What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-11-08 compared with 2023-08-08 · 228 added, 196 removed, 1456 unchanged (23% of the section changed)

3 unchanged sentences

(Amounts in thousands except share data)

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

Cash and due from banks $ 3,595 $ 17,426

44 unchanged sentences

(Amounts in thousands except share and per share data)

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022

Interest Income

9 unchanged sentences

Net Interest Income 17,378 23,994 55,097 75,424

Provision for Credit Losses 1

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

Provision for credit losses - loans 1,850 892 11,976 2,868

Benefit for credit losses - debt securities held to maturity ( 15 ) — ( 15 ) —

Provision for credit losses - off-balance sheet commitments 111 — 1,098 —

Net Interest Income After Provision for Credit Losses 15,432 23,102 42,038 72,556

17 unchanged sentences

Total noninterest expense 19,756 17,995 59,380 54,760

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

Income Before Income Taxes 3,083 9,423 1,382 33,246

Income Tax (Benefit) Provision ( 326 ) 987 ( 2,892 ) 4,056

11 unchanged sentences

First Internet Bancorp

Condensed Consolidated Statements of Comprehensive Income – Unaudited

Condensed Consolidated Statements of Comprehensive (Loss) Income – Unaudited

(Amounts in thousands except per share data)

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

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

2023 2022 2023 2022

Net income $ 3,409 $ 8,436 $ 4,274 $ 29,190

Other comprehensive (loss) income

Other comprehensive loss

Securities available-for-sale

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 )

Net unrealized holding losses recorded within other comprehensive loss before income tax ( 11,308 ) ( 18,406 ) ( 11,006 ) ( 51,682 )

Income tax benefit ( 2,600 ) ( 5,121 ) ( 2,537 ) ( 13,384 )

Net effect on other comprehensive loss ( 8,708 ) ( 13,285 ) ( 8,469 ) ( 38,298 )

Securities held-to-maturity

2 unchanged sentences

Income tax provision (benefit) 45 69 140 ( 1,203 )

Net effect on other comprehensive income (loss) 157 216 269 ( 3,818 )

Net effect on other comprehensive loss 128 227 397 ( 3,591 )

Cash flow hedges

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

Net unrealized holding gains on cash flow hedging derivatives recorded within other comprehensive income (loss) before income tax 740 6,058 664 19,424

Income tax provision 171 1,393 153 5,639

Net effect on other comprehensive loss 569 4,665 511 13,785

Total other comprehensive loss ( 8,011 ) ( 8,393 ) ( 7,561 ) ( 28,104 )

Comprehensive (loss) income $ ( 4,602 ) $ 43 $ ( 3,287 ) $ 1,086

See Notes to Condensed Consolidated Financial Statements

1 unchanged sentence

Condensed Consolidated Statements of Changes in Shareholders’ Equity - Unaudited

Six Months Ended June 30, 2023 and 2022

Nine Months Ended September 30, 2023 and 2022

(Amounts in thousands except per share data)

7 unchanged sentences

Net income — 4,274 — 4,274

Other comprehensive income — — 450 450

Other comprehensive loss — — ( 7,561 ) ( 7,561 )

Dividends declared ($ 0.18 per share)

3 unchanged sentences

( 8,535 ) — — ( 8,535 )

Excise tax on repurchase of common stock ( 85 ) — — ( 85 )

Deferred stock rights and restricted stock units issued in lieu of cash dividends payable on outstanding deferred stock rights and restricted stock units 3 — — 3

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

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

Balance, September 30, 2023 $ 185,085 $ 203,856 $ ( 41,197 ) $ 347,744

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

4 unchanged sentences

Recognition of the fair value of share-based compensation 1,967 — — 1,967

Repurchase of common stock ( 398,167 )

Repurchased shares of common stock ( 518,167 )

( 20,626 ) — — ( 20,626 )

1 unchanged sentence

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

Balance, September 30, 2022 $ 200,123 $ 199,877 $ ( 39,143 ) $ 360,857

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

2 unchanged sentences

Condensed Consolidated Statements of Changes in Shareholders’ Equity - Unaudited

Three Months Ended June 30, 2023 and 2022

Three Months Ended September 30, 2023 and 2022

(Amounts in thousands except per share data)

3 unchanged sentences

Shareholders’

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

Balance July 1, 2023 $ 186,545 $ 200,973 $ ( 33,186 ) $ 354,332

Net income — 3,409 — 3,409

6 unchanged sentences

Excise tax on repurchase of common stock ( 18 ) — — ( 18 )

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

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

Balance, September 30, 2023 $ 185,085 $ 203,856 $ ( 41,197 ) $ 347,744

Balance July 1, 2022 $ 204,071 $ 192,011 $ ( 30,750 ) $ 365,332

Net income — 8,436 — 8,436

3 unchanged sentences

Recognition of the fair value of share-based compensation 434 — — 434

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

Repurchased shares of common stock ( 120,000 )

( 4,387 ) — — ( 4,387 )

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

Balance, September 30, 2022 $ 200,123 $ 199,877 $ ( 39,143 ) $ 360,857

First Internet Bancorp

1 unchanged sentence

(Amounts in thousands except per share data)

Six Months Ended June 30,

Nine Months Ended September 30,

Operating Activities

13 unchanged sentences

Net change in accrued expenses and other liabilities ( 3,584 ) ( 5,084 )

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

Net cash provided by operating activities ( 624 ) 73,776

Investing Activities

6 unchanged sentences

Redemption of Federal Home Loan Bank of Indianapolis stock — 431

Purchase of Federal Home Loan Bank of Indianapolis stock — ( 3,131 )

Purchase of premises and equipment ( 4,970 ) ( 14,368 )

4 unchanged sentences

Financing Activities

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

Net increase in deposits 640,370 13,685

Cash dividends paid ( 1,623 ) ( 1,733 )

3 unchanged sentences

Other, net ( 106 ) ( 179 )

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

Net cash provided by financing activities 630,021 66,147

Net Increase (Decrease) in Cash and Cash Equivalents 264,653 ( 221,908 )

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

The September 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.

5 unchanged sentences

It is the opinion of management that the disposition or ultimate resolution of such claims and lawsuits will not have a material adverse effect on the consolidated financial position, results of operations, and cash flows of the Company.

Other than the adoption of new accounting standards, the Company has not changed its significant accounting and reporting policies from those disclosed in the Company’s Form 10-K for the year ended December 31, 2022.

Other than the adoption of new accounting standards, the Company has not changed its significant accounting and reporting policies from those disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

Adoption of new accounting standards

4 unchanged sentences

It also applies to off-balance sheet credit exposures, including loan commitments, standby letters of credit, financial guarantees and other similar instruments.

Additionally, ASC 326 resulted in changes to the accounting for available-for-sale and held-to-maturity debt securities.

Additionally, ASC 326 resulted in changes to the accounting for available-for-sale debt securities.

The Company adopted ASC 326 for all financial assets measured at amortized cost, available for sale securities and off-balance sheet credit exposures.

4 unchanged sentences

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.

If either of the

criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income.

If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income.

For AFS debt securities that do not meet the aforementioned criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors, such as interest rates or market conditions.

4 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 June 30, 2023 and is excluded from the estimate of credit losses.

Accrued interest receivable on AFS debt securities totaled $ 2.3 million at September 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 $ 1.0 million at June 30, 2023 and is excluded from the estimate of credit losses.

Accrued interest receivable on HTM debt securities totaled $ 1.1 million at September 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.

17 unchanged sentences

In creating the DCF model, the Company has established a one-year reasonable and supportable forecast period with a one-year straight line reversion to the long-term historical average.

Due to its minimal loss history, the Company elected to use peer data for a more reasonable calculation.

Due to its minimal loss history, the Company elected to use peer data for a more conservative calculation.

Key inputs into the DCF model include loan-level detail, including the amortized cost basis of individual loans, payment structure, loss history, and forecasted loss drivers.

The Company utilizes a third party to provide economic forecasts under various scenarios, which are assessed quarterly considering the scenarios in the context of the current economic environment and loss risk.

The Company utilizes a third party to provide economic forecasts

under various scenarios, which are assessed quarterly considering the scenarios in the context of the current economic environment and loss risk.

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

36 unchanged sentences

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,

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

(dollars in thousands, except per share data) Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

11 unchanged sentences

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

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

Excluded from the computation of diluted EPS were weighted-average antidilutive shares totaling 12,713 and 28,363 for the three and nine months ended September 30, 2023, respectively.

Excluded from the computation of diluted EPS were weighted-average antidilutive shares totaling 426 and 1,616 for the three and nine months ended September 30, 2022, respectively.

The following tables summarize securities AFS and securities HTM as of September 30, 2023 and December 31, 2022.

September 30, 2023

Amortized Gross Unrealized Fair

10 unchanged sentences

Total available-for-sale $ 507,632 $ 729 $ ( 57,534 ) $ 450,827

June 30, 2023

September 30, 2023

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

6 unchanged sentences

Total held-to-maturity $ 232,249 $ — $ ( 30,599 ) $ 201,650 $ ( 321 ) $ 231,928

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.

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

Accrued interest receivable on AFS and HTM securities at September 30, 2023 was $ 2.3 million and $ 1.1 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 June 30, 2023 and determined no additional ACL was necessary.

The Company reevaluated these securities at September 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 June 30, 2023 is shown below by their contractual maturity date.

The carrying value of securities at September 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 $ 232,249 $ 201,650

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.

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

The total fair value of these investments at September 30, 2023 and December 31, 2022 was $ 605.9 million and $ 527.4 million, which was approximately 93 % and 94 %, respectively, of the Company’s AFS and HTM securities portfolios.

As of September 30, 2023, the Company’s security portfolio consisted of 504 securities, of which 488 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 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

2 unchanged sentences

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.

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 June 30, 2023 and December 31, 2022.

June 30, 2023

September 30, 2023

Less Than 12 Months 12 Months or Longer Total

9 unchanged sentences

Private label mortgage-backed securities - residential 9,431 ( 251 ) 9,145 ( 1,465 ) 18,576 ( 1,716 )

Asset-backed securities 5,803 ( 12 ) — — 5,803 ( 12 )

Corporate securities 1,720 ( 330 ) 23,953 ( 3,047 ) 25,673 ( 3,377 )

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 June 30, 2023.

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

Held-to-Maturity

13 unchanged sentences

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 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.

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

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

Categories of loans include:

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

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

Commercial loans

20 unchanged sentences

Net loans $ 3,698,616 $ 3,467,664

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.

1 Includes carrying value adjustments of $ 29.0 million and $ 32.5 million related to terminated interest rate swaps associated with public finance loans as of September 30, 2023 and December 31, 2022, respectively.

Risk characteristics of each loan portfolio segment are as follows:

117 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 and six months ended June 30, 2023.

(in thousands) Three Months Ended June 30, 2023

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

(in thousands) Three Months Ended September 30, 2023

Allowance for credit losses:

15 unchanged sentences

Total $ 36,058 $ 1,850 $ ( 1,517 ) $ 61 $ 36,452

(in thousands) Six Months Ended June 30, 2023

(in thousands) Nine Months Ended September 30, 2023

Allowance for credit losses:

16 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 and six months ended June 30, 2022.

(in thousands) Three Months Ended June 30, 2022

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

(in thousands) Three Months Ended September 30, 2022

Allowance for loan losses:

14 unchanged sentences

Other consumer loans 2,343 651 ( 106 ) 50 2,938

Tax refund advance loans 354 18 ( 372 ) — —

Total $ 29,153 $ 892 $ ( 236 ) $ 57 $ 29,866

(in thousands) Six Months Ended June 30, 2022

(in thousands) Nine Months Ended September 30, 2022

Allowance for loan losses:

20 unchanged sentences

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.

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

(dollars in thousands) Balance

March 31, 2023 Provision for credit losses Balance

June 30, 2023

June 30, 2023 Provision for credit losses Balance

September 30, 2023

Off-balance sheet commitments

13 unchanged sentences

Total allowance for off-balance sheet commitments $ 3,491 $ 111 $ 3,602

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

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

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

June 30, 2023

September 30, 2023

Off-balance sheet commitments

51 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 June 30, 2023.

June 30, 2023

September 30, 2023

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

22 unchanged sentences

estate 5,033 36,150 24,800 9,927 48,070 5,851 — — 129,831

Gross charge-offs 591 — — — — — — — 591

Pass 9,816 140,221 58,773 37,982 — — 4,667 — 251,459

16 unchanged sentences

Total public finance 2,017 35,716 29,750 3,590 46,076 418,811 — — 535,960

June 30, 2023

September 30, 2023

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

27 unchanged sentences

Total residential mortgage 10,013 195,496 92,297 30,950 13,176 51,569 — — 393,501

Gross charge-offs — 53 3 — — — — — 56

Payment performance

32 unchanged sentences

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

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

June 30, 2023

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

September 30, 2023

(in thousands) 30-59

43 unchanged sentences

Payments subsequently received on nonaccrual loans are applied to principal.

A loan is returned to accrual status when principal and interest are no longer past due and collectability is probable, typically after a minimum of six consecutive months of performance.

A loan is returned to accrual status when principal and interest are no longer past due and collectability is probable, typically after a minimum of nine consecutive months of performance.

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:

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

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

8 unchanged sentences

1 Balance is partially guaranteed by the U.S.

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.

There was $ 0.1 million and $ 0.2 million in interest income recognized on nonaccrual loans for the nine months ended September 30, 2023 and September 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 June 30, 2023,

June 30, 2023

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

September 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 and six months ended June 30, 2022.

Three Months Ended Six Months Ended

June 30, 2022 June 30, 2022

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

Three Months Ended Nine Months Ended

September 30, 2022 September 30, 2022

(in thousands) Average

3 unchanged sentences

Loans without a specific valuation allowance

Commercial and industrial $ 4,906 $ — $ 1,636 $ —

Owner-occupied commercial real estate 1,645 — 2,471 —

9 unchanged sentences

Small business lending 1,827 — 1,611 —

Other consumer loans 199 — 66 —

Total 3,036 — 3,506 45

1 unchanged sentence

1 Balance is partially guaranteed by the U.S.

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

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

There was one portfolio residential mortgage loan classified as a new TDR during the nine months ended September 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 September 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.

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

Other Real Estate Owned

The Company had $ 0.1 million in other real estate owned (“OREO”) as of September 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, one totaling $ 0.5 million and one loan totaling $ 0.1 million, in the process of foreclosure at September 30, 2023 and December 31, 2022, respectively.

Premises and Equipment

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

(in thousands) June 30,

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

(in thousands) September 30,

2023 December 31,

6 unchanged sentences

Total $ 74,197 $ 72,711

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.

As of September 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 nine months ended September 30, 2023 or September 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.

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.

Goodwill was assessed for impairment using a quantitative test performed as of August 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 and six months ended June 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 nine months ended September 2023 and 2022 are shown in the table below.

Three Months Ended

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

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

Balance, beginning of period $ 8,251 $ 5,345

5 unchanged sentences

Balance, end of period $ 9,579 $ 5,795

Six Months Ended

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

Nine Months Ended

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

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

6 unchanged sentences

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 June 30, 2023 and December 31, 2022 are shown in the table below.

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

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

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

Loan portfolios serviced for:

1 unchanged sentence

Total $ 464,753 $ 318,194

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.

Loan servicing revenue totaled $ 1.1 million and $ 2.7 million for the three and nine months ended September 30, 2023, respectively, and $ 0.7 million and $ 1.9 million for the three and nine months ended September 30, 2022, respectively.

Loan servicing asset revaluation, which represents the change in fair value of the servicing asset, resulted in a $ 0.3 million and $ 0.7 million downward valuation for the three and nine months ended September 30, 2023, respectively, and a $ 0.3 million and $ 1.1 million downward valuation for the three and nine months ended September 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 June 30, 2023 and December 31, 2022.

June 30, 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 September 30, 2023 and December 31, 2022.

September 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 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.

The Company recorded $ 0.2 million and $ 0.6 million o f share-based compensation expense for the three and nine months ended September 30, 2023, related to stock-based awards under the 2022 Plan .

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

The following table summarizes the stock-based award activity under the 2022 Plan for the nine months ended September 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

3 unchanged sentences

Vested — — ( 3,558 ) 36.84 — —

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.

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

At September 30, 2023, the total unrecognized compensation cost related to unvested stock-based awards under the 2022 Plan was $ 1.6 million with a weighted-average expense recognition period of 2.1 years.

2013 Equity Incentive Plan

2 unchanged sentences

Award Activity Under 2013 Plan

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.

The Company recorded $ 0.2 million and $ 0.3 million of share-based compensation expense for the three and nine months ended September 30, 2023, related to stock-based awards under the 2013 Plan .

The Company recorded $ 0.4 million and $ 2.0 million of share-based compensation expense for the three and nine months ended September 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 nine months ended September 30, 2023.

3 unchanged sentences

Vested ( 35,808 ) 31.87 — — — —

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.

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

At September 30, 2023, the total unrecognized compensation cost related to unvested stock-based awards under the 2013 Plan was $ 0.8 million with a weighted-average expense recognition period of 1.2 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 six months ended June 30, 2023.

The following table summarizes the status of deferred stock rights related to the Directors Deferred Stock Plan for the nine months ended September 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 June 30, 2023 and December 31, 2022, the Company had outstanding loan commitments totaling approximately $ 544.8 million and $ 485.4 million, respectively.

At September 30, 2023 and December 31, 2022, the Company had outstanding loan commitments totaling approximately $ 668.2 million and $ 485.4 million, respectively.

Capital Commitments

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The Company entered into construction-related contracts.

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.

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

There are no remaining capital commitments left at September 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 June 30, 2023 or December 31, 2022.

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

Loans Held-for-Sale (mandatory pricing agreements)

6 unchanged sentences

The fair values of interest rate swap agreements are estimated using current market interest rates as of the balance sheet date and calculated using discounted cash flows that are observable or that can be corroborated by observable market data (Level 2).

Back-to-Back Swap Agreements

The Company offers interest rate swaps to certain loan customers to allow them to hedge the risk of rising interest rates on their variable rate loans.

The Company originates a variable rate loan and enters into a variable-to-fixed interest rate contract with the customer.

The Company also enters into an offsetting interest rate swap with a correspondent bank.

These back-to-back swap agreements are intended to offset each other and allow the Company to originate a variable rate loan, while providing a contract for fixed interest payments for the customer.

The net cash flow for the Company is equal to the interest income received from a variable rate loan originated with the customer.

The fair value of these derivatives is based on a discounted cash flow approach.

The fair value assets and liabilities of centrally cleared interest rate swaps are net of variation margin settled-to-market (Level 2).

Forward Contracts

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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 June 30, 2023 and December 31, 2022.

June 30, 2023

September 30, 2023

Fair Value Measurements Using

15 unchanged sentences

Interest rate swap agreements 8,934 — 8,934 —

Interest rate swap agreements - assets (back-to-back) 81 — 81 —

Interest rate swap agreements - liabilities (back-to-back) 81 — 81 —

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 and six months ended June 30, 2023 and 2022.

Three Months Ended

(in thousands) Servicing Asset Interest Rate Lock

Balance, April 1, 2023 $ 7,312 $ —

Balance, July 1, 2023 $ 8,251 $ —

Total realized gains

3 unchanged sentences

Change in fair value 151 —

Balance, June 30, 2023 $ 8,252 $ —

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

Balance, September 30, 2023 $ 9,579 $ —

Balance as of July 1, 2022 $ 5,345 $ 462

Total realized gains

3 unchanged sentences

Change in fair value ( 54 ) ( 850 )

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

Six Months Ended

Balance, September 30, 2022 $ 5,795 $ ( 388 )

Nine Months Ended

(in thousands) Servicing Asset Interest Rate Lock

5 unchanged sentences

Change in fair value 605 ( 133 )

Balance, June 30, 2023 $ 8,252 $ —

Balance, September 30, 2023 $ 9,579 $ —

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

4 unchanged sentences

Change in fair value ( 212 ) ( 1,106 )

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

Balance, September 30, 2022 $ 5,795 $ ( 388 )

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 June 30, 2023 and December 31, 2022.

June 30, 2023

September 30, 2023

(in thousands) Fair Value Measurements Using

12 unchanged sentences

(dollars in thousands) Fair Value at

June 30, 2023 Valuation

September 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 June 30, 2023 or December 31, 2022.

The Company did not own any securities classified within Level 3 of the hierarchy as of September 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 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

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

September 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 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,

During the three months ended September 30, 2023, the Company had no mortgage loans held-for-sale or sold mortgage loans into the secondary market.

During the three months ended September 30, 2022, the Company originated $ 85.1 million of mortgage loans held-for-sale and sold $ 95.0 million of mortgage loans into the secondary market.

During the nine months ended September 30, 2023 and 2022, the Company originated mortgage loans held-for-sale of $ 36.3 million and $ 343.3 million, respectively, and sold $ 46.5 million and $ 365.3 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 nine months ended September 30, 2023 and 2022.

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

(in thousands) 2023 2022 2023 2022

Gain on loans sold $ — $ 1,178 $ 471 $ 5,119

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 )

Loss resulting from the change in fair value of loans held-for-sale — ( 450 ) ( 143 ) ( 599 )

Gain (loss) resulting from the change in fair value of derivatives — 143 ( 252 ) ( 66 )

Net revenue from mortgage banking activities $ — $ 871 $ 76 $ 4,454

10 unchanged sentences

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

The Company offers interest rate swaps to certain loan customers to allow them to hedge the risk of rising interest rates on their variable rate loans.

The Company originates a variable rate loan and enters into a variable-to-fixed interest rate contract with the customer.

The Company also enters into an offsetting interest rate swap with a correspondent bank.

These back-to-back swap agreements are intended to offset each other and allow the Company to originate a variable rate loan, while providing a contract for fixed interest payments for the customer.

The net cash flow for the Company is equal to the interest income received from a variable rate loan originated with the customer.

The fair value of these derivatives is based on a discounted cash flow approach.

The fair value assets and liabilities of centrally cleared interest rate swaps are net of variation margin settled-to-market.

The IRLCs and forward contracts are not designated as accounting hedges and are recorded at fair value with changes in fair value reflected in noninterest income on the condensed consolidated statements of income.

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 June 30, 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 June 30, 2023 December 31, 2022 June 30, 2023 December 31, 2022

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

The designated hedged items were $ 50.0 million at both September 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 September 30, 2023 and December 31, 2022, identified by the underlying interest rate-sensitive instruments.

(dollars in thousands)

June 30, 2023

September 30, 2023

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

Instruments Associated With Fair Value Receive Pay

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

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

Securities available-for-sale $ 50,000 1.1 $ 1,717 3-month SOFR 2.33 %

Total at September 30, 2023 $ 50,000 1.1 $ 1,717 3-month SOFR 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 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.

Amortization expense totaling $ 0.1 million and $ 0.1 million for the three and nine months ended September 30, 2023, respectively, and $ 0.1 million and $ 0.2 million for the three and nine months ended September 30 2022 respectively was recognized as a reduction to interest income on securities.

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 10.8 years as of June 30, 2023.

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.

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 June 30, 2023 and December 31, 2022.

Amortization expense totaling $ 1.5 million and $ 3.5 million for the three and nine months ended September 30, 2023, respectively, and $ 1.5 million and $ 3.6 million for the three and nine months ended September 30 2022 respectively, related to these previously terminated fair value hedges was recognized as a reduction to interest income on loans.

(dollars in thousands)

June 30, 2023

September 30, 2023

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

Cash Flow Hedges Fair Value Receive Pay

Interest rate swaps $ 110,000 3.6 $ 5,395 3-month LIBOR 2.88 %

Interest rate swaps 60,000 0.1 197 1-month LIBOR 2.88 %

Interest rate swaps $ 110,000 3.3 $ 6,450 3-month SOFR 2.88 %

Interest rate swaps 20,000 0.2 85 1-month SOFR 2.94 %

Interest rate swaps 40,000 0.7 682 Fed Funds Effective 2.78 %

7 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 $ 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.

The Company received $ 9.4 million and $ 7.7 million of cash collateral from counterparties as

security for their obligations related to these swap transactions at September 30, 2023 and December 31, 2022.

The Company had no pledged cash collateral as of September 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 June 30, 2023 and December 31, 2022.

June 30, 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 September 30, 2023 and December 31, 2022.

September 30, 2023 December 31, 2022

(in thousands) Notional

5 unchanged sentences

Derivatives not designated as hedging instruments

Back-to-back swaps $ 904 $ 81 $ — $ —

IRLCs — — 14,862 133

2 unchanged sentences

$ 220,904 $ 9,015 $ 291,862 $ 8,875

Liability Derivatives

Derivatives not designated as hedging instruments

Back-to-back swaps $ 904 $ 81 $ — $ —

Total contracts

$ 904 $ 81 $ — $ —

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 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

Back-to-back swaps consist of two interest-rate swaps (a customer swap and an offsetting counterparty swap).

As a result of this offsetting relationship, no net gains or losses are recognized in income.

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 nine months ended September 30, 2023 and 2022.

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

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

Interest rate swap agreements $ 740 $ 6,058 $ 664 $ 19,424

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 and six months ended June 30, 2023 and 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

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

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

Asset Derivatives

6 unchanged sentences

Forward contracts — — ( 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 and six months ended June 30, 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 nine months ended September 30, 2023 and 2022.

(in thousands)

Line item in the condensed consolidated statements of operations

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022

Interest income

11 unchanged sentences

Accumulated Other Comprehensive Loss

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.

The components of accumulated other comprehensive loss, included in shareholders' equity, for the nine months ended September 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, January 1, 2023 $ ( 35,831 ) $ ( 3,519 ) $ 5,714 $ ( 33,636 )

Other comprehensive income (loss) before reclassifications from accumulated other comprehensive loss before tax 302 — ( 76 ) 226

Other comprehensive (loss) income before reclassifications from accumulated other comprehensive loss before tax ( 11,006 ) — 664 ( 10,342 )

Reclassifications from accumulated other comprehensive loss to earnings before tax — 537 — 537

Other comprehensive gain (loss) before tax 302 364 ( 76 ) 590

Income tax provision (benefit) 63 95 ( 18 ) 140

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

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

Other comprehensive (loss) gain before tax ( 11,006 ) 537 664 ( 9,805 )

Income tax (benefit) provision ( 2,537 ) 140 153 ( 2,244 )

Other comprehensive (loss) gain - net of tax ( 8,469 ) 397 511 ( 7,561 )

Balance, September 30, 2023 $ ( 44,300 ) $ ( 3,122 ) $ 6,225 $ ( 41,197 )

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

4 unchanged sentences

Other comprehensive (loss) income - net of tax ( 38,298 ) ( 3,591 ) 13,785 ( 28,104 )

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.

Balance, September 30, 2022 $ ( 40,853 ) $ ( 3,591 ) $ 5,301 $ ( 39,143 )

The components of accumulated other comprehensive loss, included in stockholders' equity, for the three months ended September 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 )

Balance, July 1, 2023 $ ( 35,592 ) $ ( 3,250 ) $ 5,656 $ ( 33,186 )

Other comprehensive (loss) income before reclassifications from accumulated other comprehensive loss before tax ( 11,308 ) — 740 ( 10,568 )

3 unchanged sentences

Other comprehensive (loss) income - net of tax ( 8,708 ) 128 569 ( 8,011 )

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

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

Balance, September 30, 2023 $ ( 44,300 ) $ ( 3,122 ) $ 6,225 $ ( 41,197 )

Balance, July 1, 2022 $ ( 27,568 ) $ ( 3,818 ) $ 636 $ ( 30,750 )

Other comprehensive (loss) income before reclassifications from accumulated other comprehensive loss before tax ( 18,406 ) — 6,058 ( 12,348 )

3 unchanged sentences

Other comprehensive (loss) income - net of tax ( 13,285 ) 227 4,665 ( 8,393 )

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

Balance, September 30, 2022 $ ( 40,853 ) $ ( 3,591 ) $ 5,301 $ ( 39,143 )

Details About Accumulated Other Comprehensive Loss Components Amounts Reclassified from

2 unchanged sentences

Statements of Operations

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

Three Months Ended September 30, 2023 Three Months Ended September 30, 2022 Nine Months Ended September 30, 2023 Nine Months Ended September 30, 2022

Reclassifications from accumulated other comprehensive loss to earnings before tax $ ( 173 ) ( 296 ) $ ( 537 ) $ ( 608 ) Interest income

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

Total amount reclassified before tax ( 173 ) ( 296 ) ( 537 ) ( 608 ) Income before income taxes

Tax benefit ( 45 ) ( 68 ) ( 140 ) ( 139 ) Income tax (benefit) provision

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

Total reclassifications from accumulated other comprehensive loss $ ( 128 ) $ ( 228 ) $ ( 397 ) $ ( 469 ) Net income

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