What changed in this filing

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Item 1. Financial Statements

2023-11-08 compared with 2023-08-09 · 195 added, 183 removed, 1182 unchanged (24% of the section changed)

3 unchanged sentences

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

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

Cash and due from banks $ 8,625 $ 12,655

43 unchanged sentences

(dollars in thousands, except per share data)

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

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

2023 2022 2023 2022

12 unchanged sentences

Net Interest Income 70,719 83,897 217,554 247,267

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

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

Provision for Credit Losses 5,644 3,022 17,046 730

(Reversal of) Provision for Credit Losses for Unfunded Commitments ( 839 ) 774 327 1,316

Net Interest Income After (Reversal of) Provision for Credit Losses 65,914 80,101 200,181 245,221

Noninterest Income

Service charges on deposits 1,631 1,339 4,767 3,970

Gain on sale of loans 95 855 400 2,347

(Loss) gain on sale of loans ( 5 ) 821 395 3,168

Net gain (loss) on sale of investment securities 5 4 ( 14 ) ( 172 )

9 unchanged sentences

FDIC insurance 3,342 1,287 7,409 3,251

Amortization of intangible assets 7 44 14 65

Other expenses 3,523 3,148 11,467 34,126

10 unchanged sentences

(dollars in thousands)

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

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

2023 2022 2023 2022

19 unchanged sentences

Shares Amount

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

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

Net Income — — — 27,383 — 27,383

7 unchanged sentences

Common stock repurchased — — 2 — — 2

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

Balance September 30, 2023 29,917,982 $ 296 $ 372,394 $ 1,054,699 $ ( 211,505 ) $ 1,215,884

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

Net Income — — — 37,297 — 37,297

7 unchanged sentences

— — — ( 14,438 ) — ( 14,438 )

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

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

See Notes to Consolidated Financial Statements.

16 unchanged sentences

Common stock repurchased ( 1,600,000 ) ( 15 ) ( 48,020 ) — — ( 48,035 )

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

Balance September 30, 2023 29,917,982 $ 296 $ 372,394 $ 1,054,699 $ ( 211,505 ) $ 1,215,884

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

9 unchanged sentences

— — — ( 41,586 ) — ( 41,586 )

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

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

See Notes to Consolidated Financial Statements.

2 unchanged sentences

(dollars in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Cash Flows From Operating Activities:

1 unchanged sentence

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

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

Provision for credit losses 17,046 730

Provision for credit losses for unfunded commitments 327 1,316

9 unchanged sentences

Stock-based compensation expense 7,653 7,587

Net tax expense from stock-based compensation — 1,615

Increase in other assets ( 29,589 ) ( 19,055 )

10 unchanged sentences

Proceeds from call 2,906 19,944

Purchase of Federal Reserve stock ( 158 ) ( 149 )

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

Proceeds from (purchase of) sale of Federal Reserve stock 39,378 ( 8,158 )

Net increase in loans ( 287,673 ) ( 239,089 )

5 unchanged sentences

Decrease in deposits ( 336,876 ) ( 1,218,190 )

Increase in customer repurchase agreements 1,917 2,621

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

Decrease in customer repurchase agreements ( 9,411 ) ( 2,453 )

Proceeds from short-term borrowings 325,000 215,000

Proceeds from employee stock purchase plan 459 558

1 unchanged sentence

Common stock repurchased ( 48,035 ) —

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

Cash dividends paid ( 40,825 ) ( 41,586 )

7 unchanged sentences

(dollars in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Supplemental Cash Flows Information:

3 unchanged sentences

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

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

See Notes to Consolidated Financial Statements.

21 unchanged sentences

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.

During the nine months ended September 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.

152 unchanged sentences

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

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

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

(dollars in thousands) 2023 2022 2023 2022

Provision for (reversal of) credit losses - loans $ 5,250 $ 486 $ 10,158 $ ( 2,515 )

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

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

Provision for credit losses - loans $ 5,643 $ 3,046 $ 15,802 $ 532

Provision for (reversal of) credit losses - HTM debt securities 1 ( 24 ) 1,244 800

Reversal of credit losses - AFS debt securities — — — ( 602 )

Total $ 5,644 $ 3,022 $ 17,046 $ 730

11 unchanged sentences

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.

In the second quarter of 2023, Management determined that a triggering event had occurred as a result of a sustained decrease in the Company's stock price and as a result of 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.

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.

Management has evaluated and will continue to evaluate economic conditions in interim periods for triggering events.

New Authoritative Accounting Guidance

6 unchanged sentences

Cash and Due from Banks

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.

For the nine months ended September 30, 2023 and 2022, the Bank maintained an average daily balance at the Federal Reserve Bank of $ 892.8 million and $ 1.4 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

June 30, 2023

September 30, 2023

Investment securities available-for-sale:

7 unchanged sentences

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

June 30, 2023

September 30, 2023

Investment securities held-to-maturity:

26 unchanged sentences

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

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.

In addition, at September 30, 2023 and December 31, 2022 the Company held $ 25.7 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 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.

The related unrealized loss of $ 66.2 million was included in other comprehensive loss at the time of transfer and, as of September 30, 2023, $ 53.5 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 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.

Accrued interest receivable on available-for-sale securities totaled $ 4.0 million and $ 4.3 million at September 30, 2023 and December 31, 2022, respectively, and accrued interest receivable on held-to-maturity securities totaled $ 3.6 million and $ 3.5 million at September 30, 2023 and December 31, 2022, respectively.

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

June 30, 2023

September 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

June 30, 2023

September 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 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.

Unrealized losses at September 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.

During the nine months ended September 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 during the nine months ended September 30, 2023.

At September 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 4.59 years.

1 unchanged sentence

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 June 30, 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 September 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.

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

Amortized Estimated Amortized Estimated

2 unchanged sentences

Investment securities available-for-sale

Treasury bonds (after one year through five years)

49,868 47,050 49,793 46,327

agency securities maturing:

14 unchanged sentences

After five years through ten years — — — —

Treasury 49,843 46,629 49,793 46,327

Allowance for credit losses — ( 17 ) — ( 17 )

1 unchanged sentence

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 685,648 576,058 741,057 652,667

13 unchanged sentences

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

For the three and six months ended June 30, 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.

For the three and nine months ended September 30, 2023, gross realized gains on sales and calls of investments securities were $ 5 thousand and $ 126 thousand, respectively, as compared to $ 4 thousand and $ 16 thousand for the three and nine months ended September 30, 2022.

For the nine months ended September 30, 2023, gross realized losses on sales of investments securities were $ 140 thousand as compared to $ 187 thousand for the three and nine months ended September 30, 2022, respectively.

There were no realized losses incurred during the three months ended September 30, 2023 and 2022.

Gross sales and call proceeds were $ 2.6 million and $ 11.2 million for the three and nine months ended September 30, 2023, respectively, and $ 6.2 million and $ 26.2 million for the three and nine months ended September 30, 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 September 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 September 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 deferred fees, at June 30, 2023 and December 31, 2022 are summarized by portfolio segment as follows:

June 30, 2023 December 31, 2022

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

September 30, 2023 December 31, 2022

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

12 unchanged sentences

$ 7,833,059 $ 7,561,188

(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.

(1) Excludes accrued interest receivable of $ 45.4 million and $ 43.5 million at September 30, 2023 and December 31, 2022, respectively, which were recorded in other assets on the Consolidated Balance Sheets.

Unamortized net deferred fees and costs amounted to $ 27.4 million and $ 29.2 million at September 30, 2023 and December 31, 2022, respectively.

As of September 30, 2023 and December 31, 2022, the Bank serviced $ 315.9 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.

8 unchanged sentences

Residential land acquisition, development and construction loans generally are underwritten with a maximum term of 36 months, including extensions approved at origination.

Commercial land acquisition and construction loans are secured by real property where loan funds will be used to acquire land and to construct or improve appropriately zoned real property for the creation of income producing or owner user commercial properties.

Borrowers are generally required to put equity into each project at levels determined by the appropriate approval authority.

1 unchanged sentence

Substantially all construction draw requests must be presented in writing on American Institute of Architects documents and certified either by the contractor, the borrower and/or the borrower's architect.

Each draw request shall also include the borrower's soft cost breakdown certified by the borrower or their Chief Financial Officer.

Each draw request shall also include the borrower's soft cost breakdown certified by the borrower or their agent.

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

6 unchanged sentences

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

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

ADC loans amounted to $ 1.5 billion at September 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 49.0 % of the outstanding ADC loan portfolio at June 30, 2023.

ADC loans that provide for the use of interest reserves represent approximately 52.4 % of the outstanding ADC loan portfolio at September 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:

12 unchanged sentences

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

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

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

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

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

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

Three Months Ended June 30, 2023

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

Three Months Ended September 30, 2023

Allowance for credit losses:

5 unchanged sentences

Ending balance $ 16,337 $ 40,693 $ 14,252 $ 864 $ 8,633 $ 1,894 $ 634 $ 25 $ 83,332

Six Months Ended June 30, 2023

Nine Months Ended September 30, 2023

Allowance for credit losses:

5 unchanged sentences

Ending balance $ 16,337 $ 40,693 $ 14,252 $ 864 $ 8,633 $ 1,894 $ 634 $ 25 $ 83,332

Three Months Ended June 30, 2022

Three Months Ended September 30, 2022

Allowance for credit losses:

5 unchanged sentences

Ending balance $ 15,873 $ 36,327 $ 12,581 $ 810 $ 7,229 $ 2,285 $ 624 $ 38 $ 75,767

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

Allowance for credit losses:

5 unchanged sentences

Ending balance $ 15,873 $ 36,327 $ 12,581 $ 810 $ 7,229 $ 2,285 $ 624 $ 38 $ 75,767

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

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

September 30, 2023 December 31, 2022

Business/Other Business/Other

5 unchanged sentences

Construction - commercial and residential — 39,695 — —

Home equity — 245 — —

Other consumer — — 50 —

26 unchanged sentences

to Term Total

June 30, 2023

September 30, 2023

Pass $ 179,327 $ 50,533 $ 48,437 $ 217,772 $ 159,417 $ 82,375 $ 665,282 $ 5,209 $ 1,408,352

34 unchanged sentences

Total recorded investment

$ 2,424,076 $ 661,357 $ 569,241 $ 1,224,060 $ 1,324,129 $ 597,839 $ 1,084,566 $ 31,123 $ 7,916,391

Total YTD gross charge-offs $ ( 6,377 ) $ — $ — $ — $ — $ — $ — $ ( 943 ) $ ( 7,320 )

28 unchanged sentences

Pass 14,816 8,160 11,810 33,854 653 34,679 6,507 — 110,479

Total 14,816 8,160 11,810 33,854 653 34,679 6,507 — 110,479

Pass 1,747 — — 98 551 — 48,378 906 51,680

13 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 on an amortized cost basis as of June 30, 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 September 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

June 30, 2023

September 30, 2023

Commercial $ 55 $ — $ — $ 55 $ 1,416,184 $ 2,521 $ 1,418,760

1 unchanged sentence

Income producing - commercial real estate 25,769 — — 25,769 4,096,543 24,989 4,147,301

— 662 — 662 4,060,741 24,646 4,086,049

Owner occupied - commercial real estate 404 19,125 — 19,529 1,162,672 758 1,182,959

16 unchanged sentences

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

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

The following presents the nonaccrual loans on an amortized cost basis as of September 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

June 30, 2023

September 30, 2023

Commercial $ 366 $ 2,155 $ 2,521

3 unchanged sentences

Construction - commercial and residential 39,170 525 39,695

Home equity 245 — 245

$ 63,775 $ 6,383 $ 70,158

6 unchanged sentences

$ 118 $ 6,350 $ 6,468

(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.

(1) Gross coupon interest income of approximately $ 4.1 million and $ 410 thousand would have been recorded for the nine months ended September 30, 2023 and 2022, respectively, if nonaccrual loans shown above had been current and in accordance with their original terms, while $ 1.1 million and $ 5 thousand of coupon interest income was actually recorded on such loans for the nine months ended September 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 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)

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

September 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 (2)

Three months ended June 30, 2023:

Three months ended September 30, 2023

Commercial $ 29,898 $ — $ — $ 29,898 2.1 % 4 months — %

1 unchanged sentence

Owner occupied - commercial real estate — 19,125 — 19,125 1.6 % 3 months — %

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

Total $ 37,088 $ 74,774 $ 113,833 $ 225,695

Six months ended June 30, 2023:

Nine months ended September 30, 2023

Commercial $ 36,969 $ — $ — $ 36,969 2.6 % 7 months — %

4 unchanged sentences

Total $ 51,252 $ 76,933 $ 113,833 $ 242,018

(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.

(1) For loans that received multiple modifications during the nine months ended September 30, 2023, weighted average term and principal payment extensions were calculated based on the aggregated impact of the extensions received during the period.

(2) The weighted average is calculated based on the total amortized cost at September 30, 2023 of loans that received interest rate reduction modifications during the three and nine months ended September 30, 2023.

(3) 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

In October 2023, the loan was sold.

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

September 30, 2023

Payment Status (Amortized Cost Basis)

(dollars in thousands) Current Nonaccrual

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

Commercial $ 36,969 $ — $ —

3 unchanged sentences

Total $ 174,523 $ 44,894 $ 22,601

The Company monitors loan payments on performing and nonperforming loans on an on-going basis to determine if a loan is considered to have a payment default.

To determine the existence of a payment default, the Company analyzes the economic conditions that exist for each borrower and their ability to generate positive cash flow during a given loan's term.

The following table presents the amortized cost basis of loans that had a payment default during the nine months ended September 30, 2023 and were modified in the twelve months prior to that default to borrowers experiencing financial difficulty:

September 30, 2023

Amortized Cost Basis

(dollars in thousands) Combination - Term Extension and Principal Payment Delay Combination - Term Extension, Principal Payment Delay and Interest Rate Reduction

Income producing - commercial real estate $ — $ 46,211

Owner occupied - commercial real estate 19,125 —

Total $ 19,125 $ 46,211

The Company individually evaluates nonaccrual loans when performing its CECL estimate to calculate the ACL.

Additionally, the Company utilizes historical internal and third-party service provider sourced loss data in the determination of its PD/LGD rates applied in the calculation of its CECL estimate.

Upon determination that a modified loan (or a portion of a loan) has subsequently been deemed uncollectible, the loan (or a portion of the loan) is charged off.

Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the ACL is adjusted by the same amount.

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 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.

As of September 30, 2023 and December 31, 2022, the Company had $ 20.2 million and $ 24.5 million of operating lease ROU assets, respectively, and $ 24.4 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 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.

As of September 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 nine months ended September 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 Six Months Ended

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

Three Months Ended Nine Months Ended

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

Operating lease cost (cost resulting from lease payments) $ 1,604 $ 1,757 $ 4,987 $ 5,418

3 unchanged sentences

Operating lease - operating cash flows (fixed payments) $ 1,760 $ 1,809 $ 5,433 $ 5,551

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

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

Operating lease right-of-use assets $ 20,151 $ 24,544

2 unchanged sentences

Weighted average discount rate - operating leases 2.79 % 2.91 %

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

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

(dollars in thousands)

Twelve months ended:

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

September 30, 2024 $ 1,765

September 30, 2025 6,880

September 30, 2026 5,987

September 30, 2027 2,894

September 30, 2028 2,502

Thereafter 5,776

23 unchanged sentences

Mortgage Banking Derivatives

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

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

The Company commenced the cessation of first lien residential mortgage origination for secondary sale in the first quarter of 2023.

The Company completed the residual origination and sales activities in the second quarter of 2023.

As of September 30, 2023, the Company had no outstanding mortgage banking derivatives.

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.

4 unchanged sentences

The market value of interest rate lock commitments and best efforts contracts are not readily ascertainable with precision because they are not actively traded in stand-alone markets.

The Bank determines the fair value of interest rate lock commitments and delivery contracts by measuring the fair value of the underlying asset, which is impacted by current interest rates, taking into consideration the probability that the interest rate lock commitments will close or will be funded.

Certain additional risks arise from these forward delivery contracts in that the counterparties to the contracts may not be able to meet the terms of the contracts.

The Bank does not expect any counterparty to any MBS to fail to meet its obligation.

Additional risks inherent in mandatory delivery programs include the risk that, if the Bank does not close the loans subject to interest rate risk lock commitments, it will still be obligated to deliver MBS to the counterparty under the forward sales agreement.

Should this be required, the Bank could incur significant costs in acquiring replacement loans or MBS and such costs could have an adverse effect on mortgage banking operations.

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.

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 Bank determined the fair value of interest rate lock commitments and delivery contracts by measuring the fair value of the underlying asset, which is impacted by current interest rates, taking into consideration the probability that the interest rate lock commitments will close or will be funded.

Certain additional risks arose from these forward delivery contracts in that the counterparties to the contracts may not be able to meet the terms of the contracts.

The Bank did not expect any counterparty to any MBS to fail to meet its obligation.

Additional risks inherent in mandatory delivery programs include the risk that, if the Bank did not close the loans subject to interest rate risk lock commitments, it would still be obligated to deliver MBS to the counterparty under the forward sales agreement.

Should this have been required, the Bank could have incurred significant costs in acquiring replacement loans or MBS and such costs could have an adverse effect on mortgage banking operations.

The fair value of the mortgage banking derivatives was 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 September 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 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

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

September 30, 2023 December 31, 2022

(dollars in thousands) Notional

11 unchanged sentences

Total $ 654,757 $ 41,637 $ 421,926 $ 30,067

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 table below presents the effect of the Company's derivative financial instruments on the consolidated statements of income for the three and nine months ended September 30, 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 June 30, Six Months Ended June 30,

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

(dollars in thousands) 2023 2022 2023 2022

1 unchanged sentence

Mortgage banking derivatives Gain on sale of loans — ( 90 ) — ( 619 )

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

Total $ 3,027 $ 747 $ 3,735 $ 1,680

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

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

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

Noninterest-bearing demand

$ 2,072,665 $ 3,150,751

Interest-bearing transaction

932,779 1,138,235

Savings and money market 3,129,773 3,640,697

1 unchanged sentence

Total $ 8,376,306 $ 8,713,182

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

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

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

2023 $ 348,469 $ 463,393

6 unchanged sentences

Total $ 2,241,089 $ 783,499

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

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

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

Three months or less $ 202,819 $ 87,959

3 unchanged sentences

Total $ 1,668,816 $ 517,782

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 September 30, 2023, total brokered deposits (excluding the CDARS and ICS two-way) were $ 2.4 billion, or 29.1 % 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 June 30, 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)

June 30, 2023:

September 30, 2023:

Customer repurchase agreements $ 25,689 $ — $ 25,689 $ — N/A 3.43 %

Short-term borrowings:

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

FHLB secured borrowings — — — 1,736,759 N/A N/A

BTFP secured borrowings 1,300,001 — 1,300,001 253,133 March 26, 2024 4.53 %

17 unchanged sentences

(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 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.

At September 30, 2023, the Company had total additional undrawn borrowing capacity of approximately $ 2.3 billion, comprising unencumbered securities available to be pledged of approximately $ 269.9 million and undrawn financing on pledged assets of $ 2.0 billion, including $ 1.7 billion with the FHLB, $ 253.1 million with the BTFP and $ 17.2 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 and six months ended June 30, 2023 and 2022 was as follows:

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

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

Three Months Ended September 30, Nine Months Ended September 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 and six months ended June 30, 2023 and 2022.

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

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

Three Months Ended June 30, 2023

Three Months Ended September 30, 2023

Net unrealized loss on securities available-for-sale $ ( 28,150 ) $ 6,836 $ ( 21,314 )

2 unchanged sentences

Amortization of unrealized loss on securities transferred to held-to-maturity 1,824 ( 424 ) 1,400

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

Other comprehensive loss $ ( 26,331 ) $ 6,413 $ ( 19,918 )

Three Months Ended June 30, 2022

Three Months Ended September 30, 2022

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

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

Reclassification adjustment for net gain included in net income

( 4 ) 1 ( 3 )

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

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

Total unrealized gain 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 $ ( 79,006 ) $ 20,736 $ ( 58,270 )

Six Months Ended June 30, 2023

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

Nine Months Ended September 30, 2023

Net unrealized loss on securities available-for-sale

$ ( 20,070 ) $ 4,618 $ ( 15,452 )

Reclassification adjustment for net loss included in net income 14 ( 4 ) 10

1 unchanged sentence

Amortization of unrealized loss on securities transferred to held-to-maturity 5,638 ( 2,194 ) 3,444

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

Other comprehensive loss

$ ( 14,418 ) $ 2,420 $ ( 11,998 )

Nine Months Ended September 30, 2022

Net unrealized loss on securities available-for-sale

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

$ ( 205,329 ) $ 53,876 $ ( 151,453 )

Reclassification adjustment for net loss included in net income

172 ( 58 ) 114

Total unrealized loss on investment securities available-for-sale

( 205,157 ) 53,818 ( 151,339 )

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

2 unchanged sentences

Net unrealized gain on derivatives 284 — 284

Total unrealized gain on derivatives 284 — 284

Other comprehensive loss

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.

$ ( 265,995 ) $ 69,598 $ ( 196,397 )

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

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

Three Months Ended June 30, 2023

Three Months Ended September 30, 2023

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

4 unchanged sentences

Balance at end of period $ ( 170,215 ) $ ( 41,290 ) $ — $ ( 211,505 )

Three Months Ended June 30, 2022

Three Months Ended September 30, 2022

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

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

Other comprehensive loss before reclassifications

( 60,029 ) — — ( 60,029 )

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

2 unchanged sentences

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

Six Months Ended June 30, 2023

Nine Months Ended September 30, 2023

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

2 unchanged sentences

Amortization of unrealized loss on securities transferred to held-to-maturity — 3,444 — 3,444

Net other comprehensive income during period 5,876 2,044 — 7,920

Net other comprehensive (loss) income during period

( 15,442 ) 3,444 — ( 11,998 )

Balance at end of period $ ( 170,215 ) $ ( 41,290 ) $ — $ ( 211,505 )

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

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

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

Other comprehensive loss before reclassifications

( 151,453 ) ( 49,095 ) 284 ( 200,264 )

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

2 unchanged sentences

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

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.

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

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

(dollars in thousands) 2023 2022

Realized gain (loss) on sale of investment securities $ 5 $ 4 Net gain (loss) on sale of investment securities

Income tax benefit — 51 Income tax expense

Income tax benefit (expense)

( 1 ) ( 1 ) Income tax expense

Total reclassifications for the periods $ 4 $ 3

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

Nine Months Ended September 30, Affected Line Item in Consolidated Statements of Income

(dollars in thousands) 2023 2022

Realized loss on sale of investment securities $ ( 14 ) $ ( 172 ) Net gain (loss) on sale of investment securities

Income tax benefit 5 59 Income tax expense

Income tax benefit (expense)

4 58 Income tax expense

Total reclassifications for the periods $ ( 10 ) $ ( 114 )

18 unchanged sentences

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

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

(dollars in thousands) Quoted Prices

2 unchanged sentences

(Level 3) Total Fair Value

June 30, 2023

September 30, 2023

Investment securities available-for-sale:

30 unchanged sentences

Level 1 securities include certain U.S.

treasury, U.S.

treasury bonds, U.S.

Government and agency securities that actively traded in over-the-counter markets.

4 unchanged sentences

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

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

Beginning balance at January 1, 2022

$ 10,000 $ 10,000

Realized loss included in earnings — —

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

7 unchanged sentences

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.

The following table summarizes the difference between the aggregate fair value and the aggregate unpaid principal balance for loans held for sale measured at fair value as of December 31, 2022:

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

June 30, 2023

Loans held for sale $ — $ — $ —

December 31, 2022

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 June 30, 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 December 31, 2022.

While the Company had loans held for sale outstanding in 2023, the Company does not have any loans held for sale as of September 30, 2023.

Credit risk participation agreements :

9 unchanged sentences

Mortgage banking derivatives for loans settled on a mandatory basis:

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

The Company commenced the cessation of first lien residential mortgage origination for secondary sale in the first quarter of 2023.

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.

While the Company had mortgage banking derivatives in 2023 and 2022, the Company does not have any of these derivatives as of September 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 June 30, 2023, substantially all of the Company's individually evaluated loans were evaluated based upon the fair value of the collateral.

At September 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.

10 unchanged sentences

(Level 3) Total Fair Value

June 30, 2023

September 30, 2023

Individually assessed loans:

3 unchanged sentences

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

Consumer — — 396 396

Construction - commercial and residential

— — 39,896 39,896

Home equity — — 245 245

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

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

Total assets measured at fair value on a nonrecurring basis as of September 30, 2023 $ — $ — $ 89,516 $ 89,516

December 31, 2022

15 unchanged sentences

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

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

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

Fair Value Measurements

2 unchanged sentences

(Level 2) Significant Other Unobservable Inputs

June 30, 2023

September 30, 2023

Cash and due from banks $ 8,625 $ 8,625 $ 8,625 $ — $ —

5 unchanged sentences

Loans 7,916,391 7,635,283 — — 7,635,283

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

Bank owned life insurance 112,234 112,234 — 112,234 —

Annuity investment 13,088 13,088 — 13,088 —

Mortgage banking derivatives — — — — —

Interest rate product 41,787 41,787 — 41,787 —

27 unchanged sentences

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

Interest rate swap derivatives — — — — —

Credit risk participation agreements 2 2 — 2 —

5 unchanged sentences

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 June 30, 2023 and December 31, 2022.

The Company had no contingent liabilities outstanding in connection with pending legal matters at September 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.

2 unchanged sentences

The D&O Insurance Policies for the period from December 2016 to December 2017 have been exhausted.

The Company will therefore be responsible for paying any future costs related to matters from that period, including matters that are not currently pending.

The Company will therefore be responsible for paying future costs related to matters from that period, if any, including matters that are not currently pending.

The Company cannot predict with any certainty the amount of defense costs that the Company may incur in the future in connection with any potential future investigations and legal proceedings, as they are dependent on various factors, many of which are outside of the Company's control.

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