cnob20260930

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UNITED STATES OF AMERICA

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2026

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-40751

CONNECTONE BANCORP, INC.

(Exact Name of Registrant as Specified in Its Charter)

New Jersey

52-1273725

(State or Other Jurisdiction of

Incorporation or Organization)

(IRS Employer

Identification No.)

301 Sylvan Avenue

Englewood Cliffs, New Jersey 07632

(Address of Principal Executive Offices) (Zip Code)

844-266-2548

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading symbol	Name of each exchange on which registered
Common stock	CNOB	NASDAQ
Depositary Shares (each representing a 1/40^th interest in a share of 5.25% Series A Non-Cumulative, perpetual preferred stock)	CNOBP	NASDAQ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

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Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or emerging growth company. See definition of “large accelerated filer”, “accelerated filer” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act (check one):

Large accelerated filer ☒

Accelerated filer ☐

Non-accelerated filer ☐

Smaller reporting company ☐

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common Stock, no par value:	50,268,879 shares
(Title of Class)	(Outstanding as of October 30, 2026)

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PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements	3
	Consolidated Statements of Financial Condition as of September 30, 2026 (unaudited) and December 31, 2025	3
	Consolidated Statements of Income for the three and nine months ended September 30, 2026 and 2025 (unaudited)	4
	Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2026 and 2025 (unaudited)	5
	Consolidated Statements of Changes in Stockholders’ Equity for the three and nine months ended September 30, 2026 and 2025 (unaudited)	6
	Consolidated Statements of Cash Flows for the nine months ended September 30, 2026 and 2025 (unaudited)	8
	Notes to Consolidated Financial Statements (unaudited)	10

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	57

Item 3.	Qualitative and Quantitative Disclosures about Market Risks	82

Item 4.	Controls and Procedures	82

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	83

Item 1a.	Risk Factors	83

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	83

Item 3.	Defaults Upon Senior Securities	83

Item 4.	Mine Safety Disclosures	83

Item 5.	Other Information	83

Item 6.	Exhibits	84

SIGNATURES		85

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Item 1. Financial Statements

CONNECTONE BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(dollars in thousands, except for share data)	September 30,			December 31,
	2026			2025
	(unaudited)
ASSETS
Cash and due from banks	$	50,643		$	92,406
Interest-bearing deposits with banks		262,705			288,489
Cash and cash equivalents		313,348			380,895

Investment securities		1,323,789			1,250,938
Equity securities		21,947			19,287

Loans held-for-sale		678,880			391

Loans receivable		11,432,533			11,453,280
Less: Allowance for credit losses - loans		120,620			154,305
Net loans receivable		11,311,913			11,298,975

Investment in restricted stock, at cost		62,661			54,722
Bank premises and equipment, net		48,351			55,285
Accrued interest receivable		66,657			60,761
Bank owned life insurance		378,361			370,713
Right of use operating lease assets		30,228			29,603
Goodwill		220,235			220,235
Core deposit intangibles		51,387			59,923
Other assets		270,948			200,972
Total assets	$	14,778,705		$	14,002,700
LIABILITIES
Deposits:
Noninterest-bearing	$	2,479,625		$	2,420,397
Interest-bearing		9,298,717			8,820,218
Total deposits		11,778,342			11,240,615
Borrowings		1,072,398			903,489
Subordinated debentures, net		202,423			201,864
Operating lease liabilities		32,807			32,446
Other liabilities		94,135			50,946
Total liabilities		13,180,105			12,429,360

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS’ EQUITY
Preferred Stock, no par value: $1,000 per share liquidation preference; Authorized 5,000,000 shares; issued 115,000 shares as of September 30, 2026 and as of December 31, 2025; outstanding 115,000 shares as of September 30, 2026 and as of December 31, 2025		110,927			110,927
Common stock, no par value: Authorized 100,000,000 shares; issued 54,294,427 shares as of September 30, 2026 and 54,157,402 shares as of December 31, 2025; outstanding 50,268,879 shares as of September 30, 2026 and 50,271,854 as of December 31, 2025		857,765			857,765
Additional paid-in capital		41,329			38,763
Retained earnings		751,575			673,897
Treasury stock, at cost: 4,025,548 shares as of September 30, 2026 and 3,885,548 shares as of December 31, 2025		(80,138	)		(76,116	)
Accumulated other comprehensive loss		(82,858	)		(31,896	)
Total stockholders’ equity		1,598,600			1,573,340
Total liabilities and stockholders’ equity	$	14,778,705		$	14,002,700

See accompanying notes to unaudited consolidated financial statements.

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CONNECTONE BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(unaudited)

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2026			2025		2026			2025
(dollars in thousands, except for per share data)
Interest income
Interest and fees on loans	$	182,428		$	165,937	$	526,976		$	413,604
Interest and dividends on investment securities:
Taxable		12,580			12,033		34,361			24,457
Tax-exempt		1,858			2,014		5,743			4,530
Dividends		843			1,081		2,725			2,758
Interest on federal funds sold and other short-term investments		2,432			6,644		7,640			13,179
Total interest income		200,141			187,709		577,445			458,528
Interest expense
Deposits		72,102			75,209		207,355			189,440
Borrowings		10,741			10,483		30,349			22,432
Total interest expense		82,843			85,692		237,704			211,872
Net interest income		117,298			102,017		339,741			246,656
Provision for credit losses		5,000			5,500		18,500			44,700
Net interest income after provision for credit losses		112,298			96,517		321,241			201,956
Noninterest income
Deposit, loan and other income		3,347			3,836		9,954			8,412
Defined benefit pension plan curtailment gain		-			3,501		-			3,501
Employee retention tax credit		-			6,608		-			6,608
Income on bank owned life insurance		4,136			2,931		10,104			6,602
Gains on sale of loans held-for-sale		1,203			859		3,220			1,372
(Loss) on sale of loans held-for-sale-CRE restructuring		(23,025	)		-		(23,025	)		-
(Losses) gains on equity securities		(159	)		1,674		(28	)		2,550
Total noninterest income		(14,498	)		19,409		225			29,045
Noninterest expenses
Salaries and employee benefits		32,922			32,401		97,227			80,212
Occupancy and equipment		4,968			5,122		15,832			11,280
FDIC insurance		1,500			2,400		5,200			6,200
Professional and consulting		3,278			2,929		9,513			7,893
Marketing and advertising		951			771		3,038			2,206
Information technology and communications		5,277			5,243		15,914			14,639
Restructuring and exit charges		-			994		-			994
Merger expenses and restructuring charges		-			1,898		2,233			33,963
Bank owned life insurance restructuring charge		-			-		-			327
Amortization of core deposit intangibles		2,846			3,196		8,536			4,726
Other expenses		3,627			3,719		11,161			9,187
Total noninterest expenses		55,369			58,673		168,654			171,627
Income before income tax expense		42,431			57,253		152,812			59,374
Income tax expense		11,032			16,277		41,923			18,449
Net income		31,399			40,976		110,889			40,925
Preferred dividends		1,509			1,509		4,527			4,527
Net income available to common stockholders	$	29,890		$	39,467	$	106,362		$	36,398
Earnings per common share
Basic	$	0.59		$	0.79	$	2.12		$	0.83
Diluted		0.59			0.78		2.10			0.83

See accompanying notes to unaudited consolidated financial statements.

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CONNECTONE BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(dollars in thousands)	2026			2025			2026			2025
Net income	$	31,399		$	40,976		$	110,889		$	40,925

Other comprehensive income (loss), net of tax:
Net unrealized holding (losses) gains on available-for-sale securities arising during the period		(49,703	)		13,060			(55,130	)		22,418
Net unrealized holding gains (losses) on cash flow hedges		1,693			(2,765	)		4,168			(11,682	)
Total other comprehensive (loss) income, net of tax		(48,010	)		10,295			(50,962	)		10,736
Total comprehensive (loss) income	$	(16,611	)	$	51,271		$	59,927		$	51,661

See accompanying notes to unaudited consolidated financial statements.

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CONNECTONE BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(unaudited)

	*Three Months Ended September 30, 2026*
													Accumulated
					Additional								Other			Total
	Preferred		Common		Paid-In		Retained			Treasury			Comprehensive			Stockholders’
(in thousands, except share data)	Stock		Stock		Capital		Earnings			Stock			(Loss) Income			Equity
Balance as of June 30, 2026	$	110,927	$	857,765	$	39,688	$	731,500		$	(78,507	)	$	(34,848	)	$	1,626,525
Net income		-		-		-		31,399			-			-			31,399
Other comprehensive loss, net of tax		-		-		-		-			-			(48,010	)		(48,010	)
Cash dividends paid on preferred stock ($0.328125 per depositary share)		-		-		-		(1,509	)		-			-			(1,509	)
Cash dividends paid on common stock ($0.195 per share)		-		-		-		(9,815	)		-			-			(9,815	)
Net forfeitures of restricted stock grants (953 shares)		-		-		-		-			-			-			-
Repurchase of stock (50,000 shares)		-		-		-		-			(1,631	)		-			(1,631	)
Stock-based compensation expense		-		-		1,641		-			-			-			1,641
Balance as of September 30, 2026	$	110,927	$	857,765	$	41,329	$	751,575		$	(80,138	)	$	(82,858	)	$	1,598,600

	*Three Months Ended September 30, 2025*
														Accumulated
					Additional									Other			Total
	Preferred		Common		Paid-In			Retained			Treasury			Comprehensive			Stockholders’
(in thousands, except share data)	Stock		Stock		Capital			Earnings			Stock			(Loss) Income			Equity
Balance as of June 30, 2025	$	110,927	$	857,765	$	36,728		$	614,532		$	(76,116	)	$	(47,405	)	$	1,496,431
Net income		-		-		-			40,976			-			-			40,976
Other comprehensive income, net of tax		-		-		-			-			-			10,295			10,295
Cash dividends paid on preferred stock ($0.328125 per depositary share)		-		-		-			(1,509	)		-			-			(1,509	)
Cash dividends paid on common stock ($0.18 per share)		-		-		-			(9,055	)		-			-			(9,055	)
Net forfeitures of restricted stock grants (1,221 shares)		-		-		-			-			-			-			-
Net shares issued in satisfaction of deferred stock units earned (3,938 shares)		-		-		-			-			-			-			-
Share redemption for tax withholdings on performance units and deferred stock units earned		-		-		(98	)		-			-			-			(98	)
Stock-based compensation expense		-		-		1,304			-			-			-			1,304
Balance as of September 30, 2025	$	110,927	$	857,765	$	37,934		$	644,944		$	(76,116	)	$	(37,110	)	$	1,538,344

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CONNECTONE BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(unaudited)

	*Nine Months Ended September 30, 2026*
														Accumulated
					Additional									Other			Total
	Preferred		Common		Paid-In			Retained			Treasury			Comprehensive			Stockholders’
(in thousands, except share data)	Stock		Stock		Capital			Earnings			Stock			(Loss) Income			Equity
Balance as of December 31, 2025	$	110,927	$	857,765	$	38,763		$	673,897		$	(76,116	)	$	(31,896	)	$	1,573,340
Net income		-		-		-			110,889			-			-			110,889
Other comprehensive loss, net of tax		-		-		-			-			-			(50,962	)		(50,962	)
Cash dividends paid on preferred stock ($0.984375 per depositary share)		-		-		-			(4,527	)		-			-			(4,527	)
Cash dividends paid on common stock ($0.57 per share)		-		-		-			(28,684	)		-			-			(28,684	)
Restricted stock grants, net of forfeitures (71,484 shares)		-		-		-			-			-			-			-
Stock grants (1,528 shares)		-		-		-			-			-			-			-
Net shares issued in satisfaction of deferred stock units earned (42,849 shares)		-		-		-			-			-			-			-
Net shares issued in satisfaction of performance units earned (21,164 shares)		-		-		-			-			-			-			-
Share redemption for tax withholdings on performance units and deferred stock units earned		-		-		(1,936	)		-			-			-			(1,936	)
Repurchase of stock (140,000 shares)		-		-		-			-			(4,022	)		-			(4,022	)
Stock-based compensation		-		-		4,502			-			-			-			4,502
Balance as of September 30, 2026	$	110,927	$	857,765	$	41,329		$	751,575		$	(80,138	)	$	(82,858	)	$	1,598,600

	*Nine Months Ended September 30, 2025*
														Accumulated
					Additional									Other			Total
	Preferred		Common		Paid-In			Retained			Treasury			Comprehensive			Stockholders’
(in thousands, except share data)	Stock		Stock		Capital			Earnings			Stock			(Loss) Income			Equity
Balance as of December 31, 2024	$	110,927	$	586,946	$	36,347		$	631,446		$	(76,116	)	$	(47,846	)	$	1,241,704
Net income		-		-		-			40,925			-			-			40,925
Other comprehensive income, net of tax		-		-		-			-			-			10,736			10,736
Cash dividends paid on preferred stock ($0.984375 per depositary share)		-		-		-			(4,527	)		-			-			(4,527	)
Cash dividends paid on common stock ($0.54 per share)		-		-		-			(22,900	)		-			-			(22,900	)
Restricted stock grants, net of forfeitures (71,768 shares)		-		-		-			-			-			-			-
Stock grants (1,328 shares)		-		-		-			-			-			-			-
Net shares issued in satisfaction of deferred stock units earned (42,621 shares)		-		-		-			-			-			-			-
Net shares issued in satisfaction of performance units earned (19,577 shares)		-		-		-			-			-			-			-
Share redemption for tax withholdings on restricted stock units for The First of Long Island Corporation ("FLIC") (22,638 shares)		-		-		(507	)		-			-			-			(507	)
Share redemption for tax withholdings on performance units and deferred stock units earned		-		-		(1,725	)		-			-			-			(1,725	)
Stock issued in connection with FLIC merger (11,790,116 shares)		-		270,819		-			-			-			-			270,819
Stock-based compensation		-		-		3,819			-			-			-			3,819
Balance as of September 30, 2025	$	110,927	$	857,765	$	37,934		$	644,944		$	(76,116	)	$	(37,110	)	$	1,538,344

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CONNECTONE BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

	Nine Months Ended
	September 30,
(dollars in thousands)	2026			2025
Cash flows from operating activities
Net income	$	110,889		$	40,925
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of premises and equipment		5,292			4,264
Provision for credit losses		18,500			44,700
Amortization of intangibles		8,536			4,726
Net accretion of loans		(28,510	)		(13,955	)
Amortization on deposits		337			880
Amortization on borrowings, net		11			17
Loss on bank owned life insurance policy exchange		-			327
Stock-based compensation expense		4,502			3,819
Loss (gain) on equity securities, net		28			(2,550	)
Loss (gain) on sale of loans held-for-sale, net		19,805			(1,372	)
Loans originated for resale		(33,762	)		(21,352	)
Proceeds from sale of loans held-for-sale		37,373			23,467
Net loss on disposition of premises and equipment		5			87
Increase in cash surrender value of bank owned life insurance		(9,039	)		(6,602	)
Accretion of discounts and amortization of premium on available-for-sale securities		(1,543	)		(481	)
Amortization of subordinated debentures issuance costs		559			459
Increase in accrued interest receivable		(5,896	)		(1,196	)
Net change in operating leases		(264	)		910
Decrease (increase) in other assets		9,278			(20,981	)
(Decrease) increase in other liabilities		(901	)		2,606
Net cash provided by operating activities		135,200			58,698

Cash flows from investing activities
Available-for-sale securities
Purchases		(376,464	)		(391,666	)
Sales		-			277,477
Maturities, calls and principal repayments		226,331			102,982
Purchase of equity securities		(2,688	)		(1,825	)
Proceeds from equity securities sold		-			4,334
Net (purchases) redemptions of restricted investment in bank stocks		(7,939	)		13,209
Net increase in loans		(704,753	)		(102,041	)
Proceeds from bank owned life insurance		-			278
Purchases of premises and equipment		(2,592	)		(3,787	)
Proceeds from disposition of premises and equipment		4,229			-
Investment in renewable energy tax credit		(6,030	)		-
Cash acquired, net of cash consideration paid in acquisition		-			54,861
Net cash used in investing activities		(869,906	)		(46,178	)

Cash flows from financing activities
Net increase in deposits		537,390			297,154
Proceeds from issuance of subordinated debt		-			200,000
Redemption of subordinated debt		-			(75,000	)
Payment of subordinated debt issuance costs		-			(3,726	)
Proceeds from FHLB borrowings		2,550,003			790,000
Repayment of FHLB borrowings		(2,381,105	)		(1,005,043	)
Cash dividends on preferred stock		(4,527	)		(4,527	)
Cash dividends paid on common stock		(28,684	)		(22,900	)
Repurchase of treasury stock		(3,982	)		-
Share redemption for tax withholdings on performance units and deferred stock units earned		(1,936	)		(2,232	)
Net cash provided by financing activities		667,159			173,726
Net change in cash and cash equivalents		(67,547	)		186,246
Cash and cash equivalents at beginning of period		380,895			356,488
Cash and cash equivalents at end of period	$	313,348		$	542,734

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(continued)

Supplemental disclosures of cash flow information
Cash payments for:
Interest paid on deposits and borrowings	$	237,098	$	201,801
Income taxes		27,061		36,173

Supplemental disclosures of noncash activities
Business Combination
Fair value of assets acquired	$	-	$	3,905,094
Fair value of liabilities assumed		-		3,641,505
Stock issued in connection with FLIC merger		-		270,819

Renewable Energy Tax Credit
Investment in renewable energy tax credit	$	50,000	$	-
Renewable energy tax credit commitment		43,970		-

Transfer of Loans
Transfer of loans from held-for-investment to held-for-sale	$	701,905	$	-

See accompanying notes to unaudited consolidated financial statements.

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CONNECTONE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 1a. Nature of Operations, Principles of Consolidation and Risk and Uncertainties

Nature of Operations

ConnectOne Bancorp, Inc. (the “Parent Corporation”) is incorporated under the laws of the State of New Jersey and is a registered bank holding company under the Bank Holding Company Act of 1956, as amended (the “BHCA”). The Parent Corporation’s business currently consists of the operation of its wholly-owned subsidiary, ConnectOne Bank (the “Bank” and, collectively with the Parent Corporation and the Parent Corporation’s subsidiaries, the “Company”) and making certain limited investments. The Bank’s direct and indirect subsidiaries include Union Investment Co. (a New Jersey investment company), Twin Bridge Investment Co. (a Delaware investment company), ConnectOne Preferred Funding Corp. (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), The First of Long Island REIT (a New York real estate investment trust), FNY Service Corp (a New York investment company) and BoeFly, Inc. (a New Jersey financial technology company).

The Bank is a community-based, full-service New Jersey-chartered commercial bank that was founded in 2005. The Bank operates from its headquarters located at 301 Sylvan Avenue in the Borough of Englewood Cliffs, Bergen County, New Jersey and through its 55 other banking offices located in New Jersey, New York and Florida. 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, was merged into the Bank. See Note 2.

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 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 Principles of Consolidation

The consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles ("GAAP"). The consolidated financial statements of the Parent Corporation are prepared on an accrual basis and include the accounts of the Parent Corporation and the Bank. All significant intercompany accounts and transactions have been eliminated from the accompanying consolidated financial statements.

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CONNECTONE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 1a. Nature of Operations, Principles of Consolidation and Risk and Uncertainties - (continued)

Segment Reporting

The Company’s operations are solely in the financial services industry, providing a range of regional community banking services to commercial and retail clients.

The Company's reportable segment is determined by the Chief Executive Officer, who is designated the Chief Operating Decision Maker ("CODM"), based upon information about the Company's products and services offered, primarily its banking operations. The segment is also distinguished by the level of information provided to the CODM, who uses such information to review performance of various components of the business (such as branches and the subsidiary bank), which are then aggregated if operating performance, products/services, and customers are similar. The CODM will evaluate the financial performance of the Company's business components such as by evaluating revenue streams, significant expenses, and budget to actual results in assessing the Company's segment and in the determination of allocating resources. The CODM uses revenue streams to evaluate product pricing and significant expenses to assess performance and evaluate return on assets. The CODM uses consolidated net income to benchmark the Company against its competitors. The benchmarking analysis coupled with monitoring of budget to actual results are used in assessment of performance and in establishing compensation. Loans, investments, and deposits provide the revenues in the banking operation. Interest expense, provision for credit losses, and payroll provide the significant expenses in the banking operation. All operations are domestic. See Note 15 for disclosures related to the reportable segment.

Employee Benefit Plans

The Company has a noncontributory pension plan that covered all eligible employees up until September 30, 2007, at which time the Company froze its defined benefit pension plan. 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 the FLIC merger, the Company acquired a defined benefit pension plan that covered all former eligible FLIC employees. Prior to the freezing of the Plan the Bank 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. Pension expense is the sum of service cost, interest cost, amortization of actuarial gains and losses and plan expenses, net of the expected return on plan assets and participant contributions. The costs associated with the plans are accrued based on actuarial assumptions and included in deposit, loan and other income.

The Company accounts for its defined benefit pension plans in accordance with Financial Accounting Standards Board ("FASB") Accounting Standard Codification ("ASC") 715-30. This standard requires that the funded status of defined benefit postretirement plans be recognized on the Company’s Consolidated Statements of Financial Condition and changes in the funded status be reflected in other comprehensive income (loss) ("OCI"). This standard also requires companies to measure the funded status of the plans as of the date of the company's fiscal year-end.

Use of Estimates

In preparing the consolidated financial statements, management has made estimates and assumptions that affect the reported amounts of assets and liabilities as of the dates of the Consolidated Statements of Financial Condition and that affect the results of operations for the periods presented. Actual results could differ significantly from those estimates.

Reclassifications

Certain reclassifications have been made to amounts reported in prior periods to conform to the current period presentation. The reclassifications had no material effect on net income or total stockholders' equity.

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CONNECTONE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 1b. Authoritative Accounting Guidance

Adoption of New Accounting Standards

In July 2025, the FASB issued Accounting Standards Update 2025-05, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets” (“ASU 2025-05”). ASU 2025-05 provides an optional practical expedient that allows entities, when developing reasonable and supportable forecasts for estimating expected credit losses on current accounts receivable and current contract assets, to assume that current conditions as of the balance sheet date will not change for the remaining life of the asset. The Company adopted ASU 2025-05 on a prospective basis effective January 1, 2026. The adoption of this standard did not have a material impact on the Company’s consolidated financial position, results of operations, or cash flows.

Newly Issued, But Not Yet Effective Accounting Standards

In November 2025, the FASB issued Accounting Standards Update 2025-08, "Financial Instruments – Credit Losses (Topic 326): Purchased Loans" ("ASU 2025-08"). ASU 2025-08 expands the use of the gross-up approach in Accounting Standards Codification Topic 326 to all purchased seasoned loans. ASU 2025-08 is effective for the Company for fiscal years beginning after December 15, 2026, and interim periods within those fiscal years ( January 1, 2027 for the Company). The Company is currently evaluating the impact of adopting ASU 2025-08 on its consolidated financial position, results of operations, or cash flows.

In September 2025, the FASB issued Accounting Standards Update 2025-06, "Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software" ("ASU 2025-06"). ASU 2025-06 modernizes the accounting for costs related to internal-use software by removing references to project stages and clarifying the capitalization threshold. ASU 2025-06 is effective for the Company for fiscal years beginning after December 15, 2027, and interim periods within those fiscal years ( January 1, 2028 for the Company). The Company is currently evaluating the impact of adopting ASU 2025-06 on its consolidated financial position, results of operations, or cash flows.

In November 2024, the FASB issued Accounting Standards Update 2024-03, “Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40)” (“ASU 2024-03”). ASU 2024-03 requires public entities to disclose, in the notes to the financial statements, disaggregated information about specified categories of expenses included in certain expense line items presented on the face of the income statement. In January 2025, the FASB issued ASU 2025-01 to clarify the effective date of ASU 2024-03. ASU 2024-03, as clarified, is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027. For the Company, the new disclosures will first be required in its Annual Report on Form 10-K for the year ending December 31, 2027, and in its quarterly reports beginning in 2028. Early adoption is permitted. The Company is currently evaluating the impact of adopting ASU 2024-03 on its consolidated financial statement disclosures.

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CONNECTONE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 2. Business Combination

On June 1, 2025 (the “Acquisition Date”), the Company completed the acquisition of FLIC, the parent company of 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.

Former FLIC shareholders received 0.5175 shares of the Company’s common stock for each share of FLIC common stock they held. Total transaction consideration was approximately $270.8 million, consisting primarily of 11,790,116 shares of the Company’s common stock valued at $22.97 per share. Additional information regarding the merger is included in Note 2 of the Company's Annual Report on Form 10-K for the year ended December 31, 2025.

The acquisition of FLIC was accounted for as a business combination using the acquisition method of accounting. The post-closing measurement period ended on June 1, 2026, and the purchase price allocation is final. Measurement period adjustments, primarily related to the finalization of deferred tax assets and the Section 382 valuation allowance, increased goodwill by $4.6 million from the $7.2 million originally reported as June 30, 2025, resulting in total goodwill of $11.9 million. This goodwill is not amortizable or deductible for tax purposes. There were no adjustments to the purchase price allocation during the three and nine months ended September 30, 2026.

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CONNECTONE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 2. Business Combination – (continued)

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

	As of		Measurement			As Adjusted
	June 1, 2025		Period Adjustments			June 1, 2025
	(dollars in thousands)

Total purchase price consideration	$	270,828	$	-		$	270,828

Fair Value of Assets Acquired:
Cash and cash equivalents		54,869		-			54,869
Available-for-sale securities		596,702		-			596,702
Loans receivable, 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
Other assets		107,480		(4,624	)		102,856
Total assets acquired	$	3,905,094	$	(4,624	)	$	3,900,470

Fair Value of Liabilities Assumed:
Deposits		3,251,147		-			3,251,147
Borrowings		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

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CONNECTONE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 2. Business Combination – (continued)

The core deposit intangible of $63.2 million is being amortized over an estimated useful life of 10 years. Purchased credit deteriorated ("PCD") loans had an unpaid principal balance of $271.9 million and a fair value of $194.2 million at the Acquisition Date, with an allowance for credit losses of $43.3 million established through a gross-up of the amortized cost basis.

There were no material changes in acquisition-related contingencies during the three and nine months ended September 30, 2026.

No merger expenses and restructuring charges associated with the merger were recognized during the three months ended September 30, 2026, and such charges totaled $2.2 million for the nine months ended September 30, 2026. This compares to $1.9 million and $34.0 million for the three and nine months ended September 30, 2025, respectively. All such costs were expensed as incurred and are included in “Merger expenses and restructuring charges” in the Consolidated Statements of Income.

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CONNECTONE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 3. Earnings per Common Share

The Company calculates earnings per share (“EPS”) in accordance with FASB ASC 260-10-45. The restricted stock awards granted by the Company contain non-forfeitable rights to dividends and are therefore considered participating securities. Under the two-class method, basic EPS is calculated by excluding dividends paid to participating securities and any undistributed earnings attributable to those securities.

Earnings per common share have been computed based on the following:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(dollars in thousands, except for per share data)	2026			2025			2026			2025
Net income available to common stockholders	$	29,890		$	39,467		$	106,362		$	36,398
Earnings allocated to participating securities		(67	)		(88	)		(227	)		(87	)
Income attributable to common stock	$	29,823		$	39,379		$	106,135		$	36,311

Weighted average common shares outstanding, including participating securities		50,307			50,273			50,281			43,628
Weighted average participating securities		(111	)		(112	)		(107	)		(105	)
Weighted average common shares outstanding		50,196			50,161			50,174			43,523
Incremental shares from assumed conversions of options, performance units and restricted shares		261			302			248			223
Weighted average common and equivalent shares outstanding		50,457			50,463			50,422			43,746

Earnings per common share:
Basic	$	0.59		$	0.79		$	2.12		$	0.83
Diluted		0.59			0.78			2.10			0.83

There were no anti-dilutive share equivalents for the three and nine months ended September 30, 2026 and 2025.

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CONNECTONE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 4. Investment Securities

All of the Company’s investment securities were classified as available-for-sale as of September 30, 2026 and December 31, 2025. Available-for-sale securities are reported at fair value, with unrealized gains and losses, net of tax, included in accumulated other comprehensive income (loss) within stockholders’ equity. Fair value is determined using quoted market prices or, in instances of limited market activity, based on various assumptions. See Note 8 of the Notes to Consolidated Financial Statements for further discussion regarding the valuation of the Company’s investment securities.

The following tables present the amortized cost and estimated fair value of the Company’s portfolio of available-for-sale securities as of the dates indicated.

										Allowance
										for
			Gross		Gross					Investment
	Amortized		Unrealized		Unrealized			Fair		Credit
	Cost		Gains		Losses			Value		Losses
	(dollars in thousands)
September 30, 2026
Available-for-sale securities:
Federal agency obligations	$	320,151	$	143	$	(16,457	)	$	303,837	$	-
Residential mortgage pass-through securities		871,749		-		(87,088	)		784,661		-
Commercial mortgage pass-through securities		35,008		-		(5,629	)		29,379		-
Obligations of U.S. states and political subdivisions		204,618		24		(26,346	)		178,296		-
Corporate bonds and notes		26,250		-		(616	)		25,634		-
Asset-backed securities		478		1		(1	)		478		-
Other securities		1,504		-		-			1,504		-
Total available-for-sale securities	$	1,459,758	$	168	$	(136,137	)	$	1,323,789	$	-

December 31, 2025
Available-for-sale securities:
Federal agency obligations	$	398,392	$	2,467	$	(9,669	)	$	391,190	$	-
Residential mortgage pass-through securities		644,811		5,391		(43,058	)		607,144		-
Commercial mortgage pass-through securities		30,124		-		(3,155	)		26,969		-
Obligations of U.S. states and political subdivisions		221,545		5,385		(14,521	)		212,409		-
Corporate bonds and notes		12,500		22		(3	)		12,519		-
Asset-backed securities		528		-		(3	)		525		-
Other securities		182		-		-			182		-
Total available-for-sale securities	$	1,308,082	$	13,265	$	(70,409	)	$	1,250,938	$	-

The Company did not have any securities classified as held-to-maturity at September 30, 2026 and December 31, 2025.

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CONNECTONE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 4. Investment Securities – (continued)

Investment securities with a carrying value of approximately $624.5 million and $771.2 million at September 30, 2026 and December 31, 2025, respectively, were pledged to secure public deposits, borrowings and for other purposes required or permitted by law. As of September 30, 2026 and December 31, 2025, there were no holdings of any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of stockholders’ equity.

The following table presents the amortized cost and fair value of available-for-sale securities by contractual maturity as of September 30, 2026. Actual maturities can be expected to differ from contractual maturities due to prepayment or early call options of the issuer. Securities not due at a single maturity date, such as mortgage-backed securities, are shown separately.

	September 30, 2026
	Amortized		Fair
	Cost		Value
	(dollars in thousands)
Available-for-sale securities
Due in one year or less	$	7,000	$	6,980
Due after one year through five years		26,771		26,162
Due after five years through ten years		93,834		89,293
Due after ten years		423,892		385,810
Residential mortgage pass-through securities		871,749		784,661
Commercial mortgage pass-through securities		35,008		29,379
Other securities		1,504		1,504
Total available-for-sale securities	$	1,459,758	$	1,323,789

There were no sales of available-for-sale securities during the three and nine months ended September 30, 2026. During the nine months ended September 30, 2025, immediately following the merger with FLIC, the Company sold a significant portion of the available-for-sale securities acquired from FLIC for proceeds of $277.5 million, with no gross gains or losses realized upon sale.

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CONNECTONE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 4. Investment Securities – (continued)

The following tables set forth securities with unrealized losses at the dates indicated presented by the length of time the securities have been in a continuous unrealized loss position.

	September 30, 2026
	Total					Less than 12 Months					12 Months or Longer
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
	(dollars in thousands)
Available-for-sale securities:
Federal agency obligations	$	249,528	$	(16,457	)	$	206,723	$	(4,883	)	$	42,805	$	(11,574	)
Residential mortgage pass-through securities		784,661		(87,088	)		514,760		(24,763	)		269,901		(62,325	)
Commercial mortgage pass-through securities		29,379		(5,629	)		5,071		(394	)		24,308		(5,235	)
Obligations of U.S. states and political subdivisions		174,388		(26,346	)		104,295		(5,870	)		70,093		(20,476	)
Corporate bonds and notes		23,634		(616	)		23,634		(616	)		-		-
Asset-backed securities		254		(1	)		-		-			254		(1	)
Total available-for-sale securities	$	1,261,844	$	(136,137	)	$	854,483	$	(36,526	)	$	407,361	$	(99,611	)

	December 31, 2025
	Total					Less than 12 Months					12 Months or Longer
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
	(dollars in thousands)
Available-for-sale securities:
Federal agency obligations	$	135,103	$	(9,669	)	$	101,610	$	(246	)	$	33,493	$	(9,423	)
Residential mortgage pass-through securities		331,799		(43,058	)		5,547		(45	)		326,252		(43,013	)
Commercial mortgage pass-through securities		26,969		(3,155	)		5,421		(96	)		21,548		(3,059	)
Obligations of U.S. states and political subdivisions		103,918		(14,521	)		4,276		(20	)		99,642		(14,501	)
Corporate bonds and notes		1,997		(3	)		1,997		(3	)		-		-
Asset-backed securities		525		(3	)		242		-			283		(3	)
Total available-for-sale securities	$	600,311	$	(70,409	)	$	119,093	$	(410	)	$	481,218	$	(69,999	)

The Company has elected to exclude accrued interest from the amortized cost of its available-for-sale securities. Accrued interest receivable for available-for-sale securities totaled $6.0 million and $5.2 million as of September 30, 2026 and December 31, 2025, respectively.

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CONNECTONE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 4. Investment Securities – (continued)

The Company evaluates securities in an unrealized loss position for impairment related to credit losses on at least a quarterly basis. Securities in unrealized loss positions are first assessed as to whether we intend to sell, or if it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis. If one of the criteria is met, the security’s amortized cost basis is written down to fair value through current earnings. For securities that do not meet these criteria, the Company evaluates whether the decline in fair value resulted from credit losses or other factors. If this assessment indicates that a credit loss exists, we compare the present value of cash flows expected to be collected from the security with the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis for the security, a credit loss exists and an ACL is recorded, limited to the amount that the fair value of the security is less than its amortized cost basis. Unrealized losses on asset backed securities and state and municipal securities have not been recognized into income because the issuers are of high credit quality and we do not intend to sell and it is likely that we will not be required to sell the securities prior to their anticipated recovery. The decline in fair value is largely due to changes in interest rates and other market conditions. The issuers continue to make timely principal and interest payments on the securities. Any impairment that has not been recorded through an ACL is recognized in OCI, net of applicable taxes. The Company has not recognized an ACL for available-for-sale securities as of September 30, 2026 and December 31, 2025.

Federal agency obligations, residential and commercial mortgage-backed pass-through securities are issued by U.S. Government agencies and U.S. Government sponsored enterprises. Although a government guarantee exists on these investments, these entities are not legally backed by the full faith and credit of the federal government, and the current support they receive is subject to a cap as part of the agreement entered into in 2008. Nonetheless, at this time we do not foresee any set of circumstances in which the government would not fund its commitments on these investments as the issuers are an integral part of the U.S. housing market in providing liquidity and stability. Therefore, we concluded that a zero-allowance approach for these investment securities is appropriate.

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CONNECTONE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 5. Renewable Energy Tax Credit Investment

On June 30, 2026, the Company entered into an agreement to commit up to $50.0 million in capital investments to a renewable energy tax equity fund ("Renewable Energy Investment"). The investment was executed to generate economic return as well as Federal investment tax credits ("ITCs") and other tax benefits.

The Company accounts for this investment using the Proportional Amortization Method ("PAM") under ASC 323-740, Investments – Equity Method and Joint Ventures – Income Taxes. Under PAM, the Company amortizes the initial cost of the investment in proportion to the tax credits and other tax benefits allocated to it in future periods. The net amortization expense and recognized tax credits will be reflected as a component of income tax expense in the Consolidated Statements of Income.

As of September 30, 2026, the balance sheet reflects the following:

●

Unfunded Capital Commitments: The Company's unfunded capital commitment liability was $44.0 million, included within Other Liabilities on the Consolidated Statements of Financial Condition, compared to $50.0 million at June 30, 2026. The $6.0 million decrease reflects capital contributions funded during the three months ended September 30, 2026. The remaining balance represents the Company's maximum legally binding obligation to fund future capital calls under the agreement. Capital contributions will be paid in tranches pursuant to capital calls issued as underlying project construction milestones and placed-in-service criteria are satisfied.

●

Investment Asset: The Company's equity investment asset was $50.0 million, included within Other Assets on the Consolidated Statements of Financial Condition, unchanged from June 30, 2026. The asset was recognized at the gross commitment amount at inception; capital contributions reduce the unfunded commitment liability and do not change the carrying amount of the investment.

During the three months ended September 30, 2026, the Company funded a capital call of $6.0 million. As of September 30, 2026, none of the underlying renewable energy assets had been placed in service. Accordingly, no tax credits, tax benefits, or proportional amortization expense were recognized in the Consolidated Statements of Income for the three and nine months ended September 30, 2026.

In accordance with ASC 740-270, Income Taxes — Interim Reporting, the Company calculates its quarterly income tax provision using an estimated annual effective tax rate ("AETR"). The Company incorporated the anticipated full-year tax credits and net benefits from this commitment into its estimated AETR calculation for fiscal year 2026.

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CONNECTONE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 6. Derivatives

As part of our overall asset liability management strategy, the Company utilizes interest rate swaps to help manage its interest rate risk position. The notional amount of an interest rate swap does not represent amounts exchanged by the parties. The exchange of cash flow is determined by reference to the notional amount and the other terms of the interest rate swap agreements. Derivative instruments are recognized on the balance sheet at their fair value. The Company’s cash flow hedges are reported on a gross basis as they are not subject to master netting arrangements. Conversely, interest rate caps are reported on a net basis in the balance sheet, as these instruments are subject to enforceable master netting agreements that allow for the offsetting of assets and liabilities with the same counterparty.

Derivatives Designated as Hedges

Subsequent changes in fair value for a hedging instrument that has been designated and qualifies as part of a hedging relationship are accounted for in the following manner:

1) Cash flow hedges: changes in fair value are recognized as a component in OCI

2) Fair value hedges: changes in fair value are recognized concurrently in earnings

As long as a hedging instrument is designated and the results of the effectiveness testing support that the instrument qualifies for hedge accounting treatment, 100% of the periodic changes in fair value of the hedging instrument are accounted for as outlined above. This is the case whether or not economic mismatches exist in the hedging relationship. As a result, there is no periodic measurement or recognition of ineffectiveness. Rather, the full impact of hedge gains and losses is recognized in the period in which the hedged transactions impact earnings. The change in fair value of the hedging instrument that is included in the assessment of hedge effectiveness is presented in the same income statement line item that is used to present the earnings effect of the hedged item. As of September 30, 2026, the Bank was not utilizing fair value hedges.

Cash Flow Hedges

The Company has entered into eleven pay fixed-rate interest rate swaps, with a total notional amount of $625.0 million. These are designated as cash flow hedges of outstanding FHLB 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 swaps carry expiration dates ranging from October 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. Therefore, the aggregate fair value of the swap is recorded in other assets (liabilities) with changes in fair value recorded in OCI. The amount included in accumulated other comprehensive income (loss) would be reclassified to current earnings should the hedges no longer be considered effective. The Company expects the hedges to remain fully effective during the remaining term of the swaps.

The Company previously entered into two forward starting interest rate cap spread transactions, one with a total notional amount of $150.0 million, which became effective on October 1, 2022 and which matures in October of 2027 and one interest rate cap spread transaction, with a total notional amount of $75.0 million, which became effective in November 2022 and which matures in November of 2027. These are designated as cash flow hedges of brokered certificates of deposit, and the interest rate cap spread is indexed to a benchmark of fed funds with payment required on a monthly basis. The structure of these instruments is such that the Company entered into a total of $225.0 million in notional amount of sold interest rate cap agreements, in which we are required to pay the counterparty an incremental amount if the index rate exceeds a set cap rate. Simultaneously, the Company purchased a total of $225.0 million in notional amount of interest rate cap agreements in which we receive an incremental amount if the index rate is above a set cap rate. No payments are required if the index rate is at, or below, the cap rate on the sold or purchased interest rate cap agreements.

Net interest income recorded on these swap and interest rate cap transactions totaled approximately $2.4 million and $7.5 million during the three and nine months ended September 30, 2026, respectively, and $4.7 million and $13.3 million during the three and nine months ended September 30, 2025, respectively, and is recorded as a reduction of interest expense on FHLB advances or on brokered certificates of deposit.

Table of Contents

CONNECTONE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 6. Derivatives – (continued)

The following tables present the gross gains (losses) recorded in OCI and the Consolidated Statements of Income relating to the cash flow hedge derivative instruments for the periods indicated:

	Three Months Ended September 30, 2026
	Amount of gain (loss) recognized in OCI (Effective Portion)		Amount of (gain) loss reclassified from OCI to interest expense			Amount of gain recognized in other noninterest income (Ineffective Portion)
	(dollars in thousands)
Interest rate contracts	$	4,835	$	(2,387	)	$	-

	Three Months Ended September 30, 2025
	Amount of gain (loss) recognized in OCI (Effective Portion)		Amount of (gain) loss reclassified from OCI to interest expense			Amount of gain recognized in other noninterest income (Ineffective Portion)
	(dollars in thousands)
Interest rate contracts	$	863	$	(4,709	)	$	-

	Nine Months Ended September 30, 2026
	Amount of gain (loss) recognized in OCI (Effective Portion)		Amount of (gain) loss reclassified from OCI to interest expense			Amount of gain recognized in other noninterest income (Ineffective Portion)
	(dollars in thousands)
Interest rate contracts	$	13,479	$	(7,451	)	$	-

	Nine Months Ended September 30, 2025
	Amount of gain (loss) recognized in OCI (Effective Portion)			Amount of (gain) loss reclassified from OCI to interest expense			Amount of gain recognized in other noninterest income (Ineffective Portion)
	(dollars in thousands)
Interest rate contracts	$	(2,930	)	$	(13,319	)	$	-

Table of Contents

CONNECTONE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 6. Derivatives - (continued)

The following table reflects the cash flow hedges included in the Consolidated Statements of Financial Condition as of September 30, 2026 and December 31, 2025:

	September 30, 2026				December 31, 2025
	Notional Amount		Fair Value		Notional Amount		Fair Value
			(dollars in thousands)
Interest rate contracts	$	1,075,000	$	19,754	$	1,150,000	$	15,370

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 tables reflect the back-to-back swaps that are not designated as hedging instruments as of September 30, 2026 and December 31, 2025:

	September 30, 2026
			Notional		Fair Value		Fair Value
(dollars in thousands)	Positions		Amount		Asset		Liabilities
Derivatives not designated as hedging instruments included in other assets / other liabilities:
Interest rate swaps with borrowers		3	$	35,425	$	-	$	1,474
Interest rate swaps with offsetting counterparties		3		35,425		1,474		-

	December 31, 2025
			Notional		Fair Value		Fair Value
(dollars in thousands)	Positions		Amount		Asset		Liabilities
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

Table of Contents

CONNECTONE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 7. Loans and the Allowance for Credit Losses

Loans Receivable – The following table sets forth the composition of the Company’s loan portfolio segments, including net deferred loan fees, as of September 30, 2026 and December 31, 2025:

	September 30, 2026			December 31, 2025
	(dollars in thousands)
Commercial	$	1,656,916		$	1,565,963
Commercial real estate		7,981,622			8,054,696
Commercial construction		585,707			623,902
Residential real estate		1,207,092			1,210,980
Consumer		4,306			2,017
Gross loans		11,435,643			11,457,558
Net deferred loan fees		(3,110	)		(4,278	)
Total loans receivable	$	11,432,533		$	11,453,280

As of September 30, 2026 and December 31, 2025, loans totaling approximately $9.3 billion and $8.2 billion, respectively, were pledged to secure borrowings from the FHLB of New York and the Federal Reserve Bank of New York.

Loans held-for-sale – The following table sets forth the composition of the Company's loans held-for-sale portfolio as of September 30, 2026 and December 31, 2025.

	September 30, 2026		December 31, 2025
	(dollars in thousands)
Commercial real estate	$	678,880	$	-
Residential		-		391
Total loans held-for-sale	$	678,880	$	391

Loans Receivable on Nonaccrual Status - The following tables present the carrying value of nonaccrual loans with an ACL and the carrying value of nonaccrual loans without an ACL as of September 30, 2026 and December 31, 2025:

	September 30, 2026
	Nonaccrual loans with ACL		Nonaccrual loans without ACL		Total nonaccrual loans
	(dollars in thousands)
Commercial	$	1,205	$	10,007	$	11,212
Commercial real estate		39,236		10,754		49,990
Residential real estate		474		2,654		3,128
Total	$	40,915	$	23,415	$	64,330

Table of Contents

CONNECTONE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 7. Loans and the Allowance for Credit Losses – (continued)

	December 31, 2025
	Nonaccrual loans with ACL		Nonaccrual loans without ACL		Total nonaccrual loans
	(dollars in thousands)
Commercial	$	1,987	$	11,052	$	13,039
Commercial real estate		207		28,354		28,561
Residential real estate		549		3,766		4,315
Total	$	2,743	$	43,172	$	45,915

Nonaccrual loans include both smaller balance homogeneous loans that are collectively evaluated and loans that are individually evaluated.

Purchased Credit-Deteriorated Loans ("PCD") - PCD loans are defined as a loan or group of loans that have experienced more-than-insignificant credit deterioration since origination. The following table presents the recorded investment of those loans as of September 30, 2026 and December 31, 2025:

(dollars in thousands)	September 30, 2026		December 31, 2025
Commercial	$	4,670	$	5,398
Commercial real estate		64,447		213,770
Residential real estate		1,883		1,962
Total purchased credit-deteriorated loans	$	71,000	$	221,130

As of September 30, 2026, the loans in the above table included $28.1 million of loans secured by multifamily properties located in the five boroughs of New York City that are entirely or predominantly rent-stabilized. Rent-stabilized multifamily properties are subject to particular stressors, including the 2019 New York rent laws, which restricted rent increases in an environment of rising operating expenses. In addition, in June 2026, the New York City Rent Guidelines Board approved 0% rent adjustments for both one-year and two-year leases on rent-stabilized apartments commencing between October 1, 2026 and September 30, 2027.

Credit Quality Indicators - The Company continuously monitors the credit quality of its loans receivable. In addition to its internal monitoring, the Company utilizes the services of a third-party loan review firm to periodically validate the credit quality of its loans receivable on a sample basis. Credit quality is monitored by reviewing certain credit quality indicators. Assets classified as “Pass” are deemed to possess average to superior credit quality, requiring no more than normal attention. Assets classified as “Special Mention” have potential weaknesses that deserve management’s close attention, such as strained liquidity, slow pay, stale financial statements or other conditions. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or of the Company’s credit position at some future date. Assets are classified as “Substandard” if they are inadequately protected by the current net worth and paying capacity of the obligor or by the collateral pledged, if any. Substandard assets have a well-defined weakness or weaknesses that jeopardize repayment of the debt and are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. Assets are classified as “Doubtful” if they have all the weaknesses inherent in assets classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable.

Table of Contents

CONNECTONE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 7. Loans and the Allowance for Credit Losses – (continued)

We evaluate whether a modification, extension or renewal of a loan is a current period origination in accordance with GAAP. Generally, loans up for renewal are subject to a full credit evaluation before the renewal is granted and such loans are considered current period originations for purposes of the table below. The following table presents loans by origination, risk designation and gross charge-offs as of and during the nine months ended September 30, 2026 (dollars in thousands):

	*Term loans amortized cost basis by origination year*
	*2026*		*2025*		*2024*		*2023*		*2022*		*Prior*		*Revolving Loans*		*Total Gross Loans*
Commercial
Pass	$	160,874	$	147,529	$	171,861	$	91,058	$	206,615	$	290,007	$	548,845	$	1,616,789
Special mention		-		-		-		3,007		738		245		43		4,033
Substandard		5,915		-		246		681		3,049		12,262		13,941		36,094
Doubtful		-		-		-		-		-		-		-		-
Total commercial	$	166,789	$	147,529	$	172,107	$	94,746	$	210,402	$	302,514	$	562,829	$	1,656,916
YTD gross charge-offs	$	-	$	146	$	39	$	-	$	12	$	3,340	$	756	$	4,293

Commercial real estate
Pass	$	1,177,062	$	1,072,231	$	335,532	$	238,681	$	1,264,055	$	2,287,008	$	1,429,162	$	7,803,731
Special mention		-		-		-		-		28,444		36,200		17,642		82,286
Substandard		-		-		6,079		-		7,936		60,387		21,203		95,605
Doubtful		-		-		-		-		-		-		-		-
Total commercial real estate	$	1,177,062	$	1,072,231	$	341,611	$	238,681	$	1,300,435	$	2,383,595	$	1,468,007	$	7,981,622
YTD gross charge-offs	$	-	$	-	$	5	$	765	$	16,382	$	32,598	$	-	$	49,750

Commercial construction
Pass	$	67,742	$	145,346	$	128,841	$	18,948	$	8,091	$	19,877	$	196,862	$	585,707
Special mention		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-
Total commercial construction	$	67,742	$	145,346	$	128,841	$	18,948	$	8,091	$	19,877	$	196,862	$	585,707
YTD gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Residential real estate
Pass	$	91,336	$	24,813	$	14,635	$	27,725	$	192,277	$	490,210	$	358,338	$	1,199,334
Special mention		-		-		-		-		-		-		3,294		3,294
Substandard		-		-		-		547		-		2,847		1,070		4,464
Doubtful		-		-		-		-		-		-		-		-
Total residential real estate	$	91,336	$	24,813	$	14,635	$	28,272	$	192,277	$	493,057	$	362,702	$	1,207,092
YTD gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	1	$	1

Consumer
Pass	$	4,126	$	8	$	6	$	1	$	-	$	56	$	109	$	4,306
Special mention		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-
Total consumer	$	4,126	$	8	$	6	$	1	$	-	$	56	$	109	$	4,306
YTD gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Total
Pass	$	1,501,140	$	1,389,927	$	650,875	$	376,413	$	1,671,038	$	3,087,158	$	2,533,316	$	11,209,867
Special mention		-		-		-		3,007		29,182		36,445		20,979		89,613
Substandard		5,915		-		6,325		1,228		10,985		75,496		36,214		136,163
Doubtful		-		-		-		-		-		-		-		-
Grand total	$	1,507,055	$	1,389,927	$	657,200	$	380,648	$	1,711,205	$	3,199,099	$	2,590,509	$	11,435,643
YTD gross charge-offs	$	-	$	146	$	44	$	765	$	16,394	$	35,938	$	757	$	54,044

Table of Contents

CONNECTONE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 7. Loans and the Allowance for Credit Losses – (continued)

The following table presents loans by origination, risk designation and gross charge-offs as of and for the year ended December 31, 2025 (dollars in thousands):

	*Term loans amortized cost basis by origination year*
	*2025*		*2024*		*2023*		*2022*		*2021*		*Prior*		*Revolving Loans*		*Total Gross Loans*
Commercial
Pass	$	165,942	$	194,070	$	137,181	$	217,504	$	177,715	$	145,173	$	479,906	$	1,517,491
Special mention		-		-		-		694		-		2,927		44		3,665
Substandard		146		539		3,048		3,120		2,599		10,625		24,730		44,807
Doubtful		-		-		-		-		-		-		-		-
Total commercial	$	166,088	$	194,609	$	140,229	$	221,318	$	180,314	$	158,725	$	504,680	$	1,565,963
YTD gross charge-offs	$	-	$	-	$	32	$	1,669	$	-	$	854	$	1,961	$	4,516

Commercial real estate
Pass	$	1,129,223	$	416,806	$	303,121	$	1,487,034	$	1,391,743	$	1,648,135	$	1,451,710	$	7,827,772
Special mention		-		-		-		39,271		3,741		71,452		6,998		121,462
Substandard		-		4,024		-		22,193		9,066		54,778		15,401		105,462
Doubtful		-		-		-		-		-		-		-		-
Total commercial real estate	$	1,129,223	$	420,830	$	303,121	$	1,548,498	$	1,404,550	$	1,774,365	$	1,474,109	$	8,054,696
YTD gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	13,839	$	-	$	13,839

Commercial construction
Pass	$	108,660	$	120,104	$	36,316	$	17,912	$	63,727	$	44,193	$	232,990	$	623,902
Special mention		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-
Total commercial construction	$	108,660	$	120,104	$	36,316	$	17,912	$	63,727	$	44,193	$	232,990	$	623,902
YTD gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Residential real estate
Pass	$	36,615	$	26,638	$	33,577	$	201,351	$	114,215	$	416,017	$	373,244	$	1,201,657
Special mention		-		-		-		-		-		-		3,343		3,343
Substandard		-		-		-		-		798		2,516		2,666		5,980
Doubtful		-		-		-		-		-		-		-		-
Total residential real estate	$	36,615	$	26,638	$	33,577	$	201,351	$	115,013	$	418,533	$	379,253	$	1,210,980
YTD gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	1,000	$	1,000

Consumer
Pass	$	1,863	$	-	$	-	$	-	$	-	$	63	$	91	$	2,017
Special mention		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-
Total consumer	$	1,863	$	-	$	-	$	-	$	-	$	63	$	91	$	2,017
YTD gross charge-offs	$	25	$	-	$	-	$	-	$	-	$	-	$	1	$	26

Total
Pass	$	1,442,303	$	757,618	$	510,195	$	1,923,801	$	1,747,400	$	2,253,581	$	2,537,941	$	11,172,839
Special mention		-		-		-		39,965		3,741		74,379		10,385		128,470
Substandard		146		4,563		3,048		25,313		12,463		67,919		42,797		156,249
Doubtful		-		-		-		-		-		-		-		-
Grand total	$	1,442,449	$	762,181	$	513,243	$	1,989,079	$	1,763,604	$	2,395,879	$	2,591,123	$	11,457,558
YTD gross charge-offs	$	25	$	-	$	32	$	1,669	$	-	$	14,693	$	2,962	$	19,381

Table of Contents

CONNECTONE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 7. Loans and the Allowance for Credit Losses – (continued)

Collateral Dependent Loans: The following tables present the amortized cost basis of collateral dependent loans by loan segment as of September 30, 2026 and December 31, 2025:

	September 30, 2026
	Real Estate		Other		Total
	(dollars in thousands)
Commercial	$	5,033	$	8,463	$	13,496
Commercial real estate		113,845		-		113,845
Residential real estate		4,438		-		4,438
Total	$	123,316	$	8,463	$	131,779

	December 31, 2025
	Real Estate		Other		Total
	(dollars in thousands)
Commercial	$	6,948	$	8,783	$	15,731
Commercial real estate		242,125		-		242,125
Residential real estate		5,637		-		5,637
Total	$	254,710	$	8,783	$	263,493

Table of Contents

CONNECTONE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 7. Loans and the Allowance for Credit Losses – (continued)

Aging Analysis - The following tables present the aging of the amortized cost in past due loans as of September 30, 2026 and December 31, 2025:

	September 30, 2026
	30-59 Days Past Due		60-89 Days Past Due		90 Days or Greater Past Due and Still Accruing		Nonaccrual		Total Past Due and Nonaccrual		Current		Gross Loans
	(dollars in thousands)
Commercial	$	1,580	$	640	$	391	$	11,212	$	13,823	$	1,643,093	$	1,656,916
Commercial real estate		-		3,061		-		49,990		53,051		7,928,571		7,981,622
Commercial construction		-		-		-		-		-		585,707		585,707
Residential real estate		976		-		769		3,128		4,873		1,202,219		1,207,092
Consumer		7		-		-		-		7		4,299		4,306
Total	$	2,563	$	3,701	$	1,160	$	64,330	$	71,754	$	11,363,889	$	11,435,643

	December 31, 2025
	30-59 Days Past Due		60-89 Days Past Due		90 Days or Greater Past Due and Still Accruing		Nonaccrual		Total Past Due and Nonaccrual		Current		Gross Loans
	(dollars in thousands)
Commercial	$	875	$	539	$	427	$	13,039	$	14,880	$	1,551,083	$	1,565,963
Commercial real estate		13,602		6,098		16,276		28,561		64,537		7,990,159		8,054,696
Commercial construction		-		-		-		-		-		623,902		623,902
Residential real estate		7,405		1,372		769		4,315		13,861		1,197,119		1,210,980
Consumer		-		-		-		-		-		2,017		2,017
Total	$	21,882	$	8,009	$	17,472	$	45,915	$	93,278	$	11,364,280	$	11,457,558

Table of Contents

CONNECTONE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 7. Loans and the Allowance for Credit Losses – (continued)

The following tables detail the amount of gross loans that are individually analyzed, collectively evaluated, and loans acquired with deteriorated quality, and the related portion of the ACL for loans that are allocated to each loan portfolio segment.

	September 30, 2026
	Commercial		Commercial real estate		Commercial construction		Residential real estate		Consumer		Total
	(dollars in thousands)
Allowance for credit losses – loans
Individually analyzed	$	314	$	5,450	$	-	$	-	$	-	$	5,764
Collectively evaluated		15,337		71,207		4,299		12,195		16		103,054
Acquired with deteriorated credit quality		839		10,849		-		114		-		11,802
Total	$	16,490	$	87,506	$	4,299	$	12,309	$	16	$	120,620

Gross loans
Individually analyzed	$	10,321	$	49,398	$	-	$	2,555	$	-	$	62,274
Collectively evaluated		1,641,925		7,867,777		585,707		1,202,654		4,306		11,302,369
Acquired with deteriorated credit quality		4,670		64,447		-		1,883		-		71,000
Total	$	1,656,916	$	7,981,622	$	585,707	$	1,207,092	$	4,306	$	11,435,643

	December 31, 2025
	Commercial			Commercial real estate		Commercial construction		Residential real estate		Consumer		Total
	(dollars in thousands)
Allowance for credit losses – loans
Individually analyzed	$	314		$	125	$	-	$	-	$	-	$	439
Collectively evaluated		15,392			79,046		5,303		12,084		18		111,843
Acquired with deteriorated credit quality		(348	)		42,256		-		115		-		42,023
Total	$	15,358		$	121,427	$	5,303	$	12,199	$	18	$	154,305

Gross loans
Individually analyzed	$	12,184		$	28,354	$	-	$	3,675	$	-	$	44,213
Collectively evaluated		1,548,381			7,812,572		623,902		1,205,343		2,017		11,192,215
Acquired with deteriorated credit quality		5,398			213,770		-		1,962		-		221,130
Total	$	1,565,963		$	8,054,696	$	623,902	$	1,210,980	$	2,017	$	11,457,558

Table of Contents

CONNECTONE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 7. Loans and the Allowance for Credit Losses – (continued)

Activity in the Company’s ACL for loans for the three and nine months ended September 30, 2026 and September 30, 2025 is summarized in the tables below.

	Three Months Ended September 30, 2026
	Commercial			Commercial real estate			Commercial construction		Residential real estate		Consumer			Total
	(dollars in thousands)
Balance as of June 30, 2026	$	13,902		$	110,218		$	4,169	$	11,840	$	20		$	140,149
Charge-offs:
Non-PCD Loans		(1,511	)		(1,667	)		-		-		-			(3,178	)
PCD Loans		(12	)		(22,206	)		-		-		-			(22,218	)
Recoveries		783			90			-		68		-			941
Provision for (reversal of) credit losses – loans:
Operating (reversal of) provision for credit losses		3,338			1,070			130		401		(4	)		4,935
Provision for (reversal of) PCD allowance		(10	)		1			-		-		-			(9	)
Balance as of September 30, 2026	$	16,490		$	87,506		$	4,299	$	12,309	$	16		$	120,620

	Three Months Ended September 30, 2025
	Commercial			Commercial real estate			Commercial construction		Residential real estate			Consumer		Total
	(dollars in thousands)
Balance as of June 30, 2025	$	20,961		$	115,203		$	5,422	$	14,575		$	29	$	156,190
Charge-offs		(473	)		(4,700	)		-		-			-		(5,173	)
Recoveries		22			-			-		15			-		37
Provision for (reversal of) credit losses – loans:															-
Initial provision related to acquisition		-			-			-		-			-		-
Operating provision for (reversal of) credit losses		(368	)		5,892			492		(573	)		2		5,445
Nonaccretable credit marks on PCD loans		-			-			-		-			-		-
Balance as of September 30, 2025	$	20,142		$	116,395		$	5,914	$	14,017		$	31	$	156,499

Table of Contents

CONNECTONE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 7. Loans and the Allowance for Credit Losses – (continued)

	Nine Months Ended September 30, 2026
	Commercial			Commercial real estate			Commercial construction			Residential real estate			Consumer			Total
	(dollars in thousands)
Balance as of December 31, 2025	$	15,358		$	121,427		$	5,303		$	12,199		$	18		$	154,305
Charge-offs:
Non-PCD Loans		(4,281	)		(18,676	)		-			(1	)		-			(22,958	)
PCD Loans		(12	)		(31,074	)		-			-			-			(31,086	)
Recoveries		1,718			125			-			96			-			1,939
Provision for (reversal of) credit losses – loans:
Operating (reversal of) provision for credit losses		3,717			14,829			(1,004	)		15			(2	)		17,555
Provision for (reversal of) PCD allowance		(10	)		875			-			-			-			865
Balance as of September 30, 2026	$	16,490		$	87,506		$	4,299		$	12,309		$	16		$	120,620

	Nine Months Ended September 30, 2025
	Commercial			Commercial real estate			Commercial construction		Residential real estate			Consumer			Total
	(dollars in thousands)
Balance as of December 31, 2024	$	18,278		$	54,777		$	5,064	$	4,561		$	5		$	82,685
Charge-offs		(3,484	)		(10,282	)		-		-			(1	)		(13,767	)
Recoveries		200			90			-		20			-			310
Provision for (reversal of) credit losses – loans:
Initial provision related to acquisition – loans		985			16,017			78		10,217			10			27,307
Operating provision for (reversal of) credit losses		3,198			13,537			772		(896	)		17			16,628
Nonaccretable credit marks on PCD loans		965			42,256			-		115			-			43,336
Balance as of September 30, 2025	$	20,142		$	116,395		$	5,914	$	14,017		$	31		$	156,499

Table of Contents

CONNECTONE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 7. Loans and the Allowance for Credit Losses – (continued)

Loan Modifications to Borrowers Experiencing Financial Difficulty:

The following tables present the amortized cost basis of loans to borrowers experiencing financial difficulty that were modified during the three and nine months ended September 30, 2026. The modification percentage represents the total loans modified during the three and nine months ended September 30, 2026 as a percentage of the total gross loan balances as of September 30, 2026.

	Three Months Ended
	Amortized Cost Basis
	Term Extension		Payment Deferral		Total		Gross Loans at September 30, 2026		Modification % (Modified Loans/Gross Loans)
	(dollars in thousands)

September 30, 2026
Commercial	$	8,311	$	-	$	8,311	$	1,656,916		0.50	%
Commercial real estate		1,776		-		1,776		7,981,622		0.02
Commercial construction		-		-		-		585,707		-
Residential real estate		-		-		-		1,207,092		-
Consumer		-		-		-		4,306		-
Total	$	10,087	$	-	$	10,087	$	11,435,643		0.09	%

	Nine Months Ended
	Amortized Cost Basis
	Term Extension		Payment Deferral		Interest Rate Reduction		Total		Gross Loans at September 30, 2026		Modification % (Modified Loans/Gross Loans)
	(dollars in thousands)
September 30, 2026
Commercial	$	9,811	$	-	$	594	$	10,405	$	1,656,916		0.63	%
Commercial real estate		30,220		-		-		30,220		7,981,622		0.38
Commercial construction		-		-		-		-		585,707		-
Residential real estate		-		-		-		-		1,207,092		-
Consumer		-		-		-		-		4,306		-
Total	$	40,031	$	-	$	594	$	40,625	$	11,435,643		0.36	%

Table of Contents

CONNECTONE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 7. Loans and the Allowance for Credit Losses – (continued)

The following tables present the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty during the three and nine months ended September 30, 2026.

	Three Months Ended
	Weighted Average Term Extension (Months)		Weighted Average Payment Deferral (Months)

September 30, 2026
Commercial		66		-
Commercial real estate		60		-

	Nine Months Ended
	Weighted Average Term Extension (Months)		Weighted Average Payment Deferral (Months)		Weighted Average Interest Rate Reduction
September 30, 2026
Commercial		54		-		2.0	%
Commercial real estate		23		-		-

Table of Contents

CONNECTONE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 7. Loans and the Allowance for Credit Losses – (continued)

The Company closely monitors the performance of loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The following table presents the performance of such loans that have been modified in the last twelve months through September 30, 2026.

	Current		30-89 Days Past Due		90 Days or Greater Past Due
September 30, 2026
(dollars in thousands)
Commercial	$	17,326	$	-	$	-
Commercial real estate		30,220		-		2,371
Total	$	47,546	$	-	$	2,371

The following tables present the amortized cost basis of loans to borrowers experiencing financial difficulty that were modified during the three and nine months ended September 30, 2025. The modification percentage represents the total loans modified during the three and nine months ended September 30, 2025 as a percentage of the total gross loan balances as of September 30, 2025.

	Three Months Ended
	Amortized Cost Basis
	Term Extension		Payment Deferral		Total		Gross Loans at September 30, 2025		Modification % (Modified Loans/Gross Loans)
	(dollars in thousands)

September 30, 2025
Commercial	$	-	$	18,811	$	18,811	$	1,622,975		1.16	%
Commercial real estate		-		-		-		7,721,070		-
Commercial construction		-		-		-		728,615		-
Residential real estate		-		-		-		1,233,305		-
Consumer		-		-		-		2,166		-
Total	$	-	$	18,811	$	18,811	$	11,308,131		0.17	%

	Nine Months Ended
	Amortized Cost Basis
	Term Extension		Payment Deferral		Interest Rate Reduction		Total		Gross Loans at September 30, 2025		Modification % (Modified Loans/Gross Loans)
	(dollars in thousands)
September 30, 2025
Commercial	$	6,500	$	18,811	$	-	$	25,311	$	1,622,975		1.56	%
Commercial real estate		-		-		-		-		7,721,070		-
Commercial construction		8,419		-		-		8,419		728,615		1.16
Residential real estate		-		-		-		-		1,233,305		-
Consumer		-		-		-		-		2,166		-
Total	$	14,919	$	18,811	$	-	$	33,730	$	11,308,131		0.30	%

Table of Contents

CONNECTONE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 7. Loans and the Allowance for Credit Losses – (continued)

	Three Months Ended
	Weighted Average Term Extension (Months)		Weighted Average Payment Deferral (Months)

September 30, 2025
Commercial		-		3

	Nine Months Ended
	Weighted Average Term Extension (Months)		Weighted Average Payment Deferral (Months)		Weighted Average Interest Rate Reduction
September 30, 2025
Commercial		3		3		0.0	%
Commercial construction		6		-		-

During the three and nine months ended September 30, 2026 and 2025, the Company had no commitments to lend additional funds to borrowers experiencing financial difficulty for which the Company modified the terms of the loans in the form of principal forgiveness, an interest rate reduction, an other-than-insignificant payment delay, or a term extension during the current period.

There was one loan to a borrower experiencing financial difficulty that had a payment default, in the form of a partial charge-off, during the three and nine months ended September 30, 2026, and which was modified in the twelve months prior to that default. The loan was a $2.4 million multifamily loan modified in November 2025 through a term extension. As of September 30, 2026, the ACL included a $320 thousand specific reserve against this loan. There was one loan to a borrower experiencing financial difficulty that had a payment default during the three and nine months ended September 30, 2025 and which was modified in the twelve months prior to that default. The one loan was a $323 thousand commercial loan modified in October 2024 that went into forbearance, reducing the monthly payment amount by $6 thousand. At this time, the ACL includes a full reserve against this loan. Default is determined at 90 or more days past due, upon charge-off, or upon foreclosure. Modified loans in default are individually evaluated for the ACL or if the modified loan is deemed uncollectible, the loan, or a portion of the loan, is written off and the ACL is adjusted accordingly.

Table of Contents

CONNECTONE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 7. Loans and the Allowance for Credit Losses – (continued)

Allowance for Credit Losses for Unfunded Commitments

The Company has recorded an ACL for unfunded credit commitments which was recorded in other liabilities. The provision is recorded within the provision for credit losses on the Company’s income statement. The following tables present a roll forward of the ACL for unfunded commitments for the three and nine months ended September 30, 2026 and 2025:

	Three Months Ended		Three Months Ended
	September 30,		September 30,
	2026		2025
	(dollars in thousands)
Balance at beginning of period	$	3,114	$	3,337
Provision for credit losses – unfunded commitments		74		55
Balance at end of period	$	3,188	$	3,392

	Nine Months Ended		Nine Months Ended
	September 30,		September 30,
	2026		2025
	(dollars in thousands)
Balance at beginning of period	$	3,108	$	2,627
Provision for credit losses – unfunded commitments		80		765
Balance at end of period	$	3,188	$	3,392

Components of Provision for Credit Losses

The following tables summarize the provision for (reversal of) credit losses for the three and nine months ended September 30, 2026 and 2025:

	Three Months Ended			Three Months Ended
	September 30,			September 30,
	2026			2025
	(dollars in thousands)
Operating provision for credit losses	$	4,935		$	5,445
Provision for credit losses on PCD loans		(9	)		-
Provision for credit losses - unfunded commitments		74			55
Provision for credit losses	$	5,000		$	5,500

	Nine Months Ended		Nine Months Ended
	September 30,		September 30,
	2026		2025
	(dollars in thousands)
Operating provision for credit losses	$	17,555	$	16,628
Initial provision related to acquisition - loans		-		27,307
Provision for credit losses on PCD loans		865		-
Provision for credit losses - unfunded commitments		80		765
Provision for credit losses	$	18,500	$	44,700

Table of Contents

CONNECTONE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 8. 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.

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. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date.

FASB ASC 820-10-65 provides additional guidance for estimating fair value in accordance with FASB ASC 820-10-05 when the volume and level of activity for the asset or liability have significantly decreased. This ASC also includes guidance on identifying circumstances that indicate a transaction is not orderly.

FASB ASC 820-10-05 establishes a fair value hierarchy that prioritizes the inputs to valuation methods used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under FASB ASC 820-10-05 are as follows:

Level 1:

Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2:

Quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

Level 3:

Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (for example, supported with little or no market activity).

The level of an asset or liability within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The following information should not be interpreted as an estimate of the fair value of the entire Company since a fair value calculation is only provided for a limited portion of the Company’s assets and liabilities. Due to a 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.

Table of Contents

CONNECTONE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 8. Fair Value Measurements and Fair Value of Financial Instruments – (continued)

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following methods and assumptions were used to estimate the fair values of the Company’s assets measured at fair value on a recurring basis as of September 30, 2026 and December 31, 2025:

Available-for-Sale Securities and Equity Securities: Where quoted prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. Level 1 inputs include securities that have quoted prices in active markets for identical assets. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics, or discounted cash flows. Examples of instruments which would generally be classified within Level 2 of the valuation hierarchy include municipal bonds and certain agency collateralized mortgage obligations. In certain cases where there is limited activity in the market for a particular instrument, assumptions must be made to determine the fair value of the instruments and these are classified as Level 3. When measuring fair value, the valuation techniques available under the market approach, income approach and/or cost approach are used. 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.

Derivatives: 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. Therefore, the fair values of derivatives are determined using quantitative models that utilize multiple market inputs. The inputs will vary based on the type of derivative, but could include interest rates, prices and indices to generate continuous yield or pricing curves, prepayment rate, and volatility factors to value the position. The majority of market inputs are actively quoted and can be validated through external sources, including brokers, market transactions and third-party pricing services.

Table of Contents

CONNECTONE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 8. Fair Value Measurements and Fair Value of Financial Instruments – (continued)

For financial assets and liabilities measured at fair value on a recurring basis, the fair value measurements by level within the fair value hierarchy used as of September 30, 2026 and December 31, 2025 are as follows:

			September 30, 2026
			Fair Value Measurements at Reporting Date Using
	Total Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
(dollars in thousands)
Recurring fair value measurements: Assets
Available-for-sale securities:
Federal agency obligations	$	303,837	$	-	$	303,837	$	-
Residential mortgage pass-through securities		784,661		-		784,661		-
Commercial mortgage pass-through securities		29,379		-		29,379		-
Obligations of U.S. states and political subdivisions		178,296		-		178,296		-
Corporate bonds and notes		25,634		-		25,634		-
Asset-backed securities		478		-		478		-
Other securities		1,504		1,504		-		-
Total available-for-sale securities		1,323,789		1,504		1,322,285		-

Equity securities		21,947		9,553		12,394		-
Derivatives		21,806		-		21,806		-
Total assets	$	1,367,542	$	11,057	$	1,356,485	$	-

Liabilities
Derivatives - interest rate contracts		2,052		-		2,052		-
Total liabilities	$	2,052	$	-	$	2,052	$	-

Table of Contents

CONNECTONE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 8. Fair Value Measurements and Fair Value of Financial Instruments – (continued)

			December 31, 2025
			Fair Value Measurements at Reporting Date Using
	Total Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
(dollars in thousands)
Recurring fair value measurements: Assets
Available-for-sale securities:
Federal agency obligations	$	391,190	$	-	$	391,190	$	-
Residential mortgage pass- through securities		607,144		-		607,144		-
Commercial mortgage pass-through securities		26,969		-		26,969		-
Obligations of U.S. states and political subdivisions		212,409		-		205,897		6,512
Corporate bonds and notes		12,519		-		12,519		-
Asset-backed securities		525		-		525		-
Other securities		182		182		-		-
Total available-for-sale securities	$	1,250,938	$	182	$	1,244,244	$	6,512

Equity securities		19,287		10,073		9,214		-
Derivatives		16,074		-		16,074		-
Total assets	$	1,286,299	$	10,255	$	1,269,532	$	6,512

Liabilities
Derivatives - interest rate contracts		704		-		704		-
Total liabilities	$	704	$	-	$	704	$	-

There were no transfers between Level 1, Level 2 and Level 3 during the nine months ended September 30, 2026 and for the year ended December 31, 2025.

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. The following methods and assumptions were used to estimate the fair values of the Company’s assets measured at fair value on a nonrecurring basis as of September 30, 2026 and December 31, 2025.

Loans Held-for-Sale: Loans held-for-sale consist of residential mortgage and SBA loans originated and intended for sale in the secondary market and, when applicable, loans transferred from loans receivable that management intends to sell. Loans held-for-sale are carried at the lower of amortized cost or estimated fair value. For residential mortgage and SBA loans, fair value is determined by outstanding commitments from investors or quotes obtained directly from purchasing financial institutions (Level 2). Gains and losses on loan sales (sale proceeds minus carrying value) are recorded in noninterest income, and direct loan origination costs and fees are deferred at origination and recognized in noninterest income upon sale. As of September 30, 2026, loans held-for-sale totaled $678.9 million, consisting of multifamily commercial real estate loans transferred from loans receivable in connection with the Company’s balance sheet restructuring and repositioning. These loans were measured at fair value based on the negotiated sale price with the third-party purchaser (Level 3), which resulted in a $23.0 million lower of cost or fair value adjustment recorded in noninterest income. As of December 31, 2025, loans held-for-sale totaled $0.4 million, consisting entirely of residential mortgage loans.

Table of Contents

CONNECTONE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 8. Fair Value Measurements and Fair Value of Financial Instruments – (continued)

Collateral Dependent Loans: The Company may record adjustments to the carrying value of loans based on fair value measurements, generally as partial charge-offs of the uncollectible portions of these loans. These adjustments also include certain impairment amounts for collateral dependent loans calculated in accordance with GAAP. Impairment amounts are generally based on the fair value of the underlying collateral supporting the loan and, as a result, the carrying value of the loan less the calculated impairment amount applicable to that loan does not necessarily represent the fair value of the loan. Real estate collateral is valued using independent appraisals or other indications of value based on recent comparable sales of similar properties or assumptions generally observable by market participants. However, due to the substantial judgment applied and limited volume of activity as compared to other assets, fair value is based on Level 3 inputs. Estimates of fair value used for collateral supporting commercial loans generally are based on assumptions not observable in the marketplace and are also based on Level 3 inputs.

For assets measured at fair value on a nonrecurring basis, the fair value measurements as of September 30, 2026 and December 31, 2025 are as follows:

			Fair Value Measurements at Reporting Date Using
Assets measured at fair value on a nonrecurring basis:	September 30, 2026		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Collateral dependent loans:	(dollars in thousands)
Commercial real estate	$	33,707	$	-	$	-	$	33,707

Loans held-for-sale:
Commercial real estate	$	678,880	$	-	$	-	$	678,880

			Fair Value Measurements at Reporting Date Using
Assets measured at fair value on a nonrecurring basis:	December 31, 2025		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Collateral dependent loans:	(dollars in thousands)
Commercial	$	693	$	-	$	-	$	693

Collateral dependent loans – Collateral dependent loans that required a nonrecurring fair value measurement as of September 30, 2026 had a carrying amount of $39.2 million with a specific allowance for credit losses of $5.5 million, resulting in a fair value of $33.7 million. This compares to a carrying amount of $0.8 million, with a specific allowance for credit losses of $0.1 million as of December 31, 2025.

Table of Contents

CONNECTONE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 8. Fair Value Measurements and Fair Value of Financial Instruments – (continued)

Assets Measured with Significant Unobservable Level 3 Inputs

Recurring basis

The tables below present a reconciliation of all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the nine months ended September 30, 2026 and for the year ended December 31, 2025:


(dollars in thousands)		Obligations of U.S. states and political subdivisions
Beginning balance, January 1, 2026	$	6,512
Principal paydowns		(7,364	)
Change in unrealized loss		852
Ending balance, September 30, 2026	$	-


(dollars in thousands)		Obligations of U.S. states and political subdivisions
Beginning balance, January 1, 2025	$	6,526
Principal paydowns		(314	)
Changes in unrealized gain		300
Ending balance, December 31, 2025	$	6,512

The following methods and assumptions were used to estimate the fair values of the Company’s assets measured on a recurring basis. The Company held no Level 3 recurring assets at September 30, 2026. Quantitative information regarding the significant unobservable inputs used in Level 3 fair value measurements as of December 31, 2025, is detailed below:

December 31, 2025
	Fair Value		Valuation Techniques	Unobservable Input	Rate
Available-for-sale securities:			(dollars in thousands)
Obligations of U.S. states and political subdivisions	$	6,512	Discounted cash flows	Discount rate		4.6	%

Table of Contents

CONNECTONE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 8. Fair Value Measurements and Fair Value of Financial Instruments – (continued)

Nonrecurring basis: The following methods and assumptions were used to estimate the fair values of the Company’s assets measured at fair value on a nonrecurring basis for the periods presented. The tables below provide quantitative information about significant unobservable inputs used in Level 3 fair value measurements of collateral dependent loans. Loans held-for-sale, which were also measured at fair value on a nonrecurring basis using Level 3 inputs as of September 30, 2026, are described following the tables.

September 30, 2026
(dollars in thousands)	Fair Value		Valuation Techniques	Unobservable Input	Range (weighted average)
Commercial real estate loans	$	7,773	Appraisals of collateral value	Adjustment for comparable sales	-1% to -3.1% (-1.7%)

Commercial real estate loans		25,934	Income capitalization approach	Capitalization rate		8	%
				Vacancy & collection loss rate		3	%
Total commercial real estate loans	$	33,707

December 31, 2025
(dollars in thousands)	Fair Value		Valuation Techniques	Unobservable Input	Range (weighted average)
Commercial loans	$	693	Appraisals of collateral value	Adjustment for comparable sales		-5% to +15% (+8.1%)

As of September 30, 2026, loans held-for-sale consisted of multifamily commercial real estate loans with an unpaid principal balance of $753.7 million, which were carried at a fair value of $678.9 million. Fair value was based on the price negotiated with a single third-party purchaser for the specific pool of loans. Because the loans do not trade in an active market and the price is subject to adjustment under the terms of the transaction agreements, the measurement is classified as Level 3.

Table of Contents

CONNECTONE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 8. Fair Value Measurements and Fair Value of Financial Instruments – (continued)

As of September 30, 2026, the fair value measurements presented are consistent with Topic 820, Fair Value Measurement, in which fair value represents exit price. The following presents the carrying amount, fair value, and placement in the fair value hierarchy of the Company’s financial instruments as of September 30, 2026 and December 31, 2025:

					Fair Value Measurements
	Carrying Amount		Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(dollars in thousands)

September 30, 2026
Financial assets:
Cash and due from banks	$	313,348	$	313,348	$	313,348	$	-	$	-
Available-for-sale securities:		1,323,789		1,323,789		1,504		1,322,285		-
Restricted investments in bank stocks		62,661		n/a		n/a		n/a		n/a
Equity securities		21,947		21,947		9,553		12,394		-
Net loans		11,311,913		10,995,978		-		-		10,995,978
Loans held-for-sale		678,880		678,880		-		-		678,880
Derivatives - interest rate contracts		21,806		21,806		-		21,806		-
Accrued interest receivable		66,657		66,657		-		6,005		60,652

Financial liabilities:
Noninterest-bearing deposits		2,479,625		2,479,625		2,479,625		-		-
Interest-bearing deposits		9,298,717		9,285,041		6,179,124		3,105,917		-
Borrowings		1,072,398		1,072,305		-		1,072,305		-
Subordinated debentures		202,423		206,817		-		206,817		-
Derivatives - interest rate contracts		2,052		2,052		-		2,052		-
Accrued interest payable		12,439		12,439		-		12,439		-

December 31, 2025
Financial assets:
Cash and due from banks	$	380,895	$	380,895	$	380,895	$	-	$	-
Available-for-sale securities:		1,250,938		1,250,938		182		1,244,244		6,512
Restricted investment in bank stocks		54,722		n/a		n/a		n/a		n/a
Equity securities		19,287		19,287		10,073		9,214		-
Net loans		11,298,975		11,232,658		-		-		11,232,658
Derivatives - interest rate contracts		16,074		16,074		-		16,074		-
Accrued interest receivable		60,761		60,761		-		5,172		55,589

Financial liabilities:
Noninterest-bearing deposits		2,420,397		2,420,397		2,420,397		-		-
Interest-bearing deposits		8,820,218		8,816,234		6,023,341		2,792,893		-
Borrowings		903,489		902,908		-		902,908		-
Subordinated debentures		201,864		204,454		-		204,454		-
Derivatives - interest rate contracts		704		704		-		704		-
Accrued interest payable		12,740		12,740		-		12,740		-

Table of Contents

CONNECTONE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 8. Fair Value Measurements and Fair Value of Financial Instruments – (continued)

The fair value of commitments to originate loans is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. For fixed-rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates. The fair values of letters of credit and lines of credit are based on fees currently charged for similar agreements or on the estimated cost to terminate or otherwise settle the obligations with the counterparties at the reporting date. The fair value of commitments to originate loans is immaterial and not included in the tables above.

Changes in assumptions or estimation methodologies may have a material effect on these estimated fair values.

The Company’s remaining assets and liabilities, which are not considered financial instruments, have not been valued differently than has been customary with historical cost accounting. No disclosure of the relationship value of the Company’s core deposit base is required by FASB ASC 825-10.

Fair value estimates are based on existing balance sheet financial instruments, without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. For example, there are certain significant assets and liabilities that are not considered financial assets or liabilities, such as deferred taxes, premises and equipment, and goodwill. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates.

Management believes that reasonable comparability between financial institutions may not be likely, due to the wide range of permitted valuation techniques and numerous estimates which must be made, given the absence of active secondary markets for many of the financial instruments. This lack of uniform valuation methodologies also introduces a greater degree of subjectivity to these estimated fair values.

Note 9. Comprehensive Income

Total comprehensive income includes all changes in equity during a period from transactions and other events and circumstances from non-owner sources. The Company’s OCI is comprised of unrealized holding gains and losses on available-for-sale securities, unrealized gains and losses on cash flow hedges, obligations for defined benefit pension plan and an adjustment to reflect the curtailment of the Company’s defined benefit pension plan, each net of taxes.

The following table represents the reclassification out of accumulated other comprehensive income (loss) for the periods presented (dollars in thousands):

Details about Accumulated Other Comprehensive Income (Loss) Components	Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)						Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)						Affected Line item in the Consolidated Statements of Income
	Three Months Ended September 30,						Nine Months Ended September 30,
	2026			2025			2026			2025
Interest income on cash flow hedges	$	2,387		$	4,709		$	7,451		$	13,319		Borrowings and deposits expense
		(737	)		(1,324	)		(2,300	)		(3,744	)	Income tax expense
Total reclassification	$	1,650		$	3,385		$	5,151		$	9,575

Table of Contents

CONNECTONE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 9. Comprehensive Income – (continued)

Accumulated other comprehensive income (loss) as of September 30, 2026 and December 31, 2025 consisted of the following:

	September 30, 2026			December 31, 2025
	(dollars in thousands)
Available-for-sale securities, net of tax	$	(95,782	)	$	(40,652	)
Cash flow hedge, net of tax		12,072			7,904
Defined benefit pension and post-retirement plans, net of tax		852			852
Total	$	(82,858	)	$	(31,896	)

Note 10. Stock-Based Compensation

On May 19, 2026, the Company’s stockholders approved the 2026 Equity Incentive Plan (the “2026 Plan”). Upon stockholder approval, the 2026 Plan replaced all prior equity incentive plans, and no further awards will be granted under any previous plans. The 2026 Plan authorized 1,500,000 shares of common stock for issuance, which may be granted in the form of stock options (qualified or non-qualified), restricted stock, restricted stock units, or performance units. The Company intends to issue all shares under the 2026 Plan from newly issued shares of common stock. As of September 30, 2026, the 2026 Plan was the Company’s only active equity plan, with 1,467,136 shares remaining available for future grant.

As of September 30, 2026 and December 31, 2025, the Company had no outstanding stock options. Restricted stock and deferred stock units generally vest over a three-year period, with one-third vesting annually beginning one year after the grant date. These awards also provide for accelerated vesting upon a change in control. Grants to new employees and board members may feature shorter vesting schedules. Performance units typically feature a three-year cliff vesting or accelerate upon a change of control. The Company accounts for forfeitures as they occur by reversing previously recognized compensation expense. Restricted stock grants carry the same dividend and voting rights as common stock, while options, performance units, and deferred stock units do not.

All awards are issued at the fair value of the underlying shares on the grant date. The Company expenses the cost of the awards, which is determined to be the fair market value of the awards at the date of grant, ratably, over the vesting or measurement period. Forfeiture rates are not estimated but are recorded as incurred. Stock-based compensation expense for the nine months ended September 30, 2026 and September 30, 2025 was $4.5 million and $3.8 million, respectively.

Activity in the Company’s restricted stock for the nine months ended September 30, 2026 was as follows:

	Nonvested Shares			Weighted Average Grant Date Fair Value
Nonvested as of December 31, 2025		110,349		$	20.25
Granted		81,291			27.64
Vested		(71,573	)		21.81
Forfeited/cancelled/expired		(8,279	)		22.84
Nonvested as of September 30, 2026		111,788		$	24.43

Table of Contents

CONNECTONE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 10. Stock-Based Compensation – (continued)

As of September 30, 2026, there was approximately $1.9 million of total unrecognized compensation cost related to nonvested restricted stock granted. The cost is expected to be recognized over a weighted average period of 1.1 years.

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

	Units (expected)			Units (maximum)		Weighted Average Grant Date Fair Value
Unearned as of December 31, 2025		216,151				$	20.87
Awarded		85,482					26.27
Change in estimate		6,513					17.93
Vested shares		(45,746	)				17.93
Forfeited/cancelled/expired		(12,954	)				21.36
Unearned as of September 30, 2026		249,446			382,501	$	23.16

As of September 30, 2026, the specific number of shares related to performance units that were expected to vest was 249,446, determined by actual performance in consideration of the established range of the performance targets, which is consistent with the level of expense currently being recognized over the vesting period. Should this expectation change, additional compensation expense could be recorded in future periods or previously recognized expense could be reversed. As of September 30, 2026, the maximum number of performance units that ultimately could vest if performance targets were exceeded is 382,501. During the nine months ended September 30, 2026, 45,746 shares vested. A total of 24,582 shares were netted from the vested shares to satisfy employee tax obligations. The net shares issued from vesting of performance units during the nine months ended September 30, 2026 were 21,164 shares. As of September 30, 2026, compensation cost of approximately $2.7 million related to non-vested performance units not yet recognized is expected to be recognized over a weighted average period of 1.9 years.

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

	Units (expected)			Weighted Average Grant Date Fair Value
Unearned as of December 31, 2025		170,482		$	21.50
Awarded		111,561			26.15
Vested shares		(92,170	)		20.07
Forfeited/cancelled/expired		(6,389	)		22.21
Unearned as of September 30, 2026		183,484		$	25.02

Forfeitures are recognized as they occur as a reversal of previously recognized compensation expense. A portion of the shares that vest will be netted out to satisfy the tax obligations of the recipient. During the nine months ended September 30, 2026, 92,170 shares vested. A total of 49,321 shares were netted from the vested shares to satisfy employee tax obligations. The net shares issued from vesting of deferred stock units during the nine months ended September 30, 2026 were 42,849 shares. As of September 30, 2026, compensation cost of approximately $2.3 million related to non-vested deferred stock units, not yet recognized, is expected to be recognized over a weighted average period of 1.6 years.

Table of Contents

CONNECTONE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 11. Components of Net Periodic Pension Cost

The Company maintains two frozen defined benefit pension plans; the Legacy CNOB Plan and the Legacy FLIC Plan, which were frozen on September 30, 2007 and September 30, 2025, respectively. The following tables set forth the net periodic pension cost of the Company’s pension plans for the periods indicated.

	Three Months Ended						Affected Line Item in the Consolidated
	September 30,						Statements of Income
	2026			2025
Legacy CNOB Plan	(dollars in thousands)

Service cost	$	-		$	-
Interest cost		90			105		Deposit, loan and other income/Salaries and employee benefits
Expected return on plan assets		(238	)		(230	)	Deposit, loan and other income/Salaries and employee benefits
Total periodic pension income	$	(148	)	$	(125	)

	Three Months Ended						Affected Line Item in the Consolidated
	September 30,						Statements of Income
	2026			2025
Legacy FLIC Plan	(dollars in thousands)
Service cost	$	-		$	486		Deposit, loan and other income
Interest cost		627			899		Deposit, loan and other income
Expected return on plan assets		(892	)		(1,153	)	Deposit, loan and other income
Net amortization		-			-		Deposit, loan and other income
Total periodic pension income	$	(265	)	$	232

	Nine Months Ended						Affected Line Item in the Consolidated
	September 30,						Statements of Income
	2026			2025
Legacy CNOB Plan	(dollars in thousands)

Service cost	$	-		$	-		Deposit, loan and other income/Salaries and employee benefits
Interest cost		270			316		Deposit, loan and other income/Salaries and employee benefits
Expected return on plan assets		(714	)		(690	)	Deposit, loan and other income/Salaries and employee benefits
Net amortization		-			-		Deposit, loan and other income/Salaries and employee benefits
Total periodic pension income	$	(444	)	$	(374	)

	Nine Months Ended						Affected Line Item in the Consolidated
	September 30,						Statements of Income
	2026			2025
Legacy FLIC Plan	(dollars in thousands)
Service cost	$	-		$	486		Deposit, loan and other income
Interest cost		1,879			899		Deposit, loan and other income
Expected return on plan assets		(2,675	)		(1,153	)	Deposit, loan and other income
Net amortization		-			-		Deposit, loan and other income
Total periodic pension income	$	(796	)	$	232

Table of Contents

CONNECTONE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 11. Components of Net Periodic Pension Cost - (continued)

Contributions

The Company did not contribute to the pension plans during the nine months ended September 30, 2026. The Company does not plan on contributing amounts to either Pension Trust for the remainder of 2026. Each trust is established to provide retirement and other benefits for eligible employees and their beneficiaries under each plan. No part of the trust assets may be applied to any purpose other than providing benefits under the plan and for defraying expenses of administering the plan and the trust.

FLIC Merger

In the FLIC merger, the Company acquired a defined benefit pension plan 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. The Bank has 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 this defined benefit pension 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 other income during the third quarter of 2025. The plan’s funded status improved to 134%.

Table of Contents

CONNECTONE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 12. Deposits

Time Deposits

As of September 30, 2026 and December 31, 2025, the Company's total time deposits were $3.1 billion and $2.8 billion, respectively. Included in time deposits were nonreciprocal brokered certificates of deposit of approximately $0.8 billion and $0.7 billion as of September 30, 2026 and December 31, 2025, respectively. As of September 30, 2026, the contractual maturities of these time deposits were as follows (dollars in thousands):

Remainder of 2026	$	1,581,592
2027		1,428,217
2028		94,523
2029		11,531
2030		2,724
thereafter		1,466
Time deposits (before net discount)		3,120,053
Fair value discount		(460	)
Time deposits (after net discount)	$	3,119,593

The amount of time deposits with balances greater than or equal to $250,000 was $1.2 billion and $1.0 billion as of September 30, 2026 and December 31, 2025, respectively.

Table of Contents

CONNECTONE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 13. FHLB Borrowings

The Company’s FHLB borrowings and weighted average interest rates are summarized below:

	September 30, 2026						December 31, 2025
	Amount			Rate			Amount			Rate
	(dollars in thousands)
By remaining period to maturity:
Less than 1 year	$	1,072,000			4.14	%	$	878,050			3.96	%
1 year through less than 2 years		200			2.85			226			2.85
2 years through less than 3 years		-			-			25,000			4.18
3 years through less than 4 years		-			-			-			-
4 years through 5 years		-			-			-			-
After 5 years		200			2.96			227			2.96
FHLB borrowings – gross		1,072,400			4.14	%		903,503			3.97	%
Fair value discount		(2	)					(14	)
Total FHLB borrowings	$	1,072,398					$	903,489

The FHLB borrowings are secured by pledges of certain collateral including, but not limited to, U.S. government and agency mortgage-backed securities and a blanket assignment of qualifying first lien mortgage loans, consisting of both residential mortgages and commercial real estate loans.

Advances are payable at stated maturity, with a prepayment penalty for fixed rate advances. All FHLB advances bear fixed rates. As of September 30, 2026, the Company’s total borrowing capacity with the FHLB was approximately $3.8 billion, based on collateral pledged under a blanket lien arrangement, consisting primarily of commercial mortgage loans and securities, net of required over-collateralization amounts. Of this capacity, approximately $1.1 billion was used for outstanding advances and approximately $1.3 billion was used for municipal letters of credit issued by the FHLB to secure public deposits. As a result, the Company had remaining borrowing capacity of approximately $1.4 billion with the FHLB as of September 30, 2026.

Table of Contents

CONNECTONE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 14. Subordinated Debentures

During 2003, the Company formed a statutory business trust, which exists for the exclusive purpose of (i) issuing Trust Securities representing undivided beneficial interests in the assets of the Trust; (ii) investing the gross proceeds of the Trust securities in junior subordinated deferrable interest debentures (subordinated debentures) of the Company; and (iii) engaging in only those activities necessary or incidental thereto. On December 19, 2003, Center Bancorp Statutory Trust II, a statutory business trust and wholly-owned subsidiary of the Parent Corporation issued $5.0 million of MMCapS capital securities to investors due on January 23, 2034. The capital securities presently qualify as Tier I capital. The trust loaned the proceeds of this offering to the Company and received in exchange $5.2 million of the Parent Corporation’s subordinated debentures. The subordinated debentures are redeemable in whole or in part prior to maturity. Upon the cessation of publication of LIBOR rates and pursuant to the Federal LIBOR Act and Federal Reserve regulations implementing the Act, the 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 adjustment of 0.26161%. The rate as of September 30, 2026 was 6.95%. These subordinated debentures and the related income effects are not eliminated in the consolidated financial statements, as the statutory business trust is not consolidated in accordance with FASB ASC 810-10. Distributions on the subordinated debentures owned by the subsidiary trust have been classified as interest expense in the Consolidated Statements of Income.

The following table summarizes the mandatory redeemable trust preferred securities of the Company’s Statutory Trust II as of September 30, 2026 and December 31, 2025.


Issuance Date	Securities Issued		Liquidation Value	Coupon Rate	Maturity	Redeemable by Issuer Beginning
12/19/2003	$	5,000,000	$1,000 per Capital Security	Floating 3-month CME Term SOFR + 285 Basis Points + 26.161 Basis Points	1/23/2034	1/23/2009

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, 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.

Table of Contents

CONNECTONE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 15. Segment Reporting

Accounting policies for segments are the same as those described in Note 1a. Segment performance is evaluated using Consolidated Bank net income. Information reported internally for performance assessment by the CODM follows, inclusive of reconciliations of significant segment totals to the financial statements:

	Consolidated Bank					Consolidated Bank
	Three Months Ended September 30,					Nine Months Ended September 30,
	2026			2025		2026		2025
(dollars in thousands)

Interest income	$	200,141		$	187,709	$	577,445	$	458,528
Noninterest income		(14,339	)		17,880		236		26,494
Total segment income	$	185,802		$	205,589	$	577,681	$	485,022

Less:
Interest expense		78,505			79,778		224,698		201,299
Segment net interest income and noninterest income		107,297			125,811		352,983		283,723
Less:
Provision for credit losses		5,000			5,500		18,500		44,700
Salaries and employee benefits		32,922			32,401		97,227		80,212
Other segment items*		22,841			26,540		71,787		90,914
Income tax expense (benefit)		11,032			16,277		41,923		18,449
Segment consolidated net income (loss)	$	35,502		$	45,093	$	123,546	$	49,448

Other segment disclosures
Interest income	$	200,141		$	187,709	$	577,445	$	458,528
Interest expense		78,505			79,778		224,698		201,299
Depreciation		1,705			1,841		5,292		4,264
Amortization of core deposit intangibles		2,846			3,196		8,536		4,726
Other significant noncash items:
Provision for credit losses		5,000			5,500		18,500		44,700
Segment assets		14,766,626			14,013,611		14,766,626		14,013,611
Total expenses for segment assets		150,300			160,496		454,135		435,574

Reconciliation of assets
Total assets for segment	$	14,766,626		$	14,013,611	$	14,766,626	$	14,013,611
Other assets		12,079			9,974		12,079		9,974
Total consolidated assets	$	14,778,705		$	14,023,585	$	14,778,705	$	14,023,585

*Occupancy and equipment, Federal Deposit Insurance Corporation ("FDIC") insurance premium, professional and consulting fees, marketing and advertising, information technology and communications, merger expenses and restructuring charges, and other expenses.

Table of Contents

CONNECTONE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 16. Subsequent Events

During the third quarter of 2026, the Company completed a strategic review of its balance sheet and identified a pool of loans to be sold with an unpaid principal balance of $753.7 million. As previously announced, in October 2026 the Company entered into an agreement to sell this pool of non-relationship multifamily loans to a single third-party purchaser, subject to adjustment as provided for under the transaction agreements.

On October 29, 2026, the Company completed the sale of $690.2 million in unpaid principal balance of loans from the pool for a price of $621.7 million and concurrently recognized transaction costs associated with the sale, as previously disclosed, amounting to an estimated $7 to $8 million. The remaining $61.4 million in unpaid principal balance of loans transferred to loans held-for-sale were excluded from the sale as provided for under the transaction agreements and remain in loans held-for-sale at the lower of cost or fair value at $55.3 million. No additional losses, other than those previously recognized or disclosed, resulted from completion of the sale.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The purpose of this analysis is to provide the reader with information relevant to understanding and assessing the Company’s results of operations for the periods presented herein and financial condition as of September 30, 2026 and December 31, 2025. In order to fully understand this analysis, the reader is encouraged to review the consolidated financial statements and accompanying notes thereto appearing elsewhere in this report.

Cautionary Statement Concerning Forward-Looking Statements

This report includes forward-looking statements within the meaning of Sections 27A of the Securities Act of 1933, as amended, and 21E of the Securities Exchange Act of 1934, as amended, that involve inherent risks and uncertainties. This report contains certain forward-looking statements with respect to the financial condition, results of operations, plans, objectives, future performance and business of ConnectOne Bancorp, Inc. and its subsidiaries, including statements preceded by, followed by, or that include words or phrases such as “believes,” “expects,” “anticipates,” “plans,” “trend,” “objective,” “continue,” “remain,” “pattern” or similar expressions or future or conditional verbs such as “will,” “would,” “should,” “could,” “might,” “can,” “may” or similar expressions. There are a number of important factors that could cause future results to differ materially from historical performance and these forward-looking statements. Factors that might cause such a difference include, but are not limited to: (1) competitive pressures among depository institutions may increase significantly; (2) changes in the interest rate environment may reduce interest margins; (3) prepayment speeds, loan origination and sale volumes, charge-offs and credit loss provisions may vary substantially from period to period; (4) general economic conditions may be less favorable than expected or may be adversely affected by policy uncertainties, including regarding the impact of tariffs; (5) political developments, sovereign debt problems, wars or other hostilities such as the ongoing conflict between Ukraine and Russia and the United States and Iran, and instability in the Middle East, may disrupt or increase volatility in securities markets or other economic conditions; (6) legislative or regulatory changes or actions may adversely affect the businesses in which ConnectOne Bancorp is engaged or the business of our clients, such as changes affecting the owners of rent stabilized multi-family buildings in New York City; (7) changes and trends in the securities markets may adversely impact ConnectOne Bancorp; (8) a delayed or incomplete resolution of regulatory issues could adversely impact planning by ConnectOne Bancorp; (9) the impact on reputation risk created by the developments discussed above on such matters as business generation and retention, funding and liquidity could be significant; (10) the outcome of regulatory and legal investigations and proceedings may not be anticipated, and (11) the impact of health emergencies or natural disasters on our employees and operations, and those of our customers. Further information on other factors that could affect the financial results of ConnectOne Bancorp is included in Item 1a. of ConnectOne Bancorp’s Annual Report on Form 10-K as amended and updated in ConnectOne Bancorp’s other filings with the Securities and Exchange Commission. These documents are available free of charge at the Commission’s website at http://www.sec.gov and/or from ConnectOne Bancorp, Inc.

Critical Accounting Policies and Estimates

Our accounting policies are integral to understanding the results reported. We consider accounting policies that require management to exercise significant judgment or discretion or to make significant assumptions that have, or could have, a material impact on the carrying value of certain assets or on income to be critical accounting policies. As of September 30, 2026, there have been no material changes to our critical accounting policies as compared to the critical accounting policies disclosed in our most recent Annual Report on Form 10-K. Reference is made to Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025.

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Balance Sheet Restructuring and Repositioning

During the third quarter of 2026, the Company completed a strategic review of its balance sheet and identified a pool of non-relationship multifamily loans to be sold with an unpaid principal balance of $753.7 million. As a result, in October 2026 the Company entered into an agreement to sell this pool to a single third-party purchaser, subject to adjustment as provided for under the transaction agreements.

The loan pool was transferred to held-for-sale, at the lower of cost or fair value of $678.9 million as of September 30, 2026, resulting in a $23.0 million pretax loss on loans held-for-sale, recorded in noninterest income. This charge reflects the gross discount related to the sale price, substantially offset by both interest-rate and credit purchase accounting marks previously recorded on The First National Bank of Long Island-originated loans, as part of the merger with The First of Long Island Corporation. The recognized loss on the pool is attributed to increases in market interest rates since the loans were originated. In connection with the transfer, the Company charged off $22.2 million of allowance for credit losses previously established on PCD loans in the pool; no additional provision for credit losses was required.

On October 29, 2026, the Company completed the sale of $690.2 million in unpaid principal balance of loans from the pool. Loans secured by New York City rent-stabilized properties represented approximately 61% of the pool, while approximately 31% of the pool was originated by the Bank and approximately 69% by FLIC. Loans with an unpaid principal balance of $61.4 million were excluded from the sale as provided for under the transaction agreements and remain in loans held-for-sale. The Company expects to recognize transaction costs of approximately $7 million to $8 million in the fourth quarter of 2026. The majority of the net proceeds is expected to be reinvested in government-guaranteed securities at yields similar to those of the loans sold, with the remainder used to pay down wholesale funding. The sale reduces the Company’s concentrations in CRE and New York City rent-stabilized loans and strengthens the Bank’s liquidity position. On a pro forma basis for the sale at September 30, 2026, the Bank’s regulatory CRE concentration ratio would decline to approximately 403%, from 444%. Exposure to New York City rent-stabilized loans would decline by 59% to approximately $271.0 million proforma at September 30, 2026 from approximately $656.4 million at June 30, 2026.

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Operating Results Overview

Net income available to common stockholders for the three months ended September 30, 2026 was $29.9 million, compared to $39.5 million for the prior-year period. The Company’s diluted earnings per share was $0.59 for the three months ended September 30, 2026 compared with $0.78 for the prior-year period. Results for the third quarter of 2026 include a pretax loss of $23.0 million on the transfer of loans held-for-sale. The $9.6 million decrease in net income available to common stockholders and the $0.19 decrease in diluted earnings per share resulted mainly from a $33.9 million decrease in noninterest income, primarily reflecting the $23.0 million pretax loss on the transfer of loans held-for-sale described above. This was partially offset by a $15.3 million increase in net interest income, a $5.2 million decrease in income tax expense, a $3.3 million decrease in noninterest expenses and a $0.5 million decrease in the provision for credit losses. The decrease in noninterest income also reflects $10.1 million of non-recurring income recognized in the third quarter of 2025, consisting of $6.6 million in employee retention tax credit ("ERTC") and a $3.5 million defined benefit pension plan curtailment gain.

Net income available to common stockholders for the nine months ended September 30, 2026 was $106.4 million, compared to $36.4 million for the prior-year period. The Company’s diluted earnings per share were $2.10 for the nine months ended September 30, 2026 compared with $0.83 for the prior-year period. Results for the nine months ended September 30, 2026 include the $23.0 million pretax loss on the transfer of loans held-for-sale recognized in the third quarter of 2026. The $70.0 million increase in net income available to common stockholders and the $1.27 increase in diluted earnings per share resulted mainly from a $93.1 million increase in net interest income, a $26.2 million decrease in provision for credit losses and a $3.0 million decrease in noninterest expenses. This was partially offset by a $28.8 million decrease in noninterest income and a $23.5 million increase in income tax expense. The decrease in noninterest income was mainly attributable to the $23.0 million pretax loss described above. It also reflected $10.1 million of non-recurring income recognized in the third quarter of 2025, consisting of $6.6 million in employee retention tax credit ("ERTC") and a $3.5 million defined benefit pension plan curtailment gain.

Net Interest Income and Margin

Net interest income is the difference between the interest earned on the portfolio of earning assets (principally loans and investments) and the interest paid on deposits and borrowings, which support these assets. Net interest income is presented on a tax-equivalent basis by adjusting tax-exempt income (including interest earned on tax-free loans and on obligations of state and local political subdivisions) by the amount of income tax which would have been paid had the assets been invested in taxable assets. Net interest margin is defined as net interest income on a tax-equivalent basis as a percentage of total average interest-earning assets.

Fully taxable equivalent net interest income for the three months ended September 30, 2026 was $118.5 million, an increase of $15.4 million, or 14.9%, from the prior-year period. The increase was due to a 33 basis-point widening of the net interest margin to 3.44% from 3.11%, and a 3.9% increase in average interest earning assets. The wider margin reflected a 15 basis-point increase in the yield on interest-earning assets and a 17 basis-point decrease in the average cost of deposits, including noninterest-bearing deposits.

Fully taxable equivalent net interest income for the nine months ended September 30, 2026 was $343.4 million, an increase of $93.8 million, or 37.6%, from prior-year period. The increase was due to a 38 basis-point widening of the net interest margin to 3.42% from 3.04%, and a 22.5% increase in average interest-earning assets. The margin also benefited from a 16 basis-point increase in the yield on interest-earning assets and a 31 basis-point decrease in the average costs of deposits, including noninterest-bearing deposits. The increase in average interest-earning assets mainly reflects the inclusion of FLIC’s results for the full nine months ended September 30, 2026, compared with approximately four months in the prior-year period following the completion of the merger on June 1, 2025.

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The following tables present for the three and nine months ended September 30, 2026 and 2025, the Company’s average assets, liabilities and stockholders’ equity. The Company’s net interest income, net interest spread and net interest margin are also reflected.

Average Statements of Condition with Interest and Average Rates

	Three Months Ended September 30,
	2026									2025
				Interest									Interest
	Average			Income/			Average			Average			Income/			Average
	Balance			Expense			Rate ⁽⁷⁾			Balance			Expense			Rate⁽⁷⁾
	(dollars in thousands)
Interest-earning assets:
Investment securities ^{(1) (2)}	$	1,387,589		$	14,931			4.27	%	$	1,355,775		$	14,581			4.27	%
Total loans ^{(2) (3) (4)}		11,982,883			183,178			6.06			11,162,060			166,541			5.92
Federal funds sold and interest-bearing deposits with banks		262,118			2,432			3.68			605,344			6,644			4.35
Restricted investment in bank stocks		53,371			843			6.27			49,264			1,081			8.71
Total interest-earning assets		13,685,961			201,384			5.84			13,172,443			188,847			5.69
Noninterest-earning assets:
Allowance for credit losses		(142,006	)								(159,157	)
Other noninterest-earning assets		990,641									1,037,299
Total assets	$	14,534,596								$	14,050,585

Interest-bearing liabilities:
Interest-bearing deposits:
Time deposits	$	2,920,335			27,603			3.75		$	3,019,848			30,072			3.95
Other interest-bearing deposits		6,252,427			44,499			2.82			5,889,230			45,137			3.04
Total interest-bearing deposits		9,172,762			72,102			3.12			8,909,078			75,209			3.35

Borrowings		874,544			6,393			2.90			783,994			4,550			2.30
Subordinated debentures, net		202,300			4,337			8.51			263,511			5,917			8.91
Finance lease		769			11			5.68			1,068			16			5.94
Total interest-bearing liabilities		10,250,375			82,843			3.21			9,957,651			85,692			3.41

Noninterest-bearing demand deposits		2,510,843									2,486,993
Other liabilities		137,207									92,049
Total noninterest-bearing liabilities		2,648,050									2,579,042
Stockholders’ equity		1,636,171									1,513,892
Total liabilities and stockholders’ equity	$	14,534,596								$	14,050,585
Net interest income (tax-equivalent basis)					118,541									103,155
Net interest spread ⁽⁵⁾								2.63	%								2.28	%
Net interest margin ⁽⁶⁾								3.44	%								3.11	%
Tax-equivalent adjustment					(1,243	)								(1,138	)
Net interest income				$	117,298								$	102,017

⁽¹⁾	Average balances are based on amortized cost and include equity securities.
⁽²⁾	Interest income is presented on a tax-equivalent basis using a 21% assumed tax rate.
⁽³⁾	Includes loan fee income and accretion of purchase accounting adjustments.
⁽⁴⁾	Total loans include loans held-for-sale and nonaccrual loans.
⁽⁵⁾	Represents the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities and is presented on a tax-equivalent basis.
⁽⁶⁾	Represents net interest income on a tax-equivalent basis divided by average total interest-earning assets.
⁽⁷⁾	Rates are annualized.

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	Nine Months Ended September 30,
	2026									2025
				Interest									Interest
	Average			Income/			Average			Average			Income/			Average
	Balance			Expense			Rate (7)			Balance			Expense			Rate (7)
	(dollars in thousands)
Interest-earning assets:							`
Securities ^{(1) (2)}	$	1,323,594		$	41,630			4.21	%	$	1,014,782		$	30,191			3.98	%
Total loans ^{(2) (3) (4)}		11,780,472			529,067			6.00			9,508,440			415,289			5.84
Federal funds sold and interest-bearing with banks		278,733			7,640			3.66			402,091			13,179			4.38
Restricted investment in bank stocks		51,979			2,725			7.01			44,396			2,758			8.31
Total interest-earning assets		13,434,778			581,062			5.78			10,969,709			461,417			5.62
Noninterest-earning assets:
Allowance for credit losses		(150,583	)								(114,013	)
Other noninterest-earning assets		980,585									795,936
Total assets	$	14,264,780								$	11,651,632

Interest-bearing liabilities:
Interest-bearing deposits:
Time deposits		2,938,104			82,092			3.74		$	2,723,057			81,862			4.02
Other interest-bearing deposits		6,124,664			125,263			2.73			4,754,333			107,578			3.03
Total interest-bearing deposits		9,062,768			207,355			3.06			7,477,390			189,440			3.39

Borrowings		840,310			17,306			2.75			731,587			11,806			2.16
Subordinated debentures		202,115			13,006			8.60			172,106			10,576			8.22
Finance lease		844			37			5.86			1,139			50			5.87
Total interest-bearing liabilities		10,106,037			237,704			3.14			8,382,222			211,872			3.38

Demand deposits		2,440,628									1,828,783
Other liabilities		103,497									68,837
Total noninterest-bearing liabilities		2,544,125									1,897,620
Stockholders’ equity		1,614,618									1,371,790
Total liabilities and stockholders’ equity	$	14,264,780								$	11,651,632
Net interest income (tax-equivalent basis)					343,358									249,545
Net interest spread ⁽⁵⁾								2.64	%								2.24	%
Net interest margin ⁽⁶⁾								3.42	%								3.04	%
Tax-equivalent adjustment					(3,617	)								(2,889	)
Net interest income				$	339,741								$	246,656

⁽¹⁾	Average balances are based on amortized cost and include equity securities.
⁽²⁾	Interest income is presented on a tax-equivalent basis using a 21% assumed tax rate.
⁽³⁾	Includes loan fee income and accretion of purchase accounting adjustments.
⁽⁴⁾	Total loans include loans held-for-sale and nonaccrual loans.
⁽⁵⁾	Represents the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities and is presented on a tax-equivalent basis.
⁽⁶⁾	Represents net interest income on a tax-equivalent basis divided by average total interest-earning assets.
⁽⁷⁾	Rates are annualized.

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Noninterest Income

Noninterest income was a net loss of $14.5 million for the three months ended September 30, 2026, compared with income of $19.4 million for the prior-year period. Noninterest income for the third quarter of 2026 included the $23.0 million pretax loss on the transfer of loans held-for-sale described above. Noninterest income for the third quarter of 2025 included $10.1 million of non-recurring income, consisting of $6.6 million in ERTC and a $3.5 million defined benefit pension plan curtailment gain. Excluding these items, noninterest income decreased $0.8 million from the prior-year period. The decrease was mainly due to a $1.8 million decrease in net gains on equity securities, which went from a net gain of $1.7 million to a net loss of $0.2 million, and a $0.5 million decrease in deposit, loan and other income. These were partially offset by a $1.2 million increase in BOLI income, driven by death benefits recorded in the third quarter of 2026, and a $0.3 million increase in net gains on sale of loans held-for-sale, primarily SBA loans.

Noninterest income totaled $0.2 million for the nine months ended September 30, 2026, compared with $29.0 million for prior-year-period. Noninterest income for the nine months ended 2026 included the aforementioned $23.0 million pretax restructuring charge and in 2025 the $10.1 million in non-recurring gains discussed above. Excluding these items noninterest income increased by $4.3 million compared to the prior-year period. The increase was primarily due to a $3.5 million increase in BOLI income, a $1.9 million increase in net gains on sale of loans held-for-sale, and a $1.5 million increase in deposit, loan and other income, partially offset by a decrease of $2.6 million in net gains on equity securities. Similarly, growth across these noninterest income categories was primarily attributable to operating the expanded franchise for the full nine-month period in 2026 compared to just four months of FLIC activity in the prior-year period.

Noninterest Expenses

Noninterest expenses totaled $55.4 million for the three months ended September 30, 2026, compared with $58.7 million for the prior-year period. Noninterest expenses for the third quarter of 2025 included $2.9 million in merger, restructuring and exit charges. Excluding these charges, noninterest expenses were $55.4 million for the third quarter of 2026, down $0.4 million from $55.8 million in the prior-year period. Key drivers of the decrease included a $0.9 million decrease in FDIC insurance expense, a $0.4 million decrease in amortization of core deposit intangibles, a $0.2 million decrease in occupancy and equipment expenses and a $0.1 million decrease in other expenses, partially offset by a $0.5 million increase in salaries and employee benefits, a $0.3 million increase in professional and consulting expenses and a $0.2 million increase in marketing and advertising expenses.

Noninterest expenses totaled $168.7 million for the nine months ended September 30, 2026, compared with $171.6 million for the prior-year period. Noninterest expenses for the nine months ended September 30, 2026 included $2.2 million in merger, restructuring and exit charges, compared with $35.3 million in merger, restructuring and exit charges, including a $0.3 million BOLI restructuring charge, in the prior-year period. Excluding these charges, noninterest expenses were $166.4 million for the nine months ended September 30, 2026, up $30.1 million from $136.3 million in the prior-year period. The increase was primarily driven by the inclusion of FLIC’s operations for the full nine months of 2026, compared with approximately four months in the prior-year period. Key drivers of the increase included a $17.0 million increase in salaries and employee benefits, a $4.6 million increase in occupancy and equipment expenses, a $3.8 million increase in amortization of core deposit intangibles, a $2.0 million increase in other expenses, a $1.6 million increase in professional and consulting expenses, a $1.3 million increase in information technology and communications expenses and a $0.8 million increase in marketing and advertising expenses, partially offset by a $1.0 million decrease in FDIC insurance expense.

The Company expects noninterest expenses in the fourth quarter of 2026 to increase from the third quarter of 2026, reflecting normal operating growth, as well as the transaction costs of approximately $7 million to $8 million related to the loan sale described above under “Balance Sheet Restructuring and Repositioning.”

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Income Taxes

Income tax expense was $11.0 million for the three months ended September 30, 2026, compared with $16.3 million for the prior-year period. The effective tax rate was 26.0% for the third quarter of 2026, compared with 28.4% for the prior-year period. The decrease in income tax expense and the effective tax rate was primarily due to lower taxable income resulting from the loss on loans held-for-sale related to the balance sheet restructuring.

Income tax expense was $41.9 million for the nine months ended September 30, 2026, compared with $18.4 million for the prior-year period. The effective tax rate was 27.4% for the nine months ended September 30, 2026, compared with 31.1% for the prior-year period. The $23.5 million increase in income tax expense was primarily due to higher pretax income, which was $152.8 million compared with $59.4 million in the prior-year period. This was partially offset by the effect of the loss on loans held-for-sale related to the balance sheet restructuring. Income tax expense for the prior-year period included a $3.0 million estimated state tax liability resulting from intercompany dividends. Excluding that charge, the effective tax rate for the prior-year period was 26.0%.

On June 30, 2026, the Company entered into an agreement committing up to $50.0 million to a renewable energy tax equity fund. The investment is expected to generate economic returns as well as federal investment tax credits (“ITCs”) and other tax benefits, and is accounted for under the proportional amortization method (see Note 5). During the three months ended September 30, 2026, the Company funded a $6.0 million capital call, reducing its unfunded commitment to $44.0 million. As of September 30, 2026, none of the underlying renewable energy projects had been placed in service. As a result, no tax credits, tax benefits or proportional amortization were recognized in the Consolidated Statements of Income for the three or nine months ended September 30, 2026. The Company has incorporated the anticipated 2026 tax credits and net benefits from this investment into its estimated annual effective tax rate for 2026. The Company expects the underlying projects to be placed in service in tranches during the fourth quarter of 2026. Remaining capital contributions, tax credits and proportional amortization will be recognized as each tranche is placed in service.

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Financial Condition

Loan Portfolio

The following table sets forth the composition of our loan portfolio, excluding loans held-for-sale and net deferred loan fees, by loan segment at the periods indicated.

	September 30, 2026					December 31, 2025					Amount Increase/
	Amount		Percent of Total			Amount		Percent of Total			(Decrease)
	(dollars in thousands)
Commercial	$	1,656,916		14.5	%	$	1,565,963		13.7	%	$	90,953
Commercial real estate		7,981,622		69.8			8,054,696		70.3			(73,074	)
Commercial construction		585,707		5.1			623,902		5.4			(38,195	)
Residential real estate		1,207,092		10.6			1,210,980		10.6			(3,888	)
Consumer		4,306		0.0			2,017		0.0			2,289
Gross loans	$	11,435,643		100.0	%	$	11,457,558		100.0	%	$	(21,915	)

As of September 30, 2026, gross loans totaled $11.4 billion, a decrease of $21.9 million, or 0.2%, compared to December 31, 2025. During the third quarter of 2026, in connection with the balance sheet restructuring and repositioning (see “Balance Sheet Restructuring and Repositioning” above), the Company transferred multifamily loans, included in commercial real estate, with an amortized cost of $701.9 million to loans held-for-sale. The transfer followed charge-offs of $22.2 million of allowance for credit losses on PCD loans in the pool. Excluding the transferred loans and related charge-offs, gross loans increased $702.2 million, or 6.1%, compared to December 31, 2025. The increase was primarily due to a $651.0 million increase in commercial real estate loans and a $91.0 million increase in commercial loans, partially offset by a $38.2 million decrease in commercial construction loans.

Loans held-for-sale totaled $678.9 million as of September 30, 2026, compared to $0.4 million as of December 31, 2025. The loans transferred to held-for-sale had an unpaid principal balance of $753.7 million, net of purchase accounting marks of $29.6 million and PCD charge-offs of $22.2 million. They are carried at the lower of cost or fair value, which resulted in a $23.0 million write-down recorded in noninterest income. Loans held-for-sale are excluded from the loan portfolio tables above and from the allowance for credit losses.

While the previous table reflects the classification of our loans by loan portfolio segment, the following table presents further disaggregation of our commercial real estate portfolio along with applicable weighted average loan-to-value ratios, typically determined at loan origination.

	September 30, 2026						December 31, 2025
	Balance			Loan-to-Value			Balance			Loan-to-Value
(dollars in thousands)
Commercial real estate loans
Multifamily	$	3,061,501			59	%	$	3,477,302			58	%
Nonowner-occupied		3,034,892			52			2,761,920			52
Owner-occupied		1,613,479			49			1,572,158			51
Land loans		327,871			38			349,125			42
Total commercial real estate loans (before fair value adjustment)	$	8,037,743			54	%	$	8,160,505			54	%
Fair value premium (discount)		(56,121	)					(105,809	)
Total commercial real estate loans	$	7,981,622					$	8,054,696

The decrease in multifamily loans, primarily in New York, reflects the transfer of multifamily loans with an unpaid principal balance of $753.7 million to loans held-for-sale during the third quarter of 2026 in connection with the balance sheet restructuring and repositioning.

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

	September 30, 2026					December 31, 2025
	Balance		Percent of Total			Balance		Percent of Total
(dollars in thousands)
Multifamily loans
New Jersey	$	1,708,030		55.8	%	$	1,643,765		47.3	%
New York		870,914		28.4			1,497,916		43.1
Florida		71,345		2.3			44,403		1.3
Connecticut		42,153		1.4			39,628		1.1
All Other States		369,059		12.1			251,590		7.2
Total multifamily loans (before fair value adjustment)	$	3,061,501		100.0	%	$	3,477,302		100.0	%

	September 30, 2026					December 31, 2025
	Balance		Percent of Total			Balance		Percent of Total
(dollars in thousands)
Owner-occupied
New Jersey	$	602,638		37.3	%	$	559,404		35.6	%
New York		567,665		35.2			607,679		38.6
Florida		122,525		7.6			94,682		6.0
Connecticut		57,387		3.6			59,008		3.8
All Other States		263,264		16.3			251,385		16.0
Total owner-occupied (before fair value adjustment)	$	1,613,479		100.0	%	$	1,572,158		100.0	%

	September 30, 2026					December 31, 2025
	Balance		Percent of Total			Balance		Percent of Total
(dollars in thousands)
Nonowner-occupied
New Jersey	$	847,153		27.9	%	$	780,321		28.2	%
New York		1,710,574		56.4			1,625,546		58.9
Florida		295,851		9.7			178,830		6.5
Connecticut		32,772		1.1			37,234		1.3
All Other States		148,542		4.9			139,989		5.1
Total nonowner occupied (before fair value adjustment)	$	3,034,892		100.0	%	$	2,761,920		100.0	%

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	September 30, 2026					December 31, 2025
	Balance		Percent of Total			Balance		Percent of Total
(dollars in thousands)
Land loans
New Jersey	$	137,230		41.8	%	$	123,541		35.4	%
New York		68,148		20.8			43,263		12.4
Florida		68,083		20.8			128,547		36.8
Connecticut		-		-			-		-
All Other States		54,410		16.6			53,774		15.4
Total land (before fair value adjustment)	$	327,871		100.0	%	$	349,125		100.0	%

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

	September 30, 2026					December 31, 2025
	Balance		Percent of Total			Balance		Percent of Total
(dollars in thousands)
Owner-occupied
Retail	$	222,907		13.8	%	$	216,500		13.8	%
Office		128,254		7.9			130,646		8.3
Warehouse/Industrial		431,703		26.8			395,830		25.2
Mixed Use		175,320		10.9			134,113		8.5
Other		655,295		40.6			695,069		44.2
Total owner-occupied (before fair value adjustment)	$	1,613,479		100.0	%	$	1,572,158		100.0	%

	September 30, 2026					December 31, 2025
	Balance		Percent of Total			Balance		Percent of Total
(dollars in thousands)
Nonowner-occupied
Retail	$	889,543		29.3	%	$	848,400		30.7	%
Office		680,910		22.4			672,744		24.4
Warehouse/Industrial		290,799		9.6			273,866		9.9
Mixed Use		294,859		9.7			250,588		9.1
Other		878,781		29.0			716,322		25.9
Total nonowner-occupied (before fair value adjustment)	$	3,034,892		100.0	%	$	2,761,920		100.0	%

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Allowance for Credit Losses and Related Provision

The ACL is an estimate of current expected credit losses considering available information relevant to assessing collectability of cash flows over the contractual term of the financial assets necessary to cover lifetime expected credit losses inherent in financial assets at the balance sheet date. The methodology for determining the ACL is considered a critical accounting policy by management because of the high degree of judgment involved, the subjectivity of the assumptions used, and the potential for changes in the forecasted economic environment that could result in changes to the amount of the recorded ACL. The loan portfolio also represents the largest asset type on the Company’s Consolidated Statements of Financial Condition.

As of September 30, 2026, the Company’s ACL was $120.6 million, a decrease of $33.7 million from $154.3 million as of December 31, 2025. The decrease was primarily due to a $30.2 million decrease in nonaccretable credit marks on PCD loans. That decrease mainly reflects the charge-off of $22.2 million of allowance on PCD loans transferred to loans held-for-sale in connection with the balance sheet restructuring and repositioning. These PCD charge-offs related to allowances established in connection with the FLIC merger and required no additional provision for credit losses. Excluding nonaccretable credit marks, the ACL decreased $3.5 million, to $108.8 million, as non-PCD net charge-offs exceeded the provision for credit losses on loans. The ACL represented 1.06% of loans receivable as of September 30, 2026, compared to 1.35% as of December 31, 2025.

The provision for credit losses, which includes a provision for unfunded commitments, was $5.0 million and $18.5 million for the three and nine months ended September 30, 2026, respectively, compared with $5.5 million and $44.7 million in the comparable prior-year periods. Included in the provision for credit losses for the nine months ended September 30, 2025 was $27.4 million in initial provision for credit losses related to the FLIC merger. In each of the 2026 periods, the provision for credit losses reflected charge-offs, specific reserves on individually evaluated loans, organic loan growth and changing macroeconomic forecasts and conditions.

Net charge-offs were $24.5 million and $52.1 million for the three and nine months ended September 30, 2026, respectively, compared with $5.1 million and $13.5 million for the prior-year periods. Net charge-offs for the three and nine months ended September 30, 2026 included $22.2 million of charge-offs on loans transferred to loans held-for-sale in connection with the balance sheet restructuring and repositioning. These were PCD loans for which an allowance had previously been established in connection with the FLIC merger, and the charge-offs required no additional provision for credit losses. Excluding these charge-offs, net charge-offs were $2.2 million and $29.9 million for the three and nine months ended September 30, 2026, respectively. Of the $29.9 million in charge-offs, $27.0 million related to New York City multifamily loans secured by rent-stabilized properties, primarily in the second quarter of 2026.

The level of the allowance for the respective periods of 2026 and 2025 reflects the credit quality within the loan portfolio, expected loan maturity dates, the changing composition of the commercial and residential real estate loan portfolios, including the transfer of multifamily loans to loans held-for-sale in the third quarter of 2026, and other related factors. In management’s view, the level of the ACL as of September 30, 2026 is adequate to cover expected credit losses over the contractual term of the loan portfolio. Management’s judgment regarding the adequacy of the allowance constitutes a “Forward-Looking Statement” under the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from management’s analysis, based principally upon the factors considered by management in establishing the allowance.

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Changes in the ACL on loans are presented in the following tables for the periods indicated.

	Three Months Ended
	September 30, 2026
	PCD			Non-PCD			Total
	(dollars in thousands)

Balance as of June 30, 2026,	$	34,029		$	106,120		$	140,149
Charge-offs:
Commercial		(12	)		(1,511	)		(1,523	)
Commercial real estate		(22,206	)		(1,667	)		(23,873	)
Residential real estate		-			-			-
Total charge-offs		(22,218	)		(3,178	)		(25,396	)
Recoveries:
Commercial		-			783			783
Commercial real estate		-			90			90
Residential real estate		-			68			68
Total recoveries		-			941			941
Net charge-offs		(22,218	)		(2,237	)		(24,455	)
Provision for credit losses for loans		(9	)		4,935			4,926
Balance as of September 30, 2026	$	11,802		$	108,818		$	120,620
Ratio of annualized net charge-offs during the period to average loans receivable outstanding during the period		0.74	%		0.07	%		0.81	%
Loans receivable							$	11,432,533
ACL as a percentage of loans receivable								1.06	%

	Nine Months Ended
	September 30, 2026
	PCD			Non-PCD			Total
	(dollars in thousands)

Balance as of December 31, 2025,	$	42,023		$	112,282		$	154,305
Charge-offs:
Commercial		(12	)		(4,281	)		(4,293	)
Commercial real estate		(31,074	)		(18,676	)		(49,750	)
Residential real estate		-			(1	)		(1	)
Total charge-offs		(31,086	)		(22,958	)		(54,044	)
Recoveries:
Commercial		-			1,718			1,718
Commercial real estate		-			125			125
Residential real estate		-			96			96
Total recoveries		-			1,939			1,939
Net charge-offs		(31,086	)		(21,019	)		(52,105	)
Provision for credit losses for loans		865			17,555			18,420
Balance as of September 30, 2026	$	11,802		$	108,818		$	120,620
Ratio of annualized net charge-offs during the period to average loans receivable outstanding during the period		0.35	%		0.23	%		0.58	%
Loans receivable							$	11,432,533
ACL as a percentage of loans receivable								1.06	%

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	Three Months Ended
	September 30,
	2025
	(dollars in thousands)

Average loans receivable	$	11,161,742
Analysis of the ACL:
Balance - beginning of period	$	156,190
Charge-offs:
Commercial		(473	)
Commercial real estate		(4,700	)
Total charge-offs		(5,173	)
Recoveries:
Commercial		22
Residential real estate		15
Total recoveries		37
Net recoveries (charge-offs)		(5,136	)
Provision for credit losses – loans
Provision for credit losses		5,445
Balance - end of period	$	156,499

Ratio of annualized net charge-offs during the period to average loans receivable during the period		0.18	%
Loans receivable	$	11,303,636
ACL as a percentage of loans receivable		1.38	%

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		Nine Months Ended
		September 30,
	2025
		(dollars in thousands)

Average loans receivable	$	9,508,130
Analysis of the ACL:
Balance - beginning of period	$	82,685
Charge-offs:
Commercial		(3,484	)
Commercial real estate		(10,282	)
Consumer		(1	)
Total charge-offs		(13,767	)
Recoveries:
Commercial		200
Commercial real estate		90
Residential real estate		20
Total recoveries		310
Net charge-offs		(13,457	)
Provision for credit losses – loans:
Initial provision related to acquisition		27,307
Operating provision for credit losses		16,628
Nonaccretable credit marks on PCD loans		43,336
Balance - end of period	$	156,499

Ratio of annualized net charge-offs during the period to average loans receivable during the period		0.19	%
Loans receivable	$	11,303,636
ACL as a percentage of loans receivable		1.38	%

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Asset Quality

The Company manages credit risk and portfolio quality through its underwriting standards, periodic credit reviews and ongoing monitoring of delinquencies, risk ratings and portfolio trends. Management seeks to identify deteriorating credits early and to recognize charge-offs on a timely basis, based on assessments of expected cash flows and the value of underlying collateral, while maintaining an adequate ACL.

As a matter of policy, loans are generally placed on nonaccrual status when principal or interest payments become 90 days past due, unless the loan is both well-secured and in the process of collection. Loans may be placed on nonaccrual status earlier when management determines that collection of all principal and interest is not expected. When a loan is placed on nonaccrual status, interest recognition ceases and previously accrued but uncollected interest is reversed against interest income. Payments received on nonaccrual loans are generally applied to reduce principal. Loans are returned to accrual status when all delinquent amounts are brought current and the borrower has demonstrated sustained repayment performance, generally for a period of at least six months.

Nonperforming assets consist of nonaccrual loans and other real estate owned (“OREO”). The Company had no OREO at the periods presented. Loans 90 days or greater past due and still accruing represent loans that are both well-secured and in the process of collection, as well as PCD loans, net of fair value marks, which accrete income based on the valuation at the date of acquisition. The Company considers charging off loans, or a portion thereof, at the time it deems it has exhausted all means of collection. Nonperforming assets exclude loans held-for-sale.

The following table sets forth, as of the dates indicated, the amount of the Company’s nonperforming assets:

	September 30, 2026		December 31, 2025
	(dollars in thousands)
Nonaccrual loans	$	64,330	$	45,915
OREO		-		-
Total nonperforming assets (1)	$	64,330	$	45,915

Loans 90 days or greater past due and still accruing	$	1,160	$	17,472

⁽¹⁾	Nonperforming assets are defined as nonaccrual loans and OREO.

Nonaccrual loans to total loans receivable			0.56	%			0.40	%
Nonperforming assets to total assets			0.44				0.33

Nonaccrual loans increased $18.4 million to $64.3 million as of September 30, 2026, from $45.9 million as of December 31, 2025. The increase was primarily driven by a group of New York City multifamily loans secured by rent-stabilized properties, which added $29.9 million (net of charge-offs) to nonaccrual loans during the second quarter of 2026 and remained on nonaccrual as of September 30, 2026. This increase was partially offset by work-out loan sales, charge-offs, payoffs and paydowns, net of other additions to nonaccrual loans. None of the loans transferred to loans held-for-sale were on nonaccrual status, and nonperforming assets exclude loans held-for-sale.

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Purchased Credit-Deteriorated Loans

As of September 30, 2026, the Company’s recorded investment in PCD loans totaled $71.0 million, compared to $193.4 million as of June 30, 2026. The decrease was primarily due to the transfer of PCD loans with an amortized cost of $120.4 million to loans held-for-sale during the third quarter of 2026, in connection with the balance sheet restructuring and repositioning described above. PCD loans are acquired loans that, at the time of acquisition, had experienced a more-than-insignificant deterioration in credit quality since origination. In identifying PCD loans at the time of the FLIC merger, the Company, with the assistance of independent third-party loan review experts, considered factors including nonperforming status, payment history and delinquency, risk rating, debt service coverage and rate repricing risk. The Company’s remaining PCD loans consist of multifamily, commercial real estate, commercial and residential real estate loans.

As of September 30, 2026, PCD loans included $28.1 million of loans secured by multifamily properties located in the five boroughs of New York City that are entirely or predominantly rent-stabilized, compared to $146.3 million of such loans as of June 30, 2026. The decrease was primarily due to the transfer of PCD loans to loans held-for-sale described above. Rent-stabilized multifamily properties are subject to particular stressors, including the 2019 New York rent laws, which restricted rent increases in an environment of rising operating expenses. In addition, in June 2026, the New York City Rent Guidelines Board approved 0% rent adjustments for both one-year and two-year leases on rent-stabilized apartments commencing between October 1, 2026 and September 30, 2027. These factors may adversely affect the cash flows and values of these properties and, in turn, borrowers’ ability to service their loans. These conditions also affect certain non-PCD multifamily loans secured by rent-stabilized properties, including those placed on nonaccrual status during the second quarter of 2026.

The determination of PCD classification and the related allowance at acquisition involved significant judgment, including assumptions about expected remaining life, default rates, recoveries and economic scenarios. The Company continues to monitor the performance of the remaining PCD portfolio as part of its quarterly credit review process.

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Investment Securities

As of September 30, 2026, the principal components of the securities portfolio were federal agency obligations, mortgage-backed securities, obligations of U.S. states and political subdivisions, corporate bonds and notes, asset-backed securities and equity securities. For the three months ended September 30, 2026, average securities, on an amortized cost basis, increased by $31.8 million to $1.4 billion, or 10.1% of average total interest-earning assets, compared to $1.4 billion, or 10.3% of average interest-earning assets, for the prior-year period. For the nine months ended September 30, 2026, average securities, on an amortized cost basis increased by $308.8 million to approximately $1.3 billion, or 9.9% of average total interest-earning assets, from approximately $1.0 billion, or 9.3% of average interest-earning assets, for the nine months ended September 30, 2025.

As of September 30, 2026, net unrealized losses on available-for-sale securities, which are carried as a component of accumulated other comprehensive loss and included in stockholders’ equity, net of tax, amounted to $95.8 million as compared with net unrealized losses of $40.7 million as of December 31, 2025. The increase in net unrealized losses is predominantly attributable to changes in market conditions and interest rates. Unrealized losses have not been recognized into income because the issuers are of high credit quality, we do not intend to sell, and it is likely that we will not be required to sell the securities prior to their anticipated recovery. The issuers continue to make timely principal and interest payments on the securities. Any impairment that has not been recorded through an ACL is recognized in OCI, net of applicable taxes. The Company did not record an ACL for available-for-sale securities as of September 30, 2026.

Interest Rate Sensitivity Analysis

The principal objective of our asset and liability management function is to evaluate the interest-rate risk included in certain balance sheet accounts; determine the level of risk appropriate given our business focus, operating environment, and capital and liquidity requirements; establish prudent asset concentration guidelines; and manage the risk consistent with Board approved guidelines. We seek to reduce the vulnerability of our operations to changes in interest rates, and actions in this regard are taken under the guidance of the Bank’s Asset Liability Committee (the “ALCO”). The ALCO generally reviews our liquidity, cash flow needs, maturities of investments, deposits and borrowings, and current market conditions and interest rates.

The Company utilizes a number of strategies to manage interest rate risk including, but not limited to: (i) balancing the types and structures of interest-earning assets and interest-bearing liabilities by diversifying mix, coupons, maturities and/or repricing characteristics, (ii) reducing the overall interest rate sensitivity of liabilities by emphasizing core and/or longer-term deposits and utilizing FHLB advances and wholesale deposits for our interest rate risk profile, (iii) managing the investment portfolio for liquidity and interest rate risk profile, and (iv) entering into interest rate swap and cap agreements.

We currently utilize net interest income simulation and economic value of equity (“EVE”) models to measure the potential impact to the Bank of future changes in interest rates. As of September 30, 2026 and December 31, 2025, the results of the models were within guidelines prescribed by our Board of Directors. If model results were to fall outside prescribed ranges, action, including additional monitoring and reporting to the Board, would be required by the ALCO and the Bank’s management.

The net interest income simulation model attempts to measure the change in net interest income over the next one-year period, and over the next three-year period on a cumulative basis, assuming certain changes in the general level of interest rates. The model also utilizes immediate and parallel shifts in market interest rates as of September 30, 2026.

Based on our model, which was run as of September 30, 2026, we estimated that over the next one-year period a 200 basis-point instantaneous and parallel increase in the general level of interest rates would decrease our net interest income by 9.25%, while a 100 basis-point instantaneous and parallel decrease in interest rates would increase net interest income by 4.28%. As of December 31, 2025, we estimated that over the next one-year period a 200 basis-point instantaneous and parallel increase in the general level of interest rates would decrease our net interest income by 4.95% while a 100 basis-point instantaneous and parallel decrease in interest rates would increase net interest income by 3.06%.

Based on our model, which was run as of September 30, 2026, we estimated that over the next three years, on a cumulative basis, a 200 basis-point instantaneous and parallel increase in the general level of interest rates would increase our net interest income by 5.15%, while a 100 basis-point instantaneous and parallel decrease in interest rates would decrease net interest income by 1.36%. As of December 31, 2025, we estimated that over the next three years, on a cumulative basis, a 200 basis-point instantaneous and parallel increase in the general level of interest rates would decrease our net interest income by 0.32%, while a 100 basis-point instantaneous and parallel decrease in interest rates would increase net interest income by 1.04%.

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An EVE analysis is also used to dynamically model the present value of asset and liability cash flows with instantaneous and parallel rate shocks of up 200 basis-points and down 100 basis-points. The EVE is likely to be different as interest rates change. Our EVE as of September 30, 2026, would decrease by 10.33% with an instantaneous and parallel rate shock of up 200 basis-points, and increase by 2.40% with an instantaneous and parallel rate shock of down 100 basis-points. Our EVE as of December 31, 2025, would decrease by 7.12% with an instantaneous and parallel rate shock of up 200 basis-points, and increase by 0.28% with an instantaneous and parallel rate shock of down 100 basis-points.

The change in interest rate sensitivity from December 31, 2025 was primarily impacted by changes in overall market interest rates, growth in fixed-rate loans, an increase in short-term wholesale funding and updates to certain model assumptions. The September 30, 2026 results include the multifamily loans classified as held-for-sale, and do not reflect the subsequent sale of those loans or the planned reinvestment of the proceeds and repayment of wholesale funding.

The following table illustrates the most recent results for EVE and one-year net interest income ("NII") sensitivity as of September 30, 2026.

Interest Rates	Estimated		Estimated Change in EVE						Interest Rates		Estimated		Estimated Change in NII
(basis points)	EVE		Amount			%			(basis points)		NII		Amount			%
+300	$	1,743,078	$	(345,896	)		(16.56	)		300	$	394,443	$	(67,425	)		(14.60	)
+200		1,873,224		(215,750	)		(10.33	)		200		419,139		(42,729	)		(9.25	)
+100		2,014,973		(74,001	)		(3.54	)		100		442,935		(18,933	)		(4.10	)
0		2,088,974		-			-			0		461,868		-			-
-100		2,139,007		50,033			2.40			-100		481,643		19,775			4.28
-200		2,148,472		59,498			2.85			-200		504,963		43,095			9.33
-300		2,106,027		17,053			0.82			-300		526,570		64,702			14.01

Certain model limitations are inherent in the methodology used in the EVE and net interest income measurements. The models require the making of certain assumptions which may tend to oversimplify the way actual yields and costs respond to changes in market interest rates. The models assume that the composition of the Company’s interest sensitive assets and liabilities existing at the beginning of a period remain constant over the period being measured, thus they do not consider the Company’s strategic plans, or any other steps it may take to respond to changes in rates over the forecasted period of time. Additionally, the models assume immediate changes in interest rates, based on yield curves as of a point-in-time, which are reflected in a parallel, instantaneous and uniform manner across all yield curves, when in reality changes may rarely be of this nature. The models also utilize data derived from historical performance and as interest rates change the actual performance of loan prepayments, rate sensitivities, and average life assumptions may deviate from assumptions utilized in the models and can impact the results. Accordingly, although the above measurements provide an indication of the Company’s interest rate risk exposure at a particular point in time, such measurements are not intended to provide a precise forecast of the effect of changes in market interest rates. Given the nature and speed with which interest rates change, the projections noted above on the Company’s EVE and net interest income can be expected to differ from actual results.

Estimates of Fair Value

The estimation of fair value is significant to a number of the Company’s assets, including loans held-for-sale and available-for-sale securities. These are all recorded at either fair value or the lower of cost or fair value. Fair values are volatile and may be influenced by a number of factors. Circumstances that could cause estimates of the fair value of certain assets and liabilities to change include a change in prepayment speeds, discount rates, or market interest rates. Fair values for most available-for-sale securities are based on quoted market prices. If quoted market prices are not available, fair values are based on judgments regarding future expected loss experience, current economic condition risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature, involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

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Impact of Inflation and Changing Prices

The consolidated financial statements and notes thereto presented elsewhere herein have been prepared in accordance with GAAP, which requires the measurement of financial position and operating results in terms of historical dollars without considering the change in the relative purchasing power of money over time due to inflation. The impact of inflation is reflected in the increased cost of operations; unlike most industrial companies, nearly all of the Company’s assets and liabilities are monetary. As a result, interest rates have a greater impact on performance than do the effects of general levels of inflation. Interest rates do not necessarily move in the same direction or to the same extent as the prices of goods and services.

Liquidity

Management actively monitors and manages its liquidity position to determine any current or potential future liquidity needs. Liquidity is a measure of a bank’s ability to fund loans, withdrawals or maturities of deposits, and other cash outflows in a cost-effective manner. Our principal sources of funds are deposits, scheduled amortization and prepayments of loan principal, maturities of investment securities, and funds provided by operations. While scheduled loan payments and maturing investments are relatively predictable sources of funds, deposit flow and loan prepayments are greatly influenced by general interest rates, economic conditions and competition.

Liquidity and funding needs are managed through the Bank's Treasury functions and the Asset Liability Committee. An internal policy addresses liquidity and funds management and management monitors the adherence to policy limits to satisfy current and potential future cash flow needs. The policy includes internal limits, deposit concentrations, liquidity sources and availability, stress testing, collateral management, contingency funding plan and other qualitative and quantitative metrics.

As of September 30, 2026, the amount of liquid assets remained at a level management deemed adequate to ensure that, on a short and long-term basis, contractual liabilities, depositors’ withdrawal requirements, and other operational and client credit needs could be satisfied. As of September 30, 2026, liquid assets (cash and due from banks, interest-bearing deposits with banks and unencumbered investment securities) were $1.0 billion, which represented 6.9% of total assets and 7.9% of total deposits and borrowings, compared to $874.4 million as of December 31, 2025, which represented 6.2% of total assets and 7.2% of total deposits and borrowings. As of September 30, 2026, not included in the above liquid assets were securities with a market value of $84.7 million which were pledged to the FHLB and securities with a market value of $117.0 million which were pledged to the Federal Reserve Bank of New York, which supported aggregate unutilized borrowing capacity of $191.4 million and $223.3 million, respectively as of September 30, 2026 and December 31, 2025.

The Bank is a member of the FHLB of New York and, based on available qualified collateral as of September 30, 2026, had the ability to borrow $3.8 billion. The Bank also has a credit facility established with the Federal Reserve Bank of New York for direct discount window borrowings based on pledged collateral and had the ability to borrow $2.9 billion as of September 30, 2026. In addition, as of September 30, 2026, the Bank had in place borrowing capacity of $280.0 million through correspondent banks and other unsecured borrowing lines. As of September 30, 2026, the Bank had aggregate available and unused credit of approximately $5.2 billion, which represents the aforementioned facilities totaling $7.0 billion net of $1.8 billion in outstanding borrowings and letters of credit. As of September 30, 2026, outstanding commitments for the Bank to extend credit were approximately $1.7 billion.

Cash and cash equivalents totaled $313.3 million as of September 30, 2026, decreasing by $67.6 million from $380.9 million as of December 31, 2025. Operating activities provided $135.2 million in net cash. Investing activities used $869.9 million in net cash, a net increase in loans of $704.8 million and investment purchases of $376.5 million and were partially offset by investment maturities, calls and principal repayments of $226.3 million. Financing activities provided $667.2 million in net cash, primarily reflecting a net increase in deposits of $537.4 million and FHLB net borrowings of $168.9 million.

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Deposits

Deposits serve as our primary source of funding. The Company offers a comprehensive suite of products including noninterest-bearing demand, interest-bearing checking, money market, and savings accounts, as well as time deposits with maturities generally ranging from 31 days to 60 months. We supplement core funding with brokered certificates of deposit and internet listing service deposits for asset-liability management purposes.

To support clients with balances exceeding standard FDIC insurance limits, we utilize reciprocal deposit networks. This includes the IntraFi Network LLC for the placement of Certificate of Deposit Account Registry Service ("CDARS") and Insured Cash Sweep ("ICS") accounts, as well as the National Bank InterDeposit Company (“NBID”) network, operated by ModernFi. Through these networks, large-dollar deposits are placed into accounts at other participating banks in increments below the FDIC insurance limit to ensure full principal and interest coverage.

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

	Quarter-to-Date Average September 30, 2026					Quarter-to-Date Average September 30, 2025
	Balance		Rate			Balance		Rate
(dollars in thousands)
Demand, noninterest-bearing	$	2,510,843		-	%	$	2,486,993		-	%
Demand, interest-bearing & NOW	5,309,685			2.86			4,939,455		3.05
Savings	942,742		2.62				949,775		3.01
Time	2,920,335		3.75				3,019,848		3.95
Total average deposits	$	11,683,605		2.45	%	$	11,396,071		2.62	%

Average total deposits increased by $287.5 million, or 2.5%, during the three months ended September 30, 2026 when compared to the prior-year period. The increase was due to a $370.2 million increase in interest-bearing demand and NOW deposits and a $23.9 million increase in noninterest-bearing demand deposits, partially offset by a $99.5 million decrease in time deposits and a $7.0 million decrease in savings deposits. The average cost of total deposits, including noninterest-bearing deposits, decreased 17 basis points to 2.45% from 2.62%.

The decrease in average time deposits of $99.5 million during the three months ended September 30, 2026 was primarily due to a $245.5 million decrease in nonreciprocal brokered certificates of deposit and a $22.7 million decrease in listing service deposits, partially offset by a $167.6 million increase in retail time deposits and a $1.1 million increase in CDARS reciprocal deposits. Average nonreciprocal brokered certificates of deposit included in total time deposits were $706.6 million and $952.1 million during the three months ended September 30, 2026 and 2025, respectively.

Average demand deposits included $1.2 billion and $1.1 billion in ICS and ModernFi reciprocal deposits in the aggregate during the three months ended September 30, 2026 and 2025, respectively.

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	Year-to-Date Average September 30, 2026				Year-to-Date Average September 30, 2025
	Balance	Rate			Balance		Rate
(dollars in thousands)
Demand, noninterest-bearing	$ 2,440,628		-	%	$	1,828,783		-	%
Demand, interest-bearing & NOW	5,146,170	2.76				3,958,422		3.01
Savings	978,494	2.58				795,911		3.12
Time	2,938,104	3.74				2,723,057		4.02
Total average deposits	$ 11,503,396		2.41	%	$	9,306,173		2.72	%

Average total deposits increased $2.2 billion, or 23.6%, during the nine months ended September 30, 2026 when compared to the prior-year period. The increase was due to a $1.2 billion increase in interest-bearing demand and NOW deposits, a $611.8 million increase in noninterest-bearing demand deposits, a $215.0 million increase in time deposits and a $182.6 million increase in savings deposits. The increases primarily reflect the inclusion of FLIC’s deposits for the full nine months of 2026, compared with approximately four months in the prior-year period. The average cost of total deposits, including noninterest-bearing deposits, decreased 31 basis points to 2.41% from 2.72%.

The increase in average time deposits of $215.0 million during the nine months ended September 30, 2026 was primarily due to a $344.5 million increase in retail time deposits, partially offset by a $124.4 million decrease in nonreciprocal brokered certificates of deposit, a $4.7 million decrease in CDARS reciprocal deposits and a $0.4 million decrease in listing service deposits. Average nonreciprocal brokered certificates of deposit included in total time deposits were $793.4 million for the nine months ended September 30, 2026, compared to $917.8 million for the prior-year period.

Average aggregate demand deposits included $1.2 billion and $1.1 billion in ICS and ModernFi reciprocal deposits in the aggregate during the nine months ended September 30, 2026 and September 30, 2025, respectively.

The deposit beta, a measure of the sensitivity of deposit rates to changes in market interest rates, is generally higher for nonreciprocal brokered certificates of deposit than for ICS, ModernFi and CDARS reciprocal deposits. Nonreciprocal brokered deposits are more directly tied to prevailing market rates, while reciprocal deposits generally reflect client relationships in which FDIC insurance coverage, rather than yield, is the primary consideration.

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

	September 30, 2026		December 31, 2025
	Balance		Balance
(dollars in thousands)
As stated in FFIEC 041-Consolidated Report of Condition, schedule RC-O:
Total Bank unconsolidated deposits (including affiliate and subsidiary accounts)	$	12,012,239	$	11,423,825
Estimated uninsured deposits		5,753,724		5,150,662

The Company, on a consolidated basis:
Total deposits	$	11,778,342	$	11,240,615
Estimated uninsured deposits (excluding affiliate and subsidiary accounts)		5,369,295		4,860,186

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

	September 30, 2026					December 31, 2025
	Amount		Percent of total			Amount		Percent of total
(dollars in thousands)
Demand, noninterest-bearing	$	2,479,625		21.1	%	$	2,420,397		21.5	%
Demand, interest-bearing & NOW		5,243,695		44.5			4,992,696		44.4
Savings		935,429		7.9			1,030,645		9.2
Time		3,119,593		26.5			2,796,877		24.9
Total deposits	$	11,778,342		100.0	%	$	11,240,615		100.0	%

Total deposits increased $537.7 million, or 4.8%, as of September 30, 2026, compared to December 31, 2025. The increase was due to a $322.7 million increase in time deposits, a $251.0 million increase in interest-bearing demand and NOW deposits and a $59.2 million increase in noninterest-bearing demand deposits, partially offset by a $95.2 million decrease in savings deposits.

Demand deposits included $1.3 billion and $1.2 billion in ICS and ModernFi reciprocal deposits in the aggregate as of September 30, 2026 and December 31, 2025, respectively.

Nonreciprocal brokered certificates of deposit included in total time deposits were $842.6 million and $723.4 million as of September 30, 2026 and December 31, 2025, respectively.

As of September 30, 2026, we held $1.2 billion of time deposits with balances greater than $250,000. The following table provides information on the maturity distribution of the time deposits with balances greater than $250,000 as of September 30, 2026:

	September 30, 2026
	(dollars in thousands)
3 months or less	$	616,474
Over 3 to 6 months		272,122
Over 6 to 12 months		257,494
Over 12 months		50,493
Total	$	1,196,583

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Subordinated Debentures

During December 2003, Center Bancorp Statutory Trust II, a statutory business trust and wholly-owned subsidiary of the Parent Corporation issued $5.0 million of MMCapS capital securities to investors due on January 23, 2034. The trust loaned the proceeds of this offering to the Parent Corporation and received in exchange $5.2 million of the Parent Corporation’s subordinated debentures. The subordinated debentures are redeemable in whole or part prior to maturity. Upon the cessation of publication of LIBOR rates and pursuant to the Federal LIBOR Act and Federal Reserve regulations implementing the Act, the MMCapS capital securities converted as of 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. 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 adjustment of 0.26161%. The rate as of September 30, 2026 was 6.95%.

During May 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, 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.

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Stockholders’ Equity

The Company’s stockholders’ equity increased by $25.3 million when compared to December 31, 2025. The increase in total stockholders’ equity was primarily due to an increase in retained earnings of $77.7 million, partially offset by an increase in accumulated other comprehensive loss of $51.0 million. As of September 30, 2026, the Company’s tangible common equity ratio and tangible book value per share were 8.38% and $24.19, respectively, compared to 8.62% and $23.52, respectively, as of December 31, 2025. Total goodwill and other intangible assets were $271.6 million as of September 30, 2026, and $280.2 million as of December 31, 2025.

In accordance with its terms, the dividend rate on the Company’s 5.25% Fixed-Rate Reset Non-Cumulative Perpetual Preferred Stock, Series A, reset on September 1, 2026, for the first five-year reset period. For each five-year reset period, the dividend rate equals the average of the yields to maturity on actively traded U.S. treasury securities, adjusted to constant maturity, for five-year maturities, for the five business days prior to and including the reset date, which is three business days prior to the reset date, appearing under the caption “Treasury Constant Maturities” in the most recently published statistical release designated H.15 Daily Update or any successor publication which is published by the Federal Reserve Board, plus 4.42%. As a result, the dividend rate reset from 5.25% to 8.81% per annum, effective for dividend periods beginning September 1, 2026, and will remain at that rate until the next reset date of September 1, 2031.

In October 2026, the Board of Directors declared the first quarterly dividend at the reset rate of $0.556620 per depositary share, or approximately $2.6 million, payable on December 1, 2026. Dividends on the Series A preferred stock are non-cumulative and are payable only when, as and if declared by the Board of Directors.

The following table reconciles common equity to tangible common equity and the tangible common equity ratio.

	September 30, 2026			December 31, 2025
	(dollars in thousands, except for per share data)
Stockholders' equity	$	1,598,600		$	1,573,340
Less: preferred stock		(110,927	)		(110,927	)
Common equity	$	1,487,673		$	1,462,413
Less: intangible assets		(271,622	)		(280,158	)
Tangible common stockholders’ equity	$	1,216,051		$	1,182,255

Total assets	$	14,778,705		$	14,002,700
Less: intangible assets		(271,622	)		(280,158	)
Tangible assets	$	14,507,083		$	13,722,542

Common stock outstanding at period end		50,268,879			50,271,854

Tangible common equity ratio ⁽¹⁾		8.38	%		8.62	%

Book value per common share	$	29.59		$	29.09
Less: intangible assets		5.40			5.57
Tangible book value per common share	$	24.19		$	23.52

⁽¹⁾	Tangible common equity ratio is tangible common equity divided by tangible assets and is a non-GAAP measure.

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Regulatory Capital and Capital Adequacy

The maintenance of a solid capital foundation is a primary goal for the Company. Accordingly, capital plans, stock repurchases and dividend policies are monitored on an ongoing basis. The Company’s objective with respect to the capital planning process is to effectively balance the retention of capital to support future growth with the goal of providing stockholders with an attractive long-term return on their investment.

The Company and the Bank are subject to regulatory guidelines establishing minimum capital standards that involve quantitative measures of assets, and certain off-balance sheet items, as risk-adjusted assets under regulatory accounting practices.

The following is a summary of regulatory capital amounts and ratios as of September 30, 2026 for the Company and the Bank, compared with minimum capital adequacy requirements and the regulatory requirements for classification as a well-capitalized depository institution (for the Bank).

			For Capital Adequacy Purposes		To Be Well-Capitalized Under Prompt Corrective Action Provisions
The Company	Amount	Ratio	Amount	Ratio	Amount	Ratio
As of September 30, 2026	(dollars in thousands)
Tier 1 leverage capital	$1,403,944	9.80%	$572,836	4.00%	N/A	N/A
CET I risk-based ratio	1,287,862	10.10	573,586	4.50	N/A	N/A
Tier 1 risk-based capital	1,403,944	11.01	764,781	6.00	N/A	N/A
Total risk-based capital	1,713,218	13.44	1,019,708	8.00	N/A	N/A

N/A - not applicable

			For Capital Adequacy Purposes		To Be Well-Capitalized Under Prompt Corrective Action Provisions
The Bank	Amount	Ratio	Amount	Ratio	Amount	Ratio
As of September 30, 2026			(dollars in thousands)
Tier 1 leverage capital	$1,543,064	10.78%	$572,437	4.00%	$715,546	5.00%
CET I risk-based ratio	1,543,064	12.11	573,522	4.50	828,420	6.50
Tier 1 risk-based capital	1,543,064	12.11	764,695	6.00	1,019,594	8.00
Total risk-based capital	1,655,070	12.99	1,019,594	8.00	1,274,492	10.00

As of September 30, 2026, both the Company and Bank satisfy the capital conservation buffer requirements applicable to them. The lowest ratio at the Company is the Tier 1 Risk Based Capital Ratio which was 2.51 percentage points above the minimum buffer ratio and, at the Bank, the lowest ratio was the Total Risk Based Capital Ratio which was 2.49 percentage points above the minimum buffer ratio.

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Item 3. Qualitative and Quantitative Disclosures about Market Risks

Market Risk

Interest rate risk management is our primary market risk. See “Item 2- Management’s Discussion and Analysis of Financial Condition and Results of Operations - Interest Rate Sensitivity Analysis” herein for a discussion of our management of our interest rate risk.

Item 4. Controls and Procedures

a) Disclosure controls and procedures. As of the end of the Company’s most recently completed fiscal quarter covered by this report, the Company carried out an evaluation, with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures pursuant to Securities Exchange Act Rule 13a-15. Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective in ensuring that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and are operating in an effective manner and that such information is accumulated and communicated to management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

b) Changes in internal controls over financial reporting. There have been no changes in the Company’s internal controls over financial reporting that occurred during the Company’s last fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings

On August 28, 2024, FLIC filed an 8-K disclosing that its subsidiary, FNBLI was notified by a customer of suspicious wire transfer activity in July 2024 involving the customer's bank accounts. According to the 8-K, the wire transfer activity arose as the result of unauthorized access to banking information within the customer's control. FLIC completed an investigation with the assistance of a digital forensic investigations firm, which did not yield evidence of unauthorized network activity.

The net amount of funds at issue, after the initial return of recalled wires, involved in the suspicious wire transfer activity is approximately $11.1 million.

On January 22, 2025, the customer filed suit against FLIC and FNBLI claiming damages of approximately $11.1 million. The Company and the Bank, as the successors to FLIC and FNBLI, vehemently disagree with the customer’s allegations and intend to vigorously defend these claims. FLIC, and so the Company, has been dismissed from the case, while it proceeds against the Bank as successor to FNBLI.

Item 1a. Risk Factors

There have been no material changes to the risks inherent in our business from those described under Item 1A – Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2025.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Share Repurchase Program

Historically, repurchases have been made from time to time as, in the opinion of management, market conditions warranted, in the open market or in privately negotiated transactions. During the quarter ended September 30, 2026, the Company repurchased 50,000 shares of common stock. As of September 30, 2026, shares remaining for repurchase under the program were 501,118.

	Shares Authorized		Total Number of Shares Purchased		Average Price Paid per Share		Cumulative Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
		-		-		n/a		-		551,118
July 1, 2026 - July 31, 2026		-		10,000		32.59		10,000		541,118
August 1, 2026 - August 31, 2026		-		40,000		32.30		50,000		501,118
September 1, 2026 - September 30, 2026		-		-		-		50,000		501,118

Item 3. Defaults Upon Senior Securities

Not applicable

Item 4. Mine Safety Disclosures

Not applicable

Item 5. Other Information

Not applicable

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Item 6. Exhibits

Exhibit No.		Description

31.1		Certification of the Chief Executive Officer of the Parent Corporation Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification of the Chief Financial Officer of the Parent Corporation Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certification of the Chief Executive Officer of the Parent Corporation Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certification of the Chief Financial Officer of the Parent Corporation Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS		Inline XBRL Instance Document
101.SCH		Inline XBRL Taxonomy Extension Schema Document.
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf, by the undersigned, thereunto duly authorized.

CONNECTONE BANCORP, INC.

(Registrant)

By:	/s/ Frank Sorrentino III	By:	/s/ William S. Burns
	Frank Sorrentino III		William S. Burns
	Chairman and Chief Executive Officer		Senior Executive Vice President and Chief Financial Officer

	Date: October 30, 2026		Date: October 30, 2026