What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-05-09 compared with 2023-11-08 · 262 added, 382 removed, 807 unchanged (44% of the section changed)

3 unchanged sentences

(in thousands, except share data;

unaudited) September 30, 2023 December 31, 2022

unaudited) March 31, 2024 December 31, 2023

Cash, cash equivalents and restricted cash $ 36,308 $ 30,453

Investment securities:

Held-to-maturity, at amortized cost (net of zero allowance for credit losses at September 30, 2023 and December 31, 2022)

Held-to-maturity, at amortized cost (net of zero allowance for credit losses at March 31, 2024 and December 31, 2023)

915,068 925,198

Available-for-sale, at fair value (net of zero allowance for credit losses at September 30, 2023 and December 31, 2022)

Available-for-sale, at fair value (net of zero allowance for credit losses at March 31, 2024 and December 31, 2023)

536,365 552,028

9 unchanged sentences

Core deposit intangible, net 3,515 3,766

Other real estate owned — 455

Interest receivable and other assets 74,858 74,946

8 unchanged sentences

Total deposits 3,284,102 3,290,075

Short-term borrowings and other obligations 120,335 112,439

Borrowings and other obligations 260 26,298

Operating lease liabilities 24,150 22,906

7 unchanged sentences

Authorized - 30,000,000 shares;

issued and outstanding - 16,139,321 and 16,029,138 at September 30, 2023 and December 31, 2022, respectively

issued and outstanding - 16,285,786 and 16,158,413 at March 31, 2024 and December 31, 2023, respectively

218,342 217,498

5 unchanged sentences

BANK OF MARIN BANCORP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

Three months ended Nine months ended

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three months ended

(in thousands, except per share amounts;

unaudited) September 30, 2023 June 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022

unaudited) March 31, 2024 December 31, 2023 March 31, 2023

Interest income

11 unchanged sentences

Net interest income 22,694 24,264 29,899

Provision for (reversal of) credit losses on loans 425 500 422 1,275 ( 63 )

Provision for credit losses on loans 350 1,300 350

Reversal of credit losses on unfunded loan commitments — — ( 174 )

3 unchanged sentences

Service charges on deposit accounts 529 522 533

Debit card interchange fees, net 456 555 502 1,458 1,538

Earnings on bank-owned life insurance, net 435 364 705

Debit card interchange fees, net 408 373 447

Dividends on Federal Home Loan Bank stock 377 349 302

Merchant interchange fees, net 167 119 133

Gains (losses) on sale of investment securities, net 14 — ( 63 ) 14 ( 63 )

Losses on sale of investment securities, net of gains — ( 5,907 ) —

Other income 285 337 304

3 unchanged sentences

Occupancy and equipment 1,969 1,939 2,414

Data processing 1,009 922 1,093 2,976 3,569

Professional services 1,078 921 1,123

Depreciation and amortization 423 400 414 1,705 1,259

Data processing 1,070 1,081 1,045

Deposit network fees 845 940 96

Federal Deposit Insurance Corporation insurance 435 454 289

Information technology 402 431 370

Amortization of core deposit intangible 335 340 370 1,020 1,124

Depreciation and amortization 388 393 882

Directors' expense 317 319 321

Charitable contributions 20 638 49 707 605

Amortization of core deposit intangible 251 330 345

Other real estate owned — — 4

10 unchanged sentences

Diluted 16,092 16,052 15,999

Comprehensive (loss) income:

Comprehensive income:

Net income $ 2,922 $ 610 $ 9,440

1 unchanged sentence

Change in net unrealized gains or losses on available-for-sale securities ( 4,568 ) 28,865 16,213

Reclassification adjustment for losses (gains) on available-for-sale securities included in net income 2,793 — 63 2,793 63

Reclassification adjustment for gains or losses for fair value hedge 367 — — 367 —

Net unrealized losses on securities transferred from available-for-sale to held-to-maturity — — — — ( 14,847 )

Reclassification adjustment for realized losses on available-for-sale securities in net income — 5,907 —

Reclassification adjustment for gains or losses on fair value hedges 1,217 ( 1,726 ) —

Amortization of net unrealized losses on securities transferred from available-for-sale to held-to-maturity 361 418 463

2 unchanged sentences

Other comprehensive (loss) income, net of tax ( 2,106 ) 23,574 11,746

Total comprehensive (loss) income $ ( 1,905 ) $ ( 2,829 ) $ ( 9,833 ) $ 16,451 $ ( 44,306 )

The accompanying notes are an integral part of these consolidated financial statements (unaudited).

BANK OF MARIN BANCORP

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

For the three months ended September 30, 2023 and 2022

(in thousands, except share data;

unaudited) Common Stock Retained

Earnings Accumulated Other

Comprehensive (Loss) Income,

Net of Taxes Total

Shares Amount

Three months ended September 30, 2023

Balance at July 1, 2023 16,107,192 $ 216,589 $ 276,732 $ ( 69,380 ) $ 423,941

Net income — — 5,295 — 5,295

Other comprehensive loss, net of tax — — — ( 7,200 ) ( 7,200 )

Stock issued under employee stock purchase plan 879 15 — — 15

Stock issued under employee stock ownership plan 5,800 120 — — 120

Restricted stock granted 12,550 — — — —

Restricted stock forfeited / cancelled ( 850 ) — — — —

Stock-based compensation - stock options — 21 — — 21

Stock-based compensation - restricted stock — 209 — — 209

Cash dividends paid on common stock ($ 0.25 per share)

— — ( 4,031 ) — ( 4,031 )

Stock issued in payment of director fees 13,750 248 — — 248

Balance at September 30, 2023

16,139,321 $ 217,202 $ 277,996 $ ( 76,580 ) $ 418,618

Three months ended September 30, 2022

Balance at July 1, 2022 16,009,600 $ 213,864 $ 253,737 $ ( 58,028 ) $ 409,573

Net income — — 12,174 — 12,174

Other comprehensive loss, net of tax — — — ( 22,007 ) ( 22,007 )

Stock options exercised, net of shares surrendered for cashless exercises and tax withholdings 363 — — — —

Stock issued under employee stock purchase plan 574 16 — — 16

Stock issued under employee stock ownership plan 13,000 404 — — 404

Stock-based compensation - stock options — 106 — — 106

Stock-based compensation - restricted stock — 151 — — 151

Cash dividends paid on common stock ($ 0.25 per share)

— — ( 4,004 ) — ( 4,004 )

Stock purchased by directors under director stock plan 515 16 — — 16

Stock issued in payment of director fees 4,996 163 — — 163

Balance at September 30, 2022

16,029,048 $ 214,720 $ 261,907 $ ( 80,035 ) $ 396,592

Total comprehensive income $ 816 $ 24,184 $ 21,186

The accompanying notes are an integral part of these consolidated financial statements (unaudited).

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

For the nine months ended September 30, 2023 and 2022

For the three months ended March 31, 2024 and 2023

(in thousands, except share data;

4 unchanged sentences

Shares Amount

Nine months ended September 30, 2023

Three months ended March 31, 2024

Balance at January 1, 2024 16,158,413 $ 217,498 $ 274,570 $ ( 53,006 ) $ 439,062

16,029,138 $ 215,057 $ 270,781 $ ( 73,746 ) $ 412,092

Net income — — 2,922 — 2,922

Other comprehensive loss, net of tax — — — ( 2,106 ) ( 2,106 )

— — — ( 2,834 ) ( 2,834 )

Stock options exercised, net of shares surrendered for cashless exercises and tax withholdings 11,530 230 — — 230

Stock issued under employee stock purchase plan 621 10 — — 10

8 unchanged sentences

Stock issued in payment of director fees 11,810 259 — — 259

Balance at September 30, 2023

Balance at March 31, 2024

16,285,786 $ 218,342 $ 273,450 $ ( 55,112 ) $ 436,680

Nine months ended September 30, 2022

Three months ended March 31, 2023

Balance at January 1, 2023 16,029,138 $ 215,057 $ 270,781 $ ( 73,746 ) $ 412,092

15,929,243 $ 212,524 $ 239,868 $ ( 2,024 ) $ 450,368

Net income — — 9,440 — 9,440

Other comprehensive loss, net of tax — — — ( 78,011 ) ( 78,011 )

Other comprehensive income, net of tax — — — 11,746 11,746

Stock options exercised, net of shares surrendered for cashless exercises and tax withholdings 11,530 230 — — 230

3 unchanged sentences

Restricted stock surrendered for tax withholdings upon vesting ( 2,213 ) ( 65 ) — — ( 65 )

Restricted stock forfeited / cancelled ( 13,267 ) — — — —

Stock-based compensation - stock options — 116 — — 116

2 unchanged sentences

— — ( 4,012 ) — ( 4,012 )

Stock purchased by directors under director stock plan 515 16 — — 16

Stock issued in payment of director fees 4,612 150 — — 150

Stock repurchased, including commissions ( 23,275 ) ( 877 ) — — ( 877 )

Balance at September 30, 2022

Balance at March 31, 2023

16,107,210 $ 215,965 $ 276,209 $ ( 62,000 ) $ 430,174

2 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the nine months ended September 30, 2023 and 2022

For the three months ended March 31, 2024 and 2023

(in thousands;

3 unchanged sentences

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

Provision for (reversal of) credit losses on loans 1,275 ( 63 )

Provision for credit losses on loans 350 350

Reversal of credit losses on unfunded loan commitments — ( 174 )

4 unchanged sentences

Amortization of investment security premiums, net of accretion of discounts 1,277 1,964

(Accretion of discounts) amortization of premiums on acquired loans, net ( 461 ) 143

Accretion of discounts on acquired loans, net ( 98 ) ( 168 )

Net change in deferred loan origination costs/fees 34 ( 324 )

Write-down of other real estate owned 40 345

(Gains) losses on sale of investment securities, net ( 14 ) 63

Depreciation and amortization 388 882

Loss on disposal of premises and equipment 19 —

Earnings on bank-owned life insurance policies ( 435 ) ( 705 )

4 unchanged sentences

Cash Flows from Investing Activities:

Purchase of held-to-maturity securities — ( 293,720 )

Purchase of available-for-sale securities — ( 243,459 )

Proceeds from sale of available-for-sale securities 79,840 10,664

Proceeds from paydowns/maturities of held-to-maturity securities 10,252 13,634

Proceeds from paydowns/maturities of available-for-sale securities 10,057 19,288

Proceeds from sale of Visa Inc.

Class B restricted common stock 2,807 —

Decrease in loans receivable, net 6,634 97,935

Proceeds from bank-owned life insurance policies 766 350

Increase (decrease) in loans receivable, net 18,690 ( 19,072 )

Purchase of bank-owned life insurance policies ( 1,210 ) —

Purchase of premises and equipment ( 161 ) ( 1,438 )

Proceeds from sale of other real estate owned 420 —

Cash paid for low income housing tax credit investment ( 1 ) ( 38 )

Net cash provided by (used in) investing activities 176,486 ( 283,031 )

Net cash provided by investing activities 37,627 12,374

Cash Flows from Financing Activities:

Net (decrease) increase in deposits ( 129,664 ) 94,160

Proceeds from short-term borrowings, net 8,000 —

Net decrease in deposits ( 5,973 ) ( 322,774 )

(Repayment of) proceeds from short-term borrowings, net ( 26,000 ) 293,400

Repayment of finance lease obligations ( 38 ) ( 37 )

2 unchanged sentences

Cash dividends paid on common stock ( 4,042 ) ( 4,012 )

Stock repurchased, including commissions — ( 1,250 )

Proceeds from stock issued under employee and director stock purchase plans 10 9

Net cash (used in) provided by financing activities ( 133,650 ) 81,991

Net cash used in financing activities ( 36,098 ) ( 33,249 )

Net increase (decrease) in cash, cash equivalents and restricted cash 5,855 ( 7,431 )

2 unchanged sentences

Supplemental disclosure of cash flow information:

Cash paid in interest $ 23,036 $ 1,716

Cash paid in income taxes $ — $ 11,075

Interest paid on deposits and borrowings $ 11,087 $ 4,290

Income taxes paid, net of refunds $ — $ —

Supplemental disclosure of noncash investing and financing activities:

Change in net unrealized gains or losses on available-for-sale securities $ ( 4,568 ) $ 16,213

Securities transferred from available-for-sale to held-to-maturity, at fair value $ — $ 357,482

Amortization of net unrealized loss on available-for-sale securities transferred to held-to-maturity $ 361 $ 463

Stock issued to employee stock ownership plan $ 967 $ 1,233

Bank-owned life insurance benefit receivable $ — $ 765

Restricted cash 1

1 Restricted cash includes reserve requirements held with the Federal Reserve Bank of San Francisco and other cash pledged.

In response to the COVID-19 pandemic, the Federal Reserve reduced the reserve requirement ratios to zero percent effective March 26, 2020.

The Federal Reserve reduced the reserve requirement ratios to zero percent effective March 26, 2020.

The accompanying notes are an integral part of these consolidated financial statements (unaudited).

16 unchanged sentences

The number of potentially dilutive common shares included in year-to-date diluted EPS is a year-to-date weighted average of potentially dilutive common shares included in each quarterly diluted EPS computation.

In computing diluted EPS, we exclude anti-dilutive shares such as options whose exercise prices exceed the current common stock price, as they would not reduce EPS under the treasury method.

In computing diluted EPS, we exclude anti-dilutive shares such as options whose exercise prices exceed the current common stock price, as they would not reduce EPS under the treasury stock method.

We have two forms of outstanding common stock:

2 unchanged sentences

Under the two-class method, the difference in EPS is nominal for these participating securities.

Three months ended Nine months ended

(in thousands, except per share data) September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022

Three months ended

(in thousands, except per share data) March 31, 2024 March 31, 2023

Weighted average basic common shares outstanding 16,081 15,970

9 unchanged sentences

Accounting Standards Adopted in 2024

In March 2022, the FASB issued ASU No.

2022-02, Financial Instruments - Credit Losses (Topic 326):

Troubled Debt Restructurings and Vintage Disclosures .

The amendment eliminated the recognition measurement guidance for troubled debt restructured ("TDR") loans and instead enhanced disclosure requirements for certain loan modifications when a borrower is experiencing financial difficulty.

In addition, the amendment required that an entity include in its vintage disclosures the current period gross loan charge-offs by year of origination.

We early adopted the current period charge-off disclosures in the first quarter of 2022.

We adopted the loan modification provisions as

of January 1, 2023 using a modified retrospective method.

The cumulative-effect adjustment to retained earnings was considered immaterial.

Refer to Note 5, Loans and Allowance for Credit Losses on Loans, for additional information.

In March 2022, the FASB issued ASU No.

2022-01, Derivatives and Hedging (Topic 815):

Fair Value Hedging - Portfolio Layer Method .

Among other things, the ASU renamed the "last-of-layer" method to the "portfolio layer" method and made fair value hedging more accessible for hedge accounting of interest rate risk for portfolios and financial assets.

For example, the guidance permits an entity to apply the same portfolio hedging method to both prepayable and non-prepayable financial assets, thereby providing for consistency between accounting for similar hedges.

We adopted the amendments on January 1, 2023, which had no effect on our existing hedge accounting, disclosures, financial condition or results of operations.

In March 2020, the FASB issued Accounting Standards Update ("ASU") No.

2020-04, Reference Rate Reform (Topic 848) .

The amendments in this ASU are elective and provide optional guidance for a limited period of time to ease the potential burden of accounting for, or recognizing the effects of reference rate reform.

The amendments in this ASU provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform.

Topic 848 was further amended in January 2021 with ASU No.

2021-01, which provided additional guidance on certain optional expedients and scope of derivative instruments, and in December 2022 with ASU 2022-06, which extended the sunset date of Topic 848 to December 31, 2024 given the UK Financial Conduct Authority ("FCA") March 2021 announcement that the intended cessation date of certain tenors of USD LIBOR would be June 30, 2023.

An entity may elect the amendments in these updates at an interim period with adoption methods varying based on transaction type.

As of September 30, 2023, we had four interest rate swap contracts with notional values totaling $ 11.3 million that were indexed to LIBOR, which transitioned to the Secured Overnight Financing Rate ("SOFR") effective July 1, 2023.

The transition to SOFR did not have a material impact to either our financial condition or results of operations.

Accounting Standards Not Yet Effective

In June 2022, the FASB issued ASU No.

3 unchanged sentences

In addition, this ASU provided amended examples to illustrate that a restriction that is a characteristic of the equity security, which market participants would take into account when pricing them, would be considered in measuring fair value.

This ASU also introduces new disclosure requirements.

The amendments are effective prospectively for years beginning after December 15, 2023.

Early adoption is permitted for both interim and annual financial statements.

As discussed in Note 4, Investment Securities, on July 13, 2023 we sold our remaining shares of Visa Inc.

This ASU also introduced new disclosure requirements.

The amendments were effective prospectively for years beginning after

December 15, 2023.

As discussed in Note 4, Investment Securities, in 2023 we sold our remaining shares of Visa Inc.

Class B restricted common stock.

As a result of the sale, this update will not impact our financial condition, results of operations or disclosures.

As a result of the sale, this update had no impact our financial condition, results of operations or disclosures.

In March 2023, the FASB issued ASU No.

2 unchanged sentences

For public companies, the amendment requires entities to amortize leasehold improvements associated with common control lease arrangements over the useful life of the improvements to the common control group, as opposed to the shorter of the remaining lease term and the useful life of the improvements for all other operating leases.

The amendments are effective for years beginning after December 15, 2023, and may be adopted either prospectively or retrospectively.

Early adoption is permitted for both interim and annual financial statements.

We currently do not have common control lease arrangements, and therefore do not anticipate that the amendments will impact our financial condition and results of operations.

The amendments were effective for years beginning after December 15, 2023, and may be adopted either prospectively or retrospectively.

We currently do not have common control lease arrangements, and therefore the adoption of the amendments had no impact on our financial condition, results of operations or disclosures.

In March 2023, the FASB issued ASU No.

3 unchanged sentences

The proportional amortization method results in the cost of the investment being amortized in proportion to the income tax credits and other income tax benefits received, with the amortization of the investment and the income tax credits being presented net in the consolidated statements of income as a component of income tax expense (benefit).

The amendments will allow entities to elect to account for all other equity investments made primarily for the purpose of receiving income tax credits to using the proportional amortization method, regardless of the tax credit program through which the investment earns income tax credits,

when certain conditions are met.

The amendments are effective for fiscal years beginning after December 15, 2023, and may be adopted either on a modified retrospective basis or retrospectively.

Other than investments in LIHTC funds, as disclosed in Note 4, Investment Securities, we currently have no other equity investments made primarily for the purpose of receiving income tax credits, and therefore do not anticipate that the amendments will impact our financial condition and results of operations.

The amendments were effective for fiscal years beginning after December 15, 2023, and may be adopted either on a modified retrospective basis or retrospectively.

Other than investments in LIHTC funds, as disclosed in Note 4, Investment Securities, we currently have no other equity investments made primarily for the purpose of receiving income tax credits, and therefore the adoption of this ASU had no impact on our financial condition, results of operations or disclosures.

Accounting Standards Not Yet Effective

In November 2023, the FASB issued ASU No.

2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures .

The amendments are intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses, enhanced interim disclosure requirements, clarifying circumstances in which an entity can disclose multiple segment measures of profit or loss, providing new segment disclosure requirements for entities with a single reportable segment, and requiring other disclosures.

The amendments are effective for annual reporting periods beginning after December 15, 2023 (i.e., 2024 Form 10-K) and interim periods within fiscal years beginning after December 31, 2024, and shall be applied retrospectively to all prior periods presented in the financial statements.

Early adoption is permitted.

We currently have only one reportable segment and are evaluating the impact the amendments will have on our financial statement disclosures upon adoption.

In December 2023, the FASB issued ASU No.

2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures .

The amendments require disaggregated information about the effective tax rate reconciliation and additional disclosures on reconciling items and taxes paid that meet a quantitative threshold.

The amendments are effective for annual reporting periods beginning after December 15, 2024, and may be adopted either prospectively or retrospectively.

Early adoption is permitted.

We are currently evaluating the impact of the amendments on our financial statement disclosures upon adoption.

Fair Value of Assets and Liabilities

15 unchanged sentences

Changes in Fair Value Recorded In 1

September 30, 2023

March 31, 2024

Securities available-for-sale:

6 unchanged sentences

Corporate bonds $ 10,744 $ — $ 10,744 $ — OCI

Derivative financial assets (interest rate contracts - loans) $ 854 $ — $ 854 $ — NI

Derivative financial assets (interest rate contracts - AFS securities) $ 367 $ — $ 367 $ — NI

Derivative financial assets (interest rate contracts) $ 400 $ — $ 400 $ — NI

Derivative financial liabilities (interest rate contracts) $ 142 $ — $ 142 $ — NI

December 31, 2023

7 unchanged sentences

Corporate bonds $ 10,718 $ — $ 10,718 $ — OCI

Asset-backed securities $ 1,462 $ — $ 1,462 $ — OCI

Derivative financial assets (interest rate contracts - loans) $ 602 $ — $ 602 $ — NI

Derivative financial assets (interest rate contracts) $ 287 $ — $ 287 $ — NI

Derivative financial liabilities (interest rate contracts) $ 1,361 $ — $ 1,361 $ — NI

1 Other comprehensive income ("OCI") or net income ("NI").

4 unchanged sentences

If quoted market prices are not available, we obtain pricing information from a reputable third-party service provider, who may utilize valuation techniques that use current market-based or independently sourced parameters, such as bid/ask prices, dealer-quoted prices, interest rates, benchmark yield curves, prepayment speeds, probability of default, loss severity and credit spreads (Level 2).

Level 2 securities include asset-backed securities, obligations of state and political subdivisions, U.S.

agencies or government-sponsored agencies' debt securities, mortgage-backed securities, government agency-issued, and corporate bonds.

As of September 30, 2023 and December 31, 2022, there were no Level 3 securities.

Level 2 securities include obligations of state and political subdivisions, U.S.

agencies or government-sponsored agencies' debt securities, mortgage-backed securities, government agency-issued securities, and corporate bonds.

As of March 31, 2024 and December 31, 2023, there were no Level 3 securities.

Held-to-maturity securities may be subject to an allowance for credit losses as a result of our evaluation of expected losses due to credit quality factors.

We did not record any credit loss expense on held-to-maturity securities during the nine months ended September 30, 2023 or September 30, 2022.

We did not record any credit loss expense on held-to-maturity securities during the three months ended March 31, 2024 or March 31, 2023.

Fair value of held-to-maturity securities is determined using the same techniques discussed above for available-for-sale securities.

8 unchanged sentences

We have used the spread between the Standard & Poor's BBB rated U.S.

Bank Composite rate and

SOFR for the closest maturity term corresponding to the duration of the swaps to derive the CVA.

Bank Composite rate and SOFR for the closest maturity term corresponding to the duration of the swaps to derive the CVA.

Because there is little to no counterparty risk, we did not incorporate credit adjustments from our assessment of the counterparty credit risk in determining fair value.

For further discussion on our methodology in valuing our derivative financial instruments, refer to Note 9, Derivative Financial Instruments and Hedging Activities.

For further discussion on our methodology for valuing our derivative financial instruments, refer to Note 9, Derivative Financial Instruments and Hedging Activities.

Certain financial assets may be measured at fair value on a non-recurring basis.

These assets are subject to fair value adjustments that result from the application of the lower of cost or fair value accounting or write-downs of individual assets, such as individually analyzed loans that are collateral dependent and other real estate owned ("OREO").

OREO is classified as Level 3 and represents collateral acquired through foreclosure and is initially recorded at fair value as established by a current appraisal of the collateral.

Subsequent to foreclosure, OREO is carried at the lower of cost or fair value, less estimated costs to sell.

On July 12, 2023, the Bank completed the sale of its only OREO property.

The following table presents the carrying value of assets measured at fair value on a non-recurring basis and that were held in the consolidated statements of condition at each respective period end, by level within the fair value hierarchy as of September 30, 2023 and December 31, 2022.

(in thousands) Carrying Value Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs

(Level 2) Significant Unobservable Inputs

September 30, 2023

Other real estate owned $ — $ — $ — $ —

December 31, 2022

Other real estate owned $ 455 $ — $ — $ 455

Disclosures about Fair Value of Financial Instruments

The table below is a summary of fair value estimates for financial instruments as of September 30, 2023 and December 31, 2022, excluding financial instruments recorded at fair value on a recurring basis (summarized in the first table in this note).

The table below is a summary of fair value estimates for financial instruments as of March 31, 2024 and December 31, 2023, excluding financial instruments recorded at fair value on a recurring basis (summarized in the first table in this note).

The carrying amounts in the following table are recorded in the consolidated statements of condition under the indicated captions.

Further, we have not disclosed the fair value of financial instruments specifically excluded from disclosure requirements such as bank-owned life insurance policies ("BOLI"), lease obligations and non-maturity deposit liabilities.

Additionally, we held shares of Federal Home Loan Bank ("FHLB") of San Francisco stock at cost as of September 30, 2023 and December 31, 2022, and Visa Inc.

Class B common stock with no carrying value, as of December 31, 2022, which was sold entirely in July of 2023.

There were no impairment or changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer as of September 30, 2023 or December 31, 2022.

The values are discussed in Note 4, Investment Securities.

September 30, 2023 December 31, 2022

Additionally, we held shares of Federal Home Loan Bank ("FHLB") of San Francisco stock at cost as of March 31, 2024 and December 31, 2023.

There were no impairments or changes resulting from observable price changes in orderly transactions for the identical or similar investments of the same issuer as of March 31, 2024 or December 31, 2023.

See further discussion on values within Note 4, Investment Securities.

March 31, 2024 December 31, 2023

(in thousands) Carrying Amounts Fair Value Fair Value Hierarchy Carrying Amounts Fair Value Fair Value Hierarchy

2 unchanged sentences

Investment securities held-to-maturity 915,068 795,909 Level 2 925,198 814,830 Level 2

Loans, net 2,062,682 1,949,647 Level 3 2,069,563 1,993,866 Level 3

Loans, net of allowance for credit losses 2,029,462 1,913,418 Level 3 2,048,548 1,939,702 Level 3

Interest receivable 11,678 11,678 Level 2 12,752 12,752 Level 2

1 unchanged sentence

Time deposits 267,536 268,758 Level 2 251,317 252,824 Level 2

Federal Home Loan Bank short-term borrowings — — Level 2 112,000 112,000 Level 2

Federal Reserve Bank - Bank Term Funding Program ("BTFP") 120,000 119,882 Level 2 — — Level 2

FRBSF short-term borrowings under the BTFP

— — Level 2 26,000 25,998 Level 2

Interest payable 3,130 3,130 Level 2 2,752 2,752 Level 2

Fair value of loans is based on exit price techniques and obtained from an independent third-party that uses its proprietary valuation model and methodology and may differ from actual price from a prospective buyer.

discounted cash flow valuation approach reflects key inputs and assumptions that are unobservable, such as loan probability of default, loss given default, prepayment speed, and market discount rates.

Fair value of fixed-rate time deposits is estimated by discounting future contractual cash flows using discount rates that reflect the current observable market rates offered for time deposits of similar remaining maturities.

Due to the short-term nature of the FHLB borrowings outstanding as of December 31, 2022, the carrying value approximated fair value.

The fair value of the borrowings under the BTFP is estimated by discounting the contractual cash flow using the program's period end financing rate.

The fair value of loans is based on exit price techniques and obtained from an independent third-party that uses its proprietary valuation model and methodology and may differ from the actual price from a prospective buyer.

The discounted cash flow valuation approach reflects key inputs and assumptions that are unobservable, such as loan probability of default, loss given default, prepayment speed, and market discount rates.

The fair value of fixed-rate time deposits is estimated by discounting future contractual cash flows using discount rates that reflect the current observable market rates offered for time deposits of similar remaining maturities.

The value of off-balance-sheet financial instruments is estimated based on the fee income associated with the commitments, which in the absence of credit exposure, is considered to approximate their settlement value.

The fair value of commitment fees was not material as of September 30, 2023 or December 31, 2022.

The fair value of commitment fees was not material as of March 31, 2024 or December 31, 2023.

Investment Securities

1 unchanged sentence

Treasury securities, obligations of state and political subdivisions, U.S.

federal government agencies such as Government National Mortgage Association ("GNMA") and Small Business Administration ("SBA"), U.S.

government-sponsored enterprises ("GSEs"), such as Federal National Mortgage Association ("FNMA"), Federal Home Loan Mortgage Corporation ("FHLMC"), Federal Farm Credit Banks Funding Corporation and FHLB and U.S.

federal government agencies, such as the Government National Mortgage Association ("GNMA") and Small Business Administration ("SBA"), and U.S.

government-sponsored enterprises ("GSEs"), such as the Federal National Mortgage Association ("FNMA"), Federal Home Loan Mortgage Corporation ("FHLMC"), Federal Farm Credit Banks Funding Corporation and FHLB, and U.S.

Corporations.

We also invest in residential and commercial mortgage-backed securities (“MBS”/"CMBS") and collateralized mortgage obligations (“CMOs”) issued or guaranteed by the GSEs, as reflected in the following table.

A summary of the amortized cost, fair value and allowance for credit losses related to securities held-to-maturity as of September 30, 2023 and December 31, 2022 is presented below.

A summary of the amortized cost, fair value and allowance for credit losses related to securities held-to-maturity as of March 31, 2024 and December 31, 2023 is presented below.

Held-to-maturity:

2 unchanged sentences

(in thousands) Gains (Losses)

September 30, 2023

March 31, 2024

Securities of U.S.

14 unchanged sentences

CMOs issued by FHLMC

226,416 — 226,416 28 ( 24,869 ) 201,575

CMOs issued by FNMA 101,502 — 101,502 — ( 4,779 ) 96,723

5 unchanged sentences

Total held-to-maturity $ 925,198 $ — $ 925,198 $ 75 $ ( 110,443 ) $ 814,830

1 Amortized cost and fair values exclude accrued interest receivable of $ 2.6 million and $ 3.7 million at September 30, 2023 and December 31, 2022, respectively, which is included in interest receivable and other assets in the consolidated statements of condition.

1 Amortized cost and fair values exclude accrued interest receivable of $ 2.5 million and $ 3.6 million at March 31, 2024 and December 31, 2023, respectively, which is included in interest receivable and other assets in the consolidated statements of condition.

Management measures expected credit losses on held-to-maturity securities collectively by major security type with each type sharing similar risk characteristics, and considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts.

With regard to MBSs and CMOs issued or

guaranteed by the GSEs, and SBA-backed securities, we expect to receive all the contractual principal and interest on these securities as such securities are backed by the full faith and credit of and/or guaranteed by the U.S.

With regard to MBSs and CMOs issued or guaranteed by the GSEs, and SBA-backed securities, we expect to receive all the contractual principal and interest on these securities as such securities are backed by the full faith and credit of and/or guaranteed by the U.S.

Accordingly, no allowance for credit losses has been recorded for these securities.

1 unchanged sentence

(i) issuer and/or guarantor credit ratings, (ii) historical probability of default and loss given default rates for given bond ratings and remaining maturity, (iii) whether issuers continue to make timely principal and interest payments under the contractual terms of the securities, (iv) internal credit review of the financial information, and (v) whether or not such securities have credit enhancements such as guarantees, contain a defeasance clause, or are pre-refunded by the issuers.

Based on our comprehensive anal ysis, no cred it losses are expected.

The following table summarizes the amortized cost of our portfolio of held-to-maturity securities issued by states and political subdivisions and corporate bonds by Moody's and/or Standard & Poor's bond ratings as of September 30, 2023 and December 31, 2022.

Moody's / S&P Obligations of state and political subdivisions Corporate bonds

(in thousands) September 30, 2023 December 31, 2022 September 30, 2023 December 31, 2022

Based on the comprehensive anal ysis, no cred it losses are expected.

Obligations of state and political subdivisions Corporate bonds

(in thousands) March 31, 2024 December 31, 2023 March 31, 2024 December 31, 2023

Aaa / AAA $ 42,474 $ 42,577 $ — $ —

2 unchanged sentences

Total $ 61,916 $ 62,034 $ 30,000 $ 30,000

A summary of the amortized cost, fair value and allowance for credit losses related to securities available-for-sale as of September 30, 2023 and December 31, 2022 is presented below.

A summary of the amortized cost, fair value and allowance for credit losses related to securities available-for-sale as of March 31, 2024 and December 31, 2023 is presented below.

Available-for-sale:

2 unchanged sentences

(in thousands) Gains (Losses)

September 30, 2023

March 31, 2024

Securities of U.S.

22 unchanged sentences

Corporate bonds 11,992 — ( 1,274 ) — 10,718

Asset-backed securities 1,553 — ( 91 ) — 1,462

Total available-for-sale $ 613,479 $ 3 $ ( 61,454 ) $ — $ 552,028

1 Amortized cost and fair value exclude accrued interest receivable of $ 2.7 million and $ 3.2 million at September 30, 2023 and December 31, 2022, respectively, which is included in interest receivable and other assets in the consolidated statements of condition.

As part of our ongoing review of our investment securities portfolio, we reassessed the classification of certain securities issued by government sponsored agencies.

In March 2022, we transferred $ 357.5 million of these securities from available-for-sale to held-to-maturity at fair value.

We intend and have the ability to hold these securities to maturity.

The net unrealized pre-tax loss of $ 14.8 million that remained and the related accumulated other comprehensive loss are accreted to interest income over the remaining lives of the securities.

Because these entries offset each other, there was no impact to net income.

The amortized cost a nd fair value of investment debt securities by contractual maturity at September 30, 2023 and December 31, 2022 are shown below.

1 Amortized cost and fair value exclude accrued interest receivable of $ 2.3 million and $ 2.3 million at March 31, 2024 and December 31, 2023, respectively, which is included in interest receivable and other assets in the consolidated statements of condition.

The amortized cost a nd fair value of investment debt securities by contractual maturity at March 31, 2024 and December 31, 2023 are shown below.

Expected maturities may differ from contractual maturities if the issuers of the securities have the right to call or prepay obligations with or without call or prepayment penalties.

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

Held-to-Maturity Available-for-Sale Held-to-Maturity Available-for-Sale

5 unchanged sentences

Total $ 915,068 $ 795,909 $ 602,384 $ 536,365 $ 925,198 $ 814,830 $ 613,479 $ 552,028

Sales of investment securities and gross gains and losses are shown in the following table:

Three months ended Nine months ended

(in thousands) September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022

Available-for-sale:

Sales proceeds $ 79,840 $ 10,664 $ 79,840 $ 10,664

Gross realized gains 5 17 5 17

Gross realized losses ( 2,798 ) ( 80 ) ( 2,798 ) ( 80 )

Sale of equity securities:

Sales proceeds 2,807 — 2,807 —

Gross realized gain 2,807 — 2,807 —

1 Refer to VISA Inc.

Class B Common Stock section below for more information.

In October 2023, the Bank sold $ 55.0 million of available-for-sale securities for a pretax net loss of $ 2.1 million (or $ 1.5 million after tax).

Management did not have the intent and was not required to sell these securities at the reporting date.

Therefore, no impairment loss was recognized in the third quarter of 2023.

The carrying values of pledged investment securities are shown in the following table:

(in thousands) September 30, 2023 December 31, 2022

There were no sales of investment securities in the first quarter of 2024 or 2023.

Three months ended

The reported values of pledged investment securities are shown in the following table.

(in thousands) March 31, 2024 December 31, 2023

Pledged to the State of California:

6 unchanged sentences

Pledged to the Federal Reserve "BTFP" — 265,660

Pledged to the Federal Reserve Discount Window 345,896 —

Total pledged investment securities $ 927,555 $ 938,959

There were 331 and 407 securities in unrealized loss positions at September 30, 2023 and December 31, 2022, respectively.

There were 317 and 313 securities in unrealized loss positions at March 31, 2024 and December 31, 2023, respectively.

Those securities are summarized and classified according to the duration of the loss period in the tables below:

September 30, 2023 < 12 continuous months ≥ 12 continuous months Total securities

March 31, 2024 < 12 continuous months ≥ 12 continuous months Total securities

in a loss position

20 unchanged sentences

Corporate bonds — — 10,744 ( 1,248 ) 10,744 ( 1,248 )

Asset-backed securities — — — — — —

Total available-for-sale 1,518 ( 6 ) 534,613 ( 66,015 ) 536,131 ( 66,021 )

23 unchanged sentences

Corporate Bonds — — 10,718 ( 1,274 ) 10,718 ( 1,274 )

Asset-backed securities — — 1,462 ( 91 ) 1,462 ( 91 )

Total available-for-sale 1,901 ( 8 ) 549,289 ( 61,446 ) 551,190 ( 61,454 )

Total securities at loss position $ 64,025 $ ( 684 ) $ 1,287,979 $ ( 171,213 ) $ 1,352,004 $ ( 171,897 )

As of September 30, 2023, the investment portfolio included 323 investment securities that had been in a continuous loss position for twelve months or more and 8 investment securities that had been in a loss position for less than twelve months.

Securities issued by government-sponsored enterprises, such as FNMA and FHLMC, usually have implicit credit support by the U.S.

As of March 31, 2024, the investment portfolio included 306 investment securities that had been in a continuous loss position for twelve months or more and 11 investment securities that had been in a loss position for less than twelve months.

Securities issued by government-sponsored agencies, such as FNMA and FHLMC, usually have implicit credit support from the U.S.

federal government.

However, since 2008, FNMA and FHLMC have been under government conservatorship and, therefore, contractual cash flows for these investments carry explicit guarantees by the U.S.

federal government.

federal government while FNMA and FHLMC remain under conservatorship.

Securities issued by the SBA and GNMA have explicit credit guarantees by the U.S.

federal government, which protects us from credit losses on the contractual cash flows of the securities.

Our investment in obligations of state and political subdivisions bonds are deemed credit worthy after our comprehensive analysis of the issuers' latest financial information, credit ratings by major credit agencies, and/or credit enhancements.

No allowances for credit losses have been recognized on available-for-sale securities in an unrealized loss position, as management did not believe any of the securities were impaired due to credit risk factors at either September 30, 2023 or December 31, 2022.

In addition, for any available-for-sale securities in an unrealized loss position at September 30, 2023 and December 31, 2022, the Bank assessed whether it intended to sell the securities, or if it was more likely than not that it would be required to sell the securities before recovery of its amortized cost basis, which would require a write-down to fair value through net income.

Our investments in obligations of state and political subdivision bonds are deemed creditworthy after our comprehensive analysis of the issuers' latest financial information, credit ratings by major credit agencies, and/or credit enhancements.

No allowances for credit losses have been recognized on available-for-sale securities in an unrealized loss position, as management does not believe any of the securities are impaired due to credit risk factors at either March 31, 2024 or December 31, 2023.

In addition, for any available-for-sale securities in an unrealized loss position at March 31, 2024 and December 31, 2023, the Bank assessed whether it intended to sell the securities, or if it was more likely than not that it would be required to sell the securities before recovery of its amortized cost basis, which would require a write-down to fair value through net income.

Because the Bank did not intend to sell those securities that were in an unrealized loss position, and it was not more-likely-than-not that the Bank would be required to sell the securities before recovery of their amortized cost bases, the Bank determined that no write-down was necessary as of the reporting date.

4 unchanged sentences

FHLB Capital Stock

As a member of the FHLB, we are required to maintain a minimum investment in FHLB capital stock determined by the Board of Directors of the FHLB.

As a member of the FHLB, we are required to maintain a minimum investment in FHLB capital stock as determined by the Board of Directors of the FHLB.

The minimum investment requirements can increase in the event we increase our total asset size or borrowings with the FHLB.

Shares cannot be purchased or sold except between the FHLB and its members at the $ 100 per share par value.

We held $ 16.7 million of FHLB stock included in other assets on the consolidated statements of condition at both September 30, 2023 and December 31, 2022.

We held $ 16.7 million of FHLB stock included in other assets on the consolidated statements of condition at both March 31, 2024 and December 31, 2023.

The carrying amounts of these investments are reasonable estimates of fair value because the securities are restricted to member banks and they do not have a readily determinable market value.

Based on our analysis of FHLB's financial condition and certain qualitative factors, we determined that the FHLB stock w as not im paired at September 30, 2023 and December 31, 2022.

On October 26, 2023, FHLB announced a cash dividend for the third quarter of 2023 at an annualized dividend rate of 8.25 % to be distributed on Novembe r 9, 20 23.

Based on our analysis of FHLB's financial condition and certain qualitative factors, we determined that the FHLB stock w as not im paired at March 31, 2024 and December 31, 2023.

On April 25, 2024, FHLB announced a cash dividend for the first quarter of 2024 at an annualized dividend rate of 8.25 % to be distributed in mid-May 2024.

Cash dividends paid on FHLB capital stock are recorded as non-interest income.

Class B Common Stock

As a member bank of Visa U.S.A., we held 10,439 shares of Visa Inc.

Class B common stock at December 31, 2022.

These shares had a carrying value of zero and were restricted from resale to non-member banks of Visa U.S.A.

until their conversion into Class A (voting) shares upon the termination of Visa Inc.'s Covered Litigation escrow account.

Because of the restriction and the uncertainty on the conversion rate to Class A shares, these shares lacked a readily determinable fair value.

On July 13, 2023, the Bank sold the entirety of its remaining investment in Visa Inc.

Class B restricted common stock for a $ 2.8 million gain.

For further information on the Covered Litigation, refer to Note 8, Commitments and Contingencies.

For further information, refer to Note 8, Commitments and Contingencies.

Low Income Housing Tax Credits

We invest in low-income housing tax credit funds as a limited partner, which totaled $ 2.1 million and $ 2.5 million recorded in other assets as of September 30, 2023 and December 31, 2022, respectively.

In the first nine months of 2023, we recognized $ 450 thousand of low-income housing tax credits and other tax benefits, offset by $ 377 thousand of amortization expense of low-income housing tax credit investment, as a component of income tax expense.

As of September 30, 2023, our unfunded commitments for these low-income housing tax credit funds totaled $ 346 thousand.

We did not recognize any impairment losses on these low-income housing tax credit investments during the first nine months of 2023 or 2022, as the value of the future tax benefits exceeds the carrying value of the investments.

We invest in low-income housing tax credit funds as a limited partner, which totaled $ 1.9 million and $ 2.0 million recorded in other assets as of March 31, 2024 and December 31, 2023, respectively.

In the first three months of 2024, we recognized $ 133 thousand of low-income housing tax credits and other tax benefits, offset by $ 111 thousand of amortization expense of low-income housing tax credit investment, as a component of income tax expense.

As of March 31, 2024, our unfunded commitments for these low-income housing tax credit funds totaled $ 343 thousand.

We did not recognize any impairment losses on these low-income housing tax credit investments during the first three months of 2024 or 2023, as the value of the future tax benefits exceeds the carrying value of the investments.

Loans and Allowance for Credit Losses on Loans

The following table presents the amortized cost of loans by portfolio class as of September 30, 2023 and December 31, 2022.

(in thousands) September 30, 2023 December 31, 2022

The following table presents the amortized cost of loans by portfolio class as of March 31, 2024 and December 31, 2023.

(in thousands) March 31, 2024 December 31, 2023

Commercial and industrial $ 150,896 $ 153,750

9 unchanged sentences

Total loans, net of allowance for credit losses on loans $ 2,029,462 $ 2,048,548

1 Amortized cost includes net deferred loan origination costs of $ 2.6 million and $ 1.8 million at September 30, 2023 and December 31, 2022, respectively.

Amounts are also net of unrecognized purchase discounts of $ 2.2 million and $ 2.6 million at September 30, 2023 and December 31, 2022, respectively.

Amortized cost excludes accrued interest, which totaled $ 6.3 million and $ 6.1 million at September 30, 2023 and December 31, 2022, respectively, and is included in interest receivable and other assets in the consolidated statements of condition.

1 Amortized cost includes net deferred loan origination costs of $ 2.6 million and $ 2.7 million at March 31, 2024 and December 31, 2023, respectively.

Amounts are also net of unrecognized purchase discounts of $ 1.9 million and $ 2.0 million at March 31, 2024 and December 31, 2023, respectively.

Amortized cost excludes accrued interest, which totaled $ 6.3 million and $ 6.6 million at March 31, 2024 and December 31, 2023, respectively, and is included in interest receivable and other assets in the consolidated statements of condition.

Lending Risks

Commercial and Industrial Loans - Commercial loans are generally made to established small and mid-sized businesses to provide financing for their growth and working capital needs, equipment purchases and acquisitions.

Management examines historical, current, and projected cash flows to determine the ability of the borrower to repay obligations as agreed.

Management examines historical, current, and projected cash flows to determine the ability of the

borrower to repay obligations as agreed.

Commercial loans are made based primarily on the identified cash flows of the borrower and secondarily on the underlying collateral and guarantor support.

30 unchanged sentences

Pass and Watch - Loans to borrowers of acceptable or better credit quality.

Borrowers in this category demonstrate fundamentally sound financial positions, repayment capacity, credit history and management

Borrowers in this category demonstrate fundamentally sound financial positions, repayment capacity, credit history and management expertise.

Loans in this category must have an identifiable and stable source of repayment and meet the Bank’s policy regarding debt-service-coverage ratios.

8 unchanged sentences

Substandard - Inadequately protected by either the current sound worth and paying capacity of the obligor or the collateral pledged, if any.

A Substandard asset has a well-defined weakness or weaknesses that jeopardize(s) the liquidation of the debt.

A Substandard asset has well-defined weaknesses that jeopardize the liquidation of the debt.

Substandard assets are characterized by the distinct possibility that we will sustain some loss if such weaknesses or deficiencies are not corrected.

17 unchanged sentences

We also review loans graded “Watch” or worse, regardless of loan type, no less than quarterly.

The following tables present the loan portfolio by loan portfolio class, origination year and internal risk rating as of September 30, 2023 and December 31, 2022.

The following tables present the loan portfolio by loan portfolio class, origination/renewal year and internal risk rating as of March 31, 2024 and December 31, 2023.

The current year vintage table reflects gross charge-offs by loan portfolio class and year of origination.

2 unchanged sentences

(in thousands) Term Loans - Amortized Cost by Origination Year Revolving Loans Amortized Cost

September 30, 2023 2023 2022 2021 2020 2019 Prior Total

March 31, 2024 2024 2023 2022 2021 2020 Prior Total

Commercial and industrial:

15 unchanged sentences

(in thousands) Term Loans - Amortized Cost by Origination Year Revolving Loans Amortized Cost

September 30, 2023 2023 2022 2021 2020 2019 Prior Total

March 31, 2024 2024 2023 2022 2021 2020 Prior Total

Construction:

Pass and Watch $ 13,915 $ 7,661 $ 17,794 $ — $ 19,310 $ — $ — $ 58,680

Special Mention — 12,814 — — — — — 12,814

Total construction $ 13,915 $ 20,475 $ 17,794 $ — $ 19,310 $ — $ — $ 71,494

7 unchanged sentences

Pass and Watch $ 3,379 $ 20,119 $ 13,769 $ 10,129 $ 4,489 $ 14,078 $ 1,003 $ 66,966

Substandard — — — 141 — — — 141

Total installment and other consumer $ 3,379 $ 20,119 $ 13,769 $ 10,270 $ 4,489 $ 14,078 $ 1,003 $ 67,107

16 unchanged sentences

Substandard — 2,231 — — — 1,778 — 4,009

Doubtful — — 99 — — — — 99

Total commercial real estate, owner-occupied $ 14,559 $ 48,537 $ 65,523 $ 38,528 $ 41,280 $ 124,698 $ 56 $ 333,181

6 unchanged sentences

Pass and Watch $ 13,138 $ 24,403 $ 19,521 $ 29,512 $ — $ — $ — $ 86,574

Special Mention 12,590 — — — — — — 12,590

Total construction $ 25,728 $ 24,403 $ 19,521 $ 29,512 $ — $ — $ — $ 99,164

7 unchanged sentences

Pass and Watch $ 22,038 $ 14,528 $ 10,632 $ 4,687 $ 5,300 $ 9,399 $ 1,061 $ 67,645

Substandard — — — — — 91 — 91

Total installment and other consumer $ 22,038 $ 14,528 $ 10,632 $ 4,687 $ 5,300 $ 9,399 $ 1,061 $ 67,645

2 unchanged sentences

Total Substandard $ 878 $ 2,503 $ 2,204 $ — $ 1,311 $ 25,217 $ 211 $ 32,324

Total Doubtful $ — $ — $ 99 $ — $ — $ — $ — $ 99

Totals $ 183,397 $ 291,859 $ 320,078 $ 264,689 $ 239,856 $ 610,122 $ 163,719 $ 2,073,720

The following table shows the amortized cost of loans by portfolio class, payment aging and non-accrual status as of September 30, 2023 and December 31, 2022.

The following table shows the amortized cost of loans by portfolio class, payment aging and non-accrual status as of March 31, 2024 and December 31, 2023.

Loan Aging Analysis by Class

(in thousands) Commercial and industrial Commercial real estate, owner-occupied Commercial real estate, non-owner occupied Construction Home equity Other residential Installment and other consumer Total

September 30, 2023

March 31, 2024

30-59 days past due $ 13 $ 101 $ 872 $ 1,057 $ 360 $ — $ 3 $ 2,406

1 unchanged sentence

90 days or more past due 1

29 140 10,292 — — — — 10,461

Total past due 432 241 11,164 1,057 360 — 3 13,257

9 unchanged sentences

90 days or more past due 1

1,311 149 — — — — — 1,460

Total past due 4,371 767 2,204 — 43 83 196 7,664

5 unchanged sentences

Non-accrual loans with no allowance $ 1,311 $ 434 $ 877 $ — $ 469 $ — $ — $ 3,091

1 There were no non-performing loans past due more than ninety days and accruing interest as of September 30, 2023 and December 31, 2022.

2 None of the non-accrual loans as of September 30, 2023 or December 31, 2022 were earning interest on a cash or accrual basis.

We reversed $ 131 thousand and $ 158 thousand in accrued interest income for loans that were placed on non-accrual status for the three and nine months ended September 30, 2023.

We reversed accrued interest income of $ 39 thousand and $ 47 thousand for loans that were placed on non-accrual status during the three and nine months ended September 30, 2022, respectively.

1 There was one non-owner occupied commercial real estate loan 90 days past due and accruing interest as of March 31, 2024 that has been in extended renewal negotiations, but it is well-secured and expected to be restored to a current payment status in the near future.

There were no non-performing loans over 90 days past due and accruing interest as of December 31, 2023 .

2 None of the non-accrual loans as of March 31, 2024 or December 31, 2023 were earning interest on a cash or accrual basis.

We reversed $ 10 thousand in accrued interest income for loans that were placed on non-accrual status during the three months ended March 31, 2024.

We reversed accrued interest income of $ 16 thousand for loans that were placed on non-accrual status during the three months ended March 31, 2023.

Collateral Dependent Loans

The following table presents the amortized cost basis of individually analyzed collateral-dependent loans, which are all on non-accrual status, by portfolio class at September 30, 2023 and December 31, 2022.

The following table presents the amortized cost basis of individually analyzed collateral-dependent loans, which were all on non-accrual status, by portfolio class at March 31, 2024 and December 31, 2023.

Amortized Cost by Collateral Type

(in thousands) Commercial Real Estate Residential Real Estate Other Total 1

(in thousands) Commercial Real Estate Residential Real Estate Blanket Lien Other Total 1

Allowance for Credit Losses

September 30, 2023

March 31, 2024

Commercial real estate, owner-occupied $ 416 $ — $ — $ — $ 416 $ —

1 unchanged sentence

Home equity — 473 — — 473 —

Installment and other consumer — — — 141 141 —

Total $ 3,462 $ 473 $ — $ 141 $ 4,076 $ 496

December 31, 2023

Commercial and industrial $ 1,311 $ — $ — $ — $ 1,311 $ —

Commercial real estate, owner-occupied 434 — — — 434 —

Commercial real estate, non-owner occupied 3,081 — — 3,081 408

Home equity — 469 — — 469 —

Installment and other consumer — — 91 91 —

Total $ 4,826 $ 469 $ — $ — $ 5,295 $ 408

1 There were no collateral-dependent residential real estate mortgage loans in process of foreclosure or in substance repossessed at September 30, 2023 and December 31, 2022.

The weighted average loan-to-value of collateral dependent loans was approximately 61 % at September 30, 2023 and 42 % at December 31, 2022.

1 There were no collateral-dependent residential real estate mortgage loans in process of foreclosure or in substance repossessed at March 31, 2024 and December 31, 2023.

The weighted average loan-to-value of real estate secured collateral dependent loans was approximately 82 % at March 31, 2024 and 70 % at December 31, 2023.

Loan Modifications to Borrowers Experiencing Financial Difficulty

We adopted ASU No.

2022-02, Financial Instruments - Credit Losses (Topic 326):

Troubled Debt Restructurings and Vintage Disclosures on January 1, 2023, as described in Note 2, Recently Adopted and Issued Accounting Standards.

The amendments eliminated the accounting guidance for troubled debt restructurings and enhanced disclosures related to certain types of loan modifications for borrowers experiencing financial difficulty, including principal forgiveness, interest rate reductions, other-than-insignificant payment delays, and/or term extensions which are intended to minimize the economic loss and avoid foreclosure or repossession of collateral.

The following table summarizes the amortized cost of loans as of September 30, 2023 that were modified during the three and nine months ended September 30, 2023 by portfolio class and type of modification granted.

(in thousands) Term Extension

Percent of Portfolio Class Total

Three months ended September 30, 2023

Commercial and industrial $ 391 0.2 %

Commercial owner-occupied 1,056 0.3 %

Nine months ended September 30, 2023

The following table summarizes the amortized cost of loans as of March 31, 2024 that were modified during the three months ended March 31, 2024 by portfolio class and type of modification granted.

There were no modifications of loans during the three months ended March 31, 2023 requiring disclosure.

(in thousands) Term Extension Percent of Portfolio Class Total

Three months ended March 31, 2024

Commercial and industrial $ 2,191 1.5 %

Commercial owner-occupied 1,056 0.3 %

As of September 30, 2023, there were no unfunded loan commitments for loans that were modified during the periods presented.

The following table summarizes the financial effect of loan modifications presented in the table above during the three and nine months ended September 30, 2023 by portfolio class.

Home equity 82 0.1 %

As of March 31, 2024, there were no unfunded loan commitments for loans that were modified during the period presented.

The following table summarizes the financial effect of loan modifications presented in the table above during the three months ended March 31, 2024 by portfolio class.

(in thousands) Weighted-Average Term Extension (in years)

Three months ended September 30, 2023

Commercial and industrial 2.3

Commercial owner-occupied 2.5

Nine months ended September 30, 2023

Three months ended March 31, 2024

Commercial and industrial 0.3

Commercial owner-occupied 2.5

The loan modifications did not significantly impact the determination of the allowance for credit losses on loans during the three and nine months ended September 30, 2023.

Home equity 15.0

The loan modifications did not significantly impact the determination of the allowance for credit losses on loans during the three months ended March 31, 2024.

The Bank closely monitors the performance of the modified loans to understand the effectiveness of its modification efforts.

The following table summarizes the amortized cost and payment status of loans as of September 30, 2023 that were modified during the three and nine months ended September 30, 2023 by portfolio class.

(in thousands) Current

30-59 Days Past Due 60-89 Days Past Due 90 Days or More Past Due

Three months ended September 30, 2023

Commercial and industrial $ 391 $ — $ — $ — $ 391 $ —

Commercial owner-occupied 1,056 — — — 1,056 —

$ 1,447 $ — $ — $ — $ 1,447 $ —

Nine months ended September 30, 2023

The following table summarizes the amortized cost and payment status of loans as of March 31, 2024 that were modified during the three months ended March 31, 2024 by portfolio class.

(in thousands) Current 30-59 Days Past Due 60-89 Days Past Due 90 Days or More Past Due Total Non-Accrual

Three months ended March 31, 2024

Commercial and industrial $ 2,191 $ — $ — $ — $ 2,191 $ 2,191

Commercial owner-occupied 1,056 — — — 1,056 —

Home equity 82 — — — 82 82

$ 2,273 $ — $ — $ — $ 2,273 $ 2,273

There were no loans that defaulted (fully or partially charged-off or became 90 days or more past due) that were modified during the nine months ended September 30, 2023.

There were no loans that defaulted (fully or partially charged-off or became 90 days or more past due) that were modified during the three months ended March 31, 2024.

Allocation of the Allowance for Credit Losses on Loans

The following table presents the details of the allowance for credit losses on loans segregated by loan portfolio class as of September 30, 2023 and December 31, 2022 .

The following table presents the details of the allowance for credit losses on loans segregated by loan portfolio class as of March 31, 2024 and December 31, 2023 .

Allocation of the Allowance for Credit Losses on Loans

September 30, 2023

March 31, 2024

Modeled expected credit losses $ 940 $ 1,326 $ 7,744 $ 119 $ 559 $ 670 $ 655 $ — $ 12,013

11 unchanged sentences

Three months ended September 30, 2023

Three months ended March 31, 2024

Beginning balance $ 1,712 $ 2,476 $ 14,933 $ 1,832 $ 552 $ 653 $ 976 $ 2,038 $ 25,172

3 unchanged sentences

Ending balance $ 1,727 $ 2,500 $ 15,704 $ 1,282 $ 627 $ 692 $ 920 $ 2,049 $ 25,501

Three months ended September 30, 2022

Beginning balance $ 1,699 $ 2,617 $ 12,439 $ 1,737 $ 530 $ 585 $ 733 $ 2,199 $ 22,539

Provision (Reversal) 265 ( 81 ) 299 38 12 5 83 ( 199 ) 422

(Charge-offs) ( 9 ) — — — — — ( 1 ) — ( 10 )

Recoveries 3 — — 9 — — — — 12

Ending balance $ 1,958 $ 2,536 $ 12,738 $ 1,784 $ 542 $ 590 $ 815 $ 2,000 $ 22,963

Allowance for Credit Losses on Loans Rollforward

(in thousands) Commercial and industrial Commercial real estate, owner-occupied Commercial real estate, investor Construction Home equity Other residential Installment and other consumer Unallocated Total

Nine months ended September 30, 2023

Beginning balance $ 1,794 $ 2,487 $ 12,676 $ 1,937 $ 558 $ 595 $ 868 $ 2,068 $ 22,983

Provision (Reversal)

16 43 948 56 7 10 104 91 1,275

Charge-offs ( 7 ) — — — — — ( 22 ) — ( 29 )

Recoveries 5 — — 25 — — 1 — 31

Ending balance $ 1,808 $ 2,530 $ 13,624 $ 2,018 $ 565 $ 605 $ 951 $ 2,159 $ 24,260

Nine months ended September 30, 2022

Three months ended March 31, 2023

Beginning balance $ 1,794 $ 2,487 $ 12,676 $ 1,937 $ 558 $ 595 $ 868 $ 2,068 $ 22,983

4 unchanged sentences

Pledged Loans

Our FHLB line of credit is secured under terms of a blanket collateral agreement by a pledge of certain qualifying loans with unpaid principal balances of $ 1.299 billion and $ 1.298 billion at September 30, 2023 and December 31, 2022, respectively.

In addition, we pledge eligible TIC loans, which totaled $ 108.5 million and $ 105.0 million at September 30, 2023 and December 31, 2022, respectively, to secure our borrowing capacity with the Federal Reserve Bank ("FRB").

Our FHLB line of credit is secured under terms of a blanket collateral agreement by a pledge of certain qualifying loans with unpaid principal balances of $ 1.299 billion and $ 1.288 billion at March 31, 2024 and December 31, 2023, respectively.

In addition, we pledge eligible TIC loans, which totaled $ 108.5 million and $ 110.4 million at March 31, 2024 and December 31, 2023, respectively, to secure our borrowing capacity with the Federal Reserve Bank ("FRB").

For additional information, see Note 6, Borrowings.

3 unchanged sentences

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

Related party loans totaled $ 6.3 million at September 30, 2023 and $ 6.4 million at December 31, 2022.

In addition, undisbursed commitments to related parties totaled $ 562 thousand at both September 30, 2023 and December 31, 2022.

Short-Term Borrowings and Other Obligations

Federal Home Loan Bank – As of September 30, 2023 and December 31, 2022, the Bank had total lines of credit with the FHLB totaling $ 1.023 billion and $ 711.6 million, respectively, based on eligible collateral of certain loans and investment securities.

Federal Funds Lines of Credit – The Bank had unsecured lines of credit with correspondent banks for overnight borrowings totaling $ 135.0 million and $ 150.0 million at September 30, 2023 and December 31, 2022, respectively.

The following table shows changes in net loans to related parties for each of the three years ended March 31, 2024.

Related party loans totaled $ 5.8 million as of both March 31, 2024 and December 31, 2023.

In addition, undisbursed commitments to related parties totaled $ 212 thousand as of both March 31, 2024 and December 31, 2023.

Borrowings and Other Obligations

Federal Home Loan Bank:

The Bank had lines of credit with the FHLB totaling $ 951.2 million and $ 1.009 billion as of March 31, 2024 and December 31, 2023, respectively, based on eligible collateral of certain loans and investment securities.

Federal Funds Lines of Credit:

The Bank had unsecured lines of credit with correspondent banks for overnight borrowings totaling $ 125.0 million and $ 135.0 million as of March 31, 2024 and December 31, 2023, respectively.

In general, interest rates on these lines approximate the federal funds target rate.

Federal Reserve Bank – The Bank has a line of credit with the Federal Reserve Bank of San Francisco ("FRBSF") secured by certain residential loans.

At September 30, 2023 and December 31, 2022, the Bank had total borrowing capacity under this line of $ 57.3 million and $ 58.7 million, respectively.

In addition, under the Federal Reserve’s BTFP facility, the Bank could borrow up to an additional $ 274.6 million based on the par value of pledged investment securities as of September 30, 2023 .

Other Obligations – Finance lease liabilities totaling $ 335 thousand and $ 439 thousand at September 30, 2023 and December 31, 2022, respectively, are included in short-term borrowings and other obligations in the consolidated statements of condition.

See Note 8, Commitments and Contingencies, for additional information.

Outstanding balances and weighted average interest rates on short-term borrowings and other obligations as of September 30, 2023 and December 31, 2022 are summarized in the following table.

September 30, 2023 December 31, 2022

(dollars in thousands) Outstanding Balance Weighted

Average Rate Outstanding Balance Weighted Average Rate

Federal Reserve Bank:

The Bank had a line of credit through the Discount Window at the Federal Reserve Bank of San Francisco ("FRBSF") totaling $ 350.0 million as of March 31, 2024, secured by investment securities and residential loans.

As of December 31, 2023, the Bank had a line of credit through the Discount Window totaling $ 64.0 million, secured by residential loans, and a $ 270.2 million line under the Federal Reserve's temporary Bank Term Funding Program ("BTFP") based on the par values of pledged investment securities.

When the BTFP program ended on March 11, 2024, the investment securities were used to collateralize borrowings through the Discount Window .

Other Obligations:

Finance lease liabilities totaling $ 260 thousand and $ 298 thousand as of March 31, 2024 and December 31, 2023, respectively, are included in borrowings and other obligations in the consolidated statements of condition.

Refer to Note 8, Commitments and Contingencies, for additional information.

The carrying values and weighted average interest rates on borrowings and other obligations as of March 31, 2024 and December 31, 2023 are summarized in the following table.

March 31, 2024 December 31, 2023

(dollars in thousands) Carrying Value

Average Rate Carrying Value

Weighted Average Rate

FHLB short-term borrowings $ — — % $ — — %

3 unchanged sentences

Other obligations (finance leases) 260 2.14 % 298 1.88 %

Total short-term borrowings and other obligations $ 120,335 5.41 % $ 112,439 4.64 %

Total borrowings and other obligations

$ 260 2.14 % $ 26,298 5.26 %

Stockholders' Equity

On July 21, 2023, Bancorp declared a $ 0.25 per share cash dividend, paid August 11, 2023 to shareholders of record at the close of business on August 4, 2023.

Subsequent to quarter end on October 20, 2023, Bancorp declared a $ 0.25 per share cash dividend, payable on November 10, 2023 to shareholders of record at the close of business on November 3, 2023.

On January 25, 2024, Bancorp declared a $ 0.25 per share cash dividend, paid February 15, 2024 to shareholders of record at the close of business on February 8, 2024.

Subsequent to quarter end on April 25, 2024, Bancorp declared a $ 0.25 per share cash dividend, payable on May 16, 2024 to shareholders of record at the close of business on May 9, 2024.

Share-Based Payments

The fair value of stock options as of the grant date is recorded as stock-based compensation expense in the consolidated statements of comprehensive income (loss) over the requisite service period, which is generally the vesting period, with a corresponding increase in common stock.

The fair value of stock options as of the grant date is recorded as stock-based compensation expense in the consolidated statements of comprehensive income over the requisite service period, which is generally the vesting period, with a corresponding increase in common stock.

Stock-based compensation also includes compensation expense related to the issuance of restricted stock awards.

The grant-date fair value of the restricted stock awards, which equals the grant date price, is recorded as compensation expense over the requisite service period with a corresponding increase in common stock as the shares vest.

Beginning in 2018, stock option and restricted stock awards issued include a retirement eligibility clause whereby the requisite service period is satisfied at the retirement eligibility date.

Stock options and restricted stock awards issued include a retirement eligibility clause whereby the requisite service period is satisfied at the retirement eligibility date.

For those awards, we accelerate the recording of stock-based compensation when the award holder is eligible to retire.

11 unchanged sentences

Stock options and restricted stock may be net settled in a cashless exercise by a reduction in the number of shares otherwise deliverable upon exercise or vesting in satisfaction of the exercise payment and/or applicable tax withholding requirements.

During the nine months ended September 30, 2023, we withheld 3,132 shares totaling $ 86 thousand at a weighted-average price of $ 27.57 for cashless exercises.

During the nine months ended September 30, 2022, we withheld 11,505 shares totaling $ 393 thousand at a weighted-average price of $ 34.13 for cashless exercises.

Shares withheld under net settlement arrangements are available for future grants.

The table below depicts the total number of shares, amount, and weighted average price withheld for cashless exercises for the periods presented.

Three Months Ended

March 31, 2024 March 31, 2023

Number of shares withheld 3,338 2,847

Total amount withheld (in thousands) $ 55 $ 82

Weighted-average price $ 16.62 $ 28.74

Share Repurchase Program

Bancorp had an approved share repurchase program with $ 34.7 million remaining that expired on July 31, 2023.

On July 21, 2023, the Board of Directors approved the adoption of Bancorp's new share repurchase program, which replaced the existing one at that time, for up to $ 25.0 million and expiring on July 31, 2025.

There have been no repurchases in 2023.

On July 21, 2023, the Board of Directors approved the adoption of Bancorp's new share repurchase program for up to $ 25.0 million and expiring on July 31, 2025.

There have been no repurchases to date in 2024 or in 2023.

Commitments and Contingent Liabilities

10 unchanged sentences

The contractual amount of unfunded loan commitments and standby letters of credit not reflected in the consolidated statements of condition are as follows:

(in thousands) September 30, 2023 December 31, 2022

(in thousands) March 31, 2024 December 31, 2023

Commercial lines of credit $ 250,602 $ 259,989

5 unchanged sentences

We record an allowance for credit losses on unfunded loan commitments at the balance sheet date based on estimates of the probability that these commitments will be drawn upon according to historical utilization experience of the different types of commitments and expected loss rates determined for pooled funded loans.

The allowance for credit losses on unfunded commitments totaled $ 1.1 million and $ 1.5 million as of September 30, 2023 and December 31, 2022, respectively, which is included in interest payable and other liabilities in the consolidated statements of condition.

We recorded no provision for credit losses on unfunded loan commitments in the third quarters of 2023 and 2022.

The $ 342 thousand reversal of the provision for credit losses on unfunded loan commitments in the nine months of 2023 was due primarily to a decrease in total unfunded commitments, compared to a $ 318 thousand provision reversal in the nine months of 2022, due to improved economic forecasts at the time.

We lease premises under long-term non-cancelable operating leases with remaining terms of 7 months to 18 years, 8 months , most of which include escalation clauses and one or more options to extend the lease term, and some of which contain lease termination clauses.

The allowance for credit losses on unfunded commitments totaled $ 1.1 million at both March 31, 2024 and December 31, 2023, which is included in interest payable and other liabilities in the consolidated statements of condition.

There was no provision for credit losses on unfunded loan commitments in the first quarter of 2024.

The $ 174 thousand reversal of the provision for credit losses on unfunded loan commitments in the first quarter of 2023 was due primarily to a $ 37.4 million decrease in total unfunded commitments.

We lease premises under long-term non-cancelable operating leases with remaining terms of 30 days to 18 years, 5 months , most of which include escalation clauses and one or more options to extend the lease term, and some of

which contain lease termination clauses.

Lease terms may include certain renewal options that were considered reasonably certain to be exercised.

2 unchanged sentences

The following table shows the balances of operating and finance lease right-of-use assets and lease liabilities.

(in thousands) September 30, 2023 December 31, 2022

(in thousands) March 31, 2024 December 31, 2023

Operating leases:

9 unchanged sentences

The following table shows supplemental disclosures of noncash investing and financing activities for the periods presented.

Nine months ended

(in thousands) September 30, 2023 September 30, 2022

Right-of-use assets obtained in exchange for operating lease liabilities, net of tenant improvement allowances received $ 572 $ 4,989

Right-of-use assets obtained in exchange for finance lease liabilities $ 7 $ 41

Three months ended

(in thousands) March 31, 2024 March 31, 2023

Right-of-use assets obtained in exchange for operating lease liabilities

The following table shows components of operating and finance lease cost.

Three months ended Nine months ended

(in thousands) September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022

Three months ended

(in thousands) March 31, 2024 March 31, 2023

Operating lease cost 1

Variable lease cost — — — —

Total operating lease cost 1

$ 1,318 $ 1,610

1 unchanged sentence

Amortization of right-of-use assets 2

$ 37 $ 31 $ 111 $ 93

Interest on finance lease liabilities 3

4 unchanged sentences

3 Included in interest on borrowings and other obligations in the consolidated statements of comprehensive income.

The following table shows the future minimum lease payments, weighted average remaining lease terms, and weighted average discount rates under operating and finance lease arrangements as of September 30, 2023.

The discount rates used to calculate the present value of lease liabilities were based on the collateralized FHLB borrowing rates that were commensurate with lease terms and minimum payments on the lease commencement date.

(in thousands) September 30, 2023

(in thousands) March 31, 2024

Year Operating Leases Finance Leases

2 unchanged sentences

2026 3,561 37

2026 3,373 38

Thereafter 9,856 —

16 unchanged sentences

The Bank is exposed to certain risks from both its business operations and changes in economic conditions.

As part of our asset/liability and interest rate risk management strategy, we may enter into interest rate derivative contracts to modify the repricing characteristics of certain of our interest-earning assets and interest-bearing liabilities.

As part of our asset/liability and interest rate risk management strategy, we may enter into interest rate derivative contracts to modify repricing characteristics of certain of our interest-earning assets and interest-bearing liabilities.

The Bank generally designates interest rate hedging agreements utilized in the management of interest rate risk as either fair value hedges or cash flow hedges.

4 unchanged sentences

The interest rate swaps involve the receipt of floating rate interest from a counterparty in exchange for us making fixed-rate interest payments over the lives of the agreements, without the exchange of the underlying notional values.

The transactions were designated as partial term fair value hedges and structured such that the changes in fair value of the interest rate swaps are expected to be perfectly effective in offsetting the changes in the fair value of the hedged items attributable to changes in the SOFR OIS swap rate, the designated benchmark interest rate.

The transactions were designated as partial term fair value hedges and structured such that the changes in the fair value of the interest rate swaps are expected to be perfectly effective in offsetting the changes in the fair value of the hedged items attributable to changes in the SOFR OIS swap rate, the designated benchmark interest rate.

Because the hedges met the criteria for using the shortcut method, there is no need to periodically reassess effectiveness during the term of the hedges.

For fair value designated hedges, the gain or loss on the hedging instruments as well as the offsetting loss or gain on the hedged items, are recognized in current earnings as fair values change.

In addition, we had four interest rate swap agreements on certain loans with our customers, which are scheduled to mature at various dates ranging from January 2026 to October 2037.

For fair value designated hedges, the gains or losses on the hedging instruments as well as the offsetting loss or gain on the hedged items, are recognized in current earnings as their fair values change.

In addition, we had three interest rate swap agreements on certain loans with our customers, which are scheduled to mature at various dates ranging from June 2031 to July 2032.

In December 2023, one interest rate swap, scheduled to mature in October 2037, was terminated as the hedged loan was paid off.

The loan interest rate swaps were designated as fair value hedges and allowed us to offer long-term fixed-rate loans to customers without assuming the interest rate risk of a long-term asset.

4 unchanged sentences

Asset derivatives Liability derivatives

(in thousands) September 30,

2023 December 31, 2022 September 30,

(in thousands) March 31,

2024 December 31, 2023 March 31,

2024 December 31, 2023

7 unchanged sentences

$ 400 $ 287 $ — $ 2

1 See Note 3, Fair Value of Assets and Liabilities, for valuation methodology.

The following table presents the carrying amount and associated cumulative basis adjustment related to the application of fair value hedge accounting that is included in the carrying amount of hedged assets as of September 30, 2023 and December 31, 2022.

1 Refer to Note 3, Fair Value of Assets and Liabilities, for valuation methodology.

Carrying Amounts of Hedged Assets Cumulative Amounts of Fair Value Hedging Adjustments Included in the Carrying Amounts of the Hedged Assets

(in thousands) September 30, 2023 December 31, 2022 September 30, 2023 December 31, 2022

(in thousands) March 31, 2024 December 31, 2023 March 31, 2024 December 31, 2023

Available-for-sale securities 1

3 unchanged sentences

1 Carrying value equals the amortized cost basis of the securities underlying the hedge relationship, which is the book value net of the fair value hedge adjustment.

Amortized cost excludes accrued interest totaling $ 136 thousand as of September 30, 2023.

Amortized cost excludes accrued interest totaling $ 233 thousand and $ 222 thousand as of March 31, 2024 and December 31, 2023, respectively.

2 Carrying value equals the amortized cost basis of the loans underlying the hedge relationship, which is the loan balance net of deferred loan origination fees and cost and the fair value hedge adjustment.

Amortized cost excludes accrued interest, which was not material.

The following table presents the pretax net gains (losses) recognized in interest income related to our fair value hedges.

Three months ended Nine months ended

(in thousands) September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022

The following table presents the pretax net gains (losses) recognized in interest income related to our fair value hedges for the years presented.

Three months ended

(in thousands) March 31, 2024 March 31, 2023

Interest on investment securities 1

Increase (decrease) in fair value of interest rate swaps hedging available-for-sale securities

$ 367 $ — $ 367 $ —

Receivable (payment) on interest rate swaps 162 — 162 —

(Decrease) increase in carrying value included in the hedged available-for-sale securities

( 367 ) — ( 367 ) —

Increase in fair value of interest rate swaps hedging available-for-sale securities $ 1,217 $ —

Hedged interest earned 206 —

Decrease in carrying value included in the hedged available-for-sale securities

Net gain (loss) recognized in interest income on investment securities

$ 162 $ — $ 162 $ —

Interest and fees on loans 1

1 unchanged sentence

$ 115 $ ( 221 )

Receivable (payment) on interest rate swaps 74 ( 19 ) 192 ( 169 )

Hedged interest earned 54 51

(Decrease) increase in carrying value included in the hedged loans

( 211 ) ( 538 ) ( 233 ) ( 1,718 )

Decrease in value of yield maintenance agreement ( 2 ) ( 2 )

Net gain (loss) recognized in interest income on loans

$ 84 $ ( 13 ) $ 204 $ ( 161 )

Net gain recognized in interest income on loans $ 57 $ 49

1 Represents the income line item in the statement of comprehensive income in which the effects of fair value hedges are recorded.

10 unchanged sentences

Instruments Received Net Amount

September 30, 2023

March 31, 2024

$ 400 $ — $ 400 $ — $ — $ 400

3 unchanged sentences

Total $ 287 $ — $ 287 $ — $ — $ 287

Offsetting of Financial Liabilities and Derivative Liabilities

Gross Amounts Net Amounts of Gross Amounts Not Offset in

Gross Amounts Offset in the Assets Presented the Statements of Condition

of Recognized Statements of in the Statements Financial Cash Collateral

(in thousands) Assets 1

Condition of Condition 1

Instruments Received Net Amount

March 31, 2024

142 — 142 ( 142 ) — —

Total $ 142 $ — $ 142 $ ( 142 ) $ — $ —

December 31, 2023

Counterparty $ 1,361 $ — $ 1,361 $ ( 287 ) $ ( 330 ) $ 744

Total $ 1,361 $ — $ 1,361 $ ( 287 ) $ ( 330 ) $ 744

1 Amounts exclude accrued interest on swaps.

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements