19 unchanged sentences
The Company focuses on relationship banking, providing each customer with a number of services and becoming familiar with and addressing customer needs in a proactive, personalized fashion.
−Removed: The Bank currently has a total of seventeen branch offices, including six in Northern Virginia, six in Suburban Maryland, and five in Washington, D.C.
+Added: The Bank currently has a total of sixteen branch offices, including five in Northern Virginia, six in Suburban Maryland, and five in Washington, D.C.
The Bank also operates five lending offices, with one in Northern Virginia, three in Suburban Maryland and one in Washington, D.C.
14 unchanged sentences
Settlement of Legal Matters
−Removed: On June 1, 2022, we reached an agreement in principle with the SEC staff to resolve the SEC's investigation with respect to the Company.
−Removed: As previously disclosed, the Company believes the investigation relates to the Company's identification, classification and disclosure of related party transactions;
+Added: 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.
−Removed: 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;
−Removed: and would pay a civil money penalty of $10.0 million and $2.6 million in disgorgement, plus prejudgment interest.
−Removed: 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.
−Removed: In connection with the probable settlement of the SEC matter, we 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.
−Removed: On August 2, 2022, the Bank reached an agreement in principle with the FRB to resolve the previously disclosed investigation with respect to the Bank.
−Removed: As previously disclosed, the Company believes the investigation relates to the Company's identification, classification and disclosure of related party transactions;
+Added: 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;
+Added: and agreed to pay a civil money penalty of $10.0 million and $2.6 million in disgorgement, plus prejudgment interest.
+Added: 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.
+Added: 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.
+Added: 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.
+Added: 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.
−Removed: 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.
−Removed: 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 June 30, 2022.
+Added: 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.
+Added: §§ 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.
+Added: 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.
Impact of COVID-19
13 unchanged sentences
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 and Note 1 to the Consolidated Financial Statements included in this report.
−Removed: There have been no significant changes to the Company's accounting policies as disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2021 except as indicated below and in "Accounting Standards Adopted in 2021" in Note 1 to the Consolidated Financial Statements in this report.
−Removed: Investment Securities Available-for-Sale and Held-to-Maturity:
−Removed: The Company recognizes acquired securities on the trade date.
−Removed: Investment securities comprise debt securities, which are classified depending on the Company's intent and ability to hold the securities to maturity.
−Removed: Debt securities are classified as available-for-sale when management may have the intent to sell them prior to maturity.
−Removed: Debt securities are classified as held-to-maturity and carried at amortized cost when management has the positive intent and ability to hold them to maturity.
−Removed: Premiums and discounts on investment securities held-to-maturity, and available-for-sale, are amortized or accreted to the earlier of call or maturity based on expected lives, which include prepayment adjustments and call optionality.
−Removed: The Company separately evaluates its investment securities held-to-maturity for any credit losses.
−Removed: 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.
−Removed: 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.
−Removed: 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.
+Added: There have been no significant changes to the Company's accounting policies as disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2021 except as indicated in "Investment Securities," "Transfers of Investment Securities from Available-for-Sale to Held-to-Maturity" and "Accounting Standards Adopted in 2022" in Note 1 to the Consolidated Financial Statements in this report.
RESULTS OF OPERATIONS
Earnings Summary
−Removed: Three Months Ended June 30, 2022 vs.
−Removed: Three Months Ended June 30, 2021
−Removed: Net income for the three months ended June 30, 2022 was $15.7 million compared to $48.0 million for the same period in 2021, a decrease of $32.3 million, or 67.3%.
−Removed: The decrease in net income of $32.3 million for the three months ended June 30, 2022 relative to the same period in 2021 was due primarily to an increase in noninterest expenses of $23.5 million, in addition to a decrease in noninterest income of $5.4 million and net interest income of $1.7 million.
−Removed: Noninterest expenses increased primarily in connection with the accrual of settlement expenses in connection with the agreements with the Securities and Exchange Commission ("SEC") and Federal Reserve Bank ("FRB") totaling $22.9 million.
−Removed: Additional detail on the accrual for the agreements is provided in "Noninterest Expense" section below.
−Removed: Noninterest income decreased due to decreases in gains on sale of residential loans of $2.6 million and a decrease in gains on sale of securitized loans of $2.2 million, reported within other income, quarter over quarter.
−Removed: Net interest income decreased as interest expense increased due to rising rates on deposits.
+Added: Three Months Ended September 30, 2022 vs.
+Added: Three Months Ended September 30, 2021
+Added: Net income for the three months ended September 30, 2022 was $37.3 million compared to $43.6 million for the same period in 2021, a decrease of $6.3 million, or 14.5%.
+Added: The decrease in net income of $6.3 million for the three months ended September 30, 2022 relative to the same period in 2021 was due primarily to an increase in provision for credit losses of $11.2 million and a decrease in noninterest income of $3.0 million, which were partially offset by an increase in net interest income of $4.9 million and a decrease in income taxes of $2.9 million.
+Added: Noninterest income decreased due to decreases in gain on sale of residential loans of $2.5 million and a decrease in gain on sale of investment securities of $1.5 million, which were partially offset by an increase on other income of $911 thousand.
Total revenue (i.e.
−Removed: net interest income plus noninterest income) was $88.5 million for the three months ended June 30, 2022 as compared to $95.6 million for the same period in 2021.
−Removed: The most significant portion of revenue is net interest income, which was $82.9 million for the three months ended June 30, 2022, compared to $84.6 million for the same period in 2021.
−Removed: Net interest income was down due to increased interest expense on deposits, which was partially offset by an increase in interest income due to increased income on investments, variable rate loans adjusting upwards and higher average loan balances.
+Added: net interest income plus noninterest income) was $89.2 million for the three months ended September 30, 2022 as compared to $87.3 million for the same period in 2021.
+Added: The most significant portion of revenue is net interest income, which was $83.9 million for the three months ended September 30, 2022, compared to $79.0 million for the same period in 2021.
+Added: Net interest income increased due to increased income on investments and loans, due to higher average investment and loan balances and variable rate loans adjusting upwards as rates increased, which was partially offset by the decrease in total deposits, increased interest expense due to higher rates on deposits and faster rate adjustments on money market and savings accounts.
The net interest margin, which measures the difference between interest income and interest expense (i.e.
−Removed: net interest income) as a percentage of earning assets, was 2.94% for the three months ended June 30, 2022 and 3.04% for the same period in 2021.
+Added: net interest income) as a percentage of earning assets, was 3.02% for the three months ended September 30, 2022 and 2.73% for the same period in 2021.
The drivers of the change are detailed in the "Net Interest Income and Net Interest Margin" section below.
−Removed: Total noninterest income for the three months ended June 30, 2022 decreased to $5.6 million from $10.9 million for the same period in 2021, a 49.1% decrease.
−Removed: Noninterest income was lower due to decreases in gains on sale of residential and securitized loans.
+Added: Total noninterest income for the three months ended September 30, 2022 decreased to $5.3 million from $8.3 million for the same period in 2021, a 36.0% decrease.
+Added: Noninterest income was lower due to decreases in gain on sale of residential and securitized loans and gain on sale of investment securities.
F or further information on the components and drivers of these changes see "Noninterest Income" section below.
−Removed: Gain on sale of loans for the three months ended June 30, 2022 was $855 thousand compared to $3.5 million for the same period in 2021, a decrease of 75.4%.
−Removed: The rise in interest rates for residential mortgages in the first half of 2022 had a substantial negative impact on the volume of residential mortgage originations (down 73.4% since the first quarter of 2021) and in turn the sale of residential mortgages declined.
−Removed: Other income for the three months ended June 30, 2022 decreased to $2.9 million from $5.6 million for the same period in 2021, a 48.6% decrease.
−Removed: This decrease was primarily attributable to a reduction in gain on sale of loans securitized of $2.2 million due to the rise in interest rates.
−Removed: Noninterest expenses totaled $59.0 million for the three months ended June 30, 2022, as compared to $35.5 million for same period in 2021, a 66.1% increase.
+Added: Gain on sale of loans for the three months ended September 30, 2022 was $821 thousand compared to $3.3 million for the same period in 2021, a decrease of 75.4%.
+Added: The continuing rise in interest rates for residential mortgages in 2022 had a substantial negative impact on the volume of residential mortgage originations (down 79.44% compared to the third quarter of 2021) and in turn the sale of residential mortgages declined.
+Added: Other income for the three months ended September 30, 2022 increased to $2.5 million from $1.6 million for the same period in 2021, a 56.9% increase.
+Added: This increase was primarily attributable to an increase in other loan income of $543 thousand, gain on sale of loans securitized of $248 thousand, and $189 thousand increase in miscellaneous income.
+Added: Noninterest expenses totaled $36.2 million for the three months ended September 30, 2022, as compared to $36.4 million for same period in 2021, a 0.5% decrease.
See the "Noninterest Expense" section for further detail on the components and drivers of the change.
−Removed: Income tax expenses were $12.8 million for the three months ended June 30, 2022, a decrease of 23.4%, compared to the same period in 2021.
+Added: Income tax expenses were $11.9 million for the three months ended September 30, 2022, a decrease of 19.8%, compared to the same period in 2021.
The components and drivers of the change are discussed in the "Income Tax Expense" section below.
−Removed: The efficiency ratio, which measures the ratio of noninterest expense to total revenue, was 66.64% for the three months ended June 30, 2022, as compared to 37.14% for the same period in 2021.
−Removed: The adverse change in the efficiency ratio was driven primarily by the $22.9 million accrual of settlement expenses, which increased noninterest expenses.
−Removed: Refer to the "Use of Non-GAAP Financial Measures" section for additional detail and a reconciliation of GAAP to non-GAAP financial measures.
−Removed: For the three months ended June 30, 2022, the Company reported an annualized return on average assets ("ROAA") of 0.54%, as compared to 1.68% for the same period in 2021.
−Removed: Total shareholders' equity was $1.3 billion at June 30, 2022, compared to $1.4 billion a year earlier.
−Removed: The annualized return on average common equity ("ROACE") for the three months ended June 30, 2022 was 4.91% as compared to 14.92% for the same period in 2021.
−Removed: The annualized return on average tangible common equity ("ROATCE") for the three months ended June 30, 2022 was 5.35% as compared to 16.25% for the same period in 2021.
−Removed: The decline in returns was driven primarily by the $22.9 million accrual of settlement expenses, which increased noninterest expenses, along with a decrease in net interest income.
−Removed: Refer to the "Use of Non-GAAP Financial Measures" section for additional detail and a reconciliation of GAAP to non-GAAP financial measures.
−Removed: Six Months Ended June 30, 2022 vs.
−Removed: Six Months Ended June 30, 2021
−Removed: Net income for the six months ended June 30, 2022 was $61.4 million as compared to $91.5 million for the same period in 2021, a decrease of $30.1 million, or 33%.
−Removed: The decrease in net income of $30.1 million for the six months ended June 30, 2022 relative to the same period in 2021 was due to a decreases in net interest income of $3.9 million and noninterest income of $8.5 million and an increase in noninterest expenses of $16.5 million.
−Removed: Net interest income decreased primarily due to a reduction in coupon rates on our loans, augmented by an increase in the cost of financing in connection with the increasing market rate environment period over period.
+Added: The efficiency ratio, which measures the ratio of noninterest expense to total revenue, was 40.59% for the three months ended September 30, 2022, as compared to 41.65% for the same period in 2021.
+Added: The improvement in the efficiency ratio was driven primarily by an increase in net interest income of $4.9 million which was partially offset by a $3.0 million decrease in noninterest income.
+Added: For the three months ended September 30, 2022, the Company reported an annualized return on average assets ("ROAA") of 1.29%, as compared to 1.46% for the same period in 2021.
+Added: Total shareholders' equity was $1.2 billion at September 30, 2022, compared to $1.3 billion a year earlier.
+Added: The annualized return on average common equity ("ROACE") for the three months ended September 30, 2022 was 11.64% as compared to 13.00% for the same period in 2021.
+Added: The annualized return on average tangible common equity ("ROATCE") for the three months ended September 30, 2022 was 12.67% as compared to 14.11% for the same period in 2021.
+Added: The decline in returns was driven primarily by a decrease in net income.
+Added: Nine Months Ended September 30, 2022 vs.
+Added: Nine Months Ended September 30, 2021
+Added: Net income for the nine months ended September 30, 2022 was $98.7 million as compared to $135.1 million for the same period in 2021, a decrease of $36.3 million, or 26.9%.
+Added: The decrease in net income of $36.3 million for the nine months ended September 30, 2022 relative to the same period in 2021 was due to an increase in provision for credit losses of $15.1 million, a decrease in noninterest income of $11.5 million and an increase in noninterest expenses of $16.3 million, which were partially offset by an increase in net interest income of $939 thousand and a reduction of income tax expense of $7.5 million.
Non interest income decreased primarily due to a decrease in gain on sale of residential and securitized loans.
−Removed: During the six months ended June 30, 2022, the Company closed residential mortgage locked commitments of $228.7 million, down from $551.6 million for the six months ended June 30, 2021.
−Removed: Noninterest expenses increased primarily in connection with the accrual of settlement expenses in connection with the agreements with the SEC and FRB totaling $22.9 million, which was partially offset by reductions in salaries and benefits of $2.8 million, legal and professional fees of $2.8 million and $2.1 million in FDIC insurance.
+Added: During the nine months ended September 30, 2022, the Company closed residential mortgage locked commitments of $286.2 million, down from $831.4 million for the nine months ended September 30, 2021.
+Added: Noninterest expenses increased primarily in connection with the accrual of settlement expenses in the second quarter of 2022 in connection with the agreements with the SEC and FRB totaling $22.9 million, which was partially offset by reductions in salaries and benefits of $3.4 million, legal and professional fees of $2.5 million and $2.3 million in FDIC insurance.
Additional detail is provided in "Noninterest Expense" section below.
Total revenue (i.e.
−Removed: net interest income plus noninterest income) was $176.4 million for the six months ended June 30, 2022 as compared to $188.8 million or the same period in 2021.
−Removed: The most significant portion of revenue is net interest income, which was $163.4 million for the six months ended June 30, 2022, compared to $167.3 million for the same period in 2021.
−Removed: Net interest income was down due to lower average loans and lower average yield on loans, offset by an increase in average earning assets other than loans.
−Removed: The primary driver for the reduction in revenue was the decline in noninterest income due to decreases in gain on sale of residential and securitized loans.
+Added: net interest income plus noninterest income) was $265.6 million for the nine months ended September 30, 2022 as compared to $276.1 million for the same period in 2021.
+Added: The most significant portion of revenue is net interest income, which was $247.3 million for the nine months ended September 30, 2022, compared to $246.3 million for the same period in 2021.
+Added: Net interest income increased due to increased average balances and income on investments and lower average balance on deposits and borrowings which was partially offset by lower average loan balances , increased interest rates on deposits and faster rate adjustments on money market and savings accounts .
+Added: The primary driver for the reduction in noninterest income was a decrease in gain on sale of residential and securitized loans.
The net interest margin, which measures the difference between interest income and interest expense (i.e.
−Removed: net interest income) as a percentage of earning assets, was 2.79% for the six months ended June 30, 2022 and 3.02% for the same period in 2021.
+Added: net interest income) as a percentage of earning assets, was 2.86% for the nine months ended September 30, 2022 and 2.91% for the same period in 2021.
The drivers of the change are detailed in the "Net Interest Income and Net Interest Margin" section below.
−Removed: Total noninterest income for the six months ended June 30, 2022 decreased to $13.0 million from $21.5 million for the same period in 2021, a 39.5% decrease.
−Removed: Noninterest income was lower due to decreases in gain on sale of residential and securitized loans.
+Added: Total noninterest income for the nine months ended September 30, 2022 decreased to $18.3 million from $29.8 million for the same period in 2021, a 38.5% decrease.
+Added: Noninterest income was lower due to decreases in gain on sale of investment securities and residential and securitized loans.
F or further information on the components and drivers of these changes see "Noninterest Income" section below.
−Removed: Gain on sale of loans for the six months ended June 30, 2022 was $2.3 million compared to $8.7 million for the same period in 2021, a decrease of 72.9%.
−Removed: The rise in interest rates for residential mortgages in the first half of 2022 had a substantial negative impact on the volume of residential mortgage originations and in turn the sale of residential mortgages declined.
−Removed: Other income for the six months ended June 30, 2022 decreased to $7.0 million from $9.4 million for the same period in 2021, a 26.2% decrease.
−Removed: This decrease was primarily attributable to a reduction in gains on the sale of securitized loans of $2.7 million.
−Removed: Noninterest expenses totaled $90.0 million for the six months ended June 30, 2022, as compared to $73.5 million or same period in 2021, a 22.4% increase.
+Added: Gain on sale of loans for the nine months ended September 30, 2022 was $3.2 million compared to $12.0 million for the same period in 2021, a decrease of 73.6%.
+Added: The rise in interest rates for residential mortgages in 2022 has had a substantial negative impact on the volume of residential mortgage originations and in turn the sale of residential mortgages declined.
+Added: Other income for the nine months ended September 30, 2022 decreased to $9.5 million from $11.0 million for the same period in 2021, a 14.2% decrease.
+Added: This decrease was primarily attributable to a reduction in gains on the sale of securitized loans of $2.5 million which was partially offset by an increase in other loan income of $972 thousand.
+Added: Noninterest expense totaled $126.2 million for the nine months ended September 30, 2022, as compared to $109.9 million or same period in 2021, a 14.9% increase.
+Added: The increase in non-interest expense was due to the $22.9 million accrual of settlement expenses which was partially offset by the $5.0 million accrual reduction related to share-based compensation awards and deferred compensation associated with our former CEO and Chairman which reduced noninterest expense.
See the "Noninterest Expense" section for further detail on the components and drivers of the change.
−Removed: Income tax expenses were $26.7 million for the six months ended June 30, 2022, a decrease of 14.5%, compared to the same period in 2021.
+Added: Income tax expenses were $38.6 million for the nine months ended September 30, 2022, a decrease of 16.2%, compared to the same period in 2021.
The components and drivers of the change are discussed in the "Income Tax Expense" section below.
−Removed: The efficiency ratio was 51.01% for the six months ended June 30, 2022, as compared to 38.92% for the same period in 2021.
−Removed: The adverse change in the efficiency ratio was driven by the $22.9 million accrual of settlement expenses, which increased noninterest expenses, and was partially offset by the $5.0 million accrual reduction related to share-based compensation awards and deferred compensation associated with our former CEO and Chairman which reduced noninterest expenses.
+Added: The efficiency ratio was 47.51% for the nine months ended September 30, 2022, as compared to 39.78% for the same period in 2021.
+Added: The adverse change in the efficiency ratio was driven by the $22.9 million accrual of settlement expenses, which increased noninterest expense, and was partially offset by the $5.0 million accrual reduction related to share-based compensation awards and deferred compensation associated with our former CEO and Chairman which reduced noninterest expense.
Refer to the "Use of Non-GAAP Financial Measures" section for additional detail and a reconciliation of GAAP to non-GAAP financial measures.
−Removed: For the six months ended June 30, 2022, the Company reported an annualized ROAA of 1.02%, as compared to 1.61% for the same period in 2021.
−Removed: The annualized ROACE for the six months ended June 30, 2022 was 9.45% as compared to 14.49% for the same period in 2021.
−Removed: The annualized ROATCE for the six months ended June 30, 2022 was 10.26% as compared to 15.80% or the same period in 2021.
−Removed: The decline in returns is attributable primarily to the accrual of $22.9 million of settlement expenses and the reduction on the gain on sale of loans as higher interest rates reduced mortgage origination volume.
+Added: For the nine months ended September 30, 2022, the Company reported an annualized ROAA of 1.11%, as compared to 1.56% for the same period in 2021.
+Added: The annualized ROACE for the nine months ended September 30, 2022 was 10.17% as compared to 13.98% for the same period in 2021.
+Added: The annualized ROATCE for the nine months ended September 30, 2022 was 11.06% as compared to 15.21% or the same period in 2021.
+Added: The decline in returns was attributable primarily to the $22.9 million of settlement expenses and the reduction on the gain on sale of loans as higher interest rates reduced mortgage origination volume.
Refer to the "Use of Non-GAAP Financial Measures" section for additional detail and a reconciliation of GAAP to non-GAAP financial measures.
5 unchanged sentences
Changes in the volume and mix of assets and funding sources, along with the changes in yields earned and rates paid, determine changes in net interest income.
−Removed: Net interest income was $82.9 million for the three months ended June 30, 2022, as compared to $84.6 million for the same period in 2021.
−Removed: Net interest income decreased for the three months ended June 30, 2022 due to a decline in average loans and lower average loan pricing, partially offset by a 1.3% increase in average earning assets, as compared to June 30, 2021.
−Removed: The net interest margin was 2.94% for the three months ended June 30, 2022 and 3.04% for the same period in 2021.
−Removed: The decline reflects the impact of a decline in the average balance of the loan portfolio, which are higher-earning assets, as capital has been deployed into lower interest-earning deposits and investment securities.
−Removed: Net interest income was $163.4 million for the six months ended June 30, 2022, as compared to $167.3 million for the same period in 2021.
−Removed: Net interest income decreased for the six months ended June 30, 2022 due to a decline in average loans and lower average loan pricing, partially offset by a 5.5% increase in average earning assets, as compared to June 30, 2021.
−Removed: The net interest margin was 2.79% for the six months ended June 30, 2022 and 3.02% for the same period in 2021.
−Removed: The decline reflects the impact of a decline in the average balance of the loan portfolio, which are higher-earning assets, as capital has been deployed into lower interest-earning deposits and investment securities.
−Removed: In the first six months of 2022 as compared to the same period in 2021, average U.S.
−Removed: Treasury rates in the two-to-five year range increased by approximately 186 basis points and the average yield curve flattened as the average two-to-ten year spread went from an average of 131 basis points to an average of 35 basis points.
−Removed: The Company experienced 23 basis points of net interest margin compression between the first six months of 2021 as compared to the first six months of 2022 (from 3.02% to 2.79%).
−Removed: In addition, our cost of funds declined 4 basis points (from 0.39% to 0.35%), while the yield on earning assets declined by 27 basis points (from 3.41% to 3.14%).
−Removed: Average liquidity was $1.8 billion for the first six months of 2022 and $2.1 billion for the same period of 2021.
−Removed: While overall rates moved higher in the first six months of 2022, the yield on loans was down as higher rate loans were paid off or paid down, and were replaced by loans with lower rates.
−Removed: This was partially offset in the second quarter of 2022, as variable rate loans adjusted upwards and an increased number of loans moved off their rate floors.
−Removed: The tables below presents the average balances and rates of the major categories of the Company's assets and liabilities for the three and six months ended June 30, 2022 and 2021.
+Added: Net interest income was $83.9 million for the three months ended September 30, 2022, as compared to $79.0 million for the same period in 2021.
+Added: Net interest income increased for the three months ended September 30, 2022 primarily due to an increase in average loans balances and yields (5.10% compared to 4.59%) and higher average investment balances and yields and on other average earning assets, which was partially offset by lower average deposit and borrowing balances with an increased interest rate as compared to September 30, 2021.
+Added: The net interest margin was 3.02% for the three months ended September 30, 2022 and 2.73% for the same period in 2021.
+Added: The increase reflects the impact of the change in yields on earning assets which repriced primarily due to rate increases, which more than offset the increase in rates for and faster rate adjustments on interest bearing liabilities.
+Added: Net interest income was $247.3 million for the nine months ended September 30, 2022, as compared to $246.3 million for the same period in 2021.
+Added: Net interest income increased for the nine months ended September 30, 2022 due to an increase in higher yielding earning assets, which was partially offset by lower loan volumes and increased rates on interest bearing deposits, as compared to September 30, 2021.
+Added: The net interest margin was 2.86% for the nine months ended September 30, 2022 and 2.91% for the same period in 2021.
+Added: The decline reflects the impact of an increase in average earning assets and yields which was more than offset by an increase in the cost of funds.
+Added: Net interest margin decreased by 5 basis points from the first nine months of 2021 as compared to the first nine months of 2022 (from 2.91% to 2.86%).
+Added: The yield on earning assets increased by 13 basis points (from 3.29% to 3.42%) while cost of funds increased 18 basis points (from 0.38% to 0.56%).
+Added: Average interest bearing deposits with other banks and other short term investments were $1.4 billion nine months ended September 30, 2022 compared to $2.3 billion for the same period in 2021.
+Added: Overall yields and rates moved higher in the first nine months of 2022 as compared to same period in 2021, variable rate loans adjusted upwards and an increased number of loans moved off their rate floors.
+Added: The tables below presents the average balances and rates of the major categories of the Company's assets and liabilities for the three and nine months ended September 30, 2022 and 2021.
Included in the tables are measurements of interest rate spread and margin.
6 unchanged sentences
(dollars in thousands)
−Removed: Three Months Ended June 30,
+Added: Three Months Ended September 30,
Balance Interest Average
38 unchanged sentences
(1) Loans placed on nonaccrual status are included in average balances.
−Removed: Net loan fees and late charges included in interest income on loans totaled $4.3 million and $13.4 million for the three months ended June 30, 2022 and 2021, respectively.
+Added: Net loan fees and late charges included in interest income on loans totaled $3.4 million and $6.3 million for the three months ended September 30, 2022 and 2021, respectively.
(2) Interest and fees on loans and investments exclude tax equivalent adjustments.
−Removed: Six Months Ended June 30,
+Added: Nine Months Ended September 30,
Balance Interest Average
38 unchanged sentences
(1) Loans placed on nonaccrual status are included in average balances.
−Removed: Net loan fees and late charges included in interest income on loans totaled $8.0 million and $21.2 million for the six months ended June 30, 2022 and 2021, respectively.
+Added: Net loan fees and late charges included in interest income on loans totaled $11.5 million and $26.3 million for the six months ended September 30, 2022 and 2021, respectively.
(2) Interest and fees on loans and investments exclude tax equivalent adjustments.
1 unchanged sentence
The rate/volume tables below presents the composition of the change in net interest income for the period indicated, as allocated between the change in net interest income due to changes in the volume of average earning assets and interest bearing liabilities, and the changes in net interest income due to changes in interest rates.
−Removed: Three Months Ended June 30, 2022 Compared With Three Months Ended June 30, 2021
+Added: Three Months Ended September 30, 2022 Compared With Three Months Ended September 30, 2021
(dollars in thousands) Change
16 unchanged sentences
Net interest income $ 8,109 $ (3,257) $ 4,852
−Removed: Six Months Ended June 30, 2022 Compared With Six Months Ended June 30, 2021
+Added: Nine Months Ended September 30, 2022 Compared With Nine Months Ended September 30, 2021
(dollars in thousands) Change
40 unchanged sentences
Refer to additional detail regarding these forecasts in the "Allowance for Credit Losses - Loans" section of Note 1 to the Consolidated Financial Statements.
−Removed: During the three months ended June 30, 2022, the ACL on loans reflected a provision of $486 thousand and $674 thousand in net recovery.
+Added: During the three months ended September 30, 2022, the ACL on loans reflected a provision of $3.0 million and $56 thousand in net recoveries.
The provision for credit losses on loans for the same period in 2021 reflected a reversal of $8.3 million and $1.3 million in net charge-offs.
−Removed: During the six months ended June 30, 2022, the ACL on loans reflected a reversal of the provision of $2.5 million and net recoveries on loans previously charged off of $215 thousand.
−Removed: The provision for credit losses on loans for the same six month period in 2021 was a reversal of $6.2 million and $10.8 million in net charge-offs.
−Removed: Both the first and second quarter 2022 provision was primarily driven by adjustments to the qualitative components of the CECL model owing to the high inflationary environment and the related uncertainty and impacts on the broader economy, offset by improvements in asset quality.
+Added: During the nine months ended September 30, 2022, the ACL on loans reflected a provision of $532 thousand and net recoveries of $270 thousand.
+Added: The provision for credit losses on loans for the same nine month period in 2021 was a reversal of $14.5 million in ACL and $12.2 million in net charge-offs.
+Added: For the first nine months of 2022, the provisions were primarily driven by adjustments to the qualitative components of the CECL model owing to the high inflationary environment and the related uncertainty and impacts on the broader economy, offset by improvements in asset quality.
The reversal in the same period in 2021 was driven by the improved macroeconomic outlook, improvement of credits in the loan portfolio and a reduction in total loans.
7 unchanged sentences
The following table sets forth activity in the allowance for credit losses for the periods indicated.
−Removed: Six Months Ended June 30,
+Added: Nine Months Ended September 30,
(dollars in thousands) 2022 2021
7 unchanged sentences
Commercial 648 326
+Added: Income producing - commercial real estate — 97
+Added: Owner occupied - commercial real estate 25 —
Construction - commercial and residential 1,627 499
1 unchanged sentence
Total recoveries 2,304 939
−Removed: Net charge-offs (recoveries) 215 (10,848)
−Removed: Reversal of credit losses- loans (2,515) (6,172)
+Added: Net recoveries (charge-offs) 270 (12,175)
+Added: Provision for (reversal of) credit losses- loans 532 (14,498)
Balance at end of period $ 75,767 $ 82,906
2 unchanged sentences
The allocation of the allowance to each category is not necessarily indicative of future losses or charge-offs and does not restrict the use of the allowance to absorb losses in any category.
−Removed: June 30, 2022 December 31, 2021
+Added: September 30, 2022 December 31, 2021
(dollars in thousands) Amount % of Total ACL % of Total Loans Amount % of Total ACL % of Total Loans
10 unchanged sentences
Nonperforming Assets
−Removed: As shown in the table below, the Company's level of nonperforming assets, which comprise loans delinquent 90 days or more, and nonaccrual loans, which include the nonperforming portion of TDRs and OREO, totaled $20.3 million at June 30, 2022 representing 0.19% of total assets, as compared to $30.8 million of nonperforming assets, or 0.26% of total assets, at December 31, 2021.
−Removed: At June 30, 2022, the Company had no accruing loans 90 days or more past due.
+Added: As shown in the table below, the Company's level of nonperforming assets, which comprise loans delinquent 90 days or more, and nonaccrual loans, which include the nonperforming portion of TDRs and OREO, totaled $9.6 million at September 30, 2022 representing 0.09% of total assets, as compared to $30.8 million of nonperforming assets, or 0.26% of total assets, at December 31, 2021.
+Added: At September 30, 2022, the Company had no accruing loans 90 days or more past due.
Management remains attentive to early signs of deterioration in borrowers' financial conditions and to taking the appropriate action to mitigate risk.
−Removed: Furthermore, the Company is diligent in placing loans on nonaccrual status and believes, based on its loan portfolio risk analysis, that its allowance for credit losses, at 1.02% of total loans at June 30, 2022, is adequate to absorb expected credit losses within the loan portfolio at that date.
+Added: Furthermore, the Company is diligent in placing loans on nonaccrual status and believes, based on its loan portfolio risk analysis, that its allowance for credit losses, at 1.04% of total loans at September 30, 2022, is adequate to absorb expected credit losses within the loan portfolio at that date.
CECL allows for institutions to evaluate individual loans in the event that the asset does not share similar risk characteristics with its original segmentation.
13 unchanged sentences
The determination of whether a restructured loan is a TDR requires c onsideration of all of the facts and circumstances surrounding the change in terms, and the exercise of prudent business judgment.
−Removed: The C ompany had four TDRs at June 30, 2022 totaling approximately $5.3 million.
+Added: The C ompany had five TDRs at September 30, 2022 totaling approximately $24.5 million.
All of these loans are performing under their modified terms.
The Company had seven TDRs at December 31, 2021, totaling $16.5 million.
−Removed: For the first six months of 2022 there were no TDRs that defaulted on their modified terms.
−Removed: 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-off of $1.4 million in connection with the sale.
−Removed: 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.
−Removed: 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.
+Added: For the first nine months of 2022 there were no TDRs that defaulted on their modified terms.
+Added: During the 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.
+Added: No TDRs were sold during the three months ended September 30, 2021.
+Added: 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.
+Added: In addition, 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;
+Added: and one restructured loan that was purchased as part of the 2014 acquisition of Virginia Heritage Bank was collected at its full carrying value.
Commercial and consumer loans modified in a TDR are closely monitored for delinquency as an early indicator of possible future default.
1 unchanged sentence
The allowance may be increased, adjustments may be made in the allocation of the allowance, or partial charge-offs may be taken to further write-down the carrying value of the loan.
−Removed: Total nonperforming loans amounted to $18.8 million at June 30, 2022 (0.26% of total loans) compared to $29.2 million at December 31, 2021 (0.41% of total loans).
+Added: Total nonperforming loans amounted to $7.6 million at September 30, 2022 (0.10% of total loans) compared to $29.2 million at December 31, 2021 (0.41% of total loans).
OREO properties are carried at the lower of cost or fair value less estimated costs to sell.
1 unchanged sentence
Generally, the Company would obtain updated appraisals or evaluations where it has reason to believe, based upon market indications (such as comparable sales, legitimate offers below carrying value, broker indications and similar factors), that the current appraisal does not accurately reflect current value.
−Removed: OREO properties had a lower of cost or fair market value of $1.5 million and $1.6 million for at June 30, 2022 and December 31, 2021, respectively.
−Removed: During the three and six months ended June 30, 2022, an OREO property was sold, generating proceeds of $241 thousand.
−Removed: There were no sales of OREO property during the three or six months ended June 30, 2021.
+Added: OREO properties had a lower of cost or fair market value of $2.0 million and $1.6 million at September 30, 2022 and December 31, 2021, respectively.
+Added: During the three and nine months ended September 30, 2022, an OREO property was sold, generating proceeds of $241 thousand.
+Added: There were no sales of OREO property during the three or nine months ended September 30, 2021.
The following table shows the amounts of nonperforming assets at the dates indicated.
−Removed: (dollars in thousands) June 30, 2022 December 31, 2021
+Added: (dollars in thousands) September 30, 2022 December 31, 2021
Nonaccrual Loans:
14 unchanged sentences
Significant variation in the amount of nonperforming loans may occur from period to period because the amount of nonperforming loans depends largely on the condition of a relatively small number of individual credits and borrowers relative to the total loan portfolio.
−Removed: At June 30, 2022, there were $96.5 million of performing loans considered to be potential problem loans, defined as loans that are not included in the 90 days past due, nonaccrual or restructured categories, but for which known information about possible credit problems causes management to be uncertain as to the ability of the borrowers to comply with the present loan repayment terms, which may in the future result in disclosure in the past due, nonaccrual or restructured loan categories.
+Added: At September 30, 2022, there were $89.7 million of performing loans considered to be potential problem loans, defined as loans that are not included in the 90 days past due, nonaccrual or restructured categories, but for which known information about possible credit problems causes management to be uncertain as to the ability of the borrowers to comply with the present loan repayment terms, which may in the future result in disclosure in the past due, nonaccrual or restructured loan categories.
Potential problem loans were $88.6 million at December 31, 2021.
2 unchanged sentences
Total noninterest income includes service charges on deposits, gain on sale of loans, gain on sale of investment securities, FHA multi-family income, income from bank owned life insurance ("BOLI") and other income.
−Removed: Total noninterest income for the three months ended June 30, 2022 decreased to $5.6 million from $10.9 million for the three months ended June 30, 2021, a 49.1% decrease.
−Removed: Gain on sale of loans for the three months ended June 30, 2022 decreased to $855 thousand from $3.5 million for the three months ended June 30, 2021, a 75.4% decrease;
−Removed: a decrease in gains on the sale of residential mortgage loans drove the decline between the two periods.
−Removed: Residential mortgage loan locked commitments were $92.0 million for the three months ended June 30, 2022 as compared to $248.3 million for the same period in 2021, a 63.0% decrease.
−Removed: Gains on the sale securitized loans for the three months ended June 30, 2022 decreased to $381 thousand from $2.6 million for the three months ended June 30, 2021.
−Removed: The rise in interest rates for residential mortgages in the first half of 2022 had a negative impact on the volume of mortgage originations and in turn the sale of residential mortgages declined.
+Added: Total noninterest income for the three months ended September 30, 2022 decreased to $5.3 million from $8.3 million for the three months ended September 30, 2021, a 36.0% decrease.
+Added: Gain on sale of loans for the three months ended September 30, 2022 decreased to $821 thousand from $3.3 million for the three months ended September 30, 2021, a 75.4% decrease.
+Added: Gains on the sale of investment securities decreased to $4 thousand from $1.5 million, or 99.7% for the three months ended September 30, 2022.
+Added: Residential mortgage loan locked commitments were $57.5 million for the three months ended September 30, 2022 as compared to $279.8 million for the same period in 2021, a 79.4% decrease.
+Added: The rise in interest rates for residential mortgages in 2022 has had a negative impact on the volume of mortgage originations and in turn the sale of residential mortgages declined.
The decision whether to sell residential mortgage loans on a mandatory or best efforts lock basis is a function of multiple factors, including but not limited to overall market volumes of mortgage loan originations, forecasted "pull-through" rates of origination, loan underwriting and closing operational considerations, pricing differentials between the two methods, and availability and pricing of various interest rate hedging strategies associated with the mortgage origination pipeline.
The Company continually monitors these factors to maximize profitability and minimize operational and interest rate risks.
−Removed: Other income for the three months ended June 30, 2022 decreased to $2.9 million from $5.6 million for the three months ended June 30, 2021, a 48.6% decrease.
−Removed: This decrease was primarily attributable to the $2.2 million reduction in gains on the sale of securitized loans.
−Removed: Service charges on deposits for the three months ended June 30, 2022 increased to $1.3 million from $1.1 million for the three months ended June 30, 2021.
−Removed: Losses on sales of investment securities were $151 thousand for the three months ended June 30, 2022 compared to a $318 thousand net gain on sales of investment securities for the same period in 2021, primarily due to market volatility period over period.
−Removed: Total noninterest income for the six months ended June 30, 2022 decreased to $13.0 million from $21.5 million for the six months ended June 30, 2021, a 39.5% decrease.
−Removed: Gain on sale of loans for the six months ended June 30, 2022 decreased to $2.3 million from $8.7 million for the six months ended June 30, 2021, a 72.9% decrease;
−Removed: a decrease in gains on the sale of residential mortgage loans drove the decline between the two periods.
−Removed: Residential mortgage loan locked commitments were $228.7 million for the six months ended June 30, 2022 as compared to $551.6 million for the same period in 2021, a 58.5% decrease.
−Removed: Gains on the sale securitized loans for the six months ended June 30, 2022 decreased to $421 thousand from $3.1 million for the six months ended June 30, 2021.
−Removed: The rise in interest rates for residential mortgages in the first six months of 2022 had a substantial negative impact on the volume of mortgage originations and in turn the sale of residential mortgages declined.
−Removed: Other income for the six months ended June 30, 2022 decreased to $7.0 million from $9.4 million for the six months ended June 30, 2021, a 26.2% decrease.
+Added: Other income for the three months ended September 30, 2022 increased to $2.5 million from $1.6 million for the three months ended September 30, 2021, a 56.9% increase.
+Added: This increase was primarily attributable to the $543 thousand increase in other loan income, $189 thousand increase in miscellaneous income and $248 increase in gains on the sale of securitized loans.
+Added: Service charges on deposits for the three months ended September 30, 2022 increased to $1.3 million from $1.2 million for the three months ended September 30, 2021.
+Added: Gain on sale of investment securities was $4 thousand for the three months ended September 30, 2022 compared to a $1.5 million net gain on sale of investment securities for the same period in 2021, primarily due to market volatility period over period.
+Added: Total noninterest income for the nine months ended September 30, 2022 decreased to $18.3 million from $29.8 million for the nine months ended September 30, 2021, a 38.5% decrease.
+Added: Gain on sale of loans for the nine months ended September 30, 2022 decreased to $3.2 million from $12.0 million for the nine months ended September 30, 2021, a 73.6% decrease.
+Added: The decreases in gains on the sale of residential mortgage loans and gains on sale of investment securities primarily drove the decline between the two periods.
+Added: Residential mortgage loan locked commitments were $286.2 million for the nine months ended September 30, 2022 as compared to $831.4 million for the same period in 2021, a 65.6% decrease.
+Added: The rise in interest rates for residential mortgages in the first nine months of 2022 had a substantial negative impact on the volume of mortgage originations and in turn the sale of residential mortgages declined.
+Added: Other income for the nine months ended September 30, 2022 decreased to $9.5 million from $11.0 million for the nine months ended September 30, 2021, a 14.2% decrease.
This decrease was primarily attributable to the $2.5 million reduction in gains on the sale of securitized loans.
−Removed: Service charges on deposits for the six months ended June 30, 2022 increased to $2.6 million from $2.1 million for the six months ended June 30, 2021.
−Removed: Losses on sales of investment securities were $176 thousand for the six months ended June 30, 2022 compared to a $539 thousand net gain on sale of investment securities for the same period in 2021, primarily due to market volatility period over period.
+Added: Service charges on deposits for the nine months ended September 30, 2022 increased to $4.0 million from $3.3 million for the nine months ended September 30, 2021.
+Added: Loss on sales of investment securities was $172 thousand for the nine months ended September 30, 2022 compared to a $2.1 million net gain on sale of investment securities for the same period in 2021, primarily due to market volatility period over period.
Servicing agreements relating to the Ginnie Mae mortgage-backed securities program require the Company to advance funds to make scheduled payments of principal, interest, taxes and insurance, if such payments have not been received from the borrowers.
8 unchanged sentences
The Bank considers these potential recourse provisions to be a minimal risk, but has established a reserve under GAAP for possible repurchases.
−Removed: There were no repurchases due to fraud by the borrower during the six months ended June 30, 2022.
−Removed: The reserve amounted to $50 thousand at June 30, 2022 and is included in other liabilities on the Consolidated Balance Sheets.
+Added: There were no repurchases due to fraud by the borrower during the nine months ended September 30, 2022.
+Added: The reserve amounted to $37 thousand at September 30, 2022 and is included in other liabilities on the Consolidated Balance Sheets.
In addition to having participated in the PPP program, which has largely ceased since the height of the COVID-19 pandemic, the Company is a long-time originator of SBA loans and its practice is to sell the guaranteed portion of those loans at a premium.
−Removed: There was $10 thousand of income from this source for the three months ended June 30, 2022 and $192 thousand for the six months ended June 30, 2022 compared to $181 thousand and $282 thousand for the three and six months ended June 30, 2021.
+Added: There was $59 thousand of income from this source for the three months ended September 30, 2022 and $249 thousand for the nine months ended September 30, 2022 compared to $9 thousand and $291 thousand for the three and nine months ended September 30, 2021.
Activity in SBA loan sales to secondary markets can vary widely from quarter to quarter.
1 unchanged sentence
Total noninterest expense includes salaries and employee benefits, premises and equipment expenses, marketing and advertising, data processing, legal, accounting and professional, FDIC insurance, and other expenses.
−Removed: Total noninterest expenses totaled $59.0 million for the three months ended June 30, 2022, as compared to $35.5 million for the three months ended June 30, 2021, a 66.1% decrease.
−Removed: Total noninterest expenses totaled $90.0 million for the six months ended June 30, 2022, as compared to $73.5 million for the six months ended June 30, 2021, a 22.4% increase.
−Removed: Salaries and employee benefits were $21.8 million for the three months ended June 30, 2022, as compared to $19.9 million for the same period in 2021, an increase of $1.9 million or 9.7%.
−Removed: Salaries and employee benefits were $38.8 million for the six months ended June 30, 2022, as compared to $41.6 million for the six months ended June 30, 2021, a decrease of 6.8%.
−Removed: The primary reason for decrease for the first six months of 2022 was the reduction of the $5.0 million accrual related to stock-based compensation awards and deferred compensation for our former CEO and Chairman in the first quarter of 2022.
+Added: Total noninterest expense totaled $36.2 million for the three months ended September 30, 2022, as compared to $36.4 million for the three months ended September 30, 2021, a 0.5% decrease.
+Added: Total noninterest expense totaled $126.2 million for the nine months ended September 30, 2022, as compared to $109.9 million for the nine months ended September 30, 2021, a 14.9% increase.
+Added: Salaries and employee benefits were $21.5 million for the three months ended September 30, 2022, as compared to $22.1 million for the same period in 2021, a decrease of $0.6 million or 2.7%.
+Added: Salaries and employee benefits were $60.4 million for the nine months ended September 30, 2022, as compared to $63.8 million for the nine months ended September 30, 2021, a decrease of 5.4%.
+Added: The primary reason for decrease for the first nine months of 2022 was the reduction of the $5.0 million accrual related to stock-based compensation awards and deferred compensation for our former CEO and Chairman in the first quarter of 2022.
The accrual was originally recorded in the first quarter of 2019.
−Removed: At June 30, 2022, the Company's full time equivalent staff numbered 506 as compared to 497 at June 30, 2021.
−Removed: Premises and equipment for the three and six months ended June 30, 2022 and 2021, were $3.5 million and $6.7 million compared to $3.6 million and $7.3 million, respectively, of which premises expenses were $2.8 million and $5.3 million compared to $3.0 million and $6.1 million, respectively.
−Removed: Marketing and advertising expenses totaled $1.2 million for the three months ended June 30, 2022 and $980 thousand for the same period in 2021.
−Removed: For the six months ended June 30, 2022, marketing and advertising expense was $2.3 million compared to $1.9 million for the six month period ended June 30, 2021.
−Removed: The increase for both the three and six month periods were due to additional advertising, promotions and sponsorships.
−Removed: Data processing expenses were $2.7 million and $5.6 million for the three and six months ended June 30, 2022, respectively, compared to $2.8 million and $5.6 million for the same periods in 2021, respectively.
−Removed: Legal, accounting and professional fees were $2.1 million and $3.7 million for the three and six months ended June 30, 2022, respectively, compared to $3.5 million and $6.5 million for the three and six months ended June 30, 2021, respectively, and resulted in decreases of $1.4 million and $2.8 million for the comparative periods, respectively.
−Removed: Legal fees and expenditures were $291 thousand and $1.8 million for the three months ended June 30, 2022 and 2021, respectively.
−Removed: For the six months ended June 30, 2022 and June 30, 2021 legal fees and expenditures were $496 thousand and $2.7 million, respectively.
+Added: At September 30, 2022, the Company's full time equivalent staff numbered 495 as compared to 509 at September 30, 2021.
+Added: Premises and equipment for the three and nine months ended September 30, 2022 and 2021, were $3.3 million and $9.9 million compared to $3.9 million and $11.1 million, respectively, of which premises expenses were $2.6 million and $7.9 million compared to $3.2 million and $9.3 million, respectively.
+Added: Marketing and advertising expenses totaled $1.2 million for the three months ended September 30, 2022 and $1.0 million for the same period in 2021.
+Added: For the nine months ended September 30, 2022, marketing and advertising expense was $3.4 million compared to $2.9 million for the nine month period ended September 30, 2021.
+Added: The increase for both the three and nine month periods were due to additional advertising, promotions and sponsorships.
+Added: Data processing expenses were $3.4 million and $9.1 million for the three and nine months ended September 30, 2022, respectively, compared to $2.9 million and $8.5 million for the same periods in 2021, respectively.
+Added: Legal, accounting and professional fees were $2.3 million and $6.0 million for the three and nine months ended September 30, 2022, respectively, compared to $2.0 million and $8.5 million for the three and nine months ended September 30, 2021, respectively, an increase of $311 thousand and a decrease of $2.5 million for the comparative periods, respectively.
+Added: Legal fees and expenditures were $227 thousand and $357 thousand for the three months ended September 30, 2022 and 2021, respectively.
+Added: For the nine months ended September 30, 2022 and September 30, 2021 legal fees and expenditures were $723 thousand and $3.1 million, respectively.
Legal expenses were greater in 2021 primarily due to the previously disclosed governmental investigations and related subpoenas and document requests, as well as our defense of the previously disclosed class action lawsuit.
−Removed: The amount of legal fees and expenditures reported for the three and six months ended June 30, 2022 are net of expected insurance coverage where we believe we have a high likelihood of recovery pursuant to our D&O insurance policies but does not include any offset for potential claims we may have in the future as to which recovery is impossible to predict at this time.
+Added: The amount of legal fees and expenditures reported for the three and nine months ended September 30, 2022 are net of expected insurance coverage where we believe we have a high likelihood of recovery pursuant to our D&O insurance policies but does not include any offset for potential claims we may have in the future as to which recovery is impossible to predict at this time.
See the "General" section for more information.
−Removed: FDIC expenses were $906 thousand for the three months ended June 30, 2022 compared to $1.6 million for the same period in 2021, a 43.7% decrease.
−Removed: For the six months ended June 30, 2022, FDIC expenses were $2.0 million compared to $4.0 million for the six months ended June 30, 2021.
−Removed: The decreases for the first three and six months of 2022 compared to the same periods in 2021 were due to a change in the institution's size, which improved metrics used in the calculation of fees.
+Added: FDIC expenses were $1.3 million for the three months ended September 30, 2022 compared to $1.5 million for the same period in 2021, a 16.9% decrease.
+Added: For the nine months ended September 30, 2022, FDIC expenses were $3.3 million compared to $5.6 million for the nine months ended September 30, 2021.
+Added: The decreases for the first three and nine months of 2022 compared to the same periods in 2021 were due to a change in the institution's size, which improved metrics used in the calculation of fees.
The major components of other expenses include settlement expenses, broker fees, franchise taxes, director compensation and insurance expense.
−Removed: Other expenses increased to $26.7 million and $31.0 million for the three and six months ended June 30, 2022, respectively, from $3.1 million and $6.6 million for the same periods in 2021, respectively, for increases of 752.0% and 369.1%, respectively, both primarily due to the accrual of $22.9 million in connection with the settlements with the SEC and FRB.
−Removed: The efficiency ratio, which measures the ratio of n oninterest expense to total revenue, was 66.64% for the second quarter of 2022, as compared to 37.14% for the second quarter of 2021.
−Removed: For the first six months of 2022, the efficiency ratio was 51.01% as compared to 38.92% for the same period in 2021.
+Added: Other expenses increased to $3.1 million and $34.1 million for the three and nine months ended September 30, 2022, respectively, from $2.9 million and $9.5 million for the same periods in 2021, respectively, for increases of 8.5% and 259.0%, respectively.
+Added: The increase in the nine months ended September 30, 2022 as compared to the same nine month period in 2021 was primarily due to the increase in noninterest expense associated with the $22.9 million settlement expense in connection with the settlements with the SEC and FRB.
+Added: The efficiency ratio, which measures the ratio of n oninterest expense to total revenue, was 40.59% for the third quarter of 2022, as compared to 41.65% for the third quarter of 2021.
+Added: For the first nine months of 2022, the efficiency ratio was 47.51% as compared to 39.78% for the same period in 2021.
Refer to the "Use of Non-GAAP Financial Measures" section for additional detail and a reconciliation of GAAP to non-GAAP financial measures.
−Removed: The increases in the three and six months ended June 30, 2022 as compared to the same three and six month periods in 2021 were primarily due to the increase in noninterest expense associated with the accrual of $22.9 million of settlement expenses in the second quarter, which were partially offset by the salary accrual reduction of $5.0 million related to stock-based compensation awards and deferred compensation for our former CEO and Chairman in the first quarter of 2022.
−Removed: As a percentage of average assets, total noninterest expense (annualized) was 2.02% for the three months ended June 30, 2022 as compared to 1.24% for the same period in 2021.
−Removed: As a percentage of average assets, total noninterest expense (annualized) was 1.49% for the six months ended June 30, 2022 as compared to 1.29% for the same period in 2021.
−Removed: The increases for both the three and six month periods were primarily due to the accrual of the $22.9 million of settlement expenses.
+Added: The increase in the nine months ended September 30, 2022 as compared to the same nine month period in 2021 was primarily due to the increase in noninterest expense associated with the $22.9 million of settlement expenses in the second quarter, which were partially offset by the salary accrual reduction of $5.0 million related to stock-based compensation awards and deferred compensation for our former CEO and Chairman in the first quarter of 2022.
+Added: As a percentage of average assets, total noninterest expense (annualized) was 1.27% for the three months ended September 30, 2022 as compared to 1.23% for the same period in 2021.
+Added: As a percentage of average assets, total noninterest expense (annualized) was 1.41% for the nine months ended September 30, 2022 as compared to 1.26% for the same period in 2021.
+Added: The increase for the nine month period was primarily due to the accrual of the $22.9 million of settlement expenses.
Income Tax Expense
−Removed: The Company's ratio of income tax expense to pre-tax income ("effective tax rate") for the three months ended June 30, 2022 and 2021 was 44.9% and 30.3%, respectively.
−Removed: The total tax provision for the three months ended June 30, 2022 was $12.8 million, compared to $16.7 million for the three months ended June 30, 2021.
−Removed: The effective tax rate for the six months ended June 30, 2022 was 30.3% as compared to 25.5% for the same period in 2021.
−Removed: The total tax provision for the six months ended June 30, 2022 was $26.7 million, compared to $31.3 million for the six months ended June 30, 2021.
−Removed: The increase in the effective tax rates over the comparative three and six months ended June 30, 2022 and 2021 was due to the SEC and FRB penalties totaling $22.9 million that are not deductible for tax purposes.
−Removed: Tax provisions declined over the comparative three and six months ended June 30, 2022 and 2021 due to decreases in net income period over period.
+Added: The Company's ratio of income tax expense to pre-tax income ("effective tax rate") for the three months ended September 30, 2022 and 2021 was 24.2% and 25.4%, respectively.
+Added: The total tax provision for the three months ended September 30, 2022 was $11.9 million, compared to $14.8 million for the three months ended September 30, 2021.
+Added: The effective tax rate for the nine months ended September 30, 2022 was 28.1% as compared to 25.4% for the same period in 2021.
+Added: The total tax provision for the nine months ended September 30, 2022 was $38.6 million, compared to $46.1 million for the nine months ended September 30, 2021.
+Added: The increase in the effective tax rates over the comparative nine months ended September 30, 2022 and 2021 was due to the SEC and FRB penalties totaling $22.9 million that are not deductible for tax purposes.
+Added: Tax provisions declined over the comparative three and nine months ended September 30, 2022, and 2021 due to decreases in pre-tax income period over period.
+Added: The Inflation Reduction Act of 2022 was signed into law by president Biden on August 16, 2022 which makes significant changes to the U.S.
+Added: tax law, including the introduction of a corporate alternative minimum tax of 15% of the “adjusted financial statement income” of certain domestic corporations as well as a 1% excise tax on the fair market value of stock repurchases by certain domestic corporations, effective for tax years beginning in 2023.
+Added: The Company currently does not expect the tax-related provision of the Inflation Reduction Act to have a material impact on our financial results.
FINANCIAL CONDITION
−Removed: Total assets at June 30, 2022 and December 31, 2021 were $10.9 billion and $11.8 billion, respectively.
−Removed: The largest component of assets, total loans (excluding loans held for sale), had an amortized cost basis of $7.2 billion at June 30, 2022, a 1.3% increase from the balance at December 31, 2021.
−Removed: The increase in loans over the six months ended June 30, 2022, was driven by growth from CRE loans and C&I loans.
−Removed: Additionally, the Bank reduced its PPP loans from $51.1 million at December 31, 2021 to $9.0 million at June 30, 2022 through the forgiveness process.
−Removed: Loans held for sale were $13.8 million at June 30, 2022, compared to $47.2 million at December 31, 2021, a 70.7% decrease due to a decline in production.
−Removed: Investment securities, at amortized cost net of the allowance for credit losses, totaled $3.0 billion at June 30, 2022 as compared to $2.6 billion at December 31, 2021, an increase of 15.1%, primarily due to excess liquidity being invested at greater amounts in higher earning assets in response to higher rates on investments available in the market during the quarter.
−Removed: During the six months ended June 30, 2022, we evaluated our securities portfolio and determined that certain securities will be maintained for the life of the instrument and made a decision to transfer $1.1 billion of securities designated as available-for-sale ("AFS") to held-to-maturity ("HTM"), including $237.0 million of securities acquired in the first quarter of 2022 for which the intention to hold to maturity was finalized.
−Removed: The transferred securities had unrealized losses of $66.2 million, and, as of June 30, 2022, $63.5 million remains in accumulated other comprehensive loss, and will be accreted ratably over the remaining lives of the securities through accumulated other comprehensive loss.
−Removed: The securities transferred were generally municipal bonds, corporate bonds, bonds that qualify for CRA credit, and mortgage-backed securities with longer final maturity dates.
+Added: Total assets at September 30, 2022 and December 31, 2021 were $10.7 billion and $11.8 billion, respectively.
+Added: The decrease in total assets over the nine months ended September 30, 2022 was primarily due to the decrease in total interest-bearing deposits with banks and other short-term investments.
+Added: The largest component of assets, total loans (excluding loans held for sale), had an amortized cost basis of $7.3 billion at September 30, 2022, a 3.4% increase from the balance at December 31, 2021.
+Added: The increase in loans over the nine months ended September 30, 2022, was driven by growth from CRE loans and C&I loans.
+Added: Additionally, the Bank reduced its PPP loans from $51.1 million at December 31, 2021 to $7.2 million at September 30, 2022 through the forgiveness process.
+Added: Loans held for sale were $9.4 million at September 30, 2022, compared to $47.2 million at December 31, 2021, a 80.1% decrease due to a decline in production.
+Added: Investment securities, at amortized cost net of the allowance for credit losses, totaled $3.0 billion at September 30, 2022 as compared to $2.6 billion at December 31, 2021, an increase of 13.1%, primarily due to excess liquidity being invested at greater amounts in higher earning assets in response to higher rates on investments available in the market.
+Added: During the first quarter of 2022, we evaluated our securities portfolio and determined that certain securities will be maintained for the life of the instrument and made a decision to transfer $1.1 billion of securities designated as available-for-sale ("AFS") to held-to-maturity ("HTM"), including $237.0 million of securities acquired in the first quarter of 2022 for which the intention to hold to maturity was finalized.
+Added: The transferred securities had unrealized losses of $66.2 million, and, as of September 30, 2022, $61.1 million remains in accumulated other comprehensive loss, and will be accreted ratably over the remaining lives of the securities through accumulated other comprehensive loss.
+Added: The securities transferred were generally municipal bonds, corporate bonds, bonds that qualify for Community Reinvestment Act credit, and mortgage-backed securities with longer final maturity dates.
At quarter-end, $1.1 billion, or 37.3% of the securities portfolio, was classified as securities HTM.
−Removed: In terms of funding, total deposits at June 30, 2022 were $9.2 billion down from $10.0 billion at December 31, 2021, a decline of 8.1%.
−Removed: Total borrowed funds (excluding customer repurchase agreements) were $349.7 million and $369.7 million at June 30, 2022 and December 31, 2021, respectively, the decrease of which was driven by the repayment of an FHLB advance in the first quarter of 2022.
−Removed: Total shareholders' equity was $1.3 billion as of June 30, 2022 compared to $1.4 billion as of December 31, 2021, a decrease of $98.1 million.
−Removed: The decrease in shareholders' equity from the prior quarter-end was primarily as a result of the increase in the overall interest rate environment, which created unrealized losses in investment securities available-for-sale, which are recorded in accumulated other comprehensive income (loss).
−Removed: For the six months ended June 30, 2022, other comprehensive loss was increased by $138.1 million.
+Added: In terms of funding, total deposits at September 30, 2022 were $8.8 billion down from $10.0 billion at December 31, 2021, a decline of 12.2%.
+Added: Total borrowed funds (excluding customer repurchase agreements) were $584.8 million and $369.7 million at September 30, 2022 and December 31, 2021, respectively, the increase of which was driven by loan growth and deposit outflows as a result of an increase in disintermediation driven primarily by an increase in interest rates.
+Added: Total shareholders' equity was $1.2 billion as of September 30, 2022 , as compared to $1.4 billion as of December 31, 2021, a decrease of $131.0 million.
+Added: The decrease in shareholders' equity was primarily a result of the increase in the overall interest rate environment, which created unrealized losses in investment securities available-for-sale, which are recorded in accumulated other comprehensive income (loss).
+Added: For the nine months ended September 30, 2022, other comprehensive loss was increased by $196.4 million.
This reduction was partially offset by retained earnings which included earnings of $98.7 million less dividends declared of $41.6 million.
1 unchanged sentence
Regulatory ratios based on risk-weighted assets declined from the prior quarter as non-risk weighted cash was moved into risk-weighted securities and loans.
−Removed: The total risk based capital ratio was 15.70% at June 30, 2022, as compared to 16.15% at December 31, 2021.
−Removed: The common equity tier 1 ("CET1") risk based capital ratio was 14.58% at June 30, 2022, as compared to 15.02% at December 31, 2021.
−Removed: The tier 1 risk based capital ratio was 14.58% at June 30, 2022, as compared to 15.02% at December 31, 2021.
−Removed: The tier 1 leverage ratio was 10.68% at June 30, 2022, as compared to 10.19% at December 31, 2021.
−Removed: The ratio of common equity to total assets was 11.45% at June 30, 2022, as compared to 11.40% at December 31, 2021 as declines in interest-bearing deposits with banks and other short-term investments outpaced an increase in unrealized losses on investment securities AFS over the six months ended June 30, 2022.
−Removed: Book value per share was $39.05 at June 30, 2022, a 7.6% decrease over $42.28 at December 31, 2021.
−Removed: In addition, the tangible common equity ratio was 10.60% at June 30, 2022, as compared to 10.60% at December 31, 2021.
−Removed: Tangible book value per share was $35.80 at June 30, 2022, a 8.1% decrease over $38.97 at December 31, 2021.
+Added: The total risk based capital ratio was 16.10% at September 30, 2022, as compared to 16.15% at December 31, 2021.
+Added: The common equity tier 1 ("CET1") risk based capital ratio was 15.11% at September 30, 2022, as compared to 15.02% at December 31, 2021.
+Added: The tier 1 risk based capital ratio was 15.11% at September 30, 2022, as compared to 15.02% at December 31, 2021.
+Added: The tier 1 leverage ratio was 11.55% at September 30, 2022, as compared to 10.19% at December 31, 2021.
+Added: The ratio of common equity to total assets was 11.39% at September 30, 2022, as compared to 11.40% at December 31, 2021 as an increase in unrealized losses on investment securities AFS offset retained earnings growth over the nine months ended September 30, 2022.
+Added: Book value per share was $38.02 at September 30, 2022, a 10.1% decrease over $42.28 at December 31, 2021 also owing to the increase in unrealized losses on investment securities AFS between the the period.
+Added: In addition, the tangible common equity ratio was 10.52% at September 30, 2022, as compared to 10.60% at December 31, 2021.
+Added: Tangible book value per share was $34.77 at September 30, 2022, a 10.8% decrease from $38.97 at December 31, 2021.
+Added: At September 30, 2022 and December 31, 2021, excluding the impact of the balance of accumulated other comprehensive losses, adjusted book value per share was $44.59 and $42.73, respectively, and adjusted tangible book value per share was $41.34 and $39.42, respectively.
Refer to the "Use of Non-GAAP Financial Measures" section for additional detail and a reconciliation of GAAP to non-GAAP financial measures.
3 unchanged sentences
Loan Portfolio
−Removed: Loans, net of amortized deferred fees and costs, at June 30, 2022 and December 31, 2021 by major category are summarized below.
−Removed: June 30, 2022 December 31, 2021
+Added: Loans, net of amortized deferred fees and costs, at September 30, 2022 and December 31, 2021 by major category are summarized below.
+Added: September 30, 2022 December 31, 2021
(dollars in thousands) Amount % Amount %
12 unchanged sentences
$ 7,228,731 $ 6,990,633
−Removed: (1) Excludes accrued interest receivable of $34.4 million and $38.6 million at June 30, 2022 and December 31, 2021 , respectively, which is recorded in other assets.
+Added: (1) Excludes accrued interest receivable of $37.1 million and $38.6 million at September 30, 2022 and December 31, 2021 , respectively, which is recorded in other assets.
In its lending activities, the Company seeks to develop and expand relationships with clients whose businesses and individual banking needs will grow with the Bank.
Superior customer service, local decision making, and accelerated turnaround time from application to closing have been significant factors in growing the loan portfolio and meeting the lending needs in the markets served, while maintaining sound asset quality.
−Removed: Loans outstanding were $7.2 billion at June 30, 2022, an increase of $89.1 million, or 1.3%, from the balance at December 31, 2021.
−Removed: PPP loans outstanding were $9.0 million at June 30, 2022, a decrease of $42.1 million, or 82.4%, from the $51.1 million at December 31, 2021.
−Removed: With PPP loans excluded, loans outstanding were $7.1 billion at June 30, 2022, an increase of $131.2 million from December 31, 2021.
+Added: Loans outstanding were $7.3 billion at September 30, 2022, an increase of $238.9 million, or 3.4%, from the balance at December 31, 2021.
+Added: PPP loans outstanding were $7.2 million at September 30, 2022, a decrease of $43.9 million, or 85.8%, from the $51.1 million at December 31, 2021.
+Added: With PPP loans excluded, loans outstanding were $7.3 billion at September 30, 2022, an increase of $282.8 million from December 31, 2021.
Refer to the "Use of Non-GAAP Financial Measures" section for additional detail and a reconciliation of GAAP to non-GAAP financial measures.
−Removed: The loan portfolio continued to grow in the second quarter of 2022, due primarily to our CRE and C&I loan originations.
+Added: The loan portfolio continued to grow in the third quarter of 2022, due primarily to our CRE and C&I loan originations.
Market interest rates continue to increase in connection with rate increases implemented by the Federal Reserve.
−Removed: Notwithstanding an increased supply of residential (rental) units, for sale single family residential properties and multi-family commercial real estate leasing in the Bank's market area have held up well, particularly for well-located projects close to the District of Columbia.
+Added: Multi-family commercial real estate leasing in the Bank's market area have held up well, particularly for well-located projects close to the District of Columbia.
Overall, commercial real estate values have generally held up well, but we continue to be cautious of the capitalization rates at which some assets are trading and as a result we are being cautious with our valuations.
2 unchanged sentences
We continue to believe that there are opportunities for growth in the commercial real estate market, as evidenced by the increase in CRE and C&I loans over the quarter.
−Removed: The following table sets forth the time to contractual maturity of the loan portfolio as of June 30, 2022:
−Removed: June 30, 2022
+Added: The following table sets forth the time to contractual maturity of the loan portfolio as of September 30, 2022:
+Added: September 30, 2022
(dollars in thousands) Total One Year or Less Over One Year to Five Years Over Five Years to Fifteen Years Over Fifteen Years
15 unchanged sentences
The deposit base includes transaction accounts, time and savings accounts, which customers use for cash management and which provide the Bank with a source of fee income and cross-marketing opportunities, as well as an attractive source of lower cost funds.
−Removed: To meet funding needs during periods of high loan demand and seasonal variations in core deposits, the Bank utilizes alternative funding sources such as secured borrowings from the Federal Home Loan Bank of Atlanta (the "FHLB"), federal funds purchased lines of credit from correspondent banks and brokered deposits from regional and national brokerage firms and IntraFi Network, LLC ("IntraFi").
−Removed: For the three months ended June 30, 2022, noninterest bearing deposits decreased by $446.0 million as compared to December 31, 2021, while interest bearing deposits decreased by $363.9 million during the same period primarily as a result of an increase of disintermediation driven primarily by a decrease in deposits facilitated by IntraFi.
−Removed: From time to time, the Bank accepts brokered time deposits, generally in denominations of less than $250 thousand, from national brokerage networks, including IntraFi.
+Added: To meet funding needs during periods of high loan demand and seasonal variations in core deposits, the Bank utilizes alternative funding sources such as brokered deposits from regional and national brokerage firms and IntraFi Network, LLC ("IntraFi"), secured borrowings from the Federal Home Loan Bank of Atlanta (the "FHLB"), and federal funds purchased lines of credit from correspondent banks.
+Added: For the three months ended September 30, 2022, total deposits decreased by $1.2 billion as compared to December 31, 2021.
+Added: The decline consists of $349.2 million in noninterest bearing deposits and in $869.0 million in interest bearing deposits as a result of an increase of disintermediation driven primarily by an increase in interest rates.
+Added: The Bank accepts brokered time deposits, generally in denominations of less than $250 thousand, from national brokerage networks, including IntraFi.
Additionally, the Bank participates in the Certificates of Deposit Account Registry Service (the "CDARS") and the Insured Cash Sweep product ("ICS"), which provide for reciprocal ("two-way") transactions among banks facilitated by IntraFi for the purpose of maximizing FDIC insurance.
The Bank also is able to obtain one-way CDARS deposits and participates in IntraFi's Insured Network Deposit ("IND").
−Removed: At June 30, 2022, total deposits included $2.6 billion of brokered deposits (excluding the CDARS and ICS two-way) which represented 27.9% of total deposits.
+Added: At September 30, 2022, total deposits included $2.5 billion of brokered deposits (excluding the CDARS and ICS two-way) which represented 28.0% of total deposits.
At December 31, 2021, total brokered deposits (excluding the CDARS and ICS two-way) were $2.6 billion, or 26.5% of total deposits.
−Removed: The CDARS and ICS two-way component represented $741.7 million, or 8.1%, of total deposits and $701.5 million, or 7.0%, of total deposits at June 30, 2022 and December 31, 2021, respectively.
+Added: The CDARS and ICS two-way component represented $728.7 million, or 8.3%, of total deposits and $701.5 million, or 7.0%, of total deposits at September 30, 2022 and December 31, 2021, respectively.
These sources are believed by the Company to represent a reliable and cost efficient alternative funding source for the Bank.
1 unchanged sentence
In that event, we would be required to obtain alternate sources for funding.
−Removed: At June 30, 2022, the Company had $2.8 billion in noninterest bearing demand deposits, representing 31% of total deposits, compared to $3.3 billion of noninterest bearing demand deposits at December 31, 2021, or 33% of total deposits.
−Removed: Average noninterest bearing deposits of total deposits for the three months ended June 30, 2022 and 2021 were 38% and 33%.
+Added: At September 30, 2022, the Company had $2.9 billion in noninterest bearing demand deposits, representing 33% of total deposits, compared to $3.3 billion of noninterest bearing demand deposits at December 31, 2021, or 33% of total deposits.
+Added: Average noninterest bearing deposits of total deposits for the three months ended September 30, 2022 and 2021 were 38% and 34%, respectively.
The Bank also offers business NOW accounts and business savings accounts to accommodate those customers who may have excess short term cash to deploy in interest earning assets.
As an enhancement to the basic noninterest bearing demand deposit account, the Company offers a sweep account, or "customer repurchase agreement," allowing qualifying businesses to earn interest on short-term excess funds that are not suited for either a certificate of deposit or a money market account.
−Removed: The balances in these accounts were $26.5 million at June 30, 2022 compared to $23.9 million at December 31, 2021.
+Added: The balances in these accounts were $21.5 million at September 30, 2022 compared to $23.9 million at December 31, 2021.
Customer repurchase agreements are not deposits and are not insured by the FDIC, but are collateralized by U.S.
4 unchanged sentences
This program requires the Company to maintain a sufficient investment securities level to accommodate the fluctuations in balances which may occur in these accounts.
−Removed: At June 30, 2022 the Company had $613.1 million in time deposits a decrease of $116.0 million from year end December 31, 2021.
+Added: At September 30, 2022 the Company had $649.2 million in time deposits a decrease of $79.8 million from year end December 31, 2021.
The Bank raises and renews time deposits through its branch network, for its public funds customers, and through brokered certificates of deposits ("CDs") to meet the needs of its community of savers and as part of its interest rate risk management and liquidity planning.
−Removed: In March, the Bank raised rates in most of its time deposit accounts in response to the raising rate environment and the desire to maintain stability in its short term funding.
−Removed: At June 30, 2022 and December 31, 2021, the Company had time deposits that were in excess of the FDIC's $250 thousand insurance limit totaling $102.6 million and $152.5 million, respectively.
−Removed: The Company h ad no outstanding balances under its federal funds lines of credit provided by correspondent banks (which are unsecured) at June 30, 2022 and December 31, 2021.
−Removed: At June 30, 2022 and December 31, 2021, the Company had $280 million and $300 million, respectively, of FHLB short-term advances borrowed as part of the overall asset liability strategy and to support loan growth.
+Added: Throughout the year, the Bank raised rates in most of its time deposit accounts in response to the raising rate environment and the desire to maintain stability in its short term funding.
+Added: At September 30, 2022 and December 31, 2021, the Company had time deposits that were in excess of the FDIC's $250 thousand insurance limit totaling $93.2 million and $152.5 million, respectively.
+Added: The Company h ad an outstanding balance of $15 million under its federal funds lines of credit provided by correspondent banks (which are unsecured) at September 30, 2022 and no outstanding balance at December 31, 2021.
+Added: At September 30, 2022 and December 31, 2021, the Company had $500 million and $300 million, respectively, of FHLB short-term advances borrowed as part of the overall asset liability strategy and to support loan growth.
Outstanding FHLB advances are secured by collateral consisting of a blanket lien on qualifying loans in the Bank's commercial mortgage, residential mortgage and home equity loan portfolios.
−Removed: Long-term borrowings outstanding at June 30, 2022 included the Company's August 5, 2014 issuance of $70.0 million of subordinated notes, due September 1, 2024.
+Added: Long-term borrowings outstanding at September 30, 2022 and December 31, 2021 included the Company's August 5, 2014 issuance of $70.0 million of subordinated notes, due September 1, 2024.
Liquidity Management
3 unchanged sentences
These sources of liquidity are considered primary and are supplemented by the ability of the Company and Bank to borrow funds or issue brokered deposits, which are termed secondary sources of liquidity and which are substantial.
−Removed: Additionally, the Bank c an purchase up to $155 million in federal funds on an unsecured basis from its correspondents, against which there was no amount outstanding at June 30, 2022, and can obtain unsecured funds under one-way CDARS and ICS brokered deposits in the amount of $1.6 billion, against which there was $515 thousand outstanding at June 30, 2022.
−Removed: The Bank also has a commitment from IntraFi to place up to $1.8 billion of brokered deposits from its IND program in amounts requested by the Bank, as compared to an actual balance of $1.8 billion at June 30, 2022.
−Removed: At June 30, 2022, the Bank was also eligible to make advances from the FHLB up to $1.2 billion based on loans pledged as collateral to the FHLB, of which there was $280 million outstanding at June 30, 2022.
+Added: Additionally, the Bank c an purchase up to $155 million in federal funds on an unsecured basis from its correspondents, against which there was $15 million outstanding at September 30, 2022, and can obtain unsecured funds under one-way CDARS and ICS brokered deposits in the amount of $1.6 billion, against which there was $19.5 million outstanding at September 30, 2022.
+Added: The Bank also has a commitment from IntraFi to place up to $1.8 billion of brokered deposits from its IND program in amounts requested by the Bank, as compared to an actual balance of $1.4 billion at September 30, 2022.
+Added: At September 30, 2022, the Bank was also eligible to make advances from the FHLB up to $1.1 billion based on loans pledged as collateral to the FHLB, of which there was $500 million outstanding at September 30, 2022.
The Bank may enter into repurchase agreements as well as obtain additional borrowing capabilities from the FHLB, provided adequate collateral exists to secure these lending relationships.
13 unchanged sentences
In that event, we would be required to obtain alternate sources for funding.
−Removed: Our primary and secondary sources of liquidity remain strong.
−Removed: Average deposits increased 10.1% for the first half of 2022 as compared to the first half of 2021.
−Removed: We also still maintain a very liquid investment portfolio, including significant overnight liquidity.
−Removed: In the first half of 2022, average short term liquidity was $1.8 billion, which is above EagleBank's average needs, and secondary sources of liquidity at June 30, 2022 were $2.8 billion.
−Removed: At June 30, 2022, under the Bank's liquidity formula, it had $4.7 billion of primary and secondary liquidity sources.
+Added: The Company maintains sufficient primary and secondary sources of liquidity to fund its operations.
+Added: Average deposits increased 6 .4% for the first nine months of 2022 as compared to the same period in 2021.
+Added: We also maintain a liquid investment portfolio outside of our Held-to-Maturity investments, including overnight liquidity.
+Added: In the first nine months of 2022, average short term liquidity was $1.4 billion , which is above EagleBank's average needs, and secondary sources of liquidity at September 30, 2022 were $2.6 billion.
+Added: At September 30, 2022, under the Bank's liquidity formula, it had $4.3 billion of primary and secondary liquidity sources.
The amount is deemed adequate to meet current and projected funding needs.
Commitments and Contractual Obligations
−Removed: Loan commitments outstanding and lines and letters of credit at June 30, 2022 are as follows:
+Added: Loan commitments outstanding and lines and letters of credit at September 30, 2022 are as follows:
(dollars in thousands)
7 unchanged sentences
Since commitments may expire without being drawn, the total commitment amount does not necessarily represent future cash requirements.
−Removed: As of June 30, 2022, unfunded loan commitments included $25.2 million related to interest rate lock commitments on residential mortgage loans and were of a short-term nature.
+Added: As of September 30, 2022, unfunded loan commitments included $17.9 million related to interest rate lock commitments on residential mortgage loans and were of a short-term nature.
The pipeline of loan commitments remains strong.
14 unchanged sentences
Banking is generally a business of managing the maturity and repricing mismatch inherent in its asset and liability cash flows and to provide net interest income growth consistent with the Company's profit objectives.
−Removed: During the three months ended June 30, 2022, the Company was able to produce a net interest margin of 2.94% as compared to 3.04% during the same period in 2021, and continue to manage its overall interest rate risk position .
+Added: During the nine months ended September 30, 2022, the Company was able to produce a net interest margin of 2.86% as compared to 2.91% during the same period in 2021 and continue to manage its overall interest rate risk position .
The Company, through its ALCO and ongoing financial management practices, monitors the interest rate environment in which it operates and adjusts the rates and maturities of its assets and liabilities to remain competitive and to achieve its overall financial objectives subject to established risk limits.
3 unchanged sentences
agency investment portfolio.
−Removed: At June 30, 2022, the investment portfolio increased by $1.2 billion, or 72%, as compared to the balance at June 30, 2021.
−Removed: The cash received from deposit growth alon g with cash flows from the investment and loan portfolio were deployed primarily into cash and new investments, as loan balances have declined over that same period.
−Removed: The percentage mix of municipal securities was 5% of total investments at June 30, 2022 and December 31, 2021 .
−Removed: The portion of the portfolio invested in mortgage-backed secur ities was 64% at June 30, 2022 and December 31, 2021.
+Added: At September 30, 2022, the investment portfolio increased by $345.9 million, or 13.1%, as compared to the balance at December 31, 2021.
+Added: The percentage mix of municipal securities was 5% of total investments at September 30, 2022 and December 31, 2021 .
+Added: The portion of the portfolio invested in mortgage-backed secur ities was 64% at September 30, 2022 and December 31, 2021.
The portion of the portfolio invested in U.S.
−Removed: agency investments was 24% at June 30, 2022 and December 31, 2021.
−Removed: Shorter duration floating rate corporate bonds were 5% of total investments at June 30, 2022 and December 31, 2021 .
−Removed: treasury bonds were 2% of total investments at June 30, 2022 and December 31, 2021.
−Removed: The duration of the investment portfolio increased to 5.1 years at June 30, 2022 from 4.3 years at December 31, 2021 .
−Removed: The re-pricing duration of the loan portfolio wa s 15 mo nths at June 30, 2022 and 18 months at December 31, 2021 with fixed rate loans amounting to 42 % of total loans at June 30, 2022 and 43% at December 31, 2021 .
−Removed: Variable and adjustable rate loans comprised 58 % of total loans at June 30, 2022 and 57% at December 31, 2021 , respectively.
+Added: agency investments was 25% and 24% at September 30, 2022 and December 31, 2021, respectively.
+Added: Shorter duration floating rate corporate bonds were 4% and 5% of total investments at September 30, 2022 and December 31, 2021, respectively .
+Added: treasury bonds were 2% of total investments at September 30, 2022 and December 31, 2021.
+Added: The duration of the investment portfolio increased to 4.8 years at September 30, 2022 from 4.3 years at December 31, 2021 .
+Added: The re-pricing duration of the loan portfolio wa s 14 mo nths at September 30, 2022 and 18 months at December 31, 2021 with fixed rate loans amounting to 40 % of total loans at September 30, 2022 and 43% at December 31, 2021 .
+Added: Variable and adjustable rate loans comprised 60% of total loans at September 30, 2022 and 57% at December 31, 2021 , respectively.
Variable rate loans are generally indexed to either the one month LIBOR interest rate, SOFR, or the Wall Street Journal prime interest rate, while adjustable rate loans are indexed primarily to the five year U.S.
Treasu ry interest rate.
−Removed: The duration of the deposit portfolio decreased as rates rose, measuring 29 mo nths at June 30, 2022 and 41 months at December 31, 2021.
−Removed: The net unrealized loss before income tax on the investment securities available-for-sale portfolio was $142.7 million and $18.6 million at June 30, 2022 and December 31, 2021, respectively.
+Added: The duration of the deposit portfolio decreased as rates rose, measuring 30 mo nths at September 30, 2022 and 41 months at December 31, 2021.
+Added: The net unrealized loss before income tax on the investment securities available-for-sale portfolio was $224.1 million and $18.6 million at September 30, 2022 and December 31, 2021, respectively.
The change is primarily due to higher interest rates.
−Removed: At June 30, 2022, the net unrealized loss posit ion represented 5% of the investment portfolio's book value.
−Removed: There can be no assurance that the Company will be able to successfully achieve its optimal asset liability mix, as a result of competitive pressures, customer preferences and the inability to perfectly forecast future interest rates and movements.
+Added: At September 30, 2022, the net unrealized loss posit ion represented 8% of the investment portfolio's book value.
+Added: Management relies on the use of models in order to measure the expected future impact on interest income of various interest rate environments, as described above.
+Added: Through its modeling, the Company makes certain estimates that may vary from actual results.
+Added: There can be no assurance that the Company will be able to successfully achieve its optimal asset liability mix, given competitive pressures, customer preferences and the inability to forecast future interest rates and movements with complete accuracy.
+Added: In a normal rising interest rate environment, the Company expects its interest income on variable and adjustable rate loans to increase and the interest expense on its deposit liabilities to increase based on our funding needs, market conditions and certain contractual obligations.
+Added: Interest rate floors on certain of the Company's variable and adjustable rate loans may provide asset yield protection in a low-interest rate environment;
+Added: however, they are also expected to delay the impact of increases to market rates on interest income until such floors have been exceeded.
+Added: The weighted average rate of the Company's variable rate loans increased by approximately 179 basis points from December 31, 2021 to September 30, 2022 in connection with the 300 basis points in Fed Funds rate hikes caused by actions taken by the Federal Reserve Bank.
+Added: At December 31, 2021, the Company had a portfolio of $2.8 billion of variable and adjustable rate loans that were subject to interest rate floors with a weighted average rate of 4.30%.
+Added: At September 30, 2022, only $278.4 million of loans held by the Company were earning interest at their floor rate, and the majority of those are expected to reset at rates higher than their floor at their next rate reset date.
+Added: Additionally, the Company’s cost of interest bearing deposits increased by 157 basis points across its interest-bearing deposits, which comprise 67% of its total deposits, at September 30, 2022.
One of the tools used by the Company to manage its interest rate risk is the static gap analysis presented below.
The Company also employs an earnings simulation model on a quarterly basis to monitor its interest rate sensitivity and risk and to model its balance sheet cash flows and the related income statement effects in different interest rate scenarios.
−Removed: The model utilizes current balance sheet data and attributes and is adjusted for assumptions as to investment maturities (including prepayments), loan prepayments, interest rates, and the level of noninterest income and noninterest expense.
+Added: The model utilizes current balance sheet data and attributes and is adjusted for assumptions as to investment maturities (including prepayments), loan prepayments, interest rates, deposit decay rates, and the level of noninterest income and noninterest expense.
The data is then subjected to a "shock test" which assumes a simultaneous change in interest rates up 100, 200, 300, and 400 basis points or down 100 and 200, along the entire yield curve, but not below zero.
−Removed: The results are analyzed as to the impact on net interest income, net income and the market equity over the next twelve and twenty-four month periods from June 30, 2022.
+Added: The results are analyzed as to the impact on net interest income, net income and the market equity over the next twelve period from September 30, 2022.
In addition to analysis of simultaneous changes in interest rates along the yield curve, changes based on interest rate "ramps" is also performed.
This analysis represents the impact of a more gradual change in interest rates, as well as yield curve shape changes.
−Removed: For the analysis presented below, at June 30, 2022, the simulation assumes a 45 basis point change in interest rates on money market and interest bearing transaction deposits for each 100 basis point change in market interest rates in a decreasing interest rate shock scenario with a floor of 0 basis points (compared to a floor 10 basis points in the same analysis as of June 30, 2021), and assumes a 45 basis point change in interest rates on money market and interest bearing transaction deposits for each 100 basis point change in market interest rates in an increasing interest rate shock scenario.
+Added: For the analysis presented below, at September 30, 2022, the simulation assumes a 45 basis point change in interest rates on money market and interest bearing transaction deposits for each 100 basis point change in market interest rates in a decreasing interest rate shock scenario with a floor of 0 basis points (compared to a floor 10 basis points in the same analysis as of September 30, 2021), and assumes a 45 basis point change in interest rates on money market and interest bearing transaction deposits for each 100 basis point change in market interest rates in an increasing interest rate shock scenario.
The Bank does have deposits with contractual terms which means these deposits will change 100 basis points for every 100 basis points change in market rates.
This had the effect of making the overall measure of the correlation between deposit costs and market rate changes be measured at 70%.
−Removed: The Company's analysis at June 30, 2022 shows a moderate effect on net interest income (over the next 12 months) as well as a moderate effect on the economic value of equity when interest rates are shocked both down 100 and 200 basis points and up 100, 200, 300, and 400 basis points.
+Added: The Company's analysis at September 30, 2022 shows a moderate effect on net interest income (over the next 12 months) as well as a moderate effect on the economic value of equity when interest rates are shocked down 100, 200, and 300 basis points and up 100, 200, 300, and 400 basis points.
This moderate impact is due substantially to the significant level of variable rate and repriceable assets and liabilities and related shorter relative dura tions.
−Removed: The repricing duration of the investment portfolio at June 30, 2022 is 5.1 years, the loan portfolio 1.2 years, the interest bearing deposit portfolio 2.4 years, and the borrowed funds portfolio 0.5 years.
−Removed: The following table reflects the result of simulation analysis on the June 30, 2022 asset and liabilities balances:
+Added: The repricing duration of the investment portfolio at September 30, 2022 is 4.5 years, the loan portfolio 1.2 years, the interest bearing deposit portfolio 2.5 years, and the borrowed funds portfolio 0.4 years.
+Added: The following table reflects the result of simulation analysis on the September 30, 2022 asset and liabilities balances:
Change in interest
9 unchanged sentences
- 200 (10.2)% (17.3)% (11.5)%
+Added: - 300 (13.5)% (22.9)% (21.8)%
The results of the simulation are within the relevant policy limits adopted by the Company for percentage change in net interest income.
1 unchanged sentence
For the market value of equity, the Company has adopted a policy limit of -12% for a 100 basis point change, -15% for a 200 basis point change, -25% for a 300 basis point change and -30% for a 400 basis point change.
−Removed: Management has determined that due to the level of market rates at June 30, 2022, interest rate shocks of -300 and -400 basis points leave the Bank with near zero down to negative rate instruments and are not considered practical or informative.
−Removed: The changes in net interest income, net income and the economic value of equity in higher interest rate shock scenarios at June 30, 2022 are not considered to be excessive.
−Removed: The impact of 0.4% increase in net interest income and 0.7 % increase in net income given a 100 basis point decrease in market interest rates reflects in large measure the ability to quickly reprice deposits downward while the new loans we have book recently would take time to re-price or would remain at floor rates.
−Removed: In the first h of 2022 , t he Company continued to manage its interest rate sensitivity position to moderate levels of risk, as indicated in the simulation results above.
+Added: The changes in net interest income, net income and the economic value of equity in higher interest rate shock scenarios at September 30, 2022 are not considered to be excessive.
+Added: The impact of -4.9% in net interest income and -8.3 % in net income given a 100 basis point decrease in market interest rates reflects in large measure the ability to quickly reprice deposits downward while the new loans we have book recently would take time to re-price.
+Added: In the first three quarters of 2022 , t he Company continued to manage its interest rate sensitivity position to moderate levels of risk, as indicated in the simulation results above.
Although certain assets and liabilities may have similar maturities or repricing periods, they may react in different degrees to changes in market interest rates.
3 unchanged sentences
Finally, the ability of many borrowers to service their debt may decrease in the event of a significant interest rate increase.
−Removed: During the first half of 2022 , average market interest rates increased across the yield curve as compared to the 2021 year end.
+Added: During the first three quarters of 2022 , average market interest rates increased across the yield curve as compared to the 2021 year end.
Banks a nd other financial institutions earnings are significantly dependent upon net interest income, which is the difference between interest earned on rate sensitive assets and interest expense on rate sensitive liabilities.
−Removed: Net interest income represented 93% and 89% of the Company's revenue for the first half of 2022 and 2021, respectively.
+Added: Net interest income represented 93% and 89% of the Company's revenue for the first three quarters of 2022 and the last three quarters 2021, respectively.
In falling interest rate environments, net interest income is maximized with longer term, higher yielding assets being funded by lower yielding short-term funds, or what is referred to as a negative mismatch or gap.
4 unchanged sentences
While a positive gap indicates the degree to which the volume of repriceable assets exceeds repriceable liabilities in given time periods.
−Removed: At June 30, 2022, the Company had a negative gap position of approximately $1.3 billion or 12.27% of total assets, out to three months, and a negative cumulative gap position of $1.1 billion, or 9.76% of total assets out to twelve months.
+Added: At September 30, 2022, the Company had a negative gap position of approximately $1.1 billion or 10.55% of total assets, out to three months, and a negative cumulative gap position of $742 million, or 6.93% of total assets out to twelve months.
At December 31, 2021 , the Company had a negative gap position of approximately $267 million or 2.25% of total assets out to three months and a positive cumulative gap position of $102 million or 0.86% of tot al assets out to 12 months.
−Removed: The change in the gap position at June 30, 2022 as compared to December 31, 2021 was due to reduction in cash relative to securities holdings.
+Added: The change in the gap position at September 30, 2022 as compared to December 31, 2021 was due to reduction in cash relative to securities holdings.
Such a change in the gap position is not deemed material to the Company's overall interest rate risk position, which relies more heavily on simulation analysis that captures the full opportunity within the balance sheet.
7 unchanged sentences
If this were to occur, the effects of a declining interest rate environment may not be in accordance with management's expectations.
−Removed: June 30, 2022
+Added: September 30, 2022
(dollars in thousands)
31 unchanged sentences
The Company, like many community banks, has focused on commercial real estate loans, and the Company has experienced growth in its commercial real estate portfolio in recent years.
−Removed: At June 30, 2022, we did exceed the construction, land development, and other land acquisitions regulatory concentration threshold, we continue to monitor our concentration in commercial real estate lending and remain in compliance with the guidance issued by the federal banking regulators.
+Added: At September 30, 2022, we did exceed the construction, land development, and other land acquisitions regulatory concentration threshold, we continue to monitor our concentration in commercial real estate lending and remain in compliance with the guidance issued by the federal banking regulators.
Construction, land and land development loans represent 109% of total risk based capital.
13 unchanged sentences
Under the Basel III Rules, the Company and Bank are required to maintain, inclusive of the capital conservation buffer of 2.5%, a minimum CET1 ratio of 7.0%, a minimum ratio of Tier 1 capital to risk-weighted assets of 8.5%, a minimum total capital to risk-weighted assets ratio of 10.5%, and a minimum leverage ratio of 4.0%.
−Removed: At June 30, 2022, the Company and the Bank meet all these requirements, and satisfy the requirement to maintain a capital conservation buffer of 2.5% of CET1 capital for capital adequacy purposes.
−Removed: The Company announced a regular quarterly cash dividend on June 16, 2022 of $0.45 per share to shareholders of record on July 11, 2022 and payable on July 29, 2022.
−Removed: The actual capital amounts and ratios for the Company and Bank as of June 30, 2022 and December 31, 2021 are presented in the table below.
+Added: At September 30, 2022, the Company and the Bank meet all these requirements, and satisfy the requirement to maintain a capital conservation buffer of 2.5% of CET1 capital for capital adequacy purposes.
+Added: The Company announced a regular quarterly cash dividend on September 20, 2022 of $0.45 per share to shareholders of record on October 10, 2022 and was paid on October 31, 2022.
+Added: The actual capital amounts and ratios for the Company and Bank as of September 30, 2022 and December 31, 2021 are presented in the table below.
Company Bank Minimum
2 unchanged sentences
(dollars in thousands) Amount Ratio Amount Ratio Purposes Regulations*
−Removed: As of June 30, 2022
+Added: As of September 30, 2022
CET1 capital (to risk weighted assets) $ 1,332,545 15.11 % $ 1,340,156 15.30 % 7.00 % 6.50 %
9 unchanged sentences
Bank and holding company regulations, as well as Maryland law, impose certain restrictions on dividend payments by the Bank, as well as restricting extensions of credit and transfers of assets between the Bank and the Company.
−Removed: At June 30, 2022 the Bank could pay dividends to the Company to the extent of its earnings so long as it maintained the minimum required capital ratios listed in the table above.
+Added: At September 30, 2022 the Bank could pay dividends to the Company to the extent of its earnings so long as it maintained the minimum required capital ratios listed in the table above.
In December 2018, federal banking regulators issued a final rule that provides an optional three-year phase-in period for the adverse regulatory capital effects of adopting the CECL methodology pursuant to new accounting guidance for the recognition of credit losses on certain financial instruments, effective January 1, 2020.
5 unchanged sentences
The tables below provide a reconciliation of these non-GAAP financial measures with financial measures defined by GAAP.
−Removed: Tangible common equity to tangible assets (the "tangible common equity ratio"), tangible book value per common share, the annualized return on average tangible common equity, and efficiency ratio are non-GAAP financial measures derived from GAAP-based amounts.
+Added: Tangible common equity to tangible assets (the "tangible common equity ratio"), tangible book value per common share, tangible book value per common share excluding accumulated other comprehensive loss ("AOCI"), the annualized return on average tangible common equity, and efficiency ratio are non-GAAP financial measures derived from GAAP-based amounts.
The Company calculates the tangible common equity ratio by excluding the balance of intangible assets from common shareholders' equity and dividing by tangible assets.
The Company calculates tangible book value per common share by dividing tangible common equity by common shares outstanding, as compared to book value per common share, which the Company calculates by dividing common shareholders' equity by common shares outstanding.
+Added: To calculate the tangible book value per common share excluding the AOCI, tangible common equity is reduced by the loss on the AOCI before dividing by common shares outstanding.
The Company calculates the ROATCE by dividing net income available to common shareholders by average tangible common equity which is calculated by excluding the average balance of intangible assets from the average common shareholders' equity.
3 unchanged sentences
GAAP Reconciliation
−Removed: (dollars in thousands except per share data) June 30, 2022 December 31, 2021
+Added: (dollars in thousands except per share data) September 30, 2022 December 31, 2021
Common shareholders' equity $ 1,219,771 $ 1,350,775
4 unchanged sentences
Tangible book value per common share $ 34.77 $ 38.97
+Added: Book value per common share $ 38.02 $ 42.28
+Added: AOCI book value per common share 6.57 0.45
+Added: Adjusted book value excluding AOCI per common share $ 44.59 $ 42.73
+Added: Tangible book value per common share $ 34.77 $ 38.97
+Added: AOCI book value per common share 6.57 0.45
+Added: Adjusted tangible book value excluding AOCI per common share $ 41.34 $ 39.42
Total assets $ 10,713,044 $ 11,847,310
2 unchanged sentences
Tangible common equity ratio 10.52 % 10.60 %
−Removed: Three Months Ended June 30, Six Months Ended June 30,
+Added: Three Months Ended September 30, Nine Months Ended September 30,
(dollars in thousands) 2022 2021 2022 2021
5 unchanged sentences
Annualized return on average tangible common equity 12.67 % 14.11 % 11.06 % 15.21 %
−Removed: Three Months Ended June 30, Six Months Ended June 30,
−Removed: (dollars in thousands except per share data) 2022 2021 2022 2021
+Added: Three Months Ended September 30, Nine Months Ended September 30,
+Added: (dollars in thousands) 2022 2021 2022 2021
Net interest income $ 83,897 $ 79,045 $ 247,267 $ 246,328
6 unchanged sentences
The Company considers this information important to shareholders as total loans, excluding loans held for sale and PPP loans is a measure that removes fluctuations associated with the activity related to the non-core business and management of the PPP portfolio.
−Removed: (dollars in thousands) June 30, 2022 December 31, 2021
+Added: (dollars in thousands) September 30, 2022 December 31, 2021
Total loans, excluding loans held for sale (GAAP) $ 7,304,498 $ 7,065,598
5 unchanged sentences
The Adjusted Salaries and Employee Benefits non-GAAP measure provides investors insight into how salaries and employee benefits changed during the first quarter of 2022 exclusive of the one-time accrual reduction, and allows investors to better compare the Company's performance against historical periods.
−Removed: Three Months Ended June 30, Six Months Ended June 30,
+Added: Three Months Ended September 30, Nine Months Ended September 30,
(dollars in thousands) 2022 2021 2022 2021
4 unchanged sentences
The Company calculates adjusted net income by excluding from net income the $13.4 million accrual of non-tax deductible expenses during the quarter to cover the Company's civil money penalty and disgorgement, plus prejudgment interest, in connection with the Company's agreement in principle with the SEC and $9.5 million accrual in connection with expected penalties from the FRB to resolve the previously disclosed investigation with respect to the Company.
−Removed: The Company calculates adjusted earnings per share (diluted) by dividing the total $22.9 million accrual by the weighted average shares outstanding (diluted) in the second quarter of 2022.
+Added: The Company calculates adjusted earnings per share (diluted) by dividing the total $22.9 million accrual by the weighted average shares outstanding (diluted) for the nine months ended September 30, 2022.
The Company considers this information important to shareholders because adjusted net income and adjusted earnings per share (diluted) provides investors insight into how Company earnings changed exclusive of the costs related to the agreement in principle with the SEC, and allow investors to better compare the Company's performance against historical periods.
The table below provides a reconciliation of adjusted net income and adjusted earnings per share (diluted) to the nearest GAAP measure.
−Removed: Three Months Ended June 30,
+Added: Three Months Ended September 30, Nine Months Ended September 30,
(dollars in thousands) 2022 2021 2022 2021
5 unchanged sentences
Adjusted earnings per share (diluted) (non-GAAP) $ 1.16 $ 1.36 $ 3.78 $ 4.22
−Removed: The decline in adjusted net income over the comparative three months ended June 30, 2022 and 2021 was primarily attributable to decreases in gains on sales of loans and other income in connection with the reduced activity in the residential lending business and an increase in the provision for expected credit losses during the three months ended June 30, 2022 as compared to a reversal of expected credit losses during the three months ended June 30, 2021.
+Added: The decline in adjusted net income over the comparative three months ended September 30, 2022 and 2021 was primarily attributable to decreases in gains on sales of loan and other income in connection with the reduced activity in the residential lending business, decreases in gains on the sales of investments and an increase in the provision for expected credit losses during the three months ended September 30, 2022 as compared to a reversal of expected credit losses during the three months ended September 30, 2021.
Quantitative and Qualitative Disclosures about Market Risk
1 unchanged sentence
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.