Didn't you modify the sources somehow before and after you've started the debugging session? Debugger keeps a map of changed lines and translates any inserts/removals so that it shows correct line content. This can break if the initial state does not completely correspond to the binaries.
Does restart of the debugging session help?

In this case I didn't modify the code after starting the debug session.

I was also able to reproduce this 10+ times while attempting to determine what was happening.

The key was that I needed to step over the DriverManager.getConnection call.  If I stepped into this call, I would walk through the routine and come out the other side in fine shape, but if I step over the line, it appears to execute both the getConnection and new DatabaseConnection calls.

DBExtractInsert is some proprietary code and I'm not able to reproduce such behavior on a sample project.

Would it be possible to provide some test-case that we can use to reproduce the problem? I've created following test class and stepping works fine there:

public class StepTest {
    
    public StepTest(Connection jdbcConnection) {
        throw new IllegalStateException("TEST.");
    }

    public static void main(String[] args) {
        try {
            String extractDriverClassName = Runtime.class.getName();
            String extractConnectionString = "extractConnectionString";
            String extractUsername = "extractUsername";
            String extractPassword = "extractPassword";
            Class driverClass = Class.forName(extractDriverClassName);
            Connection jdbcConnection =
        DriverManager.getConnection(extractConnectionString, extractUsername,
        extractPassword);
            StepTest connection = new StepTest(jdbcConnection);
        } catch (Exception ex) {
            Logger.getLogger(StepTest.class.getName()).log(Level.SEVERE, null, ex);
        }
        
    }
    
    private static class DriverManager {

        private static Connection getConnection(String extractConnectionString, String extractUsername, String extractPassword) {
            return new Connection() {
                <snip> empty implementation </snip>
            };
        }
        
    }
}

Also, it would be best to verify the stepping with some other debugger (e.g. JDB). Or look into the class file if it has correct debug information included.

If it's not possible to provide a sample project or verify the debug information, could you please add -J-Dorg.netbeans.modules.debugger.jpda.level=400 option to NetBeans, perform the stepping where step over steps too much and attach the resulting messages.log file to this issue? The option will log debugger steps and events.