What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-08-09 compared with 2023-05-10 · 313 added, 213 removed, 1052 unchanged (33% of the section changed)

3 unchanged sentences

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

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

Cash and due from banks $ 9,865 $ 12,655

43 unchanged sentences

(dollars in thousands, except per share data)

Three Months Ended March 31,

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

2023 2022 2023 2022

Interest Income

12 unchanged sentences

Provision for (Reversal of) Credit Losses 5,238 495 11,402 ( 2,292 )

Provision for (Reversal of) Credit Losses for Unfunded Commitments 848 ( 11 )

Provision for Credit Losses for Unfunded Commitments 318 553 1,166 542

Net Interest Income After Provision for (Reversal of) Credit Losses 66,255 81,870 134,267 165,120

2 unchanged sentences

Gain on sale of loans 95 855 400 2,347

Net loss on sale of investment securities ( 21 ) ( 25 )

Net gain (loss) on sale of investment securities 2 ( 151 ) ( 19 ) ( 176 )

Increase in the cash surrender value of bank-owned life insurance 648 632 1,303 1,258

8 unchanged sentences

FDIC insurance 2,581 906 4,067 1,964

Amortization of intangible assets 7 44 14 65

Other expenses 3,319 26,632 7,930 30,913

10 unchanged sentences

(dollars in thousands)

Three Months Ended March 31,

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

2023 2022 2023 2022

Net Income $ 28,692 $ 15,696 $ 52,926 $ 61,440

Other Comprehensive Income (Loss), Net of Tax:

Unrealized gain (loss) on securities available-for-sale 17,936 ( 58,406 )

Reclassification adjustment for loss included in net income 16 19

Total unrealized gain (loss) on investment securities available-for-sale 17,952 ( 58,387 )

Other Comprehensive (Loss) Income, Net of Tax:

Unrealized (loss) gain on securities available-for-sale ( 12,074 ) ( 33,020 ) 5,862 ( 91,424 )

Reclassification adjustment for (gain) loss included in net income ( 2 ) 100 14 117

Total unrealized (loss) gain on investment securities available-for-sale ( 12,076 ) ( 32,920 ) 5,876 ( 91,307 )

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

— — — ( 49,095 )

Amortization of unrealized loss on securities transferred to held-to-maturity 1,403 1,991 2,044 1,991

Total unrealized gain (loss) on investment securities held-to-maturity 1,403 1,991 2,044 ( 47,104 )

Other comprehensive income (loss) 18,593 ( 107,482 )

Unrealized gain on derivatives — 284 — 284

Other comprehensive (loss) income ( 10,673 ) ( 30,645 ) 7,920 ( 138,127 )

Comprehensive Income (Loss) $ 18,019 $ ( 14,949 ) $ 60,846 $ ( 76,687 )

7 unchanged sentences

Shares Amount

Balance April 1, 2023 31,111,647 $ 308 $ 397,012 $ 1,025,552 $ ( 180,914 ) $ 1,241,958

Net Income — — — 28,692 — 28,692

Other comprehensive loss, net of tax — — — — ( 10,673 ) ( 10,673 )

Stock-based compensation expense — — 2,736 — — 2,736

Vesting of time-based stock awards issued at date of grant, net of shares withheld for payroll taxes ( 6,960 ) — — — — —

Time-based stock awards granted 2,008 — — — — —

Issuance of common stock related to employee stock purchase plan 5,387 — 179 — — 179

Cash dividends declared ($ 0.45 per share)

— — — ( 13,465 ) — ( 13,465 )

Common stock repurchased ( 1,200,000 ) ( 12 ) ( 29,649 ) — — ( 29,661 )

Balance June 30, 2023 29,912,082 $ 296 $ 370,278 $ 1,040,779 $ ( 191,587 ) $ 1,219,766

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

Net Income — — — 15,696 — 15,696

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

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

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

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

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

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

Cash dividends declared ($ 0.45 per share)

— — — ( 14,483 ) — ( 14,483 )

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

See Notes to Consolidated Financial Statements.

EAGLE BANCORP, INC.

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

(dollars in thousands except share and per share data)

Accumulated Other Comprehensive Income (Loss)

Common Additional Paid-in Capital Retained Earnings Shareholders' Equity

Shares Amount

Balance January 1, 2023 31,346,903 $ 310 $ 412,303 $ 1,015,215 $ ( 199,507 ) $ 1,228,321

7 unchanged sentences

Cash dividends declared ($ 0.90 per share)

— — — ( 27,362 ) — ( 27,362 )

Common stock repurchased ( 1,600,000 ) ( 16 ) ( 48,021 ) — — ( 48,037 )

Balance March 31, 2023 31,111,647 $ 308 $ 397,012 $ 1,025,552 $ ( 180,914 ) $ 1,241,958

Balance June 30, 2023 29,912,082 $ 296 $ 370,278 $ 1,040,779 $ ( 191,587 ) $ 1,219,766

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

8 unchanged sentences

Cash dividends declared ($ 0.85 per share)

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

— — — ( 27,148 ) — ( 27,148 )

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

See Notes to Consolidated Financial Statements.

2 unchanged sentences

(dollars in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Cash Flows From Operating Activities:

2 unchanged sentences

Provision for (reversal of) credit losses 11,402 ( 2,292 )

Provision for (reversal of) credit losses for unfunded commitments 848 ( 11 )

Provision for credit losses for unfunded commitments 1,166 542

Depreciation and amortization 1,778 1,657

4 unchanged sentences

Proceeds from sale of loans held for sale 36,824 242,246

Net gain on sale of other real estate owned ( 134 ) ( 93 )

Net loss on sale of investment securities 19 176

3 unchanged sentences

Increase in other assets ( 15,623 ) ( 3,002 )

Decrease (increase) in other liabilities 33,369 ( 6,395 )

Increase in other liabilities 25,558 22,563

Net Cash Provided by Operating Activities 91,549 124,157

9 unchanged sentences

Purchase of Federal Reserve stock ( 158 ) ( 149 )

(Purchase) sale of Federal Home Loan Bank stock ( 13,998 ) 5,186

Net proceeds from redemption of Federal Home Loan Bank stock 19,026 312

Net increase in loans ( 137,661 ) ( 88,872 )

Redemption of BOLI 736 —

Proceeds from sale of OREO 609 241

Net change in premises and equipment ( 221 ) ( 681 )

3 unchanged sentences

Increase in customer repurchase agreements 1,917 2,621

Proceeds from short-term borrowings 1,138,800 ( 150,000 )

Proceeds from (paydowns on) short-term borrowings 861,758 ( 20,000 )

Proceeds from employee stock purchase plan 314 369

11 unchanged sentences

(dollars in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Supplemental Cash Flows Information:

3 unchanged sentences

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

Change in unrealized gain (loss) of investment securities available-for-sale $ 24,034 $ —

See Notes to Consolidated Financial Statements.

14 unchanged sentences

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

These statements should be read in conjunction with the audited Consolidated Financial Statements and related notes included in the Company's Annual Report on Form 10-K for the year ended December 31, 2022.

Nature of Operations

3 unchanged sentences

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

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

In March 2023, the Company closed its Alexandria, Virginia branch following the lease's expiration.

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

During the six months ended June 30, 2023, the Company closed three branches following the leases' expiration.

Landroval Municipal Finance, Inc., a subsidiary of the Bank, focuses on lending to municipalities by buying debt on the public market as well as direct purchase issuance.

The Company commenced the cessation of first lien residential mortgage origination for secondary sale during the three months ended March 31, 2023.

The Company expects to complete residual origination and sales activities by the end of the third quarter of 2023.

The Company has completed residual origination and sales activities as of June 30, 2023.

Use of Estimates

111 unchanged sentences

On January 1, 2023, the Company adopted the accounting guidance in ASU No.

2022-02, which eliminates the recognition and measurement of a troubled debt restructuring ("TDR").

Due to the removal of the TDR designation, the Company evaluates loan restructurings according to the accounting guidance to determine if we have a loan modification and whether it results in a new loan or the continuation of the existing loan.

Loan modifications to borrowers experiencing financial difficulty that result in a direct change in the timing or amount of contractual cash flows include situations where there is principal forgiveness, interest rate reductions, other-than-insignificant payment delays, term extensions, and combinations of the listed modifications.

A loan that is considered a restructured loan may be subject to an individually evaluated loan analysis if the commitment is $1.0 million or greater;

otherwise, the restructured loan remains in the appropriate segment in the ACL model and associated reserves are adjusted based on changes in the discounted cash flows resulting from the modification of the restructured loan.

2022-02, which eliminated the recognition and measurement of troubled debt restructurings ("TDR").

Due to the removal of the TDR designation, the Company evaluates loan restructurings to determine if we have a loan modification and whether it results in a new loan or the continuation of the existing loan.

Loan modifications to borrowers experiencing financial difficulty that result in a direct change in the timing or amount of contractual cash flows include situations where there are principal forgiveness, interest rate reductions, other-than-insignificant payment delays, term extensions, and combinations of the listed modifications.

A loan that is considered a modified loan may be subject to an individually-evaluated loan analysis if the commitment is $ 1.0 million or greater;

otherwise, the restructured loan remains in the appropriate segment in the ACL model and associated provisions are adjusted based on changes in the discounted cash flows resulting from the modification of the restructured loan.

Management strives to identify borrowers in financial difficulty early and work with them to modify their loan to more affordable terms before their loan reaches nonaccrual status, foreclosure or repossession of the collateral to minimize economic loss to the Company.

28 unchanged sentences

Such financial instruments are recorded when they are funded.

The Company records a reserve for RUC on off-balance sheet credit exposures through a charge to provision for credit loss expense in the Company's Consolidated Statement of Income.

The Company records an allowance for off-balance sheet credit exposures through a charge to provision for credit loss expense in the Company's Consolidated Statement of Income.

The RUC on off-balance sheet credit exposures is estimated by loan segment at each balance sheet date under the current expected credit loss model using the same methodologies as portfolio loans, taking into consideration the likelihood that funding will occur, and is included in the RUC on the Company's Consolidated Balance Sheet.

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

Three Months Ended March 31,

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

(dollars in thousands) 2023 2022 2023 2022

1 unchanged sentence

Provision for credit losses - HTM debt securities 2 8 1,244 825

Provision for (reversal of) credit losses - AFS debt securities 14 ( 603 )

(Reversal of) provision for credit losses - AFS debt securities ( 14 ) 1 — ( 602 )

Total $ 5,238 $ 495 $ 11,402 $ ( 2,292 )

Goodwill Assessment

Goodwill represents the excess of the cost of an acquisition over the fair value of the net assets acquired.

Goodwill is subject to impairment testing, which must be conducted at least annually or upon the occurrence of a triggering event.

Various factors, such as the Company’s results of operations, the trading price of the Company’s common stock relative to the book value per share, macroeconomic conditions and conditions in the banking sector, inform whether a triggering event for an interim goodwill impairment test has occurred.

Goodwill is recorded and evaluated for impairment at its reporting unit, the Company.

The Company's policy is to test goodwill for impairment annually as of December 31, or on an interim basis if an event triggering an impairment assessment is determined to have occurred.

Testing of goodwill impairment comprises a two-step process.

First, the Company performs a qualitative assessment to evaluate relevant events or circumstances to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount.

If the Company determines that it is more likely than not that an impairment has occurred, it proceeds to the quantitative impairment test, whereby it calculates the fair value of the reporting unit and compares it with its carrying amount, including goodwill.

In its performance of impairment testing, the Company has the unconditional option to proceed directly to the quantitative impairment test, bypassing the qualitative assessment.

If the carrying amount of the reporting unit exceeds the fair value, the amount by which the carrying amount exceeds fair value, up to the carrying value of goodwill, is recorded through earnings as an impairment charge.

If the results of the qualitative assessment indicate that it is not more likely than not that an impairment has occurred, or if the quantitative impairment test results in a fair value of the reporting unit that is greater than the carrying amount, then no impairment charge is recorded.

During the six months ended June 30, 2023, Management determined that a triggering event had occurred as a result of a sustained decrease in the Company's stock price and a revision in the earnings outlook in comparison to budget for the remainder of 2023 due primarily to the economic uncertainty and market volatility resulting from the rising interest rate environment and the recent events in the banking sector.

As a result, the Company performed a qualitative assessment and quantitative impairment test on its only reporting unit as of May 31, 2023 and determined that there was no impairment as the fair value exceeded the carrying amount of the Company.

New Authoritative Accounting Guidance

6 unchanged sentences

Cash and Due from Banks

For three months ended March 31, 2023 and 2022, the Bank maintained an average daily balance of balances at the Federal Reserve Bank of $ 662.4 million and $ 2.4 billion, respectively, on which interest is paid.

For six months ended June 30, 2023 and 2022, the Bank maintained an average daily balance at the Federal Reserve Bank of $ 911.2 million and $ 1.9 billion, respectively, on which interest is paid.

Additionally, the Bank maintains interest-bearing balances with the Federal Home Loan Bank of Atlanta ("FHLB") and noninterest-bearing balances with domestic correspondent banks to cover associated costs for services they provide to the Bank.

2 unchanged sentences

(dollars in thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Allowance for Credit Losses Estimated Fair Value

March 31, 2023

June 30, 2023

Investment securities available-for-sale:

7 unchanged sentences

(dollars in thousands) Amortized Cost Gross Unrecognized Gains Gross Unrecognized Losses Estimated Fair Value

March 31, 2023

June 30, 2023

Investment securities held-to-maturity:

26 unchanged sentences

Total held-to-maturity securities, net of ACL $ 1,093,374

In addition, at March 31, 2023 and December 31, 2022 the Company held $ 79.1 million and $ 65.1 million, respectively, in equity securities in a combination of Federal Reserve Bank and FHLB stocks, which were required to be held for regulatory purposes and which were not marketable, and therefore are carried at cost.

In addition, at June 30, 2023 and December 31, 2022 the Company held $ 46.2 million and $ 65.1 million, respectively, in equity securities in a combination of Federal Reserve Bank and FHLB stocks, which were required to be held for regulatory purposes and which were not marketable, and therefore are carried at cost.

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

1 unchanged sentence

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

The related unrealized loss of $ 66.2 million was included in other comprehensive loss at the time of transfer and, as of March 31, 2023, $ 57.1 million remains in accumulated other comprehensive loss, to be amortized through interest income as a yield adjustment over the remaining term of the securities.

The related unrealized loss of $ 66.2 million was included in other comprehensive loss at the time of transfer and, as of June 30, 2023, $ 55.3 million remains in accumulated other comprehensive loss, to be amortized through interest income as a yield adjustment over the remaining term of the securities.

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

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

Accrued interest receivable on available-for-sale securities totaled $ 4.2 million and $ 4.3 million at March 31, 2023 and December 31, 2022, respectively, and accrued interest receivable on held-to-maturity securities totaled $ 3.7 million and $ 3.6 million at March 31, 2023 and December 31, 2022, respectively.

Accrued interest receivable on available-for-sale securities totaled $ 4.2 million and $ 4.3 million at June 30, 2023 and December 31, 2022, respectively, and accrued interest receivable on held-to-maturity securities totaled $ 3.5 million at both June 30, 2023 and December 31, 2022.

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

2 unchanged sentences

(dollars in thousands) Number of Securities Estimated Fair Value Unrealized Losses Estimated Fair Value Unrealized Losses Estimated Fair Value Unrealized Losses

March 31, 2023

June 30, 2023

Investment securities available-for-sale:

8 unchanged sentences

(dollars in thousands) Number of Securities Estimated Fair Value Unrecognized Losses Estimated Fair Value Unrecognized Losses Estimated Fair Value Unrecognized Losses

March 31, 2023

June 30, 2023

Investment securities held-to-maturity:

24 unchanged sentences

Total 232 $ 23,881 $ ( 3,228 ) $ 932,753 $ ( 122,205 ) $ 956,634 $ ( 125,433 )

Unrealized losses at March 31, 2023 were generally attributable to changes in market interest rates and interest spread relationships since the investment securities were originally purchased, and not due to the credit quality concerns on the investment securities.

However, as of March 31, 2023, the Company determined that certain of the unrealized loss positions in available-for-sale and held-to-maturity corporate and municipal bonds were evidence of expected credit losses, and therefore, for three months ended March 31, 2023 an allowance for credit losses of $ 14 thousand was recorded for AFS securities and $ 1.2 million for HTM securities for a total allowance of $ 31 thousand and $ 2.0 million, respectively.

The allowance of $ 31 thousand for AFS securities was all for corporate bonds.

The allowance of $ 2.0 million for HTM securities consists of $ 16 thousand for municipal bonds and $ 2.0 million on corporate bonds, The weighted average duration of debt securities, which comprise 100 % of total investment securities, is 4.74 years.

Unrealized losses at June 30, 2023 were generally attributable to changes in market interest rates and interest spread relationships subsequent to the dates the securities were originally purchased, and not due to credit quality concerns on the investment securities.

The Company measures its AFS and HTM security portfolios for current expected credit losses as part of its allowance for credit losses analysis.

During the six months ended June 30, 2023, the Company recorded a provision for credit losses on its held-to-maturity portfolio of $ 1.2 million.

No provision was recorded for its available-for-sale security portfolio was recorded during the six months ended June 30, 2023.

At June 30, 2023, the Company had a total allowance of $ 17 thousand and $ 2.0 million on its available-for-sale securities and held-to-maturity securities, respectively, each of which primarily comprise allowances for corporate bonds.

The weighted average duration of debt securities, which comprise 100 % of total investment securities, is 4.73 years.

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

The Company currently has no plans to sell the investments, and it is more likely than not that the Company will not have to sell the securities before recovery of its amortized cost basis, which may be at maturity.

The amortized cost and estimated fair value of available-for-sale and held-to-maturity securities at March 31, 2023 and December 31, 2022 by contractual maturity are shown in the table below.

The amortized cost and estimated fair value of available-for-sale and held-to-maturity securities at June 30, 2023 and December 31, 2022 by contractual maturity are shown in the table below.

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

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

Amortized Estimated Amortized Estimated

8 unchanged sentences

Residential mortgage-backed securities 877,441 764,590 937,557 820,503

905,524 800,242 937,557 820,503

Commercial mortgage-backed securities 54,982 48,969 56,071 50,213

12 unchanged sentences

Investment securities held-to-maturity

agency securities maturing:

One year or less — — — —

After one year through five years — — — —

After five years through ten years — — — —

Residential mortgage-backed securities 705,256 615,772 741,057 652,667

724,756 647,470 741,057 652,667

Commercial mortgage-backed securities 91,838 78,358 92,557 80,564

12 unchanged sentences

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

For the three months ended March 31, 2023 and 2022, gross realized gains on sales and calls of investment securities were $ 5 thousand and zero , respectively.

For the three months ended March 31, 2023 and 2022, gross realized losses on sales of investment securities were $ 26 thousand and $ 25 thousand, respectively.

Gross sales and call proceeds were $ 8.4 million and $ 6.2 million for the three months ended March 31, 2023 and 2022, respectively.

The book value of securities pledged as collateral for certain government deposits, securities sold under agreements to repurchase, and certain lines of credit with correspondent banks at March 31, 2023 and December 31, 2022 was $ 1.6 billion and $ 220.1 million, respectively, which were well in excess of required amounts in order to operationally provide significant reserve amounts for new business.

As of March 31, 2023 and December 31, 2022, there were no holdings of securities of any one issuer, other than the U.S.

For the three and six months ended June 30, 2023, gross realized gains on sales and calls of investments securities were $ 2 thousand and $ 7 thousand, respectively, as compared to $ 11 thousand for the three and six months ended June 30, 2022.

For the six months ended June 30, 2023, gross realized losses on sales of investments securities were $ 26 thousand as compared to $ 162 thousand and $ 187 thousand for the three and six months ended June 30, 2022, respectively.

There were no realized losses incurred during the three months ended June 30, 2023.

Gross sales and call proceeds were $ 273 thousand and $ 8.6 million for the three and six months ended June 30, 2023, respectively, and $ 6.2 million for the three and six months ended June 30, 2022.

The book value of securities pledged as collateral for certain government deposits, securities sold under agreements to repurchase, and certain lines of credit with correspondent banks at June 30, 2023 and December 31, 2022 was $ 2.3 billion and $ 220.1 million, respectively, which were well in excess of required amounts in order to operationally provide significant reserve amounts for new business.

As of June 30, 2023 and December 31, 2022, there were no holdings of securities of any one issuer, other than the U.S.

Government and U.S.

4 unchanged sentences

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

Loans, net of unamortized net deferred fees, at March 31, 2023 and December 31, 2022 are summarized by type as follows:

March 31, 2023 December 31, 2022

Loans, net of unamortized deferred fees, at June 30, 2023 and December 31, 2022 are summarized by portfolio segment as follows:

June 30, 2023 December 31, 2022

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

12 unchanged sentences

$ 7,688,690 $ 7,561,188

(1) Excludes accrued interest receivable of $ 43.9 million and $ 43.5 million at March 31, 2023 and December 31, 2022, respectively, which were recorded in other assets on the Consolidated Balance Sheets.

Unamortized net deferred fees amounted to $ 28.5 million and $ 29.2 million at March 31, 2023 and December 31, 2022, respectively.

As of March 31, 2023 and December 31, 2022, the Bank serviced $ 344.1 million and $ 361.5 million, respectively, of multifamily FHA loans, SBA loans and other loan participations that are not reflected as loan balances on the Consolidated Balance Sheets.

(1) Excludes accrued interest receivable of $ 44.1 million and $ 43.5 million at June 30, 2023 and December 31, 2022, respectively, which were recorded in other assets on the Consolidated Balance Sheets.

Unamortized net deferred fees amounted to $ 30.4 million and $ 29.2 million at June 30, 2023 and December 31, 2022, respectively.

As of June 30, 2023 and December 31, 2022, the Bank serviced $ 349.5 million and $ 361.5 million, respectively, of multifamily FHA loans, SBA loans and other loan participations that are not reflected as loan balances on the Consolidated Balance Sheets.

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

21 unchanged sentences

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

ADC loans amounted to $ 1.6 billion at March 31, 2023.

ADC loans amounted to $ 1.5 billion at June 30, 2023.

A portion of the ADC portfolio includes loan-funded interest reserves at origination.

ADC loans that provide for the use of interest reserves represent approximately 59.0 % of the outstanding ADC loan portfolio at March 31, 2023.

ADC loans that provide for the use of interest reserves represent approximately 49.0 % of the outstanding ADC loan portfolio at June 30, 2023.

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

13 unchanged sentences

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

The following tables detail activity in the allowance for credit losses by portfolio segment for the three months ended March 31, 2023 and 2022.

The following table details activity in the allowance for credit losses by portfolio segment for the three and six months ended June 30, 2023 and 2022.

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

1 unchanged sentence

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

Three Months Ended March 31, 2023

Three Months Ended June 30, 2023

Allowance for credit losses:

5 unchanged sentences

Ending balance $ 15,374 $ 38,486 $ 12,805 $ 811 $ 9,932 $ 595 $ 26 $ 78,029

Three Months Ended March 31, 2022

Six Months Ended June 30, 2023

Allowance for credit losses:

5 unchanged sentences

Ending balance $ 15,374 $ 38,486 $ 12,805 $ 811 $ 9,932 $ 595 $ 26 $ 78,029

The following table presents the amortized cost basis of collateral-dependent loans by class of loans as of March 31, 2023 and December 31, 2022:

March 31, 2023 December 31, 2022

Three Months Ended June 30, 2022

Allowance for credit losses:

Balance at beginning of period $ 12,946 $ 39,193 $ 10,515 $ 381 $ 7,973 $ 467 $ 30 $ 71,505

Loans charged-off ( 38 ) — ( 1,355 ) — — — ( 3 ) ( 1,396 )

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

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

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

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

Six Months Ended June 30, 2022

Allowance for credit losses:

Balance at beginning of period $ 14,475 $ 38,287 $ 12,146 $ 449 $ 9,099 $ 474 $ 35 $ 74,965

Loans charged-off ( 552 ) — ( 1,355 ) — — — ( 3 ) ( 1,910 )

Recoveries of loans previously charged-off 496 — — — 1,627 — 2 2,125

Net loans (charged-off) recovered ( 56 ) — ( 1,355 ) — 1,627 — ( 1 ) 215

Provision for (reversal of) credit losses 1,335 ( 4,167 ) 2,005 341 ( 2,232 ) 173 30 ( 2,515 )

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

The following table presents the amortized cost basis of collateral-dependent loans by class of loans as of June 30, 2023 and December 31, 2022:

June 30, 2023 December 31, 2022

Business/Other Business/Other

33 unchanged sentences

to Term Total

March 31, 2023

June 30, 2023

Pass $ 192,960 $ 53,809 $ 57,194 $ 222,312 $ 161,306 $ 81,087 $ 648,638 $ 5,560 $ 1,422,866

9 unchanged sentences

Total 1,542,458 456,027 313,955 510,702 701,572 312,572 246,138 2,625 4,086,049

YTD Gross Charge-offs ( 5,306 ) — — — — — — — ( 5,306 )

Owner occupied - commercial real estate

68 unchanged sentences

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

The table presents, by class of loan, an aging analysis and the recorded investments in loans past due as of March 31, 2023 and December 31, 2022:

The table presents, by class of loan, an aging analysis and the recorded investments in loans past due on an amortized cost basis as of June 30, 2023 and December 31, 2022:

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

March 31, 2023

June 30, 2023

Commercial $ 8 $ 149 $ — $ 157 $ 1,429,162 $ 1,965 $ 1,431,284

20 unchanged sentences

Total $ 1,228 $ 975 $ — $ 2,203 $ 7,626,961 $ 6,468 $ 7,635,632

(1) The increase in the 30-59 days past due category in the income producing - commercial real estate loans is one credit for $ 14.0 million which became past due in the first quarter of 2023, and was brought current in April 2023.

The following presents the nonaccrual loans as of March 31, 2023 and December 31, 2022:

The following presents the nonaccrual loans as of June 30, 2023 and December 31, 2022:

(dollars in thousands, except amounts in footnotes) Nonaccrual with No Allowance for Credit Losses Nonaccrual with an Allowance for Credit Losses Total Nonaccrual Loans

March 31, 2023

June 30, 2023

Commercial $ 140 $ 1,825 $ 1,965

11 unchanged sentences

$ 118 $ 6,350 $ 6,468

(1) Gross interest income of $ 182 thousand and approximately $ 325 thousand would have been recorded for the three months ended March 31, 2023 and 2022, respectively, if nonaccrual loans shown above had been current and in accordance with their original terms, while no interest income was actually recorded on such loans for the three months ended March 31, 2023 and 2022.

(1) Gross interest income of approximately $ 1.1 million and $ 532 thousand would have been recorded for the six months ended June 30, 2023 and 2022, respectively, if nonaccrual loans shown above had been current and in accordance with their original terms, while $ 277 thousand and $ 6 thousand interest income was actually recorded on such loans for the six months ended June 30, 2023 and 2022, respectively.

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

16 unchanged sentences

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.

None of the loans that were restructured in the three months ended March 31, 2023, experienced any subsequent payment defaults.

The following table presents the amortized cost basis of loan restructurings at March 31, 2023 that were both experiencing financial difficulty and modified during the three months ended March 31, 2023.

(dollars in thousands) Principal Forgiveness Term Extension Combination Term Extension and Principal Payment Delay Weighted Average Term Extension Interest Rate Reduction Restructured Loans/Total Loan Portfolio

Accruing Restructured Loans

None of the loans that were modified during the three and six months ended June 30, 2023 experienced any subsequent payment defaults.

The following table presents the amortized cost basis as of June 30, 2023 and the financial effect of loans modified to borrowers experiencing financial difficulty during the three and six months ended June 30, 2023:

June 30, 2023

(dollars in thousands) Term Extension Combination - Term Extension and Principal Payment Delay Combination - Term Extension, Principal Payment Delay and Interest Rate Reduction Total Percentage of Total Loan Type Weighted Average Term and Principal Payment Extension (1)

Weighted Average Interest Rate Reduction

Three months ended June 30, 2023:

Commercial $ 30,833 $ — $ — $ 30,833 2.2 % 3 months — %

1 unchanged sentence

Owner occupied - commercial real estate — 19,170 — 19,170 1.7 % 3 months — %

Construction - commercial and residential 6,971 — — 6,971 0.8 % 6 months — %

Total $ 37,804 $ 74,773 $ 74,026 $ 186,603

The following presents the performance of loans restructured to borrowers experiencing financial difficulty by class of loan during the three months ended March 31, 2023:

Payment Status (Amortized Cost Basis) Payment Status (Amortized Cost Basis)

(dollars in thousands) Current 30-89 Days Past Due 90+ Days Past Due

Accruing Restructured Loans

Six months ended June 30, 2023:

Commercial $ 30,833 $ — $ — $ 30,833 2.2 % 5 months — %

Income producing - commercial real estate (2)

7,184 57,823 74,026 139,033 3.4 % 5 months 2.90 %

Owner occupied - commercial real estate — 19,170 — 19,170 1.7 % 6 months — %

Construction - commercial and residential $ 6,971 $ — $ — 6,971 0.8 % 6 months — %

Total $ 44,988 $ 76,993 $ 74,026 $ 196,007

(1) For loans that received multiple modifications during the six months ended June 30, 2023, calculated based on the aggregated impact of the extensions received during the period.

(2) Includes one loan modified as a combination - principal payment delay and term extension during the first quarter of 2023 that was moved to nonaccrual status and incurred a $ 2.1 million charge off in the second quarter of 2023.

The following table presents the performance of loans modified to borrowers experiencing financial difficulty during the six months ended June 30, 2023:

June 30, 2023

Payment Status (Amortized Cost Basis)

(dollars in thousands) Current Nonaccrual

Commercial $ 30,833 $ —

1 unchanged sentence

Owner occupied - commercial real estate 19,170 —

Construction - commercial and residential 6,971 —

Total $ 193,788 $ 2,219

There were no non-accrual loans modified during the three months ended March 31, 2023.

The Company accounts for leases in accordance with ASC Topic 842.

3 unchanged sentences

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

As of March 31, 2023 and December 31, 2022, the Company had $ 23.1 million and $ 24.5 million of operating lease ROU assets, respectively, and $ 27.6 million and $ 29.3 million of operating lease liabilities, respectively, on the Company's Consolidated Balance Sheets.

As of June 30, 2023 and December 31, 2022, the Company had $ 21.6 million and $ 24.5 million of operating lease ROU assets, respectively, and $ 26.0 million and $ 29.3 million of operating lease liabilities, respectively, on the Company's Consolidated Balance Sheets.

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

1 unchanged sentence

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

As of March 31, 2023, our leases do not contain material residual value guarantees or impose restrictions or covenants related to dividends or the Company's ability to incur additional financial obligations.

During the three months ended March 31, 2023, the Company did not enter into new leases or renew or extend any leases.

The Company had one lease expire during that period.

As of June 30, 2023, our leases do not contain material residual value guarantees or impose restrictions or covenants related to dividends or the Company's ability to incur additional financial obligations.

During the six months ended June 30, 2023, the Company did not enter into new leases or renew or extend any leases.

The Company had three leases expire during that period.

The following table presents lease costs and other lease information.

Three Months Ended

(dollars in thousands) March 31, 2023 March 31, 2022

Three Months Ended Six Months Ended

(dollars in thousands) June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022

Operating lease cost (cost resulting from lease payments) $ 1,667 $ 1,820 $ 3,383 $ 3,661

3 unchanged sentences

Operating lease - operating cash flows (fixed payments) $ 1,814 $ 1,923 $ 3,673 $ 3,743

(dollars in thousands) March 31, 2023 December 31, 2022

(dollars in thousands) June 30, 2023 December 31, 2022

Operating lease right-of-use assets $ 21,580 $ 24,544

2 unchanged sentences

Weighted average discount rate - operating leases 2.84 % 2.91 %

Future minimum payments for operating leases with initial or remaining terms of more than one year as of March 31, 2023 were as follows:

Future minimum payments for operating leases with initial or remaining terms of more than one year as of June 30, 2023 were as follows:

(dollars in thousands)

Twelve months ended:

March 31, 2024 $ 5,339

March 31, 2025 6,880

March 31, 2026 5,987

March 31, 2027 2,894

March 31, 2028 2,502

June 30, 2024 $ 3,525

June 30, 2025 6,880

June 30, 2026 5,987

June 30, 2027 2,894

June 30, 2028 2,502

Thereafter 5,776

24 unchanged sentences

The Company commenced the cessation of first lien residential mortgage origination for secondary sale during the three months ended March 31, 2023.

The Company expects to complete residual origination and sales activities as of the end of the third quarter of 2023.

As part of its mortgage banking activities, the Bank entered into interest rate lock commitments, which are commitments to originate loans where the interest rate on the loan is determined prior to funding and the customers have locked into that interest rate.

The Company has completed residual origination and sales activities as of June 30, 2023.

Historically, as part of its mortgage banking activities, the Bank entered into interest rate lock commitments, which are commitments to originate loans where the interest rate on the loan is determined prior to funding and the customers have locked into that interest rate.

The Bank then locks in the loan and interest rate with an investor and commits to deliver the loan if settlement occurs ("best efforts") or commits to deliver the locked loan in a binding ("mandatory") delivery program with an investor.

9 unchanged sentences

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

The table below identifies the balance sheet category and fair value of the Company's derivative instruments as of March 31, 2023 and December 31, 2022.

As of June 30, 2023, the company had no outstanding mortgage banking derivatives.

The table below identifies the balance sheet category and fair value of the Company's derivative instruments as of June 30, 2023 and December 31, 2022.

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

If the Company had breached any provisions under the agreement at March 31, 2023, it could have been required to settle its obligations under the agreement at the termination value.

March 31, 2023 December 31, 2022

If the Company had breached any provisions under the agreement at June 30, 2023, it could have been required to settle its obligations under the agreement at the termination value.

June 30, 2023 December 31, 2022

(dollars in thousands) Notional

4 unchanged sentences

Interest rate product $ 595,845 $ 30,659 Other assets $ 396,024 $ 31,039 Other assets

Mortgage banking derivatives 2,188 29 Other assets 6,963 93 Other assets

Credit risk participation agreements 26,213 3 Other liabilities — — N/A

Mortgage banking derivatives — — N/A 6,963 93 Other assets

Total $ 622,058 $ 30,662 $ 402,987 $ 31,132

1 unchanged sentence

Interest rate product $ 595,845 $ 32,341 Other liabilities $ 396,024 $ 30,065 Other liabilities

Credit risk participation agreements 25,770 3 Other liabilities 25,902 2 Other liabilities

Credit risk participation agreements — — N/A 25,902 2 Other liabilities

Total $ 595,845 $ 32,341 $ 421,926 $ 30,067

Cash and other collateral posted — —

Net derivatives in a liability position $ 25,221 $ 30,067

The table below presents the effect of the Company's derivative financial instruments on the consolidated statements of income for the three months ended March 31, 2023 and 2022:

The table below presents the effect of the Company's derivative financial instruments on the consolidated statements of income for the three and six months ended June 30, 2023 and 2022:

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

Amount of Gain (Loss) Recognized in Income on Derivatives

Location of Gain (Loss) Recognized in Income on Derivatives Three Months Ended March 31,

Location of Gain (Loss) Recognized in Income on Derivatives Three Months Ended June 30, Six Months Ended June 30,

(dollars in thousands) 2023 2022 2023 2022

1 unchanged sentence

Mortgage banking derivatives Gain on sale of loans ( 29 ) ( 299 ) ( 93 ) ( 529 )

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

Total $ 1,029 $ 35 $ 615 $ 56

The following table provides information regarding the Bank’s deposit composition at March 31, 2023 and December 31, 2022:

(dollars in thousands) March 31, 2023 December 31, 2022

The following table provides information regarding the Bank’s deposit composition at June 30, 2023 and December 31, 2022:

(dollars in thousands) June 30, 2023 December 31, 2022

Noninterest bearing demand $ 2,010,353 $ 3,150,751

3 unchanged sentences

Total $ 7,718,127 $ 8,713,182

The remaining maturity of time deposits at March 31, 2023 and December 31, 2022 were as follows:

(dollars in thousands) March 31, 2023 December 31, 2022

The remaining maturity of time deposits at June 30, 2023 and December 31, 2022 were as follows:

(dollars in thousands) June 30, 2023 December 31, 2022

2023 $ 588,446 $ 463,393

6 unchanged sentences

Total $ 1,986,426 $ 783,499

(dollars in thousands) March 31, 2023 December 31, 2022

Three months or less $ 131,277 $ 159,820

More than three months through six months 233,638 99,044

More than six months through twelve months 359,145 204,529

Over twelve months 613,745 320,106

Total $ 1,337,805 $ 783,499

As of March 31, 2023 and December 31, 2022, time deposit accounts in excess of $ 250 thousand were as follows:

(dollars in thousands) March 31, 2023 December 31, 2022

As of June 30, 2023 and December 31, 2022, time deposit accounts in excess of $ 250 thousand were as follows:

(dollars in thousands) June 30, 2023 December 31, 2022

Three months or less $ 148,171 $ 87,959

3 unchanged sentences

Total $ 1,519,941 $ 517,782

At March 31, 2023, total brokered deposits (excluding the CDARS and ICS two-way) were $ 2.1 billion, or 28.5 % of total deposits.

At June 30, 2023, total brokered deposits (excluding the CDARS and ICS two-way) were $ 2.5 billion, or 32.1 % of total deposits.

At December 31, 2022, total deposits included $ 2.3 billion of brokered deposits (excluding the CDARS and ICS two-way), which represented 26.5 % of total deposits.

The following table summarizes the Company’s borrowings, which include repurchase agreements with the Company’s customers, short-term borrowings and long-term borrowings, at March 31, 2023 and December 31, 2022:

(dollars in thousands) Borrowings - Principal Unamortized Deferred Issuance Costs Net Borrowings Outstanding Available Capacity (1)(2)

Maturity Dates Interest Rates (3)

March 31, 2023:

June 30, 2023:

Customer repurchase agreements $ 37,017 $ — $ 37,017 $ — N/A 3.27 %

Short-term borrowings:

FHLB secured borrowings 1,313,801 — 1,313,801 653,946 May 24, 2023 - December 1, 2023 5.06 %

FHLB secured borrowings 536,759 — 536,759 1,287,028 August 24, 2023 - December 1, 2023 5.34 %

BTFP secured borrowings 1,300,000 — 1,300,000 286,464 March 26, 2024 4.53 %

3 unchanged sentences

Long-term borrowings:

Subordinated notes, 5.75% 70,000 ( 175 ) 69,825 — September 1, 2024 5.75 %

Subordinated notes, 5.75 %

70,000 ( 144 ) 69,856 — September 1, 2024 5.75 %

Total borrowings $ 1,943,776 $ ( 144 ) $ 1,943,632 $ 2,182,631

6 unchanged sentences

Long-term borrowings:

Subordinated notes, 5.75% 70,000 ( 206 ) 69,794 — September 1, 2024 5.75 %

Subordinated notes, 5.75 %

70,000 ( 206 ) 69,794 — September 1, 2024 5.75 %

Total borrowings $ 1,080,101 $ ( 206 ) $ 1,079,895 $ 752,509

(1) Available capacity on the Company's short-term borrowing arrangements with the FHLB, the FRB's BTFP program and the Raymond James repurchase line comprise pledged collateral that has not been borrowed against.

At March 31, 2023, the Company had total additional undrawn borrowing capacity of approximately $ 1.7 billion, comprising unencumbered securities available to be pledged of approximately $ 1.1 billion and undrawn financing on pledged assets of $ 709.2 million, including $ 653.9 million with the FHLB, $ 37.2 million with the BTFP and $ 18.1 million with Raymond James.

At June 30, 2023, the Company had total additional undrawn borrowing capacity of approximately $ 2.0 billion, comprising unencumbered securities available to be pledged of approximately $ 428.2 million and undrawn financing on pledged assets of $ 1.6 billion, including $ 1.3 billion with the FHLB, $ 286.5 million with the BTFP and $ 17.6 million with Raymond James.

(2) As part of the Company's agreement governing its participation in the BTFP program and the Raymond James repurchase agreement, the borrowing capacity is determined based on the principal balance of the pledged assets.

16 unchanged sentences

Net Income per Common Share

The calculation of net income per common share for the three months ended March 31, 2023 and 2022 was as follows:

Three Months Ended March 31,

The calculation of net income per common share for the three and six months ended June 30, 2023 and 2022 was as follows:

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

(dollars and shares in thousands, except per share data) 2023 2022 2023 2022

9 unchanged sentences

Other Comprehensive (Loss) Income

The following table presents the components of other comprehensive (loss) income for the three months ended March 31, 2023 and 2022.

The following table presents the components of other comprehensive (loss) income for the three and six months ended June 30, 2023 and 2022.

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

Three Months Ended March 31, 2023

Net unrealized gain (loss) on securities available-for-sale $ 24,039 $ ( 6,103 ) $ 17,936

Reclassification adjustment for net loss (gain) included in net income 21 ( 5 ) 16

Total unrealized gain (loss) on investment securities available-for-sale 24,060 ( 6,108 ) 17,952

Three Months Ended June 30, 2023

Net unrealized loss on securities available-for-sale $ ( 15,959 ) $ 3,885 $ ( 12,074 )

Reclassification adjustment for net gain included in net income ( 2 ) — ( 2 )

Total unrealized loss on investment securities available-for-sale ( 15,961 ) 3,885 ( 12,076 )

Amortization of unrealized loss on securities transferred to held-to-maturity 1,831 ( 428 ) 1,403

Total unrealized loss recognized on investment securities held-to-maturity 1,983 ( 1,342 ) 641

Other comprehensive income (loss) $ 26,043 $ ( 7,450 ) $ 18,593

Three Months Ended March 31, 2022

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

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

Total unrealized (loss) gain on investment securities available-for-sale ( 79,202 ) 20,815 ( 58,387 )

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

Total unrealized (loss) gain recognized on investment securities held-to-maturity ( 66,193 ) 17,098 ( 49,095 )

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

The following table presents the changes in each component of accumulated other comprehensive (loss) income, net of tax, for the three months ended March 31, 2023 and 2022.

Total unrealized gain recognized on investment securities held-to-maturity 1,831 ( 428 ) 1,403

Other comprehensive loss $ ( 14,130 ) $ 3,457 $ ( 10,673 )

Three Months Ended June 30, 2022

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

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

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

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

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

Net unrealized gain on derivatives 284 — 284

Total unrealized gain on derivatives 284 — 284

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

Six Months Ended June 30, 2023

Net unrealized gain on securities available-for-sale $ 8,080 $ ( 2,218 ) $ 5,862

Reclassification adjustment for net loss included in net income 19 ( 5 ) 14

Total unrealized gain on investment securities available-for-sale 8,099 ( 2,223 ) 5,876

Amortization of unrealized loss on securities transferred to held-to-maturity 3,814 ( 1,770 ) 2,044

Total unrealized gain recognized on investment securities held-to-maturity 3,814 ( 1,770 ) 2,044

Other comprehensive income $ 11,913 $ ( 3,993 ) $ 7,920

Six Months Ended June 30, 2022

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

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

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

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

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

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

Net unrealized gain on derivatives 284 — 284

Total unrealized gain on derivatives 284 — 284

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

The following table presents the changes in each component of accumulated other comprehensive income (loss), net of tax, for the three and six months ended June 30, 2023 and 2022.

(dollars in thousands) Securities Available-For-Sale Securities Held-to-Maturity Derivatives Accumulated Other Comprehensive Income (Loss)

Three Months Ended March 31, 2023

Three Months Ended June 30, 2023

Balance at beginning of period $ ( 136,821 ) $ ( 44,093 ) $ — $ ( 180,914 )

Other comprehensive loss before reclassifications ( 12,074 ) — — ( 12,074 )

Amounts reclassified from accumulated other comprehensive income (loss) ( 2 ) — — ( 2 )

Amortization of unrealized loss on securities transferred to held-to-maturity — 1,403 — 1,403

Net other comprehensive (loss) income during period ( 12,076 ) 1,403 — ( 10,673 )

Balance at end of period $ ( 148,897 ) $ ( 42,690 ) $ — $ ( 191,587 )

Three Months Ended June 30, 2022

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

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

Amounts reclassified from accumulated other comprehensive income (loss) 100 — 100

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

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

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

Six Months Ended June 30, 2023

Balance at beginning of period $ ( 154,773 ) $ ( 44,734 ) $ — $ ( 199,507 )

Other comprehensive income before reclassifications 5,862 — — 5,862

Amounts reclassified from accumulated other comprehensive income 16 — — 16

Amounts reclassified from accumulated other comprehensive income (loss) 14 — — 14

Amortization of unrealized loss on securities transferred to held-to-maturity — 2,044 — 2,044

1 unchanged sentence

Balance at end of period $ ( 148,897 ) $ ( 42,690 ) $ — $ ( 191,587 )

Three Months Ended March 31, 2022

Six Months Ended June 30, 2022

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

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

Amounts reclassified from accumulated other comprehensive income 19 — — 19

Net other comprehensive (loss) during period ( 58,387 ) ( 49,095 ) — ( 107,482 )

Other comprehensive (loss) income before reclassifications ( 91,424 ) ( 49,095 ) 284 ( 140,235 )

Amounts reclassified from accumulated other comprehensive income (loss) 117 — — 117

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

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

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

The following tables present the amounts reclassified out of each component of accumulated other comprehensive income (loss) for the three months ended March 31, 2023 and 2022.

Details about Accumulated Other Comprehensive Loss Components Amount Reclassified from Accumulated Other Comprehensive (Loss) Income

Three Months Ended March 31, Affected Line Item in Consolidated Statements of Income

The following tables present the amounts reclassified out of each component of accumulated other comprehensive income (loss) for the three and six months ended June 30, 2023 and 2022.

Details about Accumulated Other Comprehensive Income (Loss) Components Amount Reclassified from Accumulated Other Comprehensive Income (Loss)

Three Months Ended June 30, Affected Line Item in Consolidated Statements of Income

(dollars in thousands) 2023 2022

Realized loss on sale of investment securities $ ( 21 ) $ ( 25 ) Net loss on sale of investment securities

Income tax benefit (expense) 5 6 Income tax expense

Realized gain (loss) on sale of investment securities $ 2 $ ( 151 ) Net gain (loss) on sale of investment securities

Income tax benefit — 51 Income tax expense

Total reclassifications for the periods $ 2 $ ( 100 )

Details about Accumulated Other Comprehensive Income (Loss) Components Amount Reclassified from Accumulated Other Comprehensive Income (Loss)

Six Months Ended June 30, Affected Line Item in Consolidated Statements of Income

(dollars in thousands) 2023 2022

Realized loss on sale of investment securities $ ( 19 ) $ ( 176 ) Net gain (loss) on sale of investment securities

Income tax benefit 5 59 Income tax expense

Total reclassifications for the periods $ ( 14 ) $ ( 117 )

Fair Value Measurements

17 unchanged sentences

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

The tables below present the recorded amount of assets and liabilities measured at fair value on a recurring basis as of March 31, 2023 and December 31, 2022.

The tables below present the recorded amount of assets and liabilities measured at fair value on a recurring basis as of June 30, 2023 and December 31, 2022.

(dollars in thousands) Quoted Prices

2 unchanged sentences

(Level 3) Total Fair Value

March 31, 2023

June 30, 2023

Investment securities available-for-sale:

5 unchanged sentences

Corporate bonds — 1,673 — 1,673

Loans held for sale — 6,488 — 6,488

Interest rate derivatives — 25,844 — 25,844

Mortgage banking derivatives — — 29 29

Total assets measured at fair value on a recurring basis $ — $ 1,614,517 $ 29 $ 1,614,546

Interest rate product — 30,659 — 30,659

Credit risk participation agreements — 3 — 3

Interest rate derivatives — 25,218 — 25,218

Total assets measured at fair value on a recurring basis $ — $ 1,566,251 $ — $ 1,566,251

Interest rate product — $ 32,341 — 32,341

Total liabilities measured at fair value on a recurring basis $ — $ 32,341 $ — $ 32,341

8 unchanged sentences

Loans held for sale — 6,734 — 6,734

Interest rate caps — 31,039 — 31,039

Interest rate product — 31,039 — 31,039

Mortgage banking derivatives — — 93 93

1 unchanged sentence

Credit risk participation agreements $ — $ 2 $ — $ 2

Interest rate derivatives — 30,065 — 30,065

Interest rate product — 30,065 — 30,065

Total liabilities measured at fair value on a recurring basis $ — $ 30,067 $ — $ 30,067

10 unchanged sentences

Securities classified as Level 3 include securities in less liquid markets, for which the carrying amounts approximate the fair value.

The following is a reconciliation of activity for assets measured at fair value based on Significant Other Unobservable Inputs (Level 3):

(dollars in thousands) Investment Securities Available-for-Sale Total

Beginning balance at January 1, 2022

$ 10,000 $ 10,000

Realized loss included in earnings — —

Reclassified to investment securities held-to-maturity ( 10,000 ) ( 10,000 )

Ending balance at December 31, 2022 $ — $ —

Loans held for sale :

The Company has elected to carry loans held for sale at fair value.

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

The Company previously carried loans held for sale at fair value.

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

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

1 unchanged sentence

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

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

The following tables summarize the difference between the aggregate fair value and the aggregate unpaid principal balance for loans held for sale measured at fair value as of March 31, 2023 and December 31, 2022.

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

The following tables summarize the difference between the aggregate fair value and the aggregate unpaid principal balance for loans held for sale measured at fair value as of June 30, 2023 and December 31, 2022.

(dollars in thousands) Fair Value Aggregate Unpaid Principal Balance Difference

March 31, 2023

June 30, 2023

Loans held for sale $ — $ — $ —

1 unchanged sentence

Loans held for sale $ 6,734 $ 6,775 $ ( 41 )

There were no residential mortgage loans held for sale that were 90 or more days past due or on nonaccrual status as of March 31, 2023 or December 31, 2022.

There were no residential mortgage loans held for sale that were 90 or more days past due or on nonaccrual status as of June 30, 2023 or December 31, 2022.

Credit risk participation agreements :

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The Company commenced the cessation of first lien residential mortgage origination for secondary sale during the three months ended March 31, 2023.

The Company expects to complete residual origination and sales activities as of the end of the third quarter of 2023.

While the Company had mortgage banking derivatives in 2023 and 2022, the Company does not expect to have any of these derivatives by the end of the third quarter 2023.

The Company relied on a third-party pricing service to value its mortgage banking derivative financial assets and liabilities, which the Company classifies as a Level 3 valuation.

The external valuation model to estimate the fair value of its interest rate lock commitments to originate residential mortgage loans held for sale requires grouping the interest rate lock commitments by interest rate and terms, applying an estimated pull-through rate based on historical experience, and then multiplying by quoted investor prices determined to be reasonably applicable to the loan commitment groups based on interest rate, terms, and rate lock expiration dates of the loan commitment groups.

The Company also relies on an external valuation model to estimate the fair value of its forward commitments to sell residential mortgage loans (i.e.

an estimate of what the Company would receive or pay to terminate the forward delivery contract based on market prices for similar financial instruments), which includes matching specific terms and maturities of the forward commitments against applicable investor pricing.

Mortgage banking derivative for loans settled best efforts basis :

The significant unobservable input (Level 3) used in the fair value measurement of the Company's interest rate lock commitments is the pull through ratio, which represents the percentage of loans currently in a lock position which management estimates will ultimately close.

An increase in the pull through ratio (i.e.

higher percentage of loans are estimated to close) will increase the gain or loss.

The pull through ratio is largely dependent on the loan processing stage that a loan is currently in.

The pull through rate is computed by the Company's secondary marketing consultant using historical data and the ratio is periodically reviewed by the Company for reasonableness.

The following is a reconciliation of activity for assets measured at fair value based on Significant Other Unobservable Inputs (Level 3):

(dollars in thousands) Investment Securities Available-for-Sale Mortgage Banking Derivatives Total

Beginning balance at January 1, 2023

$ — $ 93 $ 93

Realized loss included in earnings — ( 64 ) ( 64 )

Ending balance at March 31, 2023 $ — $ 29 $ 29

(dollars in thousands) Investment Securities Available-for-Sale Mortgage Banking Derivatives Total

Beginning balance at January 1, 2022

$ 10,000 $ 636 $ 10,636

Realized loss included in earnings — ( 543 ) ( 543 )

Reclassified to investment securities held-to-maturity ( 10,000 ) — ( 10,000 )

Ending balance at December 31, 2022 $ — $ 93 $ 93

For Level 3 assets measured at fair value on a recurring or nonrecurring basis as of March 31, 2023 and December 31, 2022, the significant unobservable inputs used in the fair value measurements were as follows:

March 31, 2023

December 31, 2022

(dollars in thousands) Valuation Technique Description Range Weighted Average (1)

Fair Value Weighted Average (1)

Range Fair Value

Mortgage banking derivatives Pricing Model Pull Through Rate 61.3 % - 100.0 %

64.90 % $ 29 83.80 % 83.8 % - 100 %

(1) Unobservable inputs for mortgage banking derivatives were weighted by loan amount.

The Company completed origination and sales activities as of the end of the second quarter of 2023.

While the Company had mortgage banking derivatives in 2023 and 2022, the Company does not have any of these derivatives as of June 30, 2023.

Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis

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

At March 31, 2023, substantially all of the Company's individually evaluated loans were evaluated based upon the fair value of the collateral.

At June 30, 2023, substantially all of the Company's individually evaluated loans were evaluated based upon the fair value of the collateral.

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

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(Level 3) Total Fair Value

March 31, 2023

June 30, 2023

Individually assessed loans:

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Real estate mortgage - residential — — 1,638 1,638

Construction - commercial and residential — — 396 396

Consumer — — 396 396

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

Total assets measured at fair value on a nonrecurring basis as of March 31, 2023 $ — $ — $ 27,545 $ 27,545

Total assets measured at fair value on a nonrecurring basis as of June 30, 2023 $ — $ — $ 48,195 $ 48,195

December 31, 2022

4 unchanged sentences

Real estate mortgage - residential — — 1,404 1,404

Construction - commercial and residential — — 3 3

Consumer — — 3 3

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

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

The estimated fair value of the Company's financial instruments at March 31, 2023 and December 31, 2022 are as follows:

The estimated fair value of the Company's financial instruments at June 30, 2023 and December 31, 2022 are as follows:

Fair Value Measurements

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(Level 2) Significant Other Unobservable Inputs

March 31, 2023

June 30, 2023

Cash and due from banks $ 9,865 $ 9,865 $ 9,865 $ — $ —

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Federal Reserve and Federal Home Loan Bank stock 46,199 N/A — — —

Loans held for sale 6,488 6,488 — 6,488 —

Loans 7,766,719 7,480,027 — — 7,480,027

Annuity investment 13,454 13,454 — 13,454 —

Bank owned life insurance 111,565 111,565 — 111,565 —

1 unchanged sentence

Mortgage banking derivatives — — — — —

Interest rate caps 25,844 25,844 — 25,844 —

Interest rate product 30,659 30,659 — 30,659 —

Credit risk participation agreement 3 3 — 3 —

Accrued interest receivable 37,896 37,896 37,896 — —

Noninterest bearing deposits $ 2,010,353 $ 2,010,353 $ — $ 2,010,353 $ —

3 unchanged sentences

Borrowings 1,906,615 1,904,242 — 1,904,242 —

Credit risk participation agreement 3 3 — 3 —

Interest rate caps 25,218 25,218 — 25,218 —

Interest rate product 32,341 32,341 — 32,341 —

Accrued interest payable 25,911 25,911 25,911 — —

December 31, 2022

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Mortgage banking derivatives 93 93 — — 93

Interest rate caps 31,039 31,039 — 31,039 —

Interest rate product 31,039 31,039 — 31,039 —

Accrued interest receivable 36,605 36,605 36,605 — —

Noninterest bearing deposits $ 3,150,751 $ 3,150,751 $ — $ 3,150,751 $ —

3 unchanged sentences

Borrowings 1,044,795 1,043,083 — 1,043,083 —

Interest rate swap derivatives — — — — —

Credit risk participation agreements 2 2 — 2 —

Interest rate caps 30,065 30,065 — 30,065 —

Interest rate product 30,065 30,065 — 30,065 —

Accrued interest payable 25,911 25,911 25,911 — —

Note 12 - Legal Contingencies

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Such matters may result in legal expenses that could adversely impact the financial condition and results of operations of the Company.

The Company had no contingent liabilities outstanding in connection with pending legal matters at March 31, 2023 and December 31, 2022.

The Company had no contingent liabilities outstanding in connection with pending legal matters at June 30, 2023 and December 31, 2022.

As previously disclosed, the Company maintains director and officer insurance policies ("D&O Insurance Policies") that provide coverage for the legal defense costs.

5 unchanged sentences

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

What changed 10-Q

Item 1. Financial Statements