

- - - ( 6,036 ) - - ( 6,036 )

Cash dividends declared on common stock ($ 0.71 per share)

Cash dividends paid on common stock ($ 0.72 per share)

- - - ( 31,956 ) - - ( 31,956 )

7 unchanged sentences

- - - - - - -

Share redemption for tax withholdings on restricted stock units for FLIC ( 22,638 shares)

- - ( 507 ) - - - ( 507 )

Share redemption for tax withholdings on performance units and deferred stock units earned

- - ( 1,725 ) - - - ( 1,725 )

Repurchase of stock ( 282,370 shares)

Stock-based compensation

- - 4,648 - - - 4,648

Stock-based compensation expense

Stock issued in connection with FLIC merger ( 11,790,116 shares)

- 270,819 - - - - 270,819

6 unchanged sentences

Years Ended December 31,

(dollars in thousands)

2025 2024 2023

Cash flows from operating activities

$ 80,443 $ 73,793 $ 87,003

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization of premises and equipment

6,087 4,422 4,503

Provision for credit losses

47,000 13,800 8,200

Amortization of intangibles

7,922 1,235 1,438

Net accretion of loans

( 23,902 ) ( 879 ) ( 1,904 )

Accretion on bank premises

Accretion on deposits

- ( 49 ) ( 49 )

Amortization (accretion) on deposits

1,236 ( 88 ) ( 279 )

Amortization on borrowings

Net deferred income tax (benefit) expense

( 2,772 ) ( 2,040 ) 4,135

Loss on bank owned life insurance policy exchange

Stock-based compensation

Change in fair value of equity securities, net

4,648 4,568 4,860

(Gain) loss on equity securities, net

( 1,704 ) ( 2 ) 117

Gain on sale of loans held-for-sale, net

Net losses on disposition of fixed assets

Gain on sale of other real estate owned

( 2,003 ) ( 2,723 ) ( 1,704 )

Loans originated for resale

( 30,321 ) ( 29,340 ) ( 26,153 )

Proceeds from sale of loans held-for-sale

Increase in cash surrender value of bank owned life insurance

Amortization of premiums on investment securities, net

32,676 31,320 36,645

Net loss on disposition of fixed assets

Net loss on sale of other real estate owned

Accretion of cash surrender value of bank owned life insurance

( 9,548 ) ( 7,142 ) ( 6,316 )

Accretion of discounts and amortization of premium on securities available-for-sale

( 746 ) 793 1,030

Amortization of subordinated debt issuance costs

Decrease (increase) in accrued interest receivable

645 505 1,184

(Increase) decrease in accrued interest receivable

( 1,327 ) 3,610 ( 3,046 )

Net change in operating leases

Decrease (increase) in other assets

( 1,042 ) ( 155 ) ( 54 )

(Increase) decrease in other assets

( 10,628 ) 8,691 ( 7,514 )

Increase (decrease) in other liabilities

8,110 ( 40,118 ) ( 9,248 )

Net cash provided by operating activities

106,398 60,700 92,891

Cash flows from investing activities

Investment securities available-for-sale:

( 441,441 ) ( 80,519 ) ( 42,143 )

Maturities, calls and principal repayments

Net redemptions (purchases) of restricted investment in bank stocks

161,768 69,651 64,550

Purchases of equity securities

( 1,825 ) ( 1,526 ) ( 2,870 )

Proceeds from equity securities sold

Net redemptions (purchases) of restricted investment in bank stocks

10,003 11,008 ( 4,853 )

Loans held-for-sale payments

Net decrease (increase) in loans

Cash flow hedge premium payment

Net (increase) decrease in loans

( 246,232 ) 57,941 ( 255,556 )

Proceeds from sale of other real estate owned

Proceeds from bank owned life insurance

Purchases of premises and equipment

Purchases of bank owned life insurance

Proceeds from BOLI death benefits

( 5,389 ) ( 3,793 ) ( 7,433 )

Proceeds from disposition of fixed assets

Proceeds from sale of other real estate owned

Net cash provided by (used in) investing activities

Cash acquired, net of cash consideration paid in acquisition

Net cash (used in) provided by investing activities

( 186,158 ) 55,151 ( 248,038 )

Cash flows from financing activities

Net increase in deposits

Repayment of subordinated debt

Advances of Federal Holme Loan Bank ("FHLB") borrowings

Repayments of FHLB borrowings

168,118 284,000 179,859

Proceeds from issuance of subordinated debt

Redemption of subordinated debt

( 75,000 ) - ( 75,000 )

Payment of subordinated debt issuance costs

( 3,725 ) - -

Proceeds from FHLB borrowings

966,000 866,529 2,946,500

Repayment of FHLB borrowings

( 1,111,002 ) ( 1,112,066 ) ( 2,870,564 )

Cash dividends paid on preferred stock

( 6,036 ) ( 6,036 ) ( 6,036 )

Cash dividends paid on common stock

( 31,956 ) ( 27,281 ) ( 25,912 )

Purchase of treasury stock

- ( 5,820 ) ( 17,497 )

Proceeds from exercise of stock options

Share redemption for tax withholdings on performance units and deferred stock units earned

Net cash (used in) provided by financing activities

( 2,232 ) ( 1,403 ) ( 1,900 )

Net cash provided by (used in) financing activities

104,167 ( 2,077 ) 129,546

Net change in cash and cash equivalents

24,407 113,774 ( 25,601 )

Cash and cash equivalents at beginning of period

356,488 242,714 268,315

Cash and cash equivalents at end of period

$ 380,895 $ 356,488 $ 242,714

Supplemental disclosures of cash flow information:

1 unchanged sentence

Interest paid

$ 286,294 $ 270,946 $ 230,806

Income taxes paid

43,739 24,001 31,647

Supplemental disclosures of noncash investing activities:

Transfer of loans to other real estate owned

Fair value of assets acquired

$ 3,905,094 $ - $ -

Fair value of liabilities assumed

3,641,505 - -

Stock issued in connection with FLIC merger

Transfer of loans held-for-sale to loans held-for-investment

13 unchanged sentences

(a New Jersey real estate investment trust), Center Financial Group, LLC (a New Jersey financial services company), Center Advertising, Inc.

(a New Jersey advertising company), Morris Property Company, LLC, (a New Jersey limited liability company), Volosin Holdings, LLC, (a New Jersey limited liability company), NJCB Spec- 1, LLC (a New Jersey limited liability company), Port Jervis Holdings, LLC (a New Jersey limited liability company), BONJ Special Properties, LLC (a New Jersey limited liability company) and BoeFly, Inc.

(a New Jersey financial technology company).

1 unchanged sentence

The Bank operates from its headquarters located at 301 Sylvan Avenue in the Borough of Englewood Cliffs, Bergen County, New Jersey and through its 58 other banking offices.

On June 1, 2025, the Company completed its acquisition of The First of Long Island Corporation ("FLIC") and the First National Bank of Long Island ("FNBLI"), FLIC’s wholly owned subsidiary depository institution, which was merged into the Bank.

Substantially all loans are secured with various types of collateral, including business assets, consumer assets and commercial/residential real estate.

Each borrower’s ability to repay its loans is dependent on the conversion of assets, cash flows generated from the borrowers’ business, real estate rental and consumer wages.

Each borrower’s ability to repay their loans is dependent on the conversion of assets, cash flows generated from the borrowers’ business, real estate rental and consumer wages.

Basis of Presentation and Principals of Consolidation

9 unchanged sentences

As a result, the Company is managed as one operating segment.

See Note 24 for disclosures related to the reportable segment.

Use of Estimates

5 unchanged sentences

Note 1a – Nature of Operations, Basis of Presentation and Summary of Significant Accounting Policies (continued)

Summary of Significant Accounting Policies

Cash and Cash Equivalents

49 unchanged sentences

In certain cases, loans are placed on nonaccrual or charged-off at an earlier date if collection of principal or interest is considered doubtful.

Nonaccrual loans include both smaller balance homogeneous loans that are collectively evaluated for credit losses and loans individually analyzed for credit losses.

Nonaccrual loans include both homogeneous loans that are collectively evaluated for credit losses and loans individually analyzed for credit losses.

All interest accrued but not received for loans placed on nonaccrual is reversed against interest income.

26 unchanged sentences

Note 1a – Nature of Operations, Basis of Presentation and Summary of Significant Accounting Policies – (continued)

Expected credit losses of financial assets are measured on a collective (pool) basis when similar risk characteristic(s) exist.

Expected credit losses of financial assets are measured on a collective (pooled) basis when similar risk characteristic(s) exist.

If the Company determines that a financial asset does not share risk characteristics with other financial assets, the Company will evaluate the financial asset for expected credit losses on an individual basis.

Financial assets are assessed once, either through collective assessments or individual assessments.

Standard expected losses are evaluated on a collective, or pool, basis when financial assets share similar risk characteristics.

For pooled loan segments, utilizing a quantitative analysis, the Company calculates estimated credit losses using a probability of default and loss given default methodology, the results of which are applied to the aggregated discounted cash flow of each individual loan within the segment.

20 unchanged sentences

For collateral dependent loans, when it is determined that a foreclosure is probable, the allowance for credit losses is determined on a loan level basis using the fair value of the collateral as of the reporting date, less estimated disposition costs (“net fair value”), which will ensure that the credit loss is not delayed until the time at which the actual foreclosure takes place.

In the event that this fair value is less than then amortized cost basis of these specific loans, the Company will recognize the difference between the net fair value at the reporting date and the amortized cost basis in the allowance for credit losses.

In the event that this fair value is less than the amortized cost basis of these specific loans, the Company will recognize the difference between the net fair value at the reporting date and the amortized cost basis in the allowance for credit losses.

If the fair value of the collateral has increased as of the evaluation date, the increase in the fair value of the collateral is reflected through a reduction in the allowance for credit losses.

19 unchanged sentences

As such, management may no longer consider the loans to be nonaccrual or nonperforming and may accrue interest on these loans, including the impact of any accretable discount.

At the inception of a derivative contract, the Company designates the derivative as one of three types based on the Company’s intentions and belief as to likely effectiveness as a hedge.

These three types are ( 1 ) a hedge of the fair value of a recognized asset or liability or of an unrecognized firm commitment ("fair value hedge"), ( 2 ) a hedge of a forecasted transaction or the variability of cash flows to be received or paid related to a recognized asset or liability ("cash flow hedge"), or ( 3 ) an instrument with no hedging designation ("non-designated derivative").

For a fair value hedge, the gain or loss on the derivative, as well as the offsetting loss or gain on the hedged item is attributable to the hedged risk, are recognized in current earnings as fair values change.

For a cash flow hedge, the gain or loss on the derivative is recorded in other comprehensive income ("OCI") and is reclassified into earnings in the same period during which the hedged transaction affects earnings.

The changes in the fair value of a derivative that is not designated is recorded currently in earnings, as noninterest income.

Net cash settlements on derivatives that qualify for hedge accounting are recorded in interest income or interest expense, based on the item being hedged.

38 unchanged sentences

As such, all future benefit accruals in this pension plan were discontinued and all retirement benefits that employees would have earned as of September 30, 2007 were preserved.

In addition, the Company acquired a defined benefit pension plan that covered all former eligible FLIC employees.

FLIC and the Bank, commencing at the merger closing on June 1, 2025, made contributions to the plan, which together with participant contributions equal to 2 % of their compensation, funded these benefits.

Effective September 30, 2025, the plan was frozen and all retirement benefits that employees earned through that date were preserved.

The Company’s policy is to fund at least the minimum contribution required by the Employee Retirement Income Security Act of 1974.

10 unchanged sentences

Stock-Based Compensation

FASB ASC 718 “Compensation-Stock Compensation”, requires that the compensation cost related to share-based payment transactions be recognized in financial statements.

FASB ASC 718 “Compensation-Stock Compensation” requires that the compensation costs related to share-based payment transactions be recognized in financial statements.

That cost will be measured based on the grant date fair value of the equity or liability instruments issued.

5 unchanged sentences

Subject to certain regulatory limitations applicable to the Parent Corporation, treasury stock purchases may be made from time to time as, in the opinion of management, market conditions warrant, in the open market or in privately negotiated transactions.

Shares repurchased are added to the corporate treasury and will be used for future stock dividends and other issuances.

Shares repurchased are added to the corporate treasury and will be used for future issuances.

The repurchased shares are recorded as treasury stock, which results in a decrease in stockholders’ equity.

Treasury stock is recorded using the cost method and accordingly is presented as a reduction of stockholders’ equity.

During the years ended December 31, 2024 and December 31, 2023, the Parent Corporation repurchased 283,270 and 904,152 shares, respectively, under board-approved share repurchase programs.

The Parent Corporation did not repurchase any shares in 2025.

During the year ended December 31, 2024, the Parent Corporation repurchased 283,270 shares under board-approved share repurchase programs.

On August 16, 2022, The Inflation Reduction Act, P.L.

12 unchanged sentences

The proposed regulations are anticipated to apply to repurchases of stock made after December 31, 2022, and to issuances of stock made during a tax year ending after December 31, 2022.

As of December 31, 2024, the Company accrued $0.1 million related to the excise tax through equity.

As of December 31, 2025, the Company had no accruals related to the excise tax through equity.

CONNECTONE BANCORP, INC.

10 unchanged sentences

Total comprehensive income includes all changes in equity during a period from transactions and other events and circumstances from nonowner sources.

The Company’s other comprehensive income (loss) is comprised of unrealized holding gains and losses on securities available-for-sale, unrecognized actuarial gains and losses of the Company’s defined benefit pension plan and unrealized gains and losses on cash flow hedges, net of taxes.

The Company’s OCI (loss) is comprised of unrealized holding gains and losses on securities available-for-sale, unrecognized actuarial gains and losses of the Company’s defined benefit pension plans and unrealized gains and losses on cash flow hedges, net of taxes.

Restrictions on Cash

13 unchanged sentences

The change in the cash surrender value of the BOLI is recorded as a component of noninterest income.

The Company accounts for income taxes in accordance with FASB ASC 740, “Income Taxes”, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements.

Deferred tax assets and liabilities are determined based on the temporary differences between the financial statement carrying amounts and the tax bases of assets and liabilities using enacted tax rates expected to be in effect when the taxes are actually paid or recovered.

Deferred tax assets are recognized to the extent it is more likely than not that they will be realized.

A valuation allowance is recorded to reduce deferred tax assets if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

The Company evaluates tax positions taken or expected to be taken in a tax return and recognizes a tax benefit if it is more likely than not that the position will be sustained upon examination by the relevant taxing authorities.

Unrecognized tax benefits, including interest and penalties, are recorded as a component of income tax expense in the Consolidated Statements of Income.

In accordance with ASC 740 - 10 - 25, the Company classifies interest and penalties related to unrecognized tax benefits as a component of income tax expense in the Consolidated Statements of Operations.

Accrued interest and penalties are included in other long-term liabilities on the Consolidated Balance Sheets.

The Company recognizes interest and penalties beginning in the period in which the uncertain tax position is taken, and they continue to accrue until the matter is resolved or until it is determined that payment is not required.

The Company accounts for income taxes in accordance with ASC 740, Income Taxes.

We recognize deferred tax assets and liabilities for the expected future tax consequences of events already included in the financial statements.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

The effect of a change in tax rates on deferred tax assets and liabilities is recognized in the period that includes the date of the enactment.

Valuation Allowances :

We record a valuation allowance to reduce deferred tax assets to the amount that is more likely than not to be realized.

In making this assessment, we weigh all available evidence, both positive and negative, including projected future taxable income and tax-planning strategies.

Uncertain Tax Positions :

The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the position will be sustained upon examination by the taxing authorities.

We record unrecognized tax benefits, including associated interest and penalties, as a component of Income tax expense in the Consolidated Statements of Operations.

Accrued interest and penalties are classified within Other long-term liabilities on the Consolidated Balance Sheets.

In December 2023, the FASB issued ASU 2023 - 09, Improvements to Income Tax Disclosures, which requires enhanced transparency through a standardized, disaggregated tax rate reconciliation table and expanded disclosures for income taxes paid.

The Company adopted the standard effective January 1, 2025.

Specifically, we are now required to:

Disaggregate the rate reconciliation into specific categories (e.g., state and local, foreign effects, enacted law changes) with a 5% quantitative threshold for separate disclosure of reconciling items.

● Disaggregate cash taxes paid by federal, state, and foreign jurisdictions, with further detail for any jurisdiction representing 5% or more of total taxes paid.

CONNECTONE BANCORP, INC.

15 unchanged sentences

Adoption of New Accounting Standards

In November 2023, the FASB issued Accounting Standards Update (“ASU”) 2023 - 07, Segment Reporting (Topic 280 ):

Improvements to Reportable Segment Disclosures.

The amendments apply to all public entities that are required to report segment information in accordance with Topic 280, Segment Reporting.

The amendments in this ASU are intended to improve reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses.

ASU 2023 - 07 is effective for the Company beginning January 1, 2024.

In December 2023, the FASB issued ASU 2023 - 09, Income Taxes (Topic 740 ):

In December 2023, the FASB issued Accounting Standard Update ("ASU") 2023 - 09, Income Taxes (Topic 740 ):

Improvements to Income Tax Disclosures.

2 unchanged sentences

1 ) The amount of income taxes paid (net of refunds received) disaggregated by federal (national), state, and foreign taxes;

2 ) The amount of income taxes paid (net of refunds received) disaggregated by individual jurisdictions in which income taxes paid (net of refunds received) is equal to or greater than 5% of total income taxes paid (net of refunds received).

and 2 ) The amount of income taxes paid (net of refunds received) disaggregated by individual jurisdictions in which income taxes paid (net of refunds received) is equal to or greater than 5% of total income taxes paid (net of refunds received).

The amendments also require that all entities disclose the following information:

1 ) Income (or loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign and 2 ) Income tax expense (or benefit) from continuing operations disaggregated by federal (national), state, and foreign.

ASU 2023 - 09 is effective for the Company beginning January 1, 2025.

The Company adopted ASU 2023 - 09 on January 1, 2025 and is currently not expected to have a material effect on the consolidated financial statements in 2025.

1 ) Income (or loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign;

and 2 ) Income tax expense (or benefit) from continuing operations disaggregated by federal (national), state, and foreign.

The Company adopted ASU 2023 - 09 on January 1, 2025.

Impact of Issued But Not Yet Effective Accounting Standards

In November 2024, the FASB issued ASU 2024 - 03, "Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220 - 40 )" ("ASU 2024 - 03" ).

ASU 2024 - 03 requires public entities to provide disaggregated disclosures, in the notes to the financial statements, of certain categories of expenses that are included in expense line items on the face of the income statement.

ASU 2024 - 03 is effective for the Company on January 1, 2027.

The Company is currently not expecting the ASU to have a material effect on the consolidated financial statements and footnotes.

CONNECTONE BANCORP, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Business Combination (unaudited)

On September 4, 2024, the Parent Corporation and The First of Long Island Corporation (Nasdaq:

FLIC) (“First of Long Island”), parent company of The First National Bank of Long Island entered into a definitive agreement pursuant to which First of Long Island will merge with and into the Parent Corporation, which will be the surviving entity in the transaction.

The combined company will operate under the ConnectOne brand, and will have approximately $ 14 billion in total assets, $ 11 billion in total deposits, and $ 11 billion in total loans.

Under the terms of the agreement, First of Long Island shareholders will receive 0.5175 shares of Parent Corporation common stock for each share of First of Long Island common stock.

The transaction is presently valued at approximately $ 284 million in aggregate based upon the closing common stock price of $ 23.97 for ConnectOne as of September 4, 2024.

On February 14, 2025, at separate special meetings, the shareholders of both companies approved proposals relating to the pending merger of the Company and FLIC.

Business Combination

On June 1, 2025 ( the “Acquisition Date”), the Company completed the acquisition of FLIC, the parent company for the FNBLI, in accordance with the definitive Agreement and Plan of Merger dated as of September 4, 2024 ( the “Merger Agreement”).

Pursuant to the Merger Agreement, on the Acquisition Date, FLIC merged with and into the Company, with the Company continuing as the surviving corporation, and FNBLI merged with and into the Bank, with the Bank as the surviving bank (collectively, the “merger”).

As part of this merger, the Company acquired 36 branch offices located in Nassau and Suffolk Counties of Long Island, and the boroughs of New York City.

In connection with the completion of the merger, former FLIC shareholders received 0.5175 shares of the Company’s common stock for each share of FLIC common stock they held.

The value of the total transaction consideration was approximately $ 270.8 million.

The consideration included the issuance of 11,790,116 shares of the Company’s common stock, valued at $ 22.97 per share, which was the closing price of the Company’s common stock on May 30, 2025, the last trading day prior to the consummation of the merger.

Also included in the total consideration was cash in lieu of any fractional shares, which was effectively settled upon closing.

The acquisition of FLIC was accounted for as a business combination using the acquisition method of accounting and, accordingly, assets acquired, liabilities assumed, and consideration paid were recorded at estimated fair values on the Acquisition Date.

The excess consideration paid over the estimated fair value of the net assets acquired has been reported as goodwill in the Company’s consolidated statements of financial condition.

Goodwill was originally reported at $ 7.2 million as of June 30, 2025.

During the measurement period, the Company updated its assessment of the fair value of net assets acquired to reflect a net increase of $ 4.6 million to goodwill, resulting in a total of $ 11.9 million recorded from the merger.

The adjustment was related to deferred tax assets, including a $ 5.0 million increase from true-ups based on tax filings (decrease to goodwill), a $ 1.3 million increase from the application of the finalized 30.9 % blended statutory tax rate (decrease to goodwill), and a $ 10.9 million valuation allowance related to Section 382 limitations-including recognized built-in losses and net operating losses resulting from the completion of a formal limitation study and updated New York apportionment rates (increase to goodwill).

The $ 11.9 million of goodwill created from the merger is not amortizable or deductible for tax purposes.

The amount of goodwill represents an asset attributed to the future economic benefits arising from other assets acquired in a business combination.

Future economic benefits consist largely of the synergies and economies of scale expected from combining the operations of FLIC and the Company.

The Company continues to identify and assess information regarding the nature of the assets acquired and liabilities assumed.

Accordingly, these valuations, including the amounts recorded for current and deferred taxes, are considered preliminary and subject to further adjustment during the measurement period, which ends June 1, 2026.

In connection with the acquisition, the consideration paid, as well as the fair value of identifiable assets acquired and liabilities assumed as of the Acquisition Date, are summarized in the following tables:

(dollars in thousands, except for per share data)

Purchase Price Consideration

FLIC common shares settled for stock

Exchange Ratio

ConnectOne shares entitlement

Fractional shares subject to cash in lieu

ConnectOne whole shares issued

Price per share of ConnectOne common stock on May 30, 2025

Total fair value of stock consideration issued

Cash consideration paid

Total purchase price consideration

CONNECTONE BANCORP, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Business Combination – (continued)

Period Adjustments

(dollars in thousands)

Total purchase price consideration

$ 270,828 $ - $ 270,828

Fair Value of Assets Acquired:

Cash and cash equivalents

54,869 - 54,869

Securities available-for-sale

596,702 - 596,702

Loans receivables, net

2,882,951 - 2,882,951

Restricted stock, at cost

24,276 - 24,276

Premises and equipment, net

45,895 - 45,895

Bank-owned life insurance

118,098 - 118,098

Pension plan assets

11,617 - 11,617

Core deposit intangible

63,206 - 63,206

107,480 ( 4,624 ) 102,856

Total assets acquired

$ 3,905,094 $ ( 4,624 ) $ 3,900,470

Fair Value of Liabilities Assumed:

3,251,147 - 3,251,147

360,405 - 360,405

Other liabilities

29,953 - 29,953

Total liabilities assumed

$ 3,641,505 $ - $ 3,641,505

Net assets acquired

$ 263,589 $ ( 4,624 ) $ 258,965

Goodwill recorded in acquisition

$ 7,239 $ 4,624 $ 11,863

CONNECTONE BANCORP, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Business Combination – (continued)

The following is a description of the valuation methodologies used to estimate the fair values of significant assets and liabilities presented above.

Cash and cash equivalents – The carrying amount of these items is a reasonable estimate of their fair value based on the short-term nature of these assets.

Investment securities – Fair values for investment securities available-for-sale were based on quoted market prices, where available.

If quoted market prices were not available, fair value estimates are based on observable inputs, including quoted market prices for similar instruments.

Fair value estimates also reflect an adjustment related to certain securities that were sold shortly after closing and were determined by the current market price.

Additional information is included in Note 4 - Investments.

Loans – The fair value of the loan portfolio was calculated on a pooled loan basis using discounted cash flow analysis for accruing loans and on an individual basis for nonaccrual loans.

The assumptions used in determining the fair value of the loan portfolio were considered reasonable from a market-participant viewpoint.

Acquired loans are classified into two categories:

purchased credit deteriorated (“PCD”) and non-PCD loans.

PCD loans are defined as a loan or group of loans that have experienced more-than-insignificant credit deterioration since origination.

The Company considers various factors in connection with the identification of more-than-insignificant deterioration in credit, including but not limited to nonperforming status, delinquency, risk ratings, and other qualitative factors that indicate deterioration in credit quality since origination.

Non-PCD loans will have an allowance established subsequent to the Acquisition Date, which is recognized as an expense through the provision for credit losses.

For PCD loans, the loans were recorded at their amortized cost, less an allowance for credit losses ("ACL") of $ 43.3 million on the Acquisition Date.

There is no provision for credit loss expense recognized on PCD loans because the initial allowance is established by grossing-up the amortized cost of the PCD loans.

The remaining difference between the net of the amortized cost basis and the ACL and the fair value allocated to the loans on the date of acquisition is recognized as a non-credit-related discount that will be accreted into interest income over the life of the loans.

The following table provides details related to the fair value of PCD loans that were acquired on June 1, 2025.

Gross-up for PCD

Unpaid Principal

Total Discount at

Allowance for Credit

Fair Value of

(dollars in thousands)

Losses at Acquisition

Loans at Acquisition

$ 271,904 $ ( 34,394 ) $ ( 43,336 ) $ 194,174

Non-PCD Loans

2,860,661 ( 171,884 ) - 2,688,777

Total Acquired Loans

$ 3,132,565 $ ( 206,278 ) $ ( 43,336 ) $ 2,882,951

CONNECTONE BANCORP, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Business Combination – (continued)

Premises and equipment – The estimated fair value of premises was measured based upon appraisals from independent third parties.

The estimated fair value of equipment was determined to approximate the carrying amount of these assets.

Deferred Tax Benefit – The Company recorded a net deferred income tax benefit of $ 46.5 million related to the tax attributes of FLIC, along with the effects of fair value adjustments resulting from applying the purchase method of accounting.

This amount represents a measurement period adjustment from the preliminary $ 51.1 million benefit previously reported.

The current estimate reflects the $ 4.6 million net decrease in deferred tax assets described above in the Purchase Price Allocation and Goodwill section, which accounts for the true-up of tax attributes, the application of the finalized 30.9 % blended statutory tax rate, and the recognition of a valuation allowance related to Section 382 limitations.

As the Company continues to evaluate the federal, state, and local combined statutory tax rate for the merged entity and the nature and extent of permanent and temporary differences between the book and tax bases of acquired assets and assumed liabilities, these amounts remain preliminary and subject to further adjustment during the measurement period.

Deposits – The fair values used for the demand and savings deposits equal the amount payable on demand at the Acquisition Date.

The fair value of time deposits is estimated by discounting the estimated future cash flows using current rates offered for deposits with similar remaining maturities.

Borrowings – The fair value of FHLB advances was estimated by discounting the estimated future cash flows using rates currently available to the Company for debt with similar remaining maturities.

As a result of the integration of operations of FLIC, the Company recognized net interest income and net income of $ 61.7 million and $ 37.3 million, respectively, from the Acquisition Date through and including December 31, 2025 which is included in the Company’s Consolidated Statements of Income.

Costs related to the acquisition totaled $ 34.0 million for the year ended December 31, 2025.

These amounts were expensed as incurred and are recorded as merger expenses in the Company’s Consolidated Statements of Income.

The following table presents unaudited supplemental pro forma information as if the merger had occurred on January 1, 2024.

The unaudited pro forma information includes adjustments for (i) accreting and amortizing the discounts and premiums associated with the estimated fair value adjustments to acquired loans, investment securities, deposits, and borrowings, (ii) the amortization of recognized intangible assets arising from the merger, (iii) depreciation expense on premises and equipment, and (iv) the related estimated income tax effects.

The pro forma amounts below do not reflect the Company's expectations as of the date of the pro forma information of further operating cost savings and other business synergies expected to be achieved, including revenue growth as a result of the merger.

As a result, actual amounts differed from the unaudited pro forma information presented.

(dollars in thousands)

Net interest income

$ 419,675 $ 293,469

Noninterest income

39,507 25,052

156,147 35,012

Net income available to common

150,111 28,976

$ 3.00 $ 0.58

$ 2.98 $ 0.58

CONNECTONE BANCORP, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 3 – Earnings per Common Share

4 unchanged sentences

Years Ended December 31,

(in thousands, except per share amounts)

(dollars in thousands, except per share amounts)

Net income available to common stockholders

81 unchanged sentences

Due after one year through five years

28,264 28,679

Due after five years through ten years

68,320 69,829

Due after ten years

55 unchanged sentences

$ 554,720 $ ( 96,074 ) $ 60,543 $ ( 1,004 ) $ 494,177 $ ( 95,070 )

The Company did not have an allowance for credit losses as of December 31, 2024.

The Company did not have an ACL for available-for-sale securities as of December 31, 2025.

The Company has elected to exclude accrued interest from the amortized cost of its investment securities available-for-sale.

Accrued interest receivable for investment securities available-for-sale as of both December 31, 2024 and December 31, 2023 was $ 2.3 million.

Accrued interest receivable for investment securities available-for-sale for December 31, 2025 and December 31, 2024 was $ 5.2 million and $ 2.3 million, respectively.

CONNECTONE BANCORP, INC.

39 unchanged sentences

$ 11,453,280 $ 8,274,810

At both December 31, 2024 and December 31, 2023 , loan balances of approximately $ 5.8 billion, were pledged to secure borrowings from the FHLB of New York and the Federal Reserve Bank of New York.

At December 31, 2025 and December 31, 2024 , loan balances of approximately $ 8.2 billion and $ 5.8 billion, respectively, were pledged to secure borrowings from the FHLB of New York and the Federal Reserve Bank of New York in the aggregate.

During 2024, the Company took actions to increase its secured borrowing access and increase levels of off-balance sheet liquidity and as such increased the amount of loans pledged to each of these borrowing facilities.

27 unchanged sentences

Commercial construction

- 2,204 2,204

Residential real estate

9 unchanged sentences

3,822 32,664 36,486

Commercial construction

- 2,204 2,204

Residential real estate

154 unchanged sentences

Commercial construction

2,204 - 2,204

Residential real estate

73 unchanged sentences

Residential real estate

(dollars in thousands)

Allowance for credit losses - loans

(dollars in thousands)

Individually analyzed

25 unchanged sentences

366 746 - 35 - 1,147

Provision for credit losses

Provision for credit losses - loans:

Initial provision related to acquisition – loans

985 16,017 78 10,217 10 27,307

Operating provision for credit losses

( 616 ) 22,679 161 ( 1,728 ) 29 20,525

Nonaccretable credit marks on PCD loans

861 41,047 - 114 - 42,022

Balance as of December 31, 2025

8 unchanged sentences

392 31 - 6 - 429

Provision for (reversal) of credit losses

Provision for credit losses

540 12,884 325 235 - 13,984

1 unchanged sentence

$ 18,278 $ 54,777 $ 5,064 $ 4,561 $ 5 $ 82,685

CONNECTONE BANCORP, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 5 – Loans and the Allowance for Credit Losses – (continued)

Commercial real estate

15 unchanged sentences

Loan Modifications to Borrowers Experiencing Financial Difficulty:

The following table presents the amortized cost basis to borrowers experiencing financial difficulty that were modified during the last 12 months.

The following table presents the amortized cost basis of loans to borrowers experiencing financial difficulty that were modified during the last 12 months.

The modification percentage represents the total modified loans as compared to the total gross loan balances as of December 31, 2025.

Amortized Cost Basis at Time of Modification

Amortized Cost Basis

Term Extension

Payment Deferral

Interest Rate Reduction

Payment Reduction

Gross Loans at December 31, 2025

5 unchanged sentences

3,687 - 3,687 8,054,696 0.05

Commercial construction

8,244 - 8,244 623,902 1.32

Residential real estate

1 unchanged sentence

- - - 2,017 -

$ 17,779 $ 18,811 $ 36,590 $ 11,457,558 0.32 %

The following table presents the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty during the last 12 months.

6 unchanged sentences

Commercial real estate

Commercial construction

Residential real estate

142 3 0.8 % $ 6

The Company closely monitors the performance of loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts.

6 unchanged sentences

Commercial real estate

Commercial construction

Residential real estate

6 unchanged sentences

The modification percentage represents the total modified loans as compared to the total gross loan balances as of December 31, 2024.

Amortized Cost Basis at Time of Modification

Amortized Cost Basis

Term Extension

9 unchanged sentences

- - 63,804 - 63,804 5,880,679 1.08

Commercial construction

- - - - - 616,246 -

Residential real estate

1,413 - - - 1,413 249,691 0.57

- - - - - 1,136 -

$ 19,054 $ 126 $ 63,804 $ 333 $ 83,317 $ 8,280,482 1.01 %

The following table presents the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty during the last 12 months.

6 unchanged sentences

Commercial real estate

Commercial construction

Residential real estate

142 3 0.8 % $ 6

11 unchanged sentences

Commercial real estate

Residential real estate

$ 83,317 $ - $ -

5 unchanged sentences

The provision is recorded within the provision for credit losses on the Company’s Consolidated Statement of Income.

The following table presents the allowance for credit losses for unfunded commitments for the year ended December 31, 2024 and 2023 (dollars in thousands):

The following table presents the allowance for credit losses for unfunded commitments for the years ended December 31, 2025 and 2024 (dollars in thousands):

Balance at beginning of period

$ 2,627 $ 2,811

Reversal of credit losses - unfunded commitments

( 184 ) ( 224 )

Provision for (reversal of) allowance for credit losses – unfunded commitments

Balance at end of period

1 unchanged sentence

Components of (Reversal of) Provision for Credit Losses

The following table summarizes the provision for (reversal of) provision for credit losses for the year ended December 31, 2024 and 2023 (dollars in thousands):

The following table summarizes the provision for (reversal of) provision for credit losses for the years ended December 31, 2025 and 2024 (dollars in thousands):

Provision for credit losses – loans

$ 20,525 $ 13,984

Reversal of credit losses - unfunded commitments

( 184 ) ( 224 )

Initial provision related to acquisition – loans

Release of marks due to improvements in expected cash flows

Provision for (reversal of) credit losses - unfunded commitments

Provision for credit losses – total

22 unchanged sentences

As of December 31, 2025, the weighted average remaining term for the finance lease was 2.9 years and the weighted average discount rate used in the measurement of finance lease liabilities was 6 %.

Total finance lease costs for the year ended December 31, 2024 was $ 0.3 million.

The Company has included this lease in premises and equipment as follows December 31, 2024 and 2023:

Total finance lease costs for the year ended December 31, 2025 were $ 0.3 million.

The Company has included this lease in premises and equipment as follows at December 31, 2025 and 2024:

(dollars in thousands)

31 unchanged sentences

Note 7 – Goodwill and Other Intangible Assets

A goodwill impairment test is required under ASC 350, Intangibles – Goodwill and Other, and the FASB issued ASU 2011 - 08, “Testing Goodwill for Impairment,” allowing an initial qualitative assessment of goodwill commonly known as step zero impairment testing.

In general, the step zero test allows an entity to first assess qualitative factors to determine whether it is more likely than not (i.e., more than 50% ) that the fair value of a reporting unit is less than its carrying value.

If a step zero impairment test results in the conclusion that it is more likely than not that the fair value of the reporting unit exceeds its carrying value, then no further testing is required.

Based upon management’s review through December 31, 2024 , the Company’s goodwill was not impaired.

Management concludes that the ASC 350 goodwill step zero test has been passed, and no further testing is required.

The change in goodwill during the year is as follows:

The Company performs an annual impairment test as required by ASC 350.

For 2025, management utilized the "step zero" qualitative assessment.

This assessment evaluates whether it is more likely than not that the fair value of a reporting unit is less than its carrying value.

Based upon management’s review through December 31, 2025 , the Company concluded that no impairment exists, the "step zero" test was passed, and no further quantitative testing was required.

The following table summarizes the changes in the carrying amount of goodwill for the years ended December 31, 2025 and 2024, including adjustments related to the measurement period of prior acquisitions:

(dollars in thousands)

2 unchanged sentences

Acquired goodwill

Measurement period adjustments

Balance, December 31

$ 220,235 $ 208,372

The adjustment was primarily driven by a finalization of deferred tax assets, including a $ 5.0 million increase from true-ups based on tax filings (decrease to goodwill), a $ 1.3 million increase from the application of the finalized 30.9 % blended statutory tax rate (decrease to goodwill) and a $ 10.9 million valuation allowance related to Section 382 limitations-including recognized built-in losses and net operating losses resulting from the completion of a formal limitation study and updated New York apportionment rates (increase to goodwill).

CONNECTONE BANCORP, INC.

3 unchanged sentences

Acquired Intangible Assets

The table below provides information regarding the carrying amounts and accumulated amortization of total amortized intangible assets as of the dates set forth below.

The following table summarizes the gross carrying amount, accumulated amortization, and net carrying amount of the Company’s core deposit intangibles as of the dates set forth below:

(dollars in thousands)

16 unchanged sentences

Total time deposits (after discount)

Time deposits that meets or exceeds $250,000 were $ 731.0 million and $ 680.9 million as of December 31, 2024 and 2023 , respectively.

Time deposits that are greater than or equal to $250,000 were $ 948.9 million and $ 731.0 million as of December 31, 2025 and 2024 , respectively.

CONNECTONE BANCORP, INC.

16 unchanged sentences

4 years through 5 years

- - 25,000 4.18

After 5 Years

10 unchanged sentences

All FHLB advances have fixed rates.

The advances as of December 31, 2024 were primarily collateralized by approximately $ 3.8 billion of commercial mortgage and residential loans, or $ 2.4 billion net of required over collateralization amounts, under a blanket lien arrangement.

As of December 31, 2024, the Company had remaining borrowing capacity of billion approximately $ 1.1 billion at the FHLB.

The advances as of December 31, 2025 were primarily collateralized by approximately $ 3.9 billion of commercial mortgage and residential loans, net of required over collateralization amounts, under a blanket lien arrangement.

As of December 31, 2025, the Company had remaining borrowing capacity of approximately $ 2.0 billion at the FHLB.

CONNECTONE BANCORP, INC.

11 unchanged sentences

Upon the cessation of publication of LIBOR rates and pursuant to the Federal LIBOR Act and Federal Reserve regulations implementing the Act, applicable US Dollar LIBOR indexed instruments like the Company’s outstanding $ 5.0 million of MMCapS capital securities converted effective June 30, 2023 to a new index based on CME Term SOFR, as defined in the LIBOR Act, plus a tenor spread adjustment, which is referred to as the Benchmark Replacement.

Therefore, effective for quarterly interest rate resets after July 3, 2023 the subordinated debentures’ floating rate will be three -month CME Term SOFR plus 2.85 % plus a tenor spread adjust of 0.26161 %.

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

20 unchanged sentences

Note 10 – Subordinated Debentures - (continued)

On June 10, 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.

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.

On June 10, 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.

On January 11, 2018, the Parent Corporation issued $ 75 million in aggregate principal amount of fixed-to-floating rate subordinated notes (the “2018 Notes”).

6 unchanged sentences

Note 11 – Income Taxes

The current and deferred amounts of income tax expense for 2024 , 2023 and 2022 are as follows (dollars in thousands):

Pretax income and income tax expense from continuing operations were as follows:

(dollars in thousands)

Pretax income

$ 112,743 $ 98,467 $ 116,958

$ 18,512 $ 15,556 $ 16,185

State and Local

16,560 11,158 9,635

1 unchanged sentence

( 2,024 ) 258 2,903

State and Local

( 748 ) ( 2,298 ) 1,232

( 2,772 ) ( 2,040 ) 4,135

Income tax expense

$ 32,300 $ 24,674 $ 29,955

Actual income tax expense differs from the tax computed based on pre-tax income and the applicable statutory federal tax rate for the following reasons (dollars in thousands) December 31,

Pretax income and income tax expense are derived solely from domestic operations.

The following table reconciles the U.S.

federal statutory income tax rate to the Company’s effective income tax rate for the year ended December 31, 2025:

(dollars in thousands)

US Federal tax at statutory rate

$ 23,676 21.0 %

State and Local tax, net of federal tax benefit

Nontaxable or nondeductible items:

Tax-exempt interest and dividends

( 3,207 ) ( 2.8 )

Bank owned life insurance

( 1,936 ) ( 1.7 )

162M adjustment

Tax benefits from stock-based compensation

Merger expenses

( 1,112 ) ( 1.0 )

Income tax expense

$ 32,300 28.6 %

State taxes in New York and New Jersey made up the majority (greater than 50 percent) of the tax effect in this category.

CONNECTONE BANCORP, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 11 – Income Taxes - (continued)

The following table sets forth a reconciliation of the income tax expense computed at the U.S.

federal statutory income tax rate to the Company's actual income tax expense for the periods indicated:

(dollars in thousands)

Income before income tax expense

1 unchanged sentence

Federal statutory rate

21 % 21 % 21 %

Computed “expected” Federal income tax expense

$ 20,678 24,561

State tax, net of federal tax benefit

State and Local tax, net of federal tax benefit

Tax-exempt interest and dividends

( 2,632 ) ( 2,514 )

162M adjustment

Bank owned life insurance

( 1,500 ) ( 1,326 )

Tax-exempt interest and dividends

( 2,632 ) ( 2,514 ) ( 1,969 )

162M adjustment

Tax benefits from stock-based compensation

1,036 ( 883 )

1,036 ( 883 ) ( 474 )

Income tax expense

4 unchanged sentences

Note 11 – Income Taxes – (continued)

The tax effects of temporary differences that give rise to significant portions of the deferred tax asset and deferred tax liability as of December 31, 2024 and 2023 are presented in the following table:

Income taxes paid were as follows for the year ended December 31, 2025:

(dollars in thousands)

State and Local:

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2025 and 2024 are as follows:

(dollars in thousands)

Deferred tax assets

2 unchanged sentences

Pension actuarial losses

New Jersey net operating loss

State net operating losses

Deferred compensation

Purchase accounting

Unrealized losses on available-for-sale securities

4 unchanged sentences

Operating lease liability

Interest Expense Disallowance

Total deferred tax assets

3 unchanged sentences

$ ( 7,709 ) $ ( 2,515 )

Pension actuarial losses

Purchase accounting

( 1,599 ) ( 1,660 )

Prepaid expenses

7 unchanged sentences

( 25,250 ) ( 19,999 )

Net deferred tax assets before valuation allowance

$ 137,678 $ 46,967

Valuation allowance

Net deferred tax assets

$ 126,731 $ 46,967

In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.

The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during periods in which those temporary differences become deductible.

Management considers the scheduled reversal of deferred tax liabilities, the projected future taxable income, and tax planning strategies in making this assessment.

During 2024 and 2023, based on the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, the Company believes the net deferred tax assets are more likely than not to be realized.

There are no unrecorded tax benefits, and the Company does not expect the total amount of unrecognized income tax benefits to significantly increase in the next twelve months.

CONNECTONE BANCORP, INC.

2 unchanged sentences

Note 11 – Income Taxes – (continued)

On June 28, 2024, the State of New Jersey enacted legislation (A.B.

4704 ) introducing a 2.5 % surtax, termed the "Corporate Transit Fee," applicable to corporations with New Jersey allocated taxable net income exceeding $ 10 million.

This fee is effective for privilege periods beginning on or after January 1, 2024, through December 31, 2028, and is in addition to the standard Corporation Business Tax (CBT) rate of 9% , resulting in a combined tax rate of 11.5 % for affected corporations.

The Corporate Transit Fee applies to the entire taxable net income of corporations surpassing the $ 10 million threshold, not just the income above this amount.

For combined group filers, the fee is assessed at the group level, and the income of all members, including public utilities and S corporations, is considered in determining the group's liability.

In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some or all of the deferred tax assets will be realized.

This assessment includes the evaluation of future taxable income, the scheduled reversal of deferred tax liabilities, and available tax planning strategies.

In connection with the acquisition of FLIC, the Company obtained net operating loss carryforwards and other tax attributes that are subject to utilization limits under Internal Revenue Code Section 382.

These limits affect both realized and unrealized built-in losses and may restrict the Company's ability to utilize these attributes during the carryforward period.

Accordingly, management established a valuation allowance against the relevant acquired deferred tax assets based on its evaluation of their future realizability.

Refer to Note 2, Business Combinations, for additional information regarding the FLIC acquisition.

Aside from these acquired attributes, the Company believes its remaining net deferred tax assets are more likely than not to be realized as of December 31, 2025 and as of December 31, 2024.

The Company has no unrecognized tax benefits as of December 31, 2025 and as of December 31, 2024.

The Company files income tax returns in multiple jurisdictions and is subject to examination by federal, state, and local taxing authorities.

2 unchanged sentences

The Company’s state income tax returns are generally open from the tax year 2021 and forward based on individual state statutes of limitations.

As of December 31, 2024, the Company has $ 29.5 million in New Jersey net operating loss (NOL).

Of that total, $ 15.2 million is set to expire on December 31, 2043 and $ 14.3 million is set to expire on December 31, 2044.

As of December 31, 2025, the Company had state net operating loss carryforwards of approximately $ 134 million, which expire at various dates from 2041 through 2045.

Additionally, the Company generated Recognized Built-In Losses (RBILs) of $ 26.5 million which may be carried forward indefinitely for federal tax purposes and expire in 2045 for the state tax purposes.

The Company also had federal interest expense disallowance carryforwards of approximately $ 24.9 million, which may be carried forward indefinitely.

These attributes are subject to utilization limits under Section 382, which is $ 9.7 million.

A valuation allowance has been established solely against certain state net operating loss and state RBIL carryforwards that are not more likely than not to be realized before expiration or utilization.

Note 12 – Preferred Stock

1 unchanged sentence

The net proceeds received from the issuance of preferred stock at the time of closing were $ 110.9 million.

On September 1, 2026 the rate will reset to the Five-year Treasury rate plus 4.42 %

CONNECTONE BANCORP, INC.

30 unchanged sentences

Note 14 – Transactions with Executive Officers, Directors and Principal Stockholders

Loans to principal officers, directors, and their affiliates during the years ended December 31, 2024 and 2023 were as follows:

Banking Transactions :

The Company has had, and may be expected to have in the future, banking transactions in the ordinary course of business with its executive officers, directors, principal stockholders, their immediate families, and affiliated companies (collectively referred to as "related parties").

These transactions include loans and deposits maintained at the Company’s banking subsidiary.

Loans to Related Parties :

Loans to related parties during the years ended December 31, 2025 and 2024 are summarized as follows:

(dollars in thousands)

5 unchanged sentences

$ 30,800 $ 23,364

Deposits from principal officers, directors, and their affiliates as of December 31, 2024 and 2023 were $ 51.9 million and $ 32.3 million respectively.

The Company has had, and may be expected to have in the future, banking transactions in the ordinary course of business with its executive officers, directors, principal stockholders, their immediate families and affiliated companies (commonly referred to as related parties).

The Company leases banking offices from related party entities.

In addition, the Company also utilizes an advertising and public relations agency at which one of the Company’s directors is President and CEO and a principal owner.

For these transactions, the expenses are not significant to the operations of the Company.

In the opinion of Management, these loans were made in the ordinary course of business on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with unrelated persons.

These transactions do not involve more than the normal risk of collectability or present other unfavorable features.

Deposits from Related Parties :

Deposits from related parties as of December 31, 2025 and 2024 were $ 70.2 million and $ 51.9 million, respectively.

These deposits were received in the ordinary course of business on substantially the same terms as those prevailing at the time of comparable transactions with unrelated persons.

Non-Banking Transactions :

The Company enters into certain business arrangements with entities owned or controlled by related parties.

Lease Agreements:

The Company leases banking offices from entities affiliated with certain related parties.

Rent expense paid to these related parties totaled $ 0.8 million for each of the years ended December 31, 2025, and 2024.

Professional Services:

The Company utilizes an advertising and public relations agency at which one of the Company’s directors serves as President, CEO, and is a principal owner.

Fees paid to this agency totaled $ 0.4 million and $ 0.3 million for the years ended December 31, 2025, and 2024, respectively.

Terms of Transactions:

Management believes these transactions were conducted on terms and conditions similar to those that would be available from unrelated third parties.

CONNECTONE BANCORP, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 15 – Stockholders ’ Equity and Regulatory Requirements

55 unchanged sentences

As of December 31, 2025 , both the Company and Bank satisfy the capital conservation buffer requirements applicable to them.

The lowest ratio at the Company is the Total Risk Capital Ratio which was 3.61 % above the minimum buffer ratio and, at the Bank, the lowest ratio was the Total Risk Based Capital Ratio which was 3.10 % above the minimum buffer ratio.

The lowest ratio at the Company is the Tier 1 Risk-based Capital Ratio which was 2.72 % above the minimum buffer ratio and, at the Bank, the lowest ratio was the Total Risk Based Capital Ratio which was 2.83 % above the minimum buffer ratio.

CONNECTONE BANCORP, INC.

16 unchanged sentences

( 5,316 ) ( 6,117 ) ( 6,086 ) Income tax expense

11,903 15,645 14,144

Amortization of pension plan net actuarial losses

1 unchanged sentence

- 48 89 Income tax benefit

- ( 123 ) ( 207 )

Total reclassification

$ 11,903 $ 15,522 $ 13,937

Accumulated other comprehensive loss as of December 31, 2025 and 2024 consisted of the following:

1 unchanged sentence

Investment securities available-for-sale, net of tax

$ ( 40,652 ) $ ( 69,632 )

Derivatives, net of tax

Defined benefit pension, net of tax

$ ( 31,896 ) $ ( 47,846 )

CONNECTONE BANCORP, INC.

3 unchanged sentences

Defined Benefit Plans

The Company maintains a frozen, noncontributory pension plan covering employees of the Company prior to the merger with Legacy ConnectOne.

The Company maintains a frozen, noncontributory pension plan covering employees of the Company prior to the merger with Legacy ConnectOne (“Legacy CNOB Plan”).

The benefits are based on years of service and the employee’s compensation over the prior five -year period.

2 unchanged sentences

Payments may be made under the Pension Plan once attaining the normal retirement age of 65 and are generally equal to 44% of a participant’s highest average compensation over a 5 -year period.

In the FLIC merger, the Company acquired a defined benefit pension plan (“Legacy FLIC Plan” and, with the Legacy CNOB Plan, the “Plans”)) with a net funded status of $ 11.2 million as of the Acquisition Date.

Former FLIC employees were eligible to participate in the Pension Plan after attaining 21 years of age and completing 12 full months of service.

Pension benefits are generally based on a percentage of average annual compensation during the period of creditable service.

FLIC historically made contributions to the Pension Plan which, when taken together with participant contributions equal to 2 % of their compensation, will be sufficient to fund these benefits.

The Bank’s funding method, the unit credit actuarial cost method, is consistent with the funding requirements of applicable federal laws and regulations which set forth both minimum required and maximum tax-deductible contributions.

Employees became fully vested after four years of participation in the Pension Plan ( no vesting occurs during the four -year period).

An internal management committee oversees the affairs of the pension plan and acts as named fiduciary.

Effective September 30, 2025, the Company froze benefit accruals under the Legacy FLIC Plan for all participants.

The freeze does not affect retirees or vested benefits.

The projected benefit obligation was remeasured using a discount rate of 5.41 %, increasing the liability by $ 2.0 million.

There were no other changes in assumptions.

The freezing of the plan also resulted in the removal of projected salary increase from the liability determination, resulting in a curtailment gain of $ 3.5 million recognized in Noninterest income during the third quarter of 2025.

The plan’s funded status improved to 134 %.

Significant Actuarial Assumptions.

The following tables set forth the significant actuarial assumptions used to determine the benefit obligation at the Acquisition Date:

Weighted average assumptions used to determine the benefit obligation:

Discount rate

Rate of increase in compensation levels

Weighted average assumptions used to determine net pension cost:

Discount rate

Rate of increase in compensation levels

Expected long-term rate of return on plan assets

CONNECTONE BANCORP, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 17 – Pension and Other Benefits – (continued)

The objective for the Plans assets is to generate long-term investment returns from both income and capital appreciation which outpaces the rate of inflation, while maintaining sufficient liquidity to ensure the Plan’s ability to pay all anticipated benefit and expense obligations when due.

The Plans may maintain a de minimis amount of cash equivalents, with the remaining assets allocated across two broadly-defined financial asset categories:

( 1 ) equity, both domestic and international;

and ( 2 ) fixed income of various durations and issuer type.

The goal of the equity allocation is to supplement the Bank’s contributions to the Plans when the Plans are underfunded and increase surplus when the Plans are overfunded.

The fixed income component will include longer-duration bonds designed to match and hedge the characteristics of the Plans’ liabilities.

Cash equivalents, under normal circumstances, will be temporary holdings for the purpose of paying expenses and monthly benefits.

For fixed income investments:

( 1 ) the minimum average credit quality shall be investment grade (Standard & Poor’s BBB or Moody’s Baa) or higher;

and ( 2 ) no more than 5 % of the portfolio may be invested in securities with ratings below investment grade, and none may be rated below investment grade at the time of purchase.

Reasonable precautions are taken to avoid excessive concentrations to protect the portfolio against unfavorable outcomes within an asset class.

Specifically, the following guidelines are in place:

With the exception of fixed income investments explicitly guaranteed by the U.S.

government, no single investment security shall represent more than 5 % of total Plan assets;

With the exception of passively managed investment vehicles seeking to match the returns of broadly diversified market indices or diversified investment vehicles chosen specifically to hedge the interest rate risk embedded in liabilities of the Plans, no single investment pool or investment company (mutual fund) shall comprise more than 10 % of total plan assets.

The portfolio will be rebalanced to the target asset allocation, if needed, no less often than quarterly.

Unless expressly authorized in writing by the Committee, the following investing activities are prohibited:

Purchasing securities on margin;

Pledging or hypothecating securities, except for loans of securities that are fully collateralized;

Purchasing or selling derivative securities for speculation or leverage;

Engaging in investment strategies that have the potential to amplify or distort the risk of loss beyond a level that is reasonably expected given the objectives of the portfolio.

The Plans actual asset allocations, target allocations and expected long-term rates of return by asset category at acquisition date are set forth in the following tables.

Cash equivalents

Equity mutual funds

25 % 26 % 10.6

Fixed income mutual funds

75 % 74 % 3.2

The ranges for the weighted average expected long-term rates of return for equity funds, bond funds and total plan assets set forth in the preceding table represent an average of all expected allocation percentile returns.

For these purposes, the trustee utilizes a third -party capital markets model (the “model”), which forecasts distributions of future returns for a wide array of broad asset classes.

The theoretical and empirical foundation of the model is that the returns of various asset classes reflect the compensation investors require for bearing different types of systematic risk.

At the core of the model are estimates of the dynamic statistical relationship between risk factors and asset returns, obtained from statistical analysis based on available historical monthly financial and economic data.

CONNECTONE BANCORP, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 17 – Pension and Other Benefits – (continued)

The following table sets forth changes in projected benefit obligation, changes in fair value of plan assets, funded status, and amounts recognized in the consolidated statements of condition for the Company’s pension plans as of December 31, 2025 and 2024 .

Legacy CNOB Plan

(dollars in thousands)

3 unchanged sentences

Interest cost

Actuarial (gain) loss

Actuarial loss (gain)

Benefits paid

12 unchanged sentences

$ 8,897 $ 7,499

The accumulated benefit obligation was $ 8.2 million and $ 9.3 million for the years ended December 31, 2024 and 2023 , respectively.

Legacy FLIC Plan

(dollars in thousands)

Change in Benefit Obligation:

Projected benefit obligation as of June 1,

Interest cost

Contributions

Assumption changes

Effect of curtailment

Benefits paid

Projected benefit obligation as of December 31,

Change in Plan Assets:

Fair value of plan assets as of June 1,

Actual return on plan assets

Contributions

Benefits paid

Fair value of plan assets as of December 31,

Funded status

CONNECTONE BANCORP, INC.

2 unchanged sentences

Note 17 – Pension and Other Benefits – (continued)

Amounts recognized as a component of accumulated other comprehensive loss as of the periods presented that have not been recognized as a component of the net periodic pension expense for the plan are presented in the following table.

As of December 31, 2024, the Company expects to recognize approximately $ 0.5 million of the net actuarial loss as a component of net periodic pension expense during 2025.

As of December 31, 2025, the Company expects to recognize approximately $ 0.6 million and $ 1.1 million of the net actuarial loss as a component of net periodic pension expense during 2026 for the Legacy CNOB and Legacy FLIC plans, respectively.

As of December 31,

Legacy CNOB Plan

(dollars in thousands)

Net actuarial loss recognized in accumulated other comprehensive income (pre-tax)

$ 967 $ 2,981

The pre-tax, net periodic pension expense (income) and other comprehensive income for the years ended December 31, 2024 , 2023 and 2022 includes the following:

As of December 31,

Legacy FLIC Plan

(dollars in thousands)

Net actuarial loss recognized in accumulated other comprehensive income (pre-tax)

The pre-tax, net periodic pension income and other comprehensive income for the years ended December 31, 2025, 2024 and 2023 for Company plans includes the following:

(dollars in thousands)

Interest cost

11 unchanged sentences

Settlement loss included in net income

( 6 ) ( 55 ) -

Total changes recognized in other comprehensive income

2 unchanged sentences

$ ( 1,398 ) $ ( 2,220 ) $ ( 1,339 )

Legacy FLIC Plan

(dollars in thousands)

Interest cost

Expected return on plan assets

Effect of Curtailment

Total recognized in net periodic pension income and other comprehensive income

CONNECTONE BANCORP, INC.

3 unchanged sentences

The following table presents the weighted average assumptions used to determine the pension benefit obligations as of December 31, for the following periods.

Legacy CNOB Plan

Discount rate

1 unchanged sentence

Rate of compensation increase

Legacy FLIC Plan

Discount rate

Rate of compensation increase

The following table presents the weighted average assumptions used to determine net periodic pension cost for the following three years:

Legacy CNOB Plan

Discount rate

3 unchanged sentences

Rate of compensation increase

Legacy FLIC Plan

Discount rate

Expected long-term return on plan assets

Rate of compensation increase

The process of determining the overall expected long-term rate of return on plan assets begins with a review of appropriate investment data, including current yields on fixed income securities, historical investment data, historical plan performance and forecasts of inflation and future total returns for the various asset classes.

This data forms the basis for the construction of a best-estimate range of real investment returns for each asset class.

A weighted average real-return range is computed reflecting the plan’s expected asset mix, and that range, when combined with an expected inflation range, produces an overall best-estimate expected return range.

Specific factors such as the plan’s investment policy, reinvestment risk and investment volatility are taken into consideration during the construction of the best estimate real return range, as well as in the selection of the final return assumption from within the range.

A weighted average real-return range is computed reflecting the Plans' expected asset mix, and that range, when combined with an expected inflation range, produces an overall best-estimate expected return range.

Specific factors such as the Plans' investment policy, reinvestment risk and investment volatility are taken into consideration during the construction of the best estimate real return range, as well as in the selection of the final return assumption from within the range.

CONNECTONE BANCORP, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 17 – Pension and Other Benefits – (continued)

The general investment policy of the Pension Trust is for the fund to experience growth in assets that will allow the market value to exceed the value of benefit obligations over time.

The Company’s pension plan asset allocation as of December 31, 2025 and 2024 , target allocation, and expected long-term rate of return by asset are as follows:

Legacy CNOB Plan

Allocation 2025 2024 Return

Equity Securities

1 unchanged sentence

International

2 % 2 % 3 % 0.1 %

Debt and/or fixed income securities

42 % 37 % 24 % 1.7 %

Cash and other alternative investments, including real estate funds, commodity funds, hedge funds and equity structured notes

— % 2 % 3 % — %

100 % 100 % 100 % 6.0 %

Legacy FLIC Plan

Allocation 2025 Return

Equity mutual funds

25 % 26 % 10.6 %

Fixed income mutual funds

75 % 74 % 3.2 %

Cash equivalents

100 % 100 % 5.1 %

CONNECTONE BANCORP, INC.

5 unchanged sentences

Quoted Prices

Identical Assets

Legacy CNOB Plan

Identical Assets Inputs Inputs

(dollars in thousands)

8 unchanged sentences

$ 16,222 $ 16,222 $ - $ -

CONNECTONE BANCORP, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 17 – Pension and Other Benefits – (continued)

Fair Value Measurements at Reporting Date Using

Quoted Prices

Identical Assets

Legacy CNOB Plan

Identical Assets Inputs Inputs

(dollars in thousands)

8 unchanged sentences

$ 15,704 $ 15,704 $ - $ -

Fair Value Measurements at Reporting Date Using

Quoted Prices

Legacy FLIC Plan

Identical Assets

(dollars in thousands)

$ - $ - $ - $ -

Equity securities:

10,316 10,316 - -

International companies

5,893 5,893 - -

Debt and/or fixed income securities

46,333 - 46,333 -

$ 62,542 $ 16,209 $ 46,333 $ -

Fair Value of Plan Assets

8 unchanged sentences

Debt and fixed income securities :

Certain debt securities are valued at the closing price reported in the active market in which the bond is traded (Level 1 inputs).

Other debt securities are valued based upon recent bid prices or the average of recent bid and asked prices when available (Level 2 inputs) and, if not available, they are valued through matrix pricing models developed by sources considered by management to be reliable.

Matrix pricing, which is a mathematical technique commonly used to price debt securities that are not actively traded, values debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs).

Certain debt securities are valued at the closing price reported in the active market in which the bond is traded (Level 1 ).

Other debt securities are valued based upon recent bid prices or the average of recent bid and asked prices when available (Level 2 ) and, if not available, they are valued through matrix pricing models developed by sources considered by management to be reliable.

For securities where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows or other market indicators (Level 3 ).

4 unchanged sentences

Contributions

The Bank does not expect to make a contribution in 2025.

The Bank does not expect to make a contribution to either of the Plans:

Estimated Future Benefit Payments

The following benefit payments, which reflect expected future service, as appropriate, for the following years are as follows (dollars in thousands):

The following benefit payments for the Legacy CNOB plan, which reflect expected future service, as appropriate, for the following years are as follows:

Year (dollars in thousands)

2031 – 2035 3,203

The following benefit payments for the Legacy FLIC plan, which reflect expected future service, as appropriate, for the following years are as follows:

Year (dollars in thousands)

2031 - 2035 17,325

CONNECTONE BANCORP, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 17 – Pension and Other Benefits – (continued)

The Company maintains a 401 (k) plan to provide for defined contributions which covers substantially all employees of the Company.

3 unchanged sentences

Supplemental Executive Retirement Plan ( “ SERP ” )

During 2019 and in 2022, the Company adopted supplemental executive retirement plans (“SERP’s”) for the benefit of several of its executive officers.

During 2019 and in 2022, the Company adopted supplemental executive retirement plans (“SERP”) for the benefit of several of its executive officers.

Each SERP is a non-qualified plan which provides supplemental retirement benefits to the participating officers of the Company.

20 unchanged sentences

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.

CONNECTONE BANCORP, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 18 – Stock Based Compensation - (continued)

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

20 unchanged sentences

( 43,331 ) 32.80

Forfeited/cancelled/expired

( 3,452 ) 19.01

3 unchanged sentences

Should this expectation change, additional compensation expense could be recorded in future periods or previously recognized expense could be reversed.

As of December 31, 2024, the maximum amount of performance units that ultimately could vest if performance targets were exceeded is 302,196 .

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.

8 unchanged sentences

( 91,364 ) 21.35

( 7,360 ) 21.53

Unearned as of December 31, 2025

33 unchanged sentences

Cash Flow Hedges

The Company during 2021, 2022 and 2024 entered into twelve pay fixed-rate interest rate swaps, with a total notional amount of $ 550 million.

The Company has entered into thirteen pay fixed-rate interest rate swaps, with a total notional amount of $ 700 million.

These are designated as cash flow hedges of outstanding Federal Home Loan Bank advances.

We are required to pay fixed rates of interest ranging from 0.63 % to 3.72 % and receive variable rates of interest that reset quarterly based on the daily compounding secured overnight financing rate (“SOFR”).

The twelve swaps carry expiration dates ranging from December 2025 to March 2028.

The swaps carry expiration dates ranging from March 2026 to November 2028.

The swaps are determined to be fully effective during the period presented and therefore no amount of ineffectiveness has been included in net income.

12 unchanged sentences

Note 20 – Derivatives (continued)

The following table presents the net gains (losses), recorded in accumulated other comprehensive income and the Consolidated Statements of Income relating to the cash flow derivative instruments for the years ended December 31, 2024 and 2023:

Amount of gain

33 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 20 – Derivatives (continued)

Derivatives Not Designated as Hedges

As part of the merger with FLIC, the Bank acquired interest rate swap agreements (each, a “back-to-back swap”) that are not designated as hedging instruments.

A back-to-back swap allows a borrower to effectively convert a variable rate loan to a fixed rate.

The Bank originates a variable rate loan with a borrower and simultaneously enters into offsetting back-to-back swaps with the borrower and an unaffiliated dealer counterparty to minimize interest rate risk.

In connection with each swap transaction, the Bank agrees to pay interest to the borrower on a notional amount at a variable interest rate and receives interest from the borrower on a similar notional amount at a fixed interest rate.

Concurrently, the Bank agrees to pay the dealer counterparty the same fixed interest rate on the same notional amount and receives the same variable interest rate on the same notional amount.

Because the Bank acts as an intermediary for its borrower, changes in the fair value of the underlying derivative contracts offset each other and do not impact the Bank’s results of operations.

The following table reflects the back-to-back swaps that are not designated as hedging instruments as of December 31, 2025:

December 31, 2025

(in thousands)

Derivatives not designated as hedging instruments included in other assets / other liabilities:

Interest rate swaps with borrowers

3 $ 35,914 $ 229 $ -

Interest rate swaps with offsetting counterparties

3 35,914 - 229

CONNECTONE BANCORP, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 21 – Fair Value Measurements and Fair Value of Financial Instruments

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

The FASB ASC 820 - 10, “Fair Value Measurements and Disclosures”, is the standard used to govern disclosures related to fair value measurements.

FASB ASC 820 - 10, “Fair Value Measurements and Disclosures”, is the standard used to govern disclosures related to fair value measurements.

FASB ASC 820 - 10 - 05 defines fair value, establishes a framework for measuring fair value, establishes a three -level valuation hierarchy for disclosure of fair value measurements and enhances disclosure requirements for fair value measurements.

11 unchanged sentences

Due to the wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between the Company’s disclosures and those of other companies may not be meaningful.

CONNECTONE BANCORP, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 21 – Fair Value Measurements and Fair Value of Financial Instruments (continued)

Assets and Liabilities Measured at Fair Value on a Recurring Basis

8 unchanged sentences

The Company’s evaluations are based on market data and the Company employs combinations of these approaches for its valuation methods depending on the asset class.

The fair value of derivatives are based on valuation models using observable market data as of the measurement date (level 2 ).

The fair value of derivatives is based on valuation models using observable market data as of the measurement date (level 2 ).

Our derivatives are traded in an over-the-counter market where quoted market prices are not always available.

27 unchanged sentences

Asset-backed securities

Certificates of deposit

Other securities

6 unchanged sentences

$ 1,286,299 $ 10,255 $ 1,269,532 $ 6,512

There were no transfers between Level 1, Level 2 and Level 3 during the years ended December 31, 2024 and 2023 .

Derivatives - interest rate contracts

Total liabilities

$ 704 $ - $ 704 $ -

CONNECTONE BANCORP, INC.

22 unchanged sentences

Asset-backed securities

1,238 - 1,238 -

Certificates of deposit

Other securities

6 unchanged sentences

$ 670,337 $ 9,910 $ 653,901 $ 6,526

Assets Measured at Fair Value on a Non-Recurring Basis

The Company may be required periodically to measure certain assets at fair value on a non-recurring basis in accordance with GAAP.

There were no transfers between Level 1, Level 2 and Level 3 during the years ended December 31, 2025 and 2024 .

Assets Measured at Fair Value on a NonRecurring Basis

The Company may be required periodically to measure certain assets at fair value on a nonrecurring basis in accordance with GAAP.

These adjustments to fair value usually result from the application of lower of cost or fair value accounting or impairment write-downs of individual assets.

17 unchanged sentences

$ 693 $ - $ - $ 693

Commercial real estate

2,913 - - 2,913

Fair Value Measurements at Reporting Date Using

17 unchanged sentences

Principal paydowns

Changes in unrealized gain (loss)

Changes in unrealized gain

Ending balance, December 31, 2025

2 unchanged sentences

Principal paydowns

Changes in unrealized gain (loss)

Changes in unrealized loss

Ending balance, December 31, 2024

27 unchanged sentences

-5% to +15% (+8.1%)

Commercial real estate loans

2,913 Appraisals of collateral

Adjustment for comparable sales

-40% to +0% (-14.3%)

December 31, 2024

28 unchanged sentences

The fair value of portfolio loans, net is determined using an exit price methodology.

The exit price methodology continues to be based on a discounted cash flow analysis, in which projected cash flows are based on contractual cash flows adjusted for prepayments for certain loan types ( e.g., residential mortgage loans and multi family loans) and the use of a discount rate based on expected relative risk of the cash flows.

The exit price methodology continues to be based on a discounted cash flow analysis, in which projected cash flows are based on contractual cash flows adjusted for prepayments for certain loan types ( e.g., residential mortgage loans and multifamily loans) and the use of a discount rate based on expected relative risk of the cash flows.

The discount rate selected considers loan type, maturity date, a liquidity premium, cost to service, and cost of capital, which is a Level 3 fair value estimate.

The carrying amounts of deposits with no stated maturities (i.e., non‐interest-bearing, savings, NOW, and money market deposits) are assigned fair values equal to the carrying amounts payable on demand.

The carrying amounts of deposits with no stated maturities (i.e., noninterest-bearing, savings, NOW, and money market deposits) are assigned fair values equal to the carrying amounts payable on demand.

The fair value of time deposits is based on the discounted value of contractual cash flows using estimated rates currently offered for alternative funding sources of similar remaining maturity.

33 unchanged sentences

201,864 204,454 - 204,454 -

Derivatives - interest rate contracts

704 704 - 704 -

Accrued interest payable

102 unchanged sentences

641 505 1,184

(Increase) decrease in other assets

Decrease in other liabilities

Decrease (increase) in other assets

127 ( 3 ) 699

Increase (decrease) in other liabilities

1,110 ( 122 ) ( 1,384 )

Net cash provided by operating activities

1 unchanged sentence

Cash flows from investing activities:

Purchases of equity securities

( 1,825 ) ( 1,533 ) ( 2,870 )

Sales and maturities of available-for-sale securities

Payments for investments and advances in subsidiaries

1 unchanged sentence

Repayment of investments and advances in subsidiaries

Purchases of equity securities

( 1,533 ) ( 2,870 ) ( 3,538 )

Net cash used in investing activities

1 unchanged sentence

Cash flows from financing activities:

Repayment of subordinated debt

Proceeds from issuance of subordinated debt

Redemption of subordinated debt

( 75,000 ) - ( 75,000 )

Payment of subordinated debt issuance costs

( 3,725 ) - -

Cash dividends paid on preferred stock

30 unchanged sentences

56,946 58,673 73,649 39,305

Income before income taxes

Income (loss) before income taxes

53,369 57,253 ( 25,281 ) 27,402

Income tax expense

Income tax expense (benefit)

13,851 16,277 ( 4,988 ) 7,160

Net income (loss)

39,518 40,976 ( 20,293 ) 20,242

1 unchanged sentence

1,509 1,509 1,509 1,509

Net income available to common stockholders

Net income (loss) available to common stockholders

$ 38,009 $ 39,467 $ ( 21,802 ) $ 18,733

2 unchanged sentences

0.75 0.78 ( 0.52 ) 0.49

Due to rounding, quarterly earnings per share for 2024 do not sum to reported annual earnings per share.

Per share amounts for the quarters may not add to the annual total due to the impact of the FLIC merger on the weighted average shares outstanding during the year.

(dollars in thousands, except per share data)

23 unchanged sentences

0.49 0.41 0.46 0.41

The sum of the quarterly earnings per share amounts for 2024 does not equal the annual earnings per share due to rounding differences.

CONNECTONE BANCORP, INC.

60 unchanged sentences

$ 14,002,700 $ 9,879,600 $ 9,855,603

*Other segment items for consolidated bank include expenses for occupancy and equipment, FDIC insurance, professional and consulting, marketing and advertising, merger expenses and other expenses.

*Other segment items for the consolidated Bank include expenses for occupancy and equipment, FDIC insurance, professional and consulting, marketing and advertising, information technology and communications, restructuring and exit charges, merger expenses, branch closing expenses and other expenses.

CONNECTONE BANCORP, INC.

3 unchanged sentences

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 8. Financial Statements and Supplementary Data