What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-05-08 compared with 2023-11-02 · 201 added, 333 removed, 1096 unchanged (33% of the section changed)

41 unchanged sentences

62,858 62,858

Subordinated debentures (less unamortized debt issuance costs of $ 43 and $ 115 )

49,957 49,885

Subordinated debentures (less unamortized debt issuance costs of $ 20 )

Total borrowings 1,025,393 1,218,379

8 unchanged sentences

issued and outstanding:

44,141,973 shares at September 30, 2023 and 45,641,238 shares at December 31, 2022 (includes 162,464 and 135,712 shares of unvested participating restricted stock awards, respectively)

42,452,457 shares at March 31, 2024 and 42,873,187 shares at December 31, 2023 (includes 215,412 and 162,812 shares of unvested participating restricted stock awards, respectively)

Value of shares held in rabbi trust at cost:

81,943 shares at September 30, 2023 and 80,965 shares at December 31, 2022

82,042 shares at March 31, 2024 and 80,222 shares at December 31, 2023

( 3,403 ) ( 3,298 )

9 unchanged sentences

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

Three Months Ended Nine Months Ended

September 30 September 30

2023 2022 2023 2022

Three Months Ended

Interest income

15 unchanged sentences

Interchange and ATM fees 4,452 4,184

Investment management 10,246 8,436 30,373 26,438

Investment management and advisory 9,941 9,779

Mortgage banking income 796 308

9 unchanged sentences

Consulting expense 1,428 2,077

Software maintenance 3,324 2,497 9,407 7,706

Software and subscriptions 4,094 2,949

Debit card expense 2,478 2,171

1 unchanged sentence

FDIC assessment 2,982 2,610

Merger and acquisition expense — — — 7,100

Other noninterest expenses 14,218 14,715

13 unchanged sentences

(Unaudited—Dollars in thousands)

Three Months Ended Nine Months Ended

September 30 September 30

2023 2022 2023 2022

Three Months Ended

Net income $ 47,770 $ 61,247

8 unchanged sentences

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Three Months Ended September 30, 2023 and 2022

(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 Loss Total

Balance June 30, 2023 44,130,901 $ 440 $ ( 3,289 ) $ 3,289 $ 1,997,674 $ 1,009,735 $ ( 152,935 ) $ 2,854,914

Net income — — — — — 60,808 — 60,808

Other comprehensive loss — — — — — — ( 7,811 ) ( 7,811 )

Common dividend declared ($ 0.55 per share)

— — — — — ( 24,277 ) — ( 24,277 )

Proceeds from exercise of stock options, net of cash paid 1,572 — — — 1 — — 1

Stock based compensation — — — — 1,128 — — 1,128

Restricted stock awards issued, net of awards surrendered ( 4,838 ) — — — ( 26 ) — — ( 26 )

Shares issued under direct stock purchase plan 14,338 — — — 671 — — 671

Deferred compensation and other retirement benefit obligations — — ( 46 ) 46 — — — —

Balance September 30, 2023 44,141,973 $ 440 $ ( 3,335 ) $ 3,335 $ 1,999,448 $ 1,046,266 $ ( 160,746 ) $ 2,885,408

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

INDEPENDENT BANK CORP.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Nine Months Ended September 30, 2023 and 2022

Three Months Ended March 31, 2024 and 2023

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

4 unchanged sentences

Net income — — — — — 47,770 — 47,770

Other comprehensive income — — — — — — 2,338 2,338

Other comprehensive loss — — — — — — ( 4,511 ) ( 4,511 )

Common dividend declared ($ 0.57 per share)

— — — — — ( 24,197 ) — ( 24,197 )

Proceeds from exercise of stock options, net of cash paid 3,238 — — — 81 — — 81

Stock based compensation — — — — 1,300 — — 1,300

3 unchanged sentences

Deferred compensation and other retirement benefit obligations — — ( 105 ) 105 — — — —

Balance September 30, 2023 44,141,973 $ 440 $ ( 3,335 ) $ 3,335 $ 1,999,448 $ 1,046,266 $ ( 160,746 ) $ 2,885,408

Balance March 31, 2024 42,452,457 $ 422 $ ( 3,403 ) $ 3,403 $ 1,902,063 $ 1,101,061 $ ( 119,338 ) $ 2,884,208

Balance December 31, 2022 45,641,238 $ 455 $ ( 3,227 ) $ 3,227 $ 2,114,888 $ 934,442 $ ( 163,084 ) $ 2,886,701

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

(1) Inclusive of $ 1.2 million impact of excise tax attributable to shares repurchased under the share repurchase program during the nine months ended September 30, 2023 .

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

(1) Inclusive of $ 278,000 and $ 1.2 million impact of excise tax attributable to shares repurchased under the share repurchase program during the three months ended March 31, 2024 and March 31, 2023, respectively .

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

6 unchanged sentences

Deferred income tax expense 2,584 644

Net (gain) loss on equity securities ( 272 ) 2,819

Net gain on equity securities ( 609 ) ( 368 )

Net loss on bank premises and equipment 12 79

4 unchanged sentences

Operating lease payments ( 3,447 ) ( 3,432 )

Operating lease termination payments ( 389 ) —

Change in fair value on loans held for sale ( 70 ) 17

6 unchanged sentences

Net cash provided by operating activities 51,145 51,466

Cash flows used in investing activities

Proceeds from sales of equity securities — 30

Cash flows provided by (used in) investing activities

Purchases of equity securities ( 165 ) ( 136 )

Proceeds from maturities and principal repayments of securities available for sale 57,399 15,694

Purchases of securities available for sale — ( 123,289 )

Proceeds from maturities and principal repayments of securities held to maturity 24,861 27,877

Purchases of securities held to maturity — ( 763,987 )

Net (purchases) redemptions of Federal Home Loan Bank stock ( 38,660 ) 6,189

Net purchases of Federal Home Loan Bank stock ( 2,747 ) ( 35,085 )

Investments in low income housing projects ( 6,519 ) ( 13,669 )

Purchases of life insurance policies ( 91 ) ( 91 )

Proceeds from life insurance policies 3,934 2,273

Net increase in loans ( 52,381 ) ( 18,981 )

1 unchanged sentence

Proceeds from the sale of bank premises and equipment 22 52

Net cash used in investing activities ( 230,922 ) ( 784,481 )

Cash flows used in financing activities

Net increase (decrease) in time deposits 816,896 ( 351,458 )

Net cash provided by (used in) investing activities 15,915 ( 28,558 )

Cash flows (used in) provided by financing activities

Net increase in time deposits 251,465 259,590

Net decrease in other deposits ( 73,832 ) ( 866,445 )

Net advances from (repayments of) short-term Federal Home Loan Bank borrowings 887,000 ( 25,000 )

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

Net (repayments of) advances from Federal Home Loan Bank borrowings ( 143,000 ) 879,000

Repayments of subordinated debentures ( 50,000 ) —

Net proceeds from exercise of stock options — 80

3 unchanged sentences

Common dividends paid ( 23,580 ) ( 25,103 )

Net cash used in financing activities ( 125,372 ) ( 825,766 )

Net decrease in cash and cash equivalents ( 132,805 ) ( 1,304,388 )

Net cash (used in) provided by financing activities ( 70,074 ) 126,703

Net (decrease) increase in cash and cash equivalents ( 3,014 ) 149,611

Cash and cash equivalents at beginning of year 224,330 352,933

14 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, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023 or any other interim period.

Results for the three months ended March 31, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024 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, 2023, filed with the Securities and Exchange Commission (the "2023 Form 10-K").

1 unchanged sentence

Trading Securities

The Company had trading securities of $ 4.5 million and $ 3.9 million as of September 30, 2023 and December 31, 2022, respectively.

The Company had trading securities of $ 4.8 million and $ 5.0 million as of March 31, 2024 and December 31, 2023, 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 $ 21.5 million and $ 21.1 million as of September 30, 2023 and December 31, 2022, respectively.

The Company had equity securities of $ 22.9 million and $ 22.5 million as of March 31, 2024 and December 31, 2023, 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

2023 2022 2023 2022

Three Months Ended

Dollars in thousands

Net (losses) gains recognized during the period on equity securities $ ( 363 ) $ ( 742 ) 272 ( 2,819 )

net (losses) gains recognized during the period on equity securities sold during the period ( 34 ) — ( 33 ) 8

Unrealized (losses) gains recognized during the reporting period on equity securities still held at the reporting date $ ( 329 ) $ ( 742 ) $ 305 $ ( 2,827 )

Net gains recognized during the period on equity securities $ 609 $ 368

net gains recognized during the period on equity securities sold during the period 435 1

Unrealized gains recognized during the reporting period on equity securities still held at the reporting date $ 174 $ 367

Available for Sale Securities

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, 2023 December 31, 2022

March 31, 2024 December 31, 2023

Gains Gross Unrealized

12 unchanged sentences

Total available for sale securities $ 1,402,389 $ 25 $ ( 129,583 ) $ — $ 1,272,831 $ 1,459,862 $ 30 $ ( 125,636 ) $ — $ 1,334,256

Excluded from the table above is accrued interest on available for sale securities of $ 3.9 million and $ 3.6 million at September 30, 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 and nine months ended September 30, 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 September 30, 2023 and December 31, 2022.

Excluded from the table above is accrued interest on available for sale securities of $ 3.8 million and $ 3.4 million at March 31, 2024 and December 31, 2023, 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, 2024 and 2023.

Furthermore, no securities held by the Company were delinquent on contractual payments nor were any securities placed on non-accrual status at March 31, 2024 and December 31, 2023.

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, 2023 and 2022, and therefore no gains or losses were realized during the periods presented.

The Company had no sales of securities available for sale during three months ended March 31, 2024 and 2023, 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 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, 2023

March 31, 2024

Less than 12 months 12 months or longer Total

11 unchanged sentences

Small business administration pooled securities 8 — — 44,397 ( 7,686 ) 44,397 ( 7,686 )

Total impaired available for sale securities 183 $ 5,896 $ ( 112 ) $ 1,347,368 $ ( 170,701 ) $ 1,353,264 $ ( 170,813 )

Total 172 $ 2,123 $ ( 23 ) $ 1,268,945 $ ( 129,560 ) $ 1,271,068 $ ( 129,583 )

December 31, 2023

12 unchanged sentences

Small business administration pooled securities 8 — — 46,572 ( 7,130 ) 46,572 ( 7,130 )

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

Total 163 $ 1,620 $ ( 18 ) $ 1,328,959 $ ( 125,618 ) $ 1,330,579 $ ( 125,636 )

The Company does not intend to sell these investments and has determined, based upon available evidence, that it is more likely than not that the Company will not be required to sell each security before the recovery of its amortized cost basis.

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, 2023 and 2022.

As a result, the Company did not recognize a provision for credit losses on these investments during the three months ended March 31, 2024 and 2023.

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, 2023:

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, 2024:

Government Agency Securities, U.S.

10 unchanged sentences

• Pooled Trust Preferred Securities:

This portfolio consists of one below investment grade security which is performing.

This portfolio consists of one security which is performing.

The unrealized loss on this security is attributable to the illiquid nature of the trust preferred market in the current economic and regulatory environment.

3 unchanged sentences

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 at the dates indicated:

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

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, 2023 and 2022.

Excluded from the table above is accrued interest on held to maturity securities of $ 4.6 million and $ 4.4 million as of September 30, 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 and nine months ended September 30, 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 September 30, 2023 and December 31, 2022.

Excluded from the table above is accrued interest on held to maturity securities of $ 4.5 million and $ 4.3 million at March 31, 2024 and December 31, 2023, 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, 2024 and 2023.

Furthermore, no securities held by the Company were delinquent on contractual payments nor were any securities placed on non-accrual status at March 31, 2024 and December 31, 2023.

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, 2023 and 2022, and therefore no gains or losses were realized for such periods.

The Company had no sales of held to maturity securities during the three months ended March 31, 2024 and 2023, and therefore no gains or losses were realized for such periods.

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

As of March 31, 2024, 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, 2023 is presented below:

A schedule of the contractual maturities of securities available for sale and securities held to maturity at March 31, 2024 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

22 unchanged sentences

Total $ 226,495 $ 220,678 $ 1,530,817 $ 1,395,521 $ 287,108 $ 252,069 $ 903,236 $ 788,184 $ 2,947,656 $ 2,656,452

Included in the table above are $ 24.7 million of callable securities at September 30, 2023.

The carrying value of securities pledged to secure public funds, trust deposits, and for other purposes, as required or permitted by law, was $ 1.8 billion and $ 959.8 million at September 30, 2023 and December 31, 2022, respectively.

At September 30, 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.

Included in the table above are $ 25.5 million of callable securities at March 31, 2024.

The carrying value of securities pledged to secure public funds, trust deposits, and for other purposes, as required or permitted by law, was $ 1.6 billion and $ 1.7 billion at March 31, 2024 and December 31, 2023, respectively.

At March 31, 2024 and December 31, 2023, the Company had no investments in obligations of individual states, counties, or municipalities which exceeded 10% of consolidated stockholders’ equity.

NOTE 3 - 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, 2023

Three Months Ended March 31, 2024

(Dollars in thousands)

11 unchanged sentences

Ending balance (1) $ 20,489 $ 77,929 $ 7,573 $ 4,028 $ 24,180 $ 12,042 $ 707 $ 146,948

Three Months Ended September 30, 2022

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

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

Recoveries 2 330 — 88 — 65 251 736

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

Nine Months Ended September 30, 2023

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, 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 $ 14,402 $ 83,486 $ 12,316 $ 3,508 $ 14,484 $ 17,986 $ 740 $ 146,922

Charge-offs — ( 62 ) — ( 59 ) — ( 122 ) ( 1,749 ) ( 1,992 )

Recoveries 44 333 — 147 — 105 754 1,383

Provision for (release of) credit losses 5,723 ( 3,721 ) ( 897 ) ( 972 ) 6,118 ( 6,318 ) 1,067 1,000

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

(1) Balances of accrued interest receivable excluded from amortized cost and the calculation of allowance for credit losses amounted to $ 58.1 million and $ 42.7 million as of September 30, 2023 and September 30, 2022, respectively.

The balance of allowance for credit losses decreased to $ 140.6 million as of September 30, 2023 compared to $ 152.4 million at December 31, 2022, driven primarily by outsized charge-offs on two large commercial loans, partially offset by net loan growth during the nine months ended September 30, 2023.

(1) Balances of accrued interest receivable excluded from amortized cost and the calculation of allowance for credit losses amounted to $ 59.3 million and $ 52.7 million as of March 31, 2024 and March 31, 2023, respectively.

The balance of allowance for credit losses increased to $ 146.9 million as of March 31, 2024 compared to $ 142.2 million at December 31, 2023, driven primarily by specific reserve allocations as well as net loan growth during the three months ended March 31, 2024.

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 :

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

Consists of revolving, nonrevolving, 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.

1 unchanged sentence

• Commercial Real Estate :

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.

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

Loans are typically written with amortizing payment structures.

4 unchanged sentences

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.

Loans may be written with nonamortizing or hybrid payment structures depending upon the type of project.

Loans may be written with non-amortizing or hybrid payment structures depending upon the type of project.

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

5 unchanged sentences

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.

For the commercial portfolio the Company typically obtains personal guarantees for payment from individuals holding material ownership interests in the borrowing entities.

Consumer Portfolio

4 unchanged sentences

• Home Equity :

Home equity loans and credit lines are made to qualified individuals and are primarily secured by senior or junior mortgage liens on owner-occupied one-to-four family homes, condominiums or vacation homes.

Home equity loans and credit lines are made to qualified individuals and are primarily secured by senior or junior mortgage liens on one-to-four family homes, condominiums or vacation homes.

Each home equity loan has a fixed rate and is billed in equal payments comprised of principal and interest.

10 unchanged sentences

Based on this information, loans demonstrating certain payment issues or other weaknesses may be categorized as adversely risk-rated, delinquent, nonperforming and/or put on nonaccrual status.

Additionally, in the course of resolving such loans, the Company may choose to restructure the contractual terms of certain loans to match the borrower’s ability to repay the loan based on their current financial condition.

Additionally, in the course of resolving such loans, the Company may choose to modify the contractual terms of certain loans to match the borrower’s ability to repay the loan based on their current financial condition.

The Company reviews numerous credit quality indicators when assessing the risk in its loan portfolio.

4 unchanged sentences

Collateral coverage is protective.

• Potential Weakness:

• Special Mention:

Borrowers exhibit potential credit weaknesses or downward trends deserving management’s close attention.

2 unchanged sentences

no loss of principal or interest is envisioned.

• Definite Weakness Loss Unlikely:

• Substandard:

Borrowers exhibit well defined weaknesses that jeopardize the orderly liquidation of debt.

3 unchanged sentences

Collateral coverage may be inadequate to cover the principal obligation.

• Partial Loss Probable:

Borrowers exhibit well defined weaknesses that jeopardize the orderly liquidation of debt with the added provision that the weaknesses make collection of the debt in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Serious problems exist to the point where partial loss of principal is likely.

• Definite Loss:

Borrowers deemed incapable of repayment.

11 unchanged sentences

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, 2023

March 31, 2024

2024 2023 2022 2021 2020 Prior Revolving Loans Revolving converted to Term Total (1)

2 unchanged sentences

Pass $ 159,082 $ 223,301 $ 148,288 $ 73,012 $ 60,865 $ 146,495 $ 685,258 $ — $ 1,496,301

Potential weakness 6,511 2,417 614 10,278 90 132 46,706 — 66,748

Definite weakness - loss unlikely 1,933 4,707 1,074 132 1,165 806 16,833 — 26,650

Partial loss probable — — — — — — — — —

Definite loss — — — — — — — — —

Special mention 3,160 3,254 1,843 322 9,206 4,024 31,525 — 53,334

Substandard 1,809 — 57 198 — 43 28,299 — 30,406

Doubtful — — — — — — — — —

Loss — — — — — — — — —

Total commercial and industrial $ 164,051 $ 226,555 $ 150,188 $ 73,532 $ 70,071 $ 150,562 $ 745,082 $ — $ 1,580,041

2 unchanged sentences

Pass $ 193,152 $ 1,127,417 $ 1,201,044 $ 1,304,867 $ 1,212,201 $ 2,562,542 $ 93,048 $ 248 $ 7,694,519

Potential weakness 62,572 37,695 57,987 14,662 2,945 118,830 — — 294,691

Definite weakness - loss unlikely 30,667 27,504 23,568 4,321 19,211 21,325 — — 126,596

Partial loss probable — — — — — — — — —

Definite loss — — — — — — — — —

Special mention — 61,943 38,590 53,837 44,806 124,614 297 — 324,087

Substandard 6,350 27,358 18,046 22,758 3,894 3,973 — — 82,379

Doubtful — — — — — 7,851 — — 7,851

Loss — — — — — — — — —

Total commercial real estate $ 199,502 $ 1,216,718 $ 1,257,680 $ 1,381,462 $ 1,260,901 $ 2,698,980 $ 93,345 $ 248 $ 8,108,836

2 unchanged sentences

Pass $ 97,558 $ 164,784 $ 336,768 $ 100,371 $ 7,971 $ 25,184 $ 19,398 $ 676 $ 752,710

Potential weakness 13,484 — 4,823 — — — — — 18,307

Definite weakness - loss unlikely 9,440 26,199 16,330 — — — — — 51,969

Partial loss probable — — — — — — — — —

Definite loss — — — — — — — — —

Special mention 3,326 18,724 — 5,618 — — — — 27,668

Substandard 10,585 — 18,601 19,336 — — — — 48,522

Doubtful — — — — — — — — —

Loss — — — — — — — — —

Total commercial construction $ 111,469 $ 183,508 $ 355,369 $ 125,325 $ 7,971 $ 25,184 $ 19,398 $ 676 $ 828,900

2 unchanged sentences

Pass $ 14,707 $ 49,885 $ 48,880 $ 37,682 $ 23,538 $ 33,246 $ 49,943 $ — $ 257,881

Potential weakness — — — 155 — 186 295 — 636

Definite weakness - loss unlikely 429 324 126 295 — 615 1,035 — 2,824

Partial loss probable — — — — — — — — —

Definite loss — — — — — — — — —

Special mention — 59 5 75 152 182 481 — 954

Substandard 180 520 224 87 461 658 725 — 2,855

Doubtful — — — — — — — — —

Loss — — — — — — — — —

Total small business $ 14,887 $ 50,464 $ 49,109 $ 37,844 $ 24,151 $ 34,086 $ 51,149 $ — $ 261,690

16 unchanged sentences

Total current-period gross write-offs $ 763 $ — $ 28 $ — $ — $ — $ 90 $ — $ 881

September 30, 2022

March 31, 2023

2022 2021 2020 2019 2018 Prior Revolving Loans Revolving converted to Term Total (1)

2 unchanged sentences

Pass $ 153,554 $ 262,933 $ 122,770 $ 94,702 $ 54,925 $ 85,391 $ 811,795 $ — $ 1,586,070

Potential weakness 1,540 973 1,038 1,844 3,955 715 6,557 — 16,622

Definite weakness - loss unlikely 2,485 935 — 39 — 111 27,019 — 30,589

Partial loss probable — — — — — — — — —

Definite loss — — — — — — — — —

Special mention — 4,712 705 868 1,608 1,342 24,114 — 33,349

Substandard — 2,295 1,516 164 377 1 2,936 — 7,289

Doubtful — — — — — — 23,174 — 23,174

Loss — — — — — — — — —

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

Pass $ 204,462 $ 1,199,328 $ 1,459,526 $ 1,259,511 $ 720,208 $ 2,439,424 $ 59,810 $ — $ 7,342,269

Potential weakness 32,579 53,096 41,164 14,147 68,298 205,234 — — 414,518

Definite weakness - loss unlikely 26,684 2,224 4,722 2,585 17,928 21,836 — — 75,979

Partial loss probable — — — — — 175 — — 175

Definite loss — — — — — — — — —

Special mention 154 52,961 67,200 29,611 13,139 225,673 — — 388,738

Substandard 3,481 39,208 13,205 5,334 4,038 23,821 — — 89,087

Doubtful — — — — — — — — —

Loss — — — — — — — — —

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

Pass $ 90,362 $ 461,824 $ 266,758 $ 89,919 $ 62,033 $ 4,755 $ 21,237 $ — $ 996,888

Potential weakness 40,631 — 3,387 — — — — — 44,018

Definite weakness - loss unlikely 2,138 12,845 — — — — — — 14,983

Partial loss probable — — — — — — — — —

Definite loss — — — — — — — — —

Special mention 18,431 — 5,889 3,919 — — — — 28,239

Substandard 7,619 11,434 2,130 — — — — — 21,183

Doubtful — — — — — — — — —

Loss — — — — — — — — —

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

Pass $ 9,770 $ 54,258 $ 43,458 $ 29,810 $ 16,173 $ 26,536 $ 42,746 $ — $ 222,751

Potential weakness — 163 394 369 193 129 697 — 1,945

Definite weakness - loss unlikely 194 — 442 7 20 224 591 — 1,478

Partial loss probable — — — — — — — — —

Definite loss — — — — — — — — —

Special mention — — — 158 — 228 527 — 913

Substandard 105 126 113 304 3 686 865 — 2,202

Doubtful — — — — — — — — —

Loss — — — — — — — — —

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

2 unchanged sentences

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

1 unchanged sentence

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 (2)

2 unchanged sentences

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

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

(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 Coronavirus Aid, Relief and Economic Security Act (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 $ 5.1 million and $ 11.1 million as of September 30, 2023 and 2022, respectively.

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

11 unchanged sentences

LTV (re-valued)(2)(3) 43.9 % 43.3 %

(1) The average FICO scores at September 30, 2023 are based upon rescores from September 2023, as available for previously originated loans, or origination score data for loans booked in September 2023.

(1) The average FICO scores at March 31, 2024 are based upon rescores from March 2024 as available for previously originated loans, or origination score data for loans booked in March 2024.

The average FICO scores at December 31, 2023 were based upon rescores available from December 2023, as available for previously originated loans, or origination score data for loans booked in December 2023.

(2) The combined LTV ratios for September 30, 2023 are based upon updated automated valuations as of August 2023, when available, and/or the most current valuation data available.

(2) The combined LTV ratios for March 31, 2024 are based upon updated automated valuations as of February 2024, when available, and/or the most current valuation data available.

The combined LTV ratios for December 31, 2023 were based upon updated automated valuations as of November 2023, when available, and/or the most current valuation data available as of such date.

4 unchanged sentences

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

At September 30, 2023 and December 31, 2022, the Company's estimated reserve for unfunded commitments amounted to $ 1.5 million and $ 1.3 million, respectively.

At March 31, 2024 and December 31, 2023, the Company's estimated reserve for unfunded commitments amounted to $ 1.5 million and $ 1.3 million, respectively.

Asset Quality

5 unchanged sentences

Nonaccrual Balances

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

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

7 unchanged sentences

Total nonaccrual loans $ 49,089 $ 7,852 $ 56,941 $ 43,040 $ 11,343 $ 54,383

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

(1) Nonaccrual balances reported above without an allowance for credit losses are attributable to loans evaluated on an individual basis where it was determined that there was no risk of loss due to sufficient underlying collateral values.

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, 2023 and 2022, except for instances where nonaccrual loans were paid off in excess of the recorded book balance.

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 three months ended March 31, 2024 and 2023, respectively, except for instances where nonaccrual loans were paid off in excess of the recorded book balance.

Total accrued interest reversed against interest income amounted to $ 385,000 and $ 80,000 for the three months ended March 31, 2024 and 2023, respectively.

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

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

(Dollars in thousands)

2 unchanged sentences

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

September 30, 2023

March 31, 2024

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

40 unchanged sentences

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

(2) The amount of net deferred costs on originated loans included in the ending balance was $ 6.1 million and $ 5.0 million at September 30, 2023 and December 31, 2022, respectively.

(2) The amount of net deferred costs on originated loans included in the ending balance was $ 5.7 million and $ 6.4 million at March 31, 2024 and December 31, 2023, respectively.

Net unamortized discounts on acquired loans included in the ending balance was $ 8.5 million and $ 8.6 million at March 31, 2024 and December 31, 2023, 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 tables present the amortized cost basis of loans modified to borrowers experiencing financial difficulty during the periods presented, disaggregated by class of financing receivable and type of modification granted.

The amortized cost basis amounts presented in these tables are as of the modification date and, in certain instances, may include multiple modifications of the same loan during the periods presented.

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

The following tables present the period end amortized cost basis of loans modified to borrowers experiencing financial difficulty during the three months ended March 31, 2024 and 2023, respectively, disaggregated by class of financing receivable and type of modification granted:

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

Interest Rate Reduction

Amortized Cost Basis % of Total Class of Financing Receivable Amortized Cost Basis % of Total Class of Financing Receivable

Loan Type (Dollars in thousands)

Small business $ 51 0.02 % $ — — %

Total $ 51 $ —

Term Extension

15 unchanged sentences

Loan Category (Dollars in thousands)

Small business $ — — % $ 44 0.02 %

Total $ — $ 44

Combination - Term Extension and Other-Than-Insignificant Payment Delay

Amortized Cost Basis % of Total Class of Financing Receivable Amortized Cost Basis % of Total Class of Financing Receivable

Loan Category (Dollars in thousands)

Commercial and industrial $ 179 0.01 % $ — — %

Commercial real estate — — % 6,857 0.09 %

Total $ — $ 8,822

The following table describes the financial effect of the modifications made to borrowers experiencing financial difficulty for the periods indicated:

Three Months Ended September 30, 2023

Term Extension

Loan Category Financial Effect

Commercial and industrial Added a weighted-average contractual term of 2 months to the life of the loans

Commercial real estate Added a weighted-average contractual term of 2.9 years to the life of the loans

Nine Months Ended September 30, 2023

Small business — — % 44 0.02 %

Home equity 72 0.01 % — — %

Grand Total $ 32,206 $ 12,507

The following table describes the financial effect of modifications made to borrowers experiencing financial difficulty for the periods indicated:

Three Months Ended March 31, 2024

Term Extension

1 unchanged sentence

Commercial and industrial Added a weighted-average contractual term of 3 months to the life of the loans

Commercial real estate Added a weighted-average contractual term of 1.8 years to the life of the loans

Commercial real estate Added a weighted-average contractual term of 6 months to the life of the loans

Commercial construction Added a weighted-average contractual term of 5 months to the life of the loans

Interest Rate Reduction

Loan Category Financial Effect

Small business Reduced contractual rate on one loan from 11.00 % to 8.20 %

Combination - Interest Rate Reduction and Term Extension

Loan Category Financial Effect

Small business Reduced weighted-average contractual interest rate from 10.00 % to 6.50 % and added a weighted-average contractual term of 4.3 years to the life of the loan

Commercial and industrial Reduced contractual rate on one loan from 10.10 % to 7.20 % and added a weighted average contractual term of 1.5 years

Home equity Reduced contractual rate on one loan from 10.00 % to 6.80 % and added a weighted-average contractual term of 8.1 years

Three Months Ended 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 loans

Small business Added a weighted-average contractual term of 4.3 years to the life of the loans

Interest Rate Reduction

Loan Category Financial Effect

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

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

The following table depicts the amortized cost and payment status of loans that have been modified in the last 12 months as of September 30, 2023:

The following table depicts the amortized cost and payment status of loans that have been modified in the last 12 months as of March 31, 2024:

Payment Status (Amortized Cost Basis)

Current 30-89 Days Past Due 90+ Days Past Due Nonaccrual Status

Current 30-89 Days Past Due 90+ Days Past Due

(Dollars in thousands)

4 unchanged sentences

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

During the three and nine months ended September 30, 2023, there was one commercial real estate loan that had a payment default and was modified within the previous 12 months as a combination term extension and other-than-insignificant payment delay, which had an amortized cost

basis of $ 6.7 million at September 30, 2022.

During the nine months ended September 30, 2022 there were no TDRs modified during the previous 12 months that subsequently defaulted.

At September 30, 2023, the Company did not have any additional commitments to lend to borrowers experiencing financial difficulty who were party to a loan modification.

As previously noted, 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.

As such, t he following table and related disclosures show the Company’s total TDRs and other pertinent TDR information as of December 31, 2022 and for the prior applicable periods:

(Dollars in thousands)

TDRs on accrual status $ 11,278

TDRs on nonaccrual 11,520

Total TDRs $ 22,798

During the three and nine months ended September 30, 2022, one new TDR occurred within the commercial and industrial category and was comprised of an extended maturity modification, with a pre-modification outstanding recorded investment of $ 68,000 and a post-modification outstanding recorded investment of $ 67,000 .

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

At March 31, 2024 there was one $ 136,000 commercial real estate loan that defaulted during the three months then ended which was modified with a term extension to a borrower experiencing financial difficulty in the prior 12 months.

At March 31, 2024, the Company had $ 640,000 in additional commitments to lend to one borrower experiencing financial difficulty, pertaining to a construction loan that was modified during the three months then ended with a term extension.

Loan modifications 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.

NOTE 4 - BORROWINGS

Federal Home Loan Bank Borrowings

During the nine months ended September 30, 2023, the Company began utilizing FHLB advances for certain short-term and long-term borrowing needs, as deemed necessary, which were comprised of the following as of September 30, 2023 :

Average Effective Rate,

Total Contractual Net of

Outstanding Rate Hedges

(Dollars in thousands)

Overnight Borrowings $ 287,000 5.57 % n/a

1-Month Term 200,000 5.50 % n/a

1-Month Term 400,000 5.51 % 3.87 %

Amortizing 548 1.40 % n/a

Total $ 887,548

At September 30, 2023 and December 31, 2022, the Company had sufficient collateral at the FHLB to support its obligations and was in compliance with the FHLB's collateral pledging program.

The Company’s FHLB advances are collateralized by a blanket pledge agreement on the Bank’s FHLB stock, certain qualified investment securities, deposits at the FHLB, residential mortgages, and by certain commercial real estate loans held in the Bank’s portfolio.

The carrying value of loans pledged as collateral for these borrowings totaled $ 3.8 billion and $ 2.7 billion at September 30, 2023 and December 31, 2022, respectively, resulting in available borrowing capacity with the FHLB of $ 1.8 billion both September 30, 2023 and December 31, 2022

Long-Term Debt

The following table summarizes long-term debt, net of debt issuances costs, at the dates indicated:

September 30 December 31

(Dollars in thousands)

Junior subordinated debentures

Capital Trust V 51,516 51,514

Central Trust I 5,258 5,258

Central Trust II 6,083 6,083

Subordinated debentures 49,957 49,885

Total long-term debt $ 112,814 $ 112,740

The interest expense on long-term debt was $ 1.8 million and $ 5.0 million for the three and nine months ended September 30, 2023, respectively, and $ 1.2 million and $ 3.2 million for the three and nine months ended September 30, 2022, respectively.

Junior Subordinated Debentures :

The junior subordinated debentures are issued to various trust subsidiaries of the Company.

These trusts were formed for the purpose of issuing trust preferred securities, which were then sold in a private placement offering.

The proceeds from the sale of the securities and the issuance of common stock by these trusts were invested in these Junior Subordinated Debentures issued by the Company.

These trust preferred securities bear interest at a rate of three-month Secured Overnight Financing Rate ("SOFR") ( 5.41 % at September 30, 2023) plus applicable spread.

Information relating to these trust preferred securities at September 30, 2023 is as follows:

Trust Principal Amount Maturity Date Interest Rate Spread All-in Rate

(Dollars in thousands)

Capital Trust V $ 50,000 3/15/2037 1.48 % 7.15 %

Central Trust I (1) $ 5,100 9/16/2034 2.44 % 8.11 %

Central Trust II (1) $ 5,900 3/15/2037 1.65 % 7.32 %

(1) These securities noted above are callable quarterly until maturity.

Subordinated Debentures :

On March 14, 2019 the Company issued subordinated debentures with an aggregate principal amount of $ 50.0 million in a private placement transaction to institutional accredited investors, which remained outstanding at September 30, 2023 and December 31, 2022.

The subordinated debentures mature on March 15, 2029.

However, with regulatory approval, the Company may redeem the subordinated debentures without penalty at any scheduled payment date on or after March 15, 2024 with 30 days' notice.

The subordinated debentures carry a fixed rate of interest of 4.75 % through March 15, 2024, after which interest converts to a variable rate of the then current three-month SOFR rate plus 219 basis points.

At September 30, 2023, the Company held no long-term debt scheduled to mature within the next 5 years.

On March 15, 2024 the Company fully redeemed its outstanding subordinated debentures with an aggregate principal amount of $ 50.0 million.

The subordinated debentures were originally issued on March 14, 2019 in a private placement transaction to institutional accredited investors and were set to mature on March 15, 2029 with an option to redeem without penalty at any scheduled date on or after March 15, 2024 with 30 days' notice, which was provided by the Company prior to redemption.

NOTE 5 - STOCK BASED COMPENSATION

During the nine months ended September 30, 2023, the Company had the following activity related to stock based compensation:

During the three months ended March 31, 2024, the Company had the following activity related to stock based compensation:

Time Vested Restricted Stock Awards

1 unchanged sentence

Date Shares Granted Plan Grant Date Fair Value Per Share Vesting Period

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

5/15/2023 1,080 2005 Employee Stock Plan $ 46.21 Ratably over 3 years from grant date

5/23/2023 12,410 2018 Non-Employee Director Stock Plan $ 48.35 Shares vested immediately

2/22/2024 106,200 2023 Omnibus Incentive Plan $ 52.73 Ratably over 3 years from grant date

9/15/2023 5,270 2023 Omnibus Incentive Plan (1) $ 51.44 Ratably over 5 years from grant date

9/15/2023 3,020 2023 Omnibus Incentive Plan (1) $ 51.44 Ratably over 3 years from grant date

(1) The 2023 Omnibus Incentive Plan was approved by the Company's shareholders on May 18, 2023 and replaces the Company's Second Amended and Restated 2005 Employee Stock Plan.

Performance-Based Restricted Stock Awards

On February 22, 2024, the Company granted 41,200 performance-based restricted stock awards, representing the maximum number of shares that may be earned under the awards, to certain executive level employees.

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 .

These performance-based restricted stock awards were issued from the 2023 Omnibus Incentive Plan and were determined to have a grant date fair value per share of $ 52.73 .

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, 2026 .

16 unchanged sentences

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:

September 30, 2023

March 31, 2024

Weighted Average Rate

11 unchanged sentences

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 $ 400,000 2.58 5.34 % 3.67 % $ 1,901

Notional Amount Average Maturity Current Rate Paid Receive Fixed

Swap Rate Fair Value

Interest rate swaps on loans 850,000 2.50 5.36 % 2.72 % ( 27,350 )

4 unchanged sentences

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 $ 6.4 million (pre-tax) to be reclassified as an increase to interest income and $ 28.1 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, 2023.

This reclassification is due to anticipated payments that will be made and/or received on the swaps based upon the forward curve at September 30, 2023.

The Company had no fair value hedges as of September 30, 2023 or December 31, 2022.

The Company expects approximately $ 4.9 million (pre-tax) to be reclassified as an increase to interest income and $ 20.6 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, 2024.

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, 2024.

The Company had no fair value hedges as of March 31, 2024 or December 31, 2023.

Customer Related Positions

13 unchanged sentences

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 at the dates indicated below for those derivatives not designated as hedging:

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

Notional Amount Maturing

1 unchanged sentence

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

September 30, 2023

March 31, 2024

(Dollars in thousands)

31 unchanged sentences

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 $ 28,000 and $ 194,000 for the three months ended September 30, 2023 and 2022, respectively, and decreased by $ 31,000 and $ 620,000 for the nine months ended September 30, 2023 and 2022, respectively.

The fair value of loans held for sale increased by $ 70,000 and decreased by $ 17,000 for the three months ended March 31, 2024 and 2023, respectively.

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

17 unchanged sentences

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 $ 333,000 and $ 229,000 for the three months ended September 30, 2023 and 2022, respectively, and $ 677,000 and $ 550,000 for the nine months ended September 30, 2023 and 2022, respectively.

The aggregate amount of net realized gains on sales of mortgage loans included within mortgage banking income was $ 593,000 and $ 174,000 for the three months ended March 31, 2024 and 2023, respectively.

Balance Sheet Offsetting

9 unchanged sentences

2024 December 31

2022 September 30

2023 March 31

2024 December 31

19 unchanged sentences

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

(3) As of September 30, 2023, approximately $ 405,000 and $ 3.2 million of accrued interest receivable is included in the fair value of interest rate and loan level derivative assets, respectively.

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 $ 2.0 million and $ 3.2 million of accrued interest payable is included in the fair value of interest rate and loan level derivative liabilities, respectively, at September 30, 2023, in comparison to accrued interest payable of approximately $ 1.3 million and $ 2.2 million, respectively, at December 31, 2022.

(3) Approximately $ 426,000 and $ 3.2 million of accrued interest receivable is included in the fair value of interest rate and loan level derivative assets, respectively, at March 31, 2024, in comparison to accrued interest receivable of approximately $ 316,000 and $ 3.0 million, respectively, at December 31, 2023.

(4) Approximately $ 1.8 million and $ 3.2 million of accrued interest payable is included in the fair value of interest rate and loan level derivative liabilities, respectively, at March 31, 2024, in comparison to accrued interest payable of approximately $ 1.9 million and $ 3.0 million, respectively, at December 31, 2023.

(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.

1 unchanged sentence

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

2023 2022 2023 2022

Three Months Ended

(Dollars in thousands)

Derivatives designated as hedges

Gain (loss) in OCI on derivatives (effective portion), net of tax $ 202 $ ( 27,144 ) $ 4,917 $ ( 52,743 )

(Loss) gain reclassified from OCI into interest income or interest expense (effective portion) $ ( 7,547 ) $ 407 $ ( 20,806 ) $ 8,427

(Loss) gain in OCI on derivatives (effective portion), net of tax $ ( 1,488 ) $ 10,163

Loss reclassified from OCI into interest income or interest expense (effective portion) $ ( 5,856 ) $ ( 6,239 )

Derivatives not designated as hedges

7 unchanged sentences

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, 2023 and December 31, 2022.

All derivative instruments with credit-risk contingent features were in a net asset position at March 31, 2024 and December 31, 2023.

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

4 unchanged sentences

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 $ 157.1 million and $ 121.2 million at September 30, 2023 and December 31, 2022, respectively.

The Company’s exposure relating to customer counterparties was approximately $ 4,000 and $ 2.2 million at September 30, 2023 and December 31, 2022, respectively.

The Company's exposure relating to institutional counterparties was $ 117.5 million and $ 95.8 million at March 31, 2024 and December 31, 2023, respectively.

The Company’s exposure relating to customer counterparties was approximately $ 313,000 and $ 5.6 million at March 31, 2024 and December 31, 2023, respectively.

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

17 unchanged sentences

Valuation Techniques

There were no changes in the valuation techniques used during the nine months ended September 30, 2023.

There were no changes in the valuation techniques used during the three months ended March 31, 2024.

Trading and Equity Securities

34 unchanged sentences

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, 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.

However, as of March 31, 2024 and December 31, 2023, 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.

22 unchanged sentences

(Level 2) Significant

September 30, 2023

March 31, 2024

(Dollars in thousands)

50 unchanged sentences

(Level 2) Significant

September 30, 2023

March 31, 2024

(Dollars in thousands)

15 unchanged sentences

Junior subordinated debentures (g) 62,858 59,740 — 59,740 —

Subordinated debentures (f) 49,957 45,990 — — 45,990

Fair Value Measurements at Reporting Date Using

25 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.

20 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

2023 September 30

2022 September 30

2023 September 30

Three Months Ended

2024 March 31

(Dollars in thousands)

4 unchanged sentences

Investment management - retail investments and insurance revenue 861 1,594

Merchant processing income 370 412 1,272 1,140

Payment processing income 538 470

Credit card income 533 493

40 unchanged sentences

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

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

(Dollars in thousands)

6 unchanged sentences

In general, the Company recognizes commission revenue at the point of sale, and for certain insurance products, may also earn and recognize annual residual commissions commensurate with annual premiums being paid.

Merchant Processing Income

The Company refers customers to third party merchant processing partners in exchange for commission and fee income.

Payment Processing Income

The Company refers customers to third party payment processing partners in exchange for commission and fee income.

The income earned is comprised of multiple components, including a fixed referral fee per each referred customer, a rebate amount determined primarily as a percentage of net revenue earned by the third party from services provided to each referred customer, and overall production bonus commissions if certain new account production thresholds are met.

Merchant processing income is recognized in conjunction with either completing the referral to earn the fixed fee amount or as the merchant activity is processed to derive the Company's rebate and/or production bonus amounts.

Payment processing income is recognized in conjunction with either completing the referral to earn the fixed fee amount or as the merchant activity is processed to derive the Company's rebate and/or production bonus amounts.

Credit Card Income

8 unchanged sentences

The safe deposit box rental fee is paid upfront and is recognized as revenue ratably over the annual term of the contract.

1031 Exchange Fee Revenue

The Company provides like-kind exchange services pursuant to Section 1031 of the Internal Revenue Code.

Fee income is recognized in conjunction with completing the exchange transactions.

Foreign Currency

4 unchanged sentences

Three Months Ended

September 30, 2023 Nine Months Ended

September 30, 2023

Amount Tax (Expense)

Benefit After Tax

Amount Pre-Tax

March 31, 2024

Amount Tax (Expense)

10 unchanged sentences

Net change in other comprehensive income for defined benefit postretirement plans (1) ( 21 ) 6 ( 15 )

Total other comprehensive (loss) income $ ( 10,224 ) $ 2,413 $ ( 7,811 ) $ 3,272 $ ( 934 ) $ 2,338

Total other comprehensive loss $ ( 6,021 ) $ 1,510 $ ( 4,511 )

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

(1) The amortization of prior service costs is included in the computation of net periodic pension cost as disclosed in Note 12 - Employee Benefit Plans within the Notes to the Consolidated Financial Statements included in Item 8 of the Company's 2023 Form 10-K.

7 unchanged sentences

Ending balance:

September 30, 2023 $ ( 130,961 ) $ ( 31,713 ) $ 1,928 $ ( 160,746 )

March 31, 2024 $ ( 99,239 ) $ ( 22,063 ) $ 1,964 $ ( 119,338 )

Beginning balance:

2 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 )

NOTE 10 - COMMITMENTS AND CONTINGENCIES

17 unchanged sentences

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

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

(Dollars in thousands)

4 unchanged sentences

Lease Commitments

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

The Company leases space for offices, parking, and ATM locations, as well as 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.

2 unchanged sentences

Other Contingencies

At September 30, 2023, the Bank was involved in pending lawsuits that arose in the ordinary course of business.

At March 31, 2024, 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.

1 unchanged sentence

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