ConnectOne Bancorp Inc

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 of1956, 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) 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 in2005. The Bank operates from its headquarters located at301 Sylvan Avenue in the Borough of Englewood Cliffs, Bergen County, New Jersey and through its23 other banking offices. Substantially all loans are secured with various types of collateral, including business assets, consumer assets and commercial/residential real estate. Each borrower’s ability to repay its loans is dependent on the conversion of assets, cash flows generated from the borrowers’ business, real estate rental and consumer wages.

Basis of Presentation and Principles of Consolidation

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

Segments

FASB ASC28, “Segment Reporting,” requires companies to report certain information about operating segments. The Company is managed asone segment: a community bank. All decisions including butnot limited to loan growth, deposit funding, interest rate risk, credit risk and pricing are determined after assessing the effect on the totality of the organization. For example, loan growth is dependent on the ability of the organization to fund this growth through deposits or other borrowings. As a result, the Company is managed asone operating segment.

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 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 hadno material effect on net income or total stockholders' equity.

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Note1b. Authoritative Accounting Guidance

Adoption of New Accounting Standards in2024**

In* June 2022,the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)2022-03, “Fair Value Measurement (Topic820*): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions” (“ASU2022-03”). ASU2022-03 clarifies that a contractual restriction on the sale of an equity security isnot considered part of the unit of account of the equity security and, therefore, isnot considered in measuring fair value. We adopted ASU2022-03 on* January 1, 2024and it didnot* have a material effect on the Company’s financial statements.

Newly Issued, ButNot Yet Effective Accounting Standards**

In* December 2023,the Financial Accounting Standards Board (“FASB”) issued ASU2023*-09, Income Taxes (Topic740): Improvements to Income Tax Disclosures. These amendments require that public business entities on an annual basis (1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than5% of the amount computed by multiplying pretax income (or loss) by the applicable statutory income tax rate). The amendments require that all entities disclose on an annual basis the following information about income taxes paid:1) The amount of income taxes paid (net of refunds received) disaggregated by federal (national), state, and foreign taxes.2) The amount of income taxes paid (net of refunds received) disaggregated by individual jurisdictions in which income taxes paid (net of refunds received) is equal to or greater than5% of total income taxes paid (net of refunds received). The amendments also require that all entities disclose the following information:1) Income (or loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign and2) Income tax expense (or benefit) from continuing operations disaggregated by federal (national), state, and foreign. ASU2023-09 is effective for the Company beginning* January 1, 2025.The Company is evaluating the effect that ASU2023*-09 will have on its consolidated financial statements.

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Note2. Business Combination

On* September 4, 2024,*the Parent Corporation and The First of Long Island Corporation (Nasdaq: FLIC) (“First of Long Island”), parent company of The First National Bank of Long Island entered into a definitive agreement pursuant to which First of Long Island will merge with and into the Parent Corporation, which will be the surviving entity in the transaction. The combined company will operate under the ConnectOne brand, and will have approximately $14 billion in total assets, $11 billion in total deposits, and $11 billion in total loans.

Under the terms of the agreement, First of Long Island shareholders will receive 0.5175 shares of Parent Corporation common stock for each share of First of Long Island common stock. The transaction is presently valued at approximately $284 million in aggregate based upon the closing common stock price of $23.97 for ConnectOne as of* September 4, 2024.*

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Note3. Earnings per Common Share

Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”)No. 260-10-45 addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting and, therefore, need to be included in the earnings allocation in computing earnings per share (“EPS”). The restricted stock awards granted by the Company contain non-forfeitable rights to dividends and therefore are considered participating securities. Thetwo-class method for calculating basic EPS excludes dividends paid to participating securities and any undistributed earnings attributable to participating securities.

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

There wereno antidilutive share equivalents during thenine months ended* September 30, 2024* and* September 30, 2023*.

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Note4. Investment Securities

All of the Company’s investment securities are classified as available-for-sale as of* September 30, 2024* and* December 31, 2023*. Investment securities available-for-sale are reported at fair value with unrealized gains or losses included in stockholders’ equity, net of tax. Accordingly, the carrying value of such securities reflects their fair value as of* September 30, 2024* and* December 31, 2023*. Fair value is based upon either quoted market prices, or in certain cases where there is limited activity in the market for a particular instrument, assumptions are made to determine their fair value. See Note7 of the Notes to Consolidated Financial Statements for further discussion.

The following tables present information related to the Company’s portfolio of securities available-for-sale as of* September 30, 2024* and* December 31, 2023*.

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Investment securities having a carrying value of approximately $201.8 million and $358.0 million as of* September 30, 2024* and* December 31, 2023*, respectively, were pledged to secure public deposits, borrowings, repurchase agreements, access to unutilized Federal Reserve Discount Window, Bank Term Funding Program ("BTFP") borrowings, and access to unutilized Federal Home Loan Bank advances and for other purposes required or permitted by law. The BTFP was a temporary facility of the Federal Reserve and expired on* March 11, 2024,contributing to the decrease in pledged securities as noted above. As of September 30, 2024* and* December 31, 2023*, there wereno holdings of securities of anyone issuer, other than the U.S. Government and its agencies, in an amount greater than10% of stockholders’ equity.

The following table presents information for investments in securities available-for-sale as of* September 30, 2024*, based on scheduled maturities. Actual maturities can be expected to differ from scheduled maturities due to prepayment or early call options of the issuer. Securitiesnot due at a single maturity date are shown separately.

There wereno realized gains or losses on securities during thenine months ended* September 30, 2024* and* September 30, 2023*.

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Impairment Analysis of Available-for-Sale Debt Securities

The following tables indicate securities in an unrealized loss position for which an allowance for credit losses (“ACL”) hasnot been recorded, aggregated by investment category and by the length of continuous time individual securities have been in an unrealized loss position as of* September 30, 2024* and* December 31, 2023*.

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The Company has elected to exclude accrued interest from the amortized cost of its investment securities available-for-sale. Accrued interest receivable for investment securities available-for-sale totaled $2.2 million and $2.3 million, as of* September**30,* 2024 and* December 31, 2023*respectively.

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 arefirst assessed as to whether we intend to sell, or if it is more likely thannot that we will be required to sell the security before recovery of its amortized cost basis. Ifone of the criteria is met, the security’s amortized cost basis is written down to fair value through current earnings. For securities that donot 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 allowance for credit losses 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 havenot been recognized into income because the issuers are of high credit quality and we donot intend to sell and it is likely that we willnot 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 hasnot been recorded through an allowance for credit losses is recognized in other comprehensive income, net of applicable taxes. No allowance for credit losses for available-for-sale securities was recorded as of* September 30, 2024*.

Federal agency obligations, residential mortgage-backed pass-through securities 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 arenot 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 in2008. Nonetheless, at this time we donot foresee any set of circumstances in which the government wouldnot 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 azero-allowance approach for these investment securities is appropriate.

Note5. Derivatives

As part of our overall asset liability management strategy the Company uses derivative instruments, which can include interest rate swaps, collars, caps, and floors. The notional amount doesnot represent amounts exchanged by the parties. The amount exchanged is determined by reference to the notional amount and the other terms of the individual agreements. Derivative instruments are recognized on the balance sheet at their fair value and arenot reported on a net basis.

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 other comprehensive income

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 ornot economic mismatches exist in the hedging relationship. As a result, there isno 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,* 2024, the Bank wasnot utilizing fair value hedges.

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Note5. Derivatives–** (continued)**

Cash Flow Hedges

The Company during2021, 2022 and2024 entered into twelve pay fixed-rate interest rate swaps, with a total notional amount of $550 million. These are designated as cash flow hedges of outstanding Federal Home Loan Bank advances. We are required to pay fixed rates of interest ranging from 0.63% to 3.72% and receive variable rates of interest that reset quarterly based on the daily compounding secured overnight financing rate (“SOFR”). Thetwelve swaps carry expiration dates ranging from* December 2025to March 2028.The swaps are determined to be fully effective during the period presented and thereforeno* 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 other comprehensive income (loss). The amount included in accumulated other comprehensive income (loss) would be reclassified to current earnings should the hedgesno longer be considered effective. The Company expects the hedges to remain fully effective during the remaining term of the swaps.

The Company previously entered intotwo forward starting interest rate cap spread transactions,one with a total notional amount of $150 million, which became effective on* October 1, 2022and which matures in Octoberof2027* andone interest rate cap spread transaction, with a total notional amount of $75 million, which became effective in* November 2022and which matures in Novemberof2027.* 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* 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 million 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 $5.6 million and $16.9 million and $5.5 million and $14.6 million during thethree andnine months ended* September 30, 2024* and* September 30, 2023*, respectively, and is recorded as a component of either interest expense on FHLB Advances or on brokered certificates of deposit.

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Note5. Derivatives–** (continued)**

The following table presents the net gains (losses) recorded in other comprehensive income and the Consolidated Statements of Income relating to the cash flow hedge derivative instruments for the periods indicated:

The following table reflects the cash flow hedges included in the consolidated statements of condition as of* September 30, 2024* and* December 31, 2023*:

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Note6. 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, 2024 and* December 31, 2023*:

As of* September 30, 2024* and* December 31, 2023*, loans totaling approximately $5.9 billion and $5.8 billion, respectively were pledged to secure borrowings from the FHLB of New York and the Federal Reserve Bank of New York.

Loans held-for-sale** -There wereno loans-held-for-sale as of either September 30, 2024or December 31, 2023.

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, 2024 and* December 31, 2023*:

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

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 athird-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 “Pass” are deemed to possess average to superior credit quality, requiringno more than normal attention. Assets classified as “Special Mention” have generally acceptable credit quality yet possess higher risk characteristics/circumstances than satisfactory assets. Such conditions include strained liquidity, slow pay, stale financial statements, or other conditions that require more stringent attention from the lending staff. These conditions, ifnot corrected,* mayweaken the credit quality or inadequately protect the Company’s credit position at some future date. Assets are classified “Substandard” if the asset has a well-defined weakness that requires management’s attention to a greater degree than for loans classified special mention. Such weakness, if left uncorrected, could possibly result in the compromised ability of the loan to perform to contractual requirements. An asset is classified as “Doubtful” if it is inadequately protected by the net worth and/or paying capacity of the obligor or of the collateral, if any, that secures the obligation. Assets classified as doubtful include assets for which there is a “distinct possibility” that a degree of loss will occur if the inadequacies arenot* corrected.

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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 thenine months ended* September 30, 2024* (dollars in thousands):

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The following table presents loans by origination, risk designation and gross charge-offs as of and for the year ended* December 31, 2023* (dollars in thousands):

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Collateral Dependent Loans: Loans which meet certain criteria are individually evaluated as part of the process of calculating the allowance for credit losses. The evaluation is determined on an individual basis using the fair value of the collateral as of the reporting date. The following table presents collateral dependent loans that were individually evaluated as of* September 30, 2024* and* December 31, 2023*:

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Aging Analysis** -The following table provides an analysis of the aging of the loans by class, excluding the effect of net deferred fees, which are past due as of September 30, 2024 and* December 31, 2023*:

As of* September 30, 2024,*one loan for $3.2 million was past due more than90 days and still accruing; the loan is well-secured at a loan-to-value of approximately 65% and is in the process of collection.

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The following tables detail, at the period-end presented, the amount of gross loans (excluding loans held-for-sale) that are evaluated individually, collectively, those acquired with deteriorated quality, and the related portion of the allowance for credit losses that are allocated to each loan portfolio segment:

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Activity in the Company’s ACL for loans for thethree andnine months ended* September 30, 2024* is summarized in the tables below.

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Activity in the Company’s ACL for loans for thethree andnine months ended* September 30, 2023* is summarized in the table below.

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Loan Modifications to Borrowers Experiencing Financial Difficulty:

The following tables presents the amortized cost basis at the end of the reporting period of the loan modifications to borrowers experiencing financial difficulty and the percentage of the amortized cost basis of loans that were modified to borrowers experiencing financial difficulty as compared to the gross loans of the relevant loan segment. The total percentage represents the total modified loans as compared to the total gross loans balance.

The above table consists ofthree commercial loans, nine commercial real estate loans andone residential real estate loan that were modified during thenine months ended* September**30,* 2024 where the borrowers were experiencing financial difficulty. Two commercial loans were term extensions that combined for a weighted average ofsix months. One commercial loan was athree-month payment deferral. Nine commercial real estate loans were interest rate reductions with a weighted average change of 0.15%. Theone $1.4 million residential real estate loan involved the freezing of a loan commitment, combined with a 10-year term extension.

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The above table consists of loans that added a weighted average of 13 years to the maturity of the modified loans, which didnot have a material effect on the cash flows.

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 tables present the payment status of loans that have been modified in the lasttwelve months.

During thenine months ended* September 30, 2024* and* September 30, 2023*, the Company hadno 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 wereno loans to borrowers experiencing financial difficulty that had a payment default during thenine months ended* September 30, 2024* and2023 and were modified in thetwelve months prior to that default. Default is determined at90 or more days past due, upon charge-off, or upon foreclosure. Modified loans in default are individually evaluated for the allowance for credit losses or if the modified loan is deemed uncollectible, the loan, or a portion of the loan, is written off and the allowance for credit losses is adjusted accordingly.

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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 table presents a roll forward of the allowance for credit losses for unfunded commitments for thethree andnine months ended* September 30, 2024and2023*:

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Components of Provision for Credit Losses

The following table summarizes the provision for (reversal of) credit losses for thethree andnine months ended* September 30, 2024and2023*:

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Note7. 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.

An asset’s or liability’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The following information shouldnot 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.

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Note7. 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, 2024* and* December 31, 2023*:

Investment Securities Available-for-Sale and Equity Securities: Where quoted prices are available in an active market, securities are classified within Level1 of the valuation hierarchy. Level1 inputs include securities that have quoted prices in active markets for identical assets. If quoted market prices arenot 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 Level2 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 Level3. 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 (level2). Our derivatives are traded in an over-the-counter market where quoted market prices arenot 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 andthird-party pricing services.

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, 2024* and* December 31, 2023* are as follows:

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There wereno transfers between Level1 and Level2 during thenine months ended* September 30, 2024* and for the year ended* December 31, 2023*.

Assets Measured at Fair Value on a Nonrecurring Basis

The Company* maybe 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, 2024* and* December 31, 2023*.

Loans Held-for-Sale: Residential mortgage loans, originated and intended for sale in the secondary market, are carried at the lower of aggregate cost or estimated fair value as determined by outstanding commitments from investors. For these loans originated and intended for sale, gains and losses on loan sales (sale proceeds minus carrying value) are recorded in other income and direct loan origination costs and fees are deferred at origination of the loan and are recognized in other income upon sale of the loan. Management obtains quotes or bids on all or parts of these loans directly from the purchasing financial institutions (Level2).

Other loans held-for-sale are carried at the lower of aggregate cost or estimated fair value. Fair value of these loans is determined based on the terms of the loan, such as interest rate, maturity date, reset term, as well as sales of similar assets (Level3).

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Collateral Dependent Loans: The Company* mayrecord 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 doesnot* 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 Level3 inputs. Estimates of fair value used for collateral supporting commercial loans generally are based on assumptionsnot observable in the marketplace and are also based on Level3 inputs.

For assets measured at fair value on a nonrecurring basis, the fair value measurements as of* September 30, 2024* and* December 31, 2023* are as follows:

Collateral dependent loans –** Collateral dependent loans as of September 30, 2024 that required a valuation allowance were $25.5 million with a related valuation allowance of $1.6 million compared to $7.7 million with a related valuation allowance of $1.4 million as of* December 31, 2023*.

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Assets Measured with Significant Unobservable Level3 Inputs

Recurring basis

The tables below present a reconciliation of all assets measured at fair value on a recurring basis using significant unobservable inputs (Level3) for thenine months ended* September 30, 2024* and for the year ended* December 31, 2023*:

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, 2024* and* December 31, 2023*. The table below provides quantitative information about significant unobservable inputs used in fair value measurements within Level3 hierarchy.

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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 fair value measurements within Level3* hierarchy of collateral dependent loans.

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As of* September 30, 2024* the fair value measurements presented are consistent with Topic820, 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, 2024* and* December 31, 2023*:

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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 andnot 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 arenot considered financial instruments, havenot 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 ASC825-10.

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 arenot considered financial instruments. For example, there are certain significant assets and liabilities that arenot 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 havenot 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.

Note8. Comprehensive (Loss) Income

Total comprehensive income (loss) includes all changes in equity during a period from transactions and other events and circumstances from non-owner sources. The Company’s other comprehensive income is comprised of unrealized holding gains and losses on securities available-for-sale, unrealized gains (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 (loss) for the periods presented (dollars in thousands):

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Note8. Comprehensive**(Loss) Income**–** (continued)**

Accumulated other comprehensive loss as of* September 30, 2024* and* December 31, 2023* consisted of the following:

Note9. Stock-based Compensation

The Company’s stockholders approved the2017 Equity Compensation Plan (“the Plan”) on* May 23, 2017.The Plan eliminates all remaining issuable shares under previous plans and is the only outstanding plan as of September 30, 2024*. On* May 30, 2023,the Company's stockholders approved an amendment to the Plan that increased the maximum number of shares issuable to 1,200,000. Grants under the Plan can be in the form of stock options (qualified or non-qualified), restricted shares, deferred stock units or performance units. Shares available for grant and issuance under the Plan as of September 30, 2024* were approximately 336,584. The Company intends to issue all shares under the Plan in the form of newly issued shares.

As of both* September 30, 2024and December, 31, 2023,the Company didnot have any outstanding stock options. Restricted stock and deferred stock units typically have athree-year vesting period startingone* year after the date of grant withone-third vesting each year, with accelerated vesting upon a change in control. Restricted stock and deferred stock units granted to new employees and board members* maybe granted with shorter vesting periods. Grants of performance units typically have a cliff vesting after three years or upon a change of control. All issuances are subject to forfeiture if the recipient isno* longer employed prior to the award's vesting. Any forfeitures would result in previously recognized expense being reversed. Restricted stock grants have the same dividend and voting rights as common stock, while options, performance units and deferred stock units donot.

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 arenot estimated but are recorded as incurred. Stock-based compensation expense for thethree andnine months ended* September 30, 2024* was $1.1 and $3.2 million respectively. Stock-based compensation expense for thethree andnine months ended* September 30, 2023* was $1.3 million and $3.6 million, respectively.

Activity in the Company’s restricted stock for thenine months ended* September 30, 2024* was as follows:

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Note9. Stock-Based Compensation–** (continued)**

As of* September 30, 2024*, there was approximately $1.0 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 1.2 years.

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

As of* September 30, 2024*, the specific number of shares related to performance units that were expected to vest was 181,847, 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, 2024*, the maximum amount of performance units that ultimately could vest if performance targets were exceeded is 302,196. During thenine months ended* September 30, 2024*,53,041 shares vested. A total of 28,971 shares were netted from the vested shares to satisfy employee tax obligations. The net shares issued from vesting of performance units during thenine months ended* September 30, 2024* were 24,070 shares. As of* September 30, 2024*, compensation cost of approximately $1.8 million related to non-vested performance unitsnot yet recognized is expected to be recognized over a weighted-average period of 2.0 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:

Any forfeitures would result in previously recognized expense being reversed. A portion of the shares that vest will be netted out to satisfy the tax obligations of the recipient. During thenine months ended* September 30, 2024*,80,889 shares vested. A total of 43,347 shares were netted from the vested shares to satisfy employee tax obligations. The net shares issued from vesting of deferred stock units during thenine months ended* September 30, 2024* were 37,542 shares. As of* September 30, 2024*, compensation cost of approximately $1.6 million related to non-vested deferred stock units,not yet recognized, is expected to be recognized over a weighted-average period of 1.5 years.

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Note10. Components of Net Periodic Pension Cost

The Company maintained a non-contributory defined benefit pension plan for substantially all of its employees until* June 30, 2007,*at which time the Company froze the plan. The following table sets forth the net periodic pension cost of the Company’s pension plan for the periods indicated.

*** Contributions***

The Company didnot contribute to the Pension Trust during thenine months ended* September 30, 2024*. The Company doesnot plan on contributing amounts to the Pension Trust for the remainder of2024. The trust is established to provide retirement and other benefits for eligible employees and their beneficiaries.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.

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Note11. Deposits

*** Time Deposits***

As of* September 30, 2024* and* December 31, 2023*, the Company's total time deposits were $2.6 billion and $2.5 billion, respectively. Included in time deposits were nonreciprocal brokered time deposits of $824.9 million and $915.5 million as of* September 30, 2024* and* December 31, 2023*, respectively. As of* September 30, 2024*, the contractual maturities of these time deposits were as follows (dollars in thousands):

The amount of time deposits with balances greater than or equal to*$250,000* were $832.4 million and $643.4 million as of* September 30, 2024* and* December 31, 2023*, respectively.

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Note12. FHLB Borrowings

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

The FHLB borrowings are secured by pledges of certain collateral including, butnot limited to, U.S. government and agency mortgage-backed securities and a blanket assignment of qualifyingfirst 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. The advances as of* September 30, 2024* were primarily collateralized by approximately $2.5 billion of commercial mortgage loans and securities, net of required over collateralization amounts, under a blanket lien arrangement. As of* September 30, 2024* the Company had a remaining borrowing capacity of approximately $1.1 billion at FHLB.

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Note13. Subordinated Debentures

During2003, 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, 2023to 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, 2023the subordinated debentures’ floating rate will bethree*-month CME Term SOFR plus 2.85% plus a tenor spread adjustment of 0.26161%. The rate as of* September 30, 2024* was 8.37%. These subordinated debentures and the related income effects arenot eliminated in the consolidated financial statements, as the statutory business trust isnot consolidated in accordance with FASB ASC810-10. 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, 2024* and* December 31, 2023*.

On* June 10, 2020,the Parent Corporation issued $75 million in aggregate principal amount of fixed-to-floating rate subordinated notes (the“2020* Notes”). The2020 Notes bear interest at 5.75% annually from, and including, the date of initial issuance up to, but excluding,* June 15, 2025or the date of earlier redemption, payable semi-annually in arrears on June 15and December 15of each year, commencing December 15, 2020.From and including June 15, 2025through maturity or earlier redemption, the interest rate shall reset quarterly to an interest rate per annum equal to a benchmark rate, which is expected to be Three-Month Term SOFR: (as defined in the Second Supplemental Indenture), plus 560.5 basis points, payable quarterly in arrears on March 15,** June 15,** September 15and December 15of each year, commencing on September 15, 2025.*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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