CNOB 10-K & 10-Q changes, risk factors and insider trading

In order to continue our growth, we will be required to maintain our regulatory capital ratios at levels higher than the minimum ratios set by our regulators. For example, in connection with our merger with FLIC, we raised $200 million of capital through the issuance of subordinated debt. We can offer you no assurances that we will be able to raise capital in the future, or that the terms of any such capital will be beneficial to our existing security holders. In the event we are unable to raise capital in the future, we may not be able to continue our growth strategy.

As of December 31, 2024,2025, we had $6.3$8.1 billion of commercial real estate loans (nonowner-occupied, owner-occupied, multifamily and land), including construction loans, which represented 76.2%70.3% of loans receivable. Concentrations in commercial real estate are monitored by regulatory agencies and subject to scrutiny. Guidance from these regulatory agencies includes all commercial real estate loans, including commercial construction loans, in calculating our commercial real estate concentration, but excludes owner-occupied commercial real estate loans. Based on this regulatory definition, our commercial real estate loans represented 435%434% of the Bank’s Tier 1 capital plus the allowance for credit losses on loans.loans at December 31, 2025.

The impact of the development of remote work or hybrid work models on the metropolitan New York area commercial real estate market is uncertain, causing volatility in rents in certain core urban markets. Many other factors, including the exchange rate for the U.S. dollar, potential international trade tariffs, inflation and changes in federal tax laws affecting the deductibility of state and local taxes and mortgage interest and new legal or regulatory requirements impacting New York City rent regulated multifamily properties could negatively impact our local economy and real estate market. Accordingly, it may be more difficult for commercial real estate borrowers to repay their loans in a timely manner, as commercial real estate borrowers’ ability to repay their loans frequently depends on the successful development and leasing of their properties. The deterioration of one or a few of our commercial real estate loans could cause a material increase in our level of nonperforming loans, which would result in a loss of revenue from these loans and could result in an increase in the provision for credit losses and/or an increase in charge-offs, all of which could have a material adverse impact on our net income. We also may incur losses on commercial real estate loans due to declines in occupancy rates and rental rates, which may decrease property values and may decrease the likelihood that a borrower may find permanent financing alternatives. Any weakening of the commercial real estate market may increase the likelihood of default on these loans, which could negatively impact our loan portfolio’s performance and asset quality. If we are required to liquidate the collateral securing a loan to satisfy the debt during a period of reduced real estate values, we could incur material losses. Any of these events could increase our costs, require management time and attention, and materially and adversely affect us.

Federal banking agencies have issued guidance regarding high concentrations of commercial real estate loans within bank loan portfolios. The guidance requires financial institutions that exceed certain levels of commercial real estate lending compared with their total capital to maintain heightened risk management practices that address the following key elements: board and management oversight and strategic planning, portfolio management, development of underwriting standards, risk assessment and monitoring through market analysis and stress testing, and maintenance of increased capital levels as needed to support the level of commercial real estate lending. If there is any deterioration in our commercial real estate portfolio or if our regulators conclude that we have not implemented appropriate risk management practices, it could adversely affect our business,business and could result in the requirement to maintain increased capital levels. Such capital may not be available at that time and may result in our regulators requiring us to reduce our concentration on commercial real estate loans.

We have a significant portfolio of loans secured by multi familymultifamily properties located in New York. On June 14, 2019, the New York State legislature passed the New York Housing Stability and Tenant Protection Act of 2019. This legislation represents the most extensive reform of New York State’s rent laws in several decades and generally limits a landlord’s ability to increase rents on rent regulated apartments and makes it more difficult to convert rent regulated apartments to market rate apartments. In addition, the new mayoral administration in New York City has discussed policies which would further limit or eliminate rent increases and make tenant evictions more difficult. As a result, the value of the collateral located in New York State and New York City securing the Company’s multi familymultifamily loans or the future net operating income of such properties could potentially become impaired which, in turn, could have a material adverse effect on our financial condition and results of operations.

A significant portion of our loan portfolio has interest rates that will reset over the next 24 months. In addition, a significant portion of our portfolio will mature over the next 24 months. Applicable increases in interest rates could harm our borrowers’ abilities to repay their loans.

As of December 31, 2024,2025, a significant portion of our loan portfolioportfolio, approximately $2.4 billion, primarily originated during the low-interest-rate environment of 2021 and 2022, bears interest at ratesrate that will reset during 20252026 and 2026.2027. Generally, these loans currently bear interest at rates that are lower than current market rates, as these loans were predominately originated in 2020 and 2021, and so these borrowers will experience an increase in the interest rates applicable to their loans, which in some cases will be significant. In addition, a significant portion of our loan portfolio matures in 2025 and 2026. For loans that are maturing, borrowers will either need to refinance these loans, with the Bank or with another financial institution, or pay these loans off using other sources of funds. Borrowers refinancing loans will likely experience an increase in the interest rates applicable to their loans, which in some cases will be significant. An increase in interest rates applicable to their loans may negatively impact our borrowers, increasing their costs and potentially making it more difficult for them to continue to perform under their loan agreements. Any increase in late payments or defaults by our borrowers due to increases in the interest rates applicable to their loans could adversely affect our asset quality and results of operations.

The small-tosmall to medium-sized businesses that the Bank lends to may have fewer resources to weather a downturn in the economy, which may impair a borrower’s ability to repay a loan to the Bank that could materially harm our operating results.

The Bank targets its business development and marketing strategy primarily to serve the banking and financial services needs of small-tosmall to medium-sized businesses. These small-tosmall to medium-sized businesses frequently have smaller market share than their competition, may be more vulnerable to economic downturns, often need substantial additional capital to expand or compete and may experience significant volatility in operating results. Any one or more of these factors may impair the borrower’s ability to repay a loan. In addition, the success of a small-tosmall to medium-sized business often depends on the management talents and efforts of one or two persons or a small group of persons, and the death, disability or resignation of one or more of these persons could have a material adverse impact on the business and its ability to repay a loan. Economic downturns and other events that negatively impact our market areas could cause the Bank to incur substantial credit losses that could negatively affect our results of operations and financial condition.

As of December 31, 2024,2025, we had approximately $612.8$1.3 millionbillion in fair value of investment securities, all of which are classified as available-for-sale. We may be required to record an allowance for credit losses on our investment securities if they suffer a decline in value below their amortized cost basis that is considered credit related. Numerous factors, including lack of liquidity for re-sales of certain investment securities, absence of reliable pricing information on investment securities, adverse changes in business climate, adverse actions by regulators, or unanticipated changes in the competitive environment could have a negative effect on our investment portfolio in future periods. If an impairment charge is significant enough, it could affect the ability of the Bank to upstream dividends to the Company, which could have a material adverse effect on our liquidity and our ability to pay dividends to shareholders and could also negatively impact our regulatory capital ratios.

We review our goodwill at least annually. Significant negative industry or economic trends, reduced estimates of future cash flows or disruptions to our business, could indicate that goodwill might be impaired. Our valuation methodology for assessing impairment requires management to make judgments and assumptions based on historical experience and to rely on projections of future operating performance. We operate in a competitive environmentenvironment, and projections of future operating results and cash flows may vary significantly from actual results. Additionally, if our analysis results in an impairment to our goodwill, we would be required to record a non-cash charge to earnings in our financial statements during the period in which such impairment is determined to exist. Any such charge could have a material adverse effect on our results of operations.

Since January 1, 2019, we have acquired GHB, BoeFly andBoeFly, BNJ and entered into an agreement to acquire FLIC (First of Long Island Corp.), the consummation of which is pending regulatory approval.. To be successful as a larger institution, we must successfullyeffectively integrate the operations and retain the clients of acquired institutions, attract and retain the management required to successfully manage larger operations, and control costs.

Finally, substantial growth may stress regulatory capital levels,levels and may require us to raise additional capital. No assurance can be given that we will be able to raise any required capital, or that we will be able to raise capital on terms that are beneficial to stockholders.

These provisions, as well as any other aspects of currentCurrent or proposed regulatory or legislative changes to laws applicable to the financial industry, as well as future legal and regulatory changes, may impact the profitability of our business activities and may change certain of our business practices, including the ability to offer new products, obtain financing, attract deposits, make loans, and achieve satisfactory interest spreads, and could expose us to additional costs, including increased compliance costs. These changes also may require us to invest significant management attention and resources to make any necessary changes to operations in order to comply and could therefore also materially and adversely affect our business, financial condition and results of operations.

The ultimate effect of certain of these changes on the financial services industry in general, and us in particular, is uncertain at this time.uncertain.

The federal and state laws and regulations applicable to our operations give regulatory authorities extensive discretion in connection with their supervisory and enforcement responsibilities,responsibilities and generally have been promulgated to protect depositors and the Deposit Insurance FundDIF and not for the purpose of protecting shareholders. These laws and regulations can materially affect our future business. Laws and regulations now affecting us may be changed at any time, and the interpretation of such laws and regulations by bank regulatory authorities is also subject to change.

Management’s Discussion and Analysis of Financial Condition and Results of Operations is based on our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. The Company considers the allowance for credit losses and related provision to be critical to our financial results. For information on our significant accounting policies, see Note 1a in the Notes to Consolidated Financial Statements.Statements:

Management believes the following information may enable investors to better understand the changes in our allowance for credit losses for loans. The Company’s allowance for credit losses ("ACL") for loans totaled $82.7$154.3 million and $82.0$82.7 million as of December 31, 20242025 and 2023,2024, respectively. The $0.7$71.6 million increase in the allowance for credit lossesACL for loans was primarily due to increasesthe inFLIC individuallymerger evaluatedwith allowance,$43.3 partiallymillion offsetof byallowance abeing decreaserecorded inthrough goodwill related to the levelpurchased ofcredit-deteriorated collectivelyloans evaluatedand allowance.$27.3 million reflecting the initial provision for credit losses.

The quantitative component of our ACL for collectively evaluated loans,loans which is largely based on a selection of various economic forecasts, decreasedincreased by $7.4$13.4 million as of December 31, 20242025 when compared to December 31, 2023.2024. This decreaseincrease was primarily attributable to aan decreaseincrease in collectively evaluated loans of $54.4$3.0 million.billion due to the FLIC merger. The qualitative component of our ACL for loans, which is largely based on management’s judgment of qualitative loss factors, increased by $8.0$17.2 million on an absolute basis, over the same period-of-time,period-of-time. asIn addition, qualitative risk factor trends generally increased over 2024.2025.

The Company’s allowance for credit losses for collectively evaluated loans totaled $81.2$111.8 million as of December 31, 2024,2025, which included $71.6$94.4 million of allowance related to commercial and commercial real estate loans. Of the $71.6$94.4 million allowance related to commercial and commercial real estate loans, $32.0$47.9 million was attributable to qualitative loss factors. Changes in managements’management's judgementjudgment of qualitative loss factors could result in a significant change to the allowance for credit lossesACL for loans. As described in Note 1a to our financial statements filed as part of this Annual Report on Form 10-K, qualitative loss factors are applied to each portfolio segment with the amounts judgmentally determined by the relative risk to the most severe loss periods identified in the historical loan charge-offs of a peer group of similar-sized regional banks. As of December 31, 2024,2025, on a weighted average basis the most severe historical loss rate for our commercial and commercial real estate loans were 2.37%2.38% and 1.96%,1.94%, respectively.

Our allowance for credit losses for individually analyzed loans is determined on an individual basis using the present value of expected cash flows discounted using the loan’s effective interest rate or, for collateral-dependent loans, the fair value of the collateral, less estimated selling costs, as applicable. As of December 31, 2024,2025, the Company’s allowance for credit losses on individually analyzed loans wasdecreased relativelyby flatapproximately $0.8 million when compared to December 31, 2023.2024.

Fully taxable equivalent net interest income for 20242025 totaled $250.7$357.3 million, aan decreaseincrease of $7.6$106.6 million, or 2.9%,42.5%, from 2023.2024. The decreaseincrease in net interest income was due to a 1039 basis-point contractionwidening inof the net interest margin to 2.72%3.11% from 2.82%,2.72%. partiallyThe offsetmargin bybenefitted from stable rates on interest-earning assets, despite a $43.0declining million,rate orenvironment, 0.5%,combined increase in average interest-earning assets. The net interest margin contraction was due towith a 49-basis58 pointbasis-point increasedecrease in the average cost of deposits, including noninterest-bearing demand, to 3.23%,deposits, and wasa 43 basis-point decrease in the average cost of borrowings. These were partially offset by a 29 basis-pointan increase in both the loancost portfolioand yieldaverage tobalance 5.86%.of outstanding subordinated debt.

Fully taxable equivalent net interest income for 20232024 totaled $258.3$250.7 million, a decrease of $46.3$7.6 million, or 15.2%,2.9%, from 2022.2023. The decrease in net interest income was due to ana 8710 basis-point contraction in the net interest margin to 2.82%2.72% from 3.69%,2.82%, partially offset by a $0.9$43.0 billion,million, or 11.0%,0.5%, increase in average interest-earning assets. The net interest margin contraction was due to a 199-basis49-basis point increase in the average cost of deposits, including noninterest-bearing demand,demand deposits, to 2.74%,3.23%, and was partially offset by a 7729 basis-point increase in the loan portfolio yield to 5.57%. Average total loans, which include loans held-for-sale, increased by 10.8% to $8.2 billion in 2023 from $7.4 billion in 2022. The increase in average total loans is attributable to higher loan originations.5.86%.

For the year ended December 31, 2024, theThe provision for credit losses was $13.8 million, an increase of $5.6 million, compared to the provision for credit losses of $8.2 million for the year ended December 31, 2023.2024, Thean increase of $5.6 million from $8.2 million in provision2023. forThis credit losses for the year ended December 31, 2024increase was due to increases in individually evaluated allowance, partially offset by a decrease in the level of collectively evaluated allowance.

Noninterest expenses for 2024 increased by $7.8 million, primarily due to increases in information technology and communications expenses of $3.2 million, attributable to additional investments in technology, equipment and software. Additionally, there were increases in salaries and employee benefits of $1.8 million, attributable to an increase in incentive compensation accruals and an increase in expenses related to the Bank’s Supplemental Executive Retirement Plan. Finally, there were increases in merger expenses of $1.6 million, due to the planned merger with The First of Long Island Corporation,FLIC, professional and consulting expenses of $0.9 million, occupancy and equipment of $0.7 million, branch closing expenses of $0.5 million, and marketing and advertising of $0.5 million, partially offset by decreases in FDIC insurance of $1.2 million, due to FDIC special assessment charge in 2023, and amortization of core deposit intangible of $0.2 million.

Income tax expense was $32.3 million for 2025 compared to $24.7 million for 2024 compared toand $30.0 million for 2023 and $46.0 million for 2022.2023. The decreaseincrease in income tax expense in 20242025 when compared to 20232024 and 20222023 was primarily the result of lowerhigher taxable income.income and higher statutory tax rates due to the FLIC merger. The effective tax rates were 28.6% in 2025, 25.1% in 2024,2024 and 25.6% in 2023 and 26.9% for 2022. The lower effective tax rate during 2024 when compared to 2023 and 2022, was the result of a lower percentage of income being derived from taxable sources.2023.

The Bank’s lending activities are generally oriented to small-to-mediumsmall to-medium sized businesses, high net worth individuals, professional practices and consumer and retail clients living and working in the Bank’s metropolitan,metropolitan New York market area, consisting of Bergen, Union, Morris, Essex, Hudson, Mercer and Monmouth counties,Counties, New Jersey, as well as NYC’s five boroughs, Nassau, Rockland, Orange, Suffolk and Westchester counties,Counties, in New York and businesses and individuals living and working in the communities served by the Bank's West Palm Beach, Florida office. The Bank has also recently established a loan production office in Orlando, in central Florida. The Bank has not made loans to borrowers outside of the United States. The Bank believes that its strategy of high-quality client service, competitive rate structures and selective marketing have enabled it to gain market share.

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

The table above is further broken down in the following tabletables by geography: The values below are shown before fair value adjustments.

In addition, the following tables present further detaildetails with respect to our owner-occupied and nonowner-occupied borrower concentrations included in the commercial real estate segment. The values below are before fair value adjustments.

General. One of our key objectives is to maintain a high level of asset quality. When a borrower fails to make a scheduled payment, we attempt to cure the deficiency by sending late notices, as well as making personal contact with the borrower. Typically, late notices are sent approximately 10 days after the date the payment is duedue, followed up by direct contact with the borrower approximately 15 days after payment is due. In most cases, deficiencies are promptly resolved. If the delinquency continues, late charges are assessed, and additional efforts are made to collect the deficiency. Total loans delinquent 30 days or more are reported to the Board of Directors of the Bank on a monthly basis.

The Company evaluates individual instruments for expected credit losses when those instruments do not share similar risk characteristics with instruments evaluated using a collective (pooled) basis. The Company evaluates the pooling methodology at least annually. Loans transition from defined segments for individual analysis when credit characteristics, or risk traits, change in a material manner. A loan is considered for individual analysis when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by the Company in determining individual analysis include payment status and the probability of collecting scheduled principal and interest payments when due. Nonaccrual loans thatwith arebalances of $250,000 or highergreater and all purchased credit-deteriorated ("PCD") loans are individually analyzed. For loans designated as nonaccrual with balances of less than $250,000, these loans are collectively evaluated, and, accordingly, are not separately identified for analysis or disclosures. InstrumentsEach financial asset is subject to either a collective or an individual loss analysis; no single instrument will not be included in eitherboth collectivecalculations or individual analysis.simultaneously. Individual analysis will establish an individually evaluated allowance for instruments in scope.

During the year ended December 31, 2024,2025, “substandard” loans and “doubtful” loans, which include lower credit quality loans which possess higher risk characteristics than “special mention” loans, increased to $156.2 million, or 1.4% of loans receivable, as of December 31, 2025 from $72.4 million, or 0.9% of loans receivable, as of December 31, 2024 from $58.5 million, or 0.7% of loans receivable, as of December 31, 2023.2024. The increase in substandard loans from the prior year was primarily due to the addition of PCD loans associated with the FLIC merger, in addition to a net increase in loans migrating to nonaccrual during the year ended December 31, 2024.2025.

During the year ended December 31, 2024, “special mentionsubstandard” loans wereand $149.4“doubtful” loans, increased to $72.4 million, or 1.8%0.9% of loans receivable, while “special mention” loans as of December 31, 20232024 werefrom $54.2$58.5 million, or 0.8%0.7% of loans receivable.receivable, as of December 31, 2023. The increase in special mentionsubstandard loans from the prior year was primarily attributabledue to a loannet modificationincrease ofin oneloans commercialmigrating realto estatenonaccrual relationshipduring ofthe $48.7year million and one commercial real estate relationship of $31.2 million. As ofended December 31, 2024, these relationships are paying as agreed and are all current.2024.

The following table sets forth, as of the dates indicated, the amount of the Company’s nonaccrual loans, other real estate owned (“OREO”),OREO, and loans past due 90 days or greater and still accruing:

The allowance for credit lossesACL is an estimate of current expected credit losses considering available information relevant to assessing collectability of cash flows over the contractual term of the financial assets necessary to cover lifetime expected credit losses inherent in financial assets at the balance sheet date. The measurement of expected credit losses is applicable to loans receivable and investment securities measured at amortized cost. It also applies to off-balance-sheet credit exposures such as loan commitments and unused lines of credit. Loan losses are charged against the allowance for credit losses when the Bank believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance for credit losses. The allowance is established through a provision for credit losses that is charged against income. The methodology for determining the allowance for credit losses 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 allowance for credit losses. The expected credit loss for unfunded loan commitments is reported on the Consolidated Statement of Financial Condition in “Other Liabilities”.

As of December 31, 2024,2025, the allowance for credit losses for loans was $82.7$154.3 million, an increase of $0.7$71.6 million, or 0.9%,86.6%, from $82.0$82.7 million as of December 31, 2023.2024. The increase in the allowance for credit losses was primarily driven by $14.0the FLIC merger with $42.0 million inof allowance being recorded through goodwill related to the purchased credit-deteriorated loans and $27.3 million reflecting the initial provision for credit losses. In addition, there was a $20.5 million provision in credit losses on loans, partially offset by net charge-offs of $13.3$18.2 million.

For the year ended December 31, 2024,2025, the average amortized cost of investment securities, including equity securities, increased by $6.8$360.8 million to approximately $1.1 billion, or 9.5% of average interest earning-assets, from $733.3 millionmillion, or 8.0% of average earning assets, from $726.5 million, or 7.9% of average earninginterest-earning assets, for the year ended December 31, 2023.2024. As of December 31, 2024,2025, the principal components of the investment portfolio are U.S. Treasury and Government Agency Obligations, Federal Agency Obligations including mortgage-backed securities, Obligations of U.S. States and Political Subdivisions, Corporate Bonds and other debt and equity securities.

As of December 31, 2024,2025, net unrealized losses on securities available-for-sale, which are carried as a component of accumulated other comprehensive loss and included in stockholders’ equity, net of tax, amounted to $69.6$40.7 million as compared with net unrealized losses of $57.8$69.6 million as of December 31, 2023.2024. The increasedecrease in unrealized losses is predominately attributable to changes in market conditions and interest rates. Unrealized losses have not been recognized into income because the issuers are of high credit quality, we do not intend to sell, and it is likely that we will not be required to sell the securities prior to their anticipated recovery. The issuers continue to make timely principal and interest payments on the securities. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income, net of applicable taxes. For additional information regarding the Company’s investment portfolio, see Note 4, Note 16 and Note 21 of the Notes to the Consolidated Financial Statements.

During 2024,2025, 20232024 and 2022,2023, there were nogains/losses from the sales from the Company’s available-for-sale portfolio. The Company had no impairment charges in 2024,2025, 20232024 and 2022.2023. The table below illustrates the maturity distribution and weighted average yield on a tax-equivalent basis for amortized cost of our investment securities, excluding equity securities, as of December 31, 2024,2025, on a contractual maturity basis.

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

Based on our model, which was run as of December 31, 2024,2025, we estimated that over the next threeone-year years, on a cumulative basis,period a 200 basis-point instantaneous increase in the general level of interest rates would decrease our net interest income by 2.08%,4.95%, while a 100 basis-point instantaneous decrease in interest rates would increase net interest income by 0.37%.3.06%. As of December 31, 2023,2024, we estimated that over the next threeone-year years, on a cumulative basis,period a 200 basis-point instantaneous increase in the general level of interest rates would decrease our net interest income by 5.68%,8.02%, while a 100 basis-point instantaneous decrease in interest rates would increase net interest income by 4.29%.3.56%.

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

As of December 31, 2024,2025, 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 December 31, 2024,2025, liquid assets (cash and due from banks, interest-bearing deposits with banks and unencumbered investment securities) were $874.4 million, which represented 6.2% of total assets and 7.2% of total deposits and borrowings, compared to $799.7 million,million as of December 31, 2024, which represented 8.1% of total assets and 9.4% of total deposits and borrowings, compared to $516.3 million as of December 31, 2023, which represented 5.2% of total assets and 6.1% of total deposits and borrowings on such date. As of December 31, 2024,2025, not included in the above liquid assets were securities with a market value of $102.5$97.7 million which were pledged to the Federal Home Loan Bank,Bank and securities with a market value of $137.6 million which supportwere pledged to the Federal Reserve Bank of New York, which supported aggregate unutilized borrowing capacity of $95.2$223.3 million as of December 31, 2024.2025.

Cash and cash equivalents totaled $380.9 million as of December 31, 2025, increasing by $24.4 million from $356.5 million as of December 31, 2024, increasing by $113.8 million from $242.7 million as of December 31, 2023.2024. Operating activities provided $60.7$106.4 million in net cash. Investing activities used $186.2 million in net cash, primarily due to purchases of securities and funding of loans. Financing activities provided $55.2$104.2 million in net cash, primarily reflecting a decrease in loans. Financing activities used $2.1 million in net cash, primarily reflecting a netan increase in deposits and proceeds from the issuance of $284.0subordinated million,debt, partially offset by a decrease in net borrowingsrepayment of $245.5 million and $33.3 million in cash dividends paid.borrowings.

The following table sets forthpresents the year-to-date average balances andof our deposit portfolios along with the associated weighted average interest rates of our deposits for the periods indicated.

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 MarchJune 31,30, 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.

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 effected 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 restrent 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.

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 MarchJune 31,30, 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.

Net income (loss) available to common stockholders for the three months ended MarchJune 31,30, 2026 was $36.3$40.2 million, as compared to $18.7($21.8) million for the prior-year period. The Company’s diluted earnings (loss) per share werewas $0.72$0.80 for the three months ended MarchJune 31,30, 2026, as2026 compared with diluted earnings per share of $0.49($0.52) for the prior-year period. The $17.6$62.0 million increase in net income available to common stockholders and the $0.23$1.32 increase in diluted earnings per share were due to a $43.0$34.8 million increase in net interest income andincome, a $2.3$27.4 million decrease in provision for credit losses, a $2.7 million increase in noninterest income,income and a $18.2 million decrease in noninterest expenses, which was partially offset by an $18.6 million increase in noninterest expenses, a $7.5$21.2 million increase in income tax expenseexpense. andThe a $1.7 million increasereduction in provision for credit losses.losses primarily reflects the initial $27.4 million provision recognized in the prior-year period upon closing the acquisition of The increasesFirst of Long Island Corporation ("FLIC"). Similarly, the $18.2 million decrease in net interest income and noninterest expenses were primarilywas driven by a$30.7 fullmillion three-monthin impactmerger and restructuring charges recognized in the prior-year period, partially offset by the inclusion of theongoing FLIC acquisitionoperating expenses in 2026,the comparedcurrent toperiod. Overall, year-over-year variances across all income statement line items were heavily impacted by the pre-mergermerger periodwith in 2025.FLIC.

Fully taxable equivalent net interest income for the firstsecond quarter of 2026 increased $43.4$35.0 million, or 65.2%,43.9%, from the prior-year period, due to a 4636 basis-point widening of the net interest margin to 3.39%3.42% from 2.93%,3.06%, and a 42.7%28.5% increase in average interest earning assets. The increase in average interest-earning assets was primarily due to the full-period impact of assets acquired in the FLIC merger. The margin also benefited from a 2016 basis-point increase in the yield on interest-earning assets and a 4932 basis-point decrease in the average costs of deposits, including noninterest-bearing deposits. The year-over-year expansion in both net interest margin and average earning assets was primarily driven by the inclusion of a full quarter of FLIC's operating results in the second quarter of 2026, compared to only one month of activity in the prior-year period following the mid-quarter closing of the merger.

The following tabletables presentspresent for the three and six months ended MarchJune 31,30, 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.

Noninterest income totaled $6.8$7.9 million for the three months ended MarchJune 31,30, 2026, compared with $4.5$5.2 million for the prior-year-period. The increase was primarily due to a $1.4 million increase in net gains on sale of loans held-for-sale, primarily SBA loans, a $0.9 million increase in BOLI income and a $1.3$0.8 million increase in deposit, loan and other income, which was partially offset by a $0.4 million decrease in net gains (losses) on equity securities. The growthincrease inacross deposit,these loanfee-based lines and otherBOLI income was primarily attributabledriven by the inclusion of a full quarter of FLIC operations in 2026, compared to theonly expandedone scalemonth of operationsactivity followingin the mergerprior-year with FLIC.period.

Income tax expense was $14.7$16.2 million for the firstsecond quarter of 2026, resulting in an effective tax rate of 28.0%,28.0% compared to income tax expensebenefit of $7.2($5.0) million and an effective tax rate of 26.1% for the prior-year period. The increase in income tax expense was primarily driven by the return to pre-tax profitability in 2026, compared to a pre-tax loss in the prior-year period that was largely due to initial credit loss provisions and merger-related charges associated with the FLIC acquisition. Additionally, the effective tax rate was primarilyimpacted due toby higher pre-tax income and changes in state and local tax apportionment factors resulting from our expanded presence in New York following the FLIC merger.

As of MarchJune 31,30, 2026, gross loans totaled $11.7$11.9 billion, an increase of $0.3$0.4 billion or 2.5%3.6% compared to December 31, 2025. The increase in gross loans as of MarchJune 31,30, 2026, compared to December 31, 2025, was primarily driven by organic growth in the commercial real estate portfolio, reflecting continued lending activity within our expanded market footprint.

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 and other related factors. In management’s view, the level of the ACL as of MarchJune 31,30, 2026 is adequate to cover credit losses inherent in 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.

Changes in the ACL on loans are presented in the following tables for the periods indicated (dollars in thousands).indicated.

The Company actively manages asset quality and credit risk by maintaining diversification in its loanand portfolio andquality through itsstringent reviewunderwriting processesstandards, that includes analysis ofroutine credit requestsreviews, and ongoing examinationmonitoring of outstandingdelinquencies, loans,risk delinquencies,ratings, and potential problem loans, with particular attention to portfolio dynamicsdynamics. andManagement mix. The Company strives to identify loans experiencing difficultyprioritizes early on,identification toof recorddeteriorating credits, ensuring timely charge-offs promptly based on realistic assessmentsappraisals of currentcash collateral valuesflows and cashunderlying flows,collateral, andwhile to maintainmaintaining an adequate ACL at all times.ACL.

It is generally the Company’s policy to discontinue interest accruals onceAs a loan is past due as to interest or principal payments for a periodmatter of ninetypolicy, days.loans When a loan isare placed on nonaccrual status when principal or interest payments become 90 days past due, or earlier if full collection is deemed doubtful. Upon transfer to nonaccrual status, interest accrualsrecognition ceaseceases, and uncollectedall previously accrued but uncollected interest is reversed and charged against currentcurrent-period interest income. PaymentsCash payments received on nonaccrual loans are generally applied againstto reduce principal. A loanLoans may be restored to anaccrual accruingstatus basisonly when all past duedelinquent amounts haveare beenbrought collected.current Loansand pastfuture due 90 days or more, whichpayments are bothreasonably well-securedassured. andWell-secured loans in the process of collection,collection may remaincontinue onto anaccrue accrualinterest basis.beyond 90 days past due, subject to management review.

As of MarchJune 31,30, 2026, the Company's recorded investment in PCD loans totaled $207.6$193.4 million. PCD loans, or purchased credit deteriorated loans, are defined by the CECL standard as acquired financial loans that, at the time of acquisition, have experienced a more-than-insignificant deterioration in credit quality since their origination. The Company, with the assistance of independent third-party loan review experts, identified such deterioration by considering various factors. These factors included, but were not limited to, nonperforming status, payment history and delinquency, risk rating, debt service coverage ability, and rate repricing risk. The resulting PCD designated loans include multifamily loans, commercial real estate, commercial loans, and residential real estate.

Within the PCD loan portfolio as of MarchJune 31,30, 2026, there is a pool of rent-regulated loans amounting to $158.0$146.3 million. These loans are associated with multifamily properties located in the five boroughs of New York City, most of which are entirely or predominantly rent-regulated. This specific pool is subject to unique stressors, primarily due to the 2019 New York rent laws, which restricted rent increases while operating in an environment of escalating expenses, and certain proposed policies of the new mayoral administration of New York City, including a proposed rent freeze.freeze which has been adopted by the New York City Rent Guidelines Board.

As of MarchJune 31,30, 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 MarchJune 31,30, 2026, average securities, on an amortized cost basis, increased by $561.3$339.1 million to $1.3 billion, or 9.9%9.5% of average total interest-earning assets, from $745.9$936.0 billion,million, or 8.1%8.9% of average interest-earning assets, for the prior-year period. For the six months ended June 30, 2026, average securities, on an amortized cost basis increased by $449.6 million to approximately $1.3 billion, or 9.7% of average total interest-earning assets, from approximately $841.5 million, or 8.5% of average interest-earning assets, for the six months ended June 30, 2025.

As of MarchJune 31,30, 2026, net unrealized losses on available-for-sale securities, which are carried as a component of AOCIaccumulated other comprehensive loss and included in stockholders’ equity, net of tax, amounted to $48.2$46.1 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 MarchJune 31,30, 2026.

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 MarchJune 31,30, 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 MarchJune 31,30, 2026.

Based on our model, which was run as of MarchJune 31,30, 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 4.71%,5.63%, while a 100 basis-point instantaneous and parallel decrease in interest rates would increase net interest income by 2.73%.3.27%. 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 MarchJune 31,30, 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 0.10%,0.87%, while a 100 basis-point instantaneous and parallel decrease in interest rates would decrease net interest income by 0.87%.0.46%. 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%.

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 pointsbasis-points and down 100 basis points.basis-points. The EVE is likely to be different as interest rates change. Our EVE as of MarchJune 31,30, 2026, would decrease by 7.41%8.38% with an instantaneous and parallel rate shock of up 200 basis points,basis-points, and increase by 0.84%1.32% with an instantaneous and parallel rate shock of down 100 basis points.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,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 was impacted by changes in overall market interest rates, updates to certain model assumptions, changes in short and intermediate-term fixed rate funding and by the deposit mix shift into noninterest-bearing deposits from listing and brokered certificates of deposit, from both noninterest-bearing and interest-bearing non-maturity deposits.deposit.

The following table illustrates the most recent results for EVE and one-year net interest income ("NII") sensitivity as of MarchJune 31,30, 2026.

As of MarchJune 31,30, 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 MarchJune 31,30, 2026, liquid assets (cash and due from banks, interest-bearing deposits with banks and unencumbered investment securities) were $772.0$870.9 million, which represented 5.4%6.0% of total assets and 6.3%7.0% 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 MarchJune 31,30, 2026, not included in the above liquid assets were securities with a market value of $95.0$92.3 million which were pledged to the FHLB and securities with a market value of $133.9$128.5 million which were pledged to the Federal Reserve Bank of New York, which supported aggregate unutilized borrowing capacity of $215.8$210.5 million and $223.3 million, respectively as of MarchJune 31,30, 2026 and December 31, 2025.

The Bank is a member of the FHLB of New York and, based on available qualified collateral as of MarchJune 31,30, 2026, had the ability to borrow $3.8$3.9 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 $2.3$2.4 billion as of MarchJune 31,30, 2026. In addition, as of MarchJune 31,30, 2026, the Bank had in place borrowing capacity of $280.0 million through correspondent banks and other unsecured borrowing lines. As of MarchJune 31,30, 2026, the Bank had aggregate available and unused credit of approximately $4.4$4.7 billion, which represents the aforementioned facilities totaling $6.3$6.6 billion net of $1.9 billion in outstanding borrowings and letters of credit. As of MarchJune 31,30, 2026, outstanding commitments for the Bank to extend credit were approximately $1.4$1.6 billion.

Cash and cash equivalents totaled $344.5$362.3 million as of MarchJune 31,30, 2026, decreasing by $36.4$18.6 million from $380.9 million as of December 31, 2025. Operating activities provided $15.3$49.8 million in net cash. Investing activities used $233.1$353.6 million in net cash, a net increase in loans $273.3of $423.9 million and investment purchases of $45.3$101.6 million and were partially offset by investment maturities, calls and principal repayments of $89.6$166.2 millionmillion. .FinancingFinancing activities provided $181.3$285.2 million in net cash, primarily reflecting a net increase in deposits of $272.3$499.5 million and werewhich was partially offset by net repayments of FHLB borrowings of $76.0$188.1 million.

To support clients with balances exceeding standard FDIC insurance limits, we utilize reciprocal deposit networks. This primarily includes the IntraFi Network LLC for the placement of Certificate of Deposit Account Registry Service ("CDARS") and Insured Cash Sweep ("ICS") accounts.accounts, as well as the recently launched partnership with 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.

Average total deposits increased by $3.6$2.7 billion, or 47.0%,31.0%, during the three months ended MarchJune 31,30, 2026 when compared to the prior-year period. The increase in total average deposits was due to a $1.8$1.5 billion increase in demand, interest-bearing and NOW deposits, a $1.1$0.7 billion increase in noninterest-bearing deposits, a $0.4$0.3 billion increase in time deposits and a $0.2 billion increase in savings deposits and a $0.4 billion increase in time deposits. TheGrowth increase inacross all quarter-to-date average deposit categories was primarily duedriven toby the merger with FLIC.FLIC, which reflected a full quarter of combined operations in 2026 compared to only one month of activity in the prior-year period.

The increase in average time deposits of $0.4$0.3 billion during the three months ended MarchJune 31,30, 2026 was primarily due to a $0.5$0.4 billion increase in retail time deposits, partially offset by a $0.1 billion dollar decrease in nonreciprocal brokered certificates of deposit. Average nonreciprocal brokered certificates of deposit included in total time deposits were $0.8$0.9 billion for both the three months ended MarchJune 31,30, 2026,2026 compared to $0.9 billion forand 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 three months ended MarchJune 31,30, 2026 and MarchJune 31,30, 2025, respectively.

The deposit beta—beta, the measurement of rate sensitivity in response to market changes—changes, on nonreciprocal brokered certificates of deposit tends to be higher than that of ICSICS, ModernFi and CDARS reciprocal deposits. This is because nonreciprocal brokered funds are more directly correlated to prevailing market rates, whereas reciprocal deposits reflect deeper client relationships and a primary focus on FDIC insurance coverage rather than market-leading yields.

Total deposits increased by $0.3$0.5 billion, or 2.4%,4.4%, when compared to December 31, 2025. The increase in total deposits was primarily due to a $0.2$0.4 billion increase in demand, interest-bearing and NOW deposits, a $0.1 billion increase in time deposits and a $0.1 billion increase in demand,noninterest interest-bearingbearing anddeposits, NOWpartially offset by a $0.1 billion decrease in savings deposits.

Aggregate demand deposits included $1.2$1.3 billion in ICS and ModernFi reciprocal deposits as of bothJune March 31,30, 2026 and $1.2 billion as of December 31, 2025.

Included in time deposits were nonreciprocal brokered certificates of deposit of $0.9$0.8 billion as of MarchJune 31,30, 2026 and $0.7 billion as of December 31, 2025.

As of MarchJune 31,30, 2026, we held $1.0$1.1 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 MarchJune 31,30, 2026: