What changed in this filing

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Item 1. Financial Statements

2022-11-09 compared with 2022-08-09 · 201 added, 200 removed, 1154 unchanged (26% of the section changed)

3 unchanged sentences

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

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Cash and due from banks $ 27,235 $ 12,886

42 unchanged sentences

(dollars in thousands, except per share data)

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

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

18 unchanged sentences

Gain on sale of loans 821 3,332 3,168 11,988

Net (loss) gain on sale of investment securities ( 151 ) 318 ( 176 ) 539

Net gain (loss) on sale of investment securities 4 1,519 ( 172 ) 2,058

Increase in the cash surrender value of bank-owned life insurance 631 642 1,889 1,429

20 unchanged sentences

(dollars in thousands)

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

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

1 unchanged sentence

Other Comprehensive (Loss) Income, Net of Tax:

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

Unrealized (loss) on securities available-for-sale ( 60,029 ) ( 5,703 ) ( 151,453 ) ( 16,666 )

Reclassification adjustment for (gain) loss included in net income ( 3 ) ( 1,133 ) 114 ( 1,534 )

Total unrealized (loss) on investment securities available-for-sale ( 60,032 ) ( 6,836 ) ( 151,339 ) ( 18,200 )

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

1 unchanged sentence

Amortization of unrealized loss on securities transferred to held-to-maturity 1,762 — 3,753 —

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

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

Total unrealized loss recognized (remaining) on investment securities held-to-maturity 1,762 — ( 45,342 ) —

Unrealized gain on derivatives — — 284 769

Reclassification adjustment for gain included in net income — — — ( 385 )

Total unrealized gain on derivatives — — 284 384

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

Other comprehensive (loss) ( 58,270 ) ( 6,836 ) ( 196,397 ) ( 17,816 )

Comprehensive (Loss) Income $ ( 20,973 ) $ 36,773 $ ( 97,660 ) $ 117,255

7 unchanged sentences

Shares Amount Capital Earnings Income (Loss) Equity

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

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

Net Income — — — 37,297 — 37,297

6 unchanged sentences

Cash dividends declared ($0.45 per share) — — — ( 14,438 ) — ( 14,438 )

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

Balance September 30, 2022 32,082,321 $ 318 $ 442,880 $ 987,212 $ ( 210,639 ) $ 1,219,771

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

Net Income — — — 43,609 — 43,609

5 unchanged sentences

Cash dividends declared ($0.40 per share) — — — ( 12,788 ) — ( 12,788 )

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

Common stock repurchased ( 11,609 ) — ( 615 ) — — ( 615 )

Balance September 30, 2021 31,947,458 $ 316 $ 432,479 $ 901,218 $ ( 2,316 ) $ 1,331,697

See Notes to Consolidated Financial Statements.

EAGLE BANCORP, INC.

14 unchanged sentences

Cash dividends declared ($ 1.30 per share) — — — ( 41,586 ) — ( 41,586 )

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

Common stock repurchased — — — — — —

Balance September 30, 2022 32,082,321 $ 318 $ 442,880 $ 987,212 $ ( 210,639 ) $ 1,219,771

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

8 unchanged sentences

Common stock repurchased ( 13,075 ) — ( 677 ) — — ( 677 )

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

Balance September 30, 2021 31,947,458 $ 316 $ 432,479 $ 901,218 $ ( 2,316 ) $ 1,331,697

See Notes to Consolidated Financial Statements.

2 unchanged sentences

(dollars in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Cash Flows From Operating Activities:

1 unchanged sentence

Adjustments to reconcile Net Income to net cash provided by operating activities:

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

Provision for (reversal of) credit losses 730 ( 14,409 )

Provision for (reversal of) credit losses for unfunded commitments 1,316 ( 487 )

12 unchanged sentences

Increase in other assets ( 19,055 ) ( 29,667 )

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

Decrease in other liabilities 5,503 89,348

Net Cash Provided by Operating Activities 139,627 224,774

7 unchanged sentences

Proceeds from maturities 82,163 —

Purchases of Federal Reserve and Federal Home Loan Bank stock ( 149 ) ( 98 )

Proceeds from call 19,944 —

(Purchase of) proceeds from sale of Federal Reserve and Federal Home Loan Bank stock ( 8,158 ) 6,011

Sale of Federal Reserve and Federal Home Loan Bank stock — —

3 unchanged sentences

Net change in premises and equipment ( 1,518 ) ( 4,973 )

Net Cash Used in Investing Activities ( 557,615 ) ( 58,628 )

Net Cash (Used in) Provided by Investing Activities ( 663,100 ) 236,959

Cash Flows From Financing Activities:

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

Increase (decrease) in deposits ( 1,218,190 ) 479,285

Increase (decrease) in customer repurchase agreements ( 2,453 ) 2,675

Decrease in short-term borrowings ( 20,000 ) —

Proceeds from short-term borrowings 215,000 —

Repayment of long-term borrowings — ( 200,000 )

3 unchanged sentences

Common stock repurchased — ( 677 )

Tax equivalent shares withheld on exercise of stock-based compensation plans ( 1,615 ) —

Cash dividends paid ( 41,586 ) ( 31,914 )

Net Cash Used in Financing Activities ( 855,598 ) ( 246,093 )

Net Decrease in Cash and Cash Equivalents ( 1,289,056 ) ( 192,833 )

Net Cash (Used in) Provided by Financing Activities ( 1,046,574 ) 249,696

Net (Decrease) Increase in Cash and Cash Equivalents ( 1,570,047 ) 711,429

Cash and Cash Equivalents at Beginning of Period 1,714,222 1,789,055

3 unchanged sentences

(dollars in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Supplemental Cash Flows Information:

5 unchanged sentences

Transfers of investment securities from available-for-sale to held-to-maturity $ 922,795 $ —

Transfers from loans to other real estate owned $ 475 $ 148

Change in fair value of investment securities available-for-sale $ 973,655 $ 24,495

Change in fair value of cash flow hedges $ — $ ( 516 )

See Notes to Consolidated Financial Statements.

19 unchanged sentences

The guaranteed portion of small business loans, guaranteed by the Small Business Administration ("SBA"), is typically sold to third party investors in a transaction apart from the loan's origination.

The Bank offers its products and services through seventeen banking offices, five lending centers and various digital capabilities, including remote deposit services and mobile banking services.

The Bank offers its products and services through sixteen banking offices, five lending centers and various digital capabilities, including remote deposit services and mobile banking services.

Eagle Insurance Services, LLC, a subsidiary of the Bank, offers access to insurance products and services through a referral program with a third-party insurance broker.

9 unchanged sentences

Premiums and discounts on investment securities held-to-maturity, like available-for-sale securities, are amortized or accreted to the earlier of call or maturity based on expected lives, which include prepayment adjustments and call optionality.

The Company separately evaluates its investment securities held-to-maturity for any credit losses.

The Company pools like securities and calculates expected credit losses through an estimate based on a security's credit rating, which is recognized as part of the allowance for credit losses for held-to-maturity securities and included in the balance of investment securities held-to-maturity on the Consolidated Balance Sheets.

If the Company determines that a security indicates evidence of deteriorated credit quality, the security is individually-evaluated and a discounted cash flow analysis is performed and compared to the amortized cost basis of the security to estimate any credit losses.

The Company excludes accrued interest receivable from the balance of amortized cost on its investment securities held-to-maturity as it would be written off in the event that an allowance for credit losses would be required.

Transfers of Investment Securities from Available-for-Sale to Held-to-Maturity

87 unchanged sentences

As our portfolio has matured, historical loss ratios have been closely monitored.

The review of the appropriateness of the allowance is performed by executive management and presented to management committees, Credit Oversight Committee (which replaced Directors Loan Committee), the Audit Committee, and the Board of Directors.

The review of the appropriateness of the allowance is performed by executive management and presented to management committees, Credit Oversight Committee, the Audit Committee, and the Board of Directors.

The committees' reports to the Board are part of the Board review on a quarterly basis of our consolidated financial statements.

15 unchanged sentences

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

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

The Company utilizes ASC 326 to evaluate its available-for-sale ("AFS") debt security portfolio for expected credit losses.

Allowance for Credit Losses - Securities

The Company utilizes ASC 326 to evaluate its available-for-sale ("AFS") and held-to-maturity ("HTM") debt security portfolio for expected credit losses.

For AFS debt securities in an unrealized loss position, the Company first assesses whether it intends to sell, or it is more likely than not that it will be required to sell, the security before recovery of its amortized cost basis.

17 unchanged sentences

Accordingly, we do not recognize an allowance for credit loss against accrued interest receivable.

The Company separately evaluates its HTM investment securities for any credit losses.

Loan Commitments and Allowance for Credit Losses on Off-Balance Sheet Credit Exposures

5 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 June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

(dollars in thousands) 2022 2021 2022 2021

Provision for (reversal of) credit losses - loans $ 3,046 $ ( 8,326 ) $ 532 $ ( 14,498 )

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

(Reversal of) provision for credit losses - HTM debt securities ( 24 ) — 800 —

Provision for (reversal of) credit losses - AFS debt securities — 123 ( 602 ) 89

27 unchanged sentences

Cash and Due from Banks

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.

The Company has deposits with other banks for derivative positions it holds, totaling $ 1.1 million at September 30, 2022 and $ 6.3 million at December 31, 2021.

At September 30, 2022, the Company was entitled to receive collateral totaling $ 30.6 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

June 30, 2022

September 30, 2022

Investment securities available-for-sale:

9 unchanged sentences

(dollars in thousands) Cost Gains Losses Value Losses

June 30, 2022

September 30, 2022

Investment securities held-to-maturity:

15 unchanged sentences

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

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.

In addition, at September 30, 2022 and December 31, 2021 the Company held $ 42.3 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.

1 unchanged sentence

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 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.

The related unrealized loss of $ 66.2 million was included in other comprehensive loss at the time of transfer and, as of September 30, 2022, $ 61.1 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 $ 4.4 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.

Accrued interest receivable on available-for-sale securities totaled $ 4.5 million and $ 6.0 million at September 30, 2022 and December 31, 2021, respectively, and accrued interest receivable on held-to-maturity securities totaled $ 3.8 million at September 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.

5 unchanged sentences

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

June 30, 2022

September 30, 2022

treasury bonds 2 $ 46,048 $ ( 3,719 ) $ — $ — $ 46,048 $ ( 3,719 )

12 unchanged sentences

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

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.

Unrealized losses at September 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 September 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 $ 802 thousand for HTM securities.

The weighted average duration of debt securities, which comprise 100 % of total investment securitie s, is 4.84 years.

If quoted prices are not available, fair value is measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security's credit rating, prepayment assumptions and other factors such as credit loss assumptions.

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 June 30, 2022 and December 31, 2021 by contractual maturity are shown in the table below.

The Company currently has no plans 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 September 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

September 30, 2022 December 31, 2021

Amortized Estimated Amortized Estimated

8 unchanged sentences

Residential mortgage-backed securities:

958,800 828,367 1,692,820 1,677,673

Commercial mortgage-backed securities 100,278 94,172 — —

12 unchanged sentences

Residential mortgage-backed securities:

761,304 674,281 — —

Commercial mortgage-backed securities 92,948 81,733 — —

12 unchanged sentences

(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.

For the three and nine months ended September 30, 2022, gross realized gains on sales and calls of investments securities were $ 4 thousand and $ 16 thousand, respectively as compared to $ 1.5 million and $ 2.2 million for the same three and nine month period ended September 30, 2021.

For the three and nine months ended September 30, 2022, gross realized losses on sales of investments securities were $ 0 and $ 187 thousand, respectively as compared to $ 0 and $ 187 thousand for the same three and nine month period for the prior year.

Gross sales and call proceeds were $ 12.6 million and $ 32.7 million for the three and nine months ended September 30, 2022 and $ 85.5 million and $ 164.6 million for the same periods in 2021.

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 September 30, 2022 and December 31, 2021 was $ 146.1 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 September 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 June 30, 2022 and December 31, 2021 are summarized by type as follows:

June 30, 2022 December 31, 2021

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

September 30, 2022 December 31, 2021

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

12 unchanged sentences

$ 7,228,731 $ 6,990,633

(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.

(1) Excludes accrued interest receivable of $ 37.1 million and $ 38.6 million at September 30, 2022 and December 31, 2021, respectively, which were recorded in other assets on the Consolidated Balance Sheets.

Unamortized net deferred fees amounted to $ 27.4 million and $ 26.9 million at September 30, 2022 and December 31, 2021, respectively.

As of September 30, 2022 and December 31, 2021, the Bank serviced $ 362.7 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.

21 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 June 30, 2022.

ADC loans amounted to $ 1.5 billion at September 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 51.2 % of the outstanding ADC loan portfolio at June 30, 2022.

ADC loans that provide for the use of interest reserves represent approximately 54.1 % of the outstanding ADC loan portfolio at September 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:

13 unchanged sentences

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 and six months ended June 30, 2022 and 2021.

The following tables detail activity in the allowance for credit losses by portfolio segment for the three and nine months ended September 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.

1 unchanged sentence

(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

Three Months Ended September 30, 2022

Allowance for credit losses:

2 unchanged sentences

Recoveries of loans previously charged-off 152 — 25 — — — 2 179

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

Net loans (charged-off) recovered 99 — 25 — — — ( 68 ) 56

Provision for (reversal of) credit losses 20 2,207 ( 240 ) 20 1,020 ( 23 ) 42 3,046

Ending balance $ 15,873 $ 36,327 $ 12,581 $ 810 $ 9,514 $ 624 $ 38 $ 75,767

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

Allowance for credit losses:

5 unchanged sentences

Ending balance $ 15,873 $ 36,327 $ 12,581 $ 810 $ 9,514 $ 624 $ 38 $ 75,767

Three Months Ended June 30, 2021

Three Months Ended September 30, 2021

Allowance for credit losses:

3 unchanged sentences

Net loans (charged-off) recovered ( 1,918 ) 97 — — 493 — — ( 1,328 )

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

Provision for (reversal of) credit losses ( 2,503 ) ( 4,636 ) ( 1,050 ) 172 ( 179 ) ( 129 ) ( 1 ) ( 8,326 )

Ending balance $ 16,927 $ 41,431 $ 11,945 $ 1,054 $ 10,741 $ 768 $ 40 $ 82,906

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2021

Allowance for credit losses:

5 unchanged sentences

Ending balance $ 16,927 $ 41,431 $ 11,945 $ 1,054 $ 10,741 $ 768 $ 40 $ 82,906

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

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

September 30, 2022 December 31, 2021

Business/Other Business/Other

35 unchanged sentences

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.

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

Cost Basis Revolving Loans Convert.

92 unchanged sentences

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 June 30, 2022 and December 31, 2021:

The table presents, by class of loan, an aging analysis and the recorded investments in loans past due as of September 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

September 30, 2022

Commercial $ 110 $ 342 $ — $ 452 $ 1,412,528 $ 3,018 $ 1,415,998

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 June 30, 2022 and December 31, 2021:

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

Nonaccrual with Nonaccrual with Total

No Allowance an Allowance Nonaccrual

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

June 30, 2022

(dollars in thousands, except amounts in footnotes) for Credit Loss for Credit Loss Loans

September 30, 2022

Commercial $ 405 $ 2,613 $ 3,018

14 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.

(1) Excludes TDRs that were performing under their restructured terms totaling $ 24.5 million and $ 10.2 million at September 30, 2022 and December 31, 2021, respectively.

(2) Gross interest income of $ 410 thousand and approximately $ 1.4 million would have been recorded for the nine months ended September 30, 2022 and 2021, respectively, if nonaccrual loans shown above had been current and in accordance with their original terms, while $ 5 thousand and $ 23 thousand interest income was actually recorded on such loans for the nine months ended September 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.

18 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 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.

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

The Company had one loan modification with a balance of $ 19.2 million that resulted in a TDR for the three and nine months ended September 30, 2022 and there were no loan modifications that resulted in TDRs for the nine months ended September 30, 2021.

The Company had five TDRs at September 30, 2022 totaling approximately $ 24.5 million.

All of these loans were performing under their modified terms as of September 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.

During the three and nine months ended September 30, 2022, four loans that had been modified as TDRs with a balance of $ 30.3 million, including two that previously were on nonperforming status, were sold, resulting in a charge-off of $ 1.4 million in connection with the sale.

For the nine months ended September 30, 2021, the collateral for one previously nonperforming restructured loan was sold, and all of the loan's principal and part of its delinquent interest were collected;

and one restructured loan that was purchased as part of the 2014 acquisition of Virginia Heritage Bank was collected at its full carrying value.

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

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

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 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.

As of September 30, 2022 and December 31, 2021, the Company had $ 26.0 million and $ 30.6 million of operating lease ROU assets, respectively, and $ 30.8 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 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.

As of September 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 Six Months Ended

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

Three Months Ended Nine Months Ended

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

Operating lease cost (cost resulting from lease payments) $ 1,757 $ 1,960 $ 5,418 $ 6,132

3 unchanged sentences

Operating lease - operating cash flows (fixed payments) $ 1,809 $ 1,992 $ 5,551 $ 6,344

June 30, 2022 December 31, 2021

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

Operating lease right-of-use assets $ 26,022 $ 30,555

2 unchanged sentences

Weighted average discount rate - operating leases 2.95 % 3.05 %

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

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

(dollars in thousands)

Twelve months ended:

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

September 30, 2023 $ 1,799

September 30, 2024 7,036

September 30, 2025 6,292

September 30, 2026 5,329

September 30, 2027 4,184

Thereafter 8,475

32 unchanged sentences

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

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.

Thus, as of September 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 June 30, 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 September 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 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

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

September 30, 2022 December 31, 2021

(dollars in thousands) Notional

13 unchanged sentences

Net derivatives in a liability position $ 27,340 $ 2,340

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

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

1 unchanged sentence

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,

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

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

3 unchanged sentences

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,

815-20 Hedging Relationships Nine Months Ended September 30, Gain (Loss) Recognized Nine Months Ended September 30,

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

1 unchanged sentence

Interest rate products $ — $ 1 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 table below presents the effect of the Company's derivative financial instruments on the consolidated statements of income for the three and nine months ended September 30, 2022 and 2021:

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

1 unchanged sentence

Fair Value and Cash Flow Hedging Relationships

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

Three Months Ended September 30, Nine Months Ended September 30,

(dollars in thousands) 2022 2021 2022 2021

4 unchanged sentences

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

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

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

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

Location of Gain (Loss) Recognized Three Months Ended September 30, Nine Months Ended September 30,

(dollars in thousands) in Income on Derivatives 2022 2021 2022 2021

Interest rate products Other income / (other expense) $ 837 $ 277 $ 2,299 $ 261

3 unchanged sentences

Long-Term Borrowings

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

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

(dollars in thousands) September 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 and six months ended June 30, 2022 and 2021 was as follows:

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

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

Three Months Ended September 30, Nine Months Ended September 30,

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

8 unchanged sentences

Anti-dilutive shares 3 3 — 3

Other Comprehensive Income (Loss)

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

Other Comprehensive (Loss) Income

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

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

Three Months Ended June 30, 2022

Three Months Ended September 30, 2022

Net unrealized (loss) on securities available-for-sale $ ( 81,384 ) $ 21,355 $ ( 60,029 )

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

Reclassification adjustment for net (gain) loss included in net income ( 4 ) 1 ( 3 )

Total unrealized (loss) on investment securities available-for-sale ( 81,388 ) 21,356 ( 60,032 )

Amortization of unrealized loss on securities transferred to held-to-maturity 2,382 ( 620 ) 1,762

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

Total unrealized loss recognized on investment securities held-to-maturity 2,382 ( 620 ) 1,762

Other comprehensive (loss) $ ( 79,006 ) $ 20,736 $ ( 58,270 )

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

Three Months Ended September 30, 2021

Net unrealized (loss) on securities available-for-sale $ ( 7,682 ) $ 1,979 $ ( 5,703 )

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

reclassification adjustment for net (gain) loss included in net income ( 1,519 ) 386 ( 1,133 )

Total unrealized (loss) gain on investment securities available-for-sale ( 9,201 ) 2,365 ( 6,836 )

Other comprehensive (loss) $ ( 9,201 ) $ 2,365 $ ( 6,836 )

Nine Months Ended September 30, 2022

Net unrealized (loss) on securities available-for-sale $ ( 205,329 ) $ 53,876 $ ( 151,453 )

Reclassification adjustment for net loss (gain) included in net income 172 ( 58 ) 114

Total unrealized (loss) on investment securities available-for-sale ( 205,157 ) 53,818 ( 151,339 )

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

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

Amortization of unrealized loss on securities transferred to held-to-maturity 5,071 ( 1,318 ) 3,753

3 unchanged sentences

Other comprehensive (loss) $ ( 265,995 ) $ 69,598 $ ( 196,397 )

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2021

Net unrealized (loss) on securities available-for-sale $ ( 22,437 ) $ 5,771 $ ( 16,666 )

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

Reclassification adjustment for net (gain) loss included in net income ( 2,058 ) 524 ( 1,534 )

Total unrealized (loss) gain on investment securities available-for-sale ( 24,495 ) 6,295 ( 18,200 )

Net unrealized gain on derivatives 1,033 ( 264 ) 769

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

Total unrealized gain on derivatives 516 ( 132 ) 384

1 unchanged sentence

(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 and six months ended June 30, 2022 and 2021.

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

Securities Securities Accumulated Other

1 unchanged sentence

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

Three Months Ended June 30, 2022

Three Months Ended September 30, 2022

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

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

Amounts reclassified from accumulated other comprehensive loss 100 — — 100

Other comprehensive (loss) before reclassifications ( 60,029 ) — — ( 60,029 )

Amounts reclassified from accumulated other comprehensive income (loss) ( 3 ) — — ( 3 )

Amortization of unrealized loss on securities transferred to held-to-maturity — 1,762 — 1,762

1 unchanged sentence

Balance at end of period $ ( 165,297 ) $ ( 45,342 ) $ — $ ( 210,639 )

Three Months Ended June 30, 2021

Three Months Ended September 30, 2021

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

Other comprehensive income before reclassifications 6,655 — — 6,655

Other comprehensive (loss) before reclassifications ( 5,703 ) — — ( 5,703 )

Amounts reclassified from accumulated other comprehensive income (loss) ( 1,133 ) — — ( 1,133 )

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

Net other comprehensive (loss) during period ( 6,836 ) — — ( 6,836 )

Balance at end of period $ ( 2,032 ) $ — $ ( 284 ) $ ( 2,316 )

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

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

Other comprehensive (loss) income before reclassifications ( 151,453 ) — 284 ( 151,169 )

Amounts reclassified from accumulated other comprehensive loss 117 — — 117

Amounts reclassified from accumulated other comprehensive income (loss) 114 — — 114

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

2 unchanged sentences

Balance at end of period $ ( 165,297 ) $ ( 45,342 ) $ — $ ( 210,639 )

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2021

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

Other comprehensive (loss) income before reclassifications ( 16,666 ) — 769 ( 15,897 )

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

Amounts reclassified from accumulated other comprehensive income (loss) ( 1,534 ) — ( 385 ) ( 1,919 )

Net other comprehensive (loss) income during period ( 18,200 ) — 384 ( 17,816 )

Balance at end of period $ ( 2,032 ) $ — $ ( 284 ) $ ( 2,316 )

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.

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

Amount Reclassified from

1 unchanged sentence

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

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

Comprehensive Loss Components Three Months Ended September 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

Realized (loss) gain on sale of investment securities $ 4 $ 1,519 Net gain (loss) on sale of investment securities

Income tax benefit (expense) ( 1 ) ( 386 ) Income tax expense

3 unchanged sentences

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

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

Comprehensive Loss Components Nine Months Ended September 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

Realized (loss) gain on sale of investment securities $ ( 172 ) $ 2,058 Net gain (loss) on sale of investment securities

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

20 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 June 30, 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 September 30, 2022 and December 31, 2021.

Significant Significant

2 unchanged sentences

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

June 30, 2022

September 30, 2022

Investment securities available-for-sale:

6 unchanged sentences

Loans held for sale — 9,387 — 9,387

Interest rate caps — 18,589 — 18,589

Interest rate derivatives — 30,635 — 30,635

Mortgage banking derivatives — — 259 259

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

Total assets measured at fair value on a recurring basis as of September 30, 2022 $ — $ 1,689,775 $ 259 $ 1,690,034

Credit risk participation agreements $ — $ 3 $ — $ 3

Interest rate caps — 17,662 — 17,662

Interest rate derivatives — 29,492 — 29,492

Mortgage banking derivatives — — 115 115

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

Total liabilities measured at fair value on a recurring basis as of September 30, 2022 $ — $ 29,495 $ 115 $ 29,610

December 31, 2021

10 unchanged sentences

Credit risk participation agreements $ — $ 47 $ — $ 47

Interest rate caps — 5,147 — 5,147

Interest rate derivatives — 5,147 — 5,147

Total liabilities measured at fair value on a recurring basis as of December 31, 2021 $ — $ 5,194 $ — $ 5,194

4 unchanged sentences

Level 1 securities include those traded on an active exchange such as the New York Stock Exchange.

Level 2 securities include U.S.

Level 2 securities includes certain U.S.

treasury bonds, U.S.

4 unchanged sentences

This election reduces certain timing differences in the Consolidated Statement of Income and better aligns with the management of the portfolio from a business perspective.

Fair value is derived from secondary market quotations for similar instruments.

Gains and losses on sales of residential mortgage loans are recorded as a component of noninterest income in the Consolidated Statements of income.

Gains and losses on sales of multifamily FHA securities are recorded as a component of noninterest income in the Consolidated Statements of Income.

Gains and losses on sale of multifamily FHA securities are recorded as a component of noninterest income in the Consolidated Statements of Income.

Fair value is derived from secondary market quotations for similar instruments.

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 June 30, 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 September 30, 2022 and December 31, 2021.

Aggregate Unpaid

(dollars in thousands) Fair Value Principal Balance Difference

June 30, 2022

September 30, 2022

Loans held for sale $ 9,387 $ 9,862 $ ( 475 )

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 June 30, 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 September 30, 2022 or December 31, 2021.

Credit risk participation agreements :

The Company enters into credit risk participation agreements ("RPAs") with institutional counterparties, under which the Company assumes its pro-rata share of the credit exposure associated with a borrower's performance related to interest rate derivative contracts.

The Company enters into RPAs with institutional counterparties, under which the Company assumes its pro-rata share of the credit exposure associated with a borrower's performance related to interest rate derivative contracts.

The fair value of RPAs is calculated by determining the total expected asset or liability exposure of the derivatives to the borrowers and applying the borrowers' credit spread to that exposure.

1 unchanged sentence

Accordingly, RPAs fall within Level 2.

Interest rate caps:

The Company entered into an interest rate cap agreement ("cap") with an institutional counterparty, under which the Company will receive cash if and when market rates exceed the cap's strike rate.

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 voltilities.

Accordingly, the cap falls within Level 2.

Interest rate derivatives:

The Company entered into an interest rate derivative agreement with an institutional counterparty, under which the Company will receive cash if and when market rates exceed the derivatives strike rate.

The fair value of the derivative 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.

Accordingly, the derivative falls within Level 2.

Mortgage banking derivatives for loans settled on a mandatory basis:

15 unchanged sentences

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

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

Ending balance at September 30, 2022 $ — $ 259 $ 259

Beginning balance at January 1, 2022 $ — $ —

Unrealized loss included in earnings 115 115

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

Ending balance at September 30, 2022 $ 115 $ 115

Securities Mortgage Banking

5 unchanged sentences

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

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

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

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

At September 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)

June 30, 2022

September 30, 2022

Collateral dependent loans

5 unchanged sentences

Other real estate owned — — 1,962 1,962

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

Total assets measured at fair value on a nonrecurring basis as of September 30, 2022 $ — $ — $ 28,273 $ 28,273

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 June 30, 2022 and December 31, 2021 are as follows:

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

Fair Value Measurements

1 unchanged sentence

(dollars in thousands) Value Fair Value

June 30, 2022

September 30, 2022

Cash and due from banks $ 27,235 $ 27,235 $ 27,235 $ — $ —

3 unchanged sentences

Investment securities held-to-maturity $ 1,114,084 $ 989,001 $ — $ 977,001 $ 12,000

Federal Reserve and Federal Home Loan Bank stock $ 33,990 $ 33,990 $ — $ 33,990 $ —

Loans held for sale $ 9,387 $ 9,387 $ — $ 9,387 $ —

Loans $ 7,228,731 $ 7,117,321 $ — $ — $ 7,117,321

Annuity investment $ 13,907 $ 13,907 $ — $ 13,907 $ —

Mortgage banking derivatives $ 259 $ 259 $ — $ — $ 259

Interest rate caps $ 18,589 $ 18,589 $ — $ 18,589 $ —

Interest rate derivatives $ 30,635 $ 30,635 $ — $ 30,635 $ —

Noninterest bearing deposits $ 2,928,774 $ 2,928,774 $ — $ 2,928,774 $ —

5 unchanged sentences

Credit risk participation agreement $ 3 $ 3 $ — $ 3 $ —

Interest rate caps $ 17,662 $ 17,662 $ — $ 17,662 $ —

Interest rate derivatives $ 29,492 $ 29,492 $ — $ 29,492 $ —

December 31, 2021

6 unchanged sentences

Loans $ 7,065,598 $ 6,930,929 $ — $ — $ 6,930,929

Mortgage banking derivative $ 636 $ 636 $ — $ — $ 636

Interest rate caps $ 5,197 $ 5,197 $ — $ 5,197 $ —

Mortgage banking derivatives $ 636 $ 636 $ — $ — $ 636

Interest rate derivatives $ 5,197 $ 5,197 $ — $ 5,197 $ —

Noninterest bearing deposits $ 3,277,956 $ 3,277,956 $ — $ 3,277,956 $ —

4 unchanged sentences

Credit risk participation agreements $ 47 $ 47 $ — $ 47 $ —

Interest rate caps $ 5,147 $ 5,147 $ — $ 5,147 $ —

Interest rate derivatives $ 5,147 $ 5,147 $ — $ 5,147 $ —

Note 11 - Legal Contingencies

5 unchanged sentences

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;

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'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 16, 2022, the SEC approved the settlement, pursuant to which the Company consented, 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 agreed to pay a civil money penalty of $ 10.0 million and $ 2.6 million in disgorgement, plus prejudgment interest.

On October 6, 2022, the SEC staff informed our Chief Financial Officer that it had concluded its related investigation as to him and does not intend to recommend an enforcement action against him.

No additional contingent liabilities were recorded in the third quarter of 2022 in connection with the SEC's approval and public announcement of the settlement.

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;

As previously disclosed, 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.

On August 16, 2022, the FRB approved the settlement, pursuant to which the Company consented, without admitting or denying the FRB's allegations, to the entry of a consent order for violations of Regulation O, 12 C.F.R.

§§ 215 et seq., and unsafe and unsound banking practices, due to internal control deficiencies relating to loans involving its former Chief Executive Officer and an inadequate third-party risk management program, in each case from 2015 to 2018, and would pay a civil money penalty of approximately $ 9.5 million.

No additional contingent liabilities were recorded in the third quarter of 2022 in connection with the FRB's approval and public announcement of the settlement.

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 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.

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 third quarter of 2022.

Since the commencement of the above-described matters in 2018 through September 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.

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Note 12 - Subsequent Events

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.

The Company has evaluated subsequent events through the filing of this report and determined 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