What changed in this filing

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Item 1. Financial Statements

2024-08-09 compared with 2024-05-10 · 350 added, 134 removed, 874 unchanged (36% of the section changed)

Financial Statements

COMMUNITY BANK SYSTEM, INC.

COMMUNITY FINANCIAL SYSTEM, INC.

CONSOLIDATED STATEMENTS OF CONDITION (Unaudited)

3 unchanged sentences

Held-to-maturity securities (fair value of $ 1,167,755 and $ 1,121,816 , respectively)

Equity and other securities (cost of $ 69,892 and $ 72,275 , respectively)

Equity and other securities

Allowance for credit losses

10 unchanged sentences

Securities sold under agreement to repurchase, short-term

Other Federal Home Loan Bank borrowings

Federal Home Loan Bank and other borrowings

Accrued interest and other liabilities

8 unchanged sentences

Accumulated other comprehensive loss

Treasury stock, at cost ( 1,775,546 shares, including 100,870 shares held by deferred compensation arrangements at March 31, 2024 and 1,045,232 shares including 120,556 shares held by deferred compensation arrangements at December 31, 2023)

Treasury stock, at cost ( 2,026,587 shares, including 101,911 shares held by deferred compensation arrangements at June 30, 2024, and 1,045,232 shares including 120,556 shares held by deferred compensation arrangements at December 31, 2023)

Deferred compensation arrangements ( 101,911 and 120,556 shares, respectively)

2 unchanged sentences

See accompanying notes to consolidated financial statements (unaudited).

COMMUNITY BANK SYSTEM, INC.

COMMUNITY FINANCIAL SYSTEM, INC.

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

1 unchanged sentence

Three Months Ended

Six Months Ended

Interest income:

19 unchanged sentences

Gain on debt extinguishment

Unrealized gain on equity securities

Unrealized gain (loss) on equity securities

Total noninterest revenues

6 unchanged sentences

Business development and marketing

Acquisition-related contingent consideration adjustment

Litigation accrual

6 unchanged sentences

See accompanying notes to consolidated financial statements (unaudited).

COMMUNITY BANK SYSTEM, INC.

COMMUNITY FINANCIAL SYSTEM, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

1 unchanged sentence

Three Months Ended

Six Months Ended

Pension and other post retirement obligations:

10 unchanged sentences

Other comprehensive (loss) gain related to unrealized (losses) gains on investment securities, net of taxes

Other comprehensive (loss) income, net of tax

Other comprehensive (loss) income, net of taxes

Comprehensive income

6 unchanged sentences

See accompanying notes to consolidated financial statements (unaudited).

COMMUNITY BANK SYSTEM, INC.

COMMUNITY FINANCIAL SYSTEM, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)

Three months ended March 31, 2024 and 2023

Three months ended June 30, 2024 and 2023

(In Thousands, Except Share Data)

Comprehensive

Balance at March 31, 2024

Other comprehensive loss, net of tax

Dividends declared:

Common, $ 0.45 per share

Common stock activity under employee stock plans

Stock-based compensation

Distribution of stock under deferred compensation agreements

Treasury stock purchased

Balance at June 30, 2024

Balance at March 31, 2023

Other comprehensive loss, net of tax

Dividends declared:

Common, $ 0.44 per share

Common stock activity under employee stock plans

Stock-based compensation

Treasury stock purchased

Balance at June 30, 2023

See accompanying notes to consolidated financial statements (unaudited).

COMMUNITY FINANCIAL SYSTEM, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)

Six months ended June 30, 2024 and 2023

(In Thousands, Except Share Data)

Comprehensive

Balance at December 31, 2023

6 unchanged sentences

Treasury stock purchased

Balance at March 31, 2024

( 1,002,124 )

Balance at June 30, 2024

Balance at December 31, 2022

6 unchanged sentences

Treasury stock purchased

Balance at March 31, 2023

Balance at June 30, 2023

See accompanying notes to consolidated financial statements (unaudited).

COMMUNITY BANK SYSTEM, INC.

COMMUNITY FINANCIAL SYSTEM, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(In Thousands)

Three Months Ended

Six Months Ended

Operating activities:

7 unchanged sentences

Loss on sales of investment securities

Unrealized gain on equity securities

Unrealized (gain) loss on equity securities

Income from bank-owned life insurance policies

8 unchanged sentences

Purchases of held-to-maturity investment securities

Purchases of equity and other securities

Purchases of equity and other securities, net

Net increase in loans

Cash paid for acquisitions

Cash paid for acquisitions, net of cash received

Proceeds from sales of premises, equipment and other assets

2 unchanged sentences

Financing activities:

Net increase in deposits

Net decrease in overnight borrowings

Net increase (decrease) in deposits

Net increase (decrease) in overnight borrowings

Net decrease in securities sold under agreement to repurchase, short-term

Proceeds from other Federal Home Loan Bank borrowings

Payments on and maturities of other Federal Home Loan Bank borrowings

Payments of contingent consideration for acquisitions

Redemption of subordinated notes payable

Proceeds from the issuance of common stock

Proceeds from issuance of common stock

Purchases of treasury stock

13 unchanged sentences

Transfers from premises and equipment, net to other assets

Finance lease right of use asset in exchange for finance lease liability

Acquisitions:

3 unchanged sentences

See accompanying notes to consolidated financial statements (unaudited).

COMMUNITY BANK SYSTEM, INC.

COMMUNITY FINANCIAL SYSTEM, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

MARCH 31, 2024

JUNE 30, 2024

BASIS OF PRESENTATION

The interim financial data as of and for the three months ended March 31, 2024 is unaudited;

however, in the opinion of Community Bank System, Inc.

The interim financial data as of and for the three and six months ended June 30, 2024 is unaudited;

however, in the opinion of Community Financial System, Inc.

(the “Company”), the interim data includes all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the results for the interim periods in conformity with generally accepted accounting principles in the United States of America (“GAAP”) and Article 10 of Regulation S-X.

1 unchanged sentence

The Company’s unaudited interim consolidated financial statements and notes thereto should be read in conjunction with the Company’s audited annual consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 filed with the Securities and Exchange Commission (“SEC”) on February 29, 2024.

Subsequent Period Acquisition

On April 1, 2024, the Company, through its subsidiary OneGroup NY, Inc.

(“OneGroup”), completed the acquisition of a New York based insurance agency for $ 4.2 million in cash plus contingent consideration with an estimated fair value of $ 1.0 million at acquisition date.

The effects of the acquisition will be included in the consolidated financial statements from that date.

Subsequent Period Acquisitions

On July 1, 2024, the Company, through its subsidiary OneGroup NY, Inc.

(“OneGroup”), completed the acquisition of certain assets of an insurance agency headquartered in Florida for $ 0.9 million in cash.

The effects of the acquired assets will be included in the consolidated financial statements from the acquisition date.

Current and Prior Period Acquisitions

On May 1, 2024, the Company, through its subsidiary OneGroup, completed the acquisition of certain assets of an insurance agency headquartered in New York for $ 0.3 million in cash.

The Company recorded a $ 0.3 million customer list intangible asset in connection with the acquisition.

The effects of the acquired assets have been included in the consolidated financial statements since the date of acquisition.

The operations of this acquisition have been integrated into the Company and discrete reporting of revenues and direct expenses for the three and six months ended June 30, 2024 is not practicable.

On April 1, 2024, the Company, through its subsidiary OneGroup, completed the acquisition of a New York-based insurance agency for $ 4.2 million in cash plus contingent consideration with an estimated fair value of $ 0.4 million at acquisition date.

The effects of the acquired assets and liabilities are included in the consolidated financial statements from that date.

The contingent consideration arrangement requires additional consideration to be paid by the Company based on a percentage of retained revenue two years after the date of acquisition, up to a maximum of $ 1.0 million.

The fair value of the contingent consideration of $ 0.4 million at the acquisition date was estimated based on projected retained revenue levels.

Net assets acquired were $ 2.1 million, including $ 2.5 million of customer list intangible assets, and the Company recorded $ 2.5 million of goodwill in conjunction with the acquisition.

Revenues and direct expenses included in the consolidated statements of income for the three and six months ended June 30, 2024 were immaterial.

On February 1, 2024, the Company, through its subsidiary Benefit Plans Administrative Services, LLC (“BPA”), completed the acquisition of certain assets of Creative Plan Designs Limited (“CPD”), a financial services company that provides employee benefit plan design, administration and consulting services.

1 unchanged sentence

The effects of the acquired assets are included in the consolidated financial statements from that date.

Revenues and direct expenses included in the consolidated statement of income for the three months ended March 31, 2024 were immaterial.

The acquisition of CPD includes contingent consideration arrangements that require additional consideration to be paid by the Company based on the future revenue levels of CPD over approximately three year s and a contract holdback payment.

Net assets acquired were $ 4.5 million, including $ 5.5 million of customer list intangible assets, and the Company recorded $ 4.4 million of goodwill in conjunction with the acquisition.

The operations of this acquisition have been integrated into the Company and discrete reporting of revenues and direct expenses for the three and six months ended June 30, 2024 is not practicable.

The contract holdback will be paid upon satisfaction of certain customer retention requirements, and will be prorated based on actual results.

13 unchanged sentences

The effects of the acquired assets have been included in the consolidated financial statements since the date of acquisition.

The operations of these acquisitions have been integrated into the Company and discrete reporting of revenues and direct expenses for the three months ended March 31, 2024 and 2023 is not practicable.

The operations of these acquisitions have been integrated into the Company and discrete reporting of revenues and direct expenses for the three and six months ended June 30, 2024 and 2023 is not practicable.

On March 1, 2023, the Company, through its subsidiary Community Bank, N.A.

2 unchanged sentences

The effects of the acquired assets have been included in the consolidated financial statements since that date.

Revenues of approximately $ 0.6 million and $ 0.1 million and direct expenses of approximately $ 0.7 million and $ 0.2 million were included in the consolidated statements of income for the three months ended March 31, 2024 and 2023, respectively.

Revenues of approximately $ 0.1 million and $ 0.7 million and direct expenses of approximately $ 0.5 million and $ 1.3 million were included in the consolidated statements of income for the three and six months ended June 30, 2024, respectively.

Revenues for the three months ended June 30, 2023 were immaterial and were approximately $ 0.1 million for the six months ended June 30, 2023.

Direct expenses of approximately $ 0.5 million and $ 0.7 million were included in the consolidated statements of income for the three and six months ended June 30, 2023, respectively.

The assets and liabilities assumed in the acquisitions were recorded at their estimated fair values based on management’s best estimates using information available at the dates of the acquisitions, and are subject to adjustment based on updated information not available at the time of the acquisitions.

During the first quarter of 2024, an additional cash consideration payment of $ 0.1 million was made associated with a 2023 acquisition based upon the receipt of new information resulting in a $ 0.1 million increase to the carrying value of other intangibles and had no impact on the carrying value of goodwill.

During the first quarter of 2024, an additional cash consideration payment of $ 0.1 million was made in connection with a 2023 acquisition based upon the receipt of new information resulting in a $ 0.1 million increase to the carrying value of other intangibles and had no impact on the carrying value of goodwill.

The Axiom acquisition generally expanded the Company’s lending presence nationwide.

8 unchanged sentences

Recognized amounts of identifiable assets acquired and liabilities assumed:

Cash and cash equivalents

Premises and equipment, net

2 unchanged sentences

Total identifiable assets, net

(1) Includes amounts for OneGroup acquisitions completed as of June 30, 2024.

(2) Includes amounts for all OneGroup, Wealth Partners and BPAS acquisitions completed in 2023.

The other intangibles related to the CPD acquisition are being amortized using an accelerated method over an estimated useful life of twelve years .

The other intangibles related to the OneGroup, Wealth Partners and BPAS acquisitions completed in 2023 and the Axiom acquisition are being amortized using an accelerated method over an estimated useful life of eight years .

The goodwill, which is not amortized for book purposes, was assigned to the Employee Benefit Services segment for the CPD acquisition and the BPAS acquisition completed in 2023, the Insurance segment for the OneGroup acquisitions completed in 2023, the Wealth Management segment for the Wealth Partners acquisition completed in 2023, and the Banking and Corporate segment for the Axiom acquisition.

Goodwill arising from all of the acquisitions completed in the first quarter of 2024 and 2023 is deductible for tax purposes.

The other intangibles related to the OneGroup acquisitions completed in 2024 and 2023, the Wealth Partners and BPAS acquisitions completed in 2023 and the Axiom acquisition are being amortized using an accelerated method over an estimated useful life of eight years .

The goodwill, which is not amortized for book purposes, was assigned to the Employee Benefit Services segment for the CPD acquisition and the BPAS acquisition completed in 2023, the Insurance segment for the OneGroup acquisitions completed in 2024 and 2023, the Wealth Management segment for the Wealth Partners acquisition completed in 2023 and the Banking and Corporate segment for the Axiom acquisition.

The goodwill arising from the OneGroup acquisition in the second quarter of 2024 is not deductible for tax purposes, while the goodwill arising from all of the acquisitions completed in the first quarter of 2024 and 2023 is deductible for tax purposes.

Direct costs related to the acquisitions were expensed as incurred.

Merger and acquisition integration-related expenses were immaterial during both the three months ended March 31, 2024 and 2023 and have been separately stated in the consolidated statements of income.

Merger and acquisition integration-related expenses were $ 0.1 million during the three and six months ended June 30, 2024.

Merger and acquisition integration-related expenses were immaterial for the three months ended June 30, 2023 and $ 0.1 million for the six months ended June 30, 2023.

These expenses have been separately stated in the consolidated statements of income.

ACCOUNTING POLICIES

The accounting policies of the Company, as applied in the consolidated interim financial statements presented herein, are substantially the same as those followed on an annual basis as presented on pages 84 through 97 of the Annual Report on Form 10-K for the year ended December 31, 2023 filed with the Securities and Exchange Commission (“SEC”) on February 29, 2024 except as noted below.

Contract Balances

4 unchanged sentences

The Company does not typically enter into long-term revenue contracts with customers, and therefore, does not experience significant contract balances.

As of March 31, 2024, $ 30.2 million of accounts receivable, including $ 8.7 million of unbilled fee revenue, and $ 3.6 million of unearned revenue, was recorded in the consolidated statements of condition.

As of June 30, 2024, $ 31.9 million of accounts receivable, including $ 8.4 million of unbilled fee revenue, and $ 2.6 million of unearned revenue, was recorded in the consolidated statements of condition.

As of December 31, 2023, $ 41.7 million of accounts receivable, including $ 8.1 million of unbilled fee revenue, and $ 0.8 million of unearned revenue, was recorded in the consolidated statements of condition.

2 unchanged sentences

The appointment of the Company’s new President and Chief Executive Officer followed the retirement of the Company’s former President and Chief Executive Officer, who previously served as the Company’s CODM until December 31, 2023.

The change in determination of reportable segments was also driven by a change in the disaggregation of segment information that management believes would be useful to readers of the financial statements and to also align its reportable segments with financial information communicated to external parties, the Board of Directors and the business leaders who regularly meet with the CODM that also review this information at the same level of disaggregation.

The change in determination of reportable segments was also driven by a change in the disaggregation of segment information that management believes would be useful to readers of the financial statements and to align its reportable segments with financial information communicated to external parties, the Company’s Board of Directors (the “Board”) and the business leaders who regularly meet with the CODM who also review this information at the same level of disaggregation.

The change in reportable measure of segment profit or loss aligns with a change in the measurement principles of the internal reporting package used by the CODM to allocate resources and assess performance, which is presented on an operating basis excluding certain items considered non-core to the underlying business.

5 unchanged sentences

The prior period has been recast to conform to the new current period presentation.

See Note L for more detail on segment information.

See Note M for more detail on segment information.

The Company entered into certain finance leases during the second quarter of 2024.

Leases are classified as operating or finance leases at the lease commencement date.

The classification is governed by five criteria in accordance with FASB ASC 842-10-25-2, and if any of the five criteria are met, the lease is classified as a finance lease.

All other leases are classified as an operating lease.

The right-of-use assets associated with finance leases are included in other assets in the Company’s consolidated statements of condition.

The lease liabilities associated with finance leases are included in Federal Home Loan Bank (“FHLB”) and other borrowings in the Company’s consolidated statements of condition.

Reclassifications

9 unchanged sentences

The amendments in this update are effective for fiscal years beginning after December 15, 2024 and early adoption is permitted.

The Company is evaluating the impact this will have on the consolidated financial statements.

The Company is evaluating the impact this will have on the consolidated financial statements, however it is not expected to have a material impact on the financial statements.

INVESTMENT SECURITIES

The amortized cost and estimated fair value of investment securities as of March 31, 2024 and December 31, 2023 are as follows:

March 31, 2024

The amortized cost and estimated fair value of investment securities as of June 30, 2024 and December 31, 2023 are as follows:

June 30, 2024

December 31, 2023

11 unchanged sentences

Total held-to-maturity portfolio

Equity and Other Securities:

Equity securities, at fair value

Federal Home Loan Bank common stock

Federal Reserve Bank common stock

Other equity securities, at adjusted cost

Total equity and other securities

Included in the Company’s investment securities portfolio is Federal Reserve Bank (“FRB”) common stock with a carrying value of $ 33.6 million at both March 31, 2024 and December 31, 2023.

As of June 30, 2024, equity and other securities on the consolidated statements of condition consists of equity securities with readily determinable fair values carried at $ 2.0 million and equity securities without readily determinable fair values carried at $ 84.5 million, including FHLB common stock of $ 44.8 million, Federal Reserve Bank (“FRB”) common stock of $ 33.6 million and other equity securities of $ 6.1 million.

As of December 31, 2023, equity and other securities on the consolidated statements of condition consists of equity securities with readily determinable fair values carried at $ 0.4 million and equity securities without readily determinable fair values carried at $ 72.8 million, including FHLB common stock of $ 32.5 million, FRB common stock of $ 33.6 million and other equity securities of $ 6.7 million.

The investment in FRB stock represents approximately half of the total required subscription, and the remaining half is unpaid and remains subject to call by the FRB.

The amount of upward and downward adjustments to equity securities without readily determinable fair values was not material for the three and six months ended June 30, 2024 and 2023.

The gains and losses on equity and other securities for the three and six months ended June 30, 2024 and 2023 are as follows:

Three Months Ended

Six Months Ended

(000’s omitted)

Net gain (loss) recognized on equity securities

Net gain (loss) recognized on equity securities sold during the period

Unrealized gain (loss) recognized on equity securities still held

A summary of investment securities that have been in a continuous unrealized loss position is as follows:

As of March 31, 2024

As of June 30, 2024

Less than 12 Months

34 unchanged sentences

The unrealized losses in the portfolios are primarily attributable to changes in interest rates.

As such, management does not believe any individual unrealized loss as of March 31, 2024 represents credit losses and no unrealized losses have been recognized in the provision for credit losses.

Accordingly, there is no allowance for credit losses on the Company’s available-for-sale portfolio as of March 31, 2024.

Accrued interest receivable on available-for-sale debt securities, included in accrued interest and fees receivable on the consolidated statements of condition, totaled $ 11.6 million at March 31, 2024 and is excluded from the estimate of credit losses.

As such, management does not believe any individual unrealized loss as of June 30, 2024 represents credit losses and no related allowance for credit losses has been recognized.

Accordingly, there is no allowance for credit losses on the Company’s available-for-sale investment portfolio as of June 30, 2024.

Accrued interest receivable on available-for-sale debt securities, included in accrued interest and fees receivable on the consolidated statements of condition, totaled $ 14.0 million at June 30, 2024 and is excluded from the estimate of credit losses.

Securities classified as held-to-maturity are included under the Current Expected Credit Loss (“CECL”) methodology.

Calculation of expected credit loss under CECL is done on a collective (“pooled”) basis, with assets grouped when similar risk characteristics exist.

The Company notes that at March 31, 2024 all securities in the held-to-maturity classification are U.S.

The Company notes that at June 30, 2024 all securities in the held-to-maturity classification are U.S.

Treasury securities and government agency mortgage-backed securities;

5 unchanged sentences

Management has concluded that the prepayment risk associated with these securities is insignificant and it is expected to recover the recorded investment.

Accordingly, there is no allowance for credit losses on the Company’s held-to-maturity debt portfolio as of March 31, 2024.

Accrued interest receivable on held-to-maturity debt securities, included in accrued interest and fees receivable on the consolidated statements of condition, totaled $ 3.3 million at March 31,2024 and is excluded from the estimate of credit losses.

Accordingly, there is no allowance for credit losses on the Company’s held-to-maturity debt portfolio as of June 30, 2024.

Accrued interest receivable on held-to-maturity debt securities, included in accrued interest and fees receivable on the consolidated statements of condition, totaled $ 5.4 million at June 30, 2024 and is excluded from the estimate of credit losses.

The Company has the intent and ability to hold the securities to maturity.

The amortized cost and estimated fair value of debt securities at March 31, 2024, by contractual maturity, are shown below.

The amortized cost and estimated fair value of debt securities at June 30, 2024, by contractual maturity, are shown below.

Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

9 unchanged sentences

Government agency collateralized mortgage obligations

Investment securities with a carrying value of $ 2.76 billion and $ 2.14 billion at March 31, 2024 and December 31, 2023, respectively, were pledged to collateralize certain deposits and borrowings.

Securities pledged to collateralize certain deposits and borrowings included $ 393.5 million and $ 598.9 million of U.S.

Treasury securities that were pledged as collateral for securities sold under agreement to repurchase at March 31, 2024 and December 31, 2023, respectively.

All securities sold under agreement to repurchase as of March 31, 2024 and December 31, 2023 have an overnight and continuous maturity.

Investment securities with a carrying value of $ 2.05 billion and $ 2.14 billion at June 30, 2024 and December 31, 2023, respectively, were pledged to collateralize certain deposits and borrowings.

Securities pledged to collateralize certain borrowings included $ 344.8 million and $ 598.9 million of U.S.

Treasury securities that were pledged as collateral for securities sold under agreement to repurchase at June 30, 2024 and December 31, 2023, respectively.

All securities sold under agreement to repurchase as of June 30, 2024 and December 31, 2023 have an overnight and continuous maturity.

During the first quarter of 2023, the Company sold $ 786.1 million in book value of available-for-sale U.S.

2 unchanged sentences

The proceeds from these sales of $ 733.8 million were redeployed entirely towards paying off existing overnight borrowings.

During the second quarter of 2024, the Company sold $ 31.2 million in book value of available-for-sale obligations of state and political subdivisions securities, recognizing $ 0.2 million of gross realized gains and $ 0.4 million of gross realized losses.

The proceeds from these sales of $ 31.0 million were redeployed entirely towards paying off existing overnight borrowings.

LOANS AND ALLOWANCE FOR CREDIT LOSSES

11 unchanged sentences

Loans, net of allowance for credit losses

The following table presents the aging of the amortized cost basis of the Company’s past due loans by segment as of March 31, 2024 and December 31, 2023:

The following table presents the aging of the amortized cost basis of the Company’s past due loans by segment as of June 30, 2024 and December 31, 2023:

90+ Days Past

(000’s omitted)

March 31, 2024

June 30, 2024

Still Accruing

17 unchanged sentences

Consumer direct

No interest income on nonaccrual loans was recognized during the three months ended March 31, 2024 and 2023.

An immaterial amount of accrued interest was written off on nonaccrual loans by reversing interest income.

An immaterial amount of interest income on nonaccrual loans was recognized during the three and six months ended June 30, 2024 and 2023 and an immaterial amount of accrued interest was written off on nonaccrual loans by reversing interest income.

The Company uses several credit quality indicators to assess credit risk in an ongoing manner.

9 unchanged sentences

The condition of the borrower has deteriorated to the point that collection of the balance is improbable based on current facts and conditions and loss is likely.

The following tables show the amount of business lending loans by credit quality category at March 31, 2024 and December 31, 2023:

The following tables show the amount of business lending loans by credit quality category at June 30, 2024 and December 31, 2023:

(000’s omitted)

Term Loans Amortized Cost Basis by Origination Year

March 31, 2024

June 30, 2024

CRE – multifamily:

18 unchanged sentences

Current period gross charge-offs (1)

(1) For the six months ended June 30, 2024.

(000’s omitted)

21 unchanged sentences

Current period gross charge-offs (1)

(1) For the year ended December 31, 2023.

All other loans are underwritten and structured using standardized criteria and characteristics, primarily payment performance, and are monitored collectively on a monthly basis.

2 unchanged sentences

Nonperforming loans include 90+ days past due and still accruing and nonaccrual loans.

The following tables detail the balances in all other loan categories at March 31, 2024 and December 31, 2023:

The following tables detail the balances in all other loan categories at June 30, 2024 and December 31, 2023:

(000’s omitted)

Term Loans Amortized Cost Basis by Origination Year

March 31, 2024

June 30, 2024

Consumer mortgage:

18 unchanged sentences

(2) FICO CDE refers to loans with FICO scores less than 720 at origination and potentially higher risk.

(3) For the six months ended June 30, 2024.

(000’s omitted)

21 unchanged sentences

(2) FICO CDE refers to loans with FICO scores less than 720 at origination and potentially higher risk.

(3) For the year ended December 31, 2023.

Business lending loans greater than $ 0.5 million that are on nonaccrual are individually assessed, and if necessary, a specific allocation of the allowance for credit losses is provided.

A summary of individually assessed business loans as of March 31, 2024 and December 31, 2023 follows:

If management determines that foreclosure is probable, expected credit losses for collateral dependent loans are based on the fair value of the collateral at the reporting date, adjusted for estimated selling costs as appropriate.

A loan is considered collateral dependent when the borrower is experiencing financial difficulty and the loan is expected to be repaid substantially through the operation or sale of the collateral.

The collateral for individually assessed CRE non-owner occupied loans consists mainly of office properties associated with two customers.

A summary of individually assessed business loans as of June 30, 2024 and December 31, 2023 follows:

June 30, 2024

December 31, 2023

(000’s omitted)

Loans with allowance allocation:

CRE – owner occupied

CRE – non-owner occupied

Loans without allowance allocation:

Carrying balance

Contractual balance

Specifically allocated allowance

The average carrying balance of individually assessed loans was $ 14.5 million and $ 3.1 million for the three months ended March 31, 2024 and 2023, respectively.

No interest income was recognized on individually assessed loans for the three months ended March 31, 2024 and 2023.

CRE – owner occupied

CRE – non-owner occupied

Commercial & industrial and other business loans

The average carrying balance of individually assessed loans was $ 15.9 million and $ 2.5 million for the three months ended June 30, 2024 and 2023, respectively.

The average carrying balance of individually assessed loans was $ 16.1 million and $ 3.1 million for the six months ended June 30, 2024 and 2023, respectively.

No interest income was recognized on individually assessed loans for the three or six months ended June 30, 2024 and 2023.

Occasionally, the Company modifies loans to borrowers experiencing financial difficulty by providing principal forgiveness, term extension, payment delay, or interest rate reduction.

6 unchanged sentences

The estimate of allowance for credit losses includes historical losses from loans that were modified due to borrower financial difficulty, therefore a charge to the allowance for credit losses is generally not recorded upon modification.

The following table presents the amortized cost basis of loans at March 31, 2024 that were both experiencing financial difficulty and modified during the three months ended March 31, 2024, by class and by type of modification.

The following table presents the amortized cost basis of loans at June 30, 2024 that were both experiencing financial difficulty and modified during the three and six months ended June 30, 2024, by class and by type of modification.

The percentage of the amortized cost basis of loans that were modified to borrowers experiencing financial difficulty as compared to the amortized cost basis of each class of financing receivable is also presented below.

The Company did not have any modifications to borrowers experiencing financial difficulty other than term extensions.

During the three months ended March 31, 2023, the amount of loans that were modified to borrowers experiencing financial difficulty was immaterial.

During the three and six months ended June 30, 2023, the amount of loans that were modified to borrowers experiencing financial difficulty was immaterial.

Three Months Ended

March 31, 2024

Six Months Ended

June 30, 2024

Total Class of

(000s omitted except for percentages)

2 unchanged sentences

Commercial & industrial and other business loans

Consumer mortgage

The Company closely monitors the performance of loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts.

The following table presents the performance of such loans that have been modified in the last 12 months.

March 31, 2024

June 30, 2024

90+ Days Past

6 unchanged sentences

Consumer mortgage

The following table presents the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty during the three months ended March 31, 2024:

The following table presents the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty during the three and six months ended June 30, 2024:

Three Months Ended

March 31, 2024

Six Months Ended

June 30, 2024

Weighted-Average

Term Extension (Years)

CRE – owner occupied

1 unchanged sentence

Commercial & industrial and other business loans

There were no loans modified to borrowers with financial difficulty that had a payment default subsequent to modification during the three months ended March 31, 2024 and 2023.

Consumer mortgage

There were no loans modified to borrowers with financial difficulty that had a payment default subsequent to modification during the three months ended June 30, 2024 and 2023.

Allowance for Credit Losses

The following presents by loan segment the activity in the allowance for credit losses during the three months ended March 31, 2024 and 2023:

Three Months Ended March 31, 2024

The following presents by segment the activity in the allowance for credit losses during the three months and six months ended June 30, 2024 and 2023:

Three Months Ended June 30, 2024

(000’s omitted)

6 unchanged sentences

Total allowance for credit losses

Three Months Ended March 31, 2023

Three Months Ended June 30, 2023

(000’s omitted)

6 unchanged sentences

Total allowance for credit losses

The allowance for credit losses increased to $ 70.1 million at March 31, 2024 compared to $ 66.7 million at December 31, 2023 and $ 63.2 million at March 31, 2023, reflective of an increase in loans outstanding, a stable economic forecast and an increase in the qualitative assessment of future uncertainty primarily concerning the business lending and consumer indirect portfolios.

Accrued interest receivable on loans, included in accrued interest and fees receivable on the consolidated statements of condition, totaled $ 34.4 million at March 31, 2024, and is excluded from the estimate of credit losses and amortized cost basis of loans.

Under ASU No.

2016-13, Financial Instruments – Credit Losses (Topic 326) , also referred to as CECL, the Company utilizes the historical loss rate on its loan portfolio as the initial basis for the estimate of credit losses using the cumulative loss, vintage loss and line loss methods, which is derived from the Company’s historical loss experience.

Six Months Ended June 30, 2024

(000’s omitted)

Business lending

Consumer mortgage

Consumer indirect

Consumer direct

Allowance for credit losses – loans

Liabilities for off-balance-sheet credit exposures

Total allowance for credit losses

Six Months Ended June 30, 2023

(000’s omitted)

Business lending

Consumer mortgage

Consumer indirect

Consumer direct

Allowance for credit losses – loans

Liabilities for off-balance-sheet credit exposures

Total allowance for credit losses

The allowance for credit losses increased to $ 71.4 million at June 30, 2024 compared to $ 66.7 million at December 31, 2023 and $ 63.2 million at March 31, 2023, reflective of an increase in loans outstanding, a stable economic forecast and continued macroeconomic uncertainty primarily concerning the business lending and consumer indirect portfolios.

Accrued interest receivable on loans, included in accrued interest and fees receivable on the consolidated statements of condition, totaled $ 34.4 million at June 30, 2024 and is excluded from the estimate of credit losses and amortized cost basis of loans.

The Company utilizes the historical loss rate on its loan portfolio as the initial basis for the estimate of credit losses using the cumulative loss, vintage loss and line loss methods, which is derived from the Company’s historical loss experience.

Adjustments to historical loss experience were made for differences in current loan-specific risk characteristics and to address current period delinquencies, charge-off rates, risk ratings, lack of loan level data through an entire economic cycle, changes in loan sizes and underwriting standards as well as the addition of acquired loans which were not underwritten by the Company.

3 unchanged sentences

Management determined that these qualitative adjustments were needed to adjust historical information for expected losses and to reflect changes as a result of current conditions.

For qualitative macroeconomic adjustments, the Company uses third party forecasted economic data scenarios utilizing a base scenario and two alternative scenarios that are weighted, with forecasts available as of March 31, 2024.

For qualitative macroeconomic adjustments, the Company uses third-party forecasted economic data scenarios utilizing a base scenario and two alternative scenarios that are weighted, with forecasts available as of June 30, 2024.

These forecasts were factored into the qualitative portion of the calculation of the estimated credit losses and include the impact of a decline in residential real estate and vehicle prices as well as inflation.

5 unchanged sentences

● Business lending – real estate:

The Company selected projected unemployment and commercial real estate values as indicators of forecasted losses related to commercial real estate loans and utilize both factors in an even weight for the calculation.

The Company selected projected unemployment and commercial real estate values as indicators of forecasted losses related to commercial real estate loans for non – office specific properties and utilize both factors in an even weight for the calculation.

For office specific properties, the Company selected projected office specific commercial real estate values and vacancy rates and utilize both factors in an even weight for the calculation.

The Company also considered the factors noted in business lending – non real estate.

8 unchanged sentences

In addition, current delinquencies, charge-offs and acquired loans were considered.

At March 31, 2024, loans with a carrying amount of approximately $ 4.44 billion were pledged for the availability to secure certain borrowings with the FHLB and FRB.

There were $ 394.4 million of borrowings outstanding under these arrangements at March 31, 2024.

At March 31, 2024 and December 31, 2023, there were foreclosures in process of $ 5.2 million and $ 5.8 million, respectively.

During the three months ended March 31, 2024, the Company did not purchase any loans, while the Company sold $ 1.2 million of secondary market eligible residential consumer mortgage loans during the period.

At June 30, 2024, loans with a carrying amount of approximately $ 4.49 billion were pledged for the availability to secure certain borrowings with the FHLB and FRB.

There were $ 710.7 million of borrowings outstanding under these arrangements at June 30, 2024.

At June 30, 2024 and December 31, 2023, there were foreclosures in process of $ 6.2 million and $ 5.8 million, respectively.

During the six months ended June 30, 2024, the Company did not purchase any loans, while the Company sold $ 12.8 million of secondary market eligible residential consumer mortgage loans during the period.

During the six months ended June 30, 2023, the Company did not purchase any loans and sold $ 1.8 million of secondary market eligible residential consumer mortgage loans.

GOODWILL AND IDENTIFIABLE INTANGIBLE ASSETS

The gross carrying amount and accumulated amortization for each type of identifiable intangible asset are as follows:

March 31, 2024

June 30, 2024

December 31, 2023

6 unchanged sentences

(000’s omitted)

Apr - Dec 2024

Shown below are the components of the Company’s goodwill at December 31, 2023 and March 31, 2024:

Jul - Dec 2024

Shown below are the components of the Company’s goodwill at December 31, 2023 and June 30, 2024:

(000’s omitted)

December 31, 2023

March 31, 2024

June 30, 2024

During January 2024, the Company secured $ 300.0 million in short-term borrowings through the Bank Term Funding Program at the Federal Reserve at a rate of 4.87 % , to fund expected net loan growth.

These short-term borrowings matured during March 2024 and the Bank Term Funding Program has ceased making new loans as of March 11, 2024.

During June 2024, three $ 50.0 million putable advances were executed with the FHLB for a total of $ 150.0 million in new term borrowings.

The advances are putable at the option of the FHLB in June 2025 and mature in June 2027 if the option is not exercised, at interest rates ranging from 4.38 % to 4.47 % .

BENEFIT PLANS

3 unchanged sentences

The Company made a $ 4.0 million contribution to its defined benefit pension plan in the first quarter of 2024.

The Company did no t make a contribution to its defined benefit pension plan in the first quarter of 2023.

The post-retirement benefits component of net periodic benefit cost for the three months ended March 31, 2024 and 2023 is immaterial.

The pension benefits component of net periodic benefit cost for the three months ended March 31, 2024 and 2023 is as follows:

The Company made a $ 4.3 million contribution to its defined benefit pension plan in the second quarter of 2023.

The post-retirement benefits component of net periodic benefit cost for the three and six months ended June 30, 2024 and 2023 is immaterial.

The pension benefits component of net periodic benefit cost for the three and six months ended June 30, 2024 and 2023 is as follows:

Pension Benefits

Three Months Ended

Six Months Ended

(000’s omitted)

1 unchanged sentence

Expected return on plan assets

Amortization of unrecognized net loss (gain)

Amortization of unrecognized net loss

Amortization of prior service cost

3 unchanged sentences

Under the two class method, earnings available to common shareholders for the period are allocated between common shareholders and participating securities according to dividends declared and participation rights in undistributed earnings.

The Company has determined that all of its outstanding non-vested stock awards are participating securities as of March 31, 2024.

The Company has determined that all of its outstanding non-vested stock awards are participating securities as of June 30, 2024.

Basic earnings per share are computed based on the weighted-average of the common shares outstanding for the period.

2 unchanged sentences

The treasury stock method determines the number of common shares that would be outstanding if all the dilutive options were exercised and the proceeds were used to repurchase common shares in the open market at the average market price for the applicable time period.

At March 31, 2024 and 2023, weighted-average anti-dilutive stock options outstanding were immaterial.

The following is a reconciliation of basic to diluted earnings per share for the three months ended March 31, 2024 and 2023:

Weighted-average anti-dilutive stock options outstanding were approximately 0.3 million and 0.2 million for the three and six months ended June 30, 2024, respectively, and were immaterial and 0.2 million for the three and six months ended June 30, 2023, respectively, and were not included in the computation below.

The following is a reconciliation of basic to diluted earnings per share for the three and six months ended June 30, 2024 and 2023:

Three Months Ended

Six Months Ended

(000’s omitted, except per share data)

13 unchanged sentences

The timing and extent of repurchases will depend on market conditions and other corporate considerations as determined at the Company’s discretion.

There were 750,000 shares of treasury stock purchases made under this authorization during the first quarter of 2024 with an average price paid per share of $ 45.95 .

There were 1,000,000 shares of treasury stock purchases made under this authorization during the first six months of 2024 with an average price paid per share of $ 45.84 .

At its December 2022 meeting, the Board approved a stock repurchase program authorizing the repurchase, at the discretion of senior management, of up to 2,697,000 shares of the Company’s common stock, in accordance with securities and banking laws and regulations, during the twelve-month period starting January 1, 2023.

There were 607,161 shares of treasury stock purchases made under this authorization during 2023 with an average price paid per share of $ 49.44 , including 200,000 shares of treasury stock purchases made under this authorization during the first quarter of 2023 with an average price paid per share of $ 54.53 .

There were 607,161 shares of treasury stock purchases made under this authorization during 2023 with an average price paid per share of $ 49.44 , including 400,000 shares of treasury stock purchases made under this authorization during the first six months of 2023 with an average price paid per share of $ 51.42 .

COMMITMENTS, CONTINGENT LIABILITIES AND RESTRICTIONS

11 unchanged sentences

Standby letters of credit

On November 16, 2023, the FDIC issued a final rulemaking that implemented a special assessment to recover the uninsured deposit losses from bank failures that occurred during 2023.

The final rule anticipates collecting the special assessment over eight quarterly assessment periods beginning in 2024 at an annual rate of approximately 13.4 basis points of uninsured deposits that exceeded $ 5.0 billion as of December 31, 2022.

The FDIC has indicated that the amount of the special assessment will be adjusted as their loss estimates change.

On November 16, 2023, the Federal Deposit Insurance Corporation (“FDIC”) issued a final rulemaking that implemented a special assessment to recover the uninsured deposit losses from bank failures that occurred during 2023.

The final rule anticipated collecting the special assessment over eight quarterly assessment periods beginning in 2024 at an annual rate of approximately 13.4 basis points of uninsured deposits that exceeded $ 5.0 billion as of December 31, 2022.

The FDIC has indicated that the amount of the special assessment and number of quarterly assessment periods are subject to adjustment as their loss estimates change.

The Company accrued $ 1.5 million of expense related to the FDIC special assessment in 2023.

During the three months ended March 31, 2024, the Company accrued an additional $ 0.4 million associated with an expected increase to the FDIC special assessment based on the receipt of new information.

Total FDIC insurance expense was $ 2.6 million and $ 2.1 million for the three months ended March 31, 2024 and 2023, respectively.

During the three months ended June 30, 2024, the Company reduced its accrual by $ 0.1 million associated with an expected decrease to the FDIC special assessment based on the receipt of additional new information from the FDIC that indicated an update to the special assessment amount and an increase in the number of quarterly assessment periods from eight to ten .

Total FDIC insurance expense was $ 1.9 million for both the three months ended June 30, 2024 and 2023 and was $ 4.5 million and $ 4.0 million for the six months ended June 30, 2024 and 2023, respectively.

Legal Contingencies

7 unchanged sentences

A settlement agreement has been executed by the parties and the terms of the settlement have been approved by the Court.

The Company recorded a $ 5.8 million litigation accrual at December 31, 2023 and there was no change as of March 31, 2024.

The Company recorded a $ 5.8 million litigation accrual at December 31, 2023.

During the three months ended June 2024, the Company paid $ 5.8 million to the qualified settlement fund and the claims administrator mailed a notice and settlement check to class members who are eligible to participate in the settlement.

Any funds that remain in the qualified settlement fund after the deadline to negotiate the settlement checks will revert to CBNA during the three months ended December 31, 2024.

Accounting standards establish a framework for measuring fair value and require certain disclosures about such fair value instruments.

7 unchanged sentences

There were no transfers between any of the levels for the periods presented.

March 31, 2024

June 30, 2024

(000’s omitted)

9 unchanged sentences

Commitments to originate real estate loans for sale

Forward sales commitments

Interest rate swap agreements asset

Interest rate swap agreements liability

December 31, 2023

23 unchanged sentences

The fair value of mortgage loans held for sale is determined using quoted secondary-market prices of loans with similar characteristics and, as such, has been classified as a Level 2 valuation.

The unpaid principal value of mortgage loans held for sale was approximately $ 0.1 million at March 31, 2024 and $ 0.4 million at December 31, 2023.

The unpaid principal value of mortgage loans held for sale was approximately $ 1.2 million at June 30, 2024 and $ 0.4 million at December 31, 2023.

Mortgage loans held for sale are included in other assets in the consolidated statements of condition.

12 unchanged sentences

The determination of expected net cash flows is considered a significant unobservable input contributing to the Level 3 classification of commitments to originate real estate loans for sale.

● Interest rate swaps – The interest rate swaps are reported at their fair value utilizing Level 2 inputs from a third-party advisor.

The fair value measurement of the interest rate swap is determined by netting the discounted future fixed cash payments and the discounted expected variable cash receipts.

The variable cash receipts are based on the expectation of future interest rates derived from observed market interest rate curves.

The changes in Level 3 assets measured at fair value on a recurring basis are immaterial.

The fair value information of assets and liabilities measured on a non-recurring basis presented below is not as of the period-end, but rather as of the date the fair value adjustment was recorded closest to the date presented.

March 31, 2024

June 30, 2024

December 31, 2023

14 unchanged sentences

The appraisals are sometimes further discounted based on management’s historical knowledge, changes in market conditions from the time of valuation, and/or management’s expertise and knowledge of the customer and customer’s business.

Such discounts are significant, ranging from 9.0 % to 73.8 % at March 31, 2024 and result in a Level 3 classification of the inputs for determining fair value.

Such discounts are significant, ranging from 7.1 % to 93.1 % at June 30, 2024 and result in a Level 3 classification of the inputs for determining fair value.

OREO is reviewed and evaluated on at least a quarterly basis for additional impairment and adjusted accordingly, based on the same factors identified above.

4 unchanged sentences

Such inputs include estimates of the cost of servicing loans, appropriate discount rate and prepayment speeds and are considered to be unobservable and contribute to the Level 3 classification of mortgage servicing rights.

In accordance with GAAP, the Company must record impairment charges, on a nonrecurring basis, when the carrying value of a stratum exceeds its estimated fair value.

In accordance with GAAP, the Company records impairment charges, on a nonrecurring basis, when the carrying value of a stratum exceeds its estimated fair value.

Impairment is recognized through a valuation allowance.

There is a valuation allowance of approximately $ 1.2 million at March 31, 2024 and December 31, 2023.

Subsequent increases in the estimated fair value of a stratum are recorded by reducing the valuation allowance up to an amount that results in the stratum being carried at its remaining amortized cost.

There was a valuation allowance of approximately $ 1.2 million at December 31, 2023.

During the three and six months ended June 30, 2024 the Company recognized a $ 1.2 million impairment recovery resulting in no valuation allowance at June 30, 2024.

The Company has recorded contingent consideration liabilities that arise from acquisition activity.

4 unchanged sentences

The remaining contingent consideration accrual was adjusted to the maximum potential amount of $ 2.7 million, using a potential probability of achievement of 100 %.

The first of the two required payments were made on the TGA contingent consideration in the third quarter of 2023 in the amount of $ 2.4 million, based on actual retained revenue results.

The first of the two required payments were made on the OneGroup acquisition of Thomas Gregory Associates Insurance Brokers, Inc.

(“TGA”) contingent consideration in the third quarter of 2023 in the amount of $ 2.4 million, based on actual retained revenue results.

The remaining contingent consideration liability related to the TGA acquisition was revalued at December 31, 2023 for an adjusted fair value of $ 1.0 million.

The first required payment was made on the CPD contingent consideration in the second quarter of 2024 in the amount of $ 0.9 million based on satisfaction of certain customer retention requirements.

The Company determines fair values based on quoted market values, where available, estimates of present values, or other valuation techniques.

5 unchanged sentences

(000’s omitted, except per loan data)

March 31, 2024

June 30, 2024

Valuation Technique

62 unchanged sentences

Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company.

The carrying amounts and estimated fair values of the Company’s other financial instruments that are not accounted for at fair value at March 31, 2024 and December 31, 2023 are presented below.

The carrying amounts and estimated fair values of the Company’s other financial instruments that are not accounted for at fair value at June 30, 2024 and December 31, 2023 are presented below.

The table presented below excludes other financial instruments for which the carrying value approximates fair value including cash and cash equivalents, accrued interest receivable and accrued interest payable.

March 31, 2024

June 30, 2024

December 31, 2023

25 unchanged sentences

The fair values of each approximate the respective carrying values because the instruments are payable on demand or have short-term maturities and present relatively low credit risk and interest rate risk.

DERIVATIVE INSTRUMENTS

The Company is party to derivative financial instruments in the normal course of its business to meet the financing needs of its customers and to manage its exposure to fluctuation in interest rates and credit risk.

These financial instruments have been limited to interest rate swap agreements and risk participation agreements.

The Company does not hold or issue derivative financial instruments for trading or other speculative purposes.

Interest Rate Swaps

The Company enters into interest rate swaps to assist our customers in managing their interest rate risk.

These swaps are considered derivatives, but are not designated in hedging relationships.

These instruments have associated interest rate and credit risk.

To mitigate the interest rate risk, the Company enters into offsetting interest rate swaps with counterparties, which are also considered derivatives and are not designated in hedging relationships.

Interest rate swaps are recorded within other assets or accrued interest and other liabilities on the consolidated statements of condition at their estimated fair value.

The terms of the interest rate swaps with the customer and the counterparties offset each other, with the only difference being counterparty credit risk.

Any changes in the fair value of the underlying derivative contracts are reported in other banking services noninterest revenue in the consolidated statements of income.

Risk Participation Agreements

The Company may enter into a risk participation agreement (“RPA”) with another institution as a means to assume a portion of the credit risk associated with a loan structure which includes a derivative instrument, in exchange for fee income commensurate with the risk assumed, referred to as an “RPA sold”.

In addition, in an effort to reduce the credit risk associated with an interest rate swap agreement with a borrower for whom the Company has provided a loan structured with a derivative, the Company may purchase an RPA from an institution participating in the facility in exchange for a fee commensurate with the risk shared, referred to as an “RPA purchased”.

Forward Sales Commitments

The Company enters into forward sales commitments for the future delivery of residential mortgage loans, and interest rate lock commitments to fund loans at a specified interest rate.

The forward sales commitments are utilized to reduce interest rate risk associated with interest rate lock commitments and loans held for sale.

Changes in the estimated fair value of the forward sales commitments and interest rate lock commitments subsequent to inception are based on changes in the fair value of the underlying loan resulting from the fulfillment of the commitment and changes in the probability that the loan will fund within the terms of the commitment, which is affected primarily by changes in interest rates and the passage of time.

At inception and during the life of the interest rate lock commitment, the Company includes the expected net future cash flows related to the associated servicing of the loan as part of the fair value measurement of the interest rate lock commitments.

Notional values and fair values of derivative instruments as of June 30, 2024 are as follows:

June 30, 2024

Derivative Assets

Derivative Liabilities

(000’s omitted)

Condition Location

Derivatives not designated as hedging instruments under Subtopic 815-20:

Commitments to originate real estate loans for sale

Accrued interest and other liabilities

Interest rate swaps

Accrued interest and other liabilities

Total derivatives

The Company’s derivative instruments as of December 31, 2023 were immaterial.

The notional amount for interest rate swaps represents the underlying principal amount used to calculate interest payments that are exchanged periodically.

The notional amount for risk participation agreements represents the amount of exposure assumed or shared in case of borrower default.

The notional amount for commitments to originate real estate loans for sale represents the unpaid principal amount of loans that have been committed to originate.

Fee income earned on interest rate swaps and risk participation agreements is recognized in other banking services noninterest revenues in the consolidated statements of income during the period the derivative instrument is executed.

During the three and six months ended June 30, 2024, the Company recognized $ 0.3 million and $ 0.4 million, respectively, of fee income associated with interest rate swaps and risk participation agreements.

Cash collateral is posted by the Company with counterparties to secure certain derivatives, which is included in cash and cash equivalents on the consolidated statements of condition.

The amount of such collateral at June 30, 2024 was $ 0.6 million.

The Company assessed its counterparty risk at June 30, 2024 and December 31, 2023 and determined any credit risk inherent in our derivative contracts was not material.

Further information about the fair value of derivative financial instruments can be found in Note K to these consolidated financial statements.

SEGMENT INFORMATION

24 unchanged sentences

Benefit Services

Three Months Ended March 31, 2024

Three Months Ended June 30, 2024

Net interest income

6 unchanged sentences

Total segment operating income before income taxes

Loss on sales of investment securities

Unrealized gain on equity securities

1 unchanged sentence

Acquisition expenses

Litigation accrual

Total consolidated income before income taxes

2 unchanged sentences

Elimination of intersegment revenues

Loss on sales of investment securities

Unrealized gain on equity securities

5 unchanged sentences

Acquisition expenses

Litigation accrual

Total consolidated noninterest expenses

5 unchanged sentences

Benefit Services

Three Months Ended March 31, 2023

Three Months Ended June 30, 2023

Net interest income

6 unchanged sentences

Total segment operating income before income taxes

Loss on sales of investment securities

Gain on debt extinguishment

Unrealized loss on equity securities

Amortization of intangible assets

Acquisition-related contingent consideration adjustment

Acquisition expenses

3 unchanged sentences

Elimination of intersegment revenues

Loss on sales of investment securities

Gain on debt extinguishment

Unrealized loss on equity securities

Total consolidated noninterest revenues

3 unchanged sentences

Amortization of intangible assets

Acquisition-related contingent consideration adjustment

Acquisition expenses

4 unchanged sentences

Total consolidated assets

(000’s omitted)

Benefit Services

Six Months Ended June 30, 2024

Net interest income

Provision for credit losses

Operating noninterest revenues

Operating noninterest expenses

Operating income before income taxes

Reconciliation of total segment operating income before income taxes to total consolidated income before income taxes:

Total segment operating income before income taxes

Loss on sales of investment securities

Unrealized gain on equity securities

Amortization of intangible assets

Acquisition expenses

Litigation accrual

Total consolidated income before income taxes

Reconciliation of total segment operating noninterest revenues to total consolidated noninterest revenues:

Total segment operating noninterest revenues

Elimination of intersegment revenues

Loss on sales of investment securities

Unrealized gain on equity securities

Total consolidated noninterest revenues

Reconciliation of total segment operating noninterest expenses to total consolidated noninterest expenses:

Total segment operating noninterest expenses

Elimination of intersegment expenses

Amortization of intangible assets

Acquisition expenses

Litigation accrual

Total consolidated noninterest expenses

(000’s omitted)

Benefit Services

Six Months Ended June 30, 2023

Net interest income

Provision for credit losses

Operating noninterest revenues

Operating noninterest expenses

Operating income before income taxes

Reconciliation of total segment operating income before income taxes to total consolidated income before income taxes:

Total segment operating income before income taxes

Loss on sales of investment securities

Unrealized loss on equity securities

Gain on debt extinguishment

Amortization of intangible assets

Acquisition-related contingent consideration adjustment

Acquisition expenses

Total consolidated income before income taxes

Reconciliation of total segment operating noninterest revenues to total consolidated noninterest revenues:

Total segment operating noninterest revenues

Elimination of intersegment revenues

Loss on sales of investment securities

Unrealized loss on equity securities

Gain on debt extinguishment

Total consolidated noninterest revenues

Reconciliation of total segment operating noninterest expenses to total consolidated noninterest expenses:

Total segment operating noninterest expenses

Elimination of intersegment expenses

Amortization of intangible assets

Acquisition-related contingent consideration adjustment

Acquisition expenses

Total consolidated noninterest expenses

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