What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-05-04 compared with 2022-11-03 · 197 added, 327 removed, 1087 unchanged (33% of the section changed)

39 unchanged sentences

Federal Home Loan Bank borrowings 879,628 637

Long-term borrowings — 14,063

Junior subordinated debentures (less unamortized debt issuance costs of $ 32 and $ 33 )

12 unchanged sentences

issued and outstanding:

45,634,626 shares at September 30, 2022 and 47,349,778 shares at December 31, 2021 (includes 136,904 and 135,273 shares of unvested participating restricted stock awards, respectively)

44,114,827 shares at March 31, 2023 and 45,641,238 shares at December 31, 2022 (includes 176,316 and 135,712 shares of unvested participating restricted stock awards, respectively)

Value of shares held in rabbi trust at cost:

82,617 shares at September 30, 2022 and 82,565 shares at December 31, 2021

80,964 shares at March 31, 2023 and 80,965 shares at December 31, 2022

( 3,286 ) ( 3,227 )

2 unchanged sentences

Retained earnings 971,338 934,442

Accumulated other comprehensive income (loss), net of tax ( 179,069 ) 2,183

Accumulated other comprehensive loss, net of tax ( 135,945 ) ( 163,084 )

Total stockholders’ equity 2,830,909 2,886,701

4 unchanged sentences

(Unaudited—Dollars in thousands, except per share data)

Three Months Ended Nine Months Ended

September 30 September 30

2022 2021 2022 2021

Three Months Ended

Interest income

47 unchanged sentences

(Unaudited—Dollars in thousands)

Three Months Ended Nine Months Ended

September 30 September 30

2022 2021 2022 2021

Three Months Ended

Net income $ 61,247 $ 53,097

3 unchanged sentences

Net change in other comprehensive income for defined benefit postretirement plans ( 92 ) 121

Total other comprehensive loss ( 69,605 ) ( 11,000 ) ( 181,252 ) ( 22,128 )

Total comprehensive income $ 2,292 $ 29,007 $ 5,518 $ 97,162

Total other comprehensive income (loss) 27,139 ( 80,385 )

Total comprehensive income (loss) $ 88,386 $ ( 27,288 )

The accompanying notes are an integral part of these unaudited consolidated financial statements.

1 unchanged sentence

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Three Months Ended September 30, 2022 and 2021

(Unaudited—Dollars in thousands, except per share data)

Common Stock Outstanding Common Stock Value of Shares Held in Rabbi Trust at Cost Deferred Compensation Obligation Additional Paid in Capital Retained Earnings Accumulated Other

Comprehensive Income (Loss) Total

Balance June 30, 2022 46,069,761 $ 459 $ ( 3,196 ) $ 3,196 $ 2,146,333 $ 833,857 $ ( 109,464 ) $ 2,871,185

Net income — — — — — 71,897 — 71,897

Other comprehensive loss — — — — — — ( 69,605 ) ( 69,605 )

Common dividend declared ($ 0.51 per share)

— — — — — ( 23,251 ) — ( 23,251 )

Stock based compensation — — — — 1,017 — — 1,017

Restricted stock awards issued, net of awards surrendered 296 — — — — — — —

Shares issued under direct stock purchase plan 7,541 — — — 606 — — 606

Shares repurchased under share repurchase program ( 442,972 ) ( 5 ) — — ( 34,643 ) — — ( 34,648 )

Deferred compensation and other retirement benefit obligations — — ( 43 ) 43 — — — —

Balance September 30, 2022 45,634,626 $ 454 $ ( 3,239 ) $ 3,239 $ 2,113,313 $ 882,503 $ ( 179,069 ) $ 2,817,201

Balance June 30, 2021 33,037,859 $ 329 $ ( 3,116 ) $ 3,116 $ 948,130 $ 763,596 $ 29,567 $ 1,741,622

Net income — — — — — 40,007 — 40,007

Other comprehensive loss — — — — — — ( 11,000 ) ( 11,000 )

Common dividend declared ($ 0.48 per share)

— — — — — ( 15,861 ) — ( 15,861 )

Stock based compensation — — — — 707 — — 707

Restricted stock awards issued, net of awards surrendered ( 763 ) — — — ( 3 ) — — ( 3 )

Shares issued under direct stock purchase plan 6,716 — — — 482 — — 482

Deferred compensation and other retirement benefit obligations — — ( 41 ) 41 — — — —

Balance September 30, 2021 33,043,812 $ 329 $ ( 3,157 ) $ 3,157 $ 949,316 $ 787,742 $ 18,567 $ 1,755,954

INDEPENDENT BANK CORP.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Nine Months Ended September 30, 2022 and 2021

Three Months Ended March 31, 2023 and 2022

(Unaudited—Dollars in thousands, except per share data)

4 unchanged sentences

Net income — — — — — 61,247 — 61,247

Other comprehensive loss — — — — — — ( 181,252 ) ( 181,252 )

Other comprehensive income — — — — — — 27,139 27,139

Common dividend declared ($ 0.55 per share)

— — — — — ( 24,351 ) — ( 24,351 )

Proceeds from exercise of stock options, net of cash paid 1,666 — — — 80 — — 80

Stock based compensation — — — — 1,672 — — 1,672

3 unchanged sentences

Deferred compensation and other retirement benefit obligations — — ( 59 ) 59 — — — —

Balance September 30, 2022 45,634,626 $ 454 $ ( 3,239 ) $ 3,239 $ 2,113,313 $ 882,503 $ ( 179,069 ) $ 2,817,201

Balance March 31, 2023 44,114,827 $ 439 $ ( 3,286 ) $ 3,286 $ 1,995,077 $ 971,338 $ ( 135,945 ) $ 2,830,909

Balance December 31, 2021 47,349,778 $ 472 $ ( 3,146 ) $ 3,146 $ 2,249,078 $ 766,716 $ 2,183 $ 3,018,449

3 unchanged sentences

— — — — — ( 24,162 ) — ( 24,162 )

Proceeds from exercise of stock options, net of cash paid 4,744 — — — ( 57 ) — — ( 57 )

Stock based compensation — — — — 834 — — 834

1 unchanged sentence

Shares issued under direct stock purchase plan 6,602 — — — 571 — — 571

Shares repurchased under share repurchase program ( 23,824 ) — — — ( 1,902 ) — — ( 1,902 )

Deferred compensation and other retirement benefit obligations — — ( 33 ) 33 — — — —

Balance September 30, 2021 33,043,812 $ 329 $ ( 3,157 ) $ 3,157 $ 949,316 $ 787,742 $ 18,567 $ 1,755,954

Balance March 31, 2022 47,377,125 $ 472 $ ( 3,179 ) $ 3,179 $ 2,247,518 $ 795,651 $ ( 78,202 ) $ 2,965,439

(1) Inclusive of $ 1.2 million impact of excise tax attributable to share repurchases made during the three months ended March 31, 2023 .

The accompanying notes are an integral part of these unaudited consolidated financial statements.

2 unchanged sentences

(Unaudited—Dollars in thousands)

Nine Months Ended

Three Months Ended

Cash flow from operating activities

2 unchanged sentences

Depreciation and amortization 9,633 10,119

Change in unamortized net loan costs and premiums ( 6,397 ) ( 17,217 )

Accretion of fair value mark of acquired loans ( 65 ) ( 5,349 )

Change in unamortized net loan costs and fees ( 529 ) ( 3,666 )

Accretion of acquired loans ( 305 ) ( 84 )

Provision for (release of) credit losses 7,250 ( 2,000 )

Deferred income tax expense 644 643

Net loss (gain) on equity securities 2,819 ( 695 )

Net (gain) loss on equity securities ( 368 ) 627

Net loss on bank premises and equipment 79 406

2 unchanged sentences

Increase in cash surrender value of life insurance policies ( 1,854 ) ( 1,795 )

Gain on life insurance benefits ( 600 ) ( 258 )

Operating lease payments ( 3,432 ) ( 9,030 )

Operating lease termination payments — ( 4,750 )

Change in fair value on loans held for sale 17 548

7 unchanged sentences

Cash flows used in investing activities

Proceeds from sales of equity securities 30 1,164

Purchases of equity securities ( 136 ) ( 184 )

3 unchanged sentences

Purchases of securities held to maturity — ( 266,972 )

Net redemption of Federal Home Loan Bank stock 6,189 1,584

Net purchase of Federal Home Loan Bank stock ( 35,085 ) —

Investments in low income housing projects ( 13,669 ) ( 6,405 )

Purchases of life insurance policies ( 91 ) ( 93 )

Proceeds from life insurance policies 2,273 576

Net (increase) decrease in loans ( 18,981 ) 10,605

2 unchanged sentences

Net cash used in investing activities ( 28,558 ) ( 283,631 )

Cash flows (used in) provided by financing activities

Net decrease in time deposits ( 351,458 ) ( 165,052 )

Net (decrease) increase in other deposits ( 225,519 ) 1,432,037

Repayments of short-term Federal Home Loan Bank borrowings ( 25,000 ) —

Repayments of long-term Federal Home Loan Bank borrowings — ( 10,000 )

Cash flows provided by (used in) financing activities

Net increase (decrease) in time deposits 259,590 ( 131,925 )

Net decrease in other deposits ( 866,445 ) ( 21,112 )

Proceeds from short-term Federal Home Loan Bank borrowings 879,000 —

Repayments of long-term debt, net of issuance costs — ( 14,063 )

Net payments for exercise of stock options — ( 57 )

Net proceeds from exercise of stock options 80 —

Restricted stock awards issued, net of awards surrendered ( 1,110 ) ( 1,063 )

2 unchanged sentences

Common dividends paid ( 25,103 ) ( 22,728 )

Net cash (used in) provided by financing activities ( 825,766 ) 1,196,259

Net (decrease) increase in cash and cash equivalents ( 1,304,388 ) 711,195

Net cash provided by (used in) financing activities 126,703 ( 192,222 )

Net increase (decrease) in cash and cash equivalents 149,611 ( 400,325 )

Cash and cash equivalents at beginning of year 352,933 2,240,684

Cash and cash equivalents at end of period $ 502,544 $ 1,840,359

Supplemental schedule of noncash activities

Net increase in capital commitments relating to low income housing project investments $ 4,408 $ 34,127

Right-of-use assets obtained in exchange for new lease obligations $ 14,124 $ 5,888

Supplemental schedule of noncash investing and financing activities

Net increase (decrease) in capital commitments relating to low income housing project investments $ 564 $ ( 718 )

Recognition of operating lease at commencement and/or at extension $ 2,642 $ 1,549

The accompanying notes are an integral part of these unaudited consolidated financial statements.

9 unchanged sentences

In the opinion of management, all adjustments considered necessary for a fair presentation of the financial statements, primarily consisting of normal recurring adjustments, have been included.

Results for the nine months ended September 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022 or any other interim period.

Results for the three months ended March 31, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023 or any other interim period.

For further information, refer to the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission (the "2022 Form 10-K").

11 unchanged sentences

The Company does not anticipate that the adoption of these updates will have a material impact on the Company's financial statements.

FASB ASC Topic 260 "Earnings Per Share" Update No.

In August 2020, the FASB issued update No.

2020-06 ("ASU 2020-06").

ASU 2020-06 included amendments to ASC 260 related to the earnings per share calculation, which were designed to simplify and improve consistency of the diluted earnings per share calculation.

ASU 2020-06 is effective for public entities for annual periods beginning after December 15, 2021 and interim periods therein.

Accordingly, the Company adopted ASU 2020-06 effective January 1, 2022 and the adoption did not have a material impact on the Company's financial statements.

FASB ASC Topic 815 "Derivatives and Hedging" Update No.

2022-01 was issued in March 2022 and its amendments allow for nonprepayable financial assets to also be included in a closed portfolio hedged using the portfolio layer method.

The expanded scope permits an entity to apply the same portfolio hedging method to both prepayable and nonprepayable financial assets resulting in more consistent accounting for similar hedges.

All amendments in this update are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

The Company is currently assessing the impact of the adoption of this standard on the Company's financial statements.

FASB ASC Topic 326 "Financial Instruments - Credit Losses" Update No.

2022-02 was issued in March 2022 and applies to public entities that have adopted ASU Topic 326.

The amendments in this update eliminate the existing accounting guidance for troubled debt restructures ("TDRs") by creditors in Subtopic 310-40, Receivables - Troubled Debt Restructurings by Creditors and instead requires that an entity evaluate whether a modification

represents a new loan or a continuation of an existing loan.

The amendments also enhance disclosure requirements for certain loan refinancing and restructuring by creditors when a borrower is experiencing financial difficulty.

ASU 2022-02 also requires additional disclosure of current period gross write-offs by year of origination for financing receivables to be included in the entity's vintage disclosure, as currently required under Topic 326.

All amendments in this update are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

The Company is currently assessing the impact of the adoption of this standard on the Company's financial statements.

NOTE 3 - SECURITIES

Trading Securities

The Company had trading securities of $ 3.5 million and $ 3.7 million as of September 30, 2022 and December 31, 2021, respectively.

The Company had trading securities of $ 4.5 million and $ 3.9 million as of March 31, 2023 and December 31, 2022, respectively.

These securities are held in a rabbi trust and will be used for future payments associated with the Company’s non-qualified 401(k) Restoration Plan and Non-qualified Deferred Compensation Plan.

Equity Securities

The Company had equity securities of $ 20.4 million and $ 23.2 million as of September 30, 2022 and December 31, 2021, respectively.

The Company had equity securities of $ 21.5 million and $ 21.1 million as of March 31, 2023 and December 31, 2022, respectively.

These securities consist primarily of mutual funds held in a rabbi trust and will be used for future payments associated with the Company’s supplemental executive retirement plans.

The following table represents a summary of the gains and losses recognized within non-interest income and non-interest expense within the consolidated statements of income that relate to equity securities for the periods indicated:

Three Months Ended Nine Months Ended

September 30 September 30

2022 2021 2022 2021

Three Months Ended

Dollars in thousands

4 unchanged sentences

The following table summarizes the amortized cost, allowance for credit losses, and fair value of available for sale securities and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive income (loss) as of the dates indicated:

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Gains Gross Unrealized

4 unchanged sentences

(Dollars in thousands)

Available for sale securities

government agency securities $ 230,753 $ — $ ( 25,739 ) $ — $ 205,014 $ 230,936 $ — $ ( 28,636 ) $ — $ 202,300

3 unchanged sentences

State, county, and municipal securities 194 1 — — 195 193 — ( 2 ) — 191

Single issuer trust preferred securities issued by banks 489 — — — 489 489 2 — — 491

Pooled trust preferred securities issued by banks and insurers 1,203 — ( 161 ) — 1,042 1,203 — ( 169 ) — 1,034

1 unchanged sentence

Total available for sale securities $ 1,551,042 $ 64 $ ( 145,504 ) $ — $ 1,405,602 $ 1,566,779 $ 54 $ ( 167,679 ) $ — $ 1,399,154

Excluded from the table above is accrued interest on available for sale securities of $ 3.3 million and $ 3.0 million as of September 30, 2022 and December 31, 2021, respectively, which is included within other assets on the consolidated balance sheets.

Additionally, the Company did not record any write-offs of accrued interest income on available for sale securities during the three and nine months ended September 30, 2022 and 2021.

Furthermore, no securities held by the Company were

delinquent on contractual payments nor were any securities placed on non-accrual status as of September 30, 2022 and December 31, 2021.

Excluded from the table above is accrued interest on available for sale securities of $ 3.2 million and $ 3.6 million at March 31, 2023 and December 31, 2022, respectively, which is included within other assets on the consolidated balance sheets.

Additionally, the Company did not record any write-offs of accrued interest income on available for sale securities during the three months ended March 31, 2023 and 2022.

Furthermore, no securities held by the Company were delinquent on contractual payments nor were any securities placed on non-accrual status at March 31, 2023 and December 31, 2022.

When securities are sold, the adjusted cost of the specific security sold is used to compute the gain or loss on the sale.

The Company had no sales of securities available for sale during the three and nine months ended September 30, 2022 and 2021, and therefore no gains or losses were realized during the periods presented.

The Company had no sales of securities available for sale during the three months ended March 31, 2023 and 2022, and therefore no gains or losses were realized during the periods presented.

The following tables show the gross unrealized losses and fair value of the Company’s available for sale securities in an unrealized loss position, and for which the Company has not recorded a provision for credit losses, as of the dates indicated.

These available for sale securities are aggregated by major security type and length of time that individual securities have been in a continuous unrealized loss position:

September 30, 2022

March 31, 2023

Less than 12 months 12 months or longer Total

8 unchanged sentences

Agency collateralized mortgage obligations 13 3,039 ( 32 ) 34,851 ( 2,562 ) 37,890 ( 2,594 )

State, county, and municipal securities 1 187 ( 6 ) — — 187 ( 6 )

Pooled trust preferred securities issued by banks and insurers 1 — — 1,042 ( 161 ) 1,042 ( 161 )

12 unchanged sentences

Agency collateralized mortgage obligations 13 38,843 ( 3,031 ) — — 38,843 ( 3,031 )

State, county, and municipal securities 1 191 ( 2 ) — — 191 ( 2 )

Pooled trust preferred securities issued by banks and insurers 1 — — 1,034 ( 169 ) 1,034 ( 169 )

Small business administration pooled securities 8 34,511 ( 3,550 ) 17,246 ( 4,163 ) 51,757 ( 7,713 )

Total impaired available for sale securities 173 $ 333,099 $ ( 35,411 ) $ 1,062,964 $ ( 132,268 ) $ 1,396,063 $ ( 167,679 )

1 unchanged sentence

In addition, management does not believe that any of the securities are impaired due to reasons of credit quality.

As a result, the Company did not recognize a provision for credit losses on these investments during the three and nine months ended September 30, 2022 and 2021, respectively.

As a result, the Company did not recognize a provision for credit losses on these investments during the three months ended March 31, 2023 and 2022.

The Company made this determination by reviewing various qualitative and quantitative factors regarding each investment category, such as current market conditions, extent and nature of changes in fair value, issuer rating changes and trends, volatility of earnings, and current analysts’ evaluations.

As a result of the Company’s review of these qualitative and quantitative factors, the causes of the impairments listed in the table above by category were as follows at September 30, 2022:

As a result of the Company’s review of these qualitative and quantitative factors, the causes of the impairments listed in the table above by category were as follows at March 31, 2023:

Government Agency Securities, U.S.

4 unchanged sentences

Government or one of its agencies.

• State, County and Municipal Securities:

This portfolio has contractual terms that generally do not permit the issuer to settle the securities at a price less than the current par value of the investment.

The decline in market value of these securities is attributable to changes in interest rates and not credit quality.

• Pooled Trust Preferred Securities:

4 unchanged sentences

Held to Maturity Securities

The following table summarizes the amortized cost, fair value and allowance for credit losses of held to maturity securities and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive income (loss) as of the dates indicated:

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Gains Gross Unrealized

13 unchanged sentences

federal government or other government sponsored agencies and have a long history of no credit losses.

As a result, management has determined these securities to have a zero loss expectation and therefore the Company did not record a provision for estimated credit losses on any held to maturity securities during the three and nine months ended September 30, 2022 and 2021, respectively.

Excluded from the table above is accrued interest on held to maturity securities of $ 4.3 million and $ 2.0 million as of September 30, 2022 and December 31, 2021, respectively, which is included within other assets on the consolidated balance sheets.

Additionally, the Company did not record any write-offs of accrued interest income on held to maturity securities during the three and nine months ended September 30, 2022 and 2021.

Furthermore, no securities held by the Company were delinquent on contractual payments nor were any securities placed on non-accrual status as of September 30, 2022 and December 31, 2021.

When securities are sold, the adjusted cost of the specific security sold is used to compute the gain or loss on the sale.

The Company had no sales of held to maturity securities during the three and nine months ended September 30, 2022 and 2021, respectively, and therefore no gains or losses were realized during the periods presented.

Excluded from the table above is accrued interest on held to maturity securities of $ 4.5 million and $ 4.4 million as of March 31, 2023 and December 31, 2022, respectively, which is included within other assets on the consolidated balance sheets.

Additionally, the Company did not record any write-offs of accrued interest income on held to maturity securities during the three months ended March 31, 2023 and 2022.

Furthermore, no securities held by the Company were delinquent on contractual payments nor were any securities placed on non-accrual status at March 31, 2023 and December 31, 2022.

While management has the positive intent and ability to hold the Company's held to maturity securities until maturity, if a decision were made to sell a security within this portfolio, the adjusted cost of the specific security sold would be used to compute the gain or loss on the sale.

The Company had no sales of held to maturity securities during the three months ended March 31, 2023 and 2022, and therefore no gains or losses were realized during the periods presented.

The Company monitors the credit quality of held to maturity securities through the use of credit ratings.

Credit ratings are monitored by the Company on at least a quarterly basis.

As of September 30, 2022, all held to maturity securities held by the Company were rated investment grade or higher.

As of March 31, 2023, all held to maturity securities held by the Company were rated investment grade or higher.

The actual maturities of certain available for sale or held to maturity securities may differ from the contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

A schedule of the contractual maturities of available for sale and held to maturity securities as of September 30, 2022 is presented below:

A schedule of the contractual maturities of available for sale and held to maturity securities as of March 31, 2023 is presented below:

Due in one year or less Due after one year to five years Due after five to ten years Due after ten years Total

10 unchanged sentences

State, county, and municipal securities — — 194 195 — — — — 194 195

Single issuer trust preferred securities issued by banks — — — — — — 489 489 489 489

Pooled trust preferred securities issued by banks and insurers — — — — — — 1,203 1,042 1,203 1,042

10 unchanged sentences

Total $ 107,197 $ 104,149 $ 1,280,338 $ 1,179,694 $ 787,194 $ 696,863 $ 1,054,689 $ 944,400 $ 3,229,418 $ 2,925,106

Included in the table above are $ 24.8 million of callable securities at September 30, 2022.

The carrying value of securities pledged to secure public funds, trust deposits, and for other purposes, as required or permitted by law, was $ 963.9 million and $ 740.6 million at September 30, 2022 and December 31, 2021, respectively.

At September 30, 2022 and December 31, 2021, the Company had no investments in obligations of individual states, counties, or municipalities which exceeded 10% of consolidated stockholders’ equity.

Included in the table above are $ 25.0 million of callable securities at March 31, 2023.

The carrying value of securities pledged to secure public funds, trust deposits, and for other purposes, as required or permitted by law, was $ 946.7 million and $ 959.8 million at March 31, 2023 and December 31, 2022, respectively.

At March 31, 2023 and December 31, 2022, the Company had no investments in obligations of individual states, counties, or municipalities which exceeded 10% of consolidated stockholders’ equity.

NOTE 4 - LOANS, ALLOWANCE FOR CREDIT LOSSES AND CREDIT QUALITY

1 unchanged sentence

The following table summarizes the change in allowance for credit losses by loan category, and bifurcates the amount of loans allocated to each loan category for the period indicated:

Three Months Ended September 30, 2022

(Dollars in thousands)

Commercial and

Industrial Commercial

Real Estate Commercial

Construction Small

Business Residential

Home Equity Other Consumer Total

Allowance for credit losses

Beginning balance $ 14,107 $ 83,456 $ 11,710 $ 2,784 $ 19,750 $ 11,740 $ 772 $ 144,319

Charge-offs — ( 62 ) — — — — ( 679 ) ( 741 )

Recoveries 2 330 — 88 — 65 251 735

Provision for (release of) credit losses 6,060 ( 3,688 ) ( 291 ) ( 248 ) 852 ( 154 ) 469 3,000

Ending balance (1) $ 20,169 $ 80,036 $ 11,419 $ 2,624 $ 20,602 $ 11,651 $ 812 $ 147,313

Three Months Ended September 30, 2021

(Dollars in thousands)

Commercial and

Industrial Commercial

Real Estate Commercial

Construction Small

Business Residential

Real Estate Home Equity Other Consumer Total

Allowance for credit losses

Beginning balance $ 17,032 $ 44,325 $ 4,865 $ 3,612 $ 12,014 $ 20,087 $ 422 $ 102,357

Charge-offs ( 1 ) — — ( 83 ) — — ( 248 ) ( 332 )

Recoveries 1 — — 50 — 49 121 221

Provision for (release of) credit losses ( 1,018 ) ( 6,527 ) ( 397 ) 88 ( 967 ) ( 1,268 ) 89 ( 10,000 )

Ending balance (1) $ 16,014 $ 37,798 $ 4,468 $ 3,667 $ 11,047 $ 18,868 $ 384 $ 92,246

Nine Months Ended September 30, 2022

Three Months Ended March 31, 2023

(Dollars in thousands)

11 unchanged sentences

Ending balance (1) $ 36,932 $ 76,198 $ 9,248 $ 3,338 $ 20,454 $ 12,428 $ 533 $ 159,131

Nine Months Ended September 30, 2021

Three Months Ended March 31, 2022

(Dollars in thousands)

11 unchanged sentences

Ending balance (1) $ 14,169 $ 84,436 $ 11,867 $ 3,159 $ 18,388 $ 11,750 $ 749 $ 144,518

(1) Balances of accrued interest receivable excluded from amortized cost and the calculation of allowance for credit losses amounted to $ 42.7 million and $ 36.7 million as of September 30, 2022 and September 30, 2021, respectively.

The balance of allowance for credit losses of $ 147.3 million as of September 30, 2022 remained relatively flat compared to $ 146.9 million at December 31, 2021.

The nominal change in the Company's allowance for credit losses for the nine months ended September 30, 2022 primarily reflects increased reserves attributable to category shifts on nonperforming loans and net loan growth, offset by a stabilized credit environment and continued strong asset quality metrics.

(1) Balances of accrued interest receivable excluded from amortized cost and the calculation of allowance for credit losses amounted to $ 52.7 million and $ 39.4 million as of March 31, 2023 and March 31, 2022, respectively.

The balance of allowance for credit losses increased to $ 159.1 million as of March 31, 2023 compared to $ 152.4 million at December 31, 2022, due primarily to an additional reserve allocation associated with further credit deterioration of a large commercial and industrial credit that migrated to nonperforming status during 2022, resulting in a full specific reserve allocation on the loan.

For the purpose of estimating the allowance for credit losses, management segregated the loan portfolio into the portfolio segments detailed in the above tables.

3 unchanged sentences

• Commercial and Industrial :

Loans in this category consist of revolving and term loan obligations extended to business and corporate enterprises for the purpose of financing working capital and/or capital investment.

Collateral generally consists of pledges of business assets including, but not limited to:

accounts receivable, inventory, plant and equipment, or real estate, if applicable.

Repayment sources consist of primarily, operating cash flow, and secondarily, liquidation of assets.

Consists of revolving and term loan obligations extended to business and corporate enterprises for the purpose of financing working capital and/or capital investment.

Collateral generally consists of accounts receivable, inventory, plant and equipment, real estate, or other business assets.

The primary source of repayment is operating cash flow and, secondarily, liquidation of assets.

• Commercial Real Estate :

Loans in this category consist of mortgage loans to finance investment in real property such as multi-family residential, commercial/retail, office, industrial, hotels, educational and healthcare facilities and other specific use properties.

Consists of mortgage loans to finance investment in real property such as multi-family residential, commercial/retail, office, industrial, hotels, educational and healthcare facilities and other specific use properties and is inclusive of owner-occupied commercial properties.

Loans are typically written with amortizing payment structures.

Collateral values are determined based upon third party appraisals and evaluations.

Loan to value ratios at origination are governed by established policy and regulatory guidelines.

Repayment sources consist of, primarily, cash flow from operating leases and rents and, secondarily, liquidation of assets.

Permissible loan to value ratios at origination are governed by Company policy and regulatory guidelines.

The primary source of repayment is cash flow from operating leases and rents and, secondarily, liquidation of assets.

• Commercial Construction :

Loans in this category consist of short-term construction loans, revolving and nonrevolving credit lines and construction/permanent loans to finance the acquisition, development and construction or rehabilitation of real property.

Consists of short-term construction loans, revolving and nonrevolving credit lines and construction/permanent loans to finance the acquisition, development and construction or rehabilitation of real property.

Project types include residential land development, one-to-four family, condominium, and multi-family home construction, commercial/retail, office, industrial, hotels, educational and healthcare facilities and other specific use properties.

1 unchanged sentence

Collateral values are determined based upon third party appraisals and evaluations.

Loan to value ratios at origination are governed by established policy and regulatory guidelines.

Repayment sources vary depending upon the type of project and may consist of sale or lease of units, operating cash flows or liquidation of other assets.

Permissible loan to value ratios at origination are governed by Company policy and regulatory guidelines.

Repayment sources vary depending upon the type of project and may consist of proceeds from the sale or lease of units, operating cash flows or liquidation of other assets.

• Small Business:

Loans in this category consist of revolving, term loan and mortgage obligations extended to sole proprietors and small businesses for purposes of financing working capital and/or capital investment.

Consists of revolving, term loan and mortgage obligations extended to sole proprietors and small businesses for purposes of financing working capital and/or capital investment.

Collateral generally consists of pledges of business assets including, but not limited to, accounts receivable, inventory, plant and equipment, or real estate if applicable.

Repayment sources consist primarily of operating cash flows and, secondarily, liquidation of assets.

The primary source of repayment is operating cash flows and, secondarily, liquidation of assets.

For the commercial portfolio it is the Company’s policy to obtain personal guarantees for payment from individuals holding material ownership interests in the borrowing entities.

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The independent loan review process achieves significant penetration into the commercial loan portfolio and reports the results of these reviews to the Audit Committee of the Board of Directors on a quarterly basis.

Commercial loan modifications granted by the Company allowing payment deferrals for qualifying borrowers in accordance with the Coronavirus Aid, Relief and Economic Security A ct (" CARES Act") were assessed for potential downgrades of risk ratings.

For the Company’s consumer portfolio, the quality of the loan is best indicated by the repayment performance of an individual borrower.

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The following table details the amortized cost balances of the Company's loan portfolios, presented by credit quality indicator and origination year as of the dates indicated below:

September 30, 2022

March 31, 2023

2023 2022 2021 2020 2019 Prior Revolving Loans Revolving converted to Term Total (1)

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Total commercial and industrial $ 153,554 $ 269,940 $ 124,991 $ 95,734 $ 56,910 $ 86,734 $ 862,019 $ — $ 1,649,882

Current-period gross write-offs $ — $ — $ — $ — $ — $ 34 $ 247 $ — $ 281

Commercial real estate

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Total commercial real estate $ 208,097 $ 1,291,497 $ 1,539,931 $ 1,294,456 $ 737,385 $ 2,688,918 $ 59,810 $ — $ 7,820,094

Current-period gross write-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —

Commercial construction

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Total commercial construction $ 116,412 $ 473,258 $ 274,777 $ 93,838 $ 62,033 $ 4,755 $ 21,237 $ — $ 1,046,310

Current-period gross write-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —

Small business

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Total small business $ 9,875 $ 54,384 $ 43,571 $ 30,272 $ 16,176 $ 27,450 $ 44,138 $ — $ 225,866

Current-period gross write-offs $ — $ — $ — $ — $ — $ — $ 28 $ — $ 28

Residential real estate

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Total residential real estate $ 91,404 $ 658,273 $ 416,067 $ 190,785 $ 93,084 $ 646,031 $ — $ — $ 2,095,644

Current-period gross write-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —

Pass $ 6,812 $ 42,352 $ 58,830 $ 53,565 $ 31,341 $ 139,472 $ 756,103 $ 937 $ 1,089,412

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Total home equity $ 6,812 $ 42,352 $ 58,830 $ 53,565 $ 31,463 $ 139,554 $ 757,242 $ 937 $ 1,090,755

Current-period gross write-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —

Other consumer (3)

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Total other consumer $ 60 $ 386 $ 1,168 $ 926 $ 520 $ 1,889 $ 14,452 $ — $ 19,401

Current-period gross write-offs $ 498 $ — $ — $ — $ — $ — $ 8 $ — $ 506

Total $ 586,214 $ 2,790,090 $ 2,459,335 $ 1,759,576 $ 997,571 $ 3,595,331 $ 1,758,898 $ 937 $ 13,947,952

September 30, 2021

Total current-period gross write-offs $ 498 $ — $ — $ — $ — $ 34 $ 283 $ — $ 815

March 31, 2022

2021 2020 2019 2018 2017 Prior Revolving Loans Revolving converted to Term Total (1)

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(1) Loan origination dates in the tables above reflect the original origination date, or the date of a material modification of a previously originated loan.

(2) Loans originated as part of the Paycheck Protection Program ("PPP") established by the CARES Act are included within commercial and industrial under the 2021 and 2020 vintage year and "pass" category as these loans are 100% guaranteed by the U.S.

Outstanding PPP loans totaled $ 11.1 million and $ 383.6 million as of September 30, 2022 and 2021, respectively.

(2) Loans originated as part of the Paycheck Protection Program ("PPP") established by the Coronavirus Aid, Relief and Economic Security Act (the "CARES Act")t are included within commercial and industrial under the 2021 and 2020 vintage year and "pass" category as these loans are 100% guaranteed by the U.S.

Outstanding PPP loans totaled $ 6.6 million and $ 99.6 million as of March 31, 2023 and 2022, respectively.

(3) Other consumer portfolio is inclusive of deposit account overdrafts recorded as loan balances and the associated gross write-offs.

For the Company’s consumer portfolio, the quality of the loan is best indicated by the repayment performance of an individual borrower.

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LTV (re-valued)(2)(3) 43.8 % 41.3 %

(1) The average FICO scores at September 30, 2022 are based upon rescores from June 2022, as available for previously originated loans, or origination score data for loans booked since June 2022.

(1) The average FICO scores at March 31, 2023 are based upon rescores from March 2023, as available for previously originated loans, or origination score data for loans booked in March 2023.

The average FICO scores at December 31, 2022 were based upon rescores available from December 2022, as available for previously originated loans, or origination score data for loans booked in December 2022.

(2) The combined LTV ratios for September 30, 2022 are based upon updated automated valuations as of August 2022, when available, and/or the most current valuation data available.

(2) The combined LTV ratios for March 31, 2023 are based upon updated automated valuations as of February 2023, when available, and/or the most current valuation data available.

The combined LTV ratios for December 31, 2022 were based upon updated automated valuations as of November 2022, when available, and/or the most current valuation data available as of such date.

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Management evaluates the need for a reserve on unfunded lending commitments in a manner consistent with loans held for investment.

At September 30, 2022 and December 31, 2021, the Company's estimated reserve for unfunded commitments amounted to $ 1.3 million and $ 1.5 million, respectively.

At March 31, 2023 and December 31, 2022, the Company's estimated reserve for unfunded commitments amounted to $ 1.6 million and $ 1.3 million, respectively.

Asset Quality

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The Company also may use discretion regarding other loans 90 days or more delinquent if the loan is well secured and/or in process of collection.

In response to the COVID-19 pandemic, the Company has granted loan modifications to allow deferral of payments for borrowers negatively impacted by the pandemic.

The balance of loans with active deferrals as of September 30, 2022 and December 31, 2021 was $ 193.3 million and $ 383.1 million, respectively.

The majority of these loans with active deferrals as of September 30, 2022 continue to be characterized as current loans.

In accordance with regulatory guidance, these modifications are not considered to be troubled debt restructures ("TDRs") if they were performing as of December 31, 2019.

Additionally, a majority of these modified loans are characterized as current and therefore are not impacting nonaccrual or delinquency totals as of September 30, 2022 and December 31, 2021.

The Company does, however, consider all active deferrals when estimating loss reserves.

As loans reach their deferral maturity date, consideration of TDR and delinquency status will resume in accordance with the Company's accounting policy.

The following table shows information regarding nonaccrual loans as of the dates indicated:

Nonaccrual Balances

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

With Allowance for Credit Losses Without Allowance for Credit Losses Total With Allowance for Credit Losses Without Allowance for Credit Losses Total (1)

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Total nonaccrual loans $ 53,196 $ 3,016 $ 56,212 $ 51,809 $ 3,072 $ 54,881

(1) Included in these amounts were $ 1.5 million and $ 2.0 million of nonaccruing TDRs at September 30, 2022 and December 31, 2021, respectively.

It is the Company's policy to reverse any accrued interest when a loan is put on nonaccrual status, and, as such, the Company did not record any interest income on nonaccrual loans during the nine months ended September 30, 2022 and 2021.

(1) Nonaccrual balances at December 31, 2022 included $ 11.5 million of nonaccruing troubled debt restructures ("TDRs").

The following table shows information regarding foreclosed residential real estate property at the dates indicated:

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

(Dollars in thousands)

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The following tables show the age analysis of past due financing receivables as of the dates indicated:

September 30, 2022

March 31, 2023

30-59 days 60-89 days 90 days or more Total Past Due Total

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(1) Other consumer portfolio is inclusive of deposit account overdrafts recorded as loan balances.

Troubled Debt Restructurings

In the course of resolving nonperforming loans, the Bank may choose to restructure the contractual terms of certain loans.

The Bank attempts to work out an alternative payment schedule with the borrower in order to avoid foreclosure actions.

Exclusive of loans modified under provisions of the CARES Act, any loans that are modified are reviewed by the Bank to identify if a TDR has occurred, which is when, for economic or legal reasons related to a borrower’s financial difficulties, the Bank grants a concession to the borrower that it would not otherwise consider.

Terms may be modified to fit the ability of the borrower to repay in line with its current financial status and the restructuring of the loan may include the transfer of assets from the borrower to satisfy the debt, a modification of loan terms, or a combination of the two.

The following table shows the Company’s total TDRs and other pertinent information as of the dates indicated:

September 30, 2022 December 31, 2021

(Dollars in thousands)

TDRs on accrual status $ 11,549 $ 14,635

TDRs on nonaccrual 1,538 1,993

Total TDRs $ 13,087 $ 16,628

Additional commitments to lend to a borrower who has been a party to a TDR $ 137 $ 190

The Company’s policy is to have any restructured loan which is on nonaccrual status prior to being modified remain on nonaccrual status for six months subsequent to being modified before management considers its return to accrual status.

If the restructured loan is on accrual status prior to being modified, it is reviewed to determine if the modified loan should remain on accrual status.

Additionally, loans classified as TDRs are adjusted to reflect the changes in value of the recorded investment in the loan, if any, resulting from the granting of a concession.

For all residential loan modifications, the borrower must perform during a 90 day trial period before the modification is finalized.

The following table shows the TDRs which occurred during the periods indicated and the change in the recorded investment subsequent to the modifications occurring:

Three Months Ended Nine Months Ended

September 30, 2022 September 30, 2022

Contracts Pre-Modification

Investment Post-Modification

Investment Number of

Contracts Pre-Modification

Investment Post-Modification

(Dollars in thousands) (Dollars in thousands)

Troubled debt restructurings

Commercial and industrial 1 $ 68 $ 67 1 68 67

(2) The amount of net deferred costs on originated loans included in the ending balance was $ 5.5 million and $ 5.0 million at March 31, 2023 and December 31, 2022, respectively.

Loan Modifications

In the course of resolving nonperforming loans, the Company may choose to restructure the contractual terms of certain loans.

The Company attempts to work out an alternative payment schedule with the borrower in order to avoid foreclosure actions.

Terms may be modified to fit the ability of the borrower to repay in line with its current financial status and the restructuring of the loan may include principal forgiveness, interest rate reductions, term extensions, other-than-insignificant payment delays, and/or any combinations thereof.

Any loans that are modified are reviewed by the Company to determine whether the modification is the direct result of a borrower experiencing financial difficulty, as the Company adopted the accounting and disclosure requirements for loan modifications made to borrowers experiencing financial difficulty and ceased to recognize TDRs effective January 1, 2023.

Loan modifications made to borrowers experiencing financial difficulty are evaluated on a collective basis with loans sharing similar risk characteristics in accordance with the current expected credit loss ("CECL") methodology.

Under previously applicable accounting guidance, the Company determined the amount of allowance for credit losses on TDRs using a discounted cash flow analysis or a fair value of collateral approach if the loan was determined to be individually evaluated.

This change in methodology did not have a material impact on the Company's allowance for credit loss estimate.

The following table presents the amortized cost basis at March 31, 2023 of loans modified to borrowers experiencing financial difficulty during the three month period then ended, disaggregated by class of financing receivable and type of modification granted:

Term Extension

Amortized Cost Basis % of Total Class of Financing Receivable

Loan Category (Dollars in thousands)

Commercial real estate $ 2,540 0.03 %

Small business 105 0.05 %

Total $ 2,645

Three Months Ended Nine Months Ended

September 30, 2021 September 30, 2021

Contracts Pre-Modification

Investment Post-Modification

Investment Number of

Contracts Pre-Modification

Investment Post-Modification

(Dollars in thousands)

Troubled debt restructurings

Other-Than-Insignificant Payment Delay

Amortized Cost Basis % of Total Class of Financing Receivable

Loan Category (Dollars in thousands)

Commercial and industrial $ 2,805 0.17 %

Commercial real estate 7,013 0.09 %

Small business — — — 2 189 189

Total $ 9,818

(1) The pre-modification and post-modification balances represent the legal principal balance of the loan.

Activity presented in the table above includes $ 14.3 million of modifications on existing TDRs occurring during the nine months ended September 30, 2021.

The following table shows the Company’s post-modification balance of TDRs listed by type of modification for the periods indicated:

Three Months Ended Nine Months Ended

September 30 September 30

2022 2021 2022 2021

Combination - Interest Rate Reduction and Term Extension

Amortized Cost Basis % of Total Class of Financing Receivable

Loan Category (Dollars in thousands)

Small business $ 44 0.02 %

The following table describes the financial effect of the modifications made to borrowers experiencing financial difficulty for the period ending March 31, 2023:

Term Extension

Loan Category Financial Effect

Commercial real estate Added a weighted-average contractual term of 2 months to the life of the loan, which reduced monthly payment amounts for the borrowers.

Small business Added a weighted-average contractual term of 4.3 years to the life of loans, which reduced monthly payment amounts for the borrowers.

Interest Rate Reduction

Loan Category Financial Effect

Small business Reduced weighted-average contractual interest rate from 10.00 % to 6.50 %

The following table shows the Company’s total TDRs and other pertinent information as of the date indicated:

December 31, 2022

(Dollars in thousands)

Combination rate and maturity — — — 14,148

Extended maturity 67 — 67 4,153

Total 67 — $ 67 $ 18,301

TDRs on accrual status $ 11,278

TDRs on nonaccrual 11,520

Total TDRs $ 22,798

There were no new TDRs during the three months ended March 31, 2022.

At March 31, 2023, the Company did not have any additional commitments to lend to borrowers experiencing financial difficulty who were party to a loan modification.

At December 31, 2022, the Company had additional commitments to lend to borrowers who had been a party to a TDR of $ 64,000 .

The Company closely monitors the performance of loans modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts.

The Company considers a loan to have defaulted when it reaches 90 days past due.

During the nine months ended September 30, 2022 and September 30, 2021, there were no loans modified during the prior twelve months that subsequently defaulted during the respective periods.

The Company determines the amount of allowance on TDRs in accordance with CECL methodology using a discounted cash flow approach, or a fair value of collateral approach if the loan is determined to be individually evaluated.

During the three months ended March 31, 2023 there were no loans modified to borrowers experiencing financial difficulty that subsequently defaulted, and during the three months ended March 31, 2022, there were no TDRs that were modified during the prior twelve months that subsequently defaulted.

Accordingly, all loans modified to borrowers experiencing financial difficulty during the period remained current and were performing in accordance with the modified terms as of March 31, 2023.

NOTE 5 - BORROWINGS

During the three months ended March 31, 2023, the Company entered into advances with the Federal Home Loan Bank ("FHLB") of $ 879.0 million, due primarily to deposit balance reductions, share repurchase activity, and a proactive strategy to bolster on-balance sheet liquidity during the quarter.

These borrowings were comprised of comprised of $ 379.0 million in overnight FHLB borrowings carrying a rate of 4.95 % at March 31, 2023, as well as $ 500.0 million in one-month term FHLB advances carrying a weighted average interest rate of 5.03 % at March 31, 2023.

In conjunction with the one-month term FHLB advances, the Company entered into hedges to convert the cost of these borrowings to a total weighted average cost of 4.47 % at March 31, 2023.

NOTE 6 - STOCK BASED COMPENSATION

During the nine months ended September 30, 2022, the Company had the following activity related to stock based compensation:

During the three months ended March 31, 2023, the Company had the following activity related to stock based compensation:

Time Vested Restricted Stock Awards

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2/16/2023 77,525 2005 Employee Stock Plan $ 80.65 Ratably over 3 years from grant date

5/24/2022 8,099 2018 Non-Employee Director Stock Plan $ 80.39 Shares vested immediately

9/15/2022 646 2005 Employee Stock Plan $ 77.44 Ratably over 5 years from grant date

2/16/2023 12,309 2005 Employee Stock Plan $ 80.65 Ratably over 5 years, on each anniversary of February 6, 2023 start date

Performance-Based Restricted Stock Awards

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These performance-based restricted stock awards were issued from the 2005 Employee Stock Plan and were determined to have a grant date fair value per share of $ 80.65 .

The number of shares to be vested are contingent upon the Company's attainment of certain performance criteria to be measured at the end of a three year performance period, ending December 31, 2024.

The number of shares to be vested is contingent upon the Company's attainment of certain performance criteria to be measured at the end of a three year performance period ending December 31, 2025 .

The awards will vest upon the earlier of the date on which it is determined if the performance goal is achieved subsequent to the performance period or March 31, 2026.

On March 10, 2022, the performance-based restricted stock awards that were awarded on February 21, 2019 vested at 50 % of the maximum target shares awarded, or 7,450 shares.

On March 13, 2023, the performance-based restricted stock awards that were awarded on February 27, 2020 vested at 80 % of the maximum target shares awarded, or 12,880 shares, net of forfeitures.

NOTE 7 - DERIVATIVE AND HEDGING ACTIVITIES

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The amounts relating to the notional principal amount are not actually exchanged.

The following tables reflect the Company's derivative positions as of the dates indicated below for interest rate derivatives which qualify as cash flow hedges for accounting purposes:

September 30, 2022

The following tables reflect the Company's derivative positions at the dates indicated below for interest rate swaps which qualify as cash flow hedges for accounting purposes:

March 31, 2023

Weighted Average Rate

Notional Amount Average Maturity Current Rate Paid Receive Fixed

Notional Amount Average Maturity Current

Received Pay Fixed

Swap Rate Fair Value

(in thousands) (in years) (in thousands)

Interest rate swaps on borrowings $ 300,000 3.48 4.87 % 3.57 % $ ( 202 )

Current Rate Paid Receive Fixed

Interest rate swaps on loans $ 1,050,000 2.73 4.68 % 2.66 % $ ( 30,615 )

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Weighted Average Rate

Notional Amount Average Maturity Current

Received Pay Fixed

Notional Amount Average Maturity Current Rate Paid Receive Fixed

Swap Rate Fair Value

(in thousands) (in years) (in thousands)

Interest rate swaps on borrowings $ 25,000 0.62 0.16 % 1.88 % $ ( 294 )

Current Rate Paid Receive Fixed

Interest rate swaps on loans 1,050,000 2.97 4.24 % 2.66 % ( 42,005 )

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The maximum length of time over which the Company is currently hedging its exposure to the variability in future cash flows for forecasted transactions related to the payment of variable interest on existing financial instruments is 6.0 years.

For derivative instruments that are designated and qualify as cash flow hedging instruments, the effective portion of the gains or losses is reported as a component of other comprehensive income ("OCI"), and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings.

The Company expects approximately $ 22.5 million (pre-tax) to be reclassified as an increase to interest expense, from OCI related to the Company’s cash flow hedges in the twelve months following September 30, 2022.

This reclassification is due to anticipated payments that will be made and/or received on the swaps based upon the forward curve as of September 30, 2022.

The Company had no fair value hedges as of September 30, 2022 or December 31, 2021.

For derivative instruments that are designated and qualify as cash flow hedging instruments, the effective portion of the gains or losses is reported as a component of other comprehensive income and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings.

The Company expects approximately $ 3.1 million (pre-tax) to be reclassified as an increase to interest income and $ 25.0 million (pre-tax) to be reclassified as an increase to interest expense, from OCI related to the Company’s cash flow hedges in the twelve months following March 31, 2023.

This reclassification is due to anticipated payments that will be made and/or received on the swaps based upon the forward curve at March 31, 2023.

The Company had no fair value hedges as of March 31, 2023 or December 31, 2022.

Customer Related Positions

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Under a risk participation-in agreement, a derivative liability, the Company assumes, or participates in, a portion of the credit risk associated with the interest rate swap position with the commercial borrower for a fee received from the other bank.

The following table reflects the Company’s customer related derivative positions as of the dates indicated below for those derivatives not designated as hedging:

The following table reflects the Company’s customer related derivative positions at the dates indicated below for those derivatives not designated as hedging:

Notional Amount Maturing

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(1) Less than 1 year Less than 2 years Less than 3 years Less than 4 years Thereafter Total Fair Value

September 30, 2022

March 31, 2023

(Dollars in thousands)

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The change in fair value of loans held for sale is recorded in current period earnings as a component of mortgage banking income in accordance with the Company's fair value election.

The fair value of loans held for sale decreased by $ 194,000 and $ 75,000 for the three months ended September 30, 2022 and 2021, respectively.

The fair value of loans held for sale decreased by $ 620,000 and $ 1.5 million for the nine months ended September 30, 2022 and 2021, respectively.

The change in fair value associated with loans held for sale was a decrease of $ 17,000 and $ 548,000 for the three months ended March 31, 2023 and 2022, respectively.

These amounts were offset in earnings by the change in the fair value of mortgage derivatives.

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The Company expects that these best efforts forward loan sale commitments will experience a net neutral shift in fair value with related derivative loan commitments.

The aggregate amount of net realized gains on sales of such loans included within mortgage banking income was $ 229,000 and $ 4.9 million for the three months ended September 30, 2022 and 2021, respectively, and $ 550,000 and $ 17.2 million for the nine months ended September 30, 2022 and 2021, respectively.

The aggregate amount of net realized gains on sales of such loans included within mortgage banking income was $ 174,000 and $ 599,000 for the three months ended March 31, 2023 and 2022, respectively.

Balance Sheet Offsetting

9 unchanged sentences

2023 December 31

2021 September 30

2022 March 31

2023 December 31

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Forward sale loan commitments — 30 5 —

Forward sale hedge commitments 73 — — 57

Total derivatives not designated as hedges 104,477 127,958 104,037 127,667

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(2) All liability derivatives are reflected in other liabilities on the balance sheet.

(3) Approximately $ 660,000 of accrued interest receivable is included in the fair value of the loan level derivative assets at September 30, 2022, in comparison to accrued interest receivable of approximately $ 1.2 million and $ 1.5 million in included in the fair value of interest rate and loan level derivative assets, respectively, at December 31, 2021.

(4) Approximately $ 36,000 and $ 660,000 of accrued interest payable is included in the fair value of interest rate and loan level derivative liabilities, respectively, at September 30, 2022.

Accrued interest payable of approximately $ 5,000 and $ 1.5 million is included in the fair value of the interest rate and loan level derivative liabilities, respectively, at December 31, 2021.

(3) As of March 31, 2023, approximately $ 30,000 of accrued interest payable is included in the fair value of interest rate derivative assets and approximately $ 2.5 million of accrued interest receivable is included in the fair value of loan level derivative assets.

Accrued interest receivable of approximately $ 2.2 million is included in the fair value of loan level derivative assets at December 31, 2022.

(4) Approximately $ 1.6 million and $ 2.5 million of accrued interest payable is included in the fair value of interest rate and loan level derivative liabilities, respectively, at March 31, 2023, in comparison to accrued interest payable of approximately $ 1.3 million and $ 2.2 million, respectively, at December 31, 2022.

(5) Netting adjustments represent the amounts recorded to convert derivative assets and liabilities cleared through CME from a gross basis to a net basis, inclusive of the variation margin payments, in accordance with applicable accounting guidance.

As displayed in the table above, derivatives that cleared through the CME were either in a net asset position or a net liability position at September 30, 2022.

(6) Reflects offsetting derivative positions with the same counterparty that are not netted on the balance sheet.

The table below presents the effect of the Company’s derivative financial instruments included in OCI and current earnings for the periods indicated:

Three Months Ended Nine Months Ended

September 30 September 30

2022 2021 2022 2021

Three Months Ended

(Dollars in thousands)

Derivatives designated as hedges

Loss in OCI on derivatives (effective portion), net of tax $ ( 27,144 ) $ ( 3,383 ) $ ( 52,743 ) $ ( 11,559 )

Gain reclassified from OCI into interest income or interest expense (effective portion) $ 407 $ 4,791 $ 8,427 $ 13,869

Gain (loss) in OCI on derivatives (effective portion), net of tax $ 10,163 $ ( 17,950 )

(Loss) gain reclassified from OCI into interest income or interest expense (effective portion) $ ( 6,239 ) $ 4,505

Derivatives not designated as hedges

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If the Company fails to meet these conditions, the counterparties could request the Company make immediate payment or demand that the Company provide immediate and ongoing full collateralization on derivative positions in net liability positions.

All derivative instruments with credit-risk contingent features were in a net asset position at September 30, 2022.

At December 31, 2021, the aggregate fair value of all derivative instruments with credit-risk related contingent features that were in a net liability position was $ 34.8 million.

Although none of the contingency provisions have applied as of September 30, 2022 and December 31, 2021, the Company posted collateral to offset the net liability exposure with institutional counterparties at December 31, 2021.

All derivative instruments with credit-risk contingent features were in a net asset position at March 31, 2023 and December 31, 2022.

By using derivatives, the Company is exposed to credit risk to the extent that counterparties to the derivative contracts do not perform as required.

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Institutional counterparties must have an investment grade credit rating and be approved by the Company's Board of Directors.

As such, management believes the risk of incurring credit losses on derivative contracts with institutional counterparties is remote.

The Company's exposure relating to institutional counterparties was $ 127.6 million and $ 28.3 million at September 30, 2022 and December 31, 2021, respectively.

The Company’s exposure relating to customer counterparties was approximately $ 8,000 and $ 62.4 million at September 30, 2022 and December 31, 2021, respectively.

In addition, certain derivative contracts executed bilaterally with a dealer counterparty in the over-the-counter market are cleared through a clearinghouse, whereby the clearinghouse becomes the counterparty to the transaction.

As such, management believes the risk of incurring credit losses on derivative contracts with those counterparties is remote.

The Company's exposure relating to institutional counterparties was $ 95.3 million and $ 121.2 million at March 31, 2023 and December 31, 2022, respectively.

The Company’s exposure relating to customer counterparties was approximately $ 5.9 million and $ 2.2 million at March 31, 2023 and December 31, 2022, respectively.

Credit exposure may be reduced by the value of collateral pledged by the counterparty.

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If there has been a significant decrease in the volume and level of activity for the asset or liability, regardless of the valuation technique(s) used, the objective of a fair value measurement remains the same.

Fair value is the price that would be received if the asset were to be sold or that would be or paid if the liability were to be transferred in an orderly market transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions.

Fair value is the price that would be received if the asset were to be sold or that would be paid if the liability were to be transferred in an orderly market transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions.

When determining fair value, the Company considers pricing information and other inputs that are current as of the measurement date.

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The Fair Value Measurements and Disclosures Topic of the FASB ASC defines fair value and establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value.

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to

unobservable inputs (Level 3 measurements).

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).

The three levels of the fair value hierarchy under the Fair Value Measurements and Disclosures Topic of the FASB ASC are described below:

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Valuation Techniques

There have been no changes in the valuation techniques used during the nine months ended September 30, 2022.

There were no changes in the valuation techniques used during the three months ended March 31, 2023.

Trading and Equity Securities

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The valuation of these instruments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative.

This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilizes.

This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities.

The Company incorporates credit valuation adjustments to appropriately reflect nonperformance risk in the fair value measurements.

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Although the Company has determined that the majority of the inputs used to value its interest rate derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its interest rate derivatives and risk participation agreements may also utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by the Company and its counterparties.

However, as of September 30, 2022 and December 31, 2021, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives.

However, as of March 31, 2023 and December 31, 2022, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives.

As a result, the Company has determined that its derivative valuations in their entirety are properly classified as Level 2.

6 unchanged sentences

Other Real Estate Owned and Other Foreclosed Assets

Other Real Estate Owned ("OREO") and Other Foreclosed Assets are valued at the lower of cost or fair value of the property, less estimated costs to sell.

Other Real Estate Owned ("OREO") and Other Foreclosed Assets, when applicable, are valued at the lower of cost or fair value of the property, less estimated costs to sell.

The fair values are generally estimated based upon recent appraisal values of the property less costs to sell the property.

13 unchanged sentences

(Level 2) Significant

September 30, 2022

March 31, 2023

(Dollars in thousands)

8 unchanged sentences

State, county, and municipal securities 195 — 195 —

Single issuer trust preferred securities issued by banks and insurers 489 — 489 —

Pooled trust preferred securities issued by banks and insurers 1,042 — 1,042 —

22 unchanged sentences

State, county, and municipal securities 191 — 191 —

Single issuer trust preferred securities issued by banks and insurers 491 — 491 —

Pooled trust preferred securities issued by banks and insurers 1,034 — 1,034 —

3 unchanged sentences

Derivative instruments 179,911 — 179,911 —

Total recurring fair value measurements $ 1,644,617 $ 26,893 $ 1,617,724 $ —

Total recurring fair value measurements, net $ 1,375,011 $ 25,007 $ 1,350,004 $ —

Nonrecurring fair value measurements

10 unchanged sentences

(Level 2) Significant

September 30, 2022

March 31, 2023

(Dollars in thousands)

37 unchanged sentences

Federal Home Loan Bank borrowings (f) 637 563 — 563 —

Long-term borrowings (f) 14,063 13,989 — 13,989 —

Junior subordinated debentures (g) 62,855 60,002 — 60,002 —

4 unchanged sentences

Additionally, this amount excludes individually assessed collateral dependent loans, which are deemed to be marked to fair value on a nonrecurring basis.

therefore, the carrying amount approximates fair value.

11 unchanged sentences

A portion of the Company's noninterest income is derived from contracts with customers, and as such, the revenue recognized depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

The Company considers the terms of the contract and all relevant facts and circumstances when applying this guidance.

The Company accounts for such revenues in accordance with ASC 606 - Revenue from Contracts with Customers considers the terms of the contract and all relevant facts and circumstances when applying this guidance.

To ensure its alignment with this core principle, the Company measures revenue and the timing of recognition by applying the following five steps:

6 unchanged sentences

The following table presents the revenue streams that the Company has disaggregated as of the periods indicated:

Three Months Ended Nine Months Ended

2022 September 30

2021 September 30

2022 September 30

Three Months Ended

2023 March 31

(Dollars in thousands)

42 unchanged sentences

The Company also offers additional services, such as estate settlement, financial planning, tax services and other special services quoted at the client's request.

The asset management and/or custody fees are based upon a percentage of the monthly valuation of the principal assets in the customer's account, whereas fees for additional or special services are fixed in nature and are charged as services are rendered.

Asset management and/or custody fees are based upon a percentage of the monthly valuation of the principal assets in the customer's account, whereas fees for additional or special services are fixed in nature and are charged as services are rendered.

As the fees are dependent on assets under management, which are susceptible to market factors outside of the Company's control, this variable consideration is constrained and therefore no revenue is estimated at contract initiation.

2 unchanged sentences

The following table provides the amount of investment management revenue earned but not received as of the dates indicated:

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

(Dollars in thousands)

1 unchanged sentence

Investment Management - Retail Investments and Insurance Revenue

The Company offers the sale of mutual fund shares, unit investment trust shares, general securities, fixed and variable annuities and life insurance products through registered representatives who are both employed by the Company and licensed and contracted with various broker general agents to offer these products to the Company’s customer base.

As such, the Company performs these services as an agent and earns a fixed commission on the sales of these products and services.

The Company offers the sale of mutual fund shares, unit investment trust shares, third party model portfolios, general securities, fixed and variable annuities and life insurance products through registered representatives who are both employed by the Company and licensed and contracted with various Broker General Agents to offer these products to the Company’s customer base.

As such, the Company performs these services as an agent and earns a fixed commission on the sales of these

products and services.

To a lesser degree, production bonus commissions can also be earned based upon the Company meeting certain volume thresholds.

23 unchanged sentences

Three Months Ended

September 30, 2022 Nine Months Ended

September 30, 2022

Amount Tax (Expense)

Benefit After Tax

Amount Pre-Tax

March 31, 2023

Amount Tax (Expense)

5 unchanged sentences

Change in fair value of cash flow hedges 7,899 ( 2,221 ) 5,678

net cash flow hedge gains reclassified into interest income or interest expense 407 ( 115 ) 292 8,427 ( 2,370 ) 6,057

net cash flow hedge losses reclassified into interest income or interest expense ( 6,239 ) 1,754 ( 4,485 )

Net change in fair value of cash flow hedges 14,138 ( 3,975 ) 10,163

Amortization of net actuarial losses 159 ( 45 ) 114 476 ( 134 ) 342

Amortization of net actuarial gains ( 137 ) 38 ( 99 )

Amortization of net prior service costs 10 ( 3 ) 7

Net change in other comprehensive income for defined benefit postretirement plans (1) ( 127 ) 35 ( 92 )

Total other comprehensive loss $ ( 93,056 ) $ 23,451 $ ( 69,605 ) $ ( 240,699 ) $ 59,447 $ ( 181,252 )

Total other comprehensive income $ 36,196 $ ( 9,057 ) $ 27,139

Three Months Ended

September 30, 2021 Nine Months Ended

September 30, 2021

Amount Tax (Expense)

Benefit After Tax

Amount Pre-Tax

March 31, 2022

Amount Tax (Expense)

7 unchanged sentences

Net change in fair value of cash flow hedges ( 24,985 ) 7,035 ( 17,950 )

Net unamortized gain related to defined benefit pension and other postretirement adjustments arising during the period — — — 653 ( 184 ) 469

Amortization of net actuarial losses 159 ( 45 ) 114

11 unchanged sentences

Ending balance:

September 30, 2022 $ ( 138,539 ) $ ( 38,606 ) $ ( 1,924 ) $ ( 179,069 )

March 31, 2023 $ ( 111,589 ) $ ( 26,467 ) $ 2,111 $ ( 135,945 )

Beginning balance:

2 unchanged sentences

Ending balance:

September 30, 2021 $ 1,377 $ 21,717 $ ( 4,527 ) $ 18,567

March 31, 2022 $ ( 72,223 ) $ ( 3,813 ) $ ( 2,166 ) $ ( 78,202 )

NOTE 11 - COMMITMENTS AND CONTINGENCIES

17 unchanged sentences

The following table summarizes the above financial instruments at the dates indicated:

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

(Dollars in thousands)

Commitments to extend credit $ 4,594,573 $ 4,566,041

Loan exposures sold with recourse 164,438 167,274

Standby letters of credit 22,850 24,941

Deferred standby letter of credit fees 190 168

Loan exposures sold with recourse 171,437 202,717

Lease Commitments

The Company leases office space, space for ATM locations, and certain branch locations under noncancellable operating leases.

The Company leases office and parking space, space for ATM locations, and certain branch locations under noncancellable operating leases.

Several of these leases contain renewal options to extend lease terms for a period of 1 to 20 years.

During the first quarter of 2022, the Company recognized approximately $ 4.4 million in costs associated with several terminated leased locations acquired from Meridian that were subsequently exited.

These costs are reflected within merger and acquisition expense in the Consolidated Statement of Income.

There has been no significant change in the future minimum lease payments payable by the Company since December 31, 2022.

1 unchanged sentence

Other Contingencies

At September 30, 2022, the Bank was involved in pending lawsuits that arose in the ordinary course of business.

At March 31, 2023, the Bank was involved in pending lawsuits that arose in the ordinary course of business.

Management has reviewed these pending lawsuits with legal counsel and has taken into consideration the view of counsel as to their outcome.

In the opinion of management, the final disposition of pending lawsuits is not expected to have a material adverse effect on the Company’s financial position or results of operations.

NOTE 11 - LOW INCOME HOUSING PROJECT INVESTMENTS

The Company has invested in low income housing projects that generate Low Income Housing Tax Credits which provide the Company with tax credits and operating loss tax benefits over a period of approximately 15 years.

None of the original investment is expected to be repaid.

The following table presents certain information related to the Company's investments in low income housing projects as of the dates indicated:

2022 December 31

(Dollars in thousands)

Original investment value $ 183,889 $ 179,481

Current recorded investment 129,875 135,497

Unfunded liability obligation 63,014 73,336

Tax credits and benefits 16,679 (1) 14,198

Amortization of investments 13,375 (1) 11,892

Net income tax benefit 3,304 (1) 2,306

(1) Amounts shown represent the estimated full year impact for the year ended December 31 , 2022.

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