What changed in this filing

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Item 1. Financial Statements

2024-05-08 compared with 2023-11-08 · 328 added, 618 removed, 1066 unchanged (47% of the section changed)

3 unchanged sentences

(Amounts in thousands except share data)

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

Cash and due from banks $ 6,638 $ 8,269

2 unchanged sentences

Securities available-for-sale, at fair value (amortized cost of $ 522,965 and $ 513,315 in 2024 and 2023, respectively)

Securities held-to-maturity, at amortized cost, net of allowance for credit losses (fair value of $201,650 and $168,483 in 2023 and 2022, respectively) 231,928 189,168

Loans held-for-sale (includes $9,110 at fair value in 2022) 31,669 21,511

482,431 474,855

Securities held-to-maturity, at amortized cost, net of allowance for credit losses of $ 0.2 million and $ 0.3 million in 2024 and 2023, respectively, (fair value of $ 214,220 and $ 207,572 in 2024 and 2023, respectively)

235,738 227,153

Loans held-for-sale 22,589 22,052

Loans 3,909,804 3,840,220

16 unchanged sentences

Subordinated debt, net of unamortized debt issuance costs of $ 2,085 and $ 2,162 in 2024 and 2023, respectively

104,915 104,838

Accrued interest payable 3,382 3,848

9 unchanged sentences

8,655,854 and 8,644,451 shares issued and outstanding in 2024 and 2023, respectively

184,720 184,700

Nonvoting common stock, no par value;

7 unchanged sentences

First Internet Bancorp

Condensed Consolidated Statements of Income – Unaudited

Condensed Consolidated Statements of Operations– Unaudited

(Amounts in thousands except share and per share data)

Three Months Ended Nine Months Ended

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

Three Months Ended

March 31, 2024 March 31, 2023

Interest Income

11 unchanged sentences

Benefit for credit losses - debt securities held to maturity ( 62 ) —

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

(Benefit) provision for credit losses - off-balance sheet commitments ( 72 ) 42

Net Interest Income After Provision for Credit Losses 18,286 10,159

17 unchanged sentences

Total noninterest expense 21,023 20,954

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

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

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

Income Per Share of Common Stock

Income (Loss) Before Income Taxes 5,610 ( 5,349 )

Income Tax Provision (Benefit) 429 ( 2,332 )

Net Income (Loss) $ 5,181 $ ( 3,017 )

Income (Loss) Per Share of Common Stock

Basic $ 0.60 $ ( 0.33 )

4 unchanged sentences

Dividends Declared Per Share $ 0.06 $ 0.06

1 Beginning January 1, 2023, the allowance calculation is based on the CECL methodology.

Prior to January 1, 2023, the allowance calculation was based on the incurred loss methodology.

See Notes to Condensed Consolidated Financial Statements

First Internet Bancorp

Condensed Consolidated Statements of Comprehensive (Loss) Income – Unaudited

(Amounts in thousands except per share data)

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

Condensed Consolidated Statements of Comprehensive Income (Loss)– Unaudited

(Amounts in thousands)

Three Months Ended March 31,

Net income (loss) $ 5,181 $ ( 3,017 )

Other comprehensive (loss) income

Securities available-for-sale

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 )

Net unrealized holding (losses) gains recorded within other comprehensive (loss) income before income tax ( 2,074 ) 5,112

Income tax (benefit) provision ( 475 ) 1,170

Net effect on other comprehensive (loss) income ( 1,599 ) 3,942

Securities held-to-maturity

Reclassification of securities from available-for-sale to held-to-maturity — — — ( 5,402 )

Amortization of net unrealized holding losses on securities transferred from available-for-sale to held-to-maturity 234 158

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

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

Cash flow hedges

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 57 46

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

Net effect on other comprehensive (loss) income 177 112

Cash flow hedges

Net unrealized holding gains (losses) on cash flow hedging derivatives recorded within other comprehensive (loss) income before income tax 902 ( 2,170 )

Income tax provision (benefit) 207 ( 499 )

Net effect on other comprehensive (loss) income 695 ( 1,671 )

Total other comprehensive (loss) income ( 727 ) 2,383

Comprehensive income (loss) $ 4,454 $ ( 634 )

See Notes to Condensed Consolidated Financial Statements

1 unchanged sentence

Condensed Consolidated Statements of Changes in Shareholders’ Equity - Unaudited

Nine Months Ended September 30, 2023 and 2022

(Amounts in thousands except per share data)

Three Months Ended March 31, 2024 and 2023

(Amounts in thousands except share and per share data)

Stock Retained

3 unchanged sentences

Balance, January 1, 2024 $ 184,700 $ 207,470 $ ( 29,375 ) $ 362,795

Impact of adoption of new accounting standards 1

— ( 4,491 ) — ( 4,491 )

Net income — 5,181 — 5,181

5 unchanged sentences

( 283 ) — — ( 283 )

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 2 — — 2

Common stock redeemed for the net settlement of share-based awards ( 142 ) — — ( 142 )

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

Balance, March 31, 2024 $ 184,720 $ 212,121 $ ( 30,102 ) $ 366,739

Balance, January 1, 2023 $ 192,935 $ 205,675 $ ( 33,636 ) $ 364,974

Impact of adoption of new accounting standards 1

— ( 4,491 ) — ( 4,491 )

Net income — ( 3,017 ) — ( 3,017 )

Other comprehensive loss — — ( 28,104 ) ( 28,104 )

Other comprehensive income — — 2,383 2,383

Dividends declared ($ 0.06 per share)

5 unchanged sentences

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

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

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

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 September 30, 2023 and 2022

(Amounts in thousands except per share data)

Stock Retained

Earnings Accumulated

Comprehensive

Shareholders’

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

Net income — 3,409 — 3,409

Other comprehensive loss — — ( 8,011 ) ( 8,011 )

Dividends declared ($ 0.06 per share)

— ( 526 ) — ( 526 )

Recognition of the fair value of share-based compensation 386 — — 386

Repurchased shares of common stock ( 97,834 )

( 1,828 ) — — ( 1,828 )

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

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

Other comprehensive loss — — ( 8,393 ) ( 8,393 )

Dividends declared ($ 0.06 per share)

— ( 570 ) — ( 570 )

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

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

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

First Internet Bancorp

Condensed Consolidated Statements of Cash Flows – Unaudited

(Amounts in thousands except per share data)

Nine Months Ended September 30,

(Amounts in thousands)

Three Months Ended March 31,

Operating Activities

Net income $ 4,274 $ 29,190

Net income (loss) $ 5,181 $ ( 3,017 )

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

7 unchanged sentences

Decrease in fair value of loans held-for-sale — 136

Gain (loss) on derivatives 362 ( 3,625 )

Gain on derivatives 1,224 536

Loan servicing asset revaluation 434 55

4 unchanged sentences

Net loan activity, excluding purchases ( 39,598 ) ( 25,111 )

Proceeds from sale of other real estate owned — 1,188

Maturities and calls of securities available-for-sale 15,891 9,448

2 unchanged sentences

Purchase of securities held-to-maturity ( 15,221 ) ( 26,572 )

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 ( 940 ) ( 2,704 )

Loans purchased ( 30,451 ) ( 90,029 )

Net proceeds from sale of portfolio loans — 14,466

Other investing activities ( 7,240 ) ( 1,315 )

8 unchanged sentences

Net cash provided by financing activities 165,842 174,087

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

Net Increase in Cash and Cash Equivalents 75,366 47,420

Cash and Cash Equivalents, Beginning of Period 405,898 256,552

4 unchanged sentences

Loans transferred to other real estate owned — 106

Loans transferred to held-for-sale from portfolio — 14,049

Cash dividends declared, paid in subsequent period 519 537

Securities purchased during the period, settled in subsequent period 3,327 8,344

Transfer of available-for-sale mortgage-backed securities to held-to-maturity mortgage-backed securities at fair value — 96,220

1 Beginning January 1, 2023, the allowance calculation is based on the CECL methodology.

Prior to January 1, 2023, the allowance calculation was based on the incurred loss methodology.

See Notes to Condensed Consolidated Financial Statements

8 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 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 results of operations for the three months ended March 31, 2024 are not necessarily indicative of the results expected for the year ending December 31, 2024 or any other period.

The March 31, 2024 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, 2023.

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 Annual Report on Form 10-K for the year ended December 31, 2022.

Adoption of new accounting standards

ASU 2016 - 13

On January 1, 2023, the Company adopted ASU 2016-03 Financial Instruments - Credit losses (“ASC 326”):

Measurement of Credit Losses on Financial Instruments, as amended, which replaces the incurred loss methodology with an expected credit loss (“CECL”) methodology.

The CECL estimate is applicable to financial assets measured at amortized cost, including loan receivables and held-to-maturity debt securities.

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 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.

Results for reporting periods beginning after January 1, 2023 are presented under ASC 326, while prior period amounts continue to be reported in accordance with previously applicable U.S.

The Company recorded a net decrease to retained earnings of $ 4.5 million as of January 1, 2023 for the cumulative effect of adopting ASC 326.

The net adjustment to allowance for credit losses (“ACL”) includes $ 2.3 million related to loans, $ 1.9 million related to off-balance sheet credit exposures and $ 0.3 million related to held-to-maturity debt securities.

ACL - Available-For-Sale (“AFS”) Debt Securities

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

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.

In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency and adverse conditions specifically related to the security, among other factors.

If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security.

If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded.

Changes in the ACL are recorded as a provision for, or recovery of, credit loss expense.

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 $ 2.3 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.

ACL - Held-To-Maturity (“HTM”) Debt Securities

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 $ 1.1 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.

Accrued interest deemed uncollectible will be written off through interest income.

The HTM securities portfolio includes municipal securities, residential mortgage-backed-securities, commercial mortgage-backed securities and corporate securities.

All residential and commercial mortgage-backed securities are U.S.

government issued or sponsored and substantially all municipal and corporate securities are rated investment grade or above.

The estimate of expected credit losses considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts.

At the time of adoption, the estimated reserve was $ 0.3 million.

The ACL for loans represents management's estimate of all expected credit losses over the expected life of the Company’s existing loan portfolio.

Management estimates the ACL balance using relevant available information about the collectability of cash flows, from internal and external sources, including historical information relating to past events, current conditions, and reasonable and supportable forecasts of future economic conditions.

When the Company is unable to forecast future economic events, management may revert to historical information.

Accrued interest receivable on loans totaled $ 17.9 million and is excluded from the estimate of credit losses.

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

Accrued interest deemed uncollectible will be written off through interest income.

ACL - Loans - Collectively Evaluated

The ACL is measured on a collective pool basis when similar risk characteristics exist.

The Company has identified the following portfolio segments in the table below.

The Company utilized a discounted cash flow (“DCF”) method to estimate the quantitative portion of the allowance for credit losses for loans evaluated on a collective pooled basis.

For each segment, a loss driver analysis was performed in order to identify loss drivers and create a regression model for use in forecasting cash flows.

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 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.

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

The contractual term excludes extensions, renewals, and modifications unless the extension or renewal options are included in the original or modified contract at the reporting date and are not unconditionally cancellable by the Company.

Additional key assumptions in the DCF model include the probability of default (“PD”), loss given default (“LGD”), and prepayment/curtailment rates.

The Company utilizes the model-driven PD and a LGD derived from a method referred to as Frye Jacobs.

The Frye Jacobs method is a mathematical formula that traces the relationship between LGD and PD over time and projects the LGD based on the level of PD forecasted.

In all cases, the Frye Jacobs method is utilized to calculate LGDs during the forecast period, reversion period and long-term historical average.

Prepayment and curtailment rates were calculated through third party analysis of the Company’s own data.

Qualitative factors for the DCF and weighted-average remaining maturity methodologies include the following:

• Changes in lending policies and procedures, including changes in underwriting standards and collections, charge-offs and recovery practices

• Changes in international, national, regional and local conditions

• Changes in the nature and volume of the portfolio and terms of loans

• Changes in the experience, depth and ability of lending management

• Changes in the volume and severity of past due loans and other similar conditions

• Changes in the quality of the organization’s loan review system

• Changes in the value of underlying collateral for collateral dependent loans

• The existence and effect of any concentrations of credit and changes in the levels of such concentrations

• The effect of other external factors (i.e.

competition, legal and regulatory requirements) on the level of estimated credit losses

ACL - Loans - Individually Evaluated

Loans that do not share risk characteristics are evaluated on an individual basis and are excluded from the collective evaluation.

The Company has determined that any loans which have been placed on nonaccrual status will be individually evaluated.

Individual analysis will establish a specific reserve for loans, if necessary.

Specific reserves on nonaccrual loans are typically based on management’s best estimate of the fair value of collateral securing these loans, adjusted for selling costs as necessary.

ACL - Off-Balance Sheet Credit Exposures

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 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.

Funding rates are based on a historical analysis of the Company’s portfolio, while estimates of credit losses are determined using the same loss rates as funded loans.

Regulatory Capital

As permitted by the federal banking regulatory agencies, the Company has elected the option to delay the impact of the day one adoption of ASC 326.

Refer to “Item 2.

Regulatory Capital Requirements” for details of the phase-in transition adjustments.

Modified Loans to Borrowers Experiencing Financial Difficulty

Concurrent with the adoption of ASU 2016-03, the Company adopted ASU 2022-02 “Financial Instruments-Credit Losses (ASC 326):

Troubled Debt Restructurings and Vintage Disclosures,” as amended.

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.

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 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

Basic earnings per share

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

Earnings (Loss) Per Share

Earnings (loss) 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 (loss) per share computations for the three months ended March 31, 2024 and 2023.

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

Basic earnings (loss) per share

Net income (loss) $ 5,181 $ ( 3,017 )

Weighted-average common shares 8,679,429 9,024,072

Basic earnings per common share $ 0.39 $ 0.89 $ 0.48 $ 3.04

Basic earnings (loss) per common share $ 0.60 $ ( 0.33 )

Diluted earnings per share

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

Net income (loss) $ 5,181 $ ( 3,017 )

Weighted-average common shares 8,679,429 9,024,072

1 unchanged sentence

Weighted-average common and incremental shares 8,750,297 9,024,072

Diluted earnings per common share 1

Diluted earnings (loss) per common share 1

$ 0.59 $ ( 0.33 )

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 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

There were no antidilutive shares for the three months ended March 31, 2024.

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.

The following tables summarize securities AFS and securities HTM as of March 31, 2024 and December 31, 2023.

March 31, 2024

Amortized Gross Unrealized Fair

10 unchanged sentences

Total available-for-sale $ 522,965 $ 905 $ ( 41,439 ) $ 482,431

September 30, 2023

March 31, 2024

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

6 unchanged sentences

Total held-to-maturity $ 235,969 $ — $ ( 21,749 ) $ 214,220 $ ( 231 ) $ 235,738

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.

Over 96% of mortgage-backed securities (including both AFS and HTM) held by the Company are issued by U.S.

government-sponsored entities and agencies.

These securities are either explicitly or implicitly guaranteed by the U.S.

government and have a long history of no credit losses;

therefore, the Company did not record an ACL on these securities.

Additionally, the Company evaluated credit impairment for individual AFS securities that are in an unrealized loss position and determined that the unrealized losses are unrelated to credit quality and are primarily attributable to changes in interest rates and volatility in the financial markets.

As the Company does not intend to sell the AFS securities that are in an unrealized loss position, and it is unlikely that it will be required to sell these securities before recovery of their amortized cost basis, the Company did not record an ACL on these securities.

In accordance with the adoption of ASC 326, the Company also evaluated its HTM securities that are in an unrealized loss position and considered issuer bond ratings, historical loss rates for bond ratings and economic forecasts.

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 September 30, 2023 and determined no additional ACL was necessary.

1 Includes $ 0.3 million of additional premium related to terminated interest rate swaps associated with agency mortgage-backed securities - residential as of March 31, 2024.

December 31, 2023

13 unchanged sentences

December 31, 2023

Amortized Gross Unrealized Fair

Amortized Gross Unrealized Fair Allowance for Credit Losses Net Carrying Value

(in thousands) Cost Gains Losses Value

6 unchanged sentences

1 Includes $ 0.4 million of additional premium related to terminated interest rate swaps associated with agency mortgage-backed securities - residential as of December 31, 2023.

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

Accrued interest receivable on AFS and HTM securities at March 31, 2024 was $ 2.7 million and $ 1.1 million, respectively, compared to $ 2.9 million and $ 1.2 million, respectively, at December 31, 2023, 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.

At both March 31, 2024 and December 31, 2023, over 95 % of mortgage-backed securities (including both AFS and HTM) held by the Company are issued by U.S.

government-sponsored entities and agencies.

These securities are either explicitly or implicitly guaranteed by the U.S.

government and have a long history of no credit losses;

therefore, the Company did not record an ACL on these securities.

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, 2024 and determined no additional ACL was necessary.

The carrying value of securities at March 31, 2024 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 $ 235,969 $ 214,220

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.

There were no gross gains or losses resulting from the sale of available-for-sale securities during the three months ended March 31, 2024 and March 31, 2023, 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 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.

The total fair value of these investments at March 31, 2024 and December 31, 2023 was $ 587.6 million and $ 578.9 million, which was approximately 84 % and 85 %, respectively, of the Company’s AFS and HTM securities portfolios.

As of March 31, 2024, the Company’s security portfolio consisted of 530 securities, of which 469 were in an unrealized loss position.

As of December 31, 2023, the Company’s security portfolio consisted of 512 securities, of which 434 were in an unrealized loss position.

9 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.

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 September 30, 2023 and December 31, 2022.

September 30, 2023

March 31, 2024

Less Than 12 Months 12 Months or Longer Total

24 unchanged sentences

Agency mortgage-backed securities - commercial 21,561 ( 50 ) 14,217 ( 1,289 ) 35,778 ( 1,339 )

Private label mortgage-backed securities 2,445 ( 330 ) 8,010 ( 992 ) 10,455 ( 1,322 )

Private label mortgage-backed securities - residential 3,567 ( 29 ) 9,114 ( 1,078 ) 12,681 ( 1,107 )

Asset-backed securities

2 unchanged sentences

Total $ 73,884 $ ( 720 ) $ 302,785 $ ( 38,794 ) $ 376,669 $ ( 39,514 )

December 31, 2022

Less Than 12 Months 12 Months or Longer Total

(in thousands) Fair

Value Unrealized

Securities held-to-maturity

Municipal securities $ 8,160 $ ( 661 ) $ 4,258 $ ( 453 ) $ 12,418 $ ( 1,114 )

Agency mortgage-backed securities - residential 68,408 ( 8,848 ) 38,332 ( 6,264 ) 106,740 ( 15,112 )

Agency mortgage-backed securities - commercial 4,552 ( 1,266 ) — — 4,552 ( 1,266 )

Corporate securities 36,866 ( 2,685 ) 7,492 ( 508 ) 44,358 ( 3,193 )

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 September 30, 2023.

The following table summarizes ratings for the Company’s HTM portfolio issued by state and political subdivisions and other securities as of March 31, 2024.

Held-to-Maturity

(in thousands) State and Municipal Other Total

Aaa/AAA $ 95 $ — $ 95

Aa1/AA+ $ 9,411 $ — $ 9,411

2 unchanged sentences

A3/A- — 9,507 9,507

A3/A- — 4,512 4,512

Baa1/BBB+ — 8,500 8,500

4 unchanged sentences

Total $ 13,384 $ 222,585 $ 235,969

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 nine months ended September 30, 2023.

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

1 HTM agency mortgage-backed securities - commercial and residential are listed under Other securities as not rated and have the explicit or implicit guarantee of the United States government.

Loan balances as of March 31, 2024 and December 31, 2023 are summarized in the table below.

Categories of loans include:

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

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

Commercial loans

20 unchanged sentences

Net loans $ 3,868,913 $ 3,801,446

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.

1 Includes carrying value adjustments of $ 26.9 million and $ 27.8 million related to terminated interest rate swaps associated with public finance loans as of March 31, 2024 and December 31, 2023, respectively.

Risk characteristics of each loan portfolio segment are as follows:

7 unchanged sentences

The primary source of repayment is the cash flow from the ongoing operations and activities conducted by the borrower, or an affiliate of the borrower, who owns the property.

This portfolio segment is generally concentrated in the Midwest and Southwest regions of the United States and its loans are often secured by manufacturing and service facilities, as well as office buildings.

This portfolio segment is generally concentrated in the Midwest and Southwest regions of the United States and its loans are often secured by manufacturing and service facilities.

Investor Commercial Real Estate:

These loans are underwritten primarily based on the cash flow expected to be generated from the property and are secondarily supported by the value of the real estate.

These loans are made on a nationwide basis and are underwritten primarily based on the cash flow expected to be generated from the property and are secondarily supported by the value of the real estate.

These loans typically incorporate a personal guarantee from the primary sponsor or sponsors.

1 unchanged sentence

Investor commercial real estate loans may be more adversely affected by changing economic conditions in the real estate markets, industry dynamics or the overall health of the local economy where the property is located.

The properties securing the Company’s investor commercial real estate portfolio tend to be diverse in terms of property type and are generally located in the Midwest and Southwest regions of the United States.

The properties securing the Company’s investor commercial real estate portfolio tend to be diverse in terms of property type.

Management monitors and evaluates commercial real estate loans based on property financial performance, collateral value, guarantor strength, economic and industry conditions together with other risk grade criteria.

1 unchanged sentence

Construction:

Construction loans are secured by land and related improvements and are made to assist in the construction of new structures, which may include commercial (retail, industrial, office, and multi-family) properties, land development for residential properties or single family residential properties offered for sale by the builder.

Construction loans are made on a nationwide basis and are secured by land and related improvements and are made to assist in the construction of new structures, which may include commercial (retail, industrial, office, and multi-family) properties, land development for residential properties or single family residential properties offered for sale by the builder.

These loans generally finance a variety of project costs, including land, site preparation, architectural services, construction, closing and soft costs and interim financing needs.

The cash flows of builders, while initially predictable, may fluctuate with market conditions, and the value of the collateral securing these loans may be subject to fluctuations based on general economic changes.

This portfolio segment is generally concentrated in the Midwest and Southwest regions of the United States.

Single Tenant Lease Financing:

These loans are made on a nationwide basis to property owners of real estate subject to long-term lease arrangements with single tenant operators.

These loans are made on a nationwide basis to owners of real estate subject to long-term lease arrangements with single tenant operators.

The real estate is typically operated by regionally, nationally or globally branded businesses.

30 unchanged sentences

Cash flows of borrowers, however, may not be as expected and collateral securing these loans may fluctuate in value.

Loans are made for a broad array of purposes including, but not limited to, providing operating cash flow, funding ownership changes, and facilitating equipment purchases.

Loans are made for a broad array of purposes including, but not limited to, providing operating cash flow, funding ownership changes, and facilitating equipment and commercial real estate purchases.

Franchise Finance:

2 unchanged sentences

Residential Mortgage:

With respect to residential loans that are secured by 1-to-4 family residences and are generally owner occupied, the Bank typically establishes a maximum loan-to-value ratio and requires private mortgage insurance if that ratio is exceeded.

With respect to residential loans that are secured by 1-to-4 family residences and are generally owner occupied, the Company typically establishes a maximum loan-to-value ratio and requires private mortgage insurance if that ratio is exceeded.

Repayment of these loans is primarily dependent on the financial circumstances of the borrowers, which can be impacted by economic conditions in their market areas such as unemployment levels.

2 unchanged sentences

Home equity loans and lines of credit are typically secured by a subordinate interest in 1-to-4 family residences.

The properties securing the home equity portfolio segment are generally geographically diverse as the Bank offered these products on a nationwide basis.

The properties securing the home equity portfolio segment are generally geographically diverse as the Company offers these products on a nationwide basis.

Repayment of these loans and lines of credit is primarily dependent on the financial circumstances of the borrowers and may be impacted by changes in unemployment levels and property values on residential properties, among other economic conditions in the market.

49 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 nine months ended September 30, 2023.

(in thousands) Three Months Ended September 30, 2023

The following tables present changes in the balance of the ACL during the three months ended March 31, 2024 and 2023.

(in thousands) Three Months Ended March 31, 2024

Allowance for credit losses:

15 unchanged sentences

Total $ 38,774 $ 2,582 $ ( 533 ) $ 68 $ 40,891

(in thousands) Nine Months Ended September 30, 2023

(in thousands) Three Months Ended March 31, 2023

Allowance for credit losses:

15 unchanged sentences

Total $ 31,737 $ 2,962 $ 9,373 $ ( 7,257 ) $ 64 $ 36,879

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 nine months ended September 30, 2022.

(in thousands) Three Months Ended September 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 $ 2,026 $ ( 301 ) $ — $ 2 $ 1,727

Owner-occupied commercial real estate 703 ( 87 ) — — 616

Investor commercial real estate 621 453 — — 1,074

Construction 1,707 ( 117 ) — — 1,590

Single tenant lease financing 9,712 315 — — 10,027

Public finance 1,850 ( 61 ) — — 1,789

Healthcare finance 4,762 ( 1,150 ) — — 3,612

Small business lending 1,956 217 ( 130 ) 3 2,046

Franchise finance 2,281 734 — — 3,015

Residential mortgage 1,138 231 — 1 1,370

Home equity 54 7 — 1 62

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

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

(in thousands) Nine Months Ended September 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 $ ( 166 ) $ — $ 2 $ 1,727

Owner-occupied commercial real estate 742 ( 126 ) — — 616

Investor commercial real estate 328 746 — — 1,074

Construction 1,612 ( 22 ) — — 1,590

Single tenant lease financing 10,385 ( 1,589 ) — 1,231 10,027

Public finance 1,776 13 — — 1,789

Healthcare finance 5,940 ( 2,328 ) — — 3,612

Small business lending 1,387 847 ( 210 ) 22 2,046

Franchise finance 1,083 1,932 — — 3,015

Residential mortgage 643 724 — 3 1,370

Home equity 64 ( 139 ) — 137 62

Other consumer loans 1,990 1,116 ( 397 ) 229 2,938

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

Total $ 27,841 $ 2,868 $ ( 2,467 ) $ 1,624 $ 29,866

Accrued interest receivable on loans totaled $ 20.5 million and $ 20.9 million at March 31, 2024 and December 31, 2023, respectively, and is excluded from the estimate of credit losses.

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

Accrued interest deemed uncollectible will be written off through interest income.

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.

2 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 September 30, 2023.

(dollars in thousands) Balance

June 30, 2023 Provision for credit losses Balance

September 30, 2023

The following tables detail activity in the provision (benefit) for credit losses on off-balance sheet commitments for the three months ended March 31, 2024 and 2023.

(in thousands) Balance

December 31, 2023 Provision (Benefit) for credit losses Balance

March 31, 2024

Off-balance sheet commitments

4 unchanged sentences

Construction 2,889 381 3,270

Healthcare finance — — —

Small business lending 541 ( 382 ) 159

6 unchanged sentences

Total allowance for off-balance sheet commitments $ 3,745 $ ( 72 ) $ 3,673

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

September 30, 2023

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

Off-balance sheet commitments

5 unchanged sentences

Healthcare finance — 2 — 2

Small business lending — — 390 390

Total commercial loans — 2,314 47 2,361

5 unchanged sentences

Total allowance for off-balance sheet commitments $ — $ 2,504 $ 42 $ 2,546

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

December 31, 2022 Ending Balance:

Collectively Evaluated for Impairment Ending Balance:

Individually Evaluated for Impairment Ending Balance Ending Balance:

Collectively Evaluated for Impairment Ending Balance:

Individually Evaluated for Impairment Ending Balance

Commercial and industrial $ 116,307 $ 9,801 $ 126,108 $ 1,660 $ 51 $ 1,711

Owner-occupied commercial real estate 60,266 1,570 61,836 651 — 651

Investor commercial real estate 93,121 — 93,121 1,099 — 1,099

Construction 181,966 — 181,966 2,074 — 2,074

Single tenant lease financing 939,240 — 939,240 10,519 — 10,519

Public finance 621,032 — 621,032 1,753 — 1,753

Healthcare finance 272,461 — 272,461 2,997 — 2,997

Small business lending 1

113,699 10,051 123,750 1,465 703 2,168

Franchise finance 299,835 — 299,835 3,988 — 3,988

Residential mortgage 380,272 3,676 383,948 1,559 — 1,559

Home equity 24,683 29 24,712 69 — 69

Other consumer 324,581 17 324,598 3,149 — 3,149

Total $ 3,427,463 $ 25,144 $ 3,452,607 $ 30,983 $ 754 $ 31,737

1 Balance is partially guaranteed by the U.S.

The Company utilizes a risk grading matrix to assign a risk grade to each of its commercial loans.

14 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 September 30, 2023.

September 30, 2023

March 31, 2024

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

7 unchanged sentences

industrial 7,904 26,273 23,404 15,382 2,464 20,586 37,884 — 133,897

Gross charge-offs — — 6,914 — 51 — — — 6,965

Year-to-date gross charge-offs — — — — — — — — —

Owner-occupied commercial real estate

5 unchanged sentences

commercial real estate 2,275 1,484 11,248 8,795 14,192 19,793 — — 57,787

Year-to-date gross charge-offs — — — — — — — — —

Investor commercial real estate

5 unchanged sentences

estate — 2,852 35,232 27,142 9,800 53,250 — — 128,276

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

Year-to-date gross charge-offs — — — — — — — — —

Pass 2,195 63,557 174,215 77,364 2,426 — 5,840 — 325,597

3 unchanged sentences

Total construction 2,195 63,557 174,215 77,364 2,426 — 5,840 — 325,597

Year-to-date gross charge-offs — — — — — — — — —

Single tenant lease financing

5 unchanged sentences

financing 16,533 52,217 224,834 94,713 66,546 486,754 — — 941,597

Year-to-date gross charge-offs — — — — — — — — —

Public finance

4 unchanged sentences

Total public finance 1,272 3,323 17,740 28,790 719 446,418 — — 498,262

September 30, 2023

Year-to-date gross charge-offs — — — — — — — — —

March 31, 2024

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

6 unchanged sentences

Total healthcare finance — — — 9,719 119,549 84,064 — — 213,332

Gross charge-offs — — — — 25 — — — 25

Year-to-date gross charge-offs — — — — — — — — —

Small business lending 1

4 unchanged sentences

Total small business lending 23,351 124,053 39,707 14,250 14,038 15,917 7,947 — 239,263

Gross charge-offs 67 464 281 1,357 — — — — 2,169

Year-to-date gross charge-offs — 46 235 8 — — — 289

Franchise finance

4 unchanged sentences

Total franchise finance 25,091 256,982 204,464 56,585 — — — — 543,122

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

Year-to-date gross charge-offs — — — — — — — — —

Consumer loans

Residential mortgage

Payment performance

Performing — 13,983 193,699 90,365 29,784 59,638 — — 387,469

1 unchanged sentence

Total residential mortgage — 13,983 194,888 90,813 29,954 60,371 — — 390,009

Gross charge-offs — 53 3 — — — — — 56

Payment performance

Year-to-date gross charge-offs — — 13 56 — — — — 69

Performing — 1,307 1,942 429 454 680 16,180 1,761 22,753

1 unchanged sentence

Total home equity — 1,307 1,942 429 454 680 16,180 1,761 22,753

Year-to-date gross charge-offs — — — — — — — — —

Other consumer

Payment performance

Performing 20,534 112,174 102,027 39,591 25,131 80,260 829 — 380,546

3 unchanged sentences

Total Loans $ 99,155 $ 658,274 $ 1,029,701 $ 463,589 $ 285,277 $ 1,268,133 $ 68,680 $ 1,761 $ 3,874,570

Total gross charge-offs $ 744 $ 908 $ 7,217 $ 1,399 $ 183 $ 188 $ — $ — $ 10,639

Total year-to-date gross charge-offs $ — $ 85 $ 312 $ 80 $ 9 $ 47 $ — $ — $ 533

1 Balance in “Substandard” is partially guaranteed by the U.S.

The following tables present the credit risk profile of the Company’s commercial and consumer loan portfolios based on rating category and payment activity as of December 31, 2022.

December 31, 2023

(in thousands) Pass Special Mention Substandard Total

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

(in thousands) 2023 2022 2021 2020 2019 Prior Total

Commercial and industrial

Pass $ 24,329 $ 19,382 $ 15,464 $ 2,502 $ 12,365 $ 8,703 $ 41,967 $ — $ 124,712

Special Mention — 4,637 — — — — — — 4,637

Substandard — — — — — — — — —

Doubtful — — — — — — — — —

Total commercial and

industrial 24,329 24,019 15,464 2,502 12,365 8,703 41,967 — 129,349

Year-to-date gross charge-offs — — 6,914 5 130 — — — 7,049

Owner-occupied commercial real estate

Pass 1,492 10,731 7,990 6,591 5,255 12,485 — — 44,544

Special Mention — 584 922 8,392 — 1,189 — — 11,087

Substandard — — — — — 1,655 — — 1,655

Doubtful — — — — — — — — —

Total owner-occupied

commercial real estate 1,492 11,315 8,912 14,983 5,255 15,329 — — 57,286

Year-to-date gross charge-offs — — — — — — — — —

Investor commercial real estate

Construction 180,768 1,198 — 181,966

Pass 6,571 35,209 26,841 9,864 47,827 5,765 — — 132,077

Special Mention — — — — — — — — —

Substandard — — — — — — — — —

Doubtful — — — — — — — — —

Total investor commercial real

estate 6,571 35,209 26,841 9,864 47,827 5,765 — — 132,077

Year-to-date gross charge-offs — — — — — 591 — — 591

Pass 26,539 153,066 70,175 6,121 — — 5,849 — 261,750

Special Mention — — — — — — — — —

Substandard — — — — — — — — —

Doubtful — — — — — — — — —

Total construction 26,539 153,066 70,175 6,121 — — 5,849 — 261,750

Year-to-date gross charge-offs — — — — — — — — —

Single tenant lease financing

Pass 52,360 221,964 89,075 65,863 142,023 346,695 — — 917,980

Special Mention — 4,362 6,698 3,032 — 4,544 — — 18,636

Substandard — — — — — — — — —

Doubtful — — — — — — — — —

Total single tenant lease

financing 52,360 226,326 95,773 68,895 142,023 351,239 — — 936,616

Year-to-date gross charge-offs — — — — — — — — —

Public finance

Pass 3,805 30,583 29,750 719 43,611 411,176 — — 519,644

Special Mention — — — — — 2,120 — — 2,120

Substandard — — — — — — — — —

Doubtful — — — — — — — — —

Total public finance 3,805 30,583 29,750 719 43,611 413,296 — — 521,764

Year-to-date gross charge-offs — — — — — — — — —

December 31, 2023

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

(in thousands) 2023 2022 2021 2020 2019 Prior Total

Healthcare finance

Pass — — 9,955 124,654 63,486 23,484 — — 221,579

Special Mention — — — — 1,214 — — — 1,214

Substandard — — — — — — — — —

Doubtful — — — — — — — — —

Total healthcare finance — — 9,955 124,654 64,700 23,484 — — 222,793

Year-to-date gross charge-offs — — — — 605 — — — 605

Small business lending 1

107,885 5,814 10,051 123,750

Pass 119,149 42,077 15,180 13,948 4,582 9,215 5,388 — 209,539

Special Mention 343 496 — 341 265 698 — — 2,143

Substandard 1,095 1,854 52 1,777 1,155 417 474 — 6,824

Doubtful — — — — — — — — —

Total small business lending 120,587 44,427 15,232 16,066 6,002 10,330 5,862 — 218,506

Year-to-date gross charge-offs 67 739 416 1,364 — — — — 2,586

Franchise finance

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

1 Balance in “Substandard” is partially guaranteed by the U.S.

December 31, 2022

(in thousands) Performing Nonaccrual Total

Pass 256,944 210,617 57,919 — — — — — 525,480

Special Mention — — — — — — — — —

Substandard — — 303 — — — — — 303

Doubtful — — — — — — — — —

Total franchise finance 256,944 210,617 58,222 — — — — — 525,783

Year-to-date gross charge-offs — 331 — — — — — — 331

Consumer loans

Residential mortgage

Home equity 24,712 — 24,712

Performing 14,942 195,453 91,010 30,092 13,072 48,330 — — 392,899

Nonperforming — 738 456 73 — 1,482 — — 2,749

Total residential mortgage 14,942 196,191 91,466 30,165 13,072 49,812 — — 395,648

Year-to-date gross charge-offs — 53 70 — 17 — — — 140

Performing 1,369 1,997 436 467 141 585 16,896 1,778 23,669

Nonperforming — — — — — — — — —

Total home equity 1,369 1,997 436 467 141 585 16,896 1,778 23,669

Year-to-date gross charge-offs — — — — — — — — —

Other consumer

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

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

September 30, 2023

Performing 115,736 106,883 41,598 26,527 27,087 58,902 795 — 377,528

Nonperforming — 53 — 5 15 13 — — 86

Total other consumer 115,736 106,936 41,598 26,532 27,102 58,915 795 — 377,614

Year-to-date gross charge-offs 97 115 20 51 56 243 — — 582

Total Loans $ 624,674 $ 1,040,686 $ 463,824 $ 300,968 $ 362,098 $ 937,458 $ 71,369 $ 1,778 $ 3,802,855

Total year-to-date gross charge-offs $ 164 $ 1,238 $ 7,420 $ 1,420 $ 808 $ 834 $ — $ — $ 11,884

1 Balance in “Substandard” is partially guaranteed by the U.S.

The following tables present the Company’s loan portfolio delinquency analysis as of March 31, 2024 and December 31, 2023.

March 31, 2024

(in thousands) 30-59

44 unchanged sentences

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.

There was no interest income recognized on nonaccrual loans for the three months ended March 31, 2024 and 2023.

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:

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

(in thousands) 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

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

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

Owner-occupied commercial real estate — — — 1,570 1,570 —

Small business lending 1

9,532 654 — 6,824 904 —

Franchise finance 295 — 555 303 — —

Residential mortgage 2,309 2,309 230 1,911 1,911 838

2 unchanged sentences

1 Balance is partially guaranteed by the U.S.

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 September 30, 2023.

September 30, 2023

The following tables present the amortized cost basis of collateral dependent loans, which are individually evaluated to determine expected credit losses as of March 31, 2024 and December 31, 2023.

March 31, 2024

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

7 unchanged sentences

1 Balance is partially guaranteed by the U.S.

The following table presents the Company’s impaired loans as of December 31, 2022.

December 31, 2023

(in thousands) Recorded

Balance Unpaid

Balance Specific

Loans without a specific valuation allowance

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

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

1 unchanged sentence

Small business lending 1

Residential mortgage 3,676 3,835 —

Home equity 29 29 —

Other consumer loans 17 36 —

Total 23,226 24,134 —

Loans with a specific valuation allowance

Commercial and industrial 51 51 51

Small business lending 1

2,875 1,210 2,226 6,311 2,391

Total 1,918 1,918 754

Total impaired loans $ 25,144 $ 26,052 $ 754

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 nine months ended September 30, 2022.

Three Months Ended Nine Months Ended

September 30, 2022 September 30, 2022

(in thousands) Average

Balance Interest

Income Average

Balance Interest

Loans without a specific valuation allowance

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

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

Small business lending 2,167 — 1,288 —

Residential mortgage — 1,911 — 1,911 —

Home equity 15 — 14 —

Other consumer loans — — 86 86 —

Total 12,452 9 8,968 26

Loans with a specific valuation allowance

Commercial and industrial $ 350 $ — 456 —

Single tenant lease financing — — 547 —

Healthcare finance 660 — 826 45

Small business lending 1,827 — 1,611 —

Other consumer loans 199 — 66 —

Total 3,036 — 3,506 45

Total impaired loans $ 15,488 $ 9 $ 12,474 $ 71

Total loans $ 2,875 $ 3,121 $ 3,966 $ 9,962 $ 2,391

1 Balance is partially guaranteed by the U.S.

6 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 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 nine months ended September 30, 2022, respectively.

The Company did not have any loan modifications made to borrowers experiencing financial difficulty during the three months ended March 31, 2024 and 2023.

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.

The Company had $ 0.4 million in other real estate owned (“OREO”) as of March 31, 2024 and December 31, 2023, which consisted of two residential mortgage properties.

There were two loans totaling $ 0.5 million and one loan totaling $ 0.8 million, in the process of foreclosure at March 31, 2024 and December 31, 2023, respectively.

Premises and Equipment

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

(in thousands) September 30,

2023 December 31,

The following table summarizes premises and equipment at March 31, 2024 and December 31, 2023.

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

Land $ 5,598 $ 5,598

5 unchanged sentences

Total $ 73,231 $ 73,463

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.

As of March 31, 2024 and December 31, 2023, 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, 2024 or March 31, 2023.

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.

5 unchanged sentences

Servicing Asset

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.

Activity for the servicing asset and the related changes in fair value for the three months ended March 2024 and 2023 are shown in the table below.

Three Months Ended

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

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

Originated and purchased servicing 1,585 783

( 408 ) ( 279 )

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

the valuation model 151 ( 54 )

Loan servicing asset revaluation $ ( 257 ) $ ( 333 )

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

Nine Months Ended

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

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

Balance, beginning of period $ 10,567 $ 6,255

Originated and purchased servicing 3,994 2,193

Originated 1,627 1,112

( 612 ) ( 339 )

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

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

The unpaid principal balances of these loans serviced for others as of March 31, 2024 and December 31, 2023 are shown in the table below.

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

Loan portfolios serviced for:

1 unchanged sentence

Total $ 599,396 $ 531,927

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.

Loan servicing revenue totaled $ 1.3 million and $ 0.8 million for the three months ended March 31, 2024 and March 31, 2023, respectively.

Loan servicing asset revaluation, which represents the change in fair value of the servicing asset, resulted in a $ 0.4 million and $ 0.1 million downward valuation for the three months ended March 31, 2024 and March 31, 2023, respectively.

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

5 unchanged sentences

In June 2019, the Company issued $ 37.0 million aggregate principal amount of 6.0 % Fixed-to-Floating Rate Subordinated Notes due 2029 (the “2029 Notes”) in a public offering.

The 2029 Notes initially bear a fixed interest rate of 6.0 % per year to, but excluding, June 30, 2024, and thereafter a floating rate equal to the then-current benchmark rate (initially three-month LIBOR rate) plus 4.11 %.

The 2029 Notes initially bear a fixed interest rate of 6.0 % per year to, but excluding, June 30, 2024, and thereafter a floating rate equal to three-month Term SOFR plus 4.376 %.

All interest on the 2029 Notes is payable quarterly.

3 unchanged sentences

In October 2020, the Company entered into a term loan in the principal amount of $ 10.0 million, evidenced by a term note due 2030 (the “2030 Note”).

The 2030 Note initially bears a fixed interest rate of 6.0 % per year to, but excluding, November 1, 2025 and thereafter at a floating rate equal to the then-current benchmark rate (initially the then current three-month term SOFR plus 5.795 %).

The 2030 Note is scheduled to mature on November 1, 2030.

11 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 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

The following table presents the principal balance and unamortized discount and debt issuance costs for the 2029 Notes, the 2030 Note, and the 2031 Notes as of March 31, 2024 and December 31, 2023.

March 31, 2024 December 31, 2023

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

2029 Notes $ 37,000 $ ( 822 ) $ 37,000 $ ( 862 )

15 unchanged sentences

Award Activity Under 2022 Plan

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.

The Company recorded $ 0.4 million and $ 0.1 million o f share-based compensation expense for the three months ended March 31, 2024, and 2023, respectively, 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, 2024.

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 75,222 24.13 — — — —

Cancelled/Forfeited — — — — — —

Vested ( 14,294 ) 24.52 — — — —

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.

Unvested at March 31, 2024 133,282 $ 24.35 30,030 $ 11.18 — $ —

At March 31, 2024, 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 2.4 years.

2013 Equity Incentive Plan

2 unchanged sentences

Award Activity Under 2013 Plan

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.

The Company recorded $ 0.1 million and $ 0.4 million of share-based compensation expense for the three months ended March 31, 2024 and 2023, respectively, 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, 2024.

Unvested at December 31, 2023 53,985 $ 39.86 — $ — — $ —

Granted — — — — — —

Cancelled/Forfeited ( 22,685 ) 30.45 — — — —

Vested ( 8,089 ) 46.64 — — — —

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.

Unvested at March 31, 2024 23,211 $ 46.69 — $ — — $ —

At March 31, 2024, the total unrecognized compensation cost related to unvested stock-based awards under the 2013 Plan was $ 0.3 million with a weighted-average expense recognition period of 0.8 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 nine months ended September 30, 2023.

The following table summarizes the status of deferred stock rights related to the Directors Deferred Stock Plan for the three months ended March 31, 2024.

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 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

Capital expenditures were made in connection with the construction of the building where our corporate headquarters is located, along with an attached parking garage.

The Company entered into construction-related contracts.

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.

At March 31, 2024 and December 31, 2023, the Company had outstanding loan commitments totaling approximately $ 726.5 million and $ 755.4 million, respectively.

Fair Value of Financial Instruments

10 unchanged sentences

Where quoted market prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy.

Level 1 securities include highly liquid mutual funds.

If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics or discounted cash flows.

The Company did not own any securities classified within Level 1 of the hierarchy as of March 31, 2024 or December 31, 2023.

Level 2 securities include U.S.

5 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 September 30, 2023 or December 31, 2022.

The Company did not own any securities classified within Level 3 of the hierarchy as of March 31, 2024 or December 31, 2023.

Loans Held-for-Sale (mandatory pricing agreements)

14 unchanged sentences

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

Forward Contracts

The fair values of forward contracts on to-be-announced securities are determined using quoted prices in active markets or benchmarked thereto (Level 1).

Interest Rate Lock Commitments

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 September 30, 2023 and December 31, 2022.

September 30, 2023

March 31, 2024

Fair Value Measurements Using

33 unchanged sentences

Total available-for-sale securities $ 474,855 $ — $ 474,855 $ —

Loans held-for-sale (mandatory pricing agreements) 9,110 — 9,110 —

Servicing asset 10,567 — — 10,567

Interest rate swap agreements 5,139 — 5,139 —

Forward contracts 97 97 — —

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 nine months ended September 30, 2023 and 2022.

Interest rate swap agreements - assets (back-to-back) 677 — 677 —

Interest rate swap agreements - liabilities (back-to-back) ( 677 ) — ( 677 ) —

Three Months Ended

(in thousands) Servicing Asset Interest Rate Lock

Balance, July 1, 2023 $ 8,251 $ —

Total realized gains

Originated and purchased servicing 1,585 —

Subtractions:

Paydowns ( 408 ) —

Change in fair value 151 —

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

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

Total realized gains

Originated and purchased servicing 783 —

Subtractions:

Paydowns ( 279 ) —

Change in fair value ( 54 ) ( 850 )

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

Nine Months Ended

(in thousands) Servicing Asset Interest Rate Lock

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

Balance as of January 1, 2024 $ 10,567 $ —

Total realized gains

Originated and purchased servicing 3,994 —

Originated 1,627 —

Subtractions:

1 unchanged sentence

Change in fair value 178 —

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

Balance, March 31, 2024 $ 11,760 $ —

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

Total realized gains

Originated and purchased servicing 2,193 —

Originated 1,112 —

Subtractions:

1 unchanged sentence

Change in fair value 284 ( 133 )

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

Balance, March 31, 2023 $ 7,312 $ —

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.

Collateral Dependent Loans

Individually Analyzed Collateral Dependent Loans

Loans for which it is probable that the Company will not collect all principal and interest due according to contractual terms are measured for impairment.

The amount of impairment may be determined based on the fair value of the underlying collateral, less costs to sell, the estimated present value of future cash flows or the loan’s observable market price.

If the impaired loan is identified as collateral dependent, the fair value of the underlying collateral, less costs to sell, is used to measure impairment.

If the individually analyzed loan is identified as collateral dependent, the fair value of the underlying collateral, less costs to sell, is used to measure impairment.

This method requires obtaining a current independent appraisal of the collateral and applying a discount factor to the value.

If the impaired loan is not collateral dependent, the Company utilizes a discounted cash flow analysis to measure impairment.

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 September 30, 2023 and December 31, 2022.

September 30, 2023

If the individually analyzed loan is not collateral dependent, the Company utilizes a discounted cash flow analysis to measure impairment.

Individually analyzed 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.

March 31, 2024

(in thousands) Fair Value Measurements Using

8 unchanged sentences

(Level 2) Significant

Impaired loans $ 1,164 $ — $ — $ 1,164

Collateral dependent loans $ 2,799 $ — $ — $ 2,799

Significant Unobservable (Level 3) Inputs

1 unchanged sentence

(dollars in thousands) Fair Value at

September 30, 2023 Valuation

March 31, 2024 Valuation

Technique Significant Unobservable

7 unchanged sentences

Inputs Range Weighted-Average Range

Impaired loans $ 1,164 Fair value of collateral Discount for type of property and current market conditions 0 % - 25 %

IRLCs 133 Discounted cash flow Loan closing rates 31 % - 100 %

Collateral dependent loans $ 2,799 Fair value of collateral Discount for type of property and current market conditions 0 % - 90 %

Servicing asset 10,567 Discounted cash flow Prepayment speeds

13 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 September 30, 2023 or December 31, 2022.

The Company did not own any securities classified within Level 3 of the hierarchy as of March 31, 2024 or December 31, 2023.

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 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

The Company determined that the fair value of commitments was zero based on the contractual value of outstanding commitments at each of March 31, 2024 and December 31, 2023.

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, 2024 and December 31, 2023.

March 31, 2024

Fair Value Measurements Using

36 unchanged sentences

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

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,

During the three months ended March 31, 2024, the Company had no mortgage loans held-for-sale or sold mortgage loans into the secondary market.

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

During the first quarter 2023, the Company made the decision to exit the residential mortgage business.

The following table presents the components of income from mortgage banking activities for the three months ended March 31, 2024 and 2023.

Three Months Ended March 31,

(in thousands) 2024 2023

1 unchanged sentence

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

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

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

Net revenue from mortgage banking activities $ — $ 76

19 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 September 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 September 30, 2023 December 31, 2022 September 30, 2023 December 31, 2022

Line item in the condensed consolidated balance sheets in which the hedged item is included March 31, 2024 December 31, 2023 March 31, 2024 December 31, 2023

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 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.

The designated hedged items were $ 50.0 million at both March 31, 2024 and December 31, 2023.

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, 2024 and December 31, 2023, identified by the underlying interest rate-sensitive instruments.

(dollars in thousands)

September 30, 2023

March 31, 2024

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

1 unchanged sentence

Securities available-for-sale $ 50,000 0.6 $ 919 3-month SOFR 2.33 %

Total at September 30, 2023 $ 50,000 1.1 $ 1,717 3-month SOFR 2.33 %

Total swap portfolio at March 31, 2024 $ 50,000 0.6 $ 919 3-month SOFR 2.33 %

(dollars in thousands)

2 unchanged sentences

Instruments Associated With Fair Value Receive Pay

Securities available-for-sale $ 50,000 1.8 $ 2,093 3-month LIBOR 2.33 %

Total swap portfolio at December 31, 2022 $ 50,000 1.8 $ 2,093 3-month LIBOR 2.33 %

Securities available-for-sale $ 50,000 0.8 $ 1,153 3-month SOFR 2.33 %

Total swap portfolio at December 31, 2023 $ 50,000 0.8 $ 1,153 3-month SOFR 2.33 %

In March 2021, the Company terminated the last layer of interest rate swaps associated with available-for-sale agency mortgage-backed securities - residential, which resulted in swap termination payments to counterparties totaling $ 1.9 million.

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 $ 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.

The Company had amortization expense totaling less than $ 0.1 million for both the three months ended March 31, 2024 and 2023, 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 10.6 years as of September 30, 2023.

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.

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 September 30, 2023 and December 31, 2022.

The Company had amortization expense totaling $ 0.9 million and $ 1.0 million for the three months ended March 31, 2024 and 2023, respectively, related to these previously terminated fair value hedges recognized as a reduction to interest income on loans.

(dollars in thousands)

September 30, 2023

March 31, 2024

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

1 unchanged sentence

Interest rate swaps $ 110,000 2.8 $ 4,715 3-month SOFR 2.88 %

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

Interest rate swaps 40,000 0.2 174 Fed Funds Effective 2.78 %

3 unchanged sentences

Cash Flow Hedges Fair Value Receive Pay

Interest rate swaps $ 110,000 4.1 $ 4,787 3-month LIBOR 2.88 %

Interest rate swaps 60,000 0.6 735 1-month LIBOR 2.88 %

Interest rate swaps $ 110,000 3.1 $ 3,596 3-month SOFR 2.88 %

Interest rate swaps 40,000 0.4 390 Fed Funds Effective 2.78 %

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

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.

The Company received $ 6.1 million and $ 5.2 million of cash collateral from counterparties as security for their obligations related to these swap transactions at March 31, 2024 and December 31, 2023.

The Company had no pledged cash collateral as of March 31, 2024 and December 31, 2023 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 September 30, 2023 and December 31, 2022.

September 30, 2023 December 31, 2022

The following table presents the notional amount and fair value of interest rate swaps utilized by the Company at March 31, 2024 and December 31, 2023.

March 31, 2024 December 31, 2023

(in thousands) Notional

6 unchanged sentences

Back-to-back swaps $ 6,453 $ 158 $ 1,778 $ 677

IRLCs — — 14,862 133

Forward contracts — — 17,000 97

Total contracts

6 unchanged sentences

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.

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

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, 2024 and 2023.

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

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

Interest rate swap agreements $ 902 $ ( 2,170 )

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 nine months ended September 30, 2023 and 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

Derivatives not designated as hedging instruments

IRLCs $ — $ — $ — $ —

Forward contracts — 993 — 1,036

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

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

Liability Derivatives

2 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 nine months ended September 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 months ended March 31, 2024 and 2023.

(in thousands)

Line item in the condensed consolidated statements of operations

Three Months Ended Nine Months Ended

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

Three Months Ended

March 31, 2024 March 31, 2023

Interest income

Securities - taxable $ — $ — $ — $ —

Securities - non-taxable 414 294

Total interest income

407 ( 7 ) 1,055 ( 442 )

Interest expense

6 unchanged sentences

Accumulated Other Comprehensive Loss

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.

The components of accumulated other comprehensive loss, included in stockholders' equity, for the three months ended March 31, 2024 and 2023, 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

4 unchanged sentences

Income tax (benefit) provision ( 475 ) 57 207 ( 211 )

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 )

Other comprehensive (loss) income before reclassifications from accumulated other comprehensive loss before tax ( 51,682 ) ( 5,402 ) 19,424 ( 37,660 )

Reclassifications from accumulated other comprehensive loss to earnings before tax — 608 — 608

Other comprehensive (loss) gain before tax ( 51,682 ) ( 4,794 ) 19,424 ( 37,052 )

Income tax (benefit) provision ( 13,384 ) ( 1,203 ) 5,639 ( 8,948 )

Other comprehensive (loss) income - net of tax ( 1,599 ) 177 695 ( 727 )

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, 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 )

Reclassifications from accumulated other comprehensive loss to earnings before tax — 173 173

Other comprehensive (loss) gain before tax ( 11,308 ) 173 740 ( 10,395 )

Income tax (benefit) provision ( 2,600 ) 45 171 ( 2,384 )

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

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 )

Balance, March 31, 2024 $ ( 31,773 ) $ ( 2,762 ) $ 4,433 $ ( 30,102 )

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 5,112 — ( 2,170 ) 2,942

Reclassifications from accumulated other comprehensive loss to earnings before tax — 158 — 158

Other comprehensive (loss) gain before tax ( 18,406 ) 296 6,058 ( 12,052 )

Income tax (benefit) provision ( 5,121 ) 69 1,393 ( 3,659 )

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

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

Other comprehensive gain (loss) before tax 5,112 158 ( 2,170 ) 3,100

Income tax provision (benefit) 1,170 46 ( 499 ) 717

Other comprehensive income (loss) - net of tax 3,942 112 ( 1,671 ) 2,383

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

Details About Accumulated Other Comprehensive Loss Components Amounts Reclassified from

Accumulated Other Comprehensive Loss for the Amounts Reclassified from

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

Accumulated Other Comprehensive Loss for the Affected Line Item in the

Statements of Operations

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 ( 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 $ ( 128 ) $ ( 228 ) $ ( 397 ) $ ( 469 ) Net income

Three Months Ended March 31, 2024 Three Months Ended March 31, 2023

Reclassifications from accumulated other comprehensive loss to earnings before tax $ ( 234 ) ( 158 ) Interest income (loss)

Total amount reclassified before tax ( 234 ) ( 158 ) Income (loss) before income taxes

Tax benefit ( 57 ) ( 46 ) Income tax provision (benefit)

Total reclassifications from accumulated other comprehensive loss $ ( 177 ) $ ( 112 ) Net income (loss)

Recent Accounting Pronouncements

ASU 2016-13 - Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments (June 2016)

The main objective of this update is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date.

To achieve this objective, the amendments in this update replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.

The amendments affect entities holding financial assets that are not accounted for at fair value through net income.

The amendments affect loans, debt securities, off-balance-sheet credit exposures, and any other financial assets not excluded from the scope that have the contractual right to receive cash.

The amendments in this update affect an entity to varying degrees depending on the credit quality of the assets held by the entity, their duration, and how the entity applies current GAAP.

There is diversity in practice in applying the incurred loss methodology, which means that before transition some entities may be more aligned under current GAAP than others to the new measure of expected credit losses.

The following describes the main provisions of this update.

• Assets Measured at Amortized Cost:

The amendments in this update require a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected.

The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset.

The statements of income reflect the measurement of credit losses for newly recognized financial assets, as well as the expected increase or decrease of credit losses that have taken place during the period.

The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount.

An entity must use judgment in determining the relevant information and estimation methods that are appropriate in its circumstances.

• Available-for-Sale Debt Securities:

Credit losses relating to available-for-sale debt securities should be recorded through an allowance for credit losses.

Available-for-sale accounting recognizes that value may be realized either through collection of contractual cash flows or through sale of the security.

Therefore, the amendments limit the amount of the allowance for credit losses to the amount by which fair value is below amortized cost because the classification as available-for-sale is premised on an investment strategy that recognizes that the investment could be sold at fair value if cash collection would result in the realization of an amount less than fair value.

• In May 2019, the FASB issued ASU 2019-05 - Financial Instruments - Credit Losses (Topic 326) - Targeted Transition Relief .

This ASU allows an option for preparers to irrevocably elect the fair value option, on an instrument-by-instrument basis, for eligible financial assets measured at amortized cost basis upon adoption of the credit losses standard.

This increases the comparability of financial statement information provided by institutions that otherwise would have reported similar financial instruments using different measurement methodologies, potentially decreasing costs for financial statement preparers while providing more useful information to investors and other users.

The Company formed a current expected credit losses (“CECL”) working group that discussed implementation matters related to the completeness and accuracy of historical data, model development and corporate governance documentation.

The new allowance model estimates credit losses over the expected life of the portfolio and includes a qualitative framework to account for drivers of losses that the quantitative model does not capture.

The CECL working group discussed results from parallel model runs for each portfolio segment, assumptions related to unfunded commitments and economic forecast factors.

Model validation was completed by an independent third party in the fourth quarter 2022.

The ASU allows for several different methods of calculating the Allowance for Credit Losses (“ACL”) and based on its analysis of observable data, the Company determined the discounted cash flow method to be the most appropriate for all its loan segments.

The Company adopted this guidance on January 1, 2023 and recorded a $ 3.0 million pre-tax one-time cumulative effect adjustment to the ACL in retained earnings on the consolidated balance sheet as of the beginning of 2023, as is required in the guidance.

In addition, the Company recorded a one-time $ 2.5 million pre-tax cumulative effect adjustment to the allowance for unfunded commitments in retained earnings on the consolidated balance sheet.

The qualitative impact of the new accounting standard is directed by many of the same factors that impacted the previous methodology for calculating the ACL, including but not limited to, quality and experience of staff, changes in the value of collateral, concentrations of credit in loan types or industries and changes to lending policies.

In addition, the Company also uses reasonable and supportable forecasts.

Examples of this are regression analyses of data from the Federal Open Market Committee quarterly economic projections for change in real GDP, housing price index and national unemployment.

The following table presents the impact of the adoption of ASC 326 as of January 1, 2023:

January 1, 2023

(dollars in thousands) Pre-ASC 326 Adoption Impact of ASC 326 Adoption As Reported Under ASC 326

Commercial loans

Commercial and industrial $ 1,711 $ ( 120 ) $ 1,591

Owner-occupied commercial real estate 651 62 713

Investor commercial real estate 1,099 ( 191 ) 908

Construction 2,074 ( 435 ) 1,639

Single tenant lease financing 10,519 ( 346 ) 10,173

Public finance 1,753 ( 135 ) 1,618

Healthcare finance 2,997 1,034 4,031

Small business lending 2,168 334 2,502

Franchise finance 3,988 ( 313 ) 3,675

Total commercial loans 26,960 ( 110 ) 26,850

Consumer loans

Residential mortgage 1,559 406 1,965

Home equity 69 133 202

Other consumer 3,149 2,533 5,682

Total consumer loans 4,777 3,072 7,849

Total allowance for credit losses $ 31,737 $ 2,962 $ 34,699

Liability for off-balance sheet credit exposures $ — $ 2,504 $ 2,504

The Company also performed an assessment to determine if an allowance for credit loss was needed for available-for-sale and held-to-maturity securities.

The Company analyzed available-for-sale securities investment securities that were in an unrealized loss position as of January 1, 2023 and determined the decline in fair value for those securities was not related to credit, but rather related to changes in interest rates and general market conditions.

As such, no ACL was recorded for available-for-sale securities.

The Company analyzed held-to-maturity securities and recorded a $ 0.3 million one-time cumulative adjustment to the allowance in retained earnings.

ASU 2020-04 - Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting (March 2020) and ASU 2022-06 - Deferral of sunset Date of Topic 848

In March 2020, FASB issued ASU 2020-04 to ease the potential burden in accounting for the transition away from the LIBOR on financial reporting.

The ASU provides optional expedients and exceptions for applying GAAP to contract modification and hedge accounting relationships.

The guidance is effective March 12, 2020 through December 31, 2024.

The Company believes the adoption of this guidance will not have a material impact on the condensed consolidated financial statements.

ASU 2022-02 - Financial Instruments - Credit Losses (Topic 326):

Troubled Debt Restructurings and Vintage Disclosures (March 2022)

ASU 2023-02 - Investments - Equity Method and Joint Ventures (Topic 323):

Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method (March 2023)

In March 2023, the FASB issued ASU No.

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

Troubled Debt Restructurings and Vintage Disclosures.

This ASU eliminates the separate recognition and measurement guidance for Troubled Debt Restructurings ("TDRs") by creditors.

The elimination of the TDR guidance may be adopted prospectively for loan modifications after adoption or on a modified retrospective basis, which would also apply to loans previously modified, resulting in a cumulative effect adjustment to retained earnings in the period of adoption for changes in the allowance for credit losses.

The ASU requires an entity to disclose current-period gross write-offs by year of origination for financing receivables within the scope of Subtopic 326-20.

This guidance is effective on January 1, 2023, with early adoption permitted.

Using a prospective approach, the Company adopted this guidance on January 1, 2023 and it did not have a material impact on the condensed consolidated financial statements.

2023-02, Investments - Equity Method and Joint Ventures (Topic 323):

Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method.

This ASU permits companies to account for tax equity investments, regardless of the tax credit program from which the income tax credits are received, using the proportional amortization method if certain conditions are met.

The Company adopted this guidance on January 1, 2024 and it did not have a material impact on its consolidated financial statements.

ASU 2023-07 - Segment Reporting (Topic 280):

Improvements to Reportable Segments (November 2023)

In November 2023, the FASB issued ASU No.

2023-07, Segment Reporting (Topic 280) - Improvements to Reportable Segments.

This ASU enhances financial reporting by requiring disclosure of incremental segment information on an annual and interim basis.

The guidance is effective for fiscal years beginning after December 15, 2023 and for interim periods within fiscal years beginning after December 15, 2024 with early adoption permitted.

The Company is currently evaluating the impact of this ASU on its condensed consolidated financial statements.

ASU 2023-09 - Income Taxes (Topic 740):

Improvements to Income Tax Disclosures (December 2023)

In December 2023, the FASB issued ASU No.

2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures.

This ASU enhances the transparency and usefulness of income tax disclosures, which addresses investor requests for more transparency about income tax disclosures related primarily to the rate reconciliation and income taxes paid information.

The guidance is effective for annual periods beginning after December 15, 2024 with early adoption permitted.

The Company is currently evaluating the impact of this ASU on its condensed consolidated financial statements.

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