What changed in this filing

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Item 1. Financial Statements

2022-08-09 compared with 2022-05-10 · 327 added, 226 removed, 1027 unchanged (35% of the section changed)

2 unchanged sentences

Consolidated Balance Sheets (Unaudited)

(dollars in thousands, except per share data)

March 31, 2022 December 31, 2021

(dollars in thousands, except share and per share data)

June 30, 2022 December 31, 2021

Cash and due from banks $ 13,132 $ 12,886

42 unchanged sentences

(dollars in thousands, except per share data)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2022 2021 2022 2021

Interest Income

11 unchanged sentences

Net Interest Income 82,918 84,632 163,370 167,283

Reversal of Credit Losses ( 2,787 ) ( 2,350 )

Reversal of Credit Losses for Unfunded Commitments ( 11 ) ( 442 )

Net Interest Income After Reversal of Credit Losses 83,250 85,443

Provision for (Reversal of) Credit Losses 495 ( 3,856 ) ( 2,292 ) ( 6,206 )

Provision for (Reversal of) Credit Losses for Unfunded Commitments 553 ( 761 ) 542 ( 1,203 )

Net Interest Income After Provision for (Reversal of) Credit Losses 81,870 89,249 165,120 174,692

Noninterest Income

24 unchanged sentences

(dollars in thousands)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2022 2021 2022 2021

Net Income $ 15,696 $ 47,993 $ 61,440 $ 91,462

Other Comprehensive (Loss) Income, Net of Tax:

Unrealized loss on securities available-for-sale ( 58,406 ) ( 17,617 )

Unrealized (loss) gain on securities available-for-sale ( 33,020 ) 6,655 ( 91,424 ) ( 10,962 )

Reclassification adjustment for loss (gain) included in net income 100 ( 236 ) 117 ( 402 )

Total unrealized loss on investment securities available-for-sale ( 58,387 ) ( 17,783 )

Total unrealized (loss) gain on investment securities available-for-sale ( 32,920 ) 6,419 ( 91,307 ) ( 11,364 )

Unrealized loss on securities transferred to held-to-maturity (1)

Unrealized gain on derivatives — 573

— — ( 49,095 ) —

Amortization of unrealized loss on securities transferred to held-to-maturity 1,991 — 1,991 —

Total unrealized gain (loss) on investment securities held-to-maturity 1,991 — ( 47,104 ) —

Unrealized gain (loss) on derivatives 284 — 284 ( 1 )

Reclassification adjustment for gain included in net income — 99 — 385

Total unrealized gain on derivatives 284 99 284 384

Other comprehensive loss ( 107,482 ) ( 17,498 )

Other comprehensive (loss) income ( 30,645 ) 6,518 ( 138,127 ) ( 10,980 )

Comprehensive (Loss) Income $ ( 14,949 ) $ 54,511 $ ( 76,687 ) $ 80,482

3 unchanged sentences

Consolidated Statements of Changes in Shareholders' Equity (Unaudited)

(dollars in thousands except share data)

(dollars in thousands except share and per share data)

Additional Other

1 unchanged sentence

Shares Amount Capital Earnings Income (Loss) Equity

Balance April 1, 2022 32,079,474 $ 318 $ 437,820 $ 963,140 $ ( 121,724 ) $ 1,279,554

Net Income — — — 15,696 — 15,696

Other comprehensive loss, net of tax — — — — ( 30,645 ) ( 30,645 )

Stock-based compensation expense — — 2,349 — — 2,349

Issuance of common stock related to options exercised, net of shares withheld for payroll taxes 1,500 — 77 — — 77

Vesting of time-based stock awards issued at date of grant, net of shares withheld for payroll taxes ( 3,810 ) — — — — —

Time-based stock awards granted 1,055 — — — — —

Issuance of common stock related to employee stock purchase plan 3,022 — 172 — — 172

Cash dividends declared ($ 0.45 per share) — — — ( 14,483 ) — ( 14,483 )

Balance June 30, 2022 32,081,241 $ 318 $ 440,418 $ 964,353 $ ( 152,369 ) $ 1,252,720

Balance April 1, 2021 31,960,379 $ 316 $ 428,917 $ 833,598 $ ( 1,998 ) $ 1,260,833

Net Income — — — 47,993 — 47,993

Other comprehensive income, net of tax — — — — 6,518 6,518

Stock-based compensation expense — — 1,998 — — 1,998

Vesting of time-based stock awards issued at date of grant, net of shares withheld for payroll taxes ( 4,336 ) — — — — —

Time-based stock awards granted 921 — — — — —

Issuance of common stock related to employee stock purchase plan 4,609 — 188 — — 188

Cash dividends declared ($ 0.35 per share) — — — ( 11,194 ) — ( 11,194 )

Balance June 30, 2021 31,961,573 $ 316 $ 431,103 $ 870,397 $ 4,520 $ 1,306,336

EAGLE BANCORP, INC.

Consolidated Statements of Changes in Shareholders' Equity - Continued (Unaudited)

(dollars in thousands except share and per share data)

Additional Other

Common Paid-in Retained Comprehensive Shareholders'

Shares Amount Capital Earnings Income (Loss) Equity

Balance January 1, 2022 31,950,092 $ 316 $ 434,640 $ 930,061 $ ( 14,242 ) $ 1,350,775

8 unchanged sentences

Cash dividends declared ($ 0.85 per share) — — — ( 27,148 ) — ( 27,148 )

Balance March 31, 2022 32,079,474 $ 318 $ 437,820 $ 963,140 $ ( 121,724 ) $ 1,279,554

Balance June 30, 2022 32,081,241 $ 318 $ 440,418 $ 964,353 $ ( 152,369 ) $ 1,252,720

Balance January 1, 2021 31,779,663 $ 315 $ 427,016 $ 798,061 $ 15,500 $ 1,240,892

8 unchanged sentences

Common stock repurchased ( 1,466 ) — ( 62 ) — — ( 62 )

Balance March 31, 2021 31,960,379 $ 316 $ 428,917 $ 833,598 $ ( 1,998 ) $ 1,260,833

Balance June 30, 2021 31,961,573 $ 316 $ 431,103 $ 870,397 $ 4,520 $ 1,306,336

See Notes to Consolidated Financial Statements.

2 unchanged sentences

(dollars in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Cash Flows From Operating Activities:

2 unchanged sentences

Reversal of credit losses ( 2,292 ) ( 6,206 )

Reversal of credit losses for unfunded commitments ( 11 ) ( 442 )

Provision for (reversal of) credit losses for unfunded commitments 542 ( 1,203 )

Depreciation and amortization 1,657 2,263

1 unchanged sentence

Gain on mortgage servicing rights ( 918 ) ( 139 )

Securities (discount accretion) premium amortization, net 2,660 2,705

Securities premium amortization, net 5,009 5,486

Origination of loans held for sale ( 206,495 ) ( 713,771 )

Proceeds from sale of loans held for sale 242,246 754,683

Net increase in cash surrender value of BOLI ( 626 ) ( 389 )

Deferred income tax expense — 144

Net gain on sale of other real estate owned ( 93 ) —

Net loss (gain) on sale of investment securities 176 ( 539 )

Net increase in cash surrender value of BOLI ( 1,258 ) ( 787 )

Stock-based compensation expense 5,314 3,823

1 unchanged sentence

Increase in other assets ( 3,002 ) ( 13,561 )

(Decrease) increase in other liabilities ( 6,395 ) 20,346

Increase (decrease) in other liabilities 22,563 ( 1,111 )

Net Cash Provided by Operating Activities 124,157 111,888

9 unchanged sentences

Sale of Federal Reserve and Federal Home Loan Bank stock 312 6,169

Proceeds from sale of SBA PPP loans — 169,778

Net (increase) decrease in loans ( 88,872 ) 320,029

Proceeds from sale of OREO 241 —

Net change in premises and equipment ( 681 ) ( 4,350 )

1 unchanged sentence

Cash Flows From Financing Activities:

(Decrease) increase in deposits ( 395,281 ) 9,641

Decrease in deposits ( 809,922 ) ( 170,156 )

Increase (decrease) in customer repurchase agreements 2,621 ( 7,076 )

11 unchanged sentences

Cash and Cash Equivalents at End of Period $ 425,166 $ 1,596,222

EAGLE BANCORP, INC.

Consolidated Statements of Cash Flows - Continued (Unaudited)

(dollars in thousands)

Six Months Ended June 30,

Supplemental Cash Flows Information:

11 unchanged sentences

The Consolidated Financial Statements include the accounts of Eagle Bancorp, Inc.

(the "Parent") and its subsidiaries (together with the Parent.

the "Company"), with all significant intercompany transactions eliminated.

EagleBank (the "Bank"), a Maryland chartered commercial bank, is the Company's principal subsidiary.

(the "Parent") and its subsidiaries (together with the Parent, the "Company"), with all significant intercompany transactions eliminated.

EagleBank (the "Bank"), a Maryland chartered commercial bank, is the Parent's principal subsidiary.

The accounting and reporting policies of the Company conform to generally accepted accounting principles in the United States of America ("GAAP") and to general practices in the banking industry.

3 unchanged sentences

Certain information and note disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC").

In addition to the "Critical Accounting Policies" described below, the Company applies the accounting policies contained in Note 1 to Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2021.

In addition to the accounting policies described below, the Company applies the accounting policies contained in Note 1 to Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2021.

Certain reclassifications have been made to 2021 amounts previously reported to conform to the 2022 presentation.

Reclassifications had no effect on net income nor shareholders' equity.

Reclassifications had no effect on net income or shareholders' equity.

Nature of Operations

34 unchanged sentences

The allowance for credit losses - loans ("ACL") is an estimate of the expected credit losses in the loans held for investment portfolio.

Accounting Standards Codification ("ASC") 326, "Financial Instruments-Credit Losses" requires that an estimate of current and expected credit losses ("CECL") be immediately recognized and reevaluated over the contractual life of the financial asset.

Accounting Standards Codification ("ASC") 326, "Financial Instruments-Credit Losses" requires that an estimate of current expected credit losses ("CECL") be immediately recognized and reevaluated over the contractual life of the financial asset.

The ACL is a valuation account that is deducted from the amortized cost basis of loans to present the net amount expected to be collected on the loans.

5 unchanged sentences

These historical loss rates are then modified to incorporate our reasonable and supportable forecast of future losses at the portfolio segment level, as well as any necessary qualitative adjustments.

The Company uses regression analysis of historical internal and peer data (as Company loss data is insufficient) to determine suitable credit loss drivers to utilize when modeling lifetime PD and LGD.

The Company uses regression analysis of historical internal and peer data provided by a third-party service provider (as Company loss data is insufficient) to determine suitable credit loss drivers to utilize when modeling lifetime PD and LGD.

This analysis also determines how expected PD will be impacted by different forecasted levels of the loss drivers.

5 unchanged sentences

For our cash flow model, management utilizes and forecasts regional unemployment by using a national forecast and estimating a regional adjustment based on historical differences between the two as the loss driver over our reasonable and supportable period of 18 months and reverts back to a historical loss rate over twelve months on a straight-line basis over the loan's remaining maturity.

Unemployment projections materially inform our CECL economic forecast and resulted in a reduction to our ACL during the three months ended March 31, 2022.

Management leverages economic projections from reputable and independent third parties to inform its loss driver forecasts over the forecast period.

In addition to the quantitative model and individual evaluation conducted in connection with CECL, the Company applies qualitative and environmental factors into its methodology for the calculation of its ACL for its loan portfolio.

The factors include:

(i) changes in the nature and volume of the portfolio;

(ii) changes in the volume and severity of past due financial assets and the volume and severity of adversely classified assets;

(iii) changes in the value of underlying collateral for loans not individually evaluated;

(iv) changes in lending policies and procedures;

(v) changes in the quality of credit review function;

(vi) changes in lending management and staff;

(vii) concentrations of credit;

(viii) other external factors (competition, legal, regulatory, etc.);

and (ix) changes in national, regional, and local economic and business conditions.

The Company's quantitative model may reflect assumptions by management that are not covered by the qualitative and environmental factors.

The Company reevaluates the qualitative and environmental factors on a quarterly basis.

While our methodology in establishing the ACL attributes portions of the ACL and RUC to the separate loan pools or segments, the entire ACL and RUC is available to absorb credit losses expected in the total loan portfolio and total amount of unfunded credit commitments, respectively.

4 unchanged sentences

and are generally secured by accounts receivable, inventory, equipment and other assets of our clients' businesses.

Paycheck Protection Program ("PPP") .

The PPP portfolio comprises loans issued under the SBA's Paycheck Protection Program to support small businesses impacted by the pandemic.

PPP loans are approved subject to limited underwriting criteria following SBA guidelines, are unsecured, and are fully guaranteed as to principal and interest by the SBA.

Income producing commercial real estate.

54 unchanged sentences

Reasonably expected TDRs and executed non-performing TDRs are evaluated individually to determine the required ACL.

Refer to the subsection above "Lendi ng operations and accommodations to borrowers" for a discussion on the impact of the CARES Act on TDRs.

Allowance for Credit Losses - Available-for-Sale Debt Securities

26 unchanged sentences

The following table presents a breakdown of the provision for credit losses included in our Consolidated Statements of Income for the applicable periods (in thousands):

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(dollars in thousands) 2022 2021 2022 2021

Provision for (reversal of) credit losses - loans $ 486 $ ( 3,911 ) $ ( 2,515 ) $ ( 6,172 )

Provision for (reversal of) credit losses- HTM debt securities 817 —

Provision for credit losses - HTM debt securities 8 — 825 —

Provision for (reversal of) credit losses - AFS debt securities 1 55 ( 602 ) ( 34 )

1 unchanged sentence

These statements should be read in conjunction with the audited Consolidated Financial Statements and related notes included in the Company's Annual Report on Form 10-K for the year ended December 31, 2021.

Other New Authoritative Accounting Guidance

New Authoritative Accounting Guidance

Accounting Standards Adopted in 2022 :

18 unchanged sentences

Troubled Debt Restructurings and Vintage Disclosures " ("ASU 2022-02") eliminates the accounting guidance for troubled debt restructurings ("TDRs") while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty that assess whether a modification has created a new loan.

Additionally, ASU 2022-02 requires that an entity disclose current-period gross writeoffs by year of origination for financing receivables and net investments in leases.

Additionally, ASU 2022-02 requires that an entity disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases.

For entities that have adopted ASC 326, the amendments in the ASU are effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years.

2 unchanged sentences

Cash and Due from Banks

The Company has deposits with other banks for derivative positions it holds, totaling $ 4.1 million at March 31, 2022 and $ 6.3 million at December 31, 2021.

At March 31, 2022, the Company was entitled to receive collateral totaling $ 10.1 million.

The Company has deposits with other banks for derivative positions it holds, totaling $ 880 thousand at June 30, 2022 and $ 6.3 million at December 31, 2021.

At June 30, 2022, the Company was entitled to receive collateral totaling $ 18.4 million.

At December 31, 2021, the Company was required to post $ 2.4 million of cash collateral with its counterparties.

6 unchanged sentences

(dollars in thousands) Cost Gains Losses Losses Value

March 31, 2022

June 30, 2022

Investment securities available-for-sale:

2 unchanged sentences

Residential mortgage-backed securities 968,589 41 ( 82,941 ) — 885,689

Commercial mortgage-backed securities 113,243 26 ( 3,720 ) — 109,549

Municipal bonds 13,508 63 ( 638 ) ( 1 ) 12,932

Corporate bonds 2,000 — ( 37 ) ( 17 ) 1,946

Total securities available-for-sale $ 1,873,491 $ 643 $ ( 98,483 ) $ ( 18 ) $ 1,775,633

Total $ 1,897,985 $ 134 $ ( 142,847 ) $ ( 18 ) $ 1,755,254

Gross Gross Estimated Allowance

1 unchanged sentence

(dollars in thousands) Cost Gains Losses Value Losses

March 31, 2022

June 30, 2022

Investment securities held-to-maturity:

Residential mortgage-backed securities $ 785,857 $ 9 $ ( 40,413 ) $ 745,453 $ —

Commercial mortgage-backed securities 94,841 — ( 6,569 ) 88,272 —

Municipal bonds 128,509 — ( 8,233 ) 120,276 ( 16 )

Corporate bonds 135,251 — ( 4,546 ) 130,705 ( 810 )

Total securities held-to-maturity $ 1,154,216 $ — $ ( 9,711 ) $ 1,144,505 $ ( 817 )

Total $ 1,144,458 $ 9 $ ( 59,761 ) $ 1,084,706 $ ( 826 )

Gross Gross Allowance Estimated

9 unchanged sentences

Total $ 2,642,667 $ 10,968 $ ( 29,607 ) $ ( 620 ) $ 2,623,408

In addition, at March 31, 2022 and December 31, 2021 the Company held $ 29.0 million and $ 34.2 million, respectively, in equity securities in a combination of FRB and FHLB stocks, which were required to be held for regulatory purposes and which were not marketable, and therefore are carried at cost.

The Company reassessed classification of certain investments in the first quarter of 2022 and, effective March 31, 2022, it transferred a total of $ 1.1 billion of residential mortgage-backed securities, municipal bonds and corporate bonds from available-for-sale to held-to-maturity securities, including $ 237.0 million of securities acquired in the first quarter of 2022 for which its intention to hold to maturity was finalized.

At the time of transfer, the Company reversed the allowance for credit losses associated with the available-for-sale securities through provision for credit losses.

In addition, at June 30, 2022 and December 31, 2021 the Company held $ 34.0 million and $ 34.2 million, respectively, in equity securities in a combination of FRB and FHLB stocks, which were required to be held for regulatory purposes and which were not marketable, and therefore are carried at cost.

The Company reassessed classification of certain investments in the first quarter of 2022 and, effective March 31, 2022, it transferred a total of $ 1.1 billion of mortgage-backed securities, municipal bonds and corporate bonds from available-for-sale to held-to-maturity securities, including $ 237.0 million of securities acquired in the first quarter of 2022 for which its intention to hold to maturity was finalized.

At the time of transfer, the Company reversed the allowance for credit losses associated with the available-for-sale securities through the provision for credit losses.

The securities were transferred at their amortized cost basis, net of any remaining unrealized gain or loss reported in accumulated other comprehensive income.

The related unrealized loss totaling $ 66.2 million included in other comprehensive loss remained in other comprehensive loss, to be amortized out of other comprehensive loss with an offsetting entry to interest income as a yield adjustment through earnings over the remaining term of the securities.

The related unrealized loss of $ 66.2 million was included in other comprehensive loss at the time of transfer and, as of June 30, 2022, $ 63.5 million remains in accumulated other comprehensive loss, to be amortized out through interest income as a yield adjustment over the remaining term of the securities.

No gain or loss was recorded at the time of transfer.

Subsequent to transfer, the allowance for credit losses on these securities was evaluated under the accounting policy for held-to-maturity securities.

Accrued interest receivable on available-for-sale securities totaled $ 4.5 million and $ 6.0 million at March 31, 2022 and December 31, 2021, respectively, and accrued interest receivable on held-to-maturity securities totaled $ 4.1 million at March 31, 2022.

Accrued interest receivable on available-for-sale securities totaled $ 4.4 million and $ 6.0 million at June 30, 2022 and December 31, 2021, respectively, and accrued interest receivable on held-to-maturity securities totaled $ 3.7 million at June 30, 2022.

The accrued interest on investment securities is excluded from the amortized cost of the securities and is reported in other assets in the Consolidated Balance Sheets.

Gross unrealized losses and fair value of available-for-sale securities, by length of time that individual securities have been in a continuous unrealized loss position are as follows:

The following table summarizes available for sale securities in an unrealized loss position for which an allowance for credit losses has not been recorded, by length of time:

Less Than 12 Months

3 unchanged sentences

(dollars in thousands) Securities Value Losses Value Losses Value Losses

March 31, 2022

June 30, 2022

treasury bonds 2 $ 47,081 $ 2,661 $ — $ — $ 47,081 $ 2,661

1 unchanged sentence

Residential mortgage-backed securities 148 713,803 62,471 143,708 20,470 857,511 82,941

Commercial mortgage-backed securities 13 104,688 3,720 — — 104,688 3,720

Municipal bonds 1 8,404 638 — — 8,404 638

Corporate bonds 1 1,963 37 — — 1,963 37

248 $ 1,377,086 $ 102,468 $ 335,070 $ 40,379 $ 1,712,156 $ 142,847

6 unchanged sentences

239 $ 1,891,310 $ 24,285 $ 177,038 $ 5,322 $ 2,068,348 $ 29,607

Unrealized losses at March 31, 2022 were generally attributable to changes in market interest rates and interest spread relationships since the investment securities were originally purchased, and not due to the credit quality concerns on the investment securities.

However, as of March 31, 2022, the Company determined that certain of the unrealized loss positions in available-for-sale & held-to-maturity corporate and municipal bonds were evidence of expected credit losses, and therefore, an allowance for credit losses of $ 18 thousand was recorded for AFS securities and $ 817 thousand for HTM securities.

Unrealized losses at June 30, 2022 were generally attributable to changes in market interest rates and interest spread relationships since the investment securities were originally purchased, and not due to the credit quality concerns on the investment securities.

However, as of June 30, 2022, the Company determined that certain of the unrealized loss positions in available-for-sale and held-to-maturity corporate and municipal bonds were evidence of expected credit losses, and therefore, an allowance for credit losses of $ 18 thousand was recorded for AFS securities and $ 826 thousand for HTM securities.

The weighted average duration of debt securities, which comprise 100 % of total investment securitie s, is 5.13 years.

1 unchanged sentence

The Company does not intend to sell the investments and it is more likely than not that the Company will not have to sell the securities before recovery of its amortized cost basis, which may be at maturity.

The amortized cost and estimated fair value of available-for-sale and held-to-maturity securities at March 31, 2022 and December 31, 2021 by contractual maturity are shown in the table below.

Contractual maturities for residential mortgage-backed securities ("MBS") are excluded as they may differ significantly from expected maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

March 31, 2022 December 31, 2021

The amortized cost and estimated fair value of available-for-sale and held-to-maturity securities at June 30, 2022 and December 31, 2021 by contractual maturity are shown in the table below.

Contractual maturities for mortgage-backed securities ("MBS") are excluded as they may differ significantly from expected maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

June 30, 2022 December 31, 2021

Amortized Estimated Amortized Estimated

2 unchanged sentences

Investment securities available-for-sale

treasury bonds (after one year through five years) $ 49,718 $ 47,492 $ 49,693 $ 49,458

treasury bonds (maturing after one year through five years) $ 49,742 $ 47,081 $ 49,693 $ 49,458

agency securities maturing:

3 unchanged sentences

Residential mortgage-backed securities 968,589 885,689 1,692,773 1,677,673

Commercial mortgage-backed securities 113,243 109,549 — —

Municipal bonds maturing:

11 unchanged sentences

Residential mortgage-backed securities 785,857 745,453 — —

Commercial mortgage-backed securities 94,841 88,272 — —

Municipal bonds maturing:

One year or less 666 663 — —

After one year through five years 38,194 36,531 — —

8 unchanged sentences

$ 3,041,617 $ 2,839,960 $ 2,642,667 $ 2,623,408

(1) Amortized cost for investment securities held-to-maturity is presented net of the allowance for credit losses.

For the three months ended March 31, 2022, net realized losses on sales of investments securities were $ 25 thousand on sales of investment securities.

For the three months ended March 31, 2021, net realized gains on sales of investments securities were $ 221 thousand.

The Company received proceeds of $ 6.2 million and $ 28.5 million for the three months ended March 31, 2022 and 2021, respectively, on sales and calls of securities.

The carrying value of securities pledged as collateral for certain government deposits, securities sold under agreements to repurchase, and certain lines of credit with correspondent banks at March 31, 2022 and December 31, 2021 was $ 251.0 million and $ 261.0 million, respectively, which were well in excess of required amounts in order to operationally provide significant reserve amounts for new business.

As of March 31, 2022 and December 31, 2021, there were no holdings of securities of any one issuer, other than the U.S.

(1) Amortized cost for investment securities held-to-maturity is presented net of the allowance for credit losses on the Consolidated Balance Sheet.

For the three and six months ended June 30, 2022, net realized losses on sales of investments securities were $ 151 thousand and $ 176 thousand, respectively, on sales of investment securities.

For the three and six months ended June 30, 2021, net realized gains on sales of investments securities were $ 318 thousand and $ 539 thousand, respectively.

The Company received proceeds of $ 6.2 million and $ 52.0 million for the six months ended June 30, 2022 and 2021, respectively, on sales and calls of securities.

The book value of securities pledged as collateral for certain government deposits, securities sold under agreements to repurchase, and certain lines of credit with correspondent banks at June 30, 2022 and December 31, 2021 was $ 244.7 million and $ 261.0 million, respectively, which were well in excess of required amounts in order to operationally provide significant reserve amounts for new business.

As of June 30, 2022 and December 31, 2021, there were no holdings of securities of any one issuer, other than the U.S.

Government and U.S.

4 unchanged sentences

A substantial portion of the Bank's loan portfolio consists of loans to businesses secured by real estate and other business assets.

Loans, net of unamortized net deferred fees, at March 31, 2022 and December 31, 2021 are summarized by type as follows:

March 31, 2022 December 31, 2021

Loans, net of unamortized net deferred fees, at June 30, 2022 and December 31, 2021 are summarized by type as follows:

June 30, 2022 December 31, 2021

(dollars in thousands, except amounts in the footnote) Amount % Amount %

12 unchanged sentences

$ 7,082,021 $ 6,990,633

(1) Excludes accrued interest receivable of $ 36.9 million and $ 38.6 million at March 31, 2022 and December 31, 2021, respectively, which were recorded in other assets on the Consolidated Balance Sheets.

Unamortized net deferred fees amounted to $ 23.7 million and $ 26.9 million at March 31, 2022 and December 31, 2021, respectively.

As of March 31, 2022 and December 31, 2021, the Bank serviced $ 339.5 million and $ 351.1 million , respectively, of multifamily FHA loans, SBA loans and other loan participations that are not reflected as loan balances on the Consolidated Balance Sheets.

(1) Excludes accrued interest receivable of $ 34.4 million and $ 38.6 million at June 30, 2022 and December 31, 2021, respectively, which were recorded in other assets on the Consolidated Balance Sheets.

Unamortized net deferred fees amounted to $ 24.6 million and $ 26.9 million at June 30, 2022 and December 31, 2021, respectively.

As of June 30, 2022 and December 31, 2021, the Bank serviced $ 362.3 million and $ 351.1 million , respectively, of multifamily FHA loans, SBA loans and other loan participations that are not reflected as loan balances on the Consolidated Balance Sheets.

Real estate loans are secured primarily by duly recorded first deeds of trust or mortgages.

14 unchanged sentences

Prior to an advance, the Bank or its contractor inspects the project to determine that the work has been completed, to justify the draw requisition.

Commercial permanent loans are generally secured by improved real property which is generating income in the normal course of operation.

Commercial permanent loans are generally secured by improved real property that is generating income in the normal course of operation.

Debt service coverage, assuming stabilized occupancy, must be satisfactory to support a permanent loan.

4 unchanged sentences

The Company's loan portfolio includes acquisition, development and construction ("ADC") real estate loans including both investment and owner occupied projects.

ADC loans amounted to $ 1.5 billion at March 31, 2022.

ADC loans amounted to $ 1.5 billion at June 30, 2022.

A portion of the ADC portfolio, both speculative and non-speculative, includes loan-funded interest reserves at origination.

ADC loans that provide for the use of interest reserves represent approximately 57.2 % of the outstanding ADC loan portfolio at March 31, 2022.

ADC loans that provide for the use of interest reserves represent approximately 51.2 % of the outstanding ADC loan portfolio at June 30, 2022.

The decision to establish a loan-funded interest reserve is made upon origination of the ADC loan and is based upon a number of factors considered during underwriting of the credit, including:

7 unchanged sentences

In order to mitigate these inherent risks, the Company employs a series of reporting and monitoring mechanisms on all ADC loans, whether or not an interest reserve is provided, including:

(1) construction and development timelines which are monitored on an ongoing basis which track the progress of a given project to the timeline projected at origination;

(1) construction and development timelines that are monitored on an ongoing basis and track the progress of a given project to the timeline projected at origination;

(2) a construction loan administration department independent of the lending function;

1 unchanged sentence

(4) monthly interest reserve monitoring reports detailing the balance of the interest reserves approved at origination and the days of interest carry represented by the reserve balances as compared to the then current anticipated time to completion and/or sale of speculative projects;

and (5) quarterly commercial real estate construction meetings among senior Company management, which includes monitoring of current and projected real estate market conditions.

and (5) quarterly commercial real estate construction meetings among senior Company management, which include monitoring of current and projected real estate market conditions.

If a project has performed as expected, it is the customary practice of the Company to increase loan-funded interest reserves.

The following tables detail activity in the allowance for credit losses by portfolio segment for the three months ended March 31, 2022 and 2021.

The following tables detail activity in the allowance for credit losses by portfolio segment for the three and six months ended June 30, 2022 and 2021.

PPP loans are excluded from these tables since they do not carry an allowance for credit loss, as these loans are fully guaranteed as to principal and interest by the SBA, whose guarantee is backed by the full faith and credit of the U.S.

Allocation of a portion of the allowance to one category of loans does not restrict the use of the allowance to absorb losses in other categories.

Income-Producing - Owner-Occupied - Real Estate Construction -

Commercial Commercial Mortgage - Commercial and Home Other

(dollars in thousands) Commercial Real Estate Real Estate Residential Residential Equity Consumer Total

Three Months Ended March 31, 2022

(dollars in thousands) Commercial Income-Producing Commercial Real Estate Owner-Occupied -Commercial Real Estate Real Estate Mortgage Residential Construction -Commercial and Residential Home Equity Other Consumer Total

Three Months Ended June 30, 2022

Allowance for credit losses:

2 unchanged sentences

Recoveries of loans previously charged-off 442 — — — 1,627 — 1 2,070

Net loans charged-off ( 460 ) — — — — — 1 ( 459 )

Net loans recovered (charged-off) 404 — ( 1,355 ) — 1,627 — ( 2 ) 674

Provision for (reversal of) credit losses 2,404 ( 5,073 ) 3,636 409 ( 1,106 ) 180 36 486

Ending balance $ 15,754 $ 34,120 $ 12,796 $ 790 $ 8,494 $ 647 $ 64 $ 72,665

Three Months Ended March 31, 2021

Six Months Ended June 30, 2022

Allowance for credit losses:

5 unchanged sentences

Ending balance $ 15,754 $ 34,120 $ 12,796 $ 790 $ 8,494 $ 647 $ 64 $ 72,665

The following table presents the amortized cost basis of collateral-dependent loans by class of loans as of March 31, 2022 and December 31, 2021:

March 31, 2022 December 31, 2021

(dollars in thousands) Business/Other Assets Real Estate Business/Other Assets Real Estate

Three Months Ended June 30, 2021

Allowance for credit losses:

Balance at beginning of period $ 23,701 $ 51,510 $ 14,315 $ 919 $ 10,683 $ 907 $ 35 $ 102,070

Loans charged-off ( 1,541 ) ( 4,216 ) — — — — — ( 5,757 )

Recoveries of loans previously charged-off 150 — — — 6 — 2 158

Net loans (charged-off) recovered ( 1,391 ) ( 4,216 ) — — 6 — 2 ( 5,599 )

(Reversal of) provision for credit losses ( 962 ) ( 1,324 ) ( 1,320 ) ( 37 ) ( 262 ) ( 10 ) 4 ( 3,911 )

Ending balance $ 21,348 $ 45,970 $ 12,995 $ 882 $ 10,427 $ 897 $ 41 $ 92,560

Six Months Ended June 30, 2021

Allowance for credit losses:

Balance at beginning of period $ 26,569 $ 55,385 $ 14,000 $ 1,020 $ 11,529 $ 1,039 $ 37 $ 109,579

Loans charged-off ( 5,691 ) ( 5,216 ) — — ( 206 ) — ( 1 ) ( 11,114 )

Recoveries of loans previously charged-off 246 — — — 6 — 15 267

Net loans (charged-off) recovered ( 5,445 ) ( 5,216 ) — — ( 200 ) — 14 ( 10,847 )

Provision for (reversal of) credit losses 224 ( 4,199 ) ( 1,005 ) ( 138 ) ( 902 ) ( 142 ) ( 10 ) ( 6,172 )

Ending balance $ 21,348 $ 45,970 $ 12,995 $ 882 $ 10,427 $ 897 $ 41 $ 92,560

The following table presents the amortized cost basis of collateral-dependent loans by class of loans as of June 30, 2022 and December 31, 2021:

June 30, 2022 December 31, 2021

Business/Other Business/Other

(dollars in thousands) Assets Real Estate Assets Real Estate

Commercial $ 2,517 $ 6,764 $ 3,098 $ 6,821

10 unchanged sentences

Credit risk ratings are applied individually to those classes of loans that have significant or unique credit characteristics that benefit from a case-by-case evaluation.

These are typically loans to businesses or individuals in the classes which comprise the commercial portfolio segment.

These are typically loans to businesses or individuals in the classes that comprise the commercial portfolio segment.

Groups of loans that are underwritten and structured using standardized criteria and characteristics, such as statistical models (e.g., credit scoring or payment performance), are typically risk rated and monitored collectively.

These are typically loans to individuals in the classes which comprise the consumer portfolio segment.

These are typically loans to individuals in the classes that comprise the consumer portfolio segment.

The following are the definitions of the Company's credit quality indicators:

16 unchanged sentences

The possibility of loss is extremely high, but because of certain important and reasonably specific pending factors, which may work to the advantage and strengthening of the assets, its classification as an estimated loss is deferred until its more exact status may be determined.

The Company's credit quality indicators are generally updated annually, and;

however , credits rated watch or below are reviewed more frequently.

Based on the most recent analysis performed, amortized cost basis of loans by risk category, class and year of origination are as follows:

March 31, 2022 (dollars in thousands) Prior 2018 2019 2020 2021 2022 Revolving Loans Amort.

The Company's credit quality indicators are generally updated annually, however , credits rated "Watch" or below are reviewed more frequently.

Based on the most recent analysis performed, the amortized cost basis of loans by risk category, class and year of origination are as follows:

June 30, 2022 (dollars in thousands) Prior 2018 2019 2020 2021 2022 Revolving Loans Amort.

Cost Basis Revolving Loans Convert.

6 unchanged sentences

Pass — — — 2,768 6,209 — — — 8,977

Substandard — — — 106 — — — — 106

Total — — — 2,768 6,209 — — — 8,977

80 unchanged sentences

Nonaccrual and Past Due Loans

As part of the Company's comprehensive loan review process, management committees carefully evaluate loans that are past-due 30 days or more.

The committees make a thorough assessment of the conditions and circumstances surrounding each delinquent loan.

As part of the Company's comprehensive loan review process, management evaluates loans that are past-due 30 days or more.

Management makes a thorough assessment of the conditions and circumstances surrounding each delinquent loan.

The Bank's loan policy requires that loans be placed on nonaccrual if they are 90 days past-due, unless they are well secured and in the process of collection.

Additionally, Credit Administration specifically analyzes the status of development and construction projects, sales activities and utilization of interest reserves in order to carefully and prudently assess potential increased levels of risk requiring additional reserves.

The table presents, by class of loan, an aging analysis and the recorded investments in loans past due as of March 31, 2022 and December 31, 2021:

Loans Loans Loans Total Recorded

30-59 Days 60-89 Days 90 Days or Total Past Current Nonaccrual Investment in

(dollars in thousands) Past Due Past Due More Past Due Due Loans Loans Loans Loans

March 31, 2022

The table presents, by class of loan, an aging analysis and the recorded investments in loans past due as of June 30, 2022 and December 31, 2021:

(dollars in thousands) Loans 30-59 Days Past Due Loans 60-89 Days Past Due Loans 90 Days or More Past Due Total Past Due Loans Current Loans Nonaccrual Loans Total Recorded Investment in Loans

June 30, 2022

Commercial $ 394 $ 339 $ — $ 733 $ 1,385,813 $ 8,289 $ 1,394,835

19 unchanged sentences

Total $ 5,051 $ 20,792 $ — $ 25,843 $ 7,010,547 $ 29,208 $ 7,065,598

The following presents the nonaccrual loans as of March 31, 2022 and December 31, 2021:

The following presents the nonaccrual loans as of June 30, 2022 and December 31, 2021:

Nonaccrual with Nonaccrual with Total

1 unchanged sentence

(dollars in thousands) for Credit Loss for Credit Loss Loans

March 31, 2022

June 30, 2022

Commercial $ 5,797 $ 2,492 $ 8,289

PPP loans (1)

Income producing - commercial real estate 3,816 3,120 6,936

13 unchanged sentences

$ 16,371 $ 12,837 $ 29,208

(1) Excludes TDRs that were performing under their restructured terms totaling $ 5.3 million and $ 10.2 million at June 30, 2022 and December 31, 2021, respectively.

(2) Gross interest income of $ 532 thousand and approximately $ 1.5 million would have been recorded for the six months ended June 30, 2022 and 2021, respectively, if nonaccrual loans shown above had been current and in accordance with their original terms, while $ 6 thousand and $ 44 thousand interest income was actually recorded on such loans for the six months ended June 30, 2022 and 2021 respectively.

See Note 1 to the Consolidated Financial Statements for a description of the Company's policy for placing loans on nonaccrual status.

(3) The CARES Act created the PPP, a program designed to aid small- and medium-sized businesses through federally guaranteed loans distributed through banks.

These loans are intended to guarantee payroll and other costs to help those businesses remain viable and allow their workers to pay their bills.

(2) Excludes TDRs that were performing under their restructured terms totaling $ 10.1 million and $ 10.2 million at March 31, 2022 and December 31, 2021, respectively.

(3) Gross interest income of $ 325 thousand and approximately $ 800 thousand would have been recorded for the three months ended March 31, 2022 and 2021, respectively, if nonaccrual loans shown above had been current and in accordance with their original terms, while no interest income was actually recorded on such loans for the three months ended March 31, 2022 and 2021 respectively.

See Note 1 to the Consolidated Financial Statements for a description of the Company's policy for placing loans on nonaccrual status.

Modifications

A modification of a loan constitutes a TDR when the borrower is experiencing financial difficulty and the modification constitutes a concession.

The Company offers various types of concessions when modifying a loan.

The Company may offer various types of concessions when modifying a loan.

Commercial and industrial loans modified in a TDR often involve temporary interest-only payments, term extensions, and converting revolving credit lines to term loans.

2 unchanged sentences

Construction loans modified in a TDR may also involve extending the interest-only payment period.

As of March 31, 2022 and December 31, 2021, all performing TDRs were categorized as interest-only modifications .

Loans modified in a TDR for the Company may have the financial effect of increasing the specific allowance associated with the loan.

8 unchanged sentences

Similar provisions have also been confirmed by interagency guidance issued by the federal banking agencies and confirmed with staff members of the Financial Accounting Standards Board.

As of March 31, 2022, substantially all of the borrowers granted deferrals under this program have returned to regular payment status.

The following table presents by class, the recorded investment of loans modified in TDRs held by the Company for the three months ended March 31, 2022 and 2021.

Number Producing -

of Commercial

(dollars in thousands) Loans Commercial Real Estate Total

Three Months Ended March 31, 2022

Troubled debt restructurings

Restructured accruing 5 $ 1,016 $ 9,105 $ 10,121

Restructured nonaccruing 2 — 6,342 6,342

Total 7 $ 1,016 $ 15,447 $ 16,463

Individually-evaluated allowance $ 170 $ 2,285 $ 2,455

Restructured and subsequently defaulted $ — $ 6,342 $ 6,342

Three Months Ended March 31, 2021

Troubled debt restructurings

Restructured accruing 5 $ 1,157 $ 9,171 $ 10,328

Restructured nonaccruing 3 101 6,342 6,443

Total 8 $ 1,258 $ 15,513 $ 16,771

Individually-evaluated allowance $ 547 $ 2,976 $ 3,523

Restructured and subsequently defaulted $ 101 $ 6,342 $ 6,443

The Company had seven TDRs at March 31, 2022 totaling approximately $ 16.5 million.

Five of these loans totaling approximately $ 10.1 million were performing under their modified terms as of March 31, 2022.

For the first three months of 2022 there were two performing TDR loans that defaulted on their modified terms.

For the first three months of 2021, one performing TDR loan, with a balance of $ 101 thousand, defaulted on its modified terms and was placed on nonaccrual status.

For the three months ended March 31, 2021, one previously nonperforming restructured loan had its collateral sold and all principal collected along with partial collection of delinquent interest;

in addition, one restructured loan purchased as part of the 2014 acquisition of Virginia Heritage Bank has now had its full carrying value collected, while additional payments will recover previously written off principal and interest, and zero nonperforming restructured loan was charged off.

No similar transactions occurred during the three months ended March 31, 2022.

As of June 30, 2022, substantially all of the borrowers granted deferrals under this program have returned to regular payment status.

The Company had no loan modifications that resulted in TDRs for the six months ended June 30, 2022 and 2021.

The Company had four TDRs at June 30, 2022 totaling approximately $ 5.3 million.

All of these loans were performing under their modified terms as of June 30, 2022.

The Company had seven TDRs at December 31, 2021, totaling $ 16.5 million.

During the three and six months ended June 30, 2022, three loans that had been modified as TDRs with a balance of $ 11.1 million, including two that previously were on nonperforming status, were sold, resulting in a charge of $ 1.4 million recorded in connection with the sale.

During the six months ended June 30, 2021, one previously nonperforming restructured loan with a balance of $ 2.4 million had its collateral sold, resulting in the full collection of the loan's principal and a partial collection of delinquent interest.

For the first six months of 2022 there were no loans that were modified as a TDR that defaulted.

For the first six months of 2021, one performing TDR loan, with a balance of $ 101 thousand, defaulted on its modified terms and was placed on nonaccrual status.

Commercial and consumer loans modified in a TDR are closely monitored for delinquency as an early indicator of possible future default.

6 unchanged sentences

With the adoption of ASC Topic 842, operating lease agreements were required to be recognized on the Consolidated Balance Sheets as a right-of-use ("ROU") asset and a corresponding lease liability.

As of March 31, 2022 and December 31, 2021, the Company had $ 29.0 million and $ 30.6 million of operating lease ROU assets, respectively, and $ 33.9 million and $ 35.5 million of operating lease liabilities, respectively, on the Company's Consolidated Balance Sheets.

As of June 30, 2022 and December 31, 2021, the Company had $ 27.5 million and $ 30.6 million of operating lease ROU assets, respectively, and $ 32.4 million and $ 35.5 million of operating lease liabilities, respectively, on the Company's Consolidated Balance Sheets.

The Company elects not to recognize ROU assets and lease liabilities arising from short-term leases, leases with initial terms of twelve months or less, or equipment leases (deemed immaterial) on the Consolidated Balance Sheets.

1 unchanged sentence

If these criteria are not met, the options are not included in ROU assets and lease liabilities.

As of March 31, 2022, our leases do not contain material residual value guarantees or impose restrictions or covenants related to dividends or the Company's ability to incur additional financial obligations.

As of June 30, 2022, our leases do not contain material residual value guarantees or impose restrictions or covenants related to dividends or the Company's ability to incur additional financial obligations.

The following table presents lease costs and other lease information.

Three Months Ended

(dollars in thousands) March 31, 2022 March 31, 2021

Three Months Ended Six Months Ended

(dollars in thousands) June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021

Operating lease cost (cost resulting from lease payments) $ 1,820 $ 2,013 $ 3,661 $ 4,172

3 unchanged sentences

Operating lease - operating cash flows (fixed payments) $ 1,923 $ 2,048 $ 3,743 $ 4,352

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

Operating lease right-of-use assets $ 27,548 $ 30,555

2 unchanged sentences

Weighted average discount rate - operating leases 2.98 % 3.05 %

Future minimum payments for operating leases with initial or remaining terms of more than one year as of March 31, 2022 were as follows:

Future minimum payments for operating leases with initial or remaining terms of more than one year as of June 30, 2022 were as follows:

(dollars in thousands)

Twelve months ended:

March 31, 2023 $ 5,411

March 31, 2024 7,037

March 31, 2025 6,293

March 31, 2026 5,331

March 31, 2027 4,186

June 30, 2023 $ 3,590

June 30, 2024 7,036

June 30, 2025 6,292

June 30, 2026 5,329

June 30, 2027 4,184

Thereafter 8,475

4 unchanged sentences

The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities.

The Company manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of its assets and liabilities and the use of derivative financial instruments.

The Company manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of its assets and liabilities through the use of derivative financial instruments.

Mortgage Banking Derivatives

11 unchanged sentences

The fair value of the mortgage banking derivatives is recorded as a freestanding asset or liability with the change in value being recognized in current earnings during the period of change.

The gain on sale of loans for the three months ended March 31, 2022 included a $ 266 thousand net loss relating to mortgage banking derivative instruments.

No net loss was recorded for the three months ended March 31, 2021.

Cash Flow Hedges of Interest Rate Risk

12 unchanged sentences

The Company's sole designated cash flow hedge matured during April 2021.

Thus, as of March 31, 2022 and December 31, 2021, the Company had no designated cash flow hedge interest rate swap transactions outstanding associated with the Company's variable rate deposits.

Thus, as of June 30, 2022 and December 31, 2021, the Company had no designated cash flow hedge interest rate swap transactions outstanding associated with the Company's variable rate deposits.

Amounts reported in accumulated other comprehensive income related to designated cash flow hedge derivatives were reclassified to interest income/expense as interest payments were made/received on the Company's variable-rate assets/liabilities.

16 unchanged sentences

3) if the Company fails to maintain its status as a well-capitalized institution then the counterparty could terminate the derivative positions and the Company would be required to settle its obligations under the agreements.

The table below identifies the balance sheet category and fair value of the Company's designated cash flow hedge derivative instruments and non-designated hedges as of March 31, 2022 and December 31, 2021.

The table below identifies the balance sheet category and fair value of the Company's designated cash flow hedge derivative instruments and non-designated hedges as of June 30, 2022 and December 31, 2021.

The Company has a minimum collateral posting threshold with its derivative counterparty.

If the Company had breached any provisions under the agreement at March 31, 2022, it could have been required to settle its obligations under the agreement at the termination value.

March 31, 2022 December 31, 2021

If the Company had breached any provisions under the agreement at June 30, 2022, it could have been required to settle its obligations under the agreement at the termination value.

June 30, 2022 December 31, 2021

(dollars in thousands) Notional

5 unchanged sentences

Mortgage banking derivatives 31,444 254 Other assets 56,331 636 Other assets

$ 308,168 $ 10,566 Other assets $ 329,156 $ 5,909 Other assets

$ 287,135 $ 18,843 $ 329,156 $ 5,909

Derivatives not designated as hedging instruments in a liability position

Interest rate product $ 255,691 $ 17,662 Other liabilities $ 272,825 $ 5,223 Other liabilities

Mortgage banking derivatives 12,000 20 Other liabilities — — Other liabilities

Credit risk participation agreements 26,162 11 Other liabilities 26,417 47 Other liabilities

$ 310,179 9,928 Other liabilities $ 299,242 5,270 Other liabilities

$ 293,853 17,693 $ 299,242 5,270

Cash and other collateral posted ( 2,270 ) ( 2,930 )

Net derivatives in a liability position $ 15,423 $ 2,340

The table below presents the pre-tax net gains (losses) of the Company's designated cash flow hedges for the three months ended March 31, 2022 and 2021:

The table below presents the pre-tax net gains (losses) of the Company's designated cash flow hedges for the three and six months ended June 30, 2022 and 2021:

The Effect of Fair Value and Cash Flow Hedge Accounting on Accumulated Other Comprehensive Income

Amount of Gain or (Loss)

Amount of Gain (Loss) Recognized Reclassified from Accumulated

Derivatives in Subtopic in OCI on Derivatives Location of Gain or (Loss) Recognized from OCI into Net Income

815-20 Hedging Relationships Three Months Ended March 31, Accumulated Other Comprehensive Income into Three Months Ended March 31,

(dollars in thousands) 2022 2021 Net Income 2022 2021

Amount of Gain (Loss) Recognized Amount of Gain (Loss) Reclassified

Derivatives in Subtopic in OCI on Derivatives Location of from AOCI into Net Income

815-20 Hedging Relationships Three Months Ended June 30, Gain (Loss) Recognized Three Months Ended June 30,

(dollars in thousands) 2022 2021 from AOCI into Net Income 2022 2021

Derivatives in cash flow hedging relationships

Interest rate products $ — $ — Interest Expense $ — $ ( 60 )

The table below presents the effect of the Company's derivative financial instruments on the Consolidated Statements of Income for the three months ended March 31, 2022 and 2021:

The Effect of Fair Value and Cash Flow Hedge Accounting on the Statements of Income

Amount of Gain or (Loss) Recognized in Interest

Expense on Fair Value and Cash Flow

Hedging Relationships

Three Months Ended March 31,

Amount of Gain (Loss) Recognized Amount of Gain (Loss) Reclassified

Derivatives in Subtopic in OCI on Derivative Location of from AOCI into Net Income

815-20 Hedging Relationships Six Months Ended June 30, Gain (Loss) Recognized Six Months Ended June 30,

(dollars in thousands) 2022 2021 from AOCI into Net Income 2022 2021

Derivatives in cash flow hedging relationships

Interest rate products $ — $ ( 844 ) Interest Expense $ — $ ( 445 )

The table below presents the effect of the Company's derivative financial instruments on the consolidated statements of income for the three and six months ended June 30, 2022 and 2021:

The Effect of Fair Value and Cash Flow Hedge Accounting on the Consolidated Statements of Income

Amount of Gain (Loss) Recognized in Interest Expense on

Fair Value and Cash Flow Hedging Relationships

Three Months Ended June 30, Six Months Ended June 30,

(dollars in thousands) 2022 2021 2022 2021

2 unchanged sentences

Interest contracts

Amount of gain or (loss) reclassified from accumulated other comprehensive income into income $ — $ ( 384 )

Amount of gain or (loss) reclassified from accumulated OCI into income - included component $ — $ ( 384 )

Amount of gain (loss) reclassified from AOCI into income $ — $ ( 60 ) $ — $ ( 445 )

Amount of gain (loss) reclassified from AOCI into income - included component $ — $ ( 60 ) $ — $ ( 445 )

Effect of Derivatives Not Designated as Hedging Instruments in the Consolidated Statements of Income

Amount of Income (Loss) Recognized

Amount of Gain (Loss) Recognized in Income on Derivatives

Location of Gain (Loss) Recognized Three Months Ended June 30, Six Months Ended June 30,

in Income on Derivatives 2022 2021 2021 2020

Derivatives not Designated as Hedging Instruments under Location of (Loss) Recognized in Three Months Ended March 31,

Subtopic 815-20 Income on Derivatives 2022 2021

Interest rate products Other income / (other expense) $ 334 $ ( 299 ) $ 585 $ ( 16 )

Mortgage banking derivatives Other income / (Other expense) 209 2,514

Mortgage banking derivatives Gain on sale of loans ( 299 ) 1,179 ( 529 ) 3,693

Other contracts Other income / (other expense) — 4 — 44

1 unchanged sentence

Long-Term Borrowings

The following table presents information related to the Company's long-term borrowings as of March 31, 2022 and December 31, 2021.

(dollars in thousands) March 31, 2022 December 31, 2021

The following table presents information related to the Company's long-term borrowings as of June 30, 2022 and December 31, 2021.

(dollars in thousands) June 30, 2022 December 31, 2021

Subordinated Notes, 5.75 %

6 unchanged sentences

Net Income per Common Share

The calculation of net income per common share for the three months ended March 31, 2022 and 2021 was as follows:

Three Months Ended March 31,

The calculation of net income per common share for the three and six months ended June 30, 2022 and 2021 was as follows:

Three Months Ended June 30, Six Months Ended June 30,

(dollars and shares in thousands, except per share data) 2022 2021 2022 2021

9 unchanged sentences

Other Comprehensive Income (Loss)

The following table presents the components of other comprehensive income (loss) for the three months ended March 31, 2022 and 2021.

The following table presents the components of other comprehensive income (loss) for the three and six months ended June 30, 2022 and 2021.

(dollars in thousands) Before Tax Tax Effect Net of Tax

Three Months Ended March 31, 2022

Net unrealized (loss) gain on securities available-for-sale $ ( 79,227 ) $ 20,821 $ ( 58,406 )

Reclassification adjustment for net loss (gain) included in net income 25 ( 6 ) 19

Total unrealized (loss) gain ( 79,202 ) 20,815 ( 58,387 )

Three Months Ended June 30, 2022

Net unrealized loss on securities available-for-sale $ ( 44,717 ) $ 11,697 $ ( 33,020 )

Reclassification adjustment for net loss included in net income 151 ( 51 ) 100

Total unrealized loss on investment securities available-for-sale ( 44,566 ) 11,646 ( 32,920 )

Amortization of unrealized loss on securities transferred to held-to-maturity 2,689 ( 698 ) 1,991

Total unrealized gain investment securities held-to-maturity 2,689 ( 698 ) 1,991

Net unrealized gain on derivatives 284 — 284

Total unrealized gain on derivatives 284 — 284

Other comprehensive loss $ ( 41,593 ) $ 10,948 $ ( 30,645 )

Three Months Ended June 30, 2021

Net unrealized gain on securities available-for-sale $ 8,957 $ ( 2,302 ) $ 6,655

reclassification adjustment for net gain included in net income ( 318 ) 82 ( 236 )

Total unrealized gain on investment securities available-for-sale 8,639 ( 2,220 ) 6,419

Reclassification adjustment for loss included in net income 133 ( 34 ) 99

Total unrealized gain on derivatives 133 ( 34 ) 99

Other comprehensive income $ 8,772 $ ( 2,254 ) $ 6,518

Six Months Ended June 30, 2022

Net unrealized loss on securities available-for-sale $ ( 123,944 ) $ 32,520 $ ( 91,424 )

Reclassification adjustment for net losses included in net income 176 ( 59 ) 117

Total unrealized loss on investment securities available-for-sale ( 123,768 ) 32,461 ( 91,307 )

Net unrealized (loss) on securities transferred to held-to-maturity ( 66,193 ) 17,098 ( 49,095 )

Other comprehensive (loss) income $ ( 145,395 ) $ 37,913 $ ( 107,482 )

Three Months Ended March 31, 2021

Net unrealized (loss) gain on securities available-for-sale $ ( 23,713 ) $ 6,096 $ ( 17,617 )

reclassification adjustment for net (gain) loss included in net income ( 221 ) 55 ( 166 )

Total unrealized (loss) gain ( 23,934 ) 6,151 ( 17,783 )

Net unrealized gain (loss) on derivatives 767 ( 194 ) 573

reclassification adjustment for (gain) loss included in net income ( 384 ) 96 ( 288 )

Total unrealized gain (loss) 383 ( 98 ) 285

Other comprehensive (loss) income $ ( 23,551 ) $ 6,053 $ ( 17,498 )

Amortization of unrealized loss on securities transferred to held-to-maturity 2,689 ( 698 ) 1,991

Total unrealized loss on investment securities held-to-maturity ( 63,504 ) 16,400 ( 47,104 )

Net unrealized gain on derivatives 284 — 284

Total unrealized gain on derivatives 284 — 284

Other comprehensive loss $ ( 186,988 ) $ 48,861 $ ( 138,127 )

Six Months Ended June 30, 2021

Net unrealized loss on securities available-for-sale $ ( 14,756 ) $ 3,794 $ ( 10,962 )

Reclassification adjustment for net gains included in net income ( 539 ) 137 ( 402 )

Total unrealized loss on investment securities available-for-sale ( 15,295 ) 3,931 ( 11,364 )

Net unrealized loss on derivatives ( 1 ) — ( 1 )

Reclassification adjustment for loss included in net income 517 ( 132 ) 385

Total unrealized gain on derivatives 516 ( 132 ) 384

Other comprehensive loss $ ( 14,779 ) $ 3,799 $ ( 10,980 )

(1) Represents unamortized AOCI on securities transferred to held-to-maturity status.

The following table presents the changes in each component of accumulated other comprehensive income (loss), net of tax, for the three months ended March 31, 2022 and 2021.

The following table presents the changes in each component of accumulated other comprehensive income (loss), net of tax, for the three and six months ended June 30, 2022 and 2021.

Securities Securities Accumulated Other

1 unchanged sentence

(dollars in thousands) For Sale Maturity Derivatives Income (Loss)

Three Months Ended March 31, 2022

Three Months Ended June 30, 2022

Balance at beginning of period $ ( 72,345 ) $ ( 49,095 ) $ ( 284 ) $ ( 121,724 )

Other comprehensive loss before reclassifications ( 58,406 ) ( 49,095 ) — (107,501)

Amounts reclassified from accumulated other comprehensive income (loss) 19 — — 19

Other comprehensive (loss) income before reclassifications ( 33,020 ) — 284 ( 32,736 )

Amounts reclassified from accumulated other comprehensive loss 100 — — 100

Amortization of unrealized loss on securities transferred to held-to-maturity — 1,991 — 1,991

Net other comprehensive loss during period ( 32,920 ) 1,991 284 ( 30,645 )

Balance at end of period $ ( 105,265 ) $ ( 47,104 ) $ — $ ( 152,369 )

Three Months Ended March 31, 2021

Three Months Ended June 30, 2021

Balance at beginning of period $ ( 1,615 ) $ — $ ( 383 ) $ ( 1,998 )

1 unchanged sentence

Amounts reclassified from accumulated other comprehensive income (loss) ( 236 ) — 99 ( 137 )

Net other comprehensive income during period 6,419 — 99 6,518

Balance at end of period $ 4,804 $ — $ ( 284 ) $ 4,520

Six Months Ended June 30, 2022

Balance at beginning of period $ ( 13,958 ) $ — $ ( 284 ) $ ( 14,242 )

Other comprehensive (loss) income before reclassifications ( 91,424 ) — 284 ( 91,140 )

Amounts reclassified from accumulated other comprehensive loss 117 — — 117

Net unrealized loss on securities transferred to held-to-maturity — ( 49,095 ) — ( 49,095 )

Amortization of unrealized loss on securities transferred to held-to-maturity — 1,991 — 1,991

Net other comprehensive (loss) income during period ( 91,307 ) ( 47,104 ) 284 ( 138,127 )

Balance at end of period $ ( 105,265 ) $ ( 47,104 ) $ — $ ( 152,369 )

The following tables present the amounts reclassified out of each component of accumulated other comprehensive income (loss) for the three months ended March 31, 2022 and 2021.

Six Months Ended June 30, 2021

Balance at beginning of period $ 16,168 $ — $ ( 668 ) $ 15,500

Other comprehensive (loss) income before reclassifications ( 10,962 ) — ( 1 ) ( 10,963 )

Amounts reclassified from accumulated other comprehensive loss ( 402 ) — 385 ( 17 )

Net other comprehensive (loss) income during period ( 11,364 ) — 384 ( 10,980 )

Balance at end of period $ 4,804 $ — $ ( 284 ) $ 4,520

The following tables present the amounts reclassified out of each component of accumulated other comprehensive income (loss) for the three and six months ended June 30, 2022 and 2021.

Amount Reclassified from

1 unchanged sentence

Details about Accumulated Other Comprehensive (Loss) Income Affected Line Item in

Comprehensive Income Components Three Months Ended March 31, the Statement Where

(dollars in thousands) 2022 2021 Net Income is Presented

Realized gain on sale of investment securities $ ( 25 ) $ 221 Net (loss) gain on sale of investment securities

Comprehensive Loss Components Three Months Ended June 30, Consolidated Statements of

(dollars in thousands) 2022 2021 Income

Realized (loss) gain on sale of investment securities $ ( 151 ) $ 318 Net (loss) gain on sale of investment securities

Interest income derivative deposits — ( 133 ) Interest on balances with other banks and short-term investments

1 unchanged sentence

Total reclassifications for the periods $ ( 100 ) $ 137

Amount Reclassified from

Accumulated Other

Details about Accumulated Other Comprehensive (Loss) Income Affected Line Item in

Comprehensive Loss Components Six Months Ended June 30, Consolidated Statements of

(dollars in thousands) 2022 2021 Income

Realized (loss) gain on sale of investment securities $ ( 176 ) $ 539 Net (loss) gain on sale of investment securities

Interest income derivative deposits — ( 517 ) Interest on balances with other banks and short-term investments

Income tax benefit (expense) 59 ( 5 ) Income tax expense

Total reclassifications for the periods $ ( 117 ) $ 17

Fair Value Measurements

17 unchanged sentences

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

The tables below present the recorded amount of assets and liabilities measured at fair value on a recurring basis as of March 31, 2022 and December 31, 2021.

The tables below present the recorded amount of assets and liabilities measured at fair value on a recurring basis as of June 30, 2022 and December 31, 2021.

Significant Significant

2 unchanged sentences

(dollars in thousands) (Level 1) (Level 2) (Level 3) (Fair Value)

March 31, 2022

June 30, 2022

Investment securities available-for-sale:

2 unchanged sentences

Residential mortgage-backed securities — 885,689 — 885,689

Commercial mortgage-backed securities — 109,549 — 109,549

Municipal bonds — 12,932 — 12,932

3 unchanged sentences

Mortgage banking derivatives — — 254 254

Total assets measured at fair value on a recurring basis as of March 31, 2022 $ — $ 1,811,494 $ 209 $ 1,811,703

Total assets measured at fair value on a recurring basis as of June 30, 2022 $ — $ 1,787,657 $ 254 $ 1,787,911

Credit risk participation agreements $ — $ 11 $ — $ 11

Interest rate caps — 17,662 — 17,662

Total liabilities measured at fair value on a recurring basis as of March 31, 2022 $ — $ 9,928 $ — $ 9,928

Mortgage banking derivatives — — 20 20

Total liabilities measured at fair value on a recurring basis as of June 30, 2022 $ — $ 17,673 $ 20 $ 17,693

December 31, 2021

2 unchanged sentences

agency securities — 622,387 — 622,387

Residential mortgage-backed securities — 1,677,673 — 1,677,673

Mortgage-backed securities — 1,677,673 — 1,677,673

Municipal bonds — 145,431 — 145,431

13 unchanged sentences

Level 2 securities include U.S.

treasury bonds, U.S.

agency debt securities, mortgage-backed securities issued by Government Sponsored Entities and municipal bonds.

7 unchanged sentences

As such, the Company classifies loans subjected to fair value adjustments as Level 2 valuation.

The following tables summarize the difference between the aggregate fair value and the aggregate unpaid principal balance for loans held for sale measured at fair value as of March 31, 2022 and December 31, 2021.

The following tables summarize the difference between the aggregate fair value and the aggregate unpaid principal balance for loans held for sale measured at fair value as of June 30, 2022 and December 31, 2021.

Aggregate Unpaid

(dollars in thousands) Fair Value Principal Balance Difference

March 31, 2022

June 30, 2022

Loans held for sale $ 13,814 $ 13,828 $ ( 14 )

1 unchanged sentence

Loans held for sale $ 47,218 $ 46,623 $ 595

There were no residential mortgage loans held for sale that were 90 or more days past due or on nonaccrual status as of March 31, 2022 or December 31, 2021.

There were no residential mortgage loans held for sale that were 90 or more days past due or on nonaccrual status as of June 30, 2022 or December 31, 2021.

Credit risk participation agreements :

6 unchanged sentences

The fair value of the cap is calculated by determining the total expected asset or liability exposure of the derivatives.

Total expected exposure incorporates both the current and potential future exposure of the derivative, derived from using observable inputs, such as yield curves and volatilities.

Total expected exposure incorporates both the current and potential future exposure of the derivative, derived from using observable inputs, such as yield curves and voltilities.

Accordingly, the cap falls within Level 2.

14 unchanged sentences

Beginning balance at January 1, 2022 $ 12,000 $ 636 $ 12,636

Realized gain (loss) included in earnings — ( 427 ) ( 427 )

Transferred from available-for-sale to held-to-maturity ( 12,000 ) — ( 12,000 )

Ending balance at March 31, 2022 $ — $ 209 $ 209

Unrealized loss included in earnings — ( 382 ) ( 382 )

Reclassified to investment securities held-to-maturity ( 12,000 ) — ( 12,000 )

Ending balance at June 30, 2022 $ — $ 254 $ 254

Beginning balance at January 1, 2022 $ — $ —

Unrealized loss included in earnings ( 20 ) ( 20 )

Ending balance at June 30, 2022 $ ( 20 ) $ ( 20 )

Securities Mortgage Banking

5 unchanged sentences

Ending balance at December 31, 2021 $ 12,000 $ 636 $ 12,636

The investment securities available-for-sale classified as Level 3 consist of one corporate bond of a local banking company which is not publicly traded, and for which the carrying amount approximates fair value.

For Level 3 assets measured at fair value on a recurring or nonrecurring basis as of March 31, 2022 and December 31, 2021, the significant unobservable inputs used in the fair value measurements were as follows:

March 31, 2022

For Level 3 assets measured at fair value on a recurring or nonrecurring basis as of June 30, 2022 and December 31, 2021, the significant unobservable inputs used in the fair value measurements were as follows:

June 30, 2022

December 31, 2021

6 unchanged sentences

The Company measures certain assets at fair value on a nonrecurring basis and the following is a general description of the methods used to value such assets.

At March 31, 2022, substantially all of the Company's individually evaluated loans were evaluated based upon the fair value of the collateral.

At June 30, 2022, substantially all of the Company's individually evaluated loans were evaluated based upon the fair value of the collateral.

In accordance with ASC Topic 820, individually evaluated loans where an allowance is established based on the fair value of collateral, i.e.

10 unchanged sentences

(dollars in thousands) (Level 1) (Level 2) (Level 3) (Fair Value)

March 31, 2022

June 30, 2022

Collateral dependent loans

Commercial $ — $ — $ 7,700 $ 7,700

PPP loans — — 106 106

Income producing - commercial real estate — — 7,844 7,844

3 unchanged sentences

Other real estate owned — — 1,487 1,487

Total assets measured at fair value on a nonrecurring basis as of March 31, 2022 $ — $ — $ 27,341 $ 27,341

Total assets measured at fair value on a nonrecurring basis as of June 30, 2022 $ — $ — $ 20,307 $ 20,307

December 31, 2021

17 unchanged sentences

In addition, the estimates are only indicative of individual financial instrument values and should not be considered an indication of the fair value of the Company taken as a whole.

The estimated fair value of the Company's financial instruments at March 31, 2022 and December 31, 2021 are as follows:

The estimated fair value of the Company's financial instruments at June 30, 2022 and December 31, 2021 are as follows:

Fair Value Measurements

1 unchanged sentence

(dollars in thousands) Value Fair Value

March 31, 2022

June 30, 2022

Cash and due from banks $ 13,132 $ 13,132 $ 13,132 $ — $ —

14 unchanged sentences

Borrowings $ 349,732 $ 350,557 $ — $ 350,557 $ —

Mortgage banking derivatives $ 20 $ 20 $ — $ — $ 20

Credit risk participation agreement $ 11 $ 11 $ — $ 11 $ —

23 unchanged sentences

As previously disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2021, on February 10, 2022, the United States District Court for the Southern District of New York (the "SDNY") approved the settlement agreement of a putative class action lawsuit filed against the Company, its current and former President and Chief Executive Officer and its current and former Chief Financial Officer.

The settlement included a total payment by the Company of $ 7.5 million in exchange for the release of all of the defendants from all alleged claims in the class action suit, without any admission or concession of wrongdoing by the Company or the other defendants.

In connection with the previously disclosed investigation by the SEC, the Company's discussions with the Staff have progressed, and the Company continues to engage with the Staff, including senior Staff members, about a potential resolution or settlement of the Staff's investigation with respect to the Company.

The Company is hopeful that these discussions will lead to a timely resolution of the investigation as it relates to the Company and any current employees and directors on a mutually agreeable basis, but there can be no assurance that will be the case.

There also can be no assurance that this would result in resolution of any charges against former employees or directors, given the Staff's ongoing review of the factual record.

Any agreements reached by the Company with the Staff would be subject to approval by the Commission, and there can be no assurance that it would be approved.

We are unable to predict the outcome of the investigation or these discussions or whether any potential resolution would have a material impact on the Company.

The Company is also continuing discussions with the Staff of the Federal Reserve Board about a potential resolution or settlement of its investigation with respect to the Company.

With respect to the other investigations described above, we are unable to predict their duration, scope or outcome.

The settlement included a total payment covered by the Company's insurance of $ 7.5 million in exchange for the release of all of the defendants from all alleged claims in the class action suit, without any admission or concession of wrongdoing by the Company or the other defendants.

On June 1, 2022, the Company reached an agreement in principle with the SEC staff to resolve the SEC's investigation with respect to the Company.

As previously disclosed, the Company believes the investigation relates to the Company's identification, classification and disclosure of related party transactions;

the retirement of certain former officers and directors;

and the relationship of the Company and certain of its former officers and directors with a local public official, among other things.

Under the terms of the settlement, the Company would consent, without admitting or denying the SEC's allegations, to the entry of an administrative cease-and-desist order for violations of Sections 17(a)(2) and (3) of the Securities Act of 1933, as amended, Sections 13(a), 13(b)(2)(A), 13(b)(2)(B) and 14(a) of the Securities Exchange Act of 1934, as amended, and Rules 13a-1, 14a-9 and 12b-20 thereunder;

and would pay a civil money penalty of $ 10.0 million and $ 2.6 million in disgorgement, plus prejudgment interest.

The agreement with the SEC staff is subject to finalization and then approval by the SEC, and there can be no assurance that the settlement will be agreed to or approved.

In connection with the probable settlement of the SEC matter, the Company recorded a contingent liability of $ 13.4 million in other liabilities on the consolidated balance sheet and in other expenses on the consolidated statements of income.

On August 2, 2022, the Bank reached an agreement in principle with the staff of the Board of Governors of the Federal Reserve System ("FRB") to resolve the FRB's investigation with respect to the Bank.

As previously disclosed, the Company believes the investigation relates to the Company's identification, classification and disclosure of related party transactions;

and the relationship of the Company and certain of its former officers and directors with a local public official, among other things.

The agreement with the FRB staff is subject to finalization and then approval by the FRB, and there can be no assurance that the settlement will be agreed to or approved.

In connection with the probable settlement of the FRB matter, the Company recorded a contingent liability of approximately $ 9.5 million as a subsequent event in other liabilities on the consolidated balance sheet and in other expenses on the consolidated statements of income as of and for the three and six months ended June 30, 2022.

As previously disclosed, the Company maintains director and officer insurance policies ("D&O Insurance Policies") that provide coverage for the legal defense costs related to certain of the above-described investigations and litigations and those discussed in the Company's Annual Report on Form 10-K for the year ended December 31, 2021.

When claims are covered by D&O Insurance Policies, the Company records a corresponding receivable against the incurred legal defense cost expense subject to coverage under the D&O Insurance Policies and then eliminates the receivable and expense when the claim is paid.

Since the commencement of the above-described matters in 2018 through March 31, 2022, the Company's D&O Insurance carriers have advanced a number defense cost claims to the Company and its current and former directors and officers.

Subject to any new developments to the above-described investigations and litigations that may occur over the next few months, the Company currently believes there is a possibility that the applicable D&O Insurance Policies may be exhausted as early as the second quarter of 2022.

Since the commencement of the above-described matters in 2018 through June 30, 2022, the Company's D&O Insurance carriers have advanced a number of defense cost claims to the Company and its current and former directors and officers.

Once the D&O Insurance Policies are exhausted, the Company will be responsible for paying the defense costs associated with the above-described investigations and litigations for itself and on behalf of any current and former Officers and Directors entitled to indemnification from the Company.

1 unchanged sentence

Note 12 - Subsequent Events

The Company has evaluated subsequent events through the filing of this report and determined that there have not been any events that have occurred that would require adjustments to or disclosures in the Consolidated Financial Statements.

The Company has evaluated subsequent events through the filing of this report and determined that, except for the FRB investigation resolution discussed in Note 11, there have not been any events that have occurred that would require adjustments to or disclosures in the Consolidated Financial Statements.

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