What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-02-29 compared with 2023-03-01 · 810 added, 736 removed, 1435 unchanged (52% of the section changed)

5 unchanged sentences

We have audited the accompanying consolidated balance sheets of Eagle Bancorp, Inc.

(the "Company") as of December 31, 2022 and 2021 and the related consolidated statements of income, comprehensive income, changes in shareholders’ equity and cash flow for each of the years in the two-year period ended December 31, 2022 and the related notes (collectively referred to as the "financial statements").

(the "Company") as of December 31, 2023 and 2022, the related consolidated statements of income, comprehensive income (loss), changes in shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2023, and the related notes (collectively referred to as the "financial statements").

We also have audited the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework:

(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021 and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2022 in conformity with accounting principles generally accepted in the United States of America.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2023 in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework:

20 unchanged sentences

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Allowance and Provision for Credit Losses on Loans

8 unchanged sentences

The ACL estimation process for loans applies economic forecast scenarios over a reasonable and supportable period of 18 months and reverts back to a historical loss rate over twelve months on a straight-line basis over the loan's remaining maturity.

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

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

We determined that auditing the allowance for credit losses on loans was a critical audit matter because of the extent of auditor judgment applied and significant audit effort to evaluate the significant subjective and complex judgments made by management throughout the application processes, including the need to involve our valuation services specialists.

4 unchanged sentences

Our audit procedures to address the critical audit matter included:

Testing the effectiveness of internal controls over:

Testing of internal controls over:

• The Company’s significant model assumptions and judgments, reasonable and supportable forecasts, and information systems.

7 unchanged sentences

• Evaluating the mathematical accuracy of the PD and LGD rates on a pooled loan level with the assistance of valuation specialists, including the completeness and accuracy of loan data used in the model.

Goodwill Impairment Analysis

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

As described in Note 7 to the consolidated financial statements, the Company’s consolidated goodwill balance was $104,168,000 as of December 31, 2023, which is allocated to the Company's single reporting unit.

Goodwill is tested for impairment at least annually or on an interim basis if an event triggering an impairment assessment is determined to have occurred.

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.

The Company performed a second qualitative assessment and quantitative impairment test on its only reporting unit as of December 31, 2023, which resulted in a determination of no impairment.

The quantitative goodwill impairment tests performed on the interim and annual basis involved a high degree of management judgment and the use of subjective assumptions in the determination of the fair value of a reporting unit.

The Company used a combination of a risk-weighted income valuation methodology, comprising a discounted cash flow analysis, and a market valuation methodology, to determine the fair value of the reporting unit.

The discounted cash flow analysis included the use of assumptions such as multi-year cash projections that rely on internal forecasts and discount rate.

The market approach considers a combination of price to tangible book value and price to earnings, adjusted based on peer data for companies similar to the reporting unit.

We determined that auditing the interim and annual quantitative goodwill impairment tests was a critical audit matter because of the extent of auditor judgment applied and audit effort to evaluate the significant judgment and assumptions made by management in the determination of the fair value of the reporting unit, including the need to use the firm valuation specialists.

The principal considerations resulting in our determination included the significant auditor judgment and audit effort in evaluating the following:

• The reasonableness of assumptions utilized in the discounted cash flow analysis including the discount rate and multi-year cash projections.

• The reasonableness of assumptions utilized in the market approach including the selected peer data, and price to tangible book value and price to earnings assumptions.

Our audit procedures to address the critical audit matter included:

Testing of internal controls over:

• Management’s review for completeness and accuracy of internal data, and evaluation of the relevance and reliability of external data used in the quantitative goodwill impairment tests.

• Management’s evaluation of the reasonableness of the valuation methodologies, and significant assumptions used in the discounted cash flow analysis including the discount rate and multi-year cash projections.

• Management’s selection and review of selected peer market data, and price to tangible book value and price to earnings assumptions.

Substantively testing management’s estimate, which included:

• Testing the completeness and accuracy of key financial internal data, and evaluation of the relevance and reliability of external data.

• With the assistance of firm valuation specialists, evaluating the appropriateness of valuation methodologies, and testing significant assumptions used in the discounted cash flow analysis including the discount rate and multi-year cash projections.

• Testing the reasonableness of the peer group selected, and assumptions related to price to tangible book value and price to earnings assumptions.

/s/ Crowe LLP

1 unchanged sentence

Washington, D.C.

March 1, 2023

Report of Independent Registered Public Accounting Firm

Shareholders and the Board of Directors of Eagle Bancorp, Inc.

Bethesda, Maryland

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated statements of income, comprehensive income, changes in shareholders’ equity and cash flows of Eagle Bancorp, Inc.

and Subsidiaries (the "Company") for the year ended December 31, 2020, and the related notes (collectively referred to as the "consolidated financial statements").

In our opinion, the consolidated financial statements present fairly, in all material respects, the results of the Company’s operations and its cash flows for the year ended December 31, 2020, in conformity with U.S.

generally accepted accounting principles.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audit provides a reasonable basis for our opinion.

/s/ FORVIS LLP

(Formerly Dixon Hughes Goodman LLP)

We have served as the Company’s auditor from 2016 to 2021.

Charlotte, North Carolina

March 1, 2021

February 29, 2024

EAGLE BANCORP, INC.

Consolidated Balance Sheets

(dollars in thousands, except per share data)

Assets December 31, 2022 December 31, 2021

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

December 31, 2023 December 31, 2022

Cash and due from banks $ 9,047 $ 12,655

1 unchanged sentence

Interest-bearing deposits with banks and other short-term investments

Investment securities available-for-sale, at fair value (net of allowance for credit losses of $ 17 and $ 620 as of December 31, 2022 and December 31, 2021, respectively).

709,897 265,272

Investment securities held-to-maturity (fair value of $ 968,707 , and $ 0 , net of allowance for credit losses of $ 766 and $ 0 , as of December 31, 2022 and December 31, 2021, respectively)

Investment securities available-for-sale (amortized cost of $ 1,668,316 and $ 1,803,898 , respectively, and allowance for credit losses of $ 17 and $ 17 , respectively)

1,506,388 1,598,666

Investment securities held-to-maturity, net of allowance for credit losses of $ 1,956 and $ 766 , respectively (fair value of $ 901,582 and $ 968,707 , respectively)

1,015,737 1,093,374

Federal Reserve and Federal Home Loan Bank stock 25,748 65,067

7 unchanged sentences

Bank-owned life insurance

112,921 110,998

Goodwill and intangible assets, net 104,925 104,233

4 unchanged sentences

Noninterest-bearing demand

$ 2,279,081 $ 3,150,751

Interest-bearing transaction

997,448 1,138,235

Savings and money market 3,314,043 3,640,697

2 unchanged sentences

Customer repurchase agreements 30,587 35,100

Other short-term borrowings 975,001 300,000

Long-term borrowings 69,794 69,670

1,369,918 1,044,795

Operating lease liabilities 23,238 29,267

6 unchanged sentences

Additional paid-in capital

374,888 412,303

Retained earnings 1,061,456 1,015,215

Accumulated other comprehensive loss

( 162,357 ) ( 199,507 )

Total Shareholders’ Equity 1,274,283 1,228,321

15 unchanged sentences

Interest on customer repurchase agreements 1,218 356 51

Interest on short-term borrowings 3,980 2,008 1,869

Interest on long-term borrowings 4,149 10,151 12,696

Interest on borrowings

76,019 8,129 12,159

Total interest expense 334,781 91,746 39,982

Net Interest Income 290,546 332,867 324,514

Provision (reversal) for Credit Losses 266 ( 20,821 ) 45,571

Provision (reversal) for Unfunded Commitments 1,477 ( 1,119 ) 1,380

Net Interest Income After Provision For Credit Losses 331,124 346,454 274,611

Provision for (Reversal of) Credit Losses

31,536 266 ( 20,821 )

(Reversal of) Provision for Unfunded Commitments

( 267 ) 1,477 ( 1,119 )

Net Interest Income After Provision for (Reversal of) Credit Losses

259,277 331,124 346,454

Noninterest Income

1 unchanged sentence

Gain on sale of loans 418 3,702 14,045

Gain (loss) on sale of investment securities ( 169 ) 2,964 1,815

Net (loss) gain on sale of investment securities

( 11 ) ( 169 ) 2,964

Increase in the cash surrender value of bank-owned life insurance

2,659 2,547 2,059

Other income 12,015 12,175 16,755

18 unchanged sentences

EAGLE BANCORP, INC.

Consolidated Statements of Comprehensive Income

Consolidated Statements of Comprehensive Income (Loss)

Years Ended December 31,

4 unchanged sentences

Unrealized gain (loss) on securities available-for-sale

Reclassification adjustment for net (gains) losses included in net income 111 ( 2,203 ) ( 1,363 )

32,519 ( 140,926 ) ( 27,923 )

Reclassification adjustment for net losses (gains) included in net income

8 111 ( 2,203 )

Total unrealized gain (loss) on investment securities 32,527 ( 140,815 ) ( 30,126 )

Unrealized loss on securities transferred to held-to-maturity

— ( 49,095 ) —

Amortization of unrealized loss on securities transferred to held-to-maturity

Total unrealized loss recognized (remaining) on investment securities held-to-maturity ( 44,734 ) — —

Unrealized gain (loss) on derivatives 284 — ( 1,378 )

Reclassification adjustment for gain included in net income — 384 860

Total unrealized gain (loss) on derivatives 284 384 ( 518 )

4,805 4,361 —

Total unrealized gain (loss) on investment securities held-to-maturity

4,805 ( 44,734 ) —

Unrealized (loss) gain on derivatives

( 182 ) 284 —

Reclassification adjustment for loss included in net income

Total unrealized (loss) gain on derivatives

( 182 ) 284 384

Other comprehensive income (loss) 37,150 ( 185,265 ) ( 29,742 )

Comprehensive (Loss) Income $ ( 44,335 ) $ 146,949 $ 144,758

Comprehensive Income (Loss)

$ 137,684 $ ( 44,335 ) $ 146,949

See Notes to Consolidated Financial Statements.

2 unchanged sentences

(dollars in thousands, except share data)

Common Additional Paid

in Capital Retained

Common Additional Paid-in Capital

Earnings Accumulated

3 unchanged sentences

Shares Amount

Balance January 1, 2020

Balance at January 1, 2021

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

Net Income — — — 176,691 — 176,691

Cumulative effect adjustment due to the adoption of

ASC 326, net of tax — — — ( 10,931 ) — ( 10,931 )

Other comprehensive loss, net of tax — — — — ( 29,742 ) ( 29,742 )

Stock-based compensation expense — — 7,811 — — 7,811

Issuance of common stock related to options exercised, net of shares withheld for payroll taxes 3,300 — 63 — — 63

Vesting of time based stock awards issued at date of grant, net of shares withheld for payroll taxes ( 24,429 ) 1 ( 1 ) — — —

5 unchanged sentences

Common stock repurchased ( 13,175 ) — ( 682 ) — — ( 682 )

Balance December 31, 2020 31,779,663 315 427,016 798,061 15,500 1,240,892

Balance at December 31, 2021 31,950,092 316 434,640 930,061 ( 14,242 ) 1,350,775

Net Income — — — 140,930 — 140,930

9 unchanged sentences

Common stock repurchased ( 738,300 ) ( 8 ) ( 33,079 ) — — ( 33,087 )

Balance December 31, 2021 31,950,092 316 434,640 930,061 ( 14,242 ) 1,350,775

Balance at December 31, 2022 31,346,903 310 412,303 1,015,215 ( 199,507 ) 1,228,321

Net Income — — — 100,534 — 100,534

Other comprehensive loss, net of tax — — — — ( 185,265 ) ( 185,265 )

Other comprehensive income, net of tax

— — — — 37,150 37,150

Stock-based compensation expense — — 10,018 — — 10,018

Issuance of common stock related to options exercised, net of shares withheld for payroll taxes 3,289 — 97 — — 97

Vesting of time based stock awards issued at date of grant, net of shares withheld for payroll taxes ( 59,992 ) 1 ( 1 ) — — —

5 unchanged sentences

Common stock repurchased ( 1,600,000 ) ( 15 ) ( 48,018 ) — — ( 48,033 )

December 31, 2022 31,346,903 $ 310 $ 412,303 $ 1,015,215 $ ( 199,507 ) $ 1,228,321

Balance at December 31, 2023 29,925,612 $ 296 $ 374,888 $ 1,061,456 $ ( 162,357 ) $ 1,274,283

See Notes to Consolidated Financial Statements.

1 unchanged sentence

Consolidated Statements of Cash Flows

(dollars in thousands)

Years Ended December 31,

(dollars in thousands)

2023 2022 2021

2 unchanged sentences

Adjustments to reconcile net income to net cash provided by operating activities:

Provision for credit losses 266 ( 20,821 ) 45,571

Provision for unfunded commitments 1,477 ( 1,119 ) 1,380

Provision for (reversal of) credit losses

31,536 266 ( 20,821 )

(Reversal of) provision for unfunded commitments

( 267 ) 1,477 ( 1,119 )

Depreciation and amortization 3,480 3,319 5,874

Gains on sale of loans ( 418 ) ( 3,702 ) ( 14,045 )

Gain on MSRs ( 837 ) ( 679 ) #REF!

Securities premium amortization (discount accretion), net 9,011 4,031 8,196

Loss (gain) on mortgage servicing rights

142 ( 837 ) ( 679 )

Securities premium amortization, net

6,189 9,011 4,031

Origination of loans held for sale ( 29,690 ) ( 299,317 ) ( 1,156,281 )

2 unchanged sentences

Net gain on sale of other real estate owned ( 134 ) ( 248 ) ( 1,266 )

Net increase in cash surrender value of BOLI ( 2,547 ) ( 2,059 ) ( 2,071 )

Net (gain)/loss on sale of investment securities 169 ( 2,964 ) ( 1,815 )

Net increase in cash surrender value of bank owned life insurance

( 2,659 ) ( 2,547 ) ( 2,059 )

Net loss (gain) on sale of investment securities

11 169 ( 2,964 )

Stock-based compensation expense 10,018 9,899 7,811

Net tax benefits from stock compensation — — 118

(Increase) decrease in other assets

( 14,976 ) ( 26,162 ) 1,358

Increase in other liabilities 58,395 12,581 24,823

2 unchanged sentences

Purchases of available-for-sale investment securities — ( 425,263 ) ( 2,029,434 )

Proceeds from maturities of available-for-sale securities 261,999 313,921 302,471

Proceeds from sale/call of available-for-sale securities 6,225 201,034 124,144

Proceeds from maturities of available-for-sale investment securities

123,782 261,999 313,921

Proceeds from sale/call of available-for-sale investment securities

8,303 6,225 201,034

Purchase of held-to-maturity investment securities

Proceeds from maturities from held to maturity securities 115,777 — —

Proceeds from call of held-to-maturity securities 8,350 — —

— ( 290,740 ) —

Proceeds from maturities from held-to-maturity investment securities

78,251 115,777 —

Proceeds from call of held-to-maturity investment securities

2,906 8,350 —

Purchases of Federal Reserve and Federal Home Loan Bank stock ( 299 ) ( 30,914 ) ( 218 )

1 unchanged sentence

Net change in loans

( 351,913 ) ( 570,977 ) 511,120

Proceeds from sale of SBA PPP loans — — 170,154

Redemption (purchase) of BOLI 338 ( 30,000 ) —

Redemption (purchase) of bank-owned life insurance

736 338 ( 30,000 )

Proceeds from sale of other real estate owned 987 241 4,618

2 unchanged sentences

Cash Flows From Financing Activities:

Increase (decrease) in deposits ( 1,268,358 ) 792,337 1,964,812

Increase (decrease) in customer repurchase agreements 11,182 ( 2,808 ) ( 4,254 )

Increase in short-term borrowings 675,001 — 50,000

Increase in long-term borrowings — — 50,000

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

(Decrease) increase in deposits

94,857 ( 1,268,358 ) 792,337

(Decrease) Increase in customer repurchase agreements

( 4,513 ) 11,182 ( 2,808 )

Increase (decrease) in borrowings

324,999 675,001 ( 200,000 )

Proceeds from exercise of equity compensation plans — 97 —

1 unchanged sentence

Common stock repurchased ( 48,033 ) ( 33,087 ) ( 682 )

Tax equivalent shares withheld on exercise of equity comp plans — — —

Cash dividends paid ( 54,993 ) ( 55,776 ) ( 44,691 )

Net cash (used in) provided by financing activities ( 670,193 ) 544,652 1,971,619

Net (Decrease) Increase In Cash and Cash Equivalents ( 1,402,368 ) ( 74,833 ) 1,547,082

Net cash provided by (used in) financing activities

312,903 ( 670,193 ) 544,652

Net Increase (Decrease) in Cash and Cash Equivalents

410,830 ( 1,402,368 ) ( 74,833 )

Cash and Cash Equivalents at Beginning of Period 311,854 1,714,222 1,789,055

Cash and Cash Equivalents at End of Period $ 722,684 $ 311,854 $ 1,714,222

Supplemental Cash Flows Information:

Supplemental Cash Flow Information:

Interest paid $ 376,841 $ 90,590 $ 30,989

Income taxes paid $ 21,540 $ 23,453 $ 54,363

Non-Cash Investing Activities

Non-Cash Operating Activities

Initial recognition of operating lease right-of-use assets $ 418 $ — $ 9,146

Non-Cash Investing Activities

Transfers of investment securities from available-for-sale to held-to-maturity $ — $ 922,975 $ —

14 unchanged sentences

The Bank was previously active in the origination and sale of residential mortgage loans, the origination of small business loans and the origination, securitization and sale of multifamily Federal Housing Administration ("FHA") loans.

Starting in the first quarter 2023 the Company will no longer originate residential mortgages for sale as the decision has been made to exit this line of business (See Note 26 of the Consolidated Financial Statements for further details).

The Company no longer originates residential mortgages for sale as the Company ceased originations of first lien residential mortgage loans for secondary sale during the three months ended March 31, 2023, and completed residual origination and sales activities as of June 30, 2023.

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.

As of December 31, 2022, the Bank offers its products and services through sixteen banking offices, five lending centers and various electronic capabilities, including remote deposit services and mobile banking services.

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

As of December 31, 2023, the Bank offers its products and services through thirteen banking offices, four lending centers and various electronic capabilities, including remote deposit services and mobile banking services.

Eagle Insurance Services, LLC, which had been offering access to insurance products and services through a referral program with a third party insurance broker, continues to receive fee income in connection with such program.

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.

3 unchanged sentences

For purposes of reporting cash flows, cash and cash equivalents include cash and due from banks, federal funds sold and interest bearing deposits with other banks that have an original maturity of three months or less.

Net cash flows are reported for customer loan and deposit transactions, interest bearing deposits in other financial institutions, federal funds purchased, repurchase agreements and other short-term borrowings.

Net cash flows are reported for customer loan and deposit transactions, interest bearing deposits in other financial institutions, federal funds purchased, repurchase agreements and other borrowings.

Interest Bearing Deposits in Other Financial Institutions

2 unchanged sentences

The Company regularly engaged in sale of residential mortgage loans held for sale in 2022 and engages in the sale of the guaranteed portion of SBA loans originated by the Bank.

Starting in the first quarter of 2023, the Company will no longer originate residential mortgages for sale as the strategic decision has been made to exit that business (See Note 26 of the Consolidated Financial Statements for further details).

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

In the first quarter of 2023, the Company ceased originations of first lien residential mortgage loans for secondary sale and completed residual origination and sales activities in the second quarter of 2023.

The Company carried loans held for sale at fair value.

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

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

The Company’s current practice is to sell residential mortgage loans held for sale on a servicing released basis, and, therefore, it has no intangible asset recorded for the value of such servicing as of December 31, 2022 and December 31, 2021.

The Company entered into commitments to originate residential mortgage loans whereby the interest rate on the loan is determined prior to funding (i.e.

The Company entered into commitments to originate residential mortgage loans whereby the interest rate on the loan was determined prior to funding (i.e.

interest rate lock commitments).

Such interest rate lock commitments on mortgage loans to be sold in the secondary market are considered to be derivatives.

Such interest rate lock commitments on mortgage loans to be sold in the secondary market were considered to be derivatives.

To protect against the price risk inherent in residential mortgage loan commitments, the Company utilized either or both “best efforts” and “mandatory delivery” forward loan sale commitments to mitigate the risk of potential decreases in the values of loans that would result from the exercise of the derivative loan commitments.

Under a “best efforts” contract, the Company committed to deliver an individual mortgage loan of a specified principal amount and quality to an investor.

The investor committed to a price, representing a premium on the day the borrower committed to an interest rate, at which it would purchase the loan from the Company if the loan to the underlying borrower closed, with the intent that the buyer/investor had assumed the interest rate risk on the loan as the Company protected itself from changes in interest rates.

As a result, the Bank was not generally exposed to losses on loans sold utilizing best efforts, nor would it realize gains related to rate lock commitments due to changes in interest rates.

The market values of interest rate lock commitments and best efforts contracts were not readily ascertainable with precision because rate lock commitments and best efforts contracts were not actively traded.

Because of the high correlation between rate lock commitments and best efforts contracts, very little gain or loss should have occurred on the interest rate lock commitments.

Under a “best efforts” contract, the Company committed to deliver an individual mortgage loan of a specified principal amount and quality to an investor with the intent that the buyer/investor had assumed the interest rate risk, rather than the Company.

Under a “mandatory delivery” contract, the Company committed to deliver a certain principal amount of mortgage loans to an investor at a specified price on or before a specified date.

If the Company failed to deliver the amount of mortgages necessary to fulfill the commitment by the specified date, it was obligated to pay the investor a “pair-off” fee, based on then-current market prices, to compensate the investor for the shortfall.

The Company managed the interest rate risk on interest rate lock commitments by entering into forward sale contracts of mortgage-backed securities, whereby the Company obtained the right to deliver securities to investors in the future at a specified price.

The Company managed the interest rate risk on interest rate lock commitments by entering into forward sale contracts of mortgage-backed securities ("MBS"), whereby the Company obtained the right to deliver securities to investors in the future at a specified price.

Such contracts were accounted for as derivatives and were recorded at fair value in derivative assets or liabilities, carried on the Consolidated Balance Sheet within other assets or other liabilities, with changes in fair value recorded in other income within the Consolidated Statements of Income.

The period of time between issuance of a loan commitment to the customer and closing and sale of the loan to an investor generally ranged from 30 to 90 days under recent market conditions.

The gross gains on loan sales were recognized based on new loan commitments with adjustments for price and pair-off activity.

3 unchanged sentences

This excess servicing asset is being amortized on a straight-line basis (with adjustment for prepayments) as an offset to servicing fees collected and is included in other income in the Consolidated Statements of Income.

The Company originates multifamily FHA loans through the Department of Housing and Urban Development’s Multifamily Accelerated Program (“MAP”).

The Company originates multifamily FHA loans through the Department of Housing and Urban Development’s Multifamily Accelerated Program.

The Company securitizes these loans through the Government National Mortgage Association ("Ginnie Mae") MBS I program and sells the resulting securities in the open market to authorized dealers in the normal course of business and periodically bundles and sells the servicing rights.

12 unchanged sentences

Premiums and discounts on investment securities are amortized/accreted to the earlier of call or maturity based on expected lives, which lives are adjusted based on prepayment assumptions and call optionality.

Declines in the fair value of individual available-for-sale securities below their cost that are other-than-temporary in nature result in write-downs of the individual securities to their fair value.

Declines in the fair value of

individual available-for-sale securities below their cost that are other-than-temporary in nature result in write-downs of the individual securities to their fair value.

Factors affecting the determination of whether other-than-temporary impairment has occurred include a downgrading of the security by a rating agency or a significant deterioration in the financial condition of the issuer.

10 unchanged sentences

Such amounts are amortized over the remaining life of the security.

The Company does not intend to sell the held-to-maturity 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.

For the impairment of investment securities please see "Allowance for Credit Losses - Available-for-Sale Debt Securities" and "Allowance for Credit Losses - Held-to-Maturity Debt Securities" below.

4 unchanged sentences

Allowance for Credit Losses

The Company adopted the current expected credit loss model under Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments – Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”) on January 1, 2020 using the modified retrospective approach.

The Company recorded a net reduction of retained earnings of $ 14.7 million upon adoption.

The transition adjustment included an increase in the allowance for credit losses on loans of $ 10.6 million, in addition to an increase of $ 4.1 million to the reserve for unfunded commitments.

In accordance with the adoption of CECL, the initial January 1, 2020 cumulative-effect adjustment was to retained earnings (net of taxes) under the modified retrospective approach.

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

For the Year Ended

(dollars in thousands) December 31, 2022

December 31, 2021

December 31, 2020

Provision/(Reversal) for credit losses- loans $ 103 $ ( 21,275 ) $ 45,404

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

For the Years Ended December 31,

(dollars in thousands) 2023

Provision for (reversal of) credit losses- loans

$ 30,346 $ 103 $ ( 21,275 )

Provision for credit losses - HTM debt securities 1,190 766 —

(Reversal) Provision for credit losses - AFS debt securities ( 603 ) 454 167

Total provision for credit losses $ 266 $ ( 20,821 ) $ 45,571

(Reversal of) provision for credit losses - AFS debt securities

— ( 603 ) 454

$ 31,536 $ 266 $ ( 20,821 )

Allowance for Credit Losses - Loans

The ACL - Loans is an estimate of the expected credit losses in the loans held for investment portfolio.

ASC 326 replaced the incurred loss impairment model that recognizes losses when it becomes probable that a credit loss will be incurred, with a requirement to recognize lifetime expected credit losses immediately when a financial asset is originated or purchased.

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

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

The Company's ACL on its loan portfolio is deducted from the amortized cost basis of loans to present the net amount expected to be collected on the loans.

Loans, or portions thereof, are charged off against the allowance when they are deemed uncollectible.

Expected recoveries are recorded to the extent they do not exceed the aggregate of amounts previously charged-off and expected to be charged-off.

Reserves on loans that do not share risk characteristics are evaluated on an individual basis (e.g., nonaccrual loans, TDRs).

Reserves on loans that do not share risk characteristics are evaluated on an individual basis.

Nonaccrual loans are specifically reviewed for loss potential and when deemed appropriate are assigned a reserve based on an individual evaluation.

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The bank groups collectively assessed loans using a call report code.

Some unique loan types, such as PPP loans, are grouped separately due to their specific risk characteristics.

Some unique loan types, such as Paycheck Protection Program ("PPP") loans, are grouped separately due to their specific risk characteristics.

For each of these loan segments, the Company generates cash flow projections at the instrument level wherein payment expectations are adjusted for estimated prepayment speeds, PD rates and LGD rates.

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

In 2022, the improvement in economic conditions, which impacted the unemployment projections, which inform our CECL economic forecast, along with improvements in credit quality and charge offs, resulted in a proportional decrease in our ACL during 2022.

In 2023, the improvement in economic conditions, which impacted the unemployment projections, which inform our current expected credit losses ("CECL") economic forecast, along with improvements in credit quality, offset by an increase in charge offs, resulted in minor fluctuations in the levels of our ACL during 2023.

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

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

The review of the appropriateness of the allowance is performed by executive management and presented to management committees, Director’s Loan Committee, the Audit Committee of the Board of Directors ("Audit Committee"), and the Board of Directors.

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

The review of the appropriateness of the allowance is performed by executive management and presented to the Risk Committee.

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

When management determines that foreclosure is probable, and for certain collateral-dependent loans where foreclosure is not considered probable, expected credit losses are based on the estimated fair value of the collateral adjusted for selling costs, when appropriate.

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Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayments when appropriate.

The contractual term excludes expected extensions, renewals and modifications unless management has a reasonable expectation that a loan will be in a troubled debt restructuring ("TDR").

The contractual term excludes expected extensions, renewals and modifications unless management has a reasonable expectation that a borrower will result in financial difficulty.

We do not measure an ACL on accrued interest receivable balances because these balances are written off in a timely manner as a reduction to interest income when loans are placed on nonaccrual status.

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The ACL may be zero if the fair value of the collateral at the measurement date exceeds the amortized cost basis of the financial asset.

A loan that has been modified or renewed is considered a TDR when two conditions are met:

1) the borrower is experiencing financial difficulty and 2) concessions are made for the borrower's benefit that would not otherwise be considered for a borrower or transaction with similar credit risk characteristics.

The Company’s ACL reflects all effects of a TDR when an individual asset is specifically identified as a reasonably expected TDR.

The Company has determined that a TDR is reasonably expected no later than the point when the lender concludes that modification is the best course of action and it is at least reasonably possible that the troubled borrower will accept some form of concession from the lender to avoid a default.

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

Loan Modifications to Borrowers in Financial Difficulty

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

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.

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

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We have made a policy election to exclude accrued interest from the amortized cost basis of available-for-sale debt securities and report accrued interest separately in accrued interest and other assets in the Consolidated Balance Sheets.

Available-for-sale debt securities are placed on nonaccrual status when we no longer expect to receive all contractual amounts due, which is generally at 90 days past due.

Available-for-sale debt securities are placed on nonaccrual status when we no longer expect to receive all contractual amounts

due, which is generally at 90 days past due.

Accrued interest receivable is reversed against interest income when a security is placed on nonaccrual status.

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Intangible assets (other than goodwill) are amortized to expense using accelerated or straight-line methods over their respective estimated useful lives.

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

Goodwill is subject to impairment testing at the reporting unit level, which must be conducted either at least annually, or when events or changes in circumstances indicate the assets might be impaired and/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'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.

The Company has determined that it has a single reporting unit.

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Any impairment would be recorded through a reduction of goodwill or other intangible asset and an offsetting charge to noninterest expense.

The Company performs impairment testing at any quarter-end when events or changes in circumstances indicate the assets might be impaired, or at least annually as of December 31.

The Company performs a qualitative impairment assessment to determine whether it is more likely than not that the fair value of the only reporting unit is less than its carrying amount.

The Company assesses qualitative factors at least on an annual basis.

Based on the assessment of these qualitative factors, if it is determined that it is more likely than not that the fair value of a reporting unit is not less than the carrying value, then performing the impairment process is not necessary.

However, if it is determined that it is more likely than not that the carrying value exceeds the fair value, a quantified analysis is required to determine whether an impairment exists.

Based on the results of qualitative assessments of the reporting unit, the Company concluded that no impairment existed at December 31, 2022.

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.

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.

In accordance with its regular schedule for impairment testing, the Company performed a second qualitative assessment and quantitative impairment test that rolled forward its second quarter of 2023 testing on its only reporting unit as of December 31, 2023, which resulted in a determination of no impairment.

However, future events could cause the Company to conclude that goodwill or other intangibles have become impaired, which would result in recording an impairment loss.

Any resulting impairment loss could have a material adverse impact on the Company’s financial condition and results of operations.

Management continues to evaluate economic conditions for evidence of new triggering events.

Interest Rate Swap Derivatives

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• Service charges on deposit accounts (i.e.

ATM fees) - These represent general service fees for monthly account maintenance and activity- or transaction-based fees and consist of transaction-based revenue, time-based revenue (service period), item-based revenue or some other individual attribute-based revenue.

Revenue is recognized when our performance obligation is completed which is generally monthly for account maintenance services or when a transaction has been completed (such as a wire transfer).

automated teller machine ("ATM") fees) - These represent general service fees for monthly account maintenance and activity- or transaction-based fees and consist of transaction-based revenue, time-based revenue (service period), item-based revenue or some other individual attribute-based revenue.

Revenue is recognized when our performance obligation is completed which is generally monthly for account maintenance

services or when a transaction has been completed (such as a wire transfer).

Payment for such performance obligations is generally received at the time the performance obligations are satisfied.

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Comprehensive income (loss) consists of net income and other comprehensive income (loss).

Other comprehensive income (loss) includes unrealized gains and losses on debt securities available for sale, debt securities held to maturity, and derivatives, net of taxes.

Other comprehensive income (loss) includes unrealized gains and losses on debt securities available for sale, debt securities transferred to HTM from AFS, and derivatives, net of taxes.

Other comprehensive income (loss) is recognized as a separate component of equity.

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New Authoritative Accounting Guidance

Accounting Standards Adopted in 2022

2020-06, "Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity's Own Equity" ("ASU 2020-06") simplifies accounting for convertible instruments by removing major separation models required under current U.S.

Consequently, more convertible debt instruments will be reported as a single liability instrument and more convertible preferred stock as a single equity instrument with no separate accounting for embedded conversion features.

ASU 2020-06 removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for it.

ASU 2020-06 also simplifies the diluted earnings per share ("EPS") calculation in certain areas.

In addition, the amendment updates the disclosure requirements for convertible instruments to increase the information transparency.

For public business entities, excluding smaller reporting companies, the amendments in ASU 2020-06 are effective for fiscal years beginning after December 15, 2021 and interim periods within those fiscal years.

ASU 2020-06 did not have a material impact on the Company's consolidated financial statements for fiscal year 2022.

2020-04, "Reference Rate Reform (Topic 848)" ("ASU 2020-04") provides optional expedients and exceptions for applying GAAP to loan and lease agreements, derivative contracts and other transactions affected by the anticipated transition away from LIBOR toward new interest rate benchmarks.

For transactions that are modified because of reference rate reform and that meet certain scope guidance (i) modifications of loan agreements should be accounted for by prospectively adjusting the effective interest rate and the modification will be considered "minor" so that any existing unamortized origination fees/costs would carry forward and continue to be amortized and (ii) modifications of lease agreements should be accounted for as a continuation of the existing agreement with no reassessments of the lease classification and the discount rate or remeasurements of lease payments that otherwise would be required for modifications not accounted for as separate contracts.

ASU 2020-04 also provides numerous optional expedients for derivative accounting.

ASU 2020-04 is effective March 12, 2020 through December 31, 2022.

An entity may elect to apply ASU 2020-04 for contract modifications as of January 1, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements are available to be issued.

Once elected for a Topic or an Industry Subtopic within the Codification, the amendments in this ASU must be applied prospectively for all eligible contract modifications for that Topic or Industry Subtopic.

ASU 2020-04 did not have a material impact on the Company's consolidated financial statements for fiscal year 2022

Accounting Standards Pending Adoption

2023-06, "Disclosure Improvements:

Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative" ("ASU 2023-06") incorporates into the Accounting Standards Codification (ASC or Codification) several U.S.

Securities and Exchange Commission ("SEC") disclosure requirements under Regulations S-K and S-X.

The amendments in the ASU are intended to clarify or improve disclosure and presentation requirements of a variety of Codification Topics, allow users to more easily compare entities subject to the SEC’s existing disclosures with those entities that were not previously subject to the requirements, and align the requirements in the Codification with the SEC’s regulations.

These requirements are similar to, but require additional information than, generally accepted accounting principles.

They modify the disclosure or presentation requirements of a variety of Topics in the Codification.

Entities should apply the amendments in ASU 2023-06 prospectively.

For entities subject to the SEC’s existing disclosure requirements and for entities that have to file or provide financial statements with or to the SEC for the purpose of selling or issuing securities that do not have contractual limits on transfer, the effective date for each amendment will be the date on which the SEC removes that related disclosure from its rules.

As a result, the effective date will be different for each individual disclosure based on the effective date of the SEC’s deletion of the related disclosure.

Early adoption is prohibited.

For all other entities, the effective date will be two years later.

Early adoption is permitted for these entities, but not before the provisions of the ASU become effective for entities subject to SEC’s regulation.

The effective dates of the amendments are predicated on the SEC removing its related disclosure requirements from its regulations.

However, if by June 30, 2027, the SEC has not removed the related disclosure from its regulations, the amendments will be removed from the Codification and not become effective for any entity.

We are currently in the process of evaluating this guidance.

2023-07, “Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures.” ("ASU 2023-07) requires filers to disclose significant segment expenses, an amount and description for other segment items, the title and position of the entity’s chief operating decision maker ("CODM") and an explanation of how the CODM uses the reported measures of profit or loss to assess segment performance, and, on an interim basis, certain segment related disclosures that previously were required only on an annual basis.

ASU 2023-07 also clarifies that entities with a single reportable segment are subject to both new and existing segment reporting requirements and that an entity is permitted to disclose multiple measures of segment profit or loss, provided that certain criteria are met.

ASU 2023-07 is effective for the Company for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

We are currently in the process of evaluating this guidance.

2023-09, "Income Taxes (Topic 740):

Improvements to Income Tax Disclosures" ("ASU 2023-09").

The ASU requires additional income tax disclosures around effective tax rates and cash income taxes paid.

ASU 2023-09 is effective for public business entities for annual periods beginning after December 15, 2024 and interim periods within those fiscal years.

The impact of ASU 2023-09 should be applied prospectively.

We are currently in the process of evaluating this guidance.

Accounting Standards Adopted in 2023

2022-02, " Financial Instruments—Credit Losses (Topic 326):

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

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

The impact of ASU 2022-02 should be applied prospectively, or, for the recognition and measurement of TDRs, with a modified retrospective transition method.

We are currently in the process of evaluating this guidance.

Effective January 1, 2023, the Company adopted the guidance prescribed under ASU 2022-02.

Refer to the "Loan Modifications" subsection above and Note 4 for additional disclosure.

Note 2 – Cash and Due from Banks

Regulation D of the Federal Reserve Act requires that banks maintain noninterest reserve balances with the Federal Reserve Bank of Richmond ("Federal Reserve Bank") based principally on the type and amount of their deposits.

During 2022, the Bank maintained balances at the Federal Reserve sufficient to meet reserve requirements, as well as excess reserves, on which interest is paid.

The average daily balance maintained in 2022 was $ 1.3 billion and in 2021 was $ 2.3 billion.

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

In 2023 and 2022, the Bank maintained average daily balances at the Federal Reserve Bank of Richmond ("Federal Reserve Bank") of $ 1.1 billion and $ 1.3 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.

Note 3 – Investment Securities

Amortized cost and estimated fair value of securities available-for-sale and held-to-maturity are summarized as follows:

December 31, 2022 Amortized

Losses Allowance for Estimated

(dollars in thousands) Credit Losses

The following tables summarize the Company's investment securities available-for-sale and held-to-maturity by major security type:

(dollars in thousands) Amortized Cost

Gross Unrealized Gains

Gross Unrealized Losses

Allowance for Credit Losses

Estimated Fair Value

December 31, 2023

Investment securities available-for-sale:

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Corporate bonds 2,000 — ( 300 ) ( 17 ) 1,683

Total available-for-sale securities $ 1,803,898 $ 63 $ ( 205,278 ) $ ( 17 ) $ 1,598,666

December 31, 2022 Amortized

Losses Estimated

(dollars in thousands) Fair Value

$ 1,668,316 $ 45 $ ( 161,956 ) $ ( 17 ) $ 1,506,388

(dollars in thousands) Amortized Cost

Gross Unrecognized Gains

Gross Unrecognized Losses

Estimated Fair Value

December 31, 2023

Investment securities held-to-maturity:

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allowance for credit losses

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

December 31, 2021 Amortized

Losses Allowance for Estimated

(dollars in thousands) Credit Losses

Total amortized cost, net of allowance for credit losses

(dollars in thousands) Amortized Cost

Gross Unrealized Gains

Gross Unrealized Losses

Allowance for Credit Losses

Estimated Fair Value

December 31, 2022

Investment securities available-for-sale:

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$ 1,803,898 $ 63 $ ( 205,278 ) $ ( 17 ) $ 1,598,666

In addition, at December 31, 2022 and December 31, 2021, the Company held $ 65.1 million and $ 34.2 million in non marketable equity securities, respectively, in a combination of FRB and FHLB stocks, which are required to be held for regulatory purposes.

The stocks are both carried at cost, classified as restricted securities, and periodically evaluated for impairment based on ultimate recovery of par value.

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.

(dollars in thousands) Amortized Cost

Gross Unrecognized Gains

Gross Unrecognized Losses

Estimated Fair Value

December 31, 2022

Investment securities held-to-maturity:

Residential mortgage-backed securities $ 741,057 $ — $ ( 88,390 ) $ 652,667

Commercial mortgage-backed securities 92,557 — ( 11,993 ) 80,564

Municipal bonds 128,273 — ( 12,092 ) 116,181

Corporate bonds 132,253 — ( 12,958 ) 119,295

1,094,140 $ — $ ( 125,433 ) $ 968,707

allowance for credit losses

Total amortized cost, net of allowance for credit losses

In addition, at December 31, 2023 and December 31, 2022, the Company held $ 25.7 million and $ 65.1 million in non marketable equity securities, respectively, in a combination of Federal Reserve System ("Federal Reserve Board," "Federal Reserve" or "FRB") and FHLB stocks, which are required to be held for regulatory purposes.

The securities are carried at cost, classified as restricted securities, and periodically evaluated for impairment based on ultimate recovery of par value.

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 MBS, municipal bonds and corporate bonds from available-for-sale to held-to-maturity securities, including $ 237.0 million of securities acquired in the first quarter of 2022 for which its intention to hold to maturity was finalized.

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

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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.

The unrealized losses that exist at December 31, 2022 are generally the result of changes in market interest rates and interest spread relationships since the investment securities were originally purchased, rather than credit quality concerns.

However, as of December 31, 2022 and 2021, 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.

An allowance for credit losses of $ 17 thousand was recorded for AFS securities and $ 766 thousand for HTM securities in 2022.

The weighted average duration of debt securities, which comprise 100 % of total investment securities, is 4.8 years.

Provision recorded for credit losses for securities was $ 163 thousand as of December 31, 2022.

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

The Company does not intend to sell the held-to-maturity 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.

Gross unrealized losses and fair value by length of time that the individual available-for-sale securities have been in a continuous unrealized loss position as of December 31, 2022 and 2021 are as follows:

The following tables summarize, by length of time, the Company's investment securities available-for-sale that have been in a continuous unrealized loss position and investment securities held-to-maturity that have been in a continuous unrecognized loss position:

Less than 12 Months

12 Months or Greater

(dollars in thousands) Number of Securities

Estimated Fair Value

Unrealized Losses

Estimated Fair Value

Unrealized Losses

Estimated Fair Value

Unrealized Losses

December 31, 2023

Investment securities available-for-sale:

12 Months 12 Months

or Greater Total

December 31, 2022 Number of

Securities Estimated

Value Unrealized

Losses Estimated

Value Unrealized

Losses Estimated

Value Unrealized

(dollars in thousands)

treasury bonds 2 $ — $ — $ 47,901 $ ( 1,993 ) $ 47,901 $ ( 1,993 )

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244 $ 3,084 $ ( 4 ) $ 1,493,993 $ ( 161,952 ) $ 1,497,077 $ ( 161,956 )

Less than 12 Months

12 Months or Greater

(dollars in thousands) Number of Securities

Estimated Fair Value

Unrecognized Losses

Estimated Fair Value

Unrecognized Losses

Estimated Fair Value

Unrecognized Losses

December 31, 2023

Investment securities held-to-maturity:

12 Months 12 Months

or Greater Total

December 31, 2022 Number of

Securities Estimated

Value Unrealized

Losses Estimated

Value Unrealized

Losses Estimated

Value Unrealized

(dollars in thousands)

Residential mortgage-backed securities 142 $ — $ — $ 590,063 $ ( 79,980 ) $ 590,063 $ ( 79,980 )

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228 $ — $ — $ 885,977 $ ( 116,116 ) $ 885,977 $ ( 116,116 )

Investment securities available-for-sale Less than

12 Months 12 Months

or Greater Total

December 31, 2021 Number of

Securities Estimated

Value Unrealized

Losses Estimated

Value Unrealized

Losses Estimated

Value Unrealized

(dollars in thousands)

Less than 12 Months

12 Months or Greater

(dollars in thousands) Number of Securities

Estimated Fair Value

Unrealized Losses

Estimated Fair Value

Unrealized Losses

Estimated Fair Value

Unrealized Losses

December 31, 2022

Investment securities available-for-sale:

treasury bonds 2 $ — $ — $ 46,327 $ ( 3,466 ) $ 46,327 $ ( 3,466 )

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260 $ 495,164 $ ( 58,439 ) $ 1,093,919 $ ( 146,839 ) $ 1,589,083 $ ( 205,278 )

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

Expected maturities for residential mortgage-backed securities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

Less than 12 Months

12 Months or Greater

(dollars in thousands) Number of Securities

Estimated Fair Value

Unrecognized Losses

Estimated Fair Value

Unrecognized Losses

Estimated Fair Value

Unrecognized Losses

December 31, 2022

Investment securities held-to-maturity:

Residential mortgage-backed securities 143 $ — $ — $ 652,667 $ ( 88,390 ) $ 652,667 $ ( 88,390 )

Commercial mortgage-backed securities 16 — — 80,564 ( 11,993 ) 80,564 ( 11,993 )

Municipal bonds 43 3,110 ( 45 ) 113,071 ( 12,047 ) 116,181 ( 12,092 )

Corporate bonds 30 20,771 ( 3,183 ) 86,451 ( 9,775 ) 107,222 ( 12,958 )

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

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

The Company measures its available-for-sale and held-to-maturity security portfolios for current expected credit losses as part of its allowance for credit losses analysis.

There was no provision for credit losses recorded during the year ended December 31, 2023 and a reversal of credit losses of $ 603 thousand was recorded for the year ended December 31, 2022 on the available-for-sale securities portfolio.

During the years ended December 31, 2023 and 2022, the Company recorded a provision for credit losses of $ 1.2 million and $ 766 thousand, respectively, on its investment securities held-to-maturity.

As of December 31, 2023 and 2022, the Company had an allowance for credit losses outstanding of $ 17 thousand and $ 17 thousand, respectively, on its AFS securities and $ 2.0 million and $ 766 thousand, respectively, on its HTM securities.

The following table summarizes the Company's investment securities available-for-sale and investment securities held-to-maturity by contractual maturity.

Expected maturities for MBS will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

December 31, 2023

(dollars in thousands) Amortized Cost

Estimated Fair Value

Investment securities available-for-sale:

December 31, 2022 December 31, 2021

(dollars in thousands) Amortized

Cost Estimated

Fair Value Amortized

Cost Estimated

agency securities maturing:

One year or less $ 549,137 $ 490,699 $ 425,597 $ 421,347

After one year through five years 111,742 100,297 141,537 140,785

Five years through ten years 73,886 68,180 62,092 60,255

After ten years 13,012 10,552

Within one year

$ 141,266 $ 137,159

One to five years 491,268 454,697

Five to ten years 136,583 119,582

Beyond ten years 20,650 18,050

Residential mortgage-backed securities

823,992 727,353

Commercial mortgage-backed securities

Municipal bonds maturing:

One year or less 300 300 4,806 4,861

After one year through five years 1,444 1,488 25,457 26,816

Five years through ten years 8,956 8,299 97,945 99,960

After ten years — — 13,708 13,797

Corporate bonds maturing:

One year or less — — 18,924 18,991

After one year through five years 2,000 1,825 54,630 54,833

Five years through ten years — — 55,458 55,252

After ten years — — — —

treasury 49,793 46,327 49,693 49,458

54,557 49,564

allowance for credit losses — ( 17 )

$ 1,803,898 $ 1,598,666 $ 2,642,667 $ 2,623,408

Total investment securities available-for-sale 1,668,316 1,506,388

Investment securities held-to-maturity:

December 31, 2022 December 31, 2021

(dollars in thousands) Amortized

Cost Estimated

Fair Value Amortized

Cost Estimated

Within one year

One to five years 56,444 54,589

Five to ten years 121,107 105,719

Beyond ten years 75,565 69,593

Residential mortgage-backed securities:

670,043 590,063

Commercial mortgage-backed securities

Municipal bonds maturing:

One year or less 3,139 3,110 — —

After one year through five years 35,579 33,743 — —

Five years through ten years 77,262 67,945 — —

After ten years 12,293 11,383 — —

Corporate bonds maturing:

One year or less 23,954 20,771 — —

After one year through five years 84,953 77,997 — —

Five years through ten years 23,346 20,527 — —

90,227 77,360

allowance for credit losses ( 1,956 ) —

$ 1,093,374 $ 968,707 $ — $ —

In 2022, gross realized gains on sales of investment securities were $ 18 thousand and gross realized losses on sales of investment securities were $ 187 thousand.

In 2021, gross realized gains on sales of investment securities were $ 3.2 million and gross realized losses on sales of investment securities were $ 187 thousand.

In 2020, gross realized gains on sales of investment securities were $ 1.9 million and gross realized losses on sales of investment securities were $ 46 thousand.

Proceeds from sales and calls of investment securities for 2022, 2021 and 2020 were $ 14.6 million, $ 201.0 million and $ 124.1 million, respectively.

The carrying value of securities pledged as collateral for certain government deposits, securities sold under agreements to repurchase and certain lines of credit with correspondent banks at December 31, 2022 was $ 220.1 million and $ 261.0 million at December 31, 2021, which is well in excess of required amounts in order to operationally provide significant reserve amounts for new business.

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

Total investment securities held-to-maturity 1,015,737 901,582

Total $ 2,684,053 $ 2,407,970

During the years ended December 31, 2023, 2022 and 2021, proceeds from the sale or call of investment securities were $ 11.2 million, $ 14.6 million and $ 201.0 million, respectively.

During the year ended December 31, 2023, gross realized gains on sales and calls of investment securities were $ 129 thousand and gross realized losses on sales of investment securities were $ 140 thousand.

During the year ended December 31, 2022, gross realized gains on sales of investment securities were $ 18 thousand and gross realized losses on sales of investment securities were $ 187 thousand.

During the year ended December 31, 2021, gross realized gains on sales of investment securities were $ 3.2 million and gross realized losses on sales of investment securities were $ 187 thousand.

At December 31, 2023 and 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 was $ 2.1 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 December 31, 2023 and 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 December 31, 2022 and 2021 are summarized by type as follows:

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

December 31, 2023 December 31, 2022

12 unchanged sentences

Net loans (1)

Unamortized net deferred fees amounted to $ 29.2 million and $ 26.9 million at December 31, 2022 and 2021.

$ 7,882,755 $ 7,561,188

(1) Excludes accrued interest receivable of $ 45.3 million and $ 43.5 million at December 31, 2023 and 2022, respectively, which were recorded in other assets on the Consolidated Balance Sheets.

Unamortized net deferred fees and costs were $ 27.0 million and $ 29.2 million at December 31, 2023 and 2022, respectively.

As of December 31, 2023 and 2022, the Bank serviced $ 328.0 million and $ 361.5 million, respectively, of multifamily FHA loans, SBA loans and other loan participations, which are not reflected as loan balances on the Consolidated Balance Sheets.

9 unchanged sentences

Residential development and construction loans will finance projects such as single family subdivisions, planned unit developments, townhouses and condominiums.

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

Residential land acquisition, development and construction ("ADC") 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.

3 unchanged sentences

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

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.

Prior to an advance, the Bank or its

contractor inspects the project to determine that the work has been completed, to justify the draw requisition.

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

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

debt service coverage ratio is ordinarily at least 1.15 to 1.0.

As part of the underwriting process, debt service coverage ratios are stress tested assuming a 200 basis point increase in interest rates from their current levels.

The debt service coverage ratio ("DSCR") is ordinarily at least 1.15 to 1.0.

As part of the underwriting process, DSCRs are stress tested assuming a 200 basis point increase in interest rates from their current levels.

Commercial permanent loans generally are underwritten with a term not greater than 10 years or the remaining useful life of the property, whichever is lower.

20 unchanged sentences

If a project has not performed as expected, it is not the customary practice of the Company to increase loan funded interest reserves.

The following tables detail activity in the ACL by portfolio segment for the years ended December 31, 2022, 2021 and 2020.

The following table details activity in the ACL by portfolio segment for the years ended December 31, 2023, 2022 and 2021.

Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.

(dollars in thousands) Commercial Income Producing -

Real Estate Owner Occupied -

Real Estate Real Estate

Residential Construction -

Commercial and

Residential Home

Consumer Total

(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)

Other Consumer

Year Ended December 31, 2023

Allowance for credit losses:

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

Balance at beginning of year

$ 15,655 $ 35,688 $ 12,702 $ 969 $ 7,195 $ 1,606 $ 555 $ 74 $ 74,444

Loans charged-off ( 2,020 ) ( 11,817 ) — — ( 5,636 ) — — ( 50 ) ( 19,523 )

Recoveries of loans previously charged-off 576 — 55 — 36 — — 6 673

Net loans charged-off ( 848 ) ( 1,330 ) — — 1,627 — ( 73 ) ( 624 )

Provision for credit losses 2,028 ( 1,269 ) 556 520 ( 1,925 ) 81 112 103

Net loans (charged-off) and recovered

( 1,444 ) ( 11,817 ) 55 — ( 5,600 ) — — ( 44 ) ( 18,850 )

Provision for (reversal of) credit losses

3,613 16,179 1,576 ( 108 ) 8,603 386 102 ( 5 ) 30,346

Ending balance $ 17,824 $ 40,050 $ 14,333 $ 861 $ 10,198 $ 1,992 $ 657 $ 25 $ 85,940

1 unchanged sentence

Allowance for credit losses:

Balance at beginning of period prior to adoption of ASC 326 $ 26,569 $ 55,385 $ 14,000 $ 1,020 $ 11,529 $ 1,039 $ 37 $ 109,579

Impact of adopting ASC 326 — — — — — — — —

Balance at beginning of year

$ 14,475 $ 38,287 $ 12,146 $ 449 $ 7,094 $ 2,005 $ 474 $ 35 $ 74,965

Loans charged-off ( 1,561 ) ( 1,355 ) — — — — — ( 79 ) ( 2,995 )

Recoveries of loans previously charged-off 713 25 — — 1,627 — — 6 2,371

Net loans (charged-off) recoveries ( 8,302 ) — ( 5,347 ) — 293 — 17 ( 13,339 )

Provision for credit losses ( 3,792 ) ( 17,098 ) 3,493 ( 571 ) ( 2,723 ) ( 565 ) ( 19 ) ( 21,275 )

Net loans (charged-off) and recovered

( 848 ) ( 1,330 ) — — 1,627 — — ( 73 ) ( 624 )

Provision for (reversal of) credit losses

2,028 ( 1,269 ) 556 520 ( 1,526 ) ( 399 ) 81 112 103

Ending balance $ 15,655 $ 35,688 $ 12,702 $ 969 $ 7,195 $ 1,606 $ 555 $ 74 $ 74,444

1 unchanged sentence

Allowance for credit losses:

Balance at beginning of period prior to adoption of ASC 326 $ 18,832 $ 29,265 $ 5,838 $ 1,557 $ 17,485 $ 656 $ 25 $ 73,658

Impact of adopting ASC 326 892 11,230 4,674 ( 301 ) ( 6,143 ) 245 17 10,614

Balance at beginning of year

$ 26,569 $ 55,385 $ 14,000 $ 1,020 $ 9,092 $ 2,437 $ 1,039 $ 37 $ 109,579

Loans charged-off ( 8,788 ) — ( 5,444 ) — ( 206 ) — — ( 1 ) ( 14,439 )

Recoveries of loans previously charged-off 486 — 97 — 499 — — 18 1,100

Net loans (charged-off) recoveries ( 11,952 ) ( 4,300 ) ( 20 ) ( 815 ) ( 2,943 ) ( 92 ) 25 ( 20,097 )

Provision for credit losses 18,797 19,190 3,508 579 3,130 230 ( 30 ) 45,404

Net loans (charged-off) and recovered

( 8,302 ) — ( 5,347 ) — 293 — — 17 ( 13,339 )

(Reversal of) provision for credit losses

( 3,792 ) ( 17,098 ) 3,493 ( 571 ) ( 2,291 ) ( 432 ) ( 565 ) ( 19 ) ( 21,275 )

Ending balance $ 14,475 $ 38,287 $ 12,146 $ 449 $ 7,094 $ 2,005 $ 474 $ 35 $ 74,965

The following table presents the ending allowance balance attributable to loans individually and collectively evaluated, as well as associated loan balances, as of December 31, 2022 and 2021:

(dollars in thousands) Commercial Income Producing -

Real Estate Owner Occupied -

Real Estate Real Estate

Residential Construction -

Commercial and

Residential Home

Consumer Total

Year Ended December 31, 2022

Allowance for credit losses:

Ending Allowance Balance Attributable to loans:

Individually evaluated for impairment $ 1,644 $ 3,198 $ — $ 294 $ — $ — $ 47 $ 5,183

Collectively evaluated for impairment 14,011 32,490 12,702 675 8,801 555 27 69,261

Total Allowance Ending Balance $ 15,655 $ 35,688 $ 12,702 $ 969 $ 8,801 $ 555 $ 74 $ 74,444

Loans Individually evaluated for impairment $ 3,434 $ 6,328 $ 19,187 $ 1,698 $ — $ — $ 50 $ 30,697

Loans Collectively evaluated for impairment 1,487,171 3,913,613 1,091,138 71,303 988,234 51,782 1,694 7,604,935

Total Ending Loans Balance $ 1,490,605 $ 3,919,941 $ 1,110,325 $ 73,001 $ 988,234 $ 51,782 $ 1,744 $ 7,635,632

Year Ended December 31, 2021

Allowance for credit losses:

Ending Allowance Balance Attributable to loans:

Individually evaluated for impairment $ 1,799 $ 5,156 $ — $ — $ — $ — $ — $ 6,955

Collectively evaluated for impairment 12,676 33,131 12,146 449 9,099 474 35 68,010

Total Allowance Ending Balance $ 14,475 $ 38,287 $ 12,146 $ 449 $ 9,099 $ 474 $ 35 $ 74,965

Loans Individually evaluated for impairment $ 11,284 $ 22,570 $ 42 $ 1,779 $ 3,093 $ 366 $ — $ 39,134

Loans Collectively evaluated for impairment 1,394,138 3,362,728 1,087,734 72,187 1,052,805 55,445 1,427 7,026,464

Total Ending Loans Balance $ 1,405,422 $ 3,385,298 $ 1,087,776 $ 73,966 $ 1,055,898 $ 55,811 $ 1,427 $ 7,065,598

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

December 31, 2022

December 31, 2021

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

December 31, 2023 December 31, 2022

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

Commercial $ 1,674 $ 1,240 $ 1,563 $ 1,871

PPP loans — — 1,365 —

Income-producing-commercial real estate 1,754 39,172 2,000 4,328

2 unchanged sentences

Construction - commercial and residential — 525 — —

Home Equity — — — 366

Other consumer — — 50 —

2 unchanged sentences

The Company uses several credit quality indicators to manage credit risk in an ongoing manner.

The Company’s primary credit quality indicator is an internal credit risk rating system that categorizes loans into pass, watch, special mention or classified categories.

The Company’s primary credit quality indicator is an internal credit risk rating system that categorizes loans into pass, special mention or classified categories.

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

5 unchanged sentences

Management believes that there is a low likelihood of loss related to those loans that are considered pass.

Loan is paying as agreed with generally acceptable asset quality;

however the obligor’s performance has not met expectations.

Balance sheet and/or income statement has shown deterioration to the point that the obligor could not sustain any further setbacks.

Credit is expected to be strengthened through improved obligor performance and/or additional collateral within a reasonable period of time.

Special Mention:

12 unchanged sentences

The data is further defined by year of loan origination.

December 31, 2022 (dollars in thousands) Prior 2018 2019 2020 2021 2022

(dollars in thousands)

Prior 2019 2020 2021 2022 2023

Revolving Loans Amort.

1 unchanged sentence

to Term Total

December 31, 2023

Pass $ 157,563 $ 48,524 $ 39,133 $ 194,555 $ 149,320 $ 191,889 $ 623,684 $ 5,207 $ 1,409,875

Watch 6,022 1,883 250 4,153 2,888 754 27,889 — 43,839

Special Mention 1,415 — — — — — 2,259 — 3,674

1 unchanged sentence

Total 172,775 48,582 49,470 196,064 149,542 191,889 659,613 5,831 1,473,766

YTD gross charge-offs ( 885 ) — — — — — — ( 1,135 ) ( 2,020 )

Pass — — — 528 — — — — 528

Total — — — 2,479 777 — — — 3,256

Income producing - commercial real estate:

Pass 1,257,937 326,999 328,743 517,957 732,291 327,126 263,317 1,845 3,756,215

Watch 237,846 5,190 — 35,707 — — — — 278,743

Special Mention 84,585 44,424 6,740 — — — — — 135,749

1 unchanged sentence

Total 1,482,483 434,112 335,483 517,957 732,291 327,126 263,317 1,845 4,094,614

YTD gross charge-offs ( 11,817 ) — — — — — — — ( 11,817 )

Owner occupied - commercial real estate:

Pass 534,525 103,034 35,385 202,776 41,907 125,934 673 55 1,044,289

Watch 16,876 11,504 4,595 — — — 59 — 33,034

Special Mention

54,288 13,348 — — — — — — 67,636

Substandard 37,167 — 1,274 — — — — 21,873 60,314

2 unchanged sentences

Pass 22,877 7,545 2,186 15,967 14,756 5,895 — — 69,226

Watch 3,038 — — — — — — — 3,038

Substandard 4,170 — — — — — — — 4,170

2 unchanged sentences

Pass 30,619 3,440 45,739 251,038 419,393 87,400 124,013 — 961,642

Watch 44,409 53,172 — — — — — — 97,581

8,124 — — — — — — — 8,124

Total 38,743 3,440 45,739 251,038 419,393 87,400 124,013 — 969,766

YTD gross charge-offs ( 136 ) ( 5,500 ) — — — — — — ( 5,636 )

Construction - C&I (owner occupied):

Pass 18,551 4,265 56,361 618 33,237 12,619 6,370 — 132,021

Watch 1,024 3,254 7,443 — — — — — 11,721

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

Pass 1,590 — 87 151 118 — 49,035 643 51,624

Watch 52 — — — — — 196 — 248

Substandard — 36 — — — — 62 242 340

2 unchanged sentences

Pass 1 — — — 46 — 354 — 401

Watch — — — — — — — — —

Substandard — — — — — — — 50 50

Total 4 — — — — 126 1,561 53 1,744

YTD gross charge-offs ( 50 ) — — — — — — — ( 50 )

Total Recorded Investment $ 2,367,170 $ 614,362 $ 525,985 $ 1,185,099 $ 1,391,290 $ 750,863 $ 1,103,437 $ 30,489 $ 7,968,695

December 31, 2021 (dollars in thousands) Prior 2017 2018 2019 2020 2021 Revolving Loans Amort.

Total YTD gross charge-offs $ ( 12,888 ) $ ( 5,500 ) $ — $ — $ — $ — $ — $ ( 1,135 ) $ ( 19,523 )

(dollars in thousands)

Prior 2018 2019 2020 2021 2022

Revolving Loans Amort.

Cost Basis Revolving Loans Convert.

to Term Total

December 31, 2022

Pass $ 183,329 $ 47,393 $ 56,261 $ 64,163 $ 237,146 $ 144,390 $ 736,090 $ 8,570 $ 1,477,342

Watch 5,896 6,567 1,020 996 4,268 3,137 18,336 627 40,847

Special Mention — — — — — 82 5,475 — 5,557

1 unchanged sentence

Total 184,661 47,744 56,537 64,163 237,146 144,472 742,909 9,717 1,487,349

Pass — — — — 16,840 32,900 — — 49,740

YTD gross charge-offs

( 569 ) ( 645 ) — — — — ( 247 ) ( 100 ) ( 1,561 )

Total — — — — 18,205 32,900 — — 51,105

Pass — — — 2,479 777 — — — 3,256

Income producing - commercial real estate:

Pass 1,016,529 439,221 480,474 334,165 542,143 744,328 192,089 358 3,749,307

Watch 58,334 73,760 — 43,561 35,094 — — — 210,749

Special Mention 44,195 5,206 4,209 6,735 — — 47,676 — 108,021

1 unchanged sentence

Total 1,121,337 446,427 484,683 340,900 542,143 744,328 239,765 358 3,919,941

YTD gross charge-offs

( 1,355 ) — — — — — — — ( 1,355 )

Owner occupied - commercial real estate:

Pass 461,029 191,646 111,497 40,562 206,595 41,765 24,240 13,238 1,090,572

Watch 22,710 4,581 11,783 7,026 — — 62 — 46,162

Special Mention — — — 2,122 — — — — 2,122

Substandard 19,753 — — — — — — — 19,753

2 unchanged sentences

Pass 16,968 12,438 8,219 2,640 16,307 14,731 — — 71,303

Watch 3,255 — — — — — — — 3,255

Substandard 1,698 — — — — — — — 1,698

2 unchanged sentences

Pass 84,522 71,841 90,560 189,023 191,127 159,771 90,911 — 877,755

Watch 506 43,918 — — — — — — 44,424

Substandard — — — 3,093 — — — — 3,093

Total 84,522 71,841 90,560 189,023 191,127 159,771 90,911 — 877,755

1 unchanged sentence

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

Watch 680 390 3,255 — — — — — 4,325

Total 20,390 2,144 28,418 39,803 61,408 768 6,648 — 159,579

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

Watch 193 — — — — — — — 193

Substandard — — 41 — — — 61 — 102

4 unchanged sentences

Total 4 — — — — 126 1,561 53 1,744

YTD gross charge-offs

( 36 ) — — — — — — ( 43 ) ( 79 )

Total Recorded Investment $ 1,906,535 $ 778,256 $ 763,347 $ 673,719 $ 1,195,299 $ 1,139,872 $ 1,154,332 $ 24,272 $ 7,635,632

Total YTD gross charge-offs

$ ( 1,960 ) $ ( 645 ) $ — $ — $ — $ — $ ( 247 ) $ ( 143 ) $ ( 2,995 )

Nonaccrual and Past Due Loans

4 unchanged sentences

Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

The following table presents, by class of loan, information related to nonaccrual loans as of December 31, 2022 and 2021.

The following table presents, by portfolio segment, information related to nonaccrual loans as of December 31, 2023 and 2022.

December 31, 2023

(dollars in thousands) Nonaccrual with No Allowance for Credit Loss Nonaccrual with an Allowance for Credit Losses Total Nonaccrual Loans

Commercial $ 101 $ 2,387 $ 2,488

Income producing - commercial real estate — 2,000 2,000

Owner occupied - commercial real estate 17 — 17

Real estate mortgage - residential — 1,913 1,913

Other Consumer — 50 50

Total nonaccrual loans (1)(2) (3)

$ 118 $ 6,350 $ 6,468

December 31, 2022

(dollars in thousands) Nonaccrual with No Allowance for Credit Loss Nonaccrual with an Allowance for Credit Losses Total Nonaccrual Loans

(dollars in thousands) Nonaccrual with No Allowance for Credit Loss Nonaccrual with an Allowance for Credit Losses Total Nonaccrual Loans Nonaccrual with No Allowance for Credit Loss Nonaccrual with an Allowance for Credit Losses Total Nonaccrual Loans

Commercial $ 1,002 $ 1,047 $ 2,049 $ 101 $ 2,387 $ 2,488

PPP 1,365 — 1,365

Income producing - commercial real estate 40,926 — 40,926 — 2,000 2,000

2 unchanged sentences

Construction- commercial and residential

Home equity 366 — 366

Total nonaccrual loans (1)(2) (3)

— 525 525 — — —

(1) Excludes TDRs that were performing under their restructured terms totaling $ 24.4 million at December 31, 2022 and $ 10.2 million at December 31, 2021.

(2) Gross interest income of $ 0.6 million, $ 1.7 million and $ 3.7 million would have been recorded for 2022, 2021 and 2020, respectively, if nonaccrual loans shown above had been current and in accordance with their original terms, while interest actually recorded on such loans were $ 17 thousand, $ 101 thousand and $ 679 thousand at December 31, 2022 2021 and 2020, respectively.

242 — 242 — — —

Other consumer

— — — — 50 50

$ 62,006 $ 3,518 $ 65,524 $ 118 $ 6,350 $ 6,468

(1) Gross coupon interest income of $ 4.2 million, $ 558 thousand and $ 1.7 million would have been recorded for years ended December 31, 2023, 2022 and 2021, respectively, if nonaccrual loans shown above had been current and in accordance with their original terms, while interest actually recorded on such loans were $ 1.5 million, $ 17 thousand and $ 101 thousand for the years ended December 31, 2023, 2022 and 2021, respectively.

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

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

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

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

(dollars in thousands) Loans

Past Due Loans

More Past Due Total Past

Due Loans Current

Loans Nonaccrual Loans Total Recorded

Investment in

The following table presents, by portfolio segment, an aging analysis and the recorded investments in loans past due as of December 31, 2023 and 2022:

(dollars in thousands) Loans 30-59 Days Past Due

Loans 60-89 Days Past Due

Loans 90 Days or More Past Due

Total Past Due Loans

Current Loans

Nonaccrual Loans Total Recorded Investment in Loans

December 31, 2023

20 unchanged sentences

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

Loan Modifications

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

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

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

Modifications with Borrowers Experiencing Financial Difficulty

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

2022-02, effective as of January 1, 2023, which eliminates the recognition and measurement of a TDR.

Due to the removal of the TDR designation, the Company evaluates all loan restructurings according to the accounting guidance for loan modifications to determine if the restructuring results in a new loan or a 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.

Therefore, the disclosures related to loan restructurings are for modifications which have a direct impact on cash flows.

The Company may offer various types of modifications when restructuring a loan.

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

Additional collateral, a co-borrower, or a guarantor is often requested.

Commercial mortgage and construction loans modified in a TDR often involve reducing the interest rate for the remaining term of the loan, extending the maturity date at an interest rate lower than the current market rate for new debt with similar risk or substituting or adding a new borrower or guarantor.

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

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

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

An allowance for consumer and commercial loans that have been modified in a TDR is measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s observable market price or the estimated fair value of the collateral, less any selling costs, if the loan is collateral dependent.

Commercial mortgage and construction loans modified in a loan restructuring often involve reducing the interest rate for the remaining term of the loan, extending the maturity date at an interest rate lower than the current market rate for new debt with similar risk, or substituting or adding a new borrower or guarantor.

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

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

An allowance for consumer and commercial loans that have been modified in a loan restructuring is measured based on the present value of expected future cash flows discounted at the loan's effective interest rate, the loan's observable market price, or the estimated fair value of the collateral, less any selling costs, if the loan is collateral dependent.

Management exercises significant judgment in developing these estimates.

In response to the COVID-19 pandemic and its economic impact to our customers, we implemented a short-term modification program that complies with the CARES Act and ASC 310-40 to provide temporary payment relief to those borrowers directly impacted by COVID-19 who were not more than 30 days past due as of December 31, 2019.

This program allowed for a deferral of payments for 90 days, which we extended for an additional 90 days for certain loans, for a maximum of 180 days on a cumulative and successive basis.

The deferred payments along with interest accrued during the deferral period are due and payable on the maturity date.

Additionally, none of the deferrals are reflected in the Company's asset quality measures (i.e.

non-performing loans) due to the provision of the CARES Act that permits U.S.

financial institutions to temporarily suspend the GAAP requirements to treat such short-term loan modifications as TDR.

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

The outstanding balance of loans with active COVID-related modifications, that were not considered TDRs under the Coronavirus Aid, Relief, and Economic Security Act, as amended by Section 541 of the Consolidated Appropriations Act, totaled $ 0 and $ 13.3 million at December 31, 2022 and 2021, respectively.

The following tables present, by class, the recorded investment of loans modified in TDRs held by the Company during the years ended December 31, 2022, 2021, and 2020.

As of December 31, 2022

(dollars in thousands) Number

Contracts Commercial Income

Real Estate Owner

Real Estate Construction -

Real Estate Total

Troubled debt restructurings

Restructured accruing 5 $ 946 $ 4,328 $ 19,170 $ — $ 24,444

Restructured nonaccruing — — — — —

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

If loans modified in a loan restructuring subsequently default, the Company evaluates the loan for possible further loss.

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.

The following table presents the amortized cost basis as of December 31, 2023 and the financial effect of loans modified to borrowers experiencing financial difficulty during the year ended December 31, 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)

Commercial $ 14,182 $ 21,003 $ — $ 35,185 2.4 % 11 months — %

Income producing - commercial real estate (3)

7,191 62,356 106,256 175,803 4.3 % 16 months 2.56 %

Owner occupied - commercial real estate — 19,127 — 19,127 1.6 % 9 months — %

Construction - commercial and residential 7,095 — — 7,095 0.7 % 12 months — %

Total $ 28,468 $ 102,486 $ 106,256 $ 237,210

Specific allowance $ 87 $ 2,140 $ 2,227

Restructured and subsequently defaulted $ — $ — $ — $ —

As of December 31, 2021

(dollars in thousands) Number

Contracts Commercial Income

Real Estate Owner

Real Estate Construction -

Real Estate Total

Troubled debt restructurings

Restructured accruing 5 $ 1,043 $ 9,116 $ — $ — $ 10,159

Restructured nonaccruing 2 — 6,342 — — 6,342

(1) For loans that received multiple modifications during the year ended December 31, 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 December 31, 2023 of loans that received interest rate reduction modifications during the year ended December 31, 2023.

(3) Includes one loan modified as a combination - principal payment delay, term extension and interest rate reduction most recently in the fourth quarter of 2023 that was moved to nonaccrual status and incurred a $ 6.1 million charge off during the year ended December 31, 2023 in connection with the receipt of an updated appraisal in January 2024.

The following table presents the performance of loans modified to borrowers experiencing financial difficulty during the year ended December 31, 2023:

December 31, 2023

Payment Status (Amortized Cost Basis)

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

Commercial $ 30,790 $ 4,395 $ — $ —

Income producing - commercial real estate 137,252 — — 38,551

Owner occupied - commercial real estate — — — 19,127

Construction - commercial and residential 7,095 — — —

Total $ 175,137 $ 4,395 $ — $ 57,678

Specific allowance $ 140 $ 3,216 $ 3,356

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

As of December 31, 2020

(dollars in thousands) Number

Contracts Commercial Income

Real Estate Owner

Real Estate Construction -

Real Estate Total

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 were experiencing payment default at December 31, 2023 and were modified in the twelve months prior to that default to borrowers experiencing financial difficulty:

December 31, 2023

Amortized Cost Basis

(dollars in thousands) Term Extension

Combination - Term Extension and Principal Payment Delay Combination - Term Extension, Principal Payment Delay and Interest Rate Reduction

$ 4,395 $ — $ —

Income producing - commercial real estate — — 38,551

Owner occupied - commercial real estate — 19,127 —

Total $ 4,395 $ 19,127 $ 38,551

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.

Troubled Debt Restructurings ("TDRs")

Historically, a modification of a loan constituted a TDR when a borrower was experiencing financial difficulty and the modification constituted a concession.

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

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

Additional collateral, a co-borrower or a guarantor were often requested.

Commercial mortgage and construction loans modified in a TDR often involved reducing the interest rate for the remaining term of the loan, extending the maturity date at an interest rate lower than the current market rate for new debt with similar risk or substituting or adding a new borrower or guarantor.

Construction loans modified in a TDR may have involved extending the interest-only payment period.

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

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

An allowance for consumer and commercial loans that had been modified in a TDR was measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s observable market price or the estimated fair value of the collateral, less any selling costs, if the loan was collateral dependent.

Management exercised significant judgment in developing these estimates.

The following table presents the recorded investment of loans modified in TDRs held by the Company as of December 31, 2022:

(dollars in thousands) Number of Contracts

Commercial Income Producing - Commercial Real Estate

Owner Occupied - Commercial Real Estate

Troubled debt restructurings:

Restructured accruing 5 $ 946 $ 4,328 $ 19,170 $ 24,444

Restructured nonaccruing 3 — 6,342 2,370 — 8,712

Total 10 $ 1,276 $ 15,525 $ 2,383 $ — $ 19,184

Specific allowance $ 87 $ 2,140 $ — $ 2,227

Restructured and subsequently defaulted $ — $ — $ — $ —

During 2022, no TDRs defaulted on their modified terms that were reclassified to nonperforming loans, as compared to one performing TDR loans during 2021 totaling approximately $ 101 thousand that defaulted on their modified terms and either charged-off or were reclassified to nonperforming loans.

During 2020, two performing TDR loans totaling approximately $ 6.3 million that defaulted on their modified terms and either charged-off or were reclassified to nonperforming loans.

A default is considered to have occurred once the TDR is past due 90 days or more, or has been placed on nonaccrual.

At December 31, 2022, all five TDR loans, totaling $24.4 million, were performing under their modified terms, as compared to December 31, 2021, when there were five of TDR loans, totaling $ 10.2 million, performing under their modified terms, and December 31, 2020, when there were seven performing TDR loans totaling approximately $ 10.5 million.

During 2022, three restructured loans, two of which totaling approximately $ 11.1 million that had their collateral property sold to a third party and a charge off of $ 1.4 million was recognized on the sale.

During 2021, one previously nonperforming restructured loan had its collateral sold and all principal collected along with partial collection of delinquent interest;

one restructured loan purchased as part of the 2014 acquisition of Virginia Heritage Bank had its full carrying value collected, while additional payments are expected to recover previously written off principal and interest;

and, the aforementioned performing TDR totaling $ 101 thousand that defaulted in 2021 was subsequently charged off later in the year.

During 2020, there were two restructured loans totaling approximately $ 870 thousand that had their collateral property sold and were paid in full, and one TDR loan totaling $ 138 thousand that had previously defaulted was charged off.

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

If loans modified in a TDR subsequently default, the Company evaluates the loan for possible further loss.

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.

During 2022, there was one loan totaling $ 19.2 million that was modified in a TDR, during 2021, there were no loans modified in a TDR, and during 2020, there were two loans totaling $ 572 thousand.

During the year ended December 31, 2022, there was one loan totaling $ 19.2 million that was modified in a TDR and no TDRs defaulted on their modified terms that were reclassified to nonperforming loans.

As of December 31, 2022, all five TDR loans, totaling $ 24.4 million, were performing under their modified terms.

During the year ended December 31, 2022, three restructured loans, two of which were nonperforming, totaling approximately $ 11.1 million had their collateral property sold to a third party and a charge off of $ 1.4 million was recognized on the sale.

Related Party Loans

1 unchanged sentence

All of such loans are either fully repaid or performing and none of such loans are nonaccrual, past due, restructured, or rated substandard or worse (not on nonaccrual).

The following table summarizes changes in amounts of loans outstanding, both direct and indirect, to those persons during 2022 and 2021.

Amounts in the “Additions due to Changes in Related Parties” reflect existing outstanding loans that transitioned to being related party loans between January 1, 2022 and December 31, 2022 as a result of changes in related party status with respect to certain of the Company’s directors who are affiliated with the related borrowers.

Amounts in “additions due to changes in related party status” or "removals due to changes in related party status" reflect loans that transitioned to being related party loans or out of being related party loans during the years presented as a result of changes in related party status with respect to certain of the Company’s directors who are affiliated with the related borrowers.

The following table summarizes the activity of loans outstanding to borrowers with relationships to related parties in 2023 and 2022:

(dollars in thousands) 2023

2 unchanged sentences

Repayments ( 44,645 ) ( 33,220 )

Additions due to Changes in Related Parties 1,423 82,315

Additions due to changes in related party status

Removals due to changes in related party status

Balance at December 31, $ 836 $ 119,198

3 unchanged sentences

Leasehold improvements $ 29,042 $ 32,126

Furniture and equipment 34,424 33,065

Less accumulated depreciation and amortization ( 53,075 ) ( 51,333 )

Furniture, fixtures and equipment

19,600 34,424

accumulated depreciation and amortization

( 38,453 ) ( 53,075 )

Total premises and equipment, net $ 10,189 $ 13,475

3 unchanged sentences

Substantially all of the leases in which the Company is the lessee are comprised of real estate property for branch offices, ATM locations and corporate office space.

All of our leases are classified as operating leases and are included in operating lease right-of-use ("ROU") assets and operating lease liabilities in the consolidated balance sheet.

All of our leases are classified as operating

leases and are included in operating lease right-of-use ("ROU") assets and operating lease liabilities in the consolidated balance sheet.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.

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As of December 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.

In 2022, the Company did not enter into new leases or renew/extend any leases and had two leases expire (two branches were closed).

In 2023, the Company did not enter into any new leases, or extend any leases;

it renewed one lease, and it had three leases expire ( three branches were closed).

The following table presents lease costs and other lease information.

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

Years Ended December 31,

(dollars in thousands) 2023 2022

Operating lease cost (cost resulting from lease payments) $ 6,590 $ 7,145

3 unchanged sentences

Operating lease - operating cash flows (fixed payments) $ 7,198 $ 7,368

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

Right-of-use assets - operating leases $ 19,129 $ 24,544

22 unchanged sentences

Goodwill $ 104,168 $ — $ — $ — $ 104,168

Core deposit — — — — —

Excess servicing (1)

4 unchanged sentences

Goodwill $ 104,168 $ — $ — $ — $ 104,168

Core deposit 7,070 — ( 7,070 ) — —

Excess servicing (1)

1 unchanged sentence

Non-compete agreements — — — — —

$ 111,722 $ 130 $ ( 7,597 ) $ — $ 104,255

Total $ 104,255 $ 67 $ ( 89 ) $ — $ 104,233

(1) The Company recognizes a servicing asset for the computed value of servicing fees on the sale of multifamily FHA loans and the sale of the guaranteed portion of SBA loans.

9 unchanged sentences

There were no properties in the process of foreclosure as of December 31, 2023 and 2022.

For the years ended December 31, 2022 and 2021, there were one and one sales of OREO, respectively.

For the years ended December 31, 2023 and 2022, there were two and one sales of OREO, respectively.

Years Ended December 31,

4 unchanged sentences

Ending Balance $ 1,108 $ 1,962

`Note 9 – Mortgage Banking Derivatives

As part of its mortgage banking activities, the Bank enters 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.

Certain loans under interest rate lock commitments are covered under forward sales contracts of mortgage-backed securities (“MBS”).

Forward sales contracts of MBS are recorded at fair value with changes in fair value recorded in noninterest income.

Interest rate lock commitments and commitments to deliver loans to investors are considered derivatives.

The market value of interest rate lock commitments, best efforts and mandatory delivery 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 values of the mortgage banking derivatives are recorded as freestanding assets or liabilities with the change in value being recognized in current earnings during the period of change.

At December 31, 2022 the Bank had mortgage banking derivative financial instruments with a notional value of $ 7.0 million related to its interest rate lock commitments.

The fair value of these mortgage banking derivative instruments at December 31, 2022 was $ 93 thousand included in other assets .

At December 31, 2021 the Bank had mortgage banking derivative financial instruments with a notional value of $ 56.3 million related to its forward contracts.

The fair value of these mortgage banking derivative instruments at December 31, 2021 was $ 636 thousand included in other assets .

Included in gain on sale of loans for the year ended December 31, 2022, 2021 and 2020 was a net loss of $ 209 thousand, a net gain of $ 209 thousand and a net loss of $ 309 thousand, respectively, relating to mortgage banking derivative instruments.

The amount included in gain on sale of loans for year ended December 31, 2022, 2021 and 2020 pertaining to its mortgage banking hedging activities was a net realized gain of $ 18 thousand, a net realized loss of $ 18 thousand and a net realized gain of $ 27 thousand, respectively.

Note 10 – Other Derivatives

Note 9 – Derivatives and Hedging Activities

The Company is exposed to certain risks arising from both its business operations and economic conditions.

2 unchanged sentences

Cash Flow Hedges of Interest Rate Risk

The Company uses interest rate swap agreements to assist in its interest rate risk management.

The Company’s objective in using interest rate derivatives designated as cash flow hedges is to add stability to interest expense and to better manage its exposure to interest rate movements.

To accomplish this objective, the Company utilizes interest rate swaps as part of its interest rate risk management strategy intended to mitigate the potential risk of rising interest rates on the Bank’s cost of funds.

The notional amounts of the interest rate swaps designated as cash flow hedges do not represent amounts exchanged by the counterparties, but rather, the notional amount is used to determine, along with other terms of the derivative, the amounts to be exchanged between the counterparties.

The interest rate swaps are designated as cash flow hedges and involve the receipt of variable rate amounts from one counterparty in exchange for the Company making fixed payments.

The Company’s intent is to hedge its exposure to the variability in potential future interest rate conditions on existing financial instruments.

For derivatives designated as cash flow hedges, changes in the fair value of the derivative are initially reported in other comprehensive income (outside of earnings), net of tax, and subsequently reclassified to earnings when the hedged transaction

affects earnings.

The Company uses interest rate swaptions to assist in its interest rate risk management.

The Company’s objective in using interest rate derivatives designated as cash flow hedges is to protect itself against adverse fluctuations in interest rates by reducing its exposure to variability in cash flows related to interest payments on a forecasted issuance of debt.

To accomplish this objective, the Company has entered into swaptions to hedge the risk of changes in its cash flows, i.e.

interest payments, attributable to changes in the designated benchmark interest rate being hedged, above the purchased swaption fixed rate, for the period from hedge inception to the Borrowings issuance window.

For derivatives designated and that qualify as cash flow hedges of interest rate risk, changes in the fair value of the derivative are initially reported in accumulated other comprehensive loss (outside of earnings), net of tax, and subsequently reclassified to earnings in the same period during which the hedged transaction affects earnings.

The Company assesses the effectiveness of each hedging relationship by comparing the changes in cash flows of the derivative hedging instrument with the changes in cash flows of the designated hedged transactions.

The Company did no t have any designated cash flow hedge interest rate swap transaction outstanding, which were associated with the Company's variable rate deposits at December 31, 2022, 2021 or 2020.

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

Non-designated Hedges

Derivatives not designated as hedges are not speculative and result from a service the Company provides to certain customers.

Gains and losses on the derivative representing hedge components excluded from the assessment of effectiveness are recognized over the life of the hedge on a systematic and rational basis, as documented at hedge inception in accordance with the Company’s accounting policy election.

Amounts reported in accumulated other comprehensive loss related to designated cash flow hedge derivatives will be reclassified to interest expense.

During the next 12 months, the Company estimates that an additional $ 616 thousand will be reclassified as an increase to interest expense.

The Company did no t have any designated cash flow hedge interest rate swap transaction outstanding at December 31, 2022 or 2021.

Interest Rate Products not Designated as Hedges

Interest rate derivatives not designated as hedges are not speculative and result from a service the Company provides to certain customers.

The Company executes interest rate caps and swaps with commercial banking customers to facilitate their respective risk management strategies.

13 unchanged sentences

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

As of December 31 2022, the aggregate fair value of derivative contracts with credit risk contingent features (i.e.

containing collateral posting or termination provisions based on our capital status) that was in a net asset position totaled $ 1.9 million.

The aggregate fair value of all derivative contracts with credit risk contingent features that were a net liability position totaled $ 2.4 million as of December 31, 2021.

The Company has minimum collateral posting thresholds with certain of its derivative counterparties.

As of December 31, 2022 the Company did no t post any funds with its derivative counterparties against its obligations under these agreements because these agreements were in a net asset position.

At December 31, 2021, the Company posted $ 2.9 million with its derivative counterparties against its obligations under these agreements because these agreements were in a net liability position.

If the Company had breached any provisions under the agreements at December 31, 2022 or December 31, 2021, it could have been required to settle its obligations under the agreements at the termination value.

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

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

Mortgage Banking Derivatives

The Company completed the cessation of first lien residential mortgage origination and sales activities during the year ended December 31, 2023.

As of December 31, 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 were 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 locked in the loan and interest rate with an investor and commits to deliver the loan if settlement occurs ("best efforts") or committed to deliver the locked loan in a binding ("mandatory") delivery program with an investor.

Certain loans that were under interest rate lock commitments were covered under forward sales contracts of MBS.

Forward sales contracts of MBS were recorded at fair value with changes in fair value recorded in noninterest income.

Interest rate lock commitments and commitments to deliver loans to investors were considered derivatives.

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

The Bank determined the fair value of interest rate lock commitments and delivery contracts by measuring the fair value of the underlying asset, which was 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 have been 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 included 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 designated cash flow hedge derivative instruments and non-designated hedges as of December 31, 2023 and 2022.

December 31, 2023 December 31, 2022

(dollars in thousands) Notional

Amount Fair Value Balance Sheet

1 unchanged sentence

Amount Fair Value Balance Sheet

Derivatives in an asset position:

Derivatives designated as hedging instruments:

Interest rate product $ 300,000 $ 374 Other Assets

$ — $ — Other Assets

Derivatives not designated as hedging instruments:

Interest rate product 651,429 30,288 Other Assets 396,024 31,039 Other Assets

Credit risk participation agreements 49,480 3 Other Liabilities — — Other Assets

Mortgage banking derivatives — — Other Assets 6,963 93 Other Assets

$ 396,024 $ 31,039 31039000 Other Assets $ 329,156 $ 5,909 Other Assets

Derivatives designated as hedging instruments

Interest rate product — $ — Other Liabilities $ — $ — Other Liabilities

700,909 30,291 402,987 31,132

Total derivatives in an asset position

$ 1,000,909 $ 30,665 $ 402,987 $ 31,132

Derivatives in a liability position:

Derivatives not designated as hedging instruments:

Interest rate product $ 654,757 $ 30,555 Other Liabilities $ 396,024 $ 30,065 Other Liabilities

Other Contracts 25,902 2 Other Liabilities 26,417 47 Other Liabilities

Mortgage banking derivatives — — Other Liabilities — — Other Liabilities

Credit risk participation agreements

— — Other Liabilities 25,902 2 Other Liabilities

Net derivatives on the balance sheet 972 639

$ 654,757 30,555 $ 421,926 30,067

Gross amounts not offset in the consolidated balance sheets:

Cash and other collateral (1)

Net derivative Amounts $ 972 $ ( 2,291 )

Net derivatives in a liability position

$ 30,555 $ 30,067

(1) Collateral represents the amount that cannot be used to offset our derivative assets and liabilities from a gross basis to a net basis in accordance with the applicable accounting guidance.

4 unchanged sentences

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

Amount of Gain or (Loss) Recognized in OCI on Derivative Year Ended December 31, Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income Year Ended December 31,

Derivatives in ASC 815-20 Hedging Relationships (dollars in thousands) 2022 2021 2020 2022 2021 2020

Amount of Gain (Loss) Recognized in OCI

Location of Gain (Loss) Recognized from Accumulated Other Comprehensive Income into Income

Amount of Gain (Loss) Reclassified from Accumulated OCI into Income

(dollars in thousands) Total

Included Component

Excluded Component

Included Component

Excluded Component

Year ended December 31, 2023:

Derivatives in cash flow hedging relationships:

Interest rate products $ ( 256 ) $ — $ ( 256 ) Interest expense $ ( 14 ) $ — $ ( 14 )

Year ended December 31, 2022:

Derivatives in cash flow hedging relationships:

Interest rate products $ — $ — $ — Interest expense $ — $ — $ —

Year ended December 31, 2021:

Derivatives in cash flow hedging relationships:

Interest rate products $ — $ — $ — Interest expense $ ( 516 ) $ ( 516 ) $ —

The tables below present the effect of the Company’s derivative financial instruments on the Consolidated Statements of Income for the years ended December 31, 2023, 2022 and 2021.

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

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

Year Ended December 31,

2023 2022 2021

Expense Interest

Total amounts of income and expense line items presented in the Consolidated Statements of Income in which the effects of fair value or cash flow hedges are recorded $ — $ ( 516 ) $ ( 1,145 )

Gain or (loss) on cash flow hedging relationships in ASC 815-20

Interest contracts

Amount of gain or (loss) reclassified from accumulated other comprehensive income into income $ — $ ( 516 ) $ ( 1,145 )

Amount of gain or (loss) reclassified from accumulated other comprehensive income into income as a result that a forecasted transaction is no longer probable of occurring $ — $ — $ —

Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income - Included Component $ — $ ( 516 ) $ ( 1,145 )

(dollars in thousands) Interest Expense Interest Expense Interest Expense

Total amounts of expense line items presented in the Consolidated Statements of Income in which the effects of cash flow hedges are recorded

$ ( 14 ) $ — $ ( 516 )

The effect of cash flow hedging:

Gain (loss) on cash flow hedging relationships:

Interest rate products:

Amount of gain (loss) reclassified from accumulated other comprehensive income into income

$ ( 14 ) $ — $ ( 516 )

Amount of gain (loss) reclassified from accumulated other comprehensive income into income - included component

$ — $ — $ ( 516 )

Amount of gain (loss) reclassified from accumulated other comprehensive income into income - excluded component

$ ( 14 ) $ — $ —

Effect of Derivatives Not Designated as Hedging Instruments on the Statements of Income

Derivatives Not Designated as Hedging Instruments under ASC 815-20 Location of Gain or (Loss) Recognized in

Income on Derivative Amount of Gain or (Loss) Recognized in Income on Derivative

(dollars in thousands)

Location of Gain or (Loss) Recognized in

Income on Derivative Amount of Gain or (Loss) Recognized in Income on Derivatives

Year Ended December 31,

2023 2022 2021

Derivatives Not Designated as Hedging Instruments under ASC 815-20:

Interest rate products Other income / (expense) $ 2,712 $ 3,057 $ 2,797

Mortgage banking derivatives Other income — 671 636

Other contracts Other income / (expense) — — 32

Total $ 2,712 $ 3,728 $ 3,433

1 unchanged sentence

Our interest rate swap derivatives are eligible for offset in the Consolidated Balance Sheet and are subject to master netting arrangements.

Our derivative transactions with counterparties are generally executed under International Swaps and Derivative Association (“ISDA”) master agreements which include “right of set-off” provisions.

Our derivative transactions with counterparties are generally executed under

International Swaps and Derivative Association (“ISDA”) master agreements which include “right of set-off” provisions.

In such cases there is generally a legally enforceable right to offset recognized amounts and there may be an intention to settle such amounts on a net basis.

The Company generally offsets such financial instruments for financial reporting purposes.

The Company generally presents such financial instruments gross for financial reporting purposes.

Note 10 – Deposits

2 unchanged sentences

Noninterest-bearing demand

$ 2,279,081 $ 3,150,751

Interest-bearing transaction

997,448 1,138,235

Savings and money market 3,314,043 3,640,697

1 unchanged sentence

Total $ 8,808,039 $ 8,713,182

The remaining maturity of time deposits at December 31, 2022 and 2021 are as follows:

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

(dollars in thousands) 2023

4 unchanged sentences

2027 5,482 4,130

2028 9,827 3,130

Thereafter — —

Total $ 783,499 $ 729,082

$ 2,217,467 $ 783,499

(dollars in thousands) 2023 2022

3 unchanged sentences

Over twelve months 772,072 320,106

Total $ 783,499 $ 729,082

Interest expense on deposits for the years ended December 31, 2022, 2021 and 2020 is as follows:

$ 2,217,467 $ 783,499

Interest expense on deposits for the years ended December 31, 2023, 2022 and 2021 was as follows:

(dollars in thousands) 2023 2022 2021

Interest-bearing transaction

$ 46,140 $ 6,721 $ 1,609

Savings and money market 132,374 65,777 15,000

2 unchanged sentences

Related Party deposits totaled $ 33.1 million and $ 31.8 million at December 31, 2023 and 2022, respectively.

Deposits in excess if the FDIC's $250 thousand relationship insurance limits were $ 6.1 billion and $ 7.5 billion at December 31, 2022 and 2021, respectively.

As of December 31, 2022 and 2021, time deposit accounts in excess of $ 250 thousand are as follows:

Time deposits $250,000 or more

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

(dollars in thousands) 2023 2022

4 unchanged sentences

Total $ 1,533,094 $ 517,782

At December 31, 2022, total deposits included $ 2.3 billion of brokered deposits (excluding the CDARS and ICS two-way), which represented 26 % of total deposits.

At December 31, 2021, total brokered deposits (excluding the CDARS and ICS two-way) were $ 2.6 billion, or 27 % of total deposits.

At December 31, 2023, total deposits included $ 2.5 billion of brokered deposits (excluding the CDARS and ICS two-way accounts), which represented 29 % of total deposits.

At December 31, 2022, total brokered deposits (excluding the CDARS and ICS two-way accounts) were $ 2.5 billion, or 29 % of total deposits.

Note 11 – Affordable Housing Projects Tax Credit Partnerships

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The Company’s net affordable housing tax credit investments were $ 48.2 million and related unfunded commitments were $ 23.9 million as of December 31, 2023 and are included in Other Assets and Other Liabilities, respectively, in the Consolidated Balance Sheets.

For tax purposes, the Company recognized low income housing tax credits of $ 5.0 million, $ 4.2 million and $ 3.6 million for the years ended December 31, 2022, December 31, 2021 and December 31, 2020, respectively, and low income housing investment expense of $ 3.7 million, $ 3.1 million and $ 2.7 million, respectively.

For tax purposes, the Company recognized low income housing tax credits of $ 5.6 million, $ 5.0 million and $ 4.2 million for the years ended December 31, 2023 and 2022, and December 31, 2021, respectively, and low income housing investment expense of $ 4.3 million, $ 3.7 million and $ 3.1 million, respectively.

The Company recognizes low income housing investment expenses as a component of income tax expense.

As of December 31, 2023, the expected payments for unfunded affordable housing commitments were as follows:

Years Ending December 31:

(dollars in thousands) Amount

Years Ended December 31:

2024 $ 16,292

Thereafter 735

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Note 12 – Borrowings

Information relating to short-term and long-term borrowings is as follows for the years ended December 31:

(dollars in thousands) Amount Rate Amount Rate

Customer repurchase agreements and federal funds purchased $ 35,100 2.55 % $ 23,918 0.20 %

Federal Home Loan Bank – current portion 975,001 4.29 % 300,000 0.67 %

Total $ 1,010,101 $ 323,918

Average Daily Balance:

Customer repurchase agreements and federal funds purchased $ 30,745 1.16 % $ 24,887 0.20 %

Federal Home Loan Bank – current portion 172,717 2.30 % 300,000 0.67 %

Total $ 203,462 $ 324,887

Maximum Month-end Balance:

Customer repurchase agreements and federal funds purchased $ 57,953 2.63 % $ 29,401 0.20 %

Federal Home Loan Bank – current portion 975,001 4.57 % 300,000 0.67 %

Total $ 1,032,954 $ 329,401

Subordinated Notes $ 69,794 5.75 % $ 69,670 5.84 %

Average Daily Balance:

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

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

Maturity Dates Interest Rates (3)

December 31, 2023:

Customer repurchase agreements $ 30,587 $ — $ 30,587 $ — N/A 3.42 %

FHLB secured borrowings — — — 1,271,846 N/A N/A

BTFP secured borrowings (4)

1,300,000 — 1,300,000 598,870 March 22, 2024 4.53 %

Discount window secured borrowings — — — 601,504 N/A N/A

Raymond James repurchase agreement — — — 17,993 N/A N/A

Subordinated notes, 5.75 %

FHLB Advance — — % 8,630 1.84 %

Maximum Month-end Balance:

70,000 ( 82 ) 69,918 — September 1, 2024 5.75 %

Total borrowings $ 1,400,587 $ ( 82 ) $ 1,400,505 $ 2,490,213

December 31, 2022:

Customer repurchase agreements $ 35,100 $ — $ 35,100 $ — N/A 2.94 %

FHLB secured borrowings 975,001 — 975,001 145,104 December 1, 2023 4.57 %

FRB discount window secured borrowings — — — 607,405 N/A N/A

Subordinated notes, 5.75 %

FHLB Advance — — % 50,000 1.84 %

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 borrowings 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 December 31, 2023, the Company had total additional undrawn borrowing capacity of approximately $ 2.2 billion, comprising unencumbered securities available to be pledged of approximately $ 292.3 million and undrawn financing on pledged assets of $ 1.9 billion, including $ 1.3 billion with the FHLB, $ 598.9 million with the BTFP and $ 18.0 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.

(3) Represent the weighted average interest rate on customer repurchase agreements, borrowings outstanding and the coupon interest rate on the subordinated notes, which approximates the effective interest rate.

(4) In January 2024, the Company borrowed an additional $ 500.0 million through the BTFP and refinanced $ 500.0 million under the program at an interest rate of 4.76 % and a maturity date in January 2025.

The remaining $ 800.0 million matures in March 2024.

The Company offers its business customers a repurchase agreement sweep account in which it collateralizes these funds with U.S.

agency and mortgage-backed securities segregated in its investment portfolio for this purpose.

By entering into the agreement, the customer agrees to have the Bank repurchase the designated securities on the business day following the

initial transaction in consideration of the payment of interest at the rate prevailing on the day of the transaction.

The Bank can purchase up to $ 155 million in federal funds on an unsecured basis from its correspondents, against which there were no amounts outstanding at December 31, 2022 and can place brokered funds under one-way CDARS and ICS deposits in the amount of $ 1.8 billion, against which there was $ 67,000 thousand outstanding at December 31, 2022.

The Bank also has a commitment at December 31, 2022 from IntraFi to place up to $ 1.8 billion of brokered deposits from its Insured Network Deposits (“IND”) program in amounts requested by the Bank, as compared to an actual balance of $ 1.1 billion at December 31, 2022.

At December 31, 2022, the Bank was also eligible to take advances from the FHLB up to $ 1.1 billion based on collateral at the FHLB, of which there was $ 975 million outstanding at December 31, 2022.

agency and MBS segregated in its investment portfolio for this purpose.

The Company’s repurchase agreements operate on a rolling basis and do not contain contractual maturity dates.

By entering into the agreement, the customer agrees to have the Bank repurchase the designated securities on the business day following the initial transaction in consideration of the payment of interest at the rate prevailing on the day of the transaction.

The Bank can purchase up to $ 155 million in federal funds on an unsecured basis from its correspondents, against which there were no amounts outstanding at December 31, 2023 and can place brokered funds under one-way CDARS and ICS deposits in the amount of $ 1.7 billion, against which there was $ 94.0 million outstanding at December 31, 2023.

The Bank also has a commitment at December 31, 2023 from IntraFi Network, LLC ("IntraFi") to place up to $ 786.5 million of brokered deposits from its Insured Network Deposits (“IND”) program in amounts requested by the Bank, as compared to an actual balance of $ 786.5 million at December 31, 2023.

At December 31, 2023, the Bank was also eligible to take advances from the FHLB up to $ 1.3 billion based on collateral at the FHLB, of which there was none outstanding at December 31, 2023.

The Bank may enter into repurchase agreements as well as obtain additional borrowing capabilities from the FHLB provided adequate collateral exists to secure these lending relationships.

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It is anticipated that, except for periodic testing, this facility would be utilized for contingency funding only.

Long-term borrowings were $ 69.8 million at December 31, 2022 and $ 69.7 million at December 31, 2021.

The contractual maturity dates on FHLB secured borrowings represent the maturity dates of current advances and are not evidence of a termination date on the line.

There are no prepayment penalties nor unused commitment fees on any of the Company’s borrowing arrangements.

Bank Term Funding Program (“BTFP”)

On March 12, 2023, the FRB, Department of Treasury and the Federal Deposit Insurance Corporation ("FDIC") issued a joint statement outlining actions they had taken to protect the U.S.

economy by strengthening public confidence in the banking system as a result of and in response to recently announced bank closures.

Among other actions, the Federal Reserve announced that it would make available additional funding to eligible depository institutions through the creation of a new BTFP.

The BTFP provides eligible depository institutions, including the Company's subsidiary bank, EagleBank, an additional source of liquidity.

Borrowings are funded based on a percentage of the principal of eligible collateral posted, as defined within the terms of the program.

Interest is payable at a fixed rate over the term of the borrowing and there are no prepayment penalties.

The Federal Reserve announced in January 2024 that the BTFP will stop originating new loans on March 11, 2024, as scheduled.

The Federal Reserve also modified the terms of the program so that the interest rate for new loans will be no lower than the interest rate on reserve balances in effect on the day the loan is made.

Subordinated Notes

Subordinated notes outstanding were $ 69.9 million at December 31, 2023 and $ 69.8 million at December 31, 2022.

On August 5, 2014, the Company completed the sale of $ 70 million of its 5.75 % subordinated notes, due September 1, 2024 (the “2024 Notes”).

The Notes were offered to the public at par.

The 2024 Notes qualify as Tier 2 capital for regulatory purposes to the fullest extent permitted under the Basel III Rule capital requirements.

The net proceeds were approximately $ 68.8 million, which includes $ 1.2 million in deferred financing costs which are being amortized over the life of the 2024 Notes.

On July 26, 2016, the Company completed the sale of $ 150 million of its 5.00 % Fixed-to-Floating Rate Subordinated Notes, due August 1, 2026 (the “2026 Notes”).

The 2026 Notes were offered to the public at par and qualified as Tier 2 capital for regulatory purposes to the fullest extent permitted under the Basel III Rule capital requirements.

The net proceeds were approximately $ 147.4 million, which includes $ 2.6 million in deferred financing costs which is being amortized over the life of the 2026 Notes.

This note was redeemed by the Company on August 2, 2021 to reduce ongoing interest expense and to reduce excess common equity at the Bank level.

On February 26, 2020, the Bank borrowed $ 50 million dollars under its borrowing arrangement with the Federal Home Loan Bank of Atlanta at a fixed rate of 1.81 % with a maturity date of February 26, 2030 as part of the overall asset liability strategy and to support loan growth.

The advance was repaid March of 2021, as it became clear that the excess on balance sheet liquidity was not necessary.

The 2024 Notes qualified as Tier 2 capital for regulatory purposes to the fullest extent permitted under the Basel III Rule capital requirements, and were fully phased out of regulatory capital as of December 31, 2023 as they approached maturity.

The net proceeds were approximately $ 68.8 million, which included $ 1.2 million in deferred financing costs which are being amortized over the life of the 2024 Notes.

Note 13 – Income Taxes

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Total current tax expense 30,363 42,190 55,213

Deferred federal income tax expense (benefit) 3,532 5,185 ( 5,212 )

Deferred state income tax benefit 3,028 585 ( 3,120 )

Total deferred tax expense (benefit) 6,560 5,770 ( 8,332 )

Deferred federal income tax (benefit) expense

( 2,966 ) 3,532 5,185

Deferred state income tax (benefit) expense

( 411 ) 3,028 585

Total deferred tax (benefit) expense

( 3,377 ) 6,560 5,770

Total income tax expense $ 26,986 $ 48,750 $ 60,983

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Unrealized loss on securities held-to-maturity 11,725 14,366

SERP 2,495 5,631

Premises and equipment ( 205 ) 1,328

Unrealized loss on interest rate swap derivatives 59 —

Supplemental executive retirement and death benefit agreements

Other assets 2,669 1,344

3 unchanged sentences

Excess servicing ( 561 ) ( 589 )

Premises and equipment

( 211 ) ( 205 )

Leases ( 4,703 ) ( 6,034 )

3 unchanged sentences

As of December 31, 2023.

the Company has $ 3.6 million of federal net operating loss carryforward in conjunction with the Fidelity acquisition, that is subject to annual limits under Section 382 of the Internal Revenue Code and expires in 2027.

The Company has concluded, based on the weight of available positive and negative evidence, a portion of its state net operating loss deferred tax asset is not more likely than not to be realized and accordingly, a valuation allowance of $ 7.0 million and $ 6.7 million is carried as of December 31, 2022 and 2021, respectively.

the Company has $ 2.9 million of federal net operating loss carryforward in conjunction with the Fidelity & Trust Financial Corporation acquisition, that is subject to annual limits under Section 382 of the Internal Revenue Code and expires in 2027.

The Company has concluded, based on the weight of available positive and negative

evidence, a portion of its state net operating loss deferred tax asset is not more likely than not to be realized and accordingly, a valuation allowance of $ 7.4 million and $ 7.0 million is carried as of December 31, 2023 and 2022, respectively.

A reconciliation of the statutory federal income tax rate to the Company’s effective income tax rate for the years ended December 31, 2023, 2022 and 2021 follows:

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The EagleBank Foundation, a 501(c)(3) non-profit, seeks to improve the well-being of our community by providing financial support to local charitable organizations that help foster and strengthen vibrant, healthy, cultural and sustainable communities.

The Company paid $ 113 thousand, $ 134 thousand and $ 185 thousand to the EagleBank Foundation for the years ended December 31, 2022, 2021 and 2020, respectively.

The Company paid $ 143 thousand, $ 113 thousand and $ 134 thousand to the EagleBank Foundation for the years ended December 31, 2023, 2022 and 2021, respectively, which were recorded in other expenses on the Consolidated Statements of Income.

Certain directors and executive officers of the Company and the Bank and certain affiliated entities of such directors and executive officers have had loan transactions with the Company.

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The Company maintains the 2021 Stock Plan ("2021 Plan"), the 2016 Stock Plan (“2016 Plan”), the 2006 Stock Plan (“2006 Plan”), the 2021 Employee Stock Purchase Plan ("2021 ESPP") and the 2011 Employee Stock Purchase Plan (“2011 ESPP”).

In connection with the acquisition of Virginia Heritage, the Company assumed the Virginia Heritage 2006 Stock Option Plan and the 2010 Long Term Incentive Plan (the “Virginia Heritage Plans”).

In connection with the acquisition of Virginia Heritage Bank ("Virginia Heritage"), the Company assumed the Virginia Heritage 2006 Stock Option Plan and the 2010 Long Term Incentive Plan (the “Virginia Heritage Plans”).

No additional options may be granted under the 2016 Plan, 2006 Plan or the Virginia Heritage Plans.

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In February 2023, the 2020 performance award vested and 11,187 incremental shares were awarded.

In March 2022, the Company awarded 168 shares of time vested restricted stock to an employee.

The shares vest in three substantially equal installments beginning on February 14, 2023.

In June 2022, the Company awarded 1,055 shares of time vested restricted stock to an employee.

In March 2023, the Company awarded 2,540 shares of time vested restricted stock to two employees.

The shares vest in three substantially equal installments beginning on the first anniversary of the date of grant.

In May 2023, the Company awarded 984 shares of time vested restricted stock to two employees.

The shares vest in three substantially equal installments beginning on the first anniversary of the date of grant.

In June 2023, the Company awarded 1,024 shares of time vested restricted stock to two employees.

The shares vest in three substantially equal installments beginning on the first anniversary of the date of grant.

In July 2023, the Company awarded 462 shares of time vested restricted stock to an employee.

The shares vest in three substantially equal installments beginning on the first anniversary of the date of grant.

In September 2023, the Company awarded 13,818 shares of time vested restricted stock to an employee.

The shares vest in three substantially equal installments beginning on the first anniversary of the date of grant.

In October 2023, the Company awarded 2,434 shares of time vested restricted stock to an employee.

The shares vest in three substantially equal installments beginning on the first anniversary of the date of grant.

The Company has unvested restricted stock awards and PRSU grants of 437,207 shares at December 31, 2023.

1 unchanged sentence

At such date, the weighted-average period over which this unrecognized expense was expected to be recognized was 1.87 years.

The following tables summarize the unvested restricted stock awards at December 31, 2022, 2021 and 2020.

The following table summarizes the unvested restricted stock awards for performance for the years ended December 31, 2023, 2022 and 2021:

Years Ended December 31,

8 unchanged sentences

Unvested at end 123,215 $ 44.74 129,855 $ 45.15 118,568 $ 44.71

The following table summarizes the unvested time vesting restricted stock awards for the years ended December 31, 2023, 2022 and 2021:

Years Ended December 31,

8 unchanged sentences

Unvested at end 313,992 $ 49.08 302,148 $ 53.75 300,792 $ 46.24

Below is a summary of stock option activity for the twelve months ended December 31, 2022 , 2021 and 2020.

Below is a summary of stock option activity for the years ended December 31, 2023 , 2022 and 2021.

The information excludes restricted stock units and awards.

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There were no grants of stock options during the years ended December 31, 2023, 2022 and 2021.

For 2020, there was one grant to an executive officer for 2,500 incentive stock options in January 2020, which has a ten-year term and vests in three equal installments beginning on the first anniversary of the date of grant.

The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option pricing model with the assumptions shown in the table below used for the grants during 2020.

Year Ended December 31, 2020

Expected volatility 42.3 %

Weighted-Average volatility 42.3 %

Expected dividends —

Expected term (in years) 6.5

Risk-free rate 1.67 %

Weighted-average fair value (grant date) $ 21.06

The expected lives were based on the "simplified" method allowed by ASC 718 "Compensation," whereby the expected term is equal to the midpoint between the vesting date and the end of the contractual term of the award.

The total intrinsic value of outstanding stock options was $ 0 and $ 123 thousand, respectively, at December 31, 2022 and 2021.

The total fair value of stock options vested was $ 18 thousand, $ 18 thousand and $ 6 thousand, for 2022, 2021 and 2020, respectively.

Grants of stock options have expected lives based on the "simplified" method allowed by ASC 718 "Compensation," whereby the expected term is equal to the midpoint between the vesting date and the end of the contractual term of the award.

There was no intrinsic value of outstanding stock options for both December 31, 2023 and 2022.

The total fair value of stock options vested was $ 18 thousand for all three years ended December 31, 2023, 2022 and 2021.

At December 31, 2023, there is no unrecognized stock-based compensation expense related to stock options.

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Total $ 2,167,094 $ 2,550,813

Because most of the Company’s business activity is with customers located in the Washington, D.C.

metropolitan area, a geographic concentration of credit risk exists within the loan portfolio, the performance of which will be influenced by the economy of the region.

As of December 31, 2023, the total reserve for unfunded commitments was $ 5.6 million as compared to $ 5.9 million at December 31, 2022 and is accounted for as a liability on the Consolidated Statements of Financial Condition.

See Note 1 of the Consolidated Financial Statements for more information on the accounting policy for the allowance for unfunded commitments.

The Bank maintains a reserve for the potential repurchase of residential mortgage loans, which amounted to $ 25 thousand at December 31, 2022 and $ 125 thousand at December 31, 2021.

The Bank maintains a reserve for the potential repurchase of residential mortgage loans, which was $ 0 at December 31, 2023 and $ 25 thousand at December 31, 2022.

These amounts are included in other liabilities in the accompanying Consolidated Balance Sheets.

The Bank recently announced that it plans to cease originating residential mortgages for sale in the first quarter of 2023 (See Note 26 of the Consolidated Financial Statements for further details).

The Company commenced the cessation of first lien residential mortgage origination for secondary sale during the three months ended March 31, 2023, and subsequently, completed residual origination and sales activities as of June 30, 2023.

Additions to the reserve are a component of other expenses in the accompanying Consolidated Statements of Income.

1 unchanged sentence

Through December 31, 2023, no reserve charges have occurred related to fraud.

The Company enters into interest rate lock commitments, which are commitments to originate loans whereby the interest rate on the loan is determined prior to funding and the customers have locked into that interest rate.

The residential mortgage division either locks in the loan and rate with an investor and commits to deliver the loan if settlement occurs under best efforts or commits to deliver the locked loan in a binding mandatory delivery program with an investor.

Certain loans under rate lock commitments are covered under forward sales contracts of mortgage-backed securities as a hedge of any interest rate risk.

Forward sales contracts of mortgage-backed securities are recorded at fair value with changes in fair value recorded in noninterest income.

Interest rate lock commitments and commitments to deliver loans to investors are considered derivatives.

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

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

These transactions are further detailed in Note 9 "Mortgage Banking Derivatives".

Note 20 – Commitments and Contingent Liabilities

17 unchanged sentences

16,292 6,340 518 735 23,885

2,000 — — — 2,000

Total $ 9,465,453 $ 784,652 $ 35,134 $ 8,966 $ 10,294,205

(1) Excludes accrued interest payable at December 31, 2023.

(2) Borrowed funds include customer repurchase agreements and other short-term and long-term borrowings.

(2) Borrowed funds include customer repurchase agreements and other borrowings.

(3) The Bank has outstanding obligations under its current core data processing contract that expire in June 2029 and one other vendor arrangement that relates to network infrastructure and data center services that expires in December 2024.

(4) The Bank has the option of terminating the George Mason agreement at the end of contract years 10 and 15 (that is, effective June 30, 2025 or June 30, 2030).

(4) The Bank has the option of terminating the George Mason University ("George Mason") agreement at the end of contract years 10 and 15 (that is, effective June 30, 2025 or June 30, 2030).

Should the Bank elect to exercise its right to terminate the George Mason contract, contractual obligations would decrease $ 3.5 million and $ 3.6 million for the first option period (years 11 - 15 ) and the second option period (years 16 - 20 ), respectively.

(5) LIHTC expected payments for unfunded affordable housing commitments.

(6) As disclosed in the 8-K dated January 25, 2021, pursuant to the executed stipulation of settlement of the demand litigation, the Company has agreed to invest an additional $ 2.0 million incremental spend above 2020 levels by the end of 2023 to enhance its corporate governance and risk and compliance controls and infrastructure.

An accrual is recorded when it is both (a) probable that a loss has occurred and (b) the amount of loss can be reasonably estimated.

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On August 16, 2022, the SEC approved the settlement, pursuant to which the Company consented, without admitting or denying the SEC's allegations, to the entry of an administrative cease-and-desist order for violations of Sections 17(a)(2) and (3) of the Securities Act of 1933, as amended, Sections 13(a), 13(b)(2)(A), 13(b)(2)(B) and 14(a) of the Securities Exchange Act of 1934, as amended, and Rules 13a-1, 14a-9 and 12b-20 thereunder;

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

and therefore, recorded and paid a civil money penalty of $ 10.0 million and $ 2.6 million in disgorgement, plus prejudgment interest.

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

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

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

No additional liabilities were recorded for the year ended December 31, 2023 in connection with the SEC's approval and public announcement of the settlement.

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

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

2 unchanged sentences

§§ 215 et seq.

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

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

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

No additional liabilities were recorded for the year ended December 31, 2023 in connection with the FRB's approval and public announcement of the settlement.

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

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

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

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

When D&O Insurance Policies are exhausted, the Company is responsible for paying the defense cost associated with any investigations and litigations for itself and on behalf of any current and former Officers and Directors entitled to indemnification from the Company.

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

Note 21 – Regulatory Matters

3 unchanged sentences

The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weighting, and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Company and Bank to maintain amounts and ratios (set forth in the table below) of Total capital, Tier 1 capital and CET1 (as defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 capital (as defined) to average assets (as defined), referred to as the Leverage Ratio.

Quantitative measures established by regulation to ensure capital adequacy require the Company and Bank to maintain amounts and ratios (set forth in the table below) of Total capital, Tier 1 capital and common equity tier one capital ("CET1") (as defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 capital (as defined) to average assets (as defined), referred to as the Leverage Ratio.

Management believes, as of December 31, 2023 and 2022, that the Company and Bank met all capital adequacy requirements to which they are subject.

1 unchanged sentence

Company Bank Minimum Required

Adequacy Purposes To Be Well

Adequacy Purposes (1)

Corrective Action

12 unchanged sentences

Tier 1 capital (to average assets) 1,329,971 11.63 % 1,341,347 11.78 % 4.00 % 5.00 %

(1) The risk-based ratios reflect the minimum requirement plus the capital conservation buffer of 2.500 %.

(2) Applies to Bank only

2 unchanged sentences

As a result the Company may be restricted in paying dividends.

Note 23 – Other Comprehensive Income

Note 22 – Other Comprehensive Income (Loss)

The following table presents the components of other comprehensive income (loss) for the years ended December 31, 2023, 2022 and 2021.

4 unchanged sentences

Total unrealized gain (loss) 43,304 ( 10,777 ) 32,527

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

Amortization of unrealized loss on securities transferred to held-to-maturity 7,412 ( 2,607 ) 4,805

Total unrealized gain (loss) ( 59,100 ) 14,366 ( 44,734 )

Net unrealized gain on derivatives 284 — 284

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

Total unrealized gain 284 — 284

Net unrealized loss on derivatives

( 182 ) — ( 182 )

Other comprehensive income (loss) $ 50,534 $ ( 13,384 ) $ 37,150

Year Ended December 31, 2022

Net unrealized gain (loss) on securities available-for-sale $ ( 37,669 ) $ 9,746 $ ( 27,923 )

Reclassification adjustment for net gain (loss) included in net income ( 2,964 ) 761 ( 2,203 )

Total unrealized gain (loss) ( 40,633 ) 10,507 ( 30,126 )

Net unrealized gain (loss) on derivatives — — —

Reclassification adjustment for gain (loss) included in net income 516 ( 132 ) 384

Total unrealized gain (loss) 516 ( 132 ) 384

Other comprehensive income (loss) $ ( 40,117 ) $ 10,375 $ ( 29,742 )

Net unrealized (loss) gain on securities available-for-sale

$ ( 186,439 ) $ 45,513 $ ( 140,926 )

Reclassification adjustment for net loss included in net income

169 ( 58 ) 111

Total unrealized (loss) gain

( 186,270 ) 45,455 ( 140,815 )

Net unrealized (loss) gain on securities transferred to held-to-maturity

( 66,193 ) 17,098 ( 49,095 )

Amortization of unrealized loss on securities transferred to held-to-maturity 7,093 ( 2,732 ) 4,361

Total unrealized (loss) gain

( 59,100 ) 14,366 ( 44,734 )

Net unrealized gain on derivatives 284 — 284

Other comprehensive (loss) income

$ ( 245,086 ) $ 59,821 $ ( 185,265 )

Year Ended December 31, 2021

Net unrealized gain (loss) on securities available-for-sale $ ( 37,669 ) $ 9,746 $ ( 27,923 )

Reclassification adjustment for net loss included in net income ( 1,815 ) 452 ( 1,363 )

Total unrealized gain (loss) 17,822 ( 4,763 ) 13,059

Net unrealized gain (loss) on derivatives ( 2,049 ) 671 ( 1,378 )

Reclassification adjustment for gain (loss) included in net income 1,145 ( 285 ) 860

Total unrealized gain (loss) ( 904 ) 386 ( 518 )

Other comprehensive income (loss) $ 16,918 $ ( 4,377 ) $ 12,541

Reclassification adjustment for net (gain) loss included in net income

( 2,964 ) 761 ( 2,203 )

Total unrealized (loss) gain

( 40,633 ) 10,507 ( 30,126 )

Reclassification adjustment for loss on derivatives included in net income

516 ( 132 ) 384

Other comprehensive (loss) income

$ ( 40,117 ) $ 10,375 $ ( 29,742 )

The following table presents the changes in each component of accumulated other comprehensive income (loss), net of tax, for the years ended December 31, 2023, 2022 and 2021.

3 unchanged sentences

Year Ended December 31, 2023

Balance at Beginning of Period $ ( 13,958 ) $ — $ ( 284 ) $ ( 14,242 )

Balance at beginning of year

$ ( 154,773 ) $ ( 44,734 ) $ — $ ( 199,507 )

Other comprehensive income (loss) before reclassifications 32,519 — ( 182 ) 32,337

Transfer of securities from AFS to HTM ( 49,095 ) ( 49,095 )

Amounts reclassified from accumulated other comprehensive income 111 4,361 — 4,472

Amortization of unrealized loss on securities transferred to held-to-maturity

— 4,805 — 4,805

Amounts reclassified from accumulated other comprehensive loss

Net other comprehensive income (loss) during period 32,527 4,805 ( 182 ) 37,150

Balance at End of Period $ ( 154,773 ) $ ( 44,734 ) $ — $ ( 199,507 )

Balance at end of year

$ ( 122,246 ) $ ( 39,929 ) $ ( 182 ) $ ( 162,357 )

Year Ended December 31, 2022

Balance at Beginning of Period $ 16,168 $ — $ ( 668 ) $ 15,500

Other comprehensive income (loss) before reclassifications ( 27,923 ) — — ( 27,923 )

Amounts reclassified from accumulated other comprehensive income ( 2,203 ) — 384 ( 1,819 )

Balance at beginning of year

$ ( 13,958 ) $ — $ ( 284 ) $ ( 14,242 )

Other comprehensive (loss) income before reclassifications

( 140,926 ) — 284 ( 140,642 )

Transfer of securities from AFS to HTM — ( 49,095 ) — ( 49,095 )

Amortization of unrealized loss on securities transferred to held-to-maturity

— 4,361 — 4,361

Amounts reclassified from accumulated other comprehensive loss

Net other comprehensive income (loss) during period ( 140,815 ) ( 44,734 ) 284 ( 185,265 )

Balance at End of Period $ ( 13,958 ) $ — $ ( 284 ) $ ( 14,242 )

Balance at end of year

$ ( 154,773 ) $ ( 44,734 ) $ — $ ( 199,507 )

Year Ended December 31, 2021

Balance at Beginning of Period $ 3,109 $ — $ ( 150 ) $ 2,959

Other comprehensive income (loss) before reclassifications 14,422 — ( 1,378 ) 13,044

Amounts reclassified from accumulated other comprehensive income ( 1,363 ) — 860 ( 503 )

Balance at beginning of year

$ 16,168 $ — $ ( 668 ) $ 15,500

Other comprehensive (loss) income before reclassifications

( 27,923 ) — — ( 27,923 )

Amounts reclassified from accumulated other comprehensive income (loss)

( 2,203 ) — 384 ( 1,819 )

Net other comprehensive income (loss) during period ( 30,126 ) — 384 ( 29,742 )

Balance at End of Period $ 16,168 $ — $ ( 668 ) $ 15,500

Balance at end of year

$ ( 13,958 ) $ — $ ( 284 ) $ ( 14,242 )

The following table presents the amounts reclassified out of each component of accumulated other comprehensive income (loss) for the years ended December 31, 2023, 2022 and 2021.

Details about Accumulated Other Amount Reclassified from

Amount Reclassified from

Accumulated Other

2 unchanged sentences

Net Income is Presented

Comprehensive Income Components Year Ended December 31,

Year Ended December 31,

(dollars in thousands) 2023 2022 2021

Realized gain (loss) on sale of investment securities $ ( 169 ) $ 2,964 $ 1,815 Gain (loss) on sale of investment securities

Gain / (loss) on derivatives — ( 516 ) ( 1,145 ) Interest on deposits

Income tax (expense) benefit 58 ( 629 ) ( 167 ) Income tax expense

Total Reclassifications for the Period $ ( 111 ) $ 1,819 $ 503 Net Income

Realized (loss) gain on sale of investment securities

$ ( 11 ) $ ( 169 ) $ 2,964 Net (loss) gain on sale of investment securities

Loss on derivatives

— — ( 516 ) Interest on deposits

Income tax benefit (expense)

3 58 ( 629 ) Income tax expense

$ ( 8 ) $ ( 111 ) $ 1,819 Net Income

Note 23 – Fair Value Measurements

6 unchanged sentences

Level 1 Quoted prices in active exchange markets for identical assets or liabilities;

also includes certain U.S.

treasury and other U.S.

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

Level 2 Observable inputs other than Level 1 including quoted prices for similar assets or liabilities, quoted prices in less active markets or other observable inputs that can be corroborated by observable market data;

also includes derivative contracts whose value is determined using a pricing model with observable market inputs or can be derived principally from or corroborated by observable market data.

also includes derivative contracts whose value is determined using a pricing model with observable market inputs or inputs that can be derived principally from or corroborated by observable market data.

This category generally includes certain U.S.

19 unchanged sentences

Corporate bonds — 1,683 — 1,683

Loans held for sale — 6,734 — 6,734

Interest rate caps — 31,039 — 31,039

Mortgage banking derivatives — — 93 93

Total assets measured at fair value on a recurring basis as of December 31, 2022 $ — $ 1,636,439 $ 93 $ 1,636,532

Interest rate swap derivatives $ — $ — $ — $ —

Interest rate product

— 30,662 — 30,662

Credit risk participation agreements

Interest rate caps — 30,065 — 30,065

Total assets measured at fair value on a recurring basis as of December 31, 2023 $ — $ 1,537,053 $ — $ 1,537,053

Interest rate product

$ — $ 30,555 $ — $ 30,555

Total liabilities measured at fair value on a recurring basis as of December 31, 2023 $ — $ 30,555 $ — $ 30,555

4 unchanged sentences

Residential mortgage-backed securities — 820,503 — 820,503

Corporate mortgage-backed securities

— 50,213 — 50,213

Municipal bonds — 10,087 — 10,087

1 unchanged sentence

Loans held for sale — 6,734 — 6,734

Interest rate caps — 5,197 — 5,197

Interest rate product

— 31,039 — 31,039

Mortgage banking derivatives — — 93 93

Total assets measured at fair value on a recurring basis as of December 31, 2022 $ — $ 1,636,439 $ 93 $ 1,636,532

Interest rate swap derivatives $ — $ — $ — $ —

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

Interest rate caps — 5,147 — 5,147

Interest rate product

— 30,065 — 30,065

Total liabilities measured at fair value on a recurring basis as of December 31, 2022 $ — $ 30,067 $ — $ 30,067

Investment Securities

Investment securities available-for-sale:

Investment securities available-for-sale are recorded at fair value on a recurring basis.

1 unchanged sentence

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

Level 2 securities include U.S.

agency debt securities, mortgage-backed securities issued by Government Sponsored Entities (“GSE’s”), U.S.

Treasury securities that are traded by dealers or brokers in active over-the-counter markets and municipal bonds.

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

Level 1 securities include certain U.S.

treasury bonds, U.S.

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

Level 2 securities includes certain U.S.

treasury bonds, U.S.

agency debt securities, MBS issued by Government Sponsored Entities and municipal bonds.

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

Loans held for sale :

1 unchanged sentence

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

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

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

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

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 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 and 2021.

December 31, 2022

(dollars in thousands) Fair Value Aggregate

Balance Difference

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

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 2022.

December 31, 2022

2 unchanged sentences

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

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

Interest rate swap derivatives:

These derivative instruments consist of interest rate swap agreements, which are accounted for as cash flow hedges under ASC 815.

The Company’s derivative position is classified within Level 2 of the fair value hierarchy and is valued using models generally accepted in the financial services industry and that use actively quoted or observable market input values from external market data providers and/or non-binding broker-dealer quotations.

The fair value of the derivatives is determined using discounted cash flow models.

These models’ key assumptions include the contractual terms of the respective contract along with significant observable inputs, including interest rates, yield curves, nonperformance risk and volatility.

Derivative contracts are executed with a Credit Support Annex, which is a bilateral agreement that requires collateral postings when the market value exceeds certain threshold limits.

These agreements protect the interests of the Company and its counterparties should either party suffer credit rating deterioration.

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 December 31, 2023.

Credit risk participation agreements :

3 unchanged sentences

Accordingly, RPAs fall within Level 2.

Interest rate caps:

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

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

Interest rate derivatives:

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

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

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

Accordingly, the cap falls within Level 2.

Accordingly, the derivative falls within Level 2.

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

7 unchanged sentences

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

(dollars in thousands) Investment

Securities Mortgage Banking

Derivatives Total

Beginning balance at January 1, 2021 $ 1,500 $ 5,213 $ 6,713

Realized loss included in earnings — ( 4,577 ) ( 4,577 )

Reclass Level 2 to 3 10,000 — 10,000

Principal redemption ( 1,500 ) — ( 1,500 )

Ending balance at December 31, 2021 $ 10,000 $ 636 $ 10,636

Beginning balance at January 1, 2021 $ — $ — $ —

Realized gain included in earnings — — —

Ending balance at December 31, 2021 $ — $ — $ —

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

December 31, 2022

December 31, 2021

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

Fair Value Weighted Average (1)

Mortgage banking derivatives Pricing Model Pull Through Rate 84 % - 100 %

83.80 % $ 93 86.40 % $ 636

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

Mortgage banking derivatives for loans settled on a mandatory basis:

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 includes 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 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, the Company does not have any of these derivatives as of December 31, 2023.

Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis

3 unchanged sentences

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

In accordance with ASC 820, individually assessed loans where an allowance is established based on the fair value of collateral require classification in the fair value hierarchy.

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

those that are collateral dependent, require classification in the fair value hierarchy.

When the fair value of the collateral is based on an observable market price or a current appraised value, the Company records the loan as nonrecurring Level 2.

When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, the Company records the loan as nonrecurring Level 3.

Other real estate owned :

Other real estate owned ("OREO") :

OREO is initially recorded at fair value less estimated selling costs.

14 unchanged sentences

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

Consumer — — 3 3

Construction - commercial and residential — — 396 396

Home equity — — 242 242

Other real estate owned — — 1,108 1,108

12 unchanged sentences

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

Construction - commercial and residential — — 3,093 3,093

Home equity — — 366 366

PPP loans 1,365 1,365

Other consumer 3 3

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

7 unchanged sentences

Accordingly, the net realizable value could be materially different from the estimates presented below.

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.

In addition, the estimates are only indicative of individual financial instrument values, including in certain cases, the Company's estimation of exit pricing, and should not be considered an indication of the fair value of the Company taken as a whole.

Estimated fair values of the Company’s financial instruments at December 31, 2023 and 2022 are as follows:

13 unchanged sentences

Federal Reserve and Federal Home Loan Bank stock 25,748 N/A — — —

Loans held for sale 6,734 6,734 — 6,734 —

Loans 7,968,695 7,720,241 — — 7,720,241

1 unchanged sentence

Annuity investment 13,112 13,112 — 13,112 —

Mortgage banking derivatives 93 93 — 93

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

Credit risk participation agreements

Interest rate product

30,662 30,662 — 30,662 —

Accrued interest receivable

53,337 53,337 53,337 — —

Noninterest bearing deposits 2,279,081 2,279,081 — 2,279,081 —

3 unchanged sentences

Borrowings 1,369,918 1,368,621 — 1,368,621 —

Credit risk participation agreements 2 2 — 2 —

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

Interest rate product

30,555 30,555 — 30,555 —

Accrued interest payable

57,395 57,395 57,395 — —

Fair Value Measurements

(dollars in thousands) Carrying

Value Fair Value Quoted Prices

(Level 1) Significant Other

Observable Inputs

(Level 2) Significant Other Unobservable

Inputs (Level 3)

December 31, 2022

3 unchanged sentences

Investment securities available-for-sale 1,598,666 1,598,666 — 1,598,666 —

Investment securities held-to-maturity

1,093,374 968,707 — 968,707 —

Federal Reserve and Federal Home Loan Bank stock 65,067 N/A — — —

1 unchanged sentence

Loans 7,635,632 7,501,484 — 7,501,484

Bank owned life insurance 110,998 110,998 — 110,998 —

Annuity investment 13,869 13,869 — 13,869 —

Mortgage banking derivatives 93 93 — 93

Interest rate swap derivatives 5,197 5,197 — 5,197 —

Interest rate product

31,039 31,039 — 31,039 —

Accrued interest receivable

51,390 51,390 51,390 — —

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

4 unchanged sentences

Credit risk participation agreements, 2 2 — 2 —

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

Interest rate product

30,065 30,065 — 30,065 —

Accrued interest payable

4,881 4,881 4,881 — —

Note 24 – Parent Company Financial Information

Condensed financial information for Eagle Bancorp, Inc.

(Parent Company only) is as follows:

(the "Parent Company") is as follows:

Parent Company Condensed Balance Sheets as of

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

Cash $ 21,540 $ 41,997

Investment securities available-for-sale, at fair value, net of allowance for credit loss of $0 in 2021 — 43,680

Investment securities held-to-maturity, net allowance for credit loss of $326 thousand in 2022 44,673 —

Investment in subsidiaries 1,240,473 1,342,784

Cash and due from banks

$ 38,396 $ 21,540

Investment securities held-to-maturity, net allowance for credit losses of $ 1,449 and $ 326 at December 31, 2023 and 2022, respectively

43,633 44,673

Investment in subsidiary

1,269,022 1,240,473

Other assets 10,366 9,065

1 unchanged sentence

Other liabilities $ 17,216 $ 17,636

Long-term borrowings 69,794 69,670

69,918 69,794

Total liabilities 87,134 87,430

6 unchanged sentences

Total Liabilities and Shareholders’ Equity $ 1,361,417 $ 1,315,751

Parent Company Condensed Statements of Income

Years Ended December 31,

15 unchanged sentences

Net Income $ 100,534 $ 140,930 $ 176,691

Parent Company Condensed Statements of Cash Flows

Years Ended December 31,

4 unchanged sentences

Equity in undistributed income of subsidiary 18,549 ( 72,748 ) ( 17,449 )

Net tax benefits from stock compensation 9,899 7,811 118

Net tax benefits from stock based compensation expense

10,018 9,899 7,811

Securities premium amortization, net 6 ( 54 ) 5

1 unchanged sentence

Depreciation and amortization 124 — —

Decrease (increase) in other assets ( 12,909 ) 66,598 ( 48,966 )

Increase (decrease) in other liabilities 4,593 ( 681 ) 6,823

(Increase) decrease in other assets

( 10,397 ) ( 12,909 ) 66,598

(Decrease) increase in other liabilities

( 1,064 ) 4,593 ( 681 )

Net cash provided by operating activities 118,894 70,037 232,975

12 unchanged sentences

Net cash used in financing activities ( 102,038 ) ( 88,018 ) ( 193,284 )

Net (Decrease) Increase in Cash ( 20,457 ) 12,722 ( 13,929 )

Net Increase (Decrease) in Cash

16,856 ( 20,457 ) 12,722

Cash and Cash Equivalents at Beginning of Year 21,540 41,997 29,275

2 unchanged sentences

Transfers of investment securities from available-for-sale to held-to-maturity $ — $ 42,467 $ —

Note 26 - Subsequent Event

In early 2023, the Company made the strategic decision to cease originating first lien residential mortgage loans for secondary sale, due to diminishing residential mortgage production volumes in the face of a higher interest rate environment and increasing costs associated with regulatory compliance and risk management.

The Company currently anticipates that the exit of the residential mortgage origination and secondary sale banking activities will be completed in the third quarter of 2023, following the expected closure of the residential first lien mortgage loans currently in the origination pipeline by the end of the first quarter of 2023, and the expected sale of all of the remaining residential mortgage loans held for sale by the end of the third quarter of 2023.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES

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-K

Item 8. Financial Statements and Supplementary Data