What changed in this filing

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Item 1. Financial Statements

2024-08-08 compared with 2024-05-03 · 352 added, 196 removed, 1078 unchanged (34% of the section changed)

3 unchanged sentences

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

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Cash and due from banks $ 10,803 $ 9,047

6 unchanged sentences

Federal Reserve and Federal Home Loan Bank stock 54,274 25,748

Loans 7,982,702 7,968,695

Loans held for sale, at lower of cost or fair value 5,000 —

Loans held for investment, at amortized cost 8,001,739 7,968,695

allowance for credit losses ( 106,301 ) ( 85,940 )

Loans, net 7,883,018 7,882,755

Loans held for investment, net of allowance 7,895,438 7,882,755

7,900,438 7,882,755

Premises and equipment, net 8,788 10,189

30 unchanged sentences

(dollars in thousands, except per share data)

Three Months Ended March 31,

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

2024 2023 2024 2023

Interest Income

27 unchanged sentences

FDIC insurance 5,917 2,581 12,329 4,067

Goodwill impairment

104,168 — 104,168 —

Other expenses 3,880 3,326 6,021 7,944

Total noninterest expense 146,491 37,978 186,488 78,562

Income Before Income Tax Expense 2,659 31,128

(Loss) Income Before Income Tax Expense ( 79,373 ) 36,872 ( 76,714 ) 68,000

Income Tax Expense 4,429 8,180 7,426 15,074

7 unchanged sentences

(dollars in thousands)

Three Months Ended March 31,

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

2024 2023 2024 2023

Net (Loss) Income $ ( 83,802 ) $ 28,692 $ ( 84,140 ) $ 52,926

Other Comprehensive (Loss) Income, Net of Tax:

Unrealized (loss) gain on securities available-for-sale ( 5,067 ) 17,936

Unrealized gain (loss) on securities available-for-sale 3,629 ( 12,074 ) ( 1,437 ) 5,862

Reclassification adjustment for (gain) loss included in net income ( 2 ) ( 2 ) ( 6 ) 14

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

Total unrealized gain (loss) on investment securities available-for-sale 3,627 ( 12,076 ) ( 1,443 ) 5,876

Amortization of unrealized loss on securities transferred to held-to-maturity 1,322 1,403 2,707 2,044

Total unrealized gain on investment securities held-to-maturity 1,322 1,403 2,707 2,044

Unrealized gain on derivatives 274 —

Total unrealized gain on derivatives 274 —

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

Unrealized (loss) gain on derivatives ( 24 ) — 250 —

Total unrealized (loss) gain on derivatives ( 24 ) — 250 —

Other comprehensive income (loss) 4,925 ( 10,673 ) 1,514 7,920

Comprehensive (Loss) Income $ ( 78,877 ) $ 18,019 $ ( 82,626 ) $ 60,846

6 unchanged sentences

Shares Amount

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

Net Income — — — ( 83,802 ) — ( 83,802 )

Other comprehensive loss, net of tax — — — — 4,925 4,925

Stock-based compensation expense — — 2,664 — — 2,664

Vesting of time-based stock awards issued at date of grant, net of shares withheld for payroll taxes ( 11,371 ) — — — — —

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

Issuance of common stock related to employee stock purchase plan 6,121 — 144 — — 144

Cash dividends declared ($ 0.45 per share)

— — — ( 13,885 ) — ( 13,885 )

Balance June 30, 2024 30,180,482 $ 297 $ 380,142 $ 949,863 $ ( 160,843 ) $ 1,169,459

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

Net Income — — — 28,692 — 28,692

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

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

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 ( 6,960 ) — — — — —

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

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

Cash dividends declared ($ 0.45 per share)

— — — ( 13,465 ) — ( 13,465 )

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

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

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

8 unchanged sentences

— — — ( 27,453 ) — ( 27,453 )

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

Balance June 30, 2024 30,180,482 $ 297 $ 380,142 $ 949,863 $ ( 160,843 ) $ 1,169,459

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

9 unchanged sentences

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

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

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

See Notes to Consolidated Financial Statements.

2 unchanged sentences

(dollars in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Cash Flows From Operating Activities:

3 unchanged sentences

Provision for credit losses for unfunded commitments 1,064 1,166

Goodwill impairment

Depreciation and amortization 1,492 1,778

Gain on sale of loans ( 37 ) ( 400 )

Loss on mortgage servicing rights 34 35

(Gain) loss on mortgage servicing rights ( 1,335 ) 70

Securities premium amortization, net 2,798 3,272

1 unchanged sentence

Proceeds from sale of loans held for sale — 36,824

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

(Gain) loss on sale of investment securities ( 7 ) 19

1 unchanged sentence

Stock-based compensation expense 5,032 5,684

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

Decrease (increase) in other assets 283 ( 15,623 )

Increase (decrease) in other liabilities ( 13,947 ) 25,558

8 unchanged sentences

Purchase of Federal Reserve stock ( 142 ) ( 158 )

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

Redemption (purchase) of Federal Home Loan Bank stock ( 28,384 ) 19,026

Proceeds from sale of mortgage servicing rights 3,618

Net increase in loans ( 62,045 ) ( 137,661 )

19 unchanged sentences

(dollars in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Supplemental Cash Flows Information:

Interest paid $ 180,999 $ 164,083

Income taxes paid $ — $ 9,930

Non-Cash Investing Activities:

Transfer from loans to loans held for sale $ 5,000 $ —

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.

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.

1 unchanged sentence

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.

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

Use of Estimates

4 unchanged sentences

Investment securities comprise debt securities, which are classified depending on the Company's intent and ability to hold the securities to maturity.

Debt securities are classified as available-for-sale when management may have the intent to sell them prior to maturity.

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.

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.

Debt securities are classified as available-for-sale ("AFS") when management may have the intent to sell them prior to maturity.

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

AFS Securities 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.

AFS Securities 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 ("HTM") securities.

Transfers of debt securities into the HTM category from the AFS 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 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.

The Company does not intend to sell the HTM 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 Company classifies loans in its portfolio as either held for investment (“HFI”) or held for sale (“HFS”) HFS loans are reported at the lower of cost or fair value on the Consolidated Balance Sheets.

HFI loans are stated at the principal amount outstanding, net of unamortized deferred costs and fees.

Interest income on loans is recognized at the contractual rate on the principal amounts outstanding.

8 unchanged sentences

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,

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

(dollars in thousands) 2024 2023 2024 2023

4 unchanged sentences

Allowance for Credit Losses - Loans

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

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

12 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.

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 ACL also includes an amount for inherent risks not reflected in the historical quantitative analysis associated with the reasonable and supportable forecast.

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 reserve for credit losses attributes portions of the ACL and RUC to the commercial and consumer portfolio 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.

Our model may reflect assumptions by management that are not covered by the qualitative and environmental factors, and we reevaluate all of its factors quarterly.

During the first quarter of 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.

4 unchanged sentences

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

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.

29 unchanged sentences

We have several pass credit grades that are assigned to loans based on varying levels of risk, ranging from credits that are secured by cash or marketable securities, to watch credits which have all the characteristics of an acceptable credit risk but warrant more than the normal level of monitoring.

Special mention loans are those that are currently protected by the sound worth and paying capacity of the borrower, but that are potentially weak and constitute an additional credit risk.

Special mention loans are those that are currently protected by the sound net worth and paying capacity of the borrower, but that are potentially weak and constitute an additional credit risk.

These loans have the potential to deteriorate to a substandard grade due to the existence of financial or administrative deficiencies.

1 unchanged sentence

They are characterized by the distinct possibility that we will sustain some loss if the deficiencies are not corrected.

Some substandard loans are inadequately protected by the sound worth and paying capacity of the borrower and of the collateral pledged and may be considered impaired.

Some substandard loans are inadequately protected by the sound net worth and paying capacity of the borrower and of the collateral pledged and may be considered impaired.

Substandard loans can be accruing or can be on nonaccrual depending on the circumstances of the individual loans.

22 unchanged sentences

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

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

A loan that is considered a modified loan may be subject to an individually-evaluated loan analysis if the commitment is $ 500 thousand or greater;

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

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

Allowance for Credit Losses - Available-for-Sale Securities

Allowance for Credit Losses - AFS Securities

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.

12 unchanged sentences

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 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.

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

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

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

Accordingly, we do not recognize an allowance for credit loss against accrued interest receivable.

Allowance for Credit Losses - Held-to-Maturity Debt Securities

Allowance for Credit Losses - HTM Securities

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 ACL for held-to-maturity securities and included in the balance of investment securities held-to-maturity on the Consolidated Balance Sheets.

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 HTM securities and included in the balance of HTM securities 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.

6 unchanged sentences

Goodwill Assessment

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

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

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

Goodwill is deemed to have an indefinite useful life and as such is not subject to amortization, and instead is subject to impairment testing, which must be conducted at least annually or upon the occurrence of a triggering event.

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

1 unchanged sentence

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

Goodwill is subject to impairment testing at the reporting unit level, which must be conducted at least annually, as well as when events or changes in circumstances indicate the assets might be impaired and/or upon the occurrence of a triggering event.

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

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

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

If the fair value of the reporting unit exceeds the book value, no write-down of recorded goodwill is required.

If the fair value of the reporting unit is less than book value, an expense may be required to write-down the related goodwill to the proper carrying value.

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

Testing of goodwill impairment comprises a two-step process.

4 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.

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.

During the three months ended June 30, 2024, Management determined that a triggering event had occurred as a result of the share price trading under book value for more than four quarters.

During the past twelve months ended June 30, 2024, changes in macroeconomic conditions, market volatility due to rising interest rates resulted in fluctuations of the Company's stock price with a sustained decrease.

As a result of the triggering event, the Company engaged a third-party service provider to assist Management with the determination of the fair value of the Company in the second quarter of 2024.

The resulting calculations indicated that the fair value did not exceed the carrying amount of the Company's only reporting unit as of May 31, 2024 which resulted in a determination that goodwill had become fully impaired.

The goodwill impairment charge of $ 104.2 million reduced fully the carrying value of the Company's goodwill.

The impaired goodwill is primarily related to the acquisition of the Virginia Heritage Bank in October 2014.

The impairment charge did not impact our cash flows, liquidity ratios, core operating performance, or regulatory capital ratios.

New Authoritative Accounting Guidance

51 unchanged sentences

Cash and Due from Banks

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.

For the six months ended June 30, 2024 and 2023, the Bank maintained an average daily balance at the Federal Reserve Bank of $ 1.7 billion and $ 0.9 billion, respectively, on which interest is paid.

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

Investment Securities

The amortized cost and estimated fair value of the Company's available-for-sale and held-to-maturity securities are summarized as follows:

The amortized cost and estimated fair value of the Company's AFS and HTM securities are summarized as follows:

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

March 31, 2024

June 30, 2024

Investment securities available-for-sale:

7 unchanged sentences

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

March 31, 2024

June 30, 2024

Investment securities held-to-maturity:

26 unchanged sentences

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

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.

At June 30, 2024 and December 31, 2023, the Company held $ 54.3 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.

These securities cannot be disposed of other than through redemption by the issuer and, if redeemed, would be redeemed at the original cost.

At June 30, 2024 and December 31, 2023, the Company had $ 48.2 million and $ 51.7 million, respectively, of unamortized unrealized losses outstanding following the transfer of investment securities from AFS to HTM 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.

Accrued interest receivable on investment securities totaled $ 7.3 million and $ 7.6 million at June 30, 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:

The following tables summarize AFS and HTM 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

March 31, 2024

June 30, 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

March 31, 2024

June 30, 2024

Investment securities held-to-maturity:

25 unchanged sentences

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

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.

Unrealized losses at June 30, 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.

1 unchanged sentence

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.

During the three months ended June 30, 2024 and 2023, the provision for credit losses for the HTM securities portfolio was $ 55 thousand and $ 2 thousand, respectively.

During the six months ended June 30, 2024 and 2023, the provision for credit losses for the HTM securities portfolio was $ 56 thousand and $ 1.2 million, respectively.

There was no provision for credit losses on the AFS securities portfolio for the three and six months ended June 30, 2024.

During the three and six months ended June 30, 2023, the Company recorded a provision reversal of 14 thousand and a provision of $ 0 , respectively.

At June 30, 2024 and December 31, 2023, the Company had a total allowance of $ 17 thousand on its AFS securities and $ 2.0 million on its HTM securities, each of which primarily comprise allowances for corporate bonds.

The following table summarizes the Company's investment in AFS securities and HTM securities 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

June 30, 2024

(dollars in thousands) Amortized Cost Estimated Fair Value

19 unchanged sentences

Total $ 2,567,390 $ 2,276,893

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.

For the three and six months ended June 30, 2024, gross realized gains on calls of investment securities were $ 3 thousand and $ 7 thousand, respectively.

For the three and six months ended June 30, 2023, gross realized gains on calls of investment securities were $ 2 thousand and $ 7 thousand, respectively.

There were no gross realized losses on sales or calls of investment securities during the three and six months ended June 30, 2024, no r during the three months ended June 30, 2023.

During the six months ended June 30, 2023, there were $ 26 thousand of gross realized losses on sales or calls of investment securities.

Gross sales and call proceeds were $ 50 thousand and $ 27.1 million for the three and six months ended June 30, 2024, respectively, and $ 273 thousand and $ 8.6 million for the same periods in 2023.

The book value of securities pledged as collateral for certain government deposits, securities sold under agreements to repurchase, and certain lines of credit with correspondent banks at June 30, 2024 and December 31, 2023 was $ 2.2 billion and $ 2.1 billion, respectively.

These balances were well in excess of required amounts in order to operationally provide significant reserve amounts for new business.

As of June 30, 2024 and December 31, 2023, there were no holdings of securities of any one issuer, other than the U.S.

Government and U.S.

agency securities, which exceeded ten percent of shareholders' equity.

agency securities, that exceeded ten percent of shareholders' equity.

Loans and Allowance for Credit Losses

2 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 March 31, 2024 and December 31, 2023 are summarized by portfolio segment as follows:

March 31, 2024 December 31, 2023

HFI Loans, net of unamortized deferred fees and costs, at June 30, 2024 and December 31, 2023 are summarized by portfolio segment as follows:

June 30, 2024 December 31, 2023

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

12 unchanged sentences

$ 7,895,438 $ 7,882,755

(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.

(1) Excludes accrued interest receivable of $ 46.8 million and $ 45.3 million at June 30, 2024 and December 31, 2023, respectively, which were recorded in other assets on the Consolidated Balance Sheets.

Unamortized net deferred costs amounted to $ 21.9 million and $ 27.0 million at June 30, 2024 and December 31, 2023, respectively.

As of June 30, 2024 and December 31, 2023, the Bank serviced $ 150.9 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.

During the six months ended June 30, 2024, the Company sold the servicing rights to all FHA loans.

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

21 unchanged sentences

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

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

ADC loans amounted to $ 1.7 billion at June 30, 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.

ADC loans that provide for the use of interest reserves represent approximately 62.8 % of the outstanding ADC loan portfolio at June 30, 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:

14 unchanged sentences

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

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

The following table details activity in the ACL by portfolio segment for the three and six months ended June 30, 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 March 31, 2024

Three Months Ended June 30, 2024

Allowance for credit losses:

5 unchanged sentences

Ending balance 21,011 53,251 15,641 750 13,510 1,431 677 30 106,301

Three Months Ended March 31, 2023

Six Months Ended June 30, 2024

Allowance for credit losses:

5 unchanged sentences

Ending balance $ 21,011 $ 53,251 $ 15,641 $ 750 $ 13,510 $ 1,431 $ 677 $ 30 $ 106,301

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

Three Months Ended June 30, 2023

Allowance for credit losses:

Balance at beginning of period $ 15,775 $ 38,140 $ 12,457 $ 1,002 $ 8,741 $ 1,642 $ 593 $ 27 $ 78,377

Loans charged-off ( 492 ) ( 5,306 ) — — — — — — ( 5,798 )

Recoveries of loans previously charged-off 156 — 8 — 34 — — 2 200

Net loans (charged-off) recovered ( 336 ) ( 5,306 ) 8 — 34 — — 2 ( 5,598 )

Provision for (reversal of) credit losses ( 65 ) 5,652 340 ( 191 ) ( 757 ) 272 2 ( 3 ) 5,250

Ending balance $ 15,374 $ 38,486 $ 12,805 $ 811 $ 8,018 $ 1,914 $ 595 $ 26 $ 78,029

Six Months Ended June 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 ( 1,360 ) ( 5,306 ) — — ( 136 ) — — ( 50 ) ( 6,852 )

Recoveries of loans previously charged-off 232 — 8 — 34 — — 5 279

Net loans (charged-off) recovered ( 1,128 ) ( 5,306 ) 8 — ( 102 ) — — ( 45 ) ( 6,573 )

Provision for (reversal of) credit losses 847 8,104 95 ( 158 ) 925 308 40 ( 3 ) 10,158

Ending balance $ 15,374 $ 38,486 $ 12,805 $ 811 $ 8,018 $ 1,914 $ 595 $ 26 $ 78,029

The following table presents the amortized cost basis of collateral-dependent HFI loans by class of loans as of June 30, 2024 and December 31, 2023:

June 30, 2024 December 31, 2023

Business/Other Business/Other

29 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, along with any charge-offs that were recorded in the applicable loan segment, if applicable, were as follows:

Based on the most recent analysis performed, the amortized cost basis of HFI 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

March 31, 2024

June 30, 2024

Pass $ 160,126 $ 32,016 $ 149,826 $ 125,551 $ 163,260 $ 67,459 $ 470,263 $ 6,572 $ 1,175,073

21 unchanged sentences

Pass 27,083 10,464 223,690 515,365 119,831 5,107 123,395 711 1,025,646

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

Substandard 6,202 29,854 — 2,062 — — — — 38,118

8 unchanged sentences

Pass 2 — — — — 69 4,349 — 4,420

Substandard — — — — — — 11 — 11

Total 2 — — — — 69 4,360 — 4,431

49 unchanged sentences

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

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

The following table presents, by portfolio segment, the nonaccrual HFI loans on amortized cost basis as of June 30, 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

June 30, 2024

Commercial $ 1,426 $ 525 $ 1,951

2 unchanged sentences

Real estate mortgage - residential 1,693 230 1,923

Construction - commercial and residential 2,062 — 2,062

Home equity 265 — 265

8 unchanged sentences

$ 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

(1) Gross coupon interest income of approximately $ 2.9 million and $ 1.1 million would have been recorded for the six months ended June 30, 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 six months ended June 30, 2024 and 2023, respectively.

The table presents, by portfolio segment, an aging analysis and the recorded investments in HFI loans past due, on an amortized cost basis as of June 30, 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

June 30, 2024

Commercial $ 6,078 $ 861 $ — $ 6,939 $ 1,229,371 $ 1,951 $ 1,238,261

8 unchanged sentences

Total $ 7,547 $ 873 $ — $ 8,420 $ 7,900,166 $ 93,153 $ 8,001,739

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

December 31, 2023

24 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 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:

The following tables present the amortized cost basis as of June 30, 2024 and 2023 and the financial effect of HFI loans modified to borrowers experiencing financial difficulty during the three and six months ended June 30, 2024 and 2023:

June 30, 2024

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

Three months ended June 30, 2024

Commercial $ 36,303 $ — $ 7,896 $ — $ 44,199 3.6 % 6 months 1.63 %

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

Income producing - commercial real estate — 83,368 — 3,510 86,878 2.9 % 4 months 3.59 %

Owner occupied - commercial real estate 876 — — — 876 0.1 % 12 months — %

Construction - commercial and residential — 11,012 — — 11,012 1.0 % 9 months — %

Total $ 37,179 $ 94,380 $ 7,896 $ 3,510 $ 142,965

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:

Six months ended June 30, 2024:

Commercial $ 36,303 $ — 7,896 $ — $ 44,199 3.6 % 8 months

Income producing - commercial real estate

7,211 60,139 67,350 1.7 % 4 months

Income producing - commercial real estate — 119,252 — 3,510 122,762 2.9 % 4 months

Owner occupied - commercial real estate 876 — — — 876 0.1 % 12 months

Construction - commercial and residential — 11,012 — — 11,012 1.0 % 9 months

Total $ 37,179 $ 130,264 $ 7,896 $ 3,510 $ 178,849

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

March 31, 2024

June 30, 2023

Three months ended June 30, 2023

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

Income producing - commercial real estate — 55,603 — 74,026 129,629 3.2 % 3 months 2.90 %

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

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

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

Six months ended June 30, 2023:

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

Income producing - commercial real estate 7,184 57,823 — 74,026 139,033 3.4 % 5 months 2.90 %

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

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

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

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

June 30, 2024

Payment Status (Amortized Cost Basis)

8 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 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

The following table presents the amortized cost basis of HFI loans that were experiencing payment default at June 30, 2024 and were modified in the twelve months prior to that default to borrowers experiencing financial difficulty:

June 30, 2024

Amortized Cost Basis

(dollars in thousands) Term Extension

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

$ — $ 1,467 $ —

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

Commercial $ 3,447 $ — $ —

Income producing - commercial real estate — 47,234 —

10 unchanged sentences

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.

As of June 30, 2024 and December 31, 2023, the Company had $ 16.3 million and $ 19.1 million of operating lease ROU assets, respectively, and $ 20.0 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.

1 unchanged sentence

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

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.

As of June 30, 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 six months ended June 30, 2024, the Company did not enter into new leases nor renew or extend any leases.

The Company had two leases expire during that period.

The following table presents lease costs and other lease information.

Three Months Ended

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

Three Months Ended Six Months Ended

(dollars in thousands) June 30, 2024 June 30, 2023 June 30, 2024 June 30, 2023

Operating lease cost (cost resulting from lease payments) $ 1,565 $ 1,667 $ 3,166 $ 3,383

3 unchanged sentences

Operating lease - operating cash flows (fixed payments) $ 1,731 $ 1,814 $ 3,509 $ 3,673

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

(dollars in thousands) June 30, 2024 December 31, 2023

Right-of-use assets - operating leases $ 16,250 $ 19,129

Operating lease liabilities $ 20,016 $ 23,238

Weighted average lease term - operating leases 4.81 yrs

Weighted average lease term - operating leases 4.71 yrs 4.93 yrs

Weighted average discount rate - operating leases 2.67 % 2.78 %

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

Future minimum payments for operating leases with initial or remaining terms of more than one year as of June 30, 2024 were as follows:

(dollars in thousands)

Twelve months ended:

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

June 30, 2025 $ 6,796

June 30, 2026 4,276

June 30, 2027 2,832

June 30, 2028 2,278

June 30, 2029 1,981

Thereafter 2,844

2 unchanged sentences

Present value of net future minimum lease payments $ 20,016

Goodwill and Intangibles

Intangible assets are included in the Consolidated Balance Sheets as a separate line item, net of accumulated amortization and consist of the following items:

(dollars in thousands) Gross

Assets Additions Accumulated

Amortization Impairment

June 30, 2024:

Goodwill $ 104,168 $ — $ — $ ( 104,168 ) $ —

Excess servicing (1)

37 — ( 11 ) — 26

Non-compete agreements 720 — ( 617 ) — 103

Total $ 104,925 $ — $ ( 628 ) $ ( 104,168 ) $ 129

December 31, 2023:

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

Excess servicing (1)

65 — ( 28 ) — 37

Non-compete agreements — 1,234 ( 514 ) — 720

Total $ 104,233 $ 1,234 $ ( 542 ) $ — $ 104,925

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

Assumptions related to loan terms and amortization are made to arrive at the initial recorded values.

During the three months ended June 30, 2024, Management determined that a triggering event had occurred as a result of the share price trading under book value for more than four quarters.

During the past twelve months ended June 30, 2024, changes in macroeconomic conditions and market volatility resulting from rising interest rates resulted in a sustained decrease in the Company’s stock price.

Management performed an interim quantitative impairment test, resulting in the impairment charge on its only reporting unit as of May 31, 2024 and determined that goodwill had become fully impaired, which resulted in an impairment charge of $ 104.2 million to reduce fully the carrying value of the Company's goodwill.

The goodwill is primarily related to the acquisition of the Virginia Heritage Bank in October 2014.

The impairment charge did not impact our cash, liquidity ratios, core operating performance, or regulatory capital ratios.

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

3 unchanged sentences

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.

During the six months ended June 30, 2024, the Company terminated its interest rate swaption contracts.

The Company expects to reclassify $ 89 thousand out of accumulated other comprehensive loss over the succeeding twelve months as a reduction of interest expense.

16 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.

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 table below identifies the balance sheet category and fair value of the Company's derivative instruments as of June 30, 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 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

If the Company had breached any provisions under the agreement at June 30, 2024, it could have been required to settle its obligations under the agreement at the termination value.

June 30, 2024 December 31, 2023

(dollars in thousands) Notional

14 unchanged sentences

Interest rate product $ 691,105 $ 33,633 Other liabilities $ 654,757 $ 30,555 Other liabilities

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 table below presents the effect of the Company's derivative financial instruments on the Consolidated Statements of Operations for the three and six months ended June 30, 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 March 31,

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

(dollars in thousands) 2024 2023 2024 2023

2 unchanged sentences

Total $ 239 $ 1,029 $ 478 $ 615

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

The following table provides information regarding the Bank’s deposit composition at June 30, 2024 and December 31, 2023:

(dollars in thousands) June 30, 2024 December 31, 2023

Noninterest-bearing demand $ 1,693,955 $ 2,279,081

3 unchanged sentences

Total $ 8,267,348 $ 8,808,039

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

The remaining maturity of time deposits at June 30, 2024 and December 31, 2023 were as follows:

(dollars in thousands) June 30, 2024 December 31, 2023

2024 $ 956,207 1,445,395

4 unchanged sentences

Total $ 2,284,099 $ 2,217,467

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

As of June 30, 2024 and December 31, 2023, time deposit accounts in excess of $250 thousand were as follows:

(dollars in thousands) June 30, 2024 December 31, 2023

Three months or less $ 347,313 $ 119,880

3 unchanged sentences

Total $ 1,633,013 $ 1,533,094

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 June 30, 2024, total brokered deposits were $ 3.9 billion or 46.9 % of total deposits, of which $ 1.5 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:

The following table summarizes the Company’s borrowings, which include repurchase agreements with the Company’s customers and borrowings, at June 30, 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)

March 31, 2024:

June 30, 2024:

Customer repurchase agreements $ 39,220 $ — $ 39,220 $ — N/A 3.31 %

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

FHLB 590,000 — 590,000 1,318,817 September 25, 2024 5.38 %

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

Discount window — — — 1,935,019 N/A N/A

Raymond James repurchase agreement — — — 17,893 N/A N/A

Subordinated notes

4 unchanged sentences

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

FHLB — — — 1,271,846 N/A N/A

BTFP 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

2 unchanged sentences

(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.

At June 30, 2024, the Company had total additional undrawn borrowing capacity of approximately $ 3.4 billion, comprising unencumbered securities available to be pledged of approximately $ 151.2 million and undrawn financing on pledged assets of $ 3.3 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.

14 unchanged sentences

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, 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.

Since the subordinated notes are due September 1, 2024, the Company is considering various options to finance the upcoming maturity of the subordinated debt, and the Company may seek to issue new subordinated notes or other debt securities to replace those that are maturing, or fund the maturity through other means.

Given prevailing interest rates, any new debt securities to refinance the subordinated notes are expected to have a higher interest rate than the subordinated notes.

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,

The calculation of net income per common share for the three and six months ended June 30, 2024 and 2023 was as follows:

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

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

Net (loss) income $ ( 83,802 ) $ 28,692 $ ( 84,140 ) $ 52,926

$ ( 338 ) $ 24,234

Average common shares outstanding 30,186 30,455 30,127 30,780

Basic net (loss) income per common share $ ( 2.78 ) $ 0.94 $ ( 2.79 ) $ 1.72

$ ( 0.01 ) $ 0.78

Net (loss) income $ ( 83,802 ) $ 28,692 $ ( 84,140 ) $ 52,926

$ ( 338 ) $ 24,234

Average common shares outstanding 30,186 30,455 30,127 30,780

4 unchanged sentences

Anti-dilutive shares 48 3 54 3

(1) For periods ended with a net loss, anti-dilutive financial instruments have been excluded from the calculation of GAAP diluted EPS.

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.

4 unchanged sentences

Other Comprehensive (Loss) Income

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

The following table presents the components of other comprehensive (loss) income for the three and six months ended June 30, 2024 and 2023.

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

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 )

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

Three Months Ended June 30, 2024

Net unrealized gain on securities available-for-sale

$ 4,812 $ ( 1,183 ) $ 3,629

Reclassification adjustment for net gain included in net income ( 3 ) 1 ( 2 )

Total unrealized gain on investment securities available-for-sale

4,809 ( 1,182 ) 3,627

Amortization of unrealized loss on securities transferred to held-to-maturity 1,725 ( 403 ) 1,322

Net unrealized loss on derivatives

( 32 ) 8 ( 24 )

Other comprehensive income

$ 6,502 $ ( 1,577 ) $ 4,925

Three Months Ended June 30, 2023

Net unrealized loss on securities available-for-sale

$ ( 15,959 ) $ 3,885 $ ( 12,074 )

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

Total unrealized loss on investment securities available-for-sale

( 15,961 ) 3,885 ( 12,076 )

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

Other comprehensive loss

$ ( 14,130 ) $ 3,457 $ ( 10,673 )

Six Months Ended June 30, 2024

Net unrealized loss on securities available-for-sale

$ ( 1,881 ) $ 444 $ ( 1,437 )

Reclassification adjustment for net gain included in net income

( 7 ) 1 ( 6 )

Total unrealized loss on investment securities available-for-sale

( 1,888 ) 445 ( 1,443 )

Amortization of unrealized loss on securities transferred to held-to-maturity 3,456 ( 749 ) 2,707

Net unrealized gain on derivatives 331 ( 81 ) 250

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

Other comprehensive income

$ 1,899 $ ( 385 ) $ 1,514

Six Months Ended June 30, 2023

Net unrealized gain on securities available-for-sale

$ 8,080 $ ( 2,218 ) $ 5,862

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

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

Total unrealized gain on investment securities available-for-sale

8,099 ( 2,223 ) 5,876

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

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.

Other comprehensive income

$ 11,913 $ ( 3,993 ) $ 7,920

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

Three Months Ended June 30, 2024

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

Other comprehensive (loss) income before reclassifications

Other comprehensive income (loss) before reclassifications

3,629 — ( 24 ) 3,605

Amounts reclassified from accumulated other comprehensive income

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

Amortization of unrealized loss on securities transferred to held-to-maturity — 1,322 — 1,322

Net other comprehensive income (loss) during period

3,627 1,322 ( 24 ) 4,925

Balance at end of period $ ( 123,689 ) $ ( 37,222 ) $ 68 $ ( 160,843 )

Three Months Ended June 30, 2023

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

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

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

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

1 unchanged sentence

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

Three Months Ended March 31, 2023

Six Months Ended June 30, 2024

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

Other comprehensive income before reclassifications

Other comprehensive (loss) income before reclassifications ( 1,437 ) — 250 ( 1,187 )

Amounts reclassified from accumulated other comprehensive income (loss)

( 6 ) — — ( 6 )

Amortization of unrealized loss on securities transferred to held-to-maturity — 2,707 — 2,707

Net other comprehensive (loss) income during period ( 1,443 ) 2,707 250 1,514

Balance at end of period $ ( 123,689 ) $ ( 37,222 ) $ 68 $ ( 160,843 )

Six Months Ended June 30, 2023

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

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

Amounts reclassified from accumulated other comprehensive income 14 — — 14

1 unchanged sentence

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

17,952 641 — 18,593

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

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.

The following table presents the amounts reclassified out of each component of accumulated other comprehensive income (loss) for the three and six months ended June 30, 2024 and 2023.

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

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

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

(dollars in thousands) 2024 2023

Realized gain (loss) on sale of investment securities

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

Realized gain (loss) on sale of investment securities $ 3 $ 2 Net gain (loss) on sale of investment securities

Income tax benefit (expense) ( 1 ) — Income tax expense

Total reclassifications for the periods $ 2 $ 2

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

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

(dollars in thousands) 2024 2023

Realized gain (loss) on sale of investment securities $ 7 $ ( 19 ) Net gain (loss) on sale of investment securities

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

Total reclassifications for the periods $ 6 $ ( 14 )

Fair Value Measurements

17 unchanged sentences

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

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

The tables below present the recorded amount of assets and liabilities measured at fair value on a recurring basis as of June 30, 2024 and December 31, 2023.

(dollars in thousands) Quoted Prices

2 unchanged sentences

(Level 3) Total Fair Value

March 31, 2024

June 30, 2024

Investment securities available-for-sale:

5 unchanged sentences

Corporate bonds — 1,695 — 1,695

Loans held for sale — 5,000 — 5,000

Interest rate product — 34,770 — 34,770

16 unchanged sentences

Investment securities available-for-sale:

Investment securities available-for-sale are recorded at fair value on a recurring basis.

AFS securities are recorded at fair value on a recurring basis.

Fair value measurement is based upon quoted prices, if available.

21 unchanged sentences

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.

At June 30, 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.

10 unchanged sentences

(Level 3) Total Fair Value

March 31, 2024

June 30, 2024

Individually assessed loans:

3 unchanged sentences

Real estate mortgage - residential — — 1,698 1,698

— — 2,072 2,072

Home equity — — 265 265

Other real estate owned — — 773 773

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

Total assets measured at fair value on a nonrecurring basis as of June 30, 2024 $ — $ — $ 97,391 $ 97,391

December 31, 2023

16 unchanged sentences

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:

The estimated fair value of the Company's financial instruments at June 30, 2024 and December 31, 2023 are as follows:

Fair Value Measurements

2 unchanged sentences

(Level 2) Significant Other Unobservable Inputs

March 31, 2024

June 30, 2024

Cash and due from banks $ 10,803 $ 10,803 $ 10,803 $ — $ —

5 unchanged sentences

Federal Reserve and Federal Home Loan Bank stock 54,274 N/A — — —

Loans held for sale 5,000 5,000 — 5,000 —

Loans 8,001,739 7,632,721 — — 7,632,721

35 unchanged sentences

Accrued interest payable 57,395 57,395 57,395 — —

Note 12 - Legal Contingencies

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.

Legal Contingencies

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.

However, considering 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.

Under ASC 450, the Company accrues for a loss contingency when the loss is probable and reasonably estimable.

The Company discloses the matter if a material loss is at least reasonably possible.

Under ASC 450, a loss contingency is “reasonably possible” if “the chance of the future event or events occurring is more than remote but less than likely”, and a loss contingency is “remote” if “the chance of the future event or events occurring is slight.”

The Company is cooperating with an ongoing investigation by the U.S.

Attorney’s Office for the Middle District of Pennsylvania into, among other things, the Company’s anti-money laundering controls between approximately 2011 and 2017 and the Company’s relationship with a former customer who pleaded guilty to a charge of bank fraud in 2020.

Due to the inherent uncertainty in predicting the outcome of a pending investigation, we are unable to estimate reasonably possible losses, if any, resulting from this matter.

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