What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-08-08 compared with 2023-05-10 · 318 added, 189 removed, 1334 unchanged (28% of the section changed)

3 unchanged sentences

(Amounts in thousands except share data)

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

Cash and due from banks $ 9,503 $ 17,426

3 unchanged sentences

Securities held-to-maturity, at amortized cost, net of allowance for credit losses (fair value of $208,643 and $168,483 in 2023 and 2022, respectively) 230,605 189,168

Loans held-for-sale (includes $2,209 and $9,110 at fair value in 2023 and 2022, respectively) 18,144 21,511

Loans held-for-sale (includes $9,110 at fair value in 2022) 32,001 21,511

Loans 3,646,832 3,499,401

36 unchanged sentences

First Internet Bancorp

Condensed Consolidated Statements of Operations – Unaudited

Condensed Consolidated Statements of Income – Unaudited

(Amounts in thousands except share and per share data)

Three Months Ended

March 31, 2023 March 31, 2022

Three Months Ended Six Months Ended

June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022

Interest Income

10 unchanged sentences

Provision for Credit Losses 1

1,698 1,185 11,113 1,976

Net Interest Income After Provision for Credit Losses 16,447 24,495 26,606 49,454

17 unchanged sentences

Total noninterest expense 18,670 17,985 39,624 36,765

(Loss) Income Before Income Taxes ( 5,349 ) 12,999

Income (Loss) Before Income Taxes 3,648 10,824 ( 1,701 ) 23,823

Income Tax (Benefit) Provision ( 234 ) 1,279 ( 2,566 ) 3,069

Net (Loss) Income $ ( 3,017 ) $ 11,209

(Loss) Income Per Share of Common Stock

Net Income $ 3,882 $ 9,545 $ 865 $ 20,754

Income Per Share of Common Stock

Basic $ 0.44 $ 0.99 $ 0.10 $ 2.14

8 unchanged sentences

First Internet Bancorp

Condensed Consolidated Statements of Comprehensive Loss – Unaudited

Condensed Consolidated Statements of Comprehensive Income – Unaudited

(Amounts in thousands except per share data)

Three Months Ended March 31,

Net (loss) income $ ( 3,017 ) $ 11,209

Other comprehensive income (loss)

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

2023 2022 2023 2022

Net income $ 3,882 $ 9,545 $ 865 $ 20,754

Other comprehensive (loss) income

Securities available-for-sale

Net unrealized holding gain (losses) recorded within other comprehensive income (loss) before income tax 5,112 ( 17,881 )

Income tax provision (benefit) 1,170 ( 4,077 )

Net effect on other comprehensive income (loss) 3,942 ( 13,804 )

Net unrealized holding (losses) gains recorded within other comprehensive (loss) income before income tax ( 4,810 ) ( 15,395 ) 302 ( 33,276 )

Income tax (benefit) provision ( 1,107 ) ( 4,186 ) 63 ( 8,263 )

Net effect on other comprehensive (loss) income ( 3,703 ) ( 11,209 ) 239 ( 25,013 )

Securities held-to-maturity

4 unchanged sentences

Cash flow hedges

Net unrealized holding (losses) gains on cash flow hedging derivatives recorded within other comprehensive income before income tax ( 2,170 ) 9,334

Income tax (benefit) provision ( 499 ) 3,318

Net effect on other comprehensive (loss) income ( 1,671 ) 6,016

Total other comprehensive income (loss) 2,383 ( 11,822 )

Comprehensive loss $ ( 634 ) $ ( 613 )

Net unrealized holding gains (losses) on cash flow hedging derivatives recorded within other comprehensive income (loss) before income tax 2,094 4,944 ( 76 ) 14,278

Income tax provision (benefit) 481 1,840 ( 18 ) 5,158

Net effect on other comprehensive income (loss) 1,613 3,104 ( 58 ) 9,120

Total other comprehensive (loss) income ( 1,933 ) ( 7,889 ) 450 ( 19,711 )

Comprehensive income $ 1,949 $ 1,656 $ 1,315 $ 1,043

See Notes to Condensed Consolidated Financial Statements

1 unchanged sentence

Condensed Consolidated Statements of Changes in Shareholders’ Equity - Unaudited

Three Months Ended March 31, 2023 and 2022

Six Months Ended June 30, 2023 and 2022

(Amounts in thousands except per share data)

6 unchanged sentences

— ( 4,491 ) — ( 4,491 )

Net loss — ( 3,017 ) — ( 3,017 )

Net Income — 865 — 865

Other comprehensive income — — 450 450

6 unchanged sentences

Common stock redeemed for the net settlement of share-based awards ( 106 ) — — ( 106 )

Balance, March 31, 2023 $ 189,202 $ 197,623 $ ( 31,253 ) $ 355,572

Balance, June 30, 2023 $ 186,545 $ 200,973 $ ( 33,186 ) $ 354,332

Balance, January 1, 2022 $ 218,946 $ 172,431 $ ( 11,039 ) $ 380,338

7 unchanged sentences

Deferred stock rights and restricted stock units issued in lieu of cash dividends payable on outstanding deferred stock rights and restricted stock units 10 — — 10

Balance, March 31, 2022 $ 214,473 $ 183,043 $ ( 22,861 ) $ 374,655

Common stock redeemed for the net settlement of share-based awards ( 179 ) — — ( 179 )

Balance, June 30, 2022 $ 204,071 $ 192,011 $ ( 30,750 ) $ 365,332

1 Reflects the impact of adopting Accounting Standards Update (“ASU”) 2016-13.

1 unchanged sentence

First Internet Bancorp

Condensed Consolidated Statements of Changes in Shareholders’ Equity - Unaudited

Three Months Ended June 30, 2023 and 2022

(Amounts in thousands except per share data)

Stock Retained

Earnings Accumulated

Comprehensive

Shareholders’

Balance April 1, 2023 $ 189,202 $ 197,623 $ ( 31,253 ) $ 355,572

Net income — 3,882 — 3,882

Other comprehensive loss — — ( 1,933 ) ( 1,933 )

Dividends declared ($ 0.06 per share)

— ( 532 ) — ( 532 )

Recognition of the fair value of share-based compensation 115 — — 115

Repurchased shares of common stock ( 85,000 )

( 2,745 ) — — ( 2,745 )

Excise tax on repurchase of common stock ( 27 ) — — ( 27 )

Balance, June 30, 2023 $ 186,545 $ 200,973 $ ( 33,186 ) $ 354,332

Balance April 1, 2022 $ 214,473 $ 183,043 $ ( 22,861 ) $ 374,655

Net income — 9,545 — 9,545

Other comprehensive loss — — ( 7,889 ) ( 7,889 )

Dividends declared ($ 0.06 per share)

— ( 577 ) — ( 577 )

Recognition of the fair value of share-based compensation 895 — — 895

Repurchase of common stock (294,464) ( 11,123 ) — — ( 11,123 )

Deferred stock rights and restricted stock units issued in lieu of cash dividends payable on outstanding deferred stock rights and restricted stock units 5 — — 5

Common stock redeemed for the net settlement of share-based awards ( 179 ) — — ( 179 )

Balance, June 30, 2022 $ 204,071 $ 192,011 $ ( 30,750 ) $ 365,332

First Internet Bancorp

Condensed Consolidated Statements of Cash Flows – Unaudited

(Amounts in thousands except per share data)

Three Months Ended March 31,

Six Months Ended June 30,

Operating Activities

Net (loss) income $ ( 3,017 ) $ 11,209

Net income $ 865 $ 20,754

Adjustments to reconcile net income to net cash used in operating activities:

11 unchanged sentences

Net change in accrued expenses and other liabilities ( 2,625 ) ( 5,173 )

Net cash provided by operating activities 5,898 30,861

Net cash (used in) provided by operating activities ( 4,844 ) 52,001

Investing Activities

10 unchanged sentences

Other investing activities ( 2,094 ) 374

Net cash (used in) provided by investing activities ( 132,565 ) 10,422

Net cash used in investing activities ( 189,057 ) ( 192,563 )

Financing Activities

Net increase in deposits 178,743 39,020

Net increase (decrease) in deposits 410,951 ( 26,858 )

Cash dividends paid ( 1,091 ) ( 1,168 )

3 unchanged sentences

Other, net ( 106 ) ( 179 )

Net cash provided by financing activities 174,087 33,306

Net Increase in Cash and Cash Equivalents 47,420 74,589

Net cash provided by (used in) financing activities 402,980 ( 94,445 )

Net Increase (Decrease) in Cash and Cash Equivalents 209,079 ( 235,007 )

Cash and Cash Equivalents, Beginning of Period 256,552 442,960

20 unchanged sentences

In our opinion, all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation have been included.

The results of operations for the three months ended March 31, 2023 are not necessarily indicative of the results expected for the year ending December 31, 2023 or any other period.

The March 31, 2023 condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the First Internet Bancorp Annual Report on Form 10-K for the year ended December 31, 2022.

The results of operations for the three and six months ended June 30, 2023 are not necessarily indicative of the results expected for the year ending December 31, 2023 or any other period.

The June 30, 2023 condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the First Internet Bancorp Annual Report on Form 10-K for the year ended December 31, 2022.

The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates, judgments, or assumptions that could have a material effect on the carrying value of certain assets and liabilities.

27 unchanged sentences

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

Accrued interest receivable on AFS debt securities totaled $ 2.0 million at March 31, 2023 and is excluded from the estimate of credit losses.

Accrued interest receivable on AFS debt securities totaled $ 2.0 million at June 30, 2023 and is excluded from the estimate of credit losses.

The Company made the policy election to exclude accrued interest from the amortized cost basis of AFS debt securities and report accrued interest separately on the condensed consolidated balance sheet.

1 unchanged sentence

Management measures expected credit losses on HTM debt securities on a collective basis by major security type.

Accrued interest receivable on HTM debt securities totaled $ 0.8 million at March 31, 2023 and is excluded from the estimate of credit losses.

Accrued interest receivable on HTM debt securities totaled $ 1.0 million at June 30, 2023 and is excluded from the estimate of credit losses.

The Company made the accounting policy election to not measure an ACL for accrued interest.

45 unchanged sentences

The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company.

The allowance on off-balance sheet credit exposure is recorded as a liability and adjusted as a provision for credit loss expense.

The ACL for off-balance sheet credit exposure is recorded as a liability and adjusted as a provision for credit loss expense.

The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life.

8 unchanged sentences

The update eliminated the accounting guidance for troubled debt restructurings (“TDRs”) by creditors, while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty.

Revision of Previously Issued Financial Statements

The Company has revised amounts reported in previously issued financial statements for the periods presented in this Quarterly Report on Form 10-Q due to immaterial clerical errors.

The clerical errors caused certain amounts related to

the transfer of available-for-sale mortgage-backed securities to held-to-maturity mortgage-backed securities to be reclassified to different line items within the statement of cash flows for the period ended March 31, 2022.

The reclassifications were between the purchases, maturities and amortization, and depreciation line items related to securities and had no impact on the ending cash balance, consolidated balance sheet or statement of operations.

The Company evaluated the impact of the clerical errors to our previously issued financial statements in accordance with SEC Staff Accounting Bulletins No.

108 and, based upon quantitative and qualitative factors, determined that the clerical errors were not material to the previously issued financial statements and disclosures included in our Quarterly Report on Form 10-Q for the three months ended March 31, 2022.

(Loss) Earnings Per Share

(Loss) earnings per share of common stock are based on the weighted-average number of basic shares and dilutive shares outstanding during the period.

The following is a reconciliation of the weighted-average common shares for the basic and diluted (loss) earnings per share computations for the three months ended March 31, 2023 and 2022.

(dollars in thousands, except per share data) Three Months Ended March 31,

Basic (loss) earnings per share

Net (loss) income $ ( 3,017 ) $ 11,209

Earnings Per Share

Earnings per share of common stock are based on the weighted-average number of basic shares and dilutive shares outstanding during the period.

The following is a reconciliation of the weighted-average common shares for the basic and diluted earnings per share computations for the three and six months ended June 30, 2023 and 2022.

(dollars in thousands, except per share data) Three Months Ended June 30, Six Months Ended June 30,

2023 2022 2023 2022

Basic earnings per share

Net income $ 3,882 $ 9,545 $ 865 $ 20,754

Weighted-average common shares 8,903,213 9,600,383 8,963,308 9,694,729

Basic (loss) earnings per common share $ ( 0.33 ) $ 1.14

Diluted (loss) earnings per share

Net (loss) income $ ( 3,017 ) $ 11,209

Basic earnings per common share $ 0.44 $ 0.99 $ 0.10 $ 2.14

Diluted earnings per share

Net income $ 3,882 $ 9,545 $ 865 $ 20,754

Weighted-average common shares 8,903,213 9,600,383 8,963,308 9,694,729

1 unchanged sentence

Weighted-average common and incremental shares 8,908,180 9,658,689 8,980,262 9,764,232

Diluted (loss) earnings per common share 1

Diluted earnings per common share 1

$ 0.44 $ 0.99 $ 0.10 $ 2.13

1 Potential dilutive common shares are excluded from the computation of diluted EPS in the periods where the effect would be antidilutive.

Since the Company was in a loss position for the three months ended March 31, 2023, basic net loss is the same as diluted net loss per share, as the inclusion of all potential shares of common stock outstanding would have been anti-dilutive.

Excluded from the computation of diluted EPS were weighted-average antidilutive shares totaling 661 for the three months ended March 31, 2022.

The following tables summarize securities available-for-sale and securities held-to-maturity as of March 31, 2023 and December 31, 2022.

March 31, 2023

Excluded from the computation of diluted EPS were weighted-average antidilutive shares totaling 79,313 and 35,033 for the three and six months ended June 30, 2023, respectively.

Excluded from the computation of diluted EPS were weighted-average antidilutive shares totaling 5,560 and 1,198 for the three and six months ended June 30, 2022, respectively.

The following tables summarize securities available-for-sale and securities held-to-maturity as of June 30, 2023 and December 31, 2022.

June 30, 2023

Amortized Gross Unrealized Fair

10 unchanged sentences

Total available-for-sale $ 424,891 $ 587 $ ( 46,084 ) $ 379,394

March 31, 2023

June 30, 2023

Amortized Cost Gross Unrealized Fair Value Allowance for Credit Losses Net Carrying Value

6 unchanged sentences

Total held-to-maturity $ 230,941 $ — $ ( 22,298 ) $ 208,643 $ ( 336 ) $ 230,605

1 Includes $ 0.5 million of additional premium related to terminated interest rate swaps associated with agency mortgage-backed securities - residential as of March 31, 2023.

Accrued interest receivable on AFS and HTM securities at March 31, 2023 was $ 2.0 million and $ 0.8 million, respectively, and is included in accrued interest receivable on the condensed consolidated balance sheet.

1 Includes $ 0.4 million of additional premium related to terminated interest rate swaps associated with agency mortgage-backed securities - residential as of June 30, 2023.

Accrued interest receivable on AFS and HTM securities at June 30, 2023 was $ 2.0 million and $ 1.0 million, respectively, and is included in accrued interest receivable on the condensed consolidated balance sheet.

The Company elected to exclude all accrued interest receivable from securities when estimating credit losses.

8 unchanged sentences

As a result, the Company recorded in an initial ACL in retained earnings of $ 0.3 million on January 1, 2023.

The Company reevaluated these securities at March 31, 2023 and determined no additional ACL was necessary.

The Company reevaluated these securities at June 30, 2023 and determined no additional ACL was necessary.

December 31, 2022

22 unchanged sentences

1 Includes $0.5 million of additional premium related to terminated interest rate swaps associated with agency mortgage-backed securities - residential as of December 31, 2022.

The carrying value of securities at March 31, 2023 is shown below by their contractual maturity date.

The carrying value of securities at June 30, 2023 is shown below by their contractual maturity date.

Actual maturities will differ because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

21 unchanged sentences

Total $ 230,941 $ 208,643

There were no gross gains or losses resulting from the sale of available-for-sale securities during the three months ended March 31, 2023 and March 31, 2022, respectively.

There were no gross gains or losses resulting from the sale of available-for-sale securities during the three and six months ended June 30, 2023 and June 30, 2022, respectively.

Certain investments in debt securities are reported in the condensed consolidated financial statements at an amount less than their historical cost.

The total fair value of these investments at March 31, 2023 and December 31, 2022 was $ 573.4 million and $ 527.4 million, which was approximately 97 % and 94 %, respectively, of the Company’s AFS and HTM securities portfolios.

As of March 31, 2023, the Company’s security portfolio consisted of 459 securities, of which 431 were in an unrealized loss position.

The total fair value of these investments at June 30, 2023 and December 31, 2022 was $ 542.0 million and $ 527.4 million, which was approximately 92 % and 94 %, respectively, of the Company’s AFS and HTM securities portfolios.

As of June 30, 2023, the Company’s security portfolio consisted of 477 securities, of which 462 were in an unrealized loss position.

As of December 31, 2022, the Company’s security portfolio consisted of 445 securities, of which 434 were in an unrealized loss position.

5 unchanged sentences

The Company does not intend to sell the investments and it is not likely that the Company will be required to sell the investments before recovery of their amortized cost basis, which may be upon maturity.

As of March 31, 2023, the unrealized losses occurred as a result of changes in interest rates, market spreads and market conditions subsequent to purchase.

Agency Mortgage-Backed, Private Label Mortgage-Backed and Asset-Backed Securities

The unrealized losses on the Company’s investments in agency mortgage-backed, private label mortgage-backed and asset-backed securities were caused primarily by interest rate changes.

As of June 30, 2023, the unrealized losses occurred as a result of changes in interest rates, market spreads and market conditions subsequent to purchase.

Agency Mortgage-Backed and Private Label Mortgage-Backed Securities

The unrealized losses on the Company’s investments in agency mortgage-backed and private label mortgage-backed securities were caused primarily by interest rate changes.

The Company expects to recover the amortized cost basis over the terms of the securities.

As of March 31, 2023, the unrealized losses occurred as a result of changes in interest rates, market spreads and market conditions subsequent to purchase.

The following tables show the securities portfolio’s gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at March 31, 2023 and December 31, 2022.

March 31, 2023

As of June 30, 2023, the unrealized losses occurred as a result of changes in interest rates, market spreads and market conditions subsequent to purchase.

June 30, 2023

Less Than 12 Months 12 Months or Longer Total

9 unchanged sentences

Private label mortgage-backed securities - residential 3,642 ( 87 ) 9,773 ( 1,247 ) 13,415 ( 1,334 )

Asset-backed securities — — 4,998 ( 2 ) 4,998 ( 2 )

Corporate securities 8,523 ( 1,036 ) 18,643 ( 3,357 ) 27,166 ( 4,393 )

29 unchanged sentences

Total $ 117,986 $ ( 13,460 ) $ 50,082 $ ( 7,225 ) $ 168,068 $ ( 20,685 )

The following table summarizes ratings for the Company’s HTM portfolio issued by state and political subdivisions and other securities as of March 31, 2023.

The following table summarizes ratings for the Company’s HTM portfolio issued by state and political subdivisions and other securities as of June 30, 2023.

Held-to-Maturity

9 unchanged sentences

Baa3/BBB- — 12,530 12,530

Ba1/BB+ — 2,000 2,000

— 174,981 174,981

1 unchanged sentence

1 HTM agency mortgage-backed securities - commercial and residential are listed under Other securities as not rated.

There were no amounts reclassified from accumulated other comprehensive loss to the condensed consolidated statements of operations during the three months ended March 31, 2023.

Loan balances as of March 31, 2023 and December 31, 2022 are summarized in the table below.

There were no amounts reclassified from accumulated other comprehensive loss to the condensed consolidated statements of income during the three and six months ended June 30, 2023.

Loan balances as of June 30, 2023 and December 31, 2022 are summarized in the table below.

Categories of loans include:

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

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

Commercial loans

20 unchanged sentences

Net loans $ 3,610,774 $ 3,467,664

1 Includes carrying value adjustments of $ 31.5 million and $ 32.5 million related to terminated interest rate swaps associated with public finance loans as of March 31, 2023 and December 31, 2022, respectively.

1 Includes carrying value adjustments of $ 30.5 million and $ 32.5 million related to terminated interest rate swaps associated with public finance loans as of June 30, 2023 and December 31, 2022, respectively.

Risk characteristics of each loan portfolio segment are as follows:

103 unchanged sentences

Modifications may include changes in the amortization terms of the loan, reductions in interest rates, acceptance of interest only payments, and/or reductions to the outstanding loan balance.

Such loans are typically placed on nonaccrual status when there is doubt concerning the full repayment of principal and interest or the loan has been in default for a period of 90 days or more.

Such loans are typically placed on nonaccrual status when there is doubt concerning the full repayment of principal and interest or the loan has been delinquent for a period of 90 days or more.

These loans may be returned to accrual status when all contractual amounts past due have been brought current, and the borrower’s performance under the modified terms of the loan agreement and the ultimate collectability of all contractual amounts due under the modified terms is no longer in doubt.

11 unchanged sentences

A home improvement loan generally is charged off no later than when it is 90 days past due as to principal or interest.

The following tables present changes in the balance of the ACL during the three months ended March 31, 2023.

(in thousands) Three Months Ended March 31, 2023

The following tables present changes in the balance of the ACL during the three and six months ended June 30, 2023.

(in thousands) Three Months Ended June 30, 2023

Allowance for credit losses:

Balance, Beginning of Period (Credit) Provision Charged to Expense Losses

Charged Off Recoveries Balance,

End of Period

Commercial and industrial $ 1,437 $ 195 $ — $ 217 $ 1,849

Owner-occupied commercial real estate 712 77 — — 789

Investor commercial real estate 1,276 140 — — 1,416

Construction 1,551 389 — — 1,940

Single tenant lease financing 10,273 ( 303 ) — — 9,970

Public finance 1,570 ( 61 ) — — 1,509

Healthcare finance 3,695 ( 1,249 ) ( 25 ) — 2,421

Small business lending 2,340 1,599 ( 1,358 ) 37 2,618

Franchise finance 4,672 143 ( 331 ) — 4,484

Residential mortgage 2,561 ( 12 ) — 1 2,550

Home equity 254 ( 32 ) — 2 224

Other consumer loans 6,538 ( 133 ) ( 150 ) 33 6,288

Total $ 36,879 $ 753 $ ( 1,864 ) $ 290 $ 36,058

(in thousands) Six Months Ended June 30, 2023

Allowance for credit losses:

Balance, Beginning of Period Adoption of CECL (Credit) Provision Charged to Expense Losses

15 unchanged sentences

Prior to the adoption of ASU 2016-13 on January 1, 2023, the Company calculated the allowance for loan losses using the incurred loss methodology.

The following table presents the activity in the allowance for loan losses by segment for the three months ended March 31, 2022.

(in thousands) Three Months Ended March 31, 2022

The following table presents the activity in the allowance for loan losses by segment for the three and six months ended June 30, 2022.

(in thousands) Three Months Ended June 30, 2022

Allowance for loan losses:

16 unchanged sentences

Total $ 28,251 $ 1,185 $ ( 500 ) $ 217 $ 29,153

(in thousands) Six Months Ended June 30, 2022

Allowance for loan losses:

Balance, Beginning of Period (Credit) Provision Charged to Expense Losses

Charged Off Recoveries Balance,

End of Period

Commercial and industrial $ 1,891 $ 135 $ — $ — $ 2,026

Owner-occupied commercial real estate 742 ( 39 ) — — 703

Investor commercial real estate 328 293 — — 621

Construction 1,612 95 — — 1,707

Single tenant lease financing 10,385 ( 1,904 ) — 1,231 9,712

Public finance 1,776 74 — — 1,850

Healthcare finance 5,940 ( 1,178 ) — — 4,762

Small business lending 1,387 630 ( 80 ) 19 1,956

Franchise finance 1,083 1,198 — — 2,281

Residential mortgage 643 493 — 2 1,138

Home equity 64 ( 146 ) — 136 54

Other consumer loans 1,990 465 ( 291 ) 179 2,343

Tax refund advance loans — 1,860 ( 1,860 ) — —

Total $ 27,841 $ 1,976 $ ( 2,231 ) $ 1,567 $ 29,153

In addition to the ACL, the Company established a reserve for off-balance sheet commitments, classified in other liabilities, as required by the adoption of the CECL methodology for measuring credit losses.

1 unchanged sentence

The day one entry for off-balance sheet commitments resulted in a reserve of $ 2.5 million.

The adequacy of the reserve for unfunded

commitments is determined quarterly based on methodology similar to the methodology for determining the ACL.

The following table details activity in the provision for credit losses on off-balance sheet commitments through March 31, 2023.

(dollars in thousands) Pre-ASC 326 Adoption Impact of ASC 326 Adoption Provision for credit losses Balance, March 31, 2023

The adequacy of the reserve for unfunded commitments is determined quarterly based on methodology similar to the methodology for determining the ACL.

The following table details activity in the provision for credit losses on off-balance sheet commitments for the three months ended June 30, 2023.

(dollars in thousands) Balance

March 31, 2023 Provision for credit losses Balance

June 30, 2023

Off-balance sheet commitments

5 unchanged sentences

Healthcare finance 2 ( 2 ) —

Small business lending — 242 242

Total commercial loans 2,361 994 3,355

5 unchanged sentences

Total allowance for off-balance sheet commitments $ 2,546 $ 945 $ 3,491

The following table present the recorded investment in loans based on portfolio segment and impairment method as of December 31, 2022.

The following table details activity in the provision for credit losses on off-balance sheet commitments for the six months ended June 30, 2023.

(dollars in thousands) Pre-ASC 326 Adoption Impact of ASC 326 Adoption Provision for credit losses Balance

June 30, 2023

Off-balance sheet commitments

Commercial loans

Commercial and industrial $ — $ 110 $ 78 $ 188

Owner-occupied commercial real estate — — 8 8

Investor commercial real estate — 9 11 20

Construction — 2,193 704 2,897

Healthcare finance — 2 ( 2 ) —

Small business lending — — 242 242

Total commercial loans — 2,314 1,041 3,355

Consumer loans

Residential mortgage — 127 ( 68 ) 59

Home equity — 52 11 63

Other consumer — 11 3 14

Total consumer loans — 190 ( 54 ) 136

Total allowance for off-balance sheet commitments $ — $ 2,504 $ 987 $ 3,491

The following table presents the recorded investment in loans based on portfolio segment and impairment method as of December 31, 2022.

(in thousands) Loans Allowance for Loan Losses

35 unchanged sentences

• “Nonperforming” - Loans that are 90 days delinquent or for which the full collection of principal and interest may be in doubt.

The following tables present the credit risk profile of the Company’s commercial and consumer loan portfolios by loan class and by year of origination for the years indicated based on rating category and payment activity as of March 31, 2023 and December 31, 2022.

March 31, 2023

June 30, 2023

Term Loans (amortized cost basis by origination year) Revolving loans amortized cost basis Revolving loans converted to term

40 unchanged sentences

Total public finance 2,396 54,105 31,950 7,640 46,505 432,945 — — 575,541

March 31, 2023

June 30, 2023

Term Loans (amortized cost basis by origination year) Revolving loans amortized cost basis Revolving loans converted to term

6 unchanged sentences

Total healthcare finance — — 10,908 137,660 70,562 25,942 — — 245,072

Gross charge-offs — — — — 25 — — — 25

Small business lending 1

11 unchanged sentences

Total franchise finance 103,670 224,752 62,057 — — — — — 390,479

Gross charge-offs — 331 — — — — — — 331

Consumer loans

30 unchanged sentences

Franchise finance 299,241 594 — 299,835

Wealth advisory lending — — — —

Total loans $ 2,672,714 $ 25,214 $ 21,421 $ 2,719,349

6 unchanged sentences

Total consumer loans $ 732,193 $ 1,065 $ 733,258

The following tables present the Company’s loan portfolio delinquency analysis as of March 31, 2023 and December 31, 2022.

March 31, 2023

The following tables present the Company’s loan portfolio delinquency analysis as of June 30, 2023 and December 31, 2022.

June 30, 2023

(in thousands) 30-59

45 unchanged sentences

The following table summarizes the Company’s nonaccrual loans and loans past due 90 days or more and still accruing by loan class for the periods indicated:

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

(in thousands) Nonaccrual Loans Nonaccrual Loans with no Allowance for Credit Losses Total Loans

Accruing Nonaccrual Loans Nonaccrual Loans with no Allowance for Credit Losses Total Loans

Accruing Nonaccrual Loans Nonaccrual Loans with no Allowance for Loan Losses Total Loans

Commercial and industrial $ — $ — $ — $ 51 $ — $ —

6 unchanged sentences

1 Balance is partially guaranteed by the U.S.

There was no interest income recognized on nonaccrual loans for the three months ended March 31, 2023 and $ 25 thousand in interest income recognized on nonaccrual loans for the three months ended March 31, 2022.

There was $ 69 thousand and $ 78 thousand in interest income recognized on nonaccrual loans for the six months ended June 30, 2023 and June 30, 2022, respectively.

Determining fair value for collateral dependent loans requires obtaining a current independent appraisal of the collateral and applying a discount factor, which includes selling costs if applicable, to the value.

4 unchanged sentences

Both appraised values and values based on borrower’s financial information are discounted as considered appropriate based on age and quality of the information and current market conditions.

The following table presents the amortized cost basis of collateral dependent loans, which are individually evaluated to determine expected credit losses as of March 31, 2023,

March 31, 2023

The following table presents the amortized cost basis of collateral dependent loans, which are individually evaluated to determine expected credit losses as of June 30, 2023,

June 30, 2023

(in thousands) Commercial Real Estate Residential Real Estate Other Total Allowance on Collateral Dependent Loans

27 unchanged sentences

1 Balance is partially guaranteed by the U.S.

The table below presents average balances and interest income recognized for impaired loans during the three months ended March 31, 2022.

Three Months Ended

March 31, 2022

The table below presents average balances and interest income recognized for impaired loans during the three and six months ended June 30, 2022.

Three Months Ended Six Months Ended

June 30, 2022 June 30, 2022

(in thousands) Average

Balance Interest

Income Average

Balance Interest

Loans without a specific valuation allowance

13 unchanged sentences

1 Balance is partially guaranteed by the U.S.

The Company had $ 0.1 million in other real estate owned (“OREO”) as of March 31, 2023, which consisted of one residential mortgage property.

The Company had $ 0.1 million in other real estate owned (“OREO”) as of June 30, 2023, which consisted of one residential mortgage property.

The Company did not have any OREO as of December 31, 2022.

There were two loans totaling $ 0.4 million and one loan totaling $ 0.1 million in the process of foreclosure at March 31, 2023 and December 31, 2022, respectively.

There were two loans totaling $ 0.4 million and one loan totaling $ 0.1 million in the process of foreclosure at June 30, 2023 and December 31, 2022, respectively.

Loan Modifications to Borrowers Experiencing Financial Difficulty

5 unchanged sentences

Modifications to borrowers experiencing financial difficulty may include interest rate reductions, principal or interest forgiveness, forbearances, term extensions and other actions intended to minimize loss and to avoid foreclosure or repossession of collateral.

The Company did not have any loan modifications made to borrowers experiencing financial difficulty during the quarter ended March 31, 2023.

There was one portfolio residential mortgage loan classified as a new TDR during the three months ended March 31, 2022 with a pre-modification and post-modification outstanding recorded investment of $ 0.7 million.

The Company did not have any loan modifications made to borrowers experiencing financial difficulty during the three and six months ended June 30, 2023.

There were no loans classified as new TDRs during the three months ended June 30, 2022.

There was one portfolio residential mortgage loan classified as a new TDR during the six months ended June 30, 2022 with a pre-modification and post-modification outstanding recorded investment of $ 0.7 million.

The Company did not allocate a specific allowance for that loan as of June 30, 2022.

The modifications consisted of interest-only payments for a period of time.

There were no performing TDRs that had payment defaults within the twelve months following modification during the three and six months ended June 30, 2022, respectively.

Premises and Equipment

The following table summarizes premises and equipment at March 31, 2023 and December 31, 2022.

(in thousands) March 31,

The following table summarizes premises and equipment at June 30, 2023 and December 31, 2022.

(in thousands) June 30,

2023 December 31,

6 unchanged sentences

Total $ 73,525 $ 72,711

As of March 31, 2023 and December 31, 2022, the carrying amount of goodwill was $ 4.7 million.

There have been no changes in the carrying amount of goodwill for the three months ended March 31, 2023 or March 31, 2022.

As of June 30, 2023 and December 31, 2022, the carrying amount of goodwill was $ 4.7 million.

There have been no changes in the carrying amount of goodwill for the three and six months ended June 30, 2023 or June 30, 2022.

Goodwill is assessed for impairment annually as of August 31, or more frequently if events occur or circumstances change that indicate an impairment may exist.

2 unchanged sentences

Alternatively, a quantitative goodwill test can be performed without performing a qualitative assessment.

Goodwill was assessed for impairment using a qualitative test performed as of August 31, 2022.

In March 2023, the closure of two large regional banks resulted in market volatility and a significant decline in regional bank stock prices, including our stock price.

This triggering event indicated that goodwill may be impaired and resulted in us performing a goodwill impairment assessment as of May 31, 2023.

The estimated fair value of the reporting unit exceeded the net carrying value, and therefore no goodwill impairment existed as of that date.

Servicing Asset

Activity for the servicing asset and the related changes in fair value for the three months ended March 2023 and 2022 are shown in the table below.

Activity for the servicing asset and the related changes in fair value for the three and six months ended June 2023 and 2022 are shown in the table below.

Three Months Ended

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

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

Balance, beginning of period $ 7,312 $ 5,249

5 unchanged sentences

Balance, end of period $ 8,252 $ 5,345

Six Months Ended

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

Balance, beginning of period $ 6,255 $ 4,702

Originated and purchased servicing 2,410 1,410

( 867 ) ( 609 )

Changes in fair value due to changes in valuation inputs or assumptions used in

the valuation model 454 ( 158 )

Loan servicing asset revaluation $ ( 413 ) $ ( 767 )

Balance, end of period $ 8,252 $ 5,345

Loans serviced for others are not included in the condensed consolidated balance sheets.

The unpaid principal balances of these loans serviced for others as of March 31, 2023 and December 31, 2022 are shown in the table below.

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

The unpaid principal balances of these loans serviced for others as of June 30, 2023 and December 31, 2022 are shown in the table below.

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

Loan portfolios serviced for:

1 unchanged sentence

Total $ 397,908 $ 318,194

Loan servicing revenue totaled $ 0.8 million and $ 0.6 million for the three months ended March 31, 2023 and March 31, 2022, respectively.

Loan servicing asset revaluation, which represents the change in fair value of the servicing asset, resulted in a $ 0.1 million and $ 0.3 million downward valuation for the three months ended March 31, 2023 and March 31, 2022, respectively.

Loan servicing revenue totaled $ 0.9 million and $ 1.6 million for the three and six months ended June 30, 2023, respectively, and $ 0.6 million and $ 1.2 million for the three and six months ended June 30, 2022, respectively.

Loan servicing asset revaluation, which represents the change in fair value of the servicing asset, resulted in a $ 0.4 million and $ 0.4 million downward valuation for the three and six months ended June 30, 2023, respectively, and a $ 0.5 million and $ 0.8 million downward valuation for the three and six months ended June 30, 2022, respectively.

The fair value of servicing rights is highly sensitive to changes in underlying assumptions.

25 unchanged sentences

Holders of $ 0.7 million of unregistered 2031 Notes did not participate in the exchange.

The following table presents the principal balance and unamortized debt issuance costs for the 2029 Notes, the 2030 Note, and the 2031 Notes as of March 31, 2023 and December 31, 2022.

March 31, 2023 December 31, 2022

The following table presents the principal balance and unamortized debt issuance costs for the 2029 Notes, the 2030 Note, and the 2031 Notes as of June 30, 2023 and December 31, 2022.

June 30, 2023 December 31, 2022

(in thousands) Principal Unamortized Debt Issuance Costs Principal Unamortized Debt Issuance Costs

16 unchanged sentences

Award Activity Under 2022 Plan

The Company recorded less than $ 0.1 million o f share-based compensation expense for the three months ended March 31, 2023, related to stock-based awards under the 2022 Plan .

The following table summarizes the stock-based award activity under the 2022 Plan for the three months ended March 31, 2023.

The Company recorded less than $ 0.1 million o f share-based compensation expense for the three and six months ended June 30, 2023, related to stock-based awards under the 2022 Plan .

The following table summarizes the stock-based award activity under the 2022 Plan for the six months ended June 30, 2023.

Restricted Stock Units Weighted-Average Grant Date Fair Value Per Share Restricted Stock Awards Weighted-Average Grant Date Fair Value Per Share Deferred Stock Units Weighted-Average Grant Date Fair Value Per Share

1 unchanged sentence

Granted 72,354 24.61 30,030 11.18 — —

Unvested at March 31, 2023 71,660 $ 24.75 3,558 $ 36.84 — $ —

At March 31, 2023, the total unrecognized compensation cost related to unvested stock-based awards under the 2022 Plan was $ 1.7 million with a weighted-average expense recognition period of 2.8 years.

Cancelled/Forfeited — — — — — —

Vested — — ( 3,558 ) 36.85 — —

Unvested at June 30, 2023 72,354 $ 24.61 30,030 $ 11.18 — $ —

At June 30, 2023, the total unrecognized compensation cost related to unvested stock-based awards under the 2022 Plan was $ 2.8 million with a weighted-average expense recognition period of 2.0 years.

2013 Equity Incentive Plan

2 unchanged sentences

Award Activity Under 2013 Plan

The Company recorded $ 0.4 million of share-based compensation expense for the three months ended March 31, 2023, related to stock-based awards under the 2013 Plan .

The Company recorded $ 0.6 million of share-based compensation expense for the three months ended March 31, 2022, related to stock-based awards under the 2013 Plan.

The following table summarizes the stock-based award activity under the 2013 Plan for the three months ended March 31, 2023.

The Company recorded less than $ 0.1 million and $ 0.5 million of share-based compensation expense for the three and six months ended June 30, 2023, related to stock-based awards under the 2013 Plan .

The Company recorded $ 0.9 million and $ 1.5 million of share-based compensation expense for the three and six months ended June 30, 2022, related to stock-based awards under the 2013 Plan.

The following table summarizes the stock-based award activity under the 2013 Plan for the six months ended June 30, 2023.

3 unchanged sentences

Vested ( 35,808 ) 31.87 — — — —

Unvested at March 31, 2023 65,648 $ 38.18 — $ — — $ —

At March 31, 2023, the total unrecognized compensation cost related to unvested stock-based awards under the 2013 Plan was $ 1.2 million with a weighted-average expense recognition period of 1.6 years.

Unvested at June 30, 2023 65,648 $ 38.18 — $ — — $ —

At June 30, 2023, the total unrecognized compensation cost related to unvested stock-based awards under the 2013 Plan was $ 1.0 million with a weighted-average expense recognition period of 1.4 years.

Directors Deferred Stock Plan

3 unchanged sentences

Deferred stock rights were to be settled in common stock following the end of the deferral period payable on the basis of one share of common stock for each deferred stock right.

The following table summarizes the status of deferred stock rights related to the Directors Deferred Stock Plan for the three months ended March 31, 2023.

The following table summarizes the status of deferred stock rights related to the Directors Deferred Stock Plan for the six months ended June 30, 2023.

Deferred Stock Rights

4 unchanged sentences

In the normal course of business, the Company makes various commitments to extend credit which are not reflected in the accompanying condensed consolidated financial statements.

At March 31, 2023 and December 31, 2022, the Company had outstanding loan commitments totaling approximately $ 501.7 million and $ 485.4 million, respectively.

At June 30, 2023 and December 31, 2022, the Company had outstanding loan commitments totaling approximately $ 544.8 million and $ 485.4 million, respectively.

Capital Commitments

1 unchanged sentence

The Company entered into construction-related contracts.

As of March 31, 2023, the project was completed at a total cost of $ 67.2 million.

There are no remaining capital commitments left at March 31, 2023.

As of June 30, 2023, the project was completed at a total cost of $ 67.2 million.

There are no remaining capital commitments left at June 30, 2023.

Fair Value of Financial Instruments

19 unchanged sentences

Rating agency and industry research reports as well as default and deferral activity are reviewed and incorporated into the calculation.

The Company did not own any securities classified within Level 3 of the hierarchy as of March 31, 2023 or December 31, 2022.

The Company did not own any securities classified within Level 3 of the hierarchy as of June 30, 2023 or December 31, 2022.

Loans Held-for-Sale (mandatory pricing agreements)

10 unchanged sentences

The fair values of IRLCs are determined using the projected sale price of individual loans based on changes in market interest rates, projected pull-through rates (the probability that an IRLC will ultimately result in an originated loan), the reduction in the value of the applicant’s option due to the passage of time, and the remaining origination costs to be incurred based on management’s estimate of market costs (Level 3).

The following tables present the fair value measurements of assets and liabilities recognized in the accompanying condensed consolidated balance sheets measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall at March 31, 2023 and December 31, 2022.

March 31, 2023

June 30, 2023

Fair Value Measurements Using

13 unchanged sentences

Total available-for-sale securities $ 379,394 $ — $ 379,394 $ —

Loans held-for-sale (mandatory pricing agreements) 2,209 — 2,209 —

Servicing asset 8,252 — — 8,252

Interest rate swap assets 6,089 — 6,089 —

Forward contracts ( 22 ) ( 22 ) — —

IRLCs — — — —

Interest rate swap agreements 8,395 — 8,395 —

December 31, 2022

19 unchanged sentences

IRLCs 133 — — 133

The following tables reconcile the beginning and ending balances of recurring fair value measurements recognized in the accompanying condensed consolidated balance sheets using significant unobservable (Level 3) inputs for the three months ended March 31, 2023 and 2022.

Three Months Ended

(in thousands) Servicing Asset Interest Rate Lock

Balance, April 1, 2023 $ 7,312 $ —

Total realized gains

Originated and purchased servicing 1,298 —

Subtractions:

Paydowns ( 528 ) —

Change in fair value 170 —

Balance, June 30, 2023 $ 8,252 $ —

Balance as of April 1, 2022 $ 5,249 $ ( 88 )

Total realized gains

Originated and purchased servicing 566 —

Subtractions:

Paydowns ( 353 ) —

Change in fair value ( 117 ) 550

Balance, June 30, 2022 $ 5,345 $ 462

Six Months Ended

(in thousands) Servicing Asset Interest Rate Lock

Balance, January 1, 2023 $ 6,255 $ 133

4 unchanged sentences

Change in fair value 454 ( 133 )

Balance, March 31, 2023 $ 7,312 $ —

Balance, June 30, 2023 $ 8,252 $ —

Balance as of January 1, 2022 $ 4,702 $ 718

4 unchanged sentences

Change in fair value ( 158 ) ( 256 )

Balance, March 31, 2022 $ 5,249 $ ( 88 )

Balance, June 30, 2022 $ 5,345 $ 462

The following describes the valuation methodologies and inputs used for assets measured at fair value on a nonrecurring basis, as well as the general classification of such assets pursuant to the valuation hierarchy.

6 unchanged sentences

Impaired loans with a specific valuation allowance based on the value of the underlying collateral or a discounted cash flow analysis are classified as Level 3 assets.

The following table presents the fair value measurements of assets and liabilities recognized in the accompanying condensed consolidated balance sheets measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurement falls at March 31, 2023 and December 31, 2022.

March 31, 2023

June 30, 2023

(in thousands) Fair Value Measurements Using

12 unchanged sentences

(dollars in thousands) Fair Value at

March 31, 2023 Valuation

June 30, 2023 Valuation

Technique Significant Unobservable

24 unchanged sentences

Rating agency and industry research reports as well as default and deferral activity are reviewed and incorporated into the calculation.

The Company did not own any securities classified within Level 3 of the hierarchy as of March 31, 2023 or December 31, 2022.

The Company did not own any securities classified within Level 3 of the hierarchy as of June 30, 2023 or December 31, 2022.

Loans Held-for-Sale (best efforts pricing agreements)

16 unchanged sentences

The fair value of commitments to extend credit are based on fees currently charged to enter into similar agreements with similar maturities and interest rates.

The Company determined that the fair value of commitments was zero based on the contractual value of outstanding commitments at each of March 31, 2023 and December 31, 2022.

The following tables present the carrying value and estimated fair value of all financial assets and liabilities that are not measured at fair value on a recurring basis at March 31, 2023 and December 31, 2022.

March 31, 2023

The Company determined that the fair value of commitments was zero based on the contractual value of outstanding commitments at each of June 30, 2023 and December 31, 2022.

The following tables present the carrying value and estimated fair value of all financial assets and liabilities that are not measured at fair value on a recurring basis at June 30, 2023 and December 31, 2022.

June 30, 2023

Fair Value Measurements Using

36 unchanged sentences

Refer to Note 13 for further information on derivative financial instruments.

During the three months ended March 31, 2023 and 2022, the Company originated mortgage loans held-for-sale of $ 36.3 million and $ 152.4 million, respectively, and sold $ 43.5 million and $ 162.4 million of mortgage loans, respectively, into the secondary market.

The following table presents the components of income from mortgage banking activities for the three months ended March 31, 2023 and 2022.

Three Months Ended March 31,

During the three months ended June 30, 2023, the Company originated no mortgage loans held-for-sale and sold $ 3.1 million of mortgage loans into the secondary market.

During the three months ended June 30, 2022, the Company originated $ 105.9 million of mortgage loans held-for-sale and sold $ 107.9 million of mortgage loans into the secondary market.

During the six months ended June 30, 2023 and 2022, the Company originated mortgage loans held-for-sale of $ 36.3 million and $ 258.2 million, respectively, and sold $ 46.5 million and $ 270.3 million of mortgage loans, respectively, into the secondary market.

The following table presents the components of income from mortgage banking activities for the three and six months ended June 30, 2023 and 2022.

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

(in thousands) 2023 2022 2023 2022

Gain on loans sold $ — $ 1,878 $ 471 $ 3,940

Loss resulting from the change in fair value of loans held-for-sale ( 136 ) ( 489 )

(Loss) gain resulting from the change in fair value of derivatives ( 252 ) 300

Gain (loss) resulting from the change in fair value of loans held-for-sale — 340 ( 143 ) ( 149 )

Loss resulting from the change in fair value of derivatives — ( 508 ) ( 252 ) ( 208 )

Net revenue from mortgage banking activities $ — $ 1,710 $ 76 $ 3,583

12 unchanged sentences

The fair value of derivative instruments with a positive fair value are reported in accrued income and other assets in the condensed consolidated balance sheets, while derivative instruments with a negative fair value are reported in accrued expenses and other liabilities in the condensed consolidated balance sheets.

The following table presents amounts that were recorded on the condensed consolidated balance sheets related to cumulative basis adjustments for interest rate swap derivatives designated as fair value accounting hedges as of March 31, 2023 and December 31, 2022.

(in thousands) Carrying amount of the hedged asset Cumulative amount of fair value hedging adjustment included in the carrying amount of the hedged assets

Line item in the condensed consolidated balance sheets in which the hedged item is included March 31, 2023 December 31, 2022 March 31, 2023 December 31, 2022

Line item in the condensed consolidated balance sheets in which the hedged item is included June 30, 2023 December 31, 2022 June 30, 2023 December 31, 2022

Securities available-for-sale 1

1 unchanged sentence

1 These amounts include the amortized cost basis of closed portfolios used to designate hedging relationships in which the hedged item is the last layer expected to be remaining at the end of the hedging relationship.

The designated hedged items were $ 50.0 million at both March 31, 2023 and December 31, 2022.

The following tables present a summary of interest rate swap derivatives designated as fair value accounting hedges of fixed-rate receivables used in the Company’s asset/liability management activities at March 31, 2023 and December 31, 2022, identified by the underlying interest rate-sensitive instruments.

The designated hedged items were $ 50.0 million at both June 30, 2023 and December 31, 2022.

The following tables present a summary of interest rate swap derivatives designated as fair value accounting hedges of fixed-rate receivables used in the Company’s asset/liability management activities at June 30, 2023 and December 31, 2022, identified by the underlying interest rate-sensitive instruments.

(dollars in thousands)

March 31, 2023

June 30, 2023

Notional Value Weighted- Average Remaining Maturity (years) Weighted-Average Ratio

1 unchanged sentence

Securities available-for-sale $ 50,000 1.3 $ 1,919 3-month LIBOR 2.33 %

Total at March 31, 2023 $ 50,000 1.6 $ 1,707 3-month LIBOR 2.33 %

Total at June 30, 2023 $ 50,000 1.3 $ 1,919 3-month LIBOR 2.33 %

(dollars in thousands)

6 unchanged sentences

The corresponding fair value hedging adjustment was allocated pro-rata to the underlying hedged securities and is being amortized over the remaining lives of the designated securities.

Amortization expense totaling less than $ 0.1 million was recognized as a reduction to interest income on securities for the three months ended March 31, 2023 and 2022, respectively.

Amortization expense totaling less than $ 0.1 million and $0.1 million was recognized as a reduction to interest income on securities for the three and six months ended June 30, 2023 and 2022, respectively.

In June 2020, the Company terminated all fair value hedging relationships associated with loans, which resulted in swap termination payments to counterparties totaling $ 46.1 million.

The corresponding loan fair value hedging adjustment as of the date of termination is being amortized over the remaining lives of the designated loans, which have a weighted average term to maturity of 11.1 years as of March 31, 2023.

Amortization expense totaling $ 1.0 million and $ 1.0 million for the three months ended March 31, 2023 and 2022, respectively, related to these previously terminated fair value hedges was recognized as a reduction to interest income on loans.

The following tables present a summary of interest rate swap derivatives designated as cash flow accounting hedges of variable-rate liabilities used in the Company’s asset/liability management activities at March 31, 2023 and December 31, 2022.

Amortization expense totaling $ 1.0 million and $ 2.0 million for the three and six months ended June 30, 2023, respectively, and $ 1.1 million and $ 2.1 million for the three and six months ended June 30 2022 respectively, related to these previously terminated fair value hedges was recognized as a reduction to interest income on loans.

(dollars in thousands)

March 31, 2023

June 30, 2023

Notional Value Weighted- Average Remaining Maturity (years) Weighted-Average Ratio

11 unchanged sentences

These derivative financial instruments were entered into for the purpose of managing the interest rate risk of certain assets and liabilities.

The Company received $ 6.6 million and $ 7.7 million of cash collateral from counterparties as security for their obligations related to these swap transactions at March 31, 2023 and December 31, 2022.

The Company had no pledged cash collateral as of March 31, 2023 and December 31, 2022 to counterparties on interest rate swap agreements as security for its obligations related to these agreements.

The Company received $ 8.3 million and $ 7.7 million of cash collateral from counterparties as security for their obligations related to these swap transactions at June 30, 2023 and December 31, 2022.

The Company had no pledged cash collateral as of June 30, 2023 and December 31, 2022 to counterparties on interest rate swap agreements as security for its obligations related to these agreements.

Collateral posted and received is dependent on the market valuation of the underlying hedges.

The following table presents the notional amount and fair value of interest rate swaps, IRLCs and forward contracts utilized by the Company at March 31, 2023 and December 31, 2022.

March 31, 2023 December 31, 2022

The following table presents the notional amount and fair value of interest rate swaps, IRLCs and forward contracts utilized by the Company at June 30, 2023 and December 31, 2022.

June 30, 2023 December 31, 2022

(in thousands) Notional

9 unchanged sentences

$ 260,000 $ 8,395 $ 291,862 $ 8,875

Liability Derivatives

Derivatives not designated as hedging instruments

Forward contracts $ 1,750 $ ( 22 ) $ — $ —

Total contracts

$ 1,750 $ ( 22 ) $ — $ —

The fair value of interest rate swaps was estimated using a discounted cash flow method that incorporates current market interest rates as of the balance sheet date.

Fair values of IRLCs and forward contracts were estimated using changes in mortgage interest rates from the date the Company entered into the IRLC and the balance sheet date.

The following table presents the effects of the Company’s cash flow hedge relationships on the condensed consolidated statements of comprehensive income during the three months ended March 31, 2023 and 2022.

Amount of Gain /(Loss) Recognized in Other Comprehensive Income (Loss) in The Three Months Ended

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

The following table presents the effects of the Company’s cash flow hedge relationships on the condensed consolidated statements of comprehensive income during the three and six months ended June 30, 2023 and 2022.

Amount of Gain Recognized in Other Comprehensive Loss in The Three Months Ended Amount of (Loss) Gain Recognized in Other Comprehensive Income (Loss) in The Six Months Ended

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

Interest rate swap agreements $ 2,094 $ 4,944 $ ( 76 ) $ 14,278

The following table summarizes the periodic changes in the fair value of derivatives not designated as hedging instruments on the condensed consolidated statements of income for the three months ended March 31, 2023 and 2022.

Amount of Gain / (Loss) Recognized in the Three Months Ended

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

Amount of Gain / (Loss) Recognized in the Three Months Ended Amount of Gain / (Loss) Recognized in the Six Months Ended

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

Asset Derivatives

6 unchanged sentences

Forward contracts — ( 1,059 ) ( 119 ) —

The following table presents the effects of the Company’s interest rate swap agreements on the condensed consolidated statements of operations during the three months ended March 31, 2023 and 2022.

The following table presents the effects of the Company’s interest rate swap agreements on the condensed consolidated statements of operations during the three and six months ended June 30, 2023 and 2022.

(in thousands)

Line item in the condensed consolidated statements of operations

Three Months Ended

March 31, 2023 March 31, 2022

Three Months Ended Six Months Ended

June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022

Interest income

2 unchanged sentences

Total interest income

354 ( 174 ) 648 ( 435 )

Interest expense

6 unchanged sentences

Accumulated Other Comprehensive Loss

The components of accumulated other comprehensive loss, included in shareholders' equity, for the three months ended March 31, 2023 and 2022, respectively, are presented in the table below.

The components of accumulated other comprehensive loss, included in shareholders' equity, for the six months ended June 30, 2023 and 2022, respectively, are presented in the table below.

(in thousands) Unrealized Losses On Debt Securities Unrealized Losses On Debt Securities Transferred From Available-For-Sale To Held-To-Maturity Cash Flow Hedges Total

5 unchanged sentences

Other comprehensive income (loss) - net of tax 239 269 ( 58 ) 450

Balance, March 31, 2023 $ ( 31,889 ) $ ( 3,407 ) $ 4,043 $ ( 31,253 )

Balance, June 30, 2023 $ ( 35,592 ) $ ( 3,250 ) $ 5,656 $ ( 33,186 )

Balance, January 1, 2022 $ ( 2,555 ) $ — $ ( 8,484 ) $ ( 11,039 )

4 unchanged sentences

Other comprehensive (loss) income - net of tax ( 25,013 ) ( 3,818 ) 9,120 ( 19,711 )

Balance, March 31, 2022 $ ( 16,359 ) $ ( 4,034 ) $ ( 2,468 ) $ ( 22,861 )

Balance, June 30, 2022 $ ( 27,568 ) $ ( 3,818 ) $ 636 $ ( 30,750 )

The components of accumulated other comprehensive loss, included in stockholders' equity, for the three months ended June 30, 2023 and 2022, respectively, are presented in the table below.

(in thousands) Unrealized Losses On Debt Securities Unrealized Losses On Debt Securities Transferred From Available-For-Sale To Held-To-Maturity Cash Flow Hedges Total

Balance, April 1, 2023 $ ( 31,889 ) $ ( 3,407 ) $ 4,043 $ ( 31,253 )

Other comprehensive (loss) income before reclassifications from accumulated other comprehensive loss before tax ( 4,810 ) — 2,094 ( 2,716 )

Reclassifications from accumulated other comprehensive loss to earnings before tax — 206 — 206

Other comprehensive (loss) gain before tax ( 4,810 ) 206 2,094 ( 2,510 )

Income tax (benefit) provision ( 1,107 ) 49 481 ( 577 )

Other comprehensive (loss) income - net of tax ( 3,703 ) 157 1,613 ( 1,933 )

Balance, June 30, 2023 $ ( 35,592 ) $ ( 3,250 ) $ 5,656 $ ( 33,186 )

Balance, April 1, 2022 $ ( 16,359 ) $ ( 4,034 ) $ ( 2,468 ) $ ( 22,861 )

Other comprehensive (loss) income before reclassifications from accumulated other comprehensive loss before tax ( 15,395 ) — 4,944 ( 10,451 )

Reclassifications from accumulated other comprehensive loss to earnings before tax — 193 — 193

Other comprehensive (loss) gain before tax ( 15,395 ) 193 4,944 ( 10,258 )

Income tax (benefit) provision ( 4,186 ) ( 23 ) 1,840 ( 2,369 )

Other comprehensive (loss) income - net of tax ( 11,209 ) 216 3,104 ( 7,889 )

Balance, June 30, 2022 $ ( 27,568 ) $ ( 3,818 ) $ 636 $ ( 30,750 )

Details About Accumulated Other Comprehensive Loss Components Amounts Reclassified from

Accumulated Other Comprehensive Loss for the Affected Line Item in the

Accumulated Other Comprehensive Loss for the Amounts Reclassified from

Accumulated Other Comprehensive Income (Loss) for the Affected Line Item in the

Statements of Operations

Three Months Ended March 31, 2023 Three Months Ended March 31, 2022

Three Months Ended June 30, 2023 Three Months Ended June 30, 2022 Six Months Ended June 30, 2023 Six Months Ended June 30, 2022

Reclassifications from accumulated other comprehensive loss to earnings before tax $ ( 206 ) ( 193 ) $ ( 364 ) $ ( 312 ) Interest income

Total amount reclassified before tax ( 158 ) ( 119 ) (Loss) income before income taxes

Total amount reclassified before tax ( 206 ) ( 193 ) ( 364 ) ( 312 ) Income (loss) before income taxes

Tax benefit ( 49 ) ( 44 ) ( 95 ) ( 71 ) Income tax (benefit) provision

Total reclassifications from accumulated other comprehensive loss $ ( 112 ) $ ( 92 ) Net (loss) income

Total reclassifications from accumulated other comprehensive loss $ ( 157 ) $ ( 149 ) $ ( 269 ) $ ( 241 ) Net income (loss)

Recent Accounting Pronouncements

73 unchanged sentences

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

What changed 10-Q

Item 1. Financial Statements