What changed in this filing

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Item 1. Financial Statements

2024-05-03 compared with 2023-11-08 · 376 added, 479 removed, 898 unchanged (49% of the section changed)

Item 1 – Financial Statements

FINANCIAL STATEMENTS

EAGLE BANCORP, INC.

1 unchanged sentence

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

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

Cash and due from banks $ 10,076 $ 9,047

6 unchanged sentences

Federal Reserve and Federal Home Loan Bank stock 54,678 25,748

Loans held for sale — 6,734

Loans 7,982,702 7,968,695

2 unchanged sentences

Premises and equipment, net 9,504 10,189

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

Right-of-use assets - operating leases 17,679 19,129

Deferred income taxes 87,813 86,620

11 unchanged sentences

Customer repurchase agreements 37,059 30,587

Other short-term borrowings 1,300,001 975,001

Long-term borrowings 69,887 69,794

Borrowings 1,669,948 1,369,918

Operating lease liabilities 21,611 23,238

12 unchanged sentences

EAGLE BANCORP, INC.

Consolidated Statements of Income (Unaudited)

Consolidated Statements of Operations (Unaudited)

(dollars in thousands, except per share data)

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

2023 2022 2023 2022

Three Months Ended March 31,

Interest Income

7 unchanged sentences

Interest on customer repurchase agreements 315 302

Interest on other short-term borrowings 18,152 412 56,989 992

Interest on long-term borrowings 1,038 1,038 3,112 3,112

Interest on borrowings 21,206 15,967

Total interest expense 100,904 65,223

1 unchanged sentence

Provision for Credit Losses 35,175 6,164

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

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

Provision for Credit Losses for Unfunded Commitments 456 848

Net Interest Income After Provision for Credit Losses 39,067 68,012

Noninterest Income

Service charges on deposits 1,699 1,510

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

Gain on sale of loans — 305

Net gain (loss) on sale of investment securities 4 ( 21 )

13 unchanged sentences

Income Tax Expense 2,997 6,894

Net Income $ 27,383 $ 37,297 $ 80,309 $ 98,737

Earnings Per Common Share

Net (Loss) Income $ ( 338 ) $ 24,234

(Loss) Earnings Per Common Share

Basic $ ( 0.01 ) $ 0.78

2 unchanged sentences

EAGLE BANCORP, INC.

Consolidated Statements of Comprehensive Income (Loss) (Unaudited)

Consolidated Statements of Comprehensive (Loss) Income (Unaudited)

(dollars in thousands)

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

2023 2022 2023 2022

Net Income $ 27,383 $ 37,297 $ 80,309 $ 98,737

Three Months Ended March 31,

Net (Loss) Income $ ( 338 ) $ 24,234

Other Comprehensive (Loss) Income, Net of Tax:

2 unchanged sentences

Total unrealized (loss) gain on investment securities available-for-sale ( 5,070 ) 17,952

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

— — — ( 49,095 )

Amortization of unrealized loss on securities transferred to held-to-maturity 1,385 641

Total unrealized gain (loss) on investment securities held-to-maturity 1,400 1,762 3,444 ( 45,342 )

Total unrealized gain on investment securities held-to-maturity 1,385 641

Unrealized gain on derivatives 274 —

Total unrealized gain on derivatives 274 —

Other comprehensive (loss) income ( 3,411 ) 18,593

Comprehensive Income (Loss) $ 7,465 $ ( 20,973 ) $ 68,311 $ ( 97,660 )

(1) Represents unamortized accumulated other comprehensive loss on securities transferred to held-to-maturity status.

Comprehensive (Loss) Income $ ( 3,749 ) $ 42,827

See Notes to Consolidated Financial Statements.

5 unchanged sentences

Shares Amount

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

Net Income — — — 27,383 — 27,383

Other comprehensive loss, net of tax — — — — ( 19,918 ) ( 19,918 )

Stock-based compensation expense — — 1,969 — — 1,969

Vesting of time-based stock awards issued at date of grant, net of shares withheld for payroll taxes ( 15,250 ) — — — — —

Time-based stock awards granted 14,280 — — — — —

Issuance of common stock related to employee stock purchase plan 6,870 — 145 — — 145

Cash dividends declared ($ 0.45 per share)

— — — ( 13,463 ) — ( 13,463 )

Common stock repurchased — — 2 — — 2

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

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

Net Income — — — 37,297 — 37,297

Other comprehensive loss, net of tax — — — — ( 58,270 ) ( 58,270 )

Stock-based compensation expense — — 2,274 — — 2,274

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

Vesting of time-based stock awards issued at date of grant, net of shares withheld for payroll taxes ( 2,893 ) — — — — —

Time-based stock awards granted — — — — — —

Issuance of common stock related to employee stock purchase plan 3,973 — 188 — — 188

Cash dividends declared ($ 0.45 per share)

— — — ( 14,438 ) — ( 14,438 )

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

See Notes to Consolidated Financial Statements.

EAGLE BANCORP, INC.

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

(dollars in thousands except share and per share data)

Accumulated Other Comprehensive Income (Loss)

Common Additional Paid-in Capital Retained Earnings Shareholders' Equity

Shares Amount

Balance January 1, 2024 29,925,612 $ 296 $ 374,888 $ 1,061,456 $ ( 162,357 ) $ 1,274,283

Net Income — — — 80,309 — 80,309

Net Loss — — — ( 338 ) — ( 338 )

Other comprehensive income, net of tax — — — — ( 3,411 ) ( 3,411 )

6 unchanged sentences

— — — ( 13,568 ) — ( 13,568 )

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

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

Balance March 31, 2024 30,185,732 $ 297 $ 377,334 $ 1,047,550 $ ( 165,768 ) $ 1,259,413

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

2 unchanged sentences

Stock-based compensation expense — — 2,948 — — 2,948

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 ( 37,104 ) 2 ( 2 ) — — —

4 unchanged sentences

— — — ( 13,897 ) — ( 13,897 )

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

Common stock repurchased ( 400,000 ) ( 4 ) ( 18,370 ) — — ( 18,374 )

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

See Notes to Consolidated Financial Statements.

2 unchanged sentences

(dollars in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash Flows From Operating Activities:

Net Income $ 80,309 $ 98,737

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

Net (Loss) Income $ ( 338 ) $ 24,234

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

Provision for credit losses 35,175 6,164

2 unchanged sentences

Gain on sale of loans — ( 305 )

Loss (gain) on mortgage servicing rights 108 ( 872 )

Loss on mortgage servicing rights 34 35

Securities premium amortization, net 1,432 1,715

1 unchanged sentence

Proceeds from sale of loans held for sale — 28,480

Net gain on sale of other real estate owned ( 134 ) ( 107 )

Net loss on sale of investment securities 14 172

(Gain) loss on sale of investment securities ( 4 ) 21

Net increase in cash surrender value of BOLI ( 703 ) ( 655 )

1 unchanged sentence

Increase in other assets ( 696 ) ( 9,019 )

Increase in other liabilities 51,058 5,503

(Increase) decrease in other liabilities ( 35,664 ) 33,369

Net Cash Provided by Operating Activities 2,846 60,796

1 unchanged sentence

Investment securities available-for-sale:

Purchases — ( 414,935 )

Proceeds from maturities 26,883 31,235

1 unchanged sentence

Investment securities held-to-maturity:

Purchases — ( 290,740 )

Proceeds from maturities 16,027 17,996

Proceeds from call 52 68

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

Purchase of Federal Reserve stock ( 71 ) ( 69 )

Purchase of Federal Home Loan Bank stock ( 28,859 ) ( 13,998 )

Net increase in loans ( 35,758 ) ( 103,019 )

2 unchanged sentences

Net change in premises and equipment ( 71 ) ( 313 )

Net Cash Used in Investing Activities ( 83,080 ) ( 663,100 )

Net Cash Provided by (Used in) Investing Activities 5,859 ( 59,361 )

Cash Flows From Financing Activities:

Decrease in deposits ( 306,600 ) ( 1,249,941 )

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

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

Increase in customer repurchase agreements 6,472 2,754

Proceeds from borrowings 2,100,000 4,883,000

Repayment of borrowings ( 1,800,000 ) ( 3,744,200 )

Proceeds from employee stock purchase plan 79 133

Proceeds from exercise of equity compensation plans — 97

Common stock repurchased — ( 18,374 )

8 unchanged sentences

(dollars in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Supplemental Cash Flows Information:

Interest paid $ 66,800 $ 61,287

Income taxes paid $ 16,940 $ 16,150

Non-Cash Investing Activities

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

Transfers from loans to other real estate owned $ 400 $ —

21 unchanged sentences

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

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

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

In April 2024, the Company closed a branch following the lease's expiration.

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

Eagle Insurance Services, LLC, a subsidiary of the Bank that previously offered 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.

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

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

Use of Estimates

6 unchanged sentences

Debt securities are classified as held-to-maturity and carried at amortized cost when management has the positive intent and ability to hold them to maturity.

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

Securities available-for-sale are acquired as part of the Company's asset/liability management strategy and may be sold in response to changes in interest rates, current market conditions, loan demand, changes in prepayment risk and other factors.

Securities available-for-sale are carried at fair value, with unrealized gains or losses, other than impairment losses, being reported as accumulated other comprehensive income/(loss), a separate component of shareholders' equity, net of deferred income tax.

Realized gains and losses, using the specific identification method, are included as a separate component of noninterest income in the Consolidated Statements of Operations.

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

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

Transfers of debt securities into the held-to-maturity category from the available-for-sale category are made at amortized cost, net of unrealized gain or loss reported in accumulated other comprehensive income (loss) at the date of transfer.

The unrealized holding gain or loss at the date of transfer is retained in other comprehensive income and in the carrying value of the held-to-maturity securities.

The unrealized holding gain or loss at the date of transfer is retained in other comprehensive income and in the carrying value of the held-to-maturity ("HTM") securities.

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.

Loans held for investment are stated at the principal amount outstanding, net of unamortized deferred costs and fees.

7 unchanged sentences

A loan is placed back on accrual status when both principal and interest are current and it is probable that we will be able to collect all amounts due (both principal and interest) according to the terms of the loan agreement.

Allowance for Credit Losses

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

Three Months Ended March 31,

(dollars in thousands) 2024 2023

Provision for credit losses - loans $ 35,174 $ 4,908

Provision for credit losses - HTM debt securities 1 1,242

Provision for credit losses - AFS debt securities — 14

Total $ 35,175 $ 6,164

Allowance for Credit Losses - Loans

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

Accounting Standards Codification ("ASC") 326, "Financial Instruments-Credit Losses" requires that an estimate of current expected credit losses ("CECL") be immediately recognized and reevaluated over the contractual life of the financial asset 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 the 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.

11 unchanged sentences

EAD is based on each instrument's underlying amortization schedule in order to estimate the bank's expected credit loss exposure at the time of the borrower's potential default.

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.

During the three months ended March 31, 2024, management enhanced the cash flow model to incorporate three macroeconomic variables in addition to national unemployment.

The four economic variables selected, national unemployment, which was the original variable used, Commercial Real Estate ("CRE") Price Index, House Price Index and Gross Domestic Product ("GDP"), are incorporated by utilizing a Loss Driver Analysis approach that factors in historical losses, including during the Great Recession, of regional peer banks and the Bank.

The updated model incorporates a weighting of three economic scenarios;

baseline, upside and downside.

The scenarios cover the four economic forecast variables, with each segment of the portfolio linked to two of these variables, depending on the segment.

The loss driver analysis is spread 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.

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

In addition to the quantitative model and individual evaluation conducted in connection with CECL, the Company applies qualitative and environmental factors into its methodology for the calculation of its ACL for its loan portfolio.

The factors include:

(i) changes in the nature and volume of the portfolio;

(ii) changes in the volume and severity of past due financial assets and the volume and severity of adversely classified assets;

(iii) changes in the value of underlying collateral for loans not individually evaluated;

(iv) changes in lending policies and procedures;

(v) changes in the quality of credit review function;

(vi) changes in lending management and staff;

(vii) concentrations of credit;

(viii) other external factors (competition, legal, regulatory, etc.);

and (ix) changes in national, regional, and local economic and business conditions.

The Company's quantitative model may reflect assumptions by management that are not covered by the qualitative and environmental factors.

The Company reevaluates the qualitative and environmental factors on a quarterly basis.

The ACL also includes an amount for inherent risks not reflected in the historical analyses.

Relevant factors include, but are not limited to, concentrations of credit risk, changes in underwriting standards, experience and depth of lending staff and trends in delinquencies.

While our methodology in establishing the ACL attributes portions of the ACL and RUC to the separate loan pools or segments, the entire ACL and RUC is available to absorb credit losses expected in the total loan portfolio and total amount of unfunded credit commitments, respectively.

Portfolio segments are used to pool loans with similar risk characteristics and align with our methodology for measuring expected credit losses.

Portfolio segments are used to pool loans with similar risk characteristics and align with our methodology for measuring current expected credit losses ("CECL").

A summary of our primary portfolio segments is as follows:

38 unchanged sentences

The methodology used in the estimation of the allowance, which is performed at least quarterly, is designed to be dynamic and responsive to changes in portfolio credit quality and forecasted economic conditions.

Changes are reflected in the allowance on collectively assessed and individually assessed loans as the collectability of classified loans is evaluated with new information.

Changes are reflected in the pool-basis allowance and individually assessed loans as the collectability of classified loans is evaluated with new information.

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, Risk Committee, the Audit Committee, and the Board of Directors.

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

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

11 unchanged sentences

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.

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.

3 unchanged sentences

Allowance for Credit Losses - Available-for-Sale Securities

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

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

9 unchanged sentences

or (3) the Company does not expect to recover the entire amortized cost basis of the security.

In all other situations, only the portion of the impairment loss representing the credit loss must be recognized in earnings, with the remaining portion being recognized in shareholders' equity as comprehensive income, net of deferred taxes.

Changes in the allowance for credit losses are recorded as a provision for (or reversal of) credit losses.

In all other situations, only the portion of the impairment loss representing the credit loss must be recognized in earnings, with the remaining portion being recognized in other comprehensive income, net of deferred taxes.

Changes in the ACL are recorded as a provision for or reversal of credit losses.

Losses are charged against the allowance when management believes the uncollectibility of an AFS security is confirmed or when either of the criteria regarding intent or requirement to sell is met.

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 other assets in the Consolidated Balance Sheets.

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.

3 unchanged sentences

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

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

If the Company determines that a security indicates evidence of deteriorated credit quality, the security is individually evaluated and enhanced analysis is performed.

This may consist of evaluating the security as if it were a below investment grade rated security or a discounted cash flow analysis may be performed and compared to the amortized cost basis.

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

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

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

2 unchanged sentences

Such financial instruments are recorded when they are funded.

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

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

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

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

(dollars in thousands) 2023 2022 2023 2022

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

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

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

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

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

Goodwill Assessment

10 unchanged sentences

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

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.

As part of its annual testing for goodwill impairment, the Company concluded that no impairment existed at December 31, 2023.

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

As of the time of this report's filing, the Company did not identify any triggering events for interim testing.

However, future events including a continuation of the recent trading price of the Company's common stock relative to the book value per share through the second quarter of 2024 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, however, it would not impact our regulatory capital ratios, tangible common equity ratio, nor its liquidity position.

New Authoritative Accounting Guidance

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 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 more information than, generally accepted accounting principles.

The new updates 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.

2023-09, "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.

2024-01, "Compensation—Stock Compensation (Topic 718):

Scope Application of Profits Interest and Similar Awards" ("ASU 2024-01") clarifies how an entity determines whether a profits interest or similar award (hereafter a "profits interest award") is accounted for either (1) as a share-based payment arrangement, and therefore, within the scope of ASC 718 or (2) not a share-based payment arrangement and therefore within the scope of other guidance.

ASU 2024-01 also improves the clarity and operation of the guidance in ASC 718-10-15-3.

The guidance in ASU 2024-01 applies to all entities that issue profits interest awards as compensation to employees or non employees in exchange for goods or services.

For public business entities, the amendments are effective for annual periods beginning after December 15, 2024, and interim periods within those annual periods.

For all other entities, the amendments are effective for annual periods beginning after December 15, 2025, and interim periods within those annual periods.

Early adoption is permitted for both interim and annual financial statements that have not yet been issued or made available for issuance.

If an entity adopts the amendments in an interim period, it should adopt them as of the beginning of the annual period that includes that interim period.

The amendments should be applied (i) retrospectively to all prior periods presented in the financial statements or (ii) prospectively to profits interest and similar awards granted or modified on or after the date at which the entity first applies the amendments.

If the amendments are applied prospectively, an entity is required to disclose the nature of and reason for the change in accounting principle.

We are currently in the process of evaluating this guidance.

2024-02, "Codification Improvements—Amendments to Remove References to the Concepts Statements" ("ASU 2024-02") amends the Accounting Standard Codification (“Codification”) by removing references to various concepts statements.

In most instances, the references are extraneous and not required to understand or apply the guidance.

In other instances, the references were used in prior statements to provide guidance in certain topical areas.

As stated in paragraph 105-10-05-3 of the Codification, FASB Concepts Statements are non authoritative.

These amendments will simplify the Codification which will further draw a distinction between authoritative and non authoritative literature.

The amendments are effective for public business entities for fiscal years beginning after December 15, 2024.

For all other entities, the amendments are effective for fiscal years beginning after December 15, 2025.

Early application of the amendments is permitted for all entities, for any fiscal year or interim period for which financial statements have not yet been issued (or made available for issuance).

If an entity adopts the amendments in an interim period, it must adopt them as of the beginning of the fiscal year that includes that interim period.

An entity should apply the amendments using one of the following transition methods:

(i) prospectively to all new transactions recognized on or after the date that the entity first applies the amendments, or (ii) retrospectively to the beginning of the earliest comparative period presented in which the amendments were first applied.

We are currently in the process of evaluating this guidance.

Accounting Standards Adopted in 2024 :

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

Troubled Debt Restructurings and Vintage Disclosures " ("ASU 2022-02") eliminates the accounting guidance for TDRs while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty that assess whether a modification has created a new loan.

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.

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.

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.

Since early adoption is permitted, the Company adopted the guidance prescribed under ASU 2023-07 effective January 1, 2024.

Adoption of this guidance did not have a material impact on our consolidated financial statements for fiscal year 2024.

Cash and Due from Banks

For the nine months ended September 30, 2023 and 2022, the Bank maintained an average daily balance at the Federal Reserve Bank of $ 892.8 million and $ 1.4 billion, respectively, on which interest is paid.

For the three months ended March 31, 2024 and 2023, the Bank maintained an average daily balance at the Federal Reserve Bank of $ 1.9 billion and $ 662.4 million, respectively, on which interest is paid.

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

2 unchanged sentences

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

September 30, 2023

March 31, 2024

Investment securities available-for-sale:

7 unchanged sentences

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

September 30, 2023

March 31, 2024

Investment securities held-to-maturity:

26 unchanged sentences

Total held-to-maturity securities, net of ACL $ 1,015,737

In addition, at September 30, 2023 and December 31, 2022 the Company held $ 25.7 million and $ 65.1 million, respectively, in equity securities in a combination of Federal Reserve Bank and FHLB stocks, which were required to be held for regulatory purposes and which were not marketable, and therefore are carried at cost.

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

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.

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

The related unrealized loss of $ 66.2 million was included in other comprehensive loss at the time of transfer and, as of September 30, 2023, $ 53.5 million remains in accumulated other comprehensive loss, to be amortized through interest income as a yield adjustment over the remaining term of the securities.

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

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

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

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

The following tables summarizes available-for-sale and held-to-maturity securities in an unrealized loss position by length of time:

At March 31, 2024 and December 31, 2023, the Company held $ 54.7 million and $ 25.7 million, respectively, of equity securities 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 not marketable, and therefore are carried at cost;

they are classified as restricted securities, and periodically evaluated for impairment based on ultimate recovery of par value.

At March 31, 2024 and December 31, 2023, the Company had $ 50.0 million and $ 51.7 million, respectively, of unamortized unrealized losses outstanding following the transfer of investment securities from available-for-sale to held-to-maturity in 2022.

These unrealized losses are included in accumulated other comprehensive loss and are amortized through interest income as a yield adjustment over the remaining term of the securities.

Accrued interest receivable on investment securities totaled $ 7.8 million and $ 7.6 million at March 31, 2024 and December 31, 2023, respectively.

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

The following tables summarize available-for-sale and held-to-maturity securities in an unrealized loss position by length of time:

Less Than 12 Months 12 Months or Greater Total

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

September 30, 2023

March 31, 2024

Investment securities available-for-sale:

8 unchanged sentences

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

September 30, 2023

March 31, 2024

Investment securities held-to-maturity:

8 unchanged sentences

Investment securities available-for-sale:

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

treasury bonds

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

agency securities 78 3,084 ( 4 ) 668,313 ( 57,689 ) 671,397 ( 57,693 )

13 unchanged sentences

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

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

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

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

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

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

The weighted average duration of debt securities, which comprise 100 % of total investment securities, is 4.59 years.

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

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

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

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

September 30, 2023 December 31, 2022

Amortized Estimated Amortized Estimated

(dollars in thousands) Cost (1)

Fair Value Cost Fair Value

Unrealized losses at March 31, 2024 were generally attributable to changes in market interest rates and interest spread relationships subsequent to the dates the securities were originally purchased and were considered to be temporary, and not due to credit quality concerns on the investment securities.

The fair values of these securities are expected to recover as the securities approach their respective maturity dates.

The Company does not intend to sell and it is likely that it will not be required to sell the securities prior to their anticipated recovery.

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

During the three months ended March 31, 2024 and 2023, the Company recorded a provision for credit losses on its held-to-maturity portfolio of $ 1 thousand and $ 1.2 million, respectively.

During the three months ended March 31, 2023, the Company recorded a provision for credit losses on its available-for-sale portfolio of $ 14 thousand.

No provision was recorded for its available-for-sale security portfolio during the three months ended March 31, 2024.

At March 31, 2024 and December 31, 2023, the Company had a total allowance of $ 17 thousand on its available-for-sale securities and $ 2.0 million on its held-to-maturity securities, each of which primarily comprise allowances for corporate bonds.

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

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

March 31, 2024

(dollars in thousands) Amortized Cost Estimated Fair Value

Investment securities available-for-sale:

Treasury bonds (after one year through five years)

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

agency securities maturing:

One year or less 544,988 485,494 $ 549,137 $ 490,699

After one year through five years 135,014 122,355 111,742 100,297

After five years through ten years 43,971 39,077 73,886 68,180

After ten years 12,105 9,351 13,012 10,552

Within one year $ 139,224 $ 135,426

One to five years 486,394 446,955

Five to ten years 112,838 97,570

Beyond ten years 20,392 17,612

Residential mortgage-backed securities 800,793 698,550

Commercial mortgage-backed securities 54,018 48,938

Municipal bonds maturing:

One year or less — — 300 300

After one year through five years — — 1,444 1,488

After five years through ten years 8,828 7,802 8,956 8,299

After ten years — — — —

Corporate bonds maturing:

One year or less — — — —

After one year through five years 2,000 1,681 2,000 1,825

After five years through ten years — — — —

allowance for credit losses — ( 17 )

1,700,233 1,474,945 1,803,898 1,598,666

Total investment securities available-for-sale 1,613,659 1,445,034

Investment securities held-to-maturity:

Within one year 4,282 4,247

One to five years 61,707 59,309

Five to ten years 117,237 102,274

Beyond ten years 74,109 67,323

Residential mortgage-backed securities:

655,388 568,040

Commercial mortgage-backed securities 89,966 76,966

Municipal bonds maturing:

One year or less 6,028 5,866 3,139 3,110

After one year through five years 35,000 31,813 35,579 33,743

After five years through ten years 72,011 60,765 77,262 67,945

After ten years 12,185 10,075 12,293 11,383

Corporate bonds maturing:

One year or less 27,011 23,577 23,954 20,771

After one year through five years 88,443 76,666 84,953 77,997

After five years through ten years 16,832 13,358 23,346 20,527

allowance for credit losses ( 1,957 ) —

1,032,485 872,710 1,093,374 968,707

$ 2,732,718 $ 2,347,655 $ 2,897,272 $ 2,567,373

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

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

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

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

Gross sales and call proceeds were $ 2.6 million and $ 11.2 million for the three and nine months ended September 30, 2023, respectively, and $ 6.2 million and $ 26.2 million for the three and nine months ended September 30, 2022, respectively.

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

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

Total investment securities held-to-maturity 1,000,732 878,159

Total $ 2,614,391 $ 2,323,193

For the three months ended March 31, 2024 and 2023, gross realized gains on calls of investment securities were $ 4 thousand and $ 5 thousand, respectively.

There were no gross realized losses on sales or calls of investment securities during the three months ended March 31, 2024.

During the three months ended March 31, 2023, there were $ 26 thousand of gross realized losses on sales or calls of investment securities.

Gross sales and call proceeds were $ 27.1 million and $ 8.4 million for the three months ended March 31, 2024 and 2023, respectively.

The book value of securities pledged as collateral for certain government deposits, securities sold under agreements to repurchase, and certain lines of credit with correspondent banks at March 31, 2024 and December 31, 2023 was $ 2.1 billion, which were well in excess of required amounts in order to operationally provide significant reserve amounts for new business.

As of March 31, 2024 and December 31, 2023, there were no holdings of securities of any one issuer, other than the U.S.

Government and U.S.

4 unchanged sentences

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

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

September 30, 2023 December 31, 2022

Loans, net of unamortized deferred fees and costs, at March 31, 2024 and December 31, 2023 are summarized by portfolio segment as follows:

March 31, 2024 December 31, 2023

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

12 unchanged sentences

$ 7,883,018 $ 7,882,755

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

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

As of September 30, 2023 and December 31, 2022, the Bank serviced $ 315.9 million and $ 361.5 million, respectively, of multifamily FHA loans, SBA loans and other loan participations that are not reflected as loan balances on the Consolidated Balance Sheets.

(1) Excludes accrued interest receivable of $ 46.3 million and $ 45.3 million at March 31, 2024 and December 31, 2023, respectively, which were recorded in other assets on the Consolidated Balance Sheets.

Unamortized net deferred fees and costs amounted to $ 24.1 million and $ 27.0 million at March 31, 2024 and December 31, 2023, respectively.

As of March 31, 2024 and December 31, 2023, the Bank serviced $ 334.1 million and $ 328.0 million, respectively, of multifamily FHA loans, SBA loans and other loan participations that are not reflected as loan balances on the Consolidated Balance Sheets.

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

21 unchanged sentences

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

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

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

ADC loans that provide for the use of interest reserves represent approximately 52.4 % of the outstanding ADC loan portfolio at September 30, 2023.

ADC loans amounted to $ 1.6 billion at March 31, 2024.

A portion of the ADC portfolio, both speculative and non-speculative, includes loan-funded interest reserves at origination.

ADC loans that provide for the use of interest reserves represent approximately 58.5 % of the outstanding ADC loan portfolio at March 31, 2024.

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

5 unchanged sentences

When appropriate, an interest reserve provides a means of addressing the cash flow characteristics of a properly underwritten ADC loan.

The Company does not significantly utilize interest reserves in other loan products.

The Company recognizes that one of the risks inherent in the use of interest reserves is the potential masking of underlying problems with the project and/or the borrower's ability to repay the loan.

5 unchanged sentences

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

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

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 table details activity in the ACL by portfolio segment for the three months ended March 31, 2024 and 2023.

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

1 unchanged sentence

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

Three Months Ended September 30, 2023

Allowance for credit losses:

Balance at beginning of period $ 15,374 $ 38,486 $ 12,805 $ 811 $ 8,018 1,914 $ 595 $ 26 $ 78,029

Loans charged-off ( 467 ) — — — — — — — ( 467 )

Recoveries of loans previously charged-off 103 — 23 — — — — 1 127

Net loans (charged-off) recovered ( 364 ) — 23 — — — — 1 ( 340 )

Provision for (reversal of) credit losses 1,327 2,207 1,424 53 615 ( 20 ) 39 ( 2 ) 5,643

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

Nine Months Ended September 30, 2023

Allowance for credit losses:

Balance at beginning of period $ 15,655 $ 35,688 $ 12,702 $ 969 $ 7,195 1,606 $ 555 $ 74 $ 74,444

Loans charged-off ( 1,828 ) ( 5,306 ) — — ( 136 ) — — ( 50 ) ( 7,320 )

Recoveries of loans previously charged-off 335 — 31 — 34 — — 6 406

Net loans (charged-off) recovered ( 1,493 ) ( 5,306 ) 31 — ( 102 ) — — ( 44 ) ( 6,914 )

Provision for (reversal of) credit losses 2,175 10,311 1,519 ( 105 ) 1,540 288 79 ( 5 ) 15,802

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

Three Months Ended September 30, 2022

Three Months Ended March 31, 2024

Allowance for credit losses:

5 unchanged sentences

Ending balance $ 23,682 $ 45,937 $ 13,537 $ 893 $ 13,058 $ 1,929 $ 618 $ 30 $ 99,684

Nine Months Ended September 30, 2022

Three Months Ended March 31, 2023

Allowance for credit losses:

5 unchanged sentences

Ending balance $ 15,775 $ 38,140 $ 12,457 $ 1,002 $ 8,741 $ 1,642 $ 593 $ 27 $ 78,377

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

September 30, 2023 December 31, 2022

The following table presents the amortized cost basis of collateral-dependent loans by class of loans as of March 31, 2024 and December 31, 2023:

March 31, 2024 December 31, 2023

Business/Other Business/Other

6 unchanged sentences

Home equity — 237 — 242

Other consumer — — 50 —

Total $ 2,410 $ 89,669 $ 3,428 $ 62,707

21 unchanged sentences

The Company's credit quality indicators are generally updated annually, however, credits rated "Special Mention" or below are reviewed more frequently.

Based on the most recent analysis performed, the amortized cost basis of loans by risk category, class and year of origination are as follows:

Based on the most recent analysis performed, the amortized cost basis of loans by risk category, class and year of origination, along with any charge-offs that were recorded in the applicable loan segment, if applicable, were as follows:

(dollars in thousands) Prior 2020 2021 2022 2023 2024 Revolving Loans Amort.

1 unchanged sentence

to Term Total

September 30, 2023

March 31, 2024

Pass $ 193,755 $ 35,451 $ 174,103 $ 141,181 $ 187,057 $ 24,604 $ 569,226 $ 1,154 $ 1,326,531

12 unchanged sentences

Pass 628,063 34,703 222,361 41,514 126,663 4,590 515 — 1,058,409

Special Mention 61,117 — — — — — — — 61,117

Substandard 64,791 1,265 — — — — — — 66,056

6 unchanged sentences

Pass 77,388 11,101 241,373 485,461 89,757 3,874 136,092 1,177 1,046,223

Special Mention 6,532 — — — — — — — 6,532

Substandard — 29,801 — — — — — — 29,801

3 unchanged sentences

Pass 26,151 56,094 615 33,242 15,084 — 7,193 — 138,379

Total 18,658 4,294 56,784 638 33,229 9,607 6,406 — 129,616

Pass 1,758 86 185 117 — — 50,589 146 52,881

6 unchanged sentences

Total recorded investment $ 2,937,900 $ 495,364 $ 1,215,951 $ 1,471,860 $ 723,714 $ 59,319 $ 1,048,700 $ 29,894 $ 7,982,702

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

Total YTD gross charge-offs $ ( 21,468 ) $ — $ — $ — $ — $ — $ ( 100 ) $ ( 1 ) $ ( 21,569 )

17 unchanged sentences

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

Special Mention 54,288 13,348 — — — — — — 67,636

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

6 unchanged sentences

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

Substandard 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)

5 unchanged sentences

Pass 1 — — — 46 — 354 — 401

Substandard — — — — — — — 50 50

Total 1 — — — 46 — 354 — 401

3 unchanged sentences

Nonaccrual and Past Due Loans

As part of the Company's comprehensive loan review process, management evaluates loans that are past-due 30 days or more.

Management makes a thorough assessment of the conditions and circumstances surrounding each delinquent loan.

The Bank's loan policy requires that loans be placed on nonaccrual if they are 90 days past-due, unless they are well secured and in the process of collection.

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

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

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

September 30, 2023

Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due.

Loans are placed on nonaccrual status when, in management’s opinion, the borrower may be unable to meet payment obligations as they become due, as well as when required by regulatory provisions.

Loans may be placed on nonaccrual status regardless of whether or not such loans are considered past due.

Interest income is subsequently recognized only to the extent cash payments are received in excess of principal due.

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 portfolio segment the nonaccrual loans on an amortized cost basis as of March 31, 2024 and December 31, 2023:

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

March 31, 2024

Commercial $ 1,045 $ 875 $ 1,920

PPP loans — — — — 588 — 588

Income producing - commercial real estate 67,602 — 67,602

1 unchanged sentence

Real estate mortgage - residential — 1,934 1,934

Construction - commercial and residential 976 — — 976 863,611 39,695 904,282

Construction - C&I (owner occupied) — — — — 129,616 — 129,616

Home equity 237 — 237

Other consumer — — — — 2,457 — 2,457

Total $ 27,246 $ 19,125 $ — $ 46,371 $ 7,799,862 $ 70,158 $ 7,916,391

$ 88,682 $ 2,809 $ 91,491

December 31, 2023

Commercial $ 1,002 $ 1,047 $ 2,049

PPP loans — — — — 3,256 — 3,256

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

2 unchanged sentences

Construction - commercial and residential — 525 525

Construction - C&I (owner occupied) — — — — 110,479 — 110,479

Home equity 242 — 242

Other consumer — 1 — 1 1,693 50 1,744

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

The following presents the nonaccrual loans on an amortized cost basis as of September 30, 2023 and December 31, 2022:

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

September 30, 2023

$ 62,006 $ 3,518 $ 65,524

(1) Gross coupon interest income of approximately $ 1.3 million and $ 182 thousand would have been recorded for the three months ended March 31, 2024 and 2023, respectively, if nonaccrual loans shown above had been current and in accordance with their original terms, while no coupon interest income was actually recorded on such loans for the three months ended March 31, 2024 and 2023, respectively.

The table presents, by portfolio segment, an aging analysis and the recorded investments in loans past due on an amortized cost basis as of March 31, 2024 and December 31, 2023:

(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

March 31, 2024

Commercial $ 11,175 $ — $ — $ 11,175 $ 1,395,672 $ 1,920 $ 1,408,767

PPP loans — — — — 467 — 467

Income producing - commercial real estate 11,106 — — 11,106 3,961,947 67,602 4,040,655

2 unchanged sentences

Construction - commercial and residential 8,590 — — 8,590 1,073,966 — 1,082,556

Construction - C&I (owner occupied) — — — — 138,379 — 138,379

Home equity — 36 — 36 52,978 237 53,251

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

Other consumer 2 — — 2 956 — 958

Total $ 31,072 $ 36 $ — $ 31,108 $ 7,860,103 $ 91,491 $ 7,982,702

December 31, 2023

Commercial $ 985 $ 7,048 $ — $ 8,033 $ 1,463,684 $ 2,049 $ 1,473,766

PPP loans — — — — 528 — 528

Income producing - commercial real estate — — — — 4,053,688 40,926 4,094,614

1 unchanged sentence

Real estate mortgage – residential 2,089 — — 2,089 69,361 1,946 73,396

Construction - commercial and residential 2,056 — — 2,056 967,185 525 969,766

Construction - C&I (owner occupied) — — — — 132,021 — 132,021

Home equity 197 — — 197 51,525 242 51,964

Other consumer — — — — 401 — 401

$ 118 $ 6,350 $ 6,468

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

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

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.

Total $ 6,601 $ 7,048 $ — $ 13,649 $ 7,889,522 $ 65,524 $ 7,968,695

Loan Modifications for Borrowers Experiencing Financial Difficulty

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 difficulties 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.

11 unchanged sentences

The allowance may be increased, adjustments may be made in the allocation of the allowance, or partial charge-offs may be taken to further write-down the carrying value of the loan.

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

September 30, 2023

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

Total Percentage of Total Loan Type Weighted Average Term and Principal Payment Extension (1)

Weighted Average Interest Rate Reduction (2)

Three months ended September 30, 2023

The following tables present the amortized cost basis as of March 31, 2024 and 2023 and the financial effect of loans modified to borrowers experiencing financial difficulty during the three months ended March 31, 2024 and 2023:

March 31, 2024

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

Three months ended March 31, 2024:

Commercial $ 31,553 $ — $ 31,553 2.2 % 4 months

Income producing - commercial real estate 7,190 55,649 113,833 176,672 4.3 % 10 months 1.89 %

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

Income producing - commercial real estate

— 50,926 50,926 1.3 % 3 months

Real estate mortgage - residential — 2,478 2,478 3.4 % 6 months

Total $ 31,553 $ 53,404 $ 84,957

Nine months ended September 30, 2023

March 31, 2023

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

Three months ended March 31, 2023:

Commercial $ 21,744 $ — $ 21,744 1.5 % 3 months

2 unchanged sentences

Owner occupied - commercial real estate — 19,170 19,170 1.8 % 3 months

Construction - commercial and residential 7,093 — — 7,093 0.8 % 6 months — %

Total $ 28,955 $ 79,309 $ 108,264

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

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

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

In October 2023, the loan was sold.

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

September 30, 2023

The following table presents the performance of loans modified during the prior twelve months to borrowers experiencing financial difficulty:

March 31, 2024

Payment Status (Amortized Cost Basis)

3 unchanged sentences

Owner occupied - commercial real estate — — 19,127

Real estate mortgage - residential

Construction - commercial and residential — 6,532 —

2 unchanged sentences

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

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

September 30, 2023

The following table presents the amortized cost basis of loans that were experiencing payment default at March 31, 2024 and were modified in the twelve months prior to that default to borrowers experiencing financial difficulty:

March 31, 2024

Amortized Cost Basis

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

(dollars in thousands) Term Extension

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

$ — $ 1,467 $ —

Income producing - commercial real estate — — 66,136

Owner occupied - commercial real estate — 19,127 —

Construction - commercial and residential

Total $ 6,532 $ 20,594 $ 66,136

6 unchanged sentences

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

Substantially all of our leases are classified as operating leases.

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

As of September 30, 2023 and December 31, 2022, the Company had $ 20.2 million and $ 24.5 million of operating lease ROU assets, respectively, and $ 24.4 million and $ 29.3 million of operating lease liabilities, respectively, on the Company's Consolidated Balance Sheets.

Substantially 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 Sheets.

As of March 31, 2024 and December 31, 2023, the Company had $ 17.7 million and $ 19.1 million of operating lease ROU assets, respectively, and $ 21.6 million and $ 23.2 million of operating lease liabilities, respectively, on the Company's Consolidated Balance Sheets.

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

The leases contain terms and conditions of options to extend or terminate the lease which are recognized as part of the ROU assets and lease liabilities when an economic benefit to exercise the option exists and there is a 90 % probability that the Company will exercise the option.

The leases contain options to extend or terminate the lease, which are recognized as part of the ROU assets and lease liabilities when an economic benefit to exercise the option exists and there is a 90 % probability that the Company will exercise the option.

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

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

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

The Company had three leases expire during that period.

As of March 31, 2024, the Company's leases do not contain material residual value guarantees or impose restrictions or covenants related to dividends or its ability to incur additional financial obligations.

During the three months ended March 31, 2024, the Company did not enter into new leases nor renew or extend any leases.

The Company had no leases expire during that period;

however, one lease expired in April 2024.

The following table presents lease costs and other lease information.

Three Months Ended Nine Months Ended

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

Three Months Ended

(dollars in thousands) March 31, 2024 March 31, 2023

Operating lease cost (cost resulting from lease payments) $ 1,601 $ 1,716

3 unchanged sentences

Operating lease - operating cash flows (fixed payments) $ 1,778 $ 1,859

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

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

(dollars in thousands) March 31, 2024 December 31, 2023

Right-of-use assets - operating leases $ 17,679 $ 19,129

Operating lease liabilities $ 21,611 $ 23,238

Weighted average lease term - operating leases 5.04 yrs 5.50 yrs

Weighted average lease term - operating leases 4.81 yrs

Weighted average discount rate - operating leases 2.73 % 2.78 %

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

Future minimum payments for operating leases with initial or remaining terms of more than one year as of March 31, 2024 were as follows:

(dollars in thousands)

Twelve months ended:

September 30, 2024 $ 1,765

September 30, 2025 6,880

September 30, 2026 5,987

September 30, 2027 2,894

September 30, 2028 2,502

March 31, 2025 $ 5,147

March 31, 2026 6,078

March 31, 2027 2,988

March 31, 2028 2,599

March 31, 2029 2,176

Thereafter 3,751

5 unchanged sentences

The Company manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of its assets and liabilities through the use of derivative financial instruments.

Cash Flow Hedges of Interest Rate Risk

The Company historically utilized interest rate swaptions, accounted for as cash flow hedges, to protect itself against adverse fluctuations in interest rates on a forecasted issuance of debt.

During the three months ended March 31, 2024, the Company terminated its interest rate swaption contracts.

The Company expects to reclassify $ 121 thousand out of accumulated other comprehensive loss over the succeeding twelve months as a reduction of interest expense.

Interest Rate Products

3 unchanged sentences

As the interest rate derivatives associated with this program do not meet the strict hedge accounting requirements, changes in the fair value of both the customer derivatives and the offsetting derivatives are recognized directly in earnings.

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

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

9 unchanged sentences

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

Mortgage Banking Derivatives

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

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

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

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

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 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 and best efforts contracts are not readily ascertainable with precision because they are 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 is impacted by current interest rates, taking into consideration the probability that the interest rate lock commitments will close or will be funded.

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

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

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

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

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

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

The table below identifies the balance sheet category and fair value of the Company's derivative instruments as of March 31, 2024 and December 31, 2023.

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

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

September 30, 2023 December 31, 2022

If the Company had breached any provisions under the agreement at March 31, 2024, it could have been required to settle its obligations under the agreement at the termination value.

March 31, 2024 December 31, 2023

(dollars in thousands) Notional

2 unchanged sentences

Amount Fair Value Balance Sheet

Derivatives not designated as hedging instruments in an asset position

Derivatives in an asset position:

Derivatives designated as hedging instruments:

Interest rate product $ — $ — Other assets $ 300,000 $ 374 Other assets

Credit risk participation agreements 49,480 1 Other liabilities — — N/A

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

Derivatives not designated as hedging instruments:

Interest rate product 680,245 34,147 Other assets 651,429 30,288 Other assets

Credit risk participation agreements 49,480 — Other liabilities 49,480 3 Other liabilities

Total 729,725 34,147 700,909 30,291

Derivatives not designated as hedging instruments in a liability position

Total derivatives in an asset position:

$ 729,725 $ 34,147 $ 1,000,909 $ 30,665

Derivatives in a liability position:

Derivatives not designated as hedging instruments:

Interest rate product $ 680,245 $ 33,646 Other liabilities $ 651,429 $ 30,555 Other liabilities

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

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

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

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

The table below presents the effect of the Company's derivative financial instruments on the Consolidated Statements of Operations for the three months ended March 31, 2024 and 2023:

The Effect of Derivatives Not Designated as Hedging Instruments on the Consolidated Statements of Operations

Amount of Gain (Loss) Recognized in Income on Derivatives

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

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

(dollars in thousands) 2024 2023

2 unchanged sentences

Total $ 239 $ ( 414 )

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

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

The following table provides information regarding the Bank’s deposit composition at March 31, 2024 and December 31, 2023:

(dollars in thousands) March 31, 2024 December 31, 2023

Noninterest-bearing demand $ 1,835,524 $ 2,279,081

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

Interest-bearing transaction 1,207,566 997,448

932,779 1,138,235

Savings and money market 3,235,391 3,314,043

1 unchanged sentence

Total $ 8,501,439 $ 8,808,039

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

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

2023 $ 348,469 $ 463,393

The remaining maturity of time deposits at March 31, 2024 and December 31, 2023 were as follows:

(dollars in thousands) March 31, 2024 December 31, 2023

2024 $ 1,294,087 1,445,395

3 unchanged sentences

2028 10,162 9,827

Thereafter — —

Total $ 2,222,958 $ 2,217,467

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

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

As of March 31, 2024 and December 31, 2023, time deposit accounts in excess of $250 thousand were as follows:

(dollars in thousands) March 31, 2024 December 31, 2023

Three months or less $ 321,017 $ 119,880

3 unchanged sentences

Total $ 1,612,784 $ 1,533,094

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

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

The following table summarizes the Company’s borrowings, which include repurchase agreements with the Company’s customers, short-term borrowings and long-term borrowings, at September 30, 2023 and December 31, 2022:

At March 31, 2024, total brokered deposits were $ 4.2 billion, or 49.1 % of total deposits, of which $ 1.7 billion were attributable to the Certificates of Deposit Account Registry Service ("CDARS") and Insured Cash Sweep ("ICS") two-way accounts.

At December 31, 2023, total brokered deposits (excluding the CDARS and ICS two-way) were $ 2.5 billion, or 28.8 % of total deposits.

The following table summarizes the Company’s borrowings, which include repurchase agreements with the Company’s customers and borrowings, at March 31, 2024 and December 31, 2023:

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

Maturity Dates Interest Rates (2)

September 30, 2023:

March 31, 2024:

Customer repurchase agreements $ 37,059 $ — $ 37,059 $ — N/A 3.48 %

Short-term borrowings:

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

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

Discount window secured borrowings — — — 606,178 N/A N/A

Raymond James repurchase agreement — — — 17,162 N/A N/A

Total 1,300,001 — 1,300,001 2,613,232

Long-term borrowings:

Secured borrowings:

600,000 — 600,000 1,302,153 September 25, 2024 5.53 %

1,000,000 — 1,000,000 — January 15, 2025 4.76 %

Discount window

— — — 568,602 N/A N/A

Raymond James repurchase agreement

— — — 17,780 N/A N/A

Subordinated notes, 5.75 %

3 unchanged sentences

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

Short-term borrowings:

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

Total 975,001 — 975,001 752,509

Long-term borrowings:

Secured borrowings:

— — — 1,271,846 N/A N/A

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

Discount window

— — — 601,504 N/A N/A

Raymond James repurchase agreement

— — — 17,993 N/A N/A

Subordinated notes, 5.75 %

1 unchanged sentence

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

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

At September 30, 2023, the Company had total additional undrawn borrowing capacity of approximately $ 2.3 billion, comprising unencumbered securities available to be pledged of approximately $ 269.9 million and undrawn financing on pledged assets of $ 2.0 billion, including $ 1.7 billion with the FHLB, $ 253.1 million with the BTFP and $ 17.2 million with Raymond James.

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

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

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

At March 31, 2024, the Company had total additional undrawn borrowing capacity of approximately $ 2.2 billion, comprising unencumbered securities available to be pledged of approximately $ 297.5 million and undrawn financing on pledged assets of $ 1.9 billion.

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

The Company’s repurchase agreements operate on a rolling basis and do not contain contractual maturity dates.

2 unchanged sentences

Bank Term Funding Program ("BTFP")

On March 12, 2023, the FRB, Department of Treasury and the FDIC issued a joint statement outlining actions they had taken to protect the U.S.

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 Board 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.

The BTFP provides eligible depository institutions, including the Company's subsidiary bank, the Bank, 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 program is expected to continue until at least March 2024.

The Federal Reserve announced in January 2024 that the BTFP would 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 would be no lower than the interest rate on reserve balances in effect on the day the loan is made.

In January 2024, the Company borrowed an additional $ 500.0 million through the BTFP and refinanced $ 500.0 million under the program, both at an interest rate of 4.76 % that mature in January 2025.

Subordinated Notes

On August 5, 2014, the Company completed the sale of $ 70.0 million of its 5.75 % subordinated notes, due September 1, 2024 (the "2024 Notes").

The 2024 Notes were offered to the public at par and qualify as Tier 2 capital for regulatory purposes to the fullest extent permitted under the Basel III Rule capital requirements.

The 2024 Notes were offered to the public at par and qualify 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.

Net Income per Common Share

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

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

Net Income (Loss) per Common Share

The calculation of net income per common share for the three months ended March 31, 2024 and 2023 was as follows:

Three Months Ended March 31,

(dollars and shares in thousands, except per share data) 2024 2023

Net income $ 27,383 $ 37,297 $ 80,309 $ 98,737

Net (loss) income

$ ( 338 ) $ 24,234

Average common shares outstanding 30,068 31,109

Basic net income per common share $ 0.91 $ 1.16 $ 2.63 $ 3.08

Net income $ 27,383 $ 37,297 $ 80,309 $ 98,737

Basic net (loss) income per common share

$ ( 0.01 ) $ 0.78

Net (loss) income

$ ( 338 ) $ 24,234

Average common shares outstanding 30,068 31,109

1 unchanged sentence

Average common shares outstanding-diluted 30,068 31,180

Diluted net income per common share $ 0.91 $ 1.16 $ 2.63 $ 3.07

Diluted net (loss) income per common share

$ ( 0.01 ) $ 0.78

Anti-dilutive shares 58 3

Basic net (loss) income per share is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the period.

Diluted net (loss) income per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the net income (loss) of the Company.

The computation of diluted per share does not assume conversion or exercise of securities that would have an anti-dilutive effect on net income (loss) per share.

Securities issued by the Company that could potentially dilute net income (loss) per share in future periods include stock options and restricted stock.

To calculate diluted net income (loss) per share, the Company utilizes the Treasury Stock method which results in only an incremental number of shares added to shares outstanding during the period.

Other Comprehensive (Loss) Income

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

The following table presents the components of other comprehensive (loss) income for the three months ended March 31, 2024 and 2023.

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

Three Months Ended September 30, 2023

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

Reclassification adjustment for net gain included in net income ( 5 ) 1 ( 4 )

Total unrealized loss on investment securities available-for-sale ( 28,155 ) 6,837 ( 21,318 )

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

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

Three Months Ended September 30, 2022

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

Reclassification adjustment for net gain included in net income

( 4 ) 1 ( 3 )

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

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

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

Nine Months Ended September 30, 2023

Net unrealized loss on securities available-for-sale

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

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

Total unrealized gain on investment securities available-for-sale ( 20,056 ) 4,614 ( 15,442 )

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

Other comprehensive loss

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

Nine Months Ended September 30, 2022

Net unrealized loss on securities available-for-sale

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

Three Months Ended March 31, 2024

Net unrealized (loss) gain on securities available-for-sale $ ( 6,693 ) $ 1,626 $ ( 5,067 )

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

172 ( 58 ) 114

Total unrealized loss on investment securities available-for-sale

Total unrealized (loss) gain on investment securities available-for-sale

( 6,697 ) 1,627 ( 5,070 )

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

Amortization of unrealized loss on securities transferred to held-to-maturity 1,731 ( 346 ) 1,385

Total unrealized loss on investment securities held-to-maturity ( 61,122 ) 15,780 ( 45,342 )

Net unrealized gain on derivatives 363 ( 89 ) 274

Other comprehensive loss

Other comprehensive (loss) income $ ( 4,603 ) $ 1,192 $ ( 3,411 )

Three Months Ended March 31, 2023

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

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

Total unrealized gain (loss) on investment securities available-for-sale

24,060 ( 6,108 ) 17,952

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

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

Three Months Ended September 30, 2023

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

Other comprehensive loss before reclassifications ( 21,314 ) — — ( 21,314 )

Amounts reclassified from accumulated other comprehensive income (loss) ( 4 ) — — ( 4 )

Amortization of unrealized loss on securities transferred to held-to-maturity 1,983 ( 1,342 ) 641

Net other comprehensive (loss) income during period ( 21,318 ) 1,400 — ( 19,918 )

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

Three Months Ended September 30, 2022

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

The following table presents the changes in each component of accumulated other comprehensive income (loss), net of tax, for the three months ended March 31, 2024 and 2023.

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

Three Months Ended March 31, 2024

Balance at beginning of period $ ( 122,246 ) $ ( 39,929 ) $ ( 182 ) $ ( 162,357 )

Other comprehensive loss before reclassifications

Other comprehensive (loss) income before reclassifications

( 5,067 ) — 274 ( 4,793 )

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

Amounts reclassified from accumulated other comprehensive income

( 3 ) — — ( 3 )

Amortization of unrealized loss on securities transferred to held-to-maturity — 1,385 — 1,385

1 unchanged sentence

Balance at end of period $ ( 127,316 ) $ ( 38,544 ) $ 92 $ ( 165,768 )

Nine Months Ended September 30, 2023

Three Months Ended March 31, 2023

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

Other comprehensive income before reclassifications

Amounts reclassified from accumulated other comprehensive income (loss) 10 — — 10

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

Net other comprehensive (loss) income during period

17,936 — — 17,936

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

Nine Months Ended September 30, 2022

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

Other comprehensive loss before reclassifications

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

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

Amounts reclassified from accumulated other comprehensive income

Amortization of unrealized loss on securities transferred to held-to-maturity — 641 — 641

Net other comprehensive (loss) income during period ( 151,339 ) ( 45,342 ) 284 ( 196,397 )

Net other comprehensive income during period

17,952 641 — 18,593

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

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

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

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

(dollars in thousands) 2023 2022

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

Income tax benefit (expense)

( 1 ) ( 1 ) Income tax expense

Total reclassifications for the periods $ 4 $ 3

The following table presents the amounts reclassified out of each component of accumulated other comprehensive income (loss) for the three months ended March 31, 2024 and 2023.

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

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

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

(dollars in thousands) 2024 2023

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

Income tax benefit (expense)

4 58 Income tax expense

Realized gain (loss) on sale of investment securities

$ 4 $ ( 21 ) Net gain (loss) on sale of investment securities

Income tax benefit (expense) ( 1 ) 5 Income tax expense

Total reclassifications for the periods $ 3 $ ( 16 )

18 unchanged sentences

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

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

The tables below present the recorded amount of assets and liabilities measured at fair value on a recurring basis as of March 31, 2024 and December 31, 2023.

(dollars in thousands) Quoted Prices

2 unchanged sentences

(Level 3) Total Fair Value

September 30, 2023

March 31, 2024

Investment securities available-for-sale:

6 unchanged sentences

Interest rate product — 34,147 — 34,147

Credit risk participation agreements — 1 — 1

Total assets measured at fair value on a recurring basis $ — $ 1,479,181 $ — $ 1,479,181

9 unchanged sentences

Corporate bonds — 1,683 — 1,683

Loans held for sale — 6,734 — 6,734

Interest rate product — 30,662 — 30,662

Mortgage banking derivatives — — 93 93

Total assets measured at fair value on a recurring basis $ — $ 1,636,439 $ 93 $ 1,636,532

Credit risk participation agreements — 3 — 3

Total assets measured at fair value on a recurring basis $ — $ 1,537,053 $ — $ 1,537,053

Interest rate product $ — $ 30,555 $ — $ 30,555

9 unchanged sentences

treasury bonds, U.S.

agency debt securities, mortgage-backed securities issued by Government Sponsored Entities and municipal bonds.

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.

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

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

Beginning balance at January 1, 2022

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

Ending balance at December 31, 2022

Loans held for sale :

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

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

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

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

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

As such, the Company classified 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:

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

December 31, 2022

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

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

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

Credit risk participation agreements :

8 unchanged sentences

Accordingly, the derivative falls within Level 2.

Mortgage banking derivatives for loans settled on a mandatory basis:

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

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

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

Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis

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

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

The fair value of individually assessed loans is estimated using one of several methods, including the collateral value, market value of similar debt, enterprise value, liquidation value and discounted cash flows.

Those individually assessed loans not requiring a specific allowance represent loans for which the fair value of expected repayments or collateral exceed the recorded investment in such loans.

At March 31, 2024, substantially all of the Company's individually evaluated loans were evaluated based upon the fair value of the collateral.

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

2 unchanged sentences

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 is initially recorded at fair value less estimated selling costs.

Other real estate owned ("OREO") :

OREO is initially recorded at fair value less estimated selling costs.

Fair value is based upon independent market prices, appraised values of the collateral or management's estimation of the value of the collateral, which the Company classifies as a Level 3 valuation.

4 unchanged sentences

(Level 3) Total Fair Value

September 30, 2023

March 31, 2024

Individually assessed loans:

3 unchanged sentences

Real estate mortgage - residential — — 1,633 1,633

Construction - commercial and residential

— — 39,896 39,896

Home equity — — 237 237

Other real estate owned — — 773 773

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

Total assets measured at fair value on a nonrecurring basis as of March 31, 2024 $ — $ — $ 92,465 $ 92,465

December 31, 2023

5 unchanged sentences

Consumer — — 396 396

Home equity — — 242 242

Other real estate owned — — 1,108 1,108

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.

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

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.

The estimated fair value of the Company's financial instruments at March 31, 2024 and December 31, 2023 are as follows:

Fair Value Measurements

2 unchanged sentences

(Level 2) Significant Other Unobservable Inputs

September 30, 2023

March 31, 2024

Cash and due from banks $ 10,076 $ 10,076 $ 10,076 $ — $ —

1 unchanged sentence

Interest-bearing deposits with other banks

696,453 696,453 — 696,453 —

Investment securities available-for-sale 1,445,034 1,445,034 — 1,445,034 —

5 unchanged sentences

Interest rate product 34,147 34,147 — 34,147 —

Credit risk participation agreement 1 1 — 1 —

Accrued interest receivable 54,074 54,074 54,074 — —

Noninterest-bearing deposits

$ 1,835,524 $ 1,835,524 $ — $ 1,835,524 $ —

Interest-bearing deposits

4,442,957 4,442,957 — 4,442,957 —

Time deposits 2,222,958 2,217,742 — 2,217,742 —

7 unchanged sentences

Interest-bearing deposits with other banks

709,897 709,897 — 709,897 —

Investment securities available-for-sale 1,506,388 1,506,388 — 1,506,388 —

1 unchanged sentence

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

Credit risk participation agreements

Interest rate product 30,662 30,662 — 30,662 —

1 unchanged sentence

Noninterest-bearing deposits

$ 2,279,081 $ 2,279,081 $ — $ 2,279,081 $ —

Interest-bearing deposits

4,311,491 4,311,491 — 4,311,491 —

Time deposits 2,217,467 2,217,795 — 2,217,795 —

1 unchanged sentence

Borrowings 1,369,918 1,368,621 — 1,368,621 —

Credit risk participation agreements 2 2 — 2 —

Interest rate product 30,555 30,555 — 30,555 —

1 unchanged sentence

Note 12 - Legal Contingencies

There have been no material changes in the status of the legal, regulatory and governmental proceedings, investigations and inquiries previously disclosed in Part II, Item 8, "Note 21 - Commitments and Contingent Liabilities" of the Company's Annual Report on Form 10-K for the year ended December 31, 2022.

From time to time, the Company and its subsidiaries are involved in various legal proceedings and regulatory and governmental investigations and inquiries incidental to their business in the ordinary course, including matters in which damages in various amounts are claimed.

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

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

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

When claims are covered by D&O Insurance Policies, the Company records a corresponding receivable against the incurred legal defense cost expense subject to coverage under the D&O Insurance Policies and then eliminates the receivable and expense when the claim is paid.

If the D&O Insurance Policies are exhausted, the Company will be responsible for paying the defense costs 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 D&O Insurance Policies for the period from December 2016 to December 2017 have been exhausted.

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

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

From time to time, the Company and its subsidiaries are involved in various legal proceedings incidental to their business in the ordinary course, including matters in which damages in various amounts are claimed, as well as regulatory and governmental investigations and inquiries.

Based on information currently available, the Company does not believe that the liabilities (if any) resulting from such matters will have a material effect on the financial position of the Company.

However, in light of the inherent uncertainties involved in such matters, ongoing legal expenses or an adverse outcome in one or more of these matters could materially and adversely affect the Company's financial condition, results of operations or cash flows in any particular reporting period, as well as its reputation.

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

What changed 10-Q

Item 1. Financial Statements