INDEPENDENT BANK CORP 10-Q

Item 1. Financial Statements INDEPENDENT BANK CORP. CONSOLIDATED BALANCE SHEETS (Unaudited—Dollars in thousands) September 30 2024 December 31 2023 Assets Cash and due from banks $ 198,987 $ 178,861 Interest-earning deposits with banks 225,465 45,469 Securities Trading 4,410 4,987 Equity 21,639 22,510 Available for sale (amortized cost $ 1,334,733 and $ 1,459,862 ) 1,247,211 1,334,256 Held to maturity (fair value $ 1,377,465 and $ 1,417,608 ) 1,492,315 1,569,107 Total securities 2,765,575 2,930,860 Loans held for sale (at fair value) 16,259 6,368 Loans Commercial and industrial 1,577,861 1,579,986 Commercial real estate 8,162,020 8,041,508 Commercial construction 742,042 849,586 Small business 270,018 251,956 Residential real estate 2,441,859 2,424,754 Home equity - first position 498,193 518,706 Home equity - subordinate positions 632,242 578,920 Other consumer 36,572 32,654 Total loans 14,360,807 14,278,070 Less: allowance for credit losses ( 163,696 ) ( 142,222 ) Net loans 14,197,111 14,135,848 Federal Home Loan Bank stock 29,926 43,557 Bank premises and equipment, net 192,197 193,049 Goodwill 985,072 985,072 Other intangible assets 13,701 18,190 Cash surrender value of life insurance policies 302,132 297,387 Other assets 481,692 512,712 Total assets $ 19,408,117 $ 19,347,373 Liabilities and Stockholders' Equity Deposits Noninterest-bearing demand deposits $ 4,519,492 $ 4,567,083 Savings and interest checking accounts 5,188,303 5,298,913 Money market 2,969,809 2,818,072 Time certificates of deposit 2,763,419 2,181,479 Total deposits 15,441,023 14,865,547 Borrowings Federal Home Loan Bank borrowings 600,521 1,105,541 Junior subordinated debentures (less unamortized debt issuance costs of $ 29 and $ 30 ) 62,859 62,858 5 Table of Contents Subordinated debentures (less unamortized debt issuance costs of $ 20 ) — 49,980 Total borrowings 663,380 1,218,379 Other liabilities 326,566 368,196 Total liabilities 16,430,969 16,452,122 Commitments and contingencies — — Stockholders' equity Preferred stock, $ 0.01 par value, authorized: 1,000,000 shares, outstanding: none — — Common stock, $ 0.01 par value, authorized: 75,000,000 shares, issued and outstanding: 42,480,765 shares at September 30, 2024 and 42,873,187 shares at December 31, 2023 (includes 202,940 and 162,812 shares of unvested participating restricted stock awards, respectively) 423 427 Value of shares held in rabbi trust at cost: 79,686 shares at September 30, 2024 and 80,222 shares at December 31, 2023 ( 3,399 ) ( 3,298 ) Deferred compensation and other retirement benefit obligations 3,399 3,298 Additional paid in capital 1,907,012 1,932,163 Retained earnings 1,146,915 1,077,488 Accumulated other comprehensive loss, net of tax ( 77,202 ) ( 114,827 ) Total stockholders’ equity 2,977,148 2,895,251 Total liabilities and stockholders' equity $ 19,408,117 $ 19,347,373 The accompanying notes are an integral part of these unaudited consolidated financial statements. 6 Table of Contents INDEPENDENT BANK CORP. CONSOLIDATED STATEMENTS OF INCOME (Unaudited—Dollars in thousands, except per share data) Three Months Ended Nine Months Ended September 30 September 30 2024 2023 2024 2023 Interest income Interest and fees on loans $ 200,597 $ 187,145 $ 591,097 $ 537,830 Taxable interest and dividends on securities 14,064 14,817 42,287 45,707 Nontaxable interest and dividends on securities 1 1 4 4 Interest on loans held for sale 227 60 530 133 Interest on federal funds sold and short-term investments 1,635 905 2,515 4,882 Total interest and dividend income 216,524 202,928 636,433 588,556 Interest expense Interest on deposits 66,985 40,713 182,774 95,297 Interest on borrowings 7,836 12,335 36,591 31,835 Total interest expense 74,821 53,048 219,365 127,132 Net interest income 141,703 149,880 417,068 461,424 Provision for credit losses 19,500 5,500 28,750 17,750 Net interest income after provision for credit losses 122,203 144,380 388,318 443,674 Noninterest income Deposit account fees 6,779 5,936 19,339 17,360 Interchange and ATM fees 4,970 4,808 14,175 13,470 Investment management and advisory 11,033 10,246 31,961 30,373 Mortgage banking income 972 739 3,088 1,717 Increase in cash surrender value of life insurance policies 2,006 1,983 5,934 5,777 Gain on life insurance benefits — 1,924 263 2,111 Loan level derivative income 1,125 842 1,678 2,525 Other noninterest income 6,664 7,065 19,384 19,209 Total noninterest income 33,549 33,543 95,822 92,542 Noninterest expenses Salaries and employee benefits 60,108 54,797 174,444 165,747 Occupancy and equipment expenses 12,734 12,321 38,673 37,528 Data processing and facilities management 2,510 2,404 7,398 7,461 Software and subscriptions 4,736 3,324 13,305 9,407 FDIC assessment 2,628 2,727 8,304 8,011 Consulting expense 1,429 2,753 4,854 6,765 Debit card expense 614 2,319 4,694 6,707 Amortization of intangible assets 1,460 1,712 4,488 5,243 Other noninterest expenses 14,224 15,425 43,784 45,129 Total noninterest expenses 100,443 97,782 299,944 291,998 Income before income taxes 55,309 80,141 184,196 244,218 Provision for income taxes 12,362 19,333 42,149 59,519 Net income $ 42,947 $ 60,808 $ 142,047 $ 184,699 Basic earnings per share $ 1.01 $ 1.38 $ 3.34 $ 4.16 Diluted earnings per share $ 1.01 $ 1.38 $ 3.34 $ 4.16 Weighted average common shares (basic) 42,481,441 44,135,487 42,501,199 44,419,731 Common share equivalents 11,622 11,417 9,602 12,851 Weighted average common shares (diluted) 42,493,063 44,146,904 42,510,801 44,432,582 Cash dividends declared per common share $ 0.57 $ 0.55 $ 1.71 $ 1.65 The accompanying notes are an integral part of these unaudited consolidated financial statements. 7 Table of Contents INDEPENDENT BANK CORP. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited—Dollars in thousands) Three Months Ended Nine Months Ended September 30 September 30 2024 2023 2024 2023 Net income $ 42,947 $ 60,808 $ 142,047 $ 184,699 Other comprehensive income (loss), net of tax Net change in fair value of securities available for sale 28,286 ( 7,921 ) 28,670 ( 2,304 ) Net change in fair value of cash flow hedges 8,753 202 9,000 4,917 Net change in other comprehensive income for defined benefit postretirement plans ( 16 ) ( 92 ) ( 45 ) ( 275 ) Total other comprehensive income (loss) 37,023 ( 7,811 ) 37,625 2,338 Total comprehensive income $ 79,970 $ 52,997 $ 179,672 $ 187,037 The accompanying notes are an integral part of these unaudited consolidated financial statements. 8 Table of Contents INDEPENDENT BANK CORP. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY Three Months Ended September 30, 2024 and 2023 (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, 2024 42,469,867 $ 423 $ ( 3,353 ) $ 3,353 $ 1,904,869 $ 1,128,182 $ ( 114,225 ) $ 2,919,249 Net income — — — — — 42,947 — 42,947 Other comprehensive income — — — — — — 37,023 37,023 Common dividend declared ($ 0.57 per share) — — — — — ( 24,214 ) — ( 24,214 ) Stock based compensation — — — — 1,514 — — 1,514 Restricted stock awards issued, net of awards surrendered ( 2,559 ) — — — ( 20 ) — — ( 20 ) Shares issued under direct stock purchase plan 13,457 — — — 649 — — 649 Deferred compensation and other retirement benefit obligations — — ( 46 ) 46 — — — — Balance September 30, 2024 42,480,765 $ 423 $ ( 3,399 ) $ 3,399 $ 1,907,012 $ 1,146,915 $ ( 77,202 ) $ 2,977,148 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 9 Table of Contents INDEPENDENT BANK CORP. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY Nine Months Ended September 30, 2024 and 2023 (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 December 31, 2023 42,873,187 $ 427 $ ( 3,298 ) $ 3,298 $ 1,932,163 $ 1,077,488 $ ( 114,827 ) $ 2,895,251 Net income — — — — — 142,047 — 142,047 Other comprehensive income — — — — — — 37,625 37,625 Common dividend declared ($ 1.71 per share) — — — — — ( 72,620 ) — ( 72,620 ) Stock based compensation — — — — 4,953 — — 4,953 Restricted stock awards issued, net of awards surrendered 102,754 1 — — ( 782 ) — — ( 781 ) Shares issued under direct stock purchase plan 37,090 — — — 1,970 — — 1,970 Shares repurchased under share repurchase program (1) ( 532,266 ) ( 5 ) — — ( 31,292 ) — — ( 31,297 ) Deferred compensation and other retirement benefit obligations — — ( 101 ) 101 — — — — Balance September 30, 2024 42,480,765 $ 423 $ ( 3,399 ) $ 3,399 $ 1,907,012 $ 1,146,915 $ ( 77,202 ) $ 2,977,148 Balance December 31, 2022 45,641,238 $ 455 $ ( 3,227 ) $ 3,227 $ 2,114,888 $ 934,442 $ ( 163,084 ) $ 2,886,701 Net income — — — — — 184,699 — 184,699 Other comprehensive income — — — — — — 2,338 2,338 Common dividend declared ($ 1.65 per share) — — — — — ( 72,875 ) — ( 72,875 ) Proceeds from exercise of stock options, net of cash paid 3,238 — — — 81 — — 81 Stock based compensation — — — — 4,721 — — 4,721 Restricted stock awards issued, net of awards surrendered 81,721 1 — — ( 1,137 ) — — ( 1,136 ) Shares issued under direct stock purchase plan 32,809 — — — 1,990 — — 1,990 Shares repurchased under share repurchase program (1) ( 1,617,033 ) ( 16 ) — — ( 121,095 ) — — ( 121,111 ) Deferred compensation and other retirement benefit obligations — — ( 108 ) 108 — — — — Balance September 30, 2023 44,141,973 $ 440 $ ( 3,335 ) $ 3,335 $ 1,999,448 $ 1,046,266 $ ( 160,746 ) $ 2,885,408 (1) Inclusive of $ 311,000 and $ 1.2 million impact of excise tax attributable to shares repurchased under the share repurchase program during the nine months ended September 30, 2024 and September 30, 2023, respectively . The accompanying notes are an integral part of these unaudited consolidated financial statements. 10 Table of Contents INDEPENDENT BANK CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited—Dollars in thousands) Nine Months Ended September 30 2024 2023 Cash flow from operating activities Net income $ 142,047 $ 184,699 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization 31,500 27,575 Change in unamortized net loan costs and fees ( 1,070 ) ( 1,199 ) Accretion of acquired loans ( 393 ) ( 1,057 ) Provision for credit losses 28,750 17,750 Deferred income tax expense 5,102 13 Net gain on equity securities ( 1,187 ) ( 272 ) Net loss on bank premises and equipment 68 304 Realized gain on sale leaseback transaction — ( 193 ) Stock based compensation 4,953 4,721 Increase in cash surrender value of life insurance policies ( 5,934 ) ( 5,786 ) Gain on life insurance benefits ( 263 ) ( 2,111 ) Operating lease payments ( 10,214 ) ( 10,381 ) Operating lease termination payments ( 389 ) — Change in fair value on loans held for sale ( 167 ) 31 Net change in: Trading assets 577 ( 588 ) Loans held for sale ( 9,724 ) ( 1,226 ) Other assets 31,942 ( 2,317 ) Other liabilities ( 28,567 ) 13,526 Total adjustments 44,984 38,790 Net cash provided by operating activities 187,031 223,489 Cash flows provided by (used in) investing activities Purchases of equity securities ( 498 ) ( 440 ) Proceeds from maturities and principal repayments of securities available for sale 172,701 42,087 Purchases of securities available for sale ( 47,776 ) — Proceeds from maturities and principal repayments of securities held to maturity 79,843 114,698 Net redemptions (purchases) of Federal Home Loan Bank stock 13,631 ( 38,660 ) Investments in low income housing projects ( 22,245 ) ( 20,086 ) Purchases of life insurance policies ( 114 ) ( 114 ) Proceeds from life insurance policies 1,566 3,934 Net increase in loans ( 88,550 ) ( 322,904 ) Purchases of bank premises and equipment ( 14,052 ) ( 9,541 ) Proceeds from the sale of bank premises and equipment 32 104 Net cash provided by (used in) investing activities 94,538 ( 230,922 ) Cash flows used in financing activities Net increase in time deposits 581,845 816,896 Net decrease in other deposits ( 6,464 ) ( 1,636,503 ) Net (repayments of) advances from Federal Home Loan Bank borrowings ( 505,000 ) 887,000 11 Table of Contents Repayments of subordinated debentures ( 50,000 ) — Net proceeds from exercise of stock options — 80 Restricted stock awards issued, net of awards surrendered ( 813 ) ( 1,143 ) Proceeds from shares issued under direct stock purchase plan 1,957 1,977 Payments for shares repurchased under share repurchase program ( 30,986 ) ( 119,951 ) Common dividends paid ( 71,986 ) ( 73,728 ) Net cash used in financing activities ( 81,447 ) ( 125,372 ) Net increase (decrease) in cash and cash equivalents 200,122 ( 132,805 ) Cash and cash equivalents at beginning of year 224,330 352,933 Cash and cash equivalents at end of period $ 424,452 $ 220,128 Supplemental schedule of noncash investing and financing activities Net increase in capital commitments relating to low income housing project investments $ 29,282 $ 15,718 Recognition of operating lease at commencement and/or at extension $ 5,620 $ 5,747 The accompanying notes are an integral part of these unaudited consolidated financial statements. 12 Table of Contents NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - BASIS OF PRESENTATION Independent Bank Corp. (the “Company”) is a state chartered, federally registered bank holding company, incorporated in 1985. The Company is the sole stockholder of Rockland Trust Company (“Rockland Trust” or the “Bank”), a Massachusetts trust company chartered in 1907. All material intercompany balances and transactions have been eliminated in consolidation. Certain previously reported amounts have been reclassified to conform to the current year’s presentation. The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. 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, 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”). NOTE 2 - SECURITIES Trading Securities The Company had trading securities of $ 4.4 million and $ 5.0 million as of September 30, 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 $ 21.6 million and $ 22.5 million as of September 30, 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 2024 2023 2024 2023 Dollars in thousands Net gains (losses) recognized during the period on equity securities $ 685 $ ( 363 ) 1,187 272 Less: net gains (losses) recognized during the period on equity securities sold during the period 81 ( 34 ) 519 ( 33 ) Unrealized gains (losses) recognized during the reporting period on equity securities still held at the reporting date $ 604 $ ( 329 ) $ 668 $ 305 13 Table of Contents 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) at the dates indicated: September 30, 2024 December 31, 2023 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Allowance for credit losses Fair Value Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Allowance for credit losses Fair Value (Dollars in thousands) U.S. government agency securities $ 229,642 $ — $ ( 16,558 ) $ — $ 213,084 $ 230,198 $ — $ ( 23,060 ) $ — $ 207,138 U.S. treasury securities 674,920 — ( 34,007 ) — 640,913 824,597 — ( 55,495 ) — 769,102 Agency mortgage-backed securities 346,931 60 ( 29,282 ) — 317,709 314,269 24 ( 37,246 ) — 277,047 Agency collateralized mortgage obligations 32,277 8 ( 1,646 ) — 30,639 35,713 6 ( 2,530 ) — 33,189 State, county, and municipal securities 196 — — — 196 195 — ( 5 ) — 190 Pooled trust preferred securities issued by banks and insurers 1,180 — ( 153 ) — 1,027 1,188 — ( 170 ) — 1,018 Small business administration pooled securities 49,587 — ( 5,944 ) — 43,643 53,702 — ( 7,130 ) — 46,572 Total available for sale securities $ 1,334,733 $ 68 $ ( 87,590 ) $ — $ 1,247,211 $ 1,459,862 $ 30 $ ( 125,636 ) $ — $ 1,334,256 Excluded from the table above is accrued interest on available for sale securities of $ 3.1 million and $ 3.4 million at September 30, 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 and nine months ended September 30, 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 September 30, 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, 2024 and 2023, and therefore no gains or losses were realized during the periods presented. 14 Table of Contents 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, 2024 Less than 12 months 12 months or longer Total # of holdings Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses (Dollars in thousands) U.S. government agency securities 9 $ — $ — $ 213,084 $ ( 16,558 ) $ 213,084 $ ( 16,558 ) U.S. treasury securities 14 — — 640,913 ( 34,007 ) 640,913 ( 34,007 ) Agency mortgage-backed securities 104 47,479 ( 188 ) 266,901 ( 29,094 ) 314,380 ( 29,282 ) Agency collateralized mortgage obligations 9 — — 28,452 ( 1,646 ) 28,452 ( 1,646 ) Pooled trust preferred securities issued by banks and insurers 1 — — 1,027 ( 153 ) 1,027 ( 153 ) Small business administration pooled securities 8 — — 43,643 ( 5,944 ) 43,643 ( 5,944 ) Total 145 $ 47,479 $ ( 188 ) $ 1,194,020 $ ( 87,402 ) $ 1,241,499 $ ( 87,590 ) December 31, 2023 Less than 12 months 12 months or longer Total # of holdings Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses (Dollars in thousands) U.S. government agency securities 9 $ — $ — $ 207,138 $ ( 23,060 ) $ 207,138 $ ( 23,060 ) U.S. treasury securities 17 — — 769,102 ( 55,495 ) 769,102 ( 55,495 ) Agency mortgage-backed securities 115 1,091 ( 11 ) 273,447 ( 37,235 ) 274,538 ( 37,246 ) Agency collateralized mortgage obligations 12 339 ( 2 ) 31,682 ( 2,528 ) 32,021 ( 2,530 ) State, county, and municipal securities 1 190 ( 5 ) — — 190 ( 5 ) Pooled trust preferred securities issued by banks and insurers 1 — — 1,018 ( 170 ) 1,018 ( 170 ) Small business administration pooled securities 8 — — 46,572 ( 7,130 ) 46,572 ( 7,130 ) 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, 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, 2024: • U.S. Government Agency Securities, U.S. Treasury Securities, Agency Mortgage-Backed Securities, Agency Collateralized Mortgage Obligations and Small Business Administration Pooled Securities: These portfolios have 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. Additionally, these securities are implicitly guaranteed by the U.S. Government or one of its agencies. • Pooled Trust Preferred Securities: 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. Management evaluates collateral credit and instrument structure, including current and 15 Table of Contents expected deferral and default rates and timing. In addition, discount rates are determined by evaluating comparable spreads observed currently in the market for similar instruments. 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 at the dates indicated: September 30, 2024 December 31, 2023 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Allowance for credit losses Fair Value Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Allowance for credit losses Fair Value (Dollars in thousands) U.S. government agency securities $ 28,218 $ — $ ( 156 ) $ — $ 28,062 $ 29,521 $ — $ ( 1,113 ) $ — $ 28,408 U.S. treasury securities 100,772 — ( 6,582 ) — 94,190 100,712 — ( 9,177 ) — 91,535 Agency mortgage-backed securities 798,919 644 ( 48,044 ) — 751,519 829,431 175 ( 65,878 ) — 763,728 Agency collateralized mortgage obligations 437,552 — ( 57,209 ) — 380,343 477,517 — ( 69,606 ) — 407,911 Single issuer trust preferred securities issued by banks 1,500 — ( 49 ) — 1,451 1,500 — ( 127 ) — 1,373 Small business administration pooled securities 125,354 482 ( 3,936 ) — 121,900 130,426 384 ( 6,157 ) — 124,653 Total held to maturity securities $ 1,492,315 $ 1,126 $ ( 115,976 ) $ — $ 1,377,465 $ 1,569,107 $ 559 $ ( 152,058 ) $ — $ 1,417,608 Substantially all held to maturity securities held by the Company are guaranteed by the U.S. 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, 2024 and 2023. Excluded from the table above is accrued interest on held to maturity securities of $ 4.0 million and $ 4.3 million at September 30, 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 and nine months ended September 30, 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 September 30, 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, 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, 2024, all held to maturity securities held by the Company were rated investment grade or higher. 16 Table of Contents 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 securities available for sale and securities held to maturity at September 30, 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 Amortized Cost Fair Value Amortized Cost Fair Value Amortized Cost Fair Value Amortized Cost Fair Value Amortized Cost Fair Value (Dollars in thousands) Available for sale securities U.S. government agency securities $ — $ — $ 229,642 $ 213,084 $ — $ — $ — $ — $ 229,642 $ 213,084 U.S. treasury securities 196,815 192,493 478,105 448,420 — — — — 674,920 640,913 Agency mortgage-backed securities 16 16 139,183 128,734 71,034 66,751 136,698 122,208 346,931 317,709 Agency collateralized mortgage obligations — — — — 2,598 2,446 29,679 28,193 32,277 30,639 State, county, and municipal securities — — 196 196 — — — — 196 196 Pooled trust preferred securities issued by banks and insurers — — — — — — 1,180 1,027 1,180 1,027 Small business administration pooled securities — — — — — — 49,587 43,643 49,587 43,643 Total available for sale securities $ 196,831 $ 192,509 $ 847,126 $ 790,434 $ 73,632 $ 69,197 $ 217,144 $ 195,071 $ 1,334,733 $ 1,247,211 Held to maturity securities U.S. government agency securities $ 28,218 $ 28,062 $ — $ — $ — $ — $ — $ — $ 28,218 $ 28,062 U.S. treasury securities — — 99,779 93,334 993 856 — — 100,772 94,190 Agency mortgage-backed securities — — 463,840 441,693 158,938 142,894 176,141 166,932 798,919 751,519 Agency collateralized mortgage obligations — — 63,176 60,049 17,779 16,183 356,597 304,111 437,552 380,343 Single issuer trust preferred securities issued by banks — — 1,500 1,451 — — — — 1,500 1,451 Small business administration pooled securities — — — — 7,076 6,643 118,278 115,257 125,354 121,900 Total held to maturity securities $ 28,218 $ 28,062 $ 628,295 $ 596,527 $ 184,786 $ 166,576 $ 651,016 $ 586,300 $ 1,492,315 $ 1,377,465 Total $ 225,049 $ 220,571 $ 1,475,421 $ 1,386,961 $ 258,418 $ 235,773 $ 868,160 $ 781,371 $ 2,827,048 $ 2,624,676 Included in the table above are $ 26.2 million of callable securities at September 30, 2024. The carrying value of securities pledged to secure public funds, trust deposits, and for other purposes, as required or permitted by law, was $ 2.2 billion and $ 1.7 billion at September 30, 2024 and December 31, 2023, respectively. At September 30, 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. 17 Table of Contents NOTE 3 - LOANS, ALLOWANCE FOR CREDIT LOSSES AND CREDIT QUALITY Loans Held for Investment and Allowance for Credit Losses 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, 2024 (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 $ 20,884 $ 80,501 $ 7,804 $ 4,059 $ 24,836 $ 11,755 $ 1,020 $ 150,859 Charge-offs ( 5,886 ) — — ( 163 ) — ( 38 ) ( 919 ) ( 7,006 ) Recoveries 3 — — 3 — 14 323 343 Provision for (release of) credit losses 936 19,121 ( 278 ) 206 ( 333 ) ( 570 ) 418 19,500 Ending balance (1) $ 15,937 $ 99,622 $ 7,526 $ 4,105 $ 24,503 $ 11,161 $ 842 $ 163,696 Three Months Ended September 30, 2023 (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 $ 15,142 $ 78,396 $ 9,038 $ 3,606 $ 21,465 $ 12,433 $ 567 $ 140,647 Charge-offs — ( 5,072 ) — ( 112 ) — — ( 834 ) ( 6,018 ) Recoveries 111 — — 35 — 12 282 440 Provision for (release of) credit losses 1,681 1,078 ( 208 ) 385 1,682 101 781 5,500 Ending balance (1) $ 16,934 $ 74,402 $ 8,830 $ 3,914 $ 23,147 $ 12,546 $ 796 $ 140,569 Nine Months Ended September 30, 2024 (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 $ 19,243 $ 74,148 $ 7,683 $ 3,963 $ 23,637 $ 12,797 $ 751 $ 142,222 Charge-offs ( 5,886 ) — — ( 332 ) — ( 49 ) ( 2,428 ) ( 8,695 ) Recoveries 90 — — 54 — 295 980 1,419 Provision for (release of) credit losses 2,490 25,474 ( 157 ) 420 866 ( 1,882 ) 1,539 28,750 Ending balance (1) $ 15,937 $ 99,622 $ 7,526 $ 4,105 $ 24,503 $ 11,161 $ 842 $ 163,696 Nine Months Ended September 30, 2023 (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 $ 27,559 $ 77,799 $ 10,762 $ 2,834 $ 20,973 $ 11,504 $ 988 $ 152,419 Charge-offs ( 23,471 ) ( 5,072 ) — ( 199 ) — — ( 1,858 ) ( 30,600 ) Recoveries 132 — — 74 — 38 756 1,000 Provision for (release of) credit losses 12,714 1,675 ( 1,932 ) 1,205 2,174 1,004 910 17,750 Ending balance (1) $ 16,934 $ 74,402 $ 8,830 $ 3,914 $ 23,147 $ 12,546 $ 796 $ 140,569 18 Table of Contents (1) Balances of accrued interest receivable excluded from amortized cost and the calculation of allowance for credit losses amounted to $ 55.3 million and $ 58.1 million as of September 30, 2024 and September 30, 2023, respectively. The balance of allowance for credit losses increased to $ 163.7 million as of September 30, 2024 compared to $ 142.2 million at December 31, 2023, driven primarily by specific reserve allocations on certain commercial loans during the nine months ended September 30, 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. Each of these loan categories possesses unique risk characteristics that are considered when determining the appropriate level of allowance for each segment. Some of the characteristics unique to each loan category include: Commercial Portfolio • Commercial and Industrial : 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. The primary source of repayment is operating cash flow and, secondarily, liquidation of assets. • 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, as well as 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. 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 : 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 as well as other specific use properties. 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. 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: 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. The primary source of repayment is operating cash flows and, secondarily, liquidation of assets. For the commercial portfolio the Company typically obtains personal guarantees for payment from individuals holding material ownership interests in the borrowing entities. Consumer Portfolio • Residential Real Estate : Residential mortgage loans held in the Company’s portfolio are made to borrowers who demonstrate the ability to make scheduled payments with full consideration to underwriting factors such as current and expected income, employment status, current assets, other financial resources, credit history and the value of the collateral. Collateral consists of mortgage liens on one-to-four family residential properties. Residential mortgage loans also include loans to construct owner-occupied one-to-four family residential properties. • Home Equity : 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. The majority of home equity lines of credit have a variable rate and are billed in interest-only payments during the draw period. At the end of the draw period, the home equity line of credit is billed as a percentage of the then outstanding principal balance plus all accrued interest over a predetermined repayment period, as set forth in the note. Additionally, the Company has the option of renewing each line of credit for additional draw periods. Borrower qualifications include favorable credit history combined with supportive income requirements and combined loan to value ratios within established policy guidelines. • Other Consumer: Other consumer loan products include personal lines of credit and amortizing loans made to qualified individuals for various purposes such as debt consolidation, personal expenses or overdraft protection. Borrower qualifications include favorable credit history combined with supportive income and collateral requirements within established policy guidelines. These loans may be secured or unsecured. 19 Table of Contents Credit Quality The Company continually monitors the asset quality of the loan portfolio using all available information. 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 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. For the commercial portfolio, the Company utilizes a 10-point credit risk-rating system, which assigns a risk-grade to each loan obligation based on a number of quantitative and qualitative factors associated with a commercial or small business loan transaction. Factors considered include industry and market conditions, position within the industry, earnings trends, operating cash flow, asset/liability values, debt capacity, guarantor strength, management and controls, financial reporting, collateral, and other considerations. The risk-rating categories for the commercial portfolio are defined as follows: • Pass: Risk-rating “1” through “6” comprises loans ranging from ‘Substantially Risk Free’ which indicates borrowers are of unquestioned credit standing and the pinnacle of credit quality, well established companies with a very strong financial condition, and loans fully secured by cash collateral, through ‘Acceptable Risk,’ which indicates borrowers may exhibit declining earnings, strained cash flow, increasing or above average leverage and/or weakening market fundamentals that indicate below average asset quality, margins and market share. Collateral coverage is protective. • Special Mention: Borrowers exhibit potential credit weaknesses or downward trends deserving management’s close attention. If not checked or corrected, these trends will weaken the Company’s asset and position. While potentially weak, currently these borrowers are marginally acceptable; no loss of principal or interest is envisioned. • Substandard: Borrowers exhibit well defined weaknesses that jeopardize the orderly liquidation of debt. Loans may be inadequately protected by the current net worth and paying capacity of the obligor or by the collateral pledged, if any. Normal repayment from the borrower is in jeopardy, although no loss of principal is envisioned. However, there is a distinct possibility that a partial loss of interest and/or principal will occur if the deficiencies are not corrected. Collateral coverage may be inadequate to cover the principal obligation. • Doubtful: 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. • Loss: Borrowers deemed incapable of repayment. Loans to such borrowers are considered uncollectible and of such little value that continuation as active assets of the Company is not warranted. The Company utilizes a comprehensive, continuous strategy for evaluating and monitoring commercial credit quality. Initially, credit quality is determined at loan origination and is re-evaluated when subsequent actions, such as renewals, modifications or reviews, occur. Actively managed commercial borrowers are required to provide updated financial information at least annually which is carefully evaluated for any changes in credit quality. Larger loan relationships are subject to a full annual credit review by experienced credit professionals, while continuous portfolio monitoring techniques are employed to evaluate changes in credit quality for smaller loan relationships. Any changes in credit quality are reflected in risk-rating changes. Additionally, the Company retains an independent loan review firm to evaluate the credit quality of the commercial loan portfolio. 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. For the Company’s consumer portfolio, the quality of the loan is best indicated by the repayment performance of an individual borrower. As a result, for this portfolio the Company utilizes a pass/default risk-rating system, based on an age analysis (i.e., days past due) associated with each consumer loan. Under this structure, consumer loans less than 90 days past due are assigned a “pass” rating, while any consumer loans 90 days or more past due are assigned a “default” rating. 20 Table of Contents 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, 2024 2024 2023 2022 2021 2020 Prior Revolving Loans Revolving converted to Term Total (1) (Dollars in thousands) Commercial and industrial Pass $ 282,973 $ 188,687 $ 133,680 $ 61,678 $ 41,639 $ 129,637 $ 682,099 $ — $ 1,520,393 Special mention 11,775 194 946 346 — 113 4,702 — 18,076 Substandard 2,103 161 35 455 — 22 24,964 — 27,740 Doubtful — — — — — — 11,652 — 11,652 Loss — — — — — — — — — Total commercial and industrial $ 296,851 $ 189,042 $ 134,661 $ 62,479 $ 41,639 $ 129,772 $ 723,417 $ — $ 1,577,861 Current-period gross write-offs $ — $ — $ — $ — $ — $ — $ 5,886 $ — $ 5,886 Commercial real estate Pass $ 744,344 $ 1,053,780 $ 1,179,121 $ 1,256,074 $ 1,151,010 $ 2,298,419 $ 96,822 $ 1,116 $ 7,780,686 Special mention 7,442 6,350 29,443 13,085 12,691 101,133 — — 170,144 Substandard 32,609 13,017 25,442 29,264 31,070 6,076 — — 137,478 Doubtful — 54,637 — 11,660 — 7,415 — — 73,712 Loss — — — — — — — — — Total commercial real estate $ 784,395 $ 1,127,784 $ 1,234,006 $ 1,310,083 $ 1,194,771 $ 2,413,043 $ 96,822 $ 1,116 $ 8,162,020 Current-period gross write-offs $ — $ — $ — $ — $ — $ — $ — $ — $ — Commercial construction Pass $ 140,421 $ 176,796 $ 218,298 $ 89,854 $ — $ 24,783 $ 27,213 $ 902 $ 678,267 Special mention — 1,925 15,540 6,065 — — — — 23,530 Substandard 31,125 — 9,120 — — — — — 40,245 Doubtful — — — — — — — — — Loss — — — — — — — — — Total commercial construction $ 171,546 $ 178,721 $ 242,958 $ 95,919 $ — $ 24,783 $ 27,213 $ 902 $ 742,042 Current-period gross write-offs $ — $ — $ — $ — $ — $ — $ — $ — $ — Small business Pass $ 38,687 $ 45,927 $ 45,358 $ 34,503 $ 22,766 $ 29,356 $ 50,009 $ 51 $ 266,657 Special mention — 104 27 174 — 224 784 — 1,313 Substandard 389 396 65 3 183 391 621 — 2,048 Doubtful — — — — — — — — — Loss — — — — — — — — — Total small business $ 39,076 $ 46,427 $ 45,450 $ 34,680 $ 22,949 $ 29,971 $ 51,414 $ 51 $ 270,018 Current-period gross write-offs $ 48 $ — $ 28 $ — $ — $ — $ 256 $ — $ 332 Residential real estate Pass $ 134,868 $ 482,280 $ 615,795 $ 387,127 $ 177,583 $ 640,992 $ — $ — $ 2,438,645 Default — 213 — 659 — 2,342 — — 3,214 Total residential real estate $ 134,868 $ 482,493 $ 615,795 $ 387,786 $ 177,583 $ 643,334 $ — $ — $ 2,441,859 Current-period gross write-offs $ — $ — $ — $ — $ — $ — $ — $ — $ — Home equity Pass $ 14,034 $ 25,276 $ 34,092 $ 50,948 $ 46,614 $ 132,804 $ 813,118 $ 11,612 $ 1,128,498 Default — — — — — 170 1,532 235 1,937 Total home equity $ 14,034 $ 25,276 $ 34,092 $ 50,948 $ 46,614 $ 132,974 $ 814,650 $ 11,847 $ 1,130,435 21 Table of Contents Current-period gross write-offs $ — $ — $ — $ — $ — $ — $ 49 $ — $ 49 Other consumer (2) Pass $ 559 $ 486 $ 159 $ 703 $ 300 $ 1,279 $ 33,071 $ — $ 36,557 Default — — — — — 14 1 — 15 Total other consumer $ 559 $ 486 $ 159 $ 703 $ 300 $ 1,293 $ 33,072 $ — $ 36,572 Current-period gross write-offs $ 2,413 $ — $ — $ — $ — $ — $ 15 $ — $ 2,428 Total $ 1,441,329 $ 2,050,229 $ 2,307,121 $ 1,942,598 $ 1,483,856 $ 3,375,170 $ 1,746,588 $ 13,916 $ 14,360,807 Total current-period gross write-offs $ 2,461 $ — $ 28 $ — $ — $ — $ 6,206 $ — $ 8,695 September 30, 2023 2023 2022 2021 2020 2019 Prior Revolving Loans Revolving converted to Term Total (1) (Dollars in thousands) Commercial and industrial Pass $ 303,838 $ 188,559 $ 94,714 $ 73,366 $ 45,741 $ 116,052 $ 737,335 $ — $ 1,559,605 Special mention 6,511 2,417 614 10,278 90 132 46,706 — 66,748 Substandard 1,933 4,707 1,074 132 1,165 806 16,833 — 26,650 Doubtful — — — — — — — — — Loss — — — — — — — — — Total commercial and industrial $ 312,282 $ 195,683 $ 96,402 $ 83,776 $ 46,996 $ 116,990 $ 800,874 $ — $ 1,653,003 Current-period gross write-offs $ — $ — $ — $ — $ — $ 34 $ 23,437 $ — $ 23,471 Commercial real estate Pass $ 795,830 $ 1,160,497 $ 1,338,792 $ 1,312,240 $ 610,009 $ 2,188,221 $ 68,496 $ 858 $ 7,474,943 Special mention 62,572 37,695 57,987 14,662 2,945 118,830 — — 294,691 Substandard 30,667 27,504 23,568 4,321 19,211 21,325 — — 126,596 Doubtful — — — — — — — — — Loss — — — — — — — — — Total commercial real estate $ 889,069 $ 1,225,696 $ 1,420,347 $ 1,331,223 $ 632,165 $ 2,328,376 $ 68,496 $ 858 $ 7,896,230 Current-period gross write-offs $ — $ 5,072 $ — $ — $ — $ — $ — $ — $ 5,072 Commercial construction Pass $ 146,278 $ 491,098 $ 201,730 $ 9,939 $ 27,304 $ 1,569 $ 17,248 $ — $ 895,166 Special mention 13,484 — 4,823 — — — — — 18,307 Substandard 9,440 26,199 16,330 — — — — — 51,969 Doubtful — — — — — — — — — Loss — — — — — — — — — Total commercial construction $ 169,202 $ 517,297 $ 222,883 $ 9,939 $ 27,304 $ 1,569 $ 17,248 $ — $ 965,442 Current-period gross write-offs $ — $ — $ — $ — $ — $ — $ — $ — $ — Small business Pass $ 40,551 $ 52,883 $ 40,706 $ 26,759 $ 13,759 $ 23,458 $ 43,759 $ — $ 241,875 Special mention — — — 155 — 186 295 — 636 Substandard 429 324 126 295 — 615 1,035 — 2,824 Doubtful — — — — — — — — — Loss — — — — — — — — — Total small business $ 40,980 $ 53,207 $ 40,832 $ 27,209 $ 13,759 $ 24,259 $ 45,089 $ — $ 245,335 Current-period gross write-offs $ — $ — $ 22 $ 37 $ — $ — $ 140 $ — $ 199 22 Table of Contents Residential real estate Pass $ 391,121 $ 645,593 $ 408,752 $ 186,334 $ 89,911 $ 612,878 $ — $ — $ 2,334,589 Default 219 — 393 135 942 1,824 — — 3,513 Total residential real estate $ 391,340 $ 645,593 $ 409,145 $ 186,469 $ 90,853 $ 614,702 $ — $ — $ 2,338,102 Current-period gross write-offs $ — $ — $ — $ — $ — $ — $ — $ — $ — Home equity Pass $ 21,729 $ 39,251 $ 56,216 $ 50,724 $ 30,039 $ 126,897 $ 765,079 $ 4,190 $ 1,094,125 Default — — — — — — 1,289 141 1,430 Total home equity $ 21,729 $ 39,251 $ 56,216 $ 50,724 $ 30,039 $ 126,897 $ 766,368 $ 4,331 $ 1,095,555 Current-period gross write-offs $ — $ — $ — $ — $ — $ — $ — $ — $ — Other consumer (2) Pass $ 538 $ 320 $ 1,370 $ 912 $ 410 $ 2,154 $ 24,843 $ — $ 30,547 Default — — — — — 19 2 — 21 Total other consumer $ 538 $ 320 $ 1,370 $ 912 $ 410 $ 2,173 $ 24,845 $ — $ 30,568 Current-period gross write-offs $ 1,836 $ — $ — $ — $ — $ 7 $ 15 $ — $ 1,858 Total $ 1,825,140 $ 2,677,047 $ 2,247,195 $ 1,690,252 $ 841,526 $ 3,214,966 $ 1,722,920 $ 5,189 $ 14,224,235 Total current -period gross write-offs $ 1,836 $ 5,072 $ 22 $ 37 $ — $ 41 $ 23,592 $ — $ 30,600 (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) 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. However, the Company does supplement performance data with current Fair Isaac Corporation (“FICO”) scores and Loan to Value (“LTV”) estimates. Current FICO data is purchased and appended to all consumer loans on a regular basis. In addition, automated valuation services and broker opinions of value are used to supplement original value data for the residential real estate and home equity portfolios, periodically. The following table shows the weighted average FICO scores and the weighted average combined LTV ratios at the dates indicated below: September 30 2024 December 31 2023 Residential real estate portfolio FICO score (re-scored)(1) 755 754 LTV (re-valued)(2) 57.9 % 59.8 % Home equity portfolio FICO score (re-scored)(1) 769 770 LTV (re-valued)(2)(3) 43.4 % 43.3 % (1) The average FICO scores at September 30, 2024 are based upon rescores from September 2024 as available for previously originated loans, or origination score data for loans booked in September 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, 2024 are based upon updated automated valuations as of August 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. The updated automated valuations provide new information on loans that may be available since the previous valuation was obtained. If no new information is available, the valuation will default to the previously obtained data or most recent appraisal. (3) For home equity loans and lines in a subordinate lien, the LTV data represents a combined LTV, taking into account the senior lien data for loans and lines. Unfunded Commitments Management evaluates the need for a reserve on unfunded lending commitments in a manner consistent with loans held for investment. At September 30, 2024 and December 31, 2023, the Company's estimated reserve for unfunded commitments amounted to $ 1.4 million and $ 1.5 million, respectively. 23 Table of Contents Asset Quality The Company’s philosophy toward managing its loan portfolios is predicated upon careful monitoring, which stresses early detection and response to delinquent and default situations. Delinquent loans are managed by a team of collection specialists and the Company seeks to make arrangements to resolve any delinquent or default situation over the shortest possible time frame. As a general rule, loans 90 days or more past due with respect to principal or interest are classified as nonaccrual loans. 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. The following table shows information regarding nonaccrual loans as of the dates indicated: Nonaccrual Balances September 30, 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 (Dollars in thousands) Commercial and industrial $ 375 $ 11,652 $ 12,027 $ 19,890 $ 298 $ 20,188 Commercial real estate 77,951 — 77,951 11,911 11,041 22,952 Small business 501 — 501 394 4 398 Residential real estate 9,744 — 9,744 7,634 — 7,634 Home equity 3,992 — 3,992 3,171 — 3,171 Other consumer 33 — 33 40 — 40 Total nonaccrual loans $ 92,596 $ 11,652 $ 104,248 $ 43,040 $ 11,343 $ 54,383 (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, or reflect partially charged-off loans, with no risk of further loss. 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 and nine months ended September 30, 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 $ 95,000 and $ 62,000 for the three months ended September 30, 2024 and 2023, respectively, and $ 594,000 and $ 487,000 for the nine months ended September 30, 2024 and 2023, respectively. The following table shows information regarding foreclosed residential real estate property at the dates indicated: September 30, 2024 December 31, 2023 (Dollars in thousands) Foreclosed residential real estate property held by the creditor $ 110 $ 110 Recorded investment in mortgage loans collateralized by residential real estate property that are in the process of foreclosure $ 1,686 $ 1,697 24 Table of Contents The following tables show the age analysis of past due financing receivables as of the dates indicated: September 30, 2024 30-59 days 60-89 days 90 days or more Total Past Due Total Financing Receivables (2) Number of Loans Principal Balance Number of Loans Principal Balance Number of Loans Principal Balance Number of Loans Principal Balance Current (Dollars in thousands) Loan Portfolio Commercial and industrial 3 $ 200 — $ — 5 $ 12,005 8 $ 12,205 $ 1,565,656 $ 1,577,861 Commercial real estate 5 1,839 3 2,056 3 20,657 11 24,552 8,137,468 8,162,020 Commercial construction — — — — — — — — 742,042 742,042 Small business 11 397 5 71 8 153 24 621 269,397 270,018 Residential real estate 19 3,624 8 1,597 9 1,617 36 6,838 2,435,021 2,441,859 Home equity 13 1,392 4 217 10 1,937 27 3,546 1,126,889 1,130,435 Other consumer (1) 421 264 7 24 2 15 430 303 36,269 36,572 Total 472 $ 7,716 27 $ 3,965 37 $ 36,384 536 $ 48,065 $ 14,312,742 $ 14,360,807 December 31, 2023 30-59 days 60-89 days 90 days or more Total Past Due Total Financing Receivables (2) Number of Loans Principal Balance Number of Loans Principal Balance Number of Loans Principal Balance Number of Loans Principal Balance Current (Dollars in thousands) Loan Portfolio Commercial and industrial 6 $ 398 1 $ 17,538 2 $ 673 9 $ 18,609 $ 1,561,377 $ 1,579,986 Commercial real estate 8 14,674 2 8,419 3 7,279 13 30,372 8,011,136 8,041,508 Commercial construction — — — — — — — — 849,586 849,586 Small business 6 400 1 20 6 243 13 663 251,293 251,956 Residential real estate 24 6,216 7 2,187 13 1,573 44 9,976 2,414,778 2,424,754 Home equity 23 1,640 4 1,238 10 529 37 3,407 1,094,219 1,097,626 Other consumer (1) 413 288 14 31 6 8 433 327 32,327 32,654 Total 480 $ 23,616 29 $ 29,433 40 $ 10,305 549 $ 63,354 $ 14,214,716 $ 14,278,070 (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 $ 6.2 million and $ 6.4 million at September 30, 2024 and December 31, 2023, respectively. Net unamortized discounts on acquired loans included in the ending balance were $ 8.3 million and $ 8.6 million at September 30, 2024 and December 31, 2023, respectively. 25 Table of Contents Loan Modifications The following tables present the period end amortized cost basis of loans modified to borrowers experiencing financial difficulty during the periods indicated, disaggregated by class of financing receivable, type of modification granted and the financial effect of the modifications: Three Months Ended September 30, 2024 Amortized Cost Basis % of Total Class of Financing Receivable Financial Effect (Dollars in thousands) Term Extension Commercial and industrial $ 5,985 0.38 % Added a weighted-average contractual term of 4 months to the life of the loans Commercial real estate 4,507 0.06 % Added a weighted-average contractual term of 5 months to the life of the loans Total $ 10,492 Nine Months Ended September 30, 2024 Amortized Cost Basis % of Total Class of Financing Receivable Financial Effect (Dollars in thousands) Term Extension Commercial and industrial $ 8,368 0.53 % Added a weighted-average contractual term of 7 months to the life of the loans Commercial real estate 37,380 0.46 % Added a weighted-average contractual term of 1 year to the life of the loans Commercial construction 3,488 0.47 % Added a weighted-average contractual term of 10 months to the life of the loans Residential real estate 297 0.01 % Extended the contractual term on one loan by 6.2 years Total $ 49,533 Interest Rate Reduction Small business $ 42 0.02 % Reduced contractual rate on one loan from 11.00 % to 8.20 % Home equity 64 0.01 % Reduced contractual rate on one loan from 7.99 % to 7.00 % Total $ 106 26 Table of Contents Term Extension and Interest Rate Reduction Commercial and industrial $ 97 0.01 % Extended the contractual term on one loan by 1.5 years and reduced the interest rate from 10.10 % to 7.20 % Small business 34 0.01 % Extended the contractual term on one loan by 2.5 years and reduced the interest rate from 10.25 % to 6.50 % Home equity 69 0.01 % Extended the contractual term on one loan by 8.1 years and reduced the interest rate from 10.00 % to 6.80 % Total $ 200 Other Than Insignificant Payment Delay Commercial and industrial $ 1,809 0.11 % Modification was made with minimal financial effect Commercial real estate 6,350 0.08 % Modification was made with minimal financial effect Total $ 8,159 Total Outstanding Modified $ 57,998 Three Months Ended September 30, 2023 Amortized Cost Basis % of Total Class of Financing Receivable Financial Effect (Dollars in thousands) Term Extension Commercial and industrial $ 7,915 0.48 % Added a weighted-average contractual term of 2 months to the life of the loans Commercial real estate 719 0.01 % Added a weighted-average contractual term of 2.9 years to the life of the loans Total $ 8,634 Nine Months Ended September 30, 2023 Amortized Cost Basis % of Total Class of Financing Receivable Financial Effect (Dollars in thousands) Term Extension Commercial and industrial $ 16,108 0.97 % Added a weighted-average contractual term of 2 months to the life of the loans Commercial real estate 19,180 0.24 % Added a weighted-average contractual term of 1.8 years to the life of the loans Commercial construction 2,369 0.25 % Added a weighted-average contractual term of 2 months to the life of the loans Small business 105 0.04 % Added a weighted-average contractual term of 4.3 years to the life of the loans Total $ 37,762 Other Than Insignificant Payment Delay Commercial and industrial $ 2,805 0.17 % Modification was made with minimal financial effect Commercial real estate 7,013 0.09 % Modification was made with minimal financial effect 27 Table of Contents Total $ 9,818 Term Extension and Interest Rate Reduction Small business $ 44 0.02 % Reduced the contractual interest rate on one loan from 10.00 % to 6.50 %; the financial effect of term extensions are included in term extension table shown above Total $ 44 Term Extension and Other Than Insignificant Payment Delay Commercial and industrial $ 1,965 0.12 % The financial effects of term extensions are included in term extension table above, while the payment delay modifications had minimal financial effect Commercial real estate 6,857 0.09 % The financial effects of term extensions are included in term extension table above, while the payment delay modifications had minimal financial effect Total $ 8,822 Total Outstanding Modified $ 56,446 28 Table of Contents 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 tables depict the amortized cost and payment status of loans that were modified during the previous 12 months as of the periods indicated: September 30, 2024 Payment Status (Amortized Cost Basis) Current 30-89 Days Past Due 90+ Days Past Due (Dollars in thousands) Loan Type Commercial and industrial $ 10,467 $ — $ — Commercial real estate 43,731 — — Commercial construction 3,488 — — Small business 146 34 — Residential real estate 297 — — Home equity 133 — — Total $ 58,262 $ 34 $ — September 30, 2023 Payment Status (Amortized Cost Basis) Current 30-89 Days Past Due 90+ Days Past Due (Dollars in thousands) Loan Type Commercial and industrial $ 7,409 $ 504 $ — Commercial real estate 16,252 660 — Small business 140 — — Total $ 23,801 $ 1,164 $ — The Company considers a loan to have defaulted when it reaches 90 days past due. At September 30, 2024, there were no loans modified to borrowers experiencing financial difficulty during the previous 12 months that subsequently defaulted during the three or nine months then ended. 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 both September 30, 2024 and September 30, 2023, the Company had no additional commitments to lend to borrowers experiencing financial difficulty whose loans were modified and included in the above tables for the three and nine months then ended. 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. 29 Table of Contents NOTE 4 - STOCK BASED COMPENSATION During the nine months ended September 30, 2024, the Company had the following activity related to stock based compensation: Time Vested Restricted Stock Awards The Company made the following awards of time vested restricted stock: Date Shares Granted Plan Grant Date Fair Value Per Share Vesting Period 2/22/2024 106,200 2023 Omnibus Incentive Plan $ 52.73 Ratably over 3 years from grant date 4/15/2024 1,650 2023 Omnibus Incentive Plan $ 48.49 Ratably over 3 years from grant date 5/21/2024 11,340 2018 Non-Employee Director Stock Plan $ 52.94 Shares vested immediately 8/15/2024 3,703 2023 Omnibus Incentive Plan $ 59.42 Ratably over 3 years from grant date 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 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 . 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 15, 2027. On March 14, 2024, the performance-based restricted stock awards that were awarded on February 18, 2021 vested at 80 % of the maximum target shares awarded, or 11,874 shares, net of forfeitures. 30 Table of Contents NOTE 5 - DERIVATIVE AND HEDGING ACTIVITIES The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally to manage the Company’s interest rate risk. Additionally, the Company enters into interest rate derivatives, foreign exchange contracts and risk participation agreements to accommodate the business requirements of its customers (“customer related positions”). The Company minimizes the market and liquidity risks of customer related positions by entering into similar offsetting positions with broker-dealers. Derivative instruments are carried at fair value in the Company’s financial statements. The accounting for changes in the fair value of a derivative instrument is dependent upon whether or not it qualifies as a hedge for accounting purposes, and further, by the type of hedging relationship. The Company does not enter into proprietary trading positions for any derivatives. The Company is subject to over-the-counter derivative clearing requirements which require certain derivatives to be cleared through central clearing houses. Accordingly, the Company clears certain derivative transactions through the Chicago Mercantile Exchange Clearing House (“CME”). This clearing house requires the Company to post initial and variation margin to mitigate the risk of non-payment, the latter of which is received or paid daily based on the net asset or liability position of the contracts. Interest Rate Positions The Company may utilize various interest rate derivatives as hedging instruments against interest rate risk associated with the Company’s borrowings and loan portfolios. An interest rate derivative is an agreement whereby one party agrees to pay a floating rate of interest on a notional principal amount in exchange for receiving a fixed rate of interest on the same notional amount, for a predetermined period of time, from a second party. The amounts relating to the notional principal amount are not actually exchanged. 31 Table of Contents 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, 2024 Weighted Average Rate Notional Amount Average Maturity Current Rate Received Pay Fixed Swap Rate Fair Value (in thousands) (in years) (in thousands) Interest rate swaps on borrowings $ 400,000 1.83 5.24 % 3.67 % $ ( 1,106 ) Current Rate Paid Receive Fixed Swap Rate Interest rate swaps on loans 800,000 1.90 5.29 % 2.70 % ( 15,035 ) Current Rate Paid Receive Fixed Swap Rate Cap - Floor Interest rate collars on loans 200,000 1.68 5.43 % 3.40 % - 2.09 % ( 965 ) Total $ 1,400,000 $ ( 17,106 ) December 31, 2023 Weighted Average Rate Notional Amount Average Maturity Current Rate 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 Current Rate Paid Receive Fixed Swap Rate Interest rate swaps on loans 850,000 2.50 5.36 % 2.72 % ( 27,350 ) Current Rate Paid Receive Fixed Swap Rate Cap - Floor Interest rate collars on loans 350,000 1.48 5.45 % 3.09 % - 2.12 % ( 4,714 ) Total $ 1,600,000 $ ( 30,163 ) 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 4.5 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 and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. The Company expects approximately $ 419,000 (pre-tax) to be reclassified as an increase to net interest income and $ 9.0 million (pre-tax) to be reclassified as a decrease to net interest income, from other comprehensive income related to the Company’s cash flow hedges in the twelve months following September 30, 2024. 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, 2024. The Company had no fair value hedges as of September 30, 2024 or December 31, 2023. 32 Table of Contents Customer Related Positions Loan level derivatives, primarily interest rate swaps, offered to commercial borrowers through the Company’s loan level derivative program do not qualify as hedges for accounting purposes. The Company believes that its exposure to commercial customer derivatives is limited because these contracts are simultaneously matched at inception with an offsetting dealer transaction. Derivatives with dealer counterparties are then either cleared through a clearinghouse or settled directly with a single counterparty. The commercial customer derivative program allows the Company to retain variable-rate commercial loans while allowing the customer to synthetically fix the loan rate by entering into a variable-to-fixed interest rate swap. The amounts relating to the notional principal amount are not actually exchanged. Foreign exchange contracts offered to commercial borrowers through the Company’s derivative program do not qualify as hedges for accounting purposes. The Company acts as a seller and buyer of foreign exchange contracts to accommodate its customers. To mitigate the market and liquidity risk associated with these derivatives, the Company enters into similar offsetting positions. The amounts relating to the notional principal amount are exchanged. The Company has entered into risk participation agreements with other dealer banks in commercial loan agreements. Participating banks guarantee the performance on borrower-related interest rate swap contracts. These derivatives are not designated as hedges and, therefore, changes in fair value are recognized in earnings. Under a risk participation-out agreement, a derivative asset, the Company participates out a portion of the credit risk associated with the interest rate swap position executed with the commercial borrower for a fee paid to the participating bank. 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. 33 Table of Contents 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 Number of Positions (1) Less than 1 year Less than 2 years Less than 3 years Less than 4 years Thereafter Total Fair Value September 30, 2024 (Dollars in thousands) Loan level swaps Receive fixed, pay variable 275 $ 231,770 $ 209,148 $ 266,673 $ 140,679 $ 936,347 $ 1,784,617 $ ( 54,720 ) Pay fixed, receive variable 275 231,770 209,148 266,673 140,679 936,347 1,784,617 54,590 Foreign exchange contracts Buys foreign currency, sells U.S. currency 24 101,143 — — — — 101,143 1,374 Buys U.S. currency, sells foreign currency 24 101,143 — — — — 101,143 ( 1,325 ) Risk participation agreements Participation out 18 23,802 — 17,874 30,654 91,422 163,752 168 Participation in 12 — 13,016 23,023 15,469 — 51,508 ( 32 ) Notional Amount Maturing Number of Positions (1) Less than 1 year Less than 2 years Less than 3 years Less than 4 years Thereafter Total Fair Value December 31, 2023 (Dollars in thousands) Loan level swaps Receive fixed, pay variable 281 $ 80,682 $ 252,260 $ 223,928 $ 230,513 $ 997,108 $ 1,784,491 $ ( 88,415 ) Pay fixed, receive variable 281 80,682 252,260 223,928 230,513 997,108 1,784,491 88,280 Foreign exchange contracts Buys foreign currency, sells U.S. currency 22 65,586 12,957 — — — 78,543 2,197 Buys U.S. currency, sells foreign currency 22 65,586 12,957 — — — 78,543 ( 2,160 ) Risk participation agreements Participation out 17 — 24,193 — 13,119 114,027 151,339 200 Participation in 8 — — 13,016 18,989 15,725 47,730 ( 44 ) (1) The Company may enter into one dealer swap agreement which offsets multiple commercial borrower swap agreements. 34 Table of Contents Mortgage Derivatives The Company enters into commitments to fund residential mortgage loans at specified rates and times in the future, with the intention that loans may be sold subsequently in the secondary market. Mortgage loan commitments are referred to as derivative loan commitments if the loan that will result from exercise of the commitment will be held for sale upon funding. These commitments are recognized at fair value on the consolidated balance sheet in other assets and other liabilities with changes in their fair values recorded within mortgage banking income. In addition, the Company has elected the fair value option to carry loans held for sale at fair value. 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 $ 16,000 and $ 28,000 for the three months ended September 30, 2024 and 2023, respectively. For the respective nine months ended September 30, 2024 and 2023, the fair value of loans held for sale increased by $ 167,000 and decreased by $ 31,000 . These amounts were offset in earnings by the change in the fair value of mortgage derivatives. Outstanding loan commitments expose the Company to the risk that the price of the loans arising from exercise of the loan commitment might change from inception of the rate lock to funding of the loan due to changes in mortgage interest rates. If interest rates increase, the value of these loan commitments decreases. Conversely, if interest rates decrease, the value of these loan commitments increases. To protect against the price risk inherent in derivative loan commitments, the Company utilizes both “mandatory delivery” and “best efforts” forward loan sale commitments to mitigate the risk of potential decreases in the values of loans that would result from the exercise of the derivative loan commitments. Mandatory delivery contracts are accounted for as derivative instruments. Included in the mandatory delivery forward commitments are To Be Announced securities (“TBAs”). Certain assumptions, including pull through rates and rate lock periods, are used in managing the existing and future hedges. The accuracy of underlying assumptions will impact the ultimate effectiveness of any hedging strategies. With mandatory delivery contracts, the Company commits to deliver a certain principal amount of mortgage loans to an investor at a specified price on or before a specified date. If the Company fails to deliver the amount of mortgages necessary to fulfill the commitment by the specified date, it is obligated to pay a “pair-off” fee, based on then-current market prices, to the investor/counterparty to compensate the investor for the shortfall. Generally, the Company makes this type of commitment once mortgage loans have been funded and are held for sale, in order to minimize the risk of failure to deliver the requisite volume of loans to the investor and paying pair-off fees as a result. The Company also sells TBA securities to offset potential changes in the fair value of derivative loan commitments. Generally, the Company sells TBA securities by entering into derivative loan commitments for settlement in 30 to 90 days. The Company expects that mandatory delivery contracts, including TBA securities, will experience changes in fair value opposite to the changes in the fair value of derivative loan commitments. With best effort contracts, the Company commits to deliver an individual mortgage loan of a specified principal amount and quality to an investor if the loan to the underlying borrower closes. Generally, best efforts cash contracts have no pair off risk regardless of market movement. The price the investor will pay the seller for an individual loan is specified prior to the loan being funded (e.g., on the same day the lender commits to lend funds to a potential borrower). 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 mortgage loans included within mortgage banking income was $ 1.7 million and $ 333,000 for the three months ended September 30, 2024 and 2023, respectively, and $ 3.2 million and $ 677,000 for the nine months ended September 30, 2024 and 2023, respectively. Balance Sheet Offsetting The Company does not offset fair value amounts recognized for derivative instruments. The Company does net the amount recognized for the right to reclaim cash collateral against the obligation to return cash collateral arising from derivative instruments executed with the same counterparty under a master netting arrangement. Collateral legally required to be maintained at dealer banks by the Company is monitored and adjusted as necessary. A daily settlement occurs through the CME for changes in the fair value of centrally cleared derivatives. Not all of the derivatives are required to be cleared through the daily clearing agent. As a result, the total fair values of loan level derivative assets and liabilities recognized on the Company’s financial statements are not equal and offsetting. 35 Table of Contents The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the balance sheet and the potential effect of netting arrangements on its financial position, at the dates indicated: Asset Derivatives (1) Liability Derivatives (2) Fair Value at Fair Value at Fair Value at Fair Value at September 30 2024 December 31 2023 September 30 2024 December 31 2023 (Dollars in thousands) Derivatives designated as hedges Interest rate derivatives $ 379 (3) $ 1,927 (3) $ 17,485 (4) $ 32,090 (4) Derivatives not designated as hedges Customer Related Positions Loan level derivatives 76,598 (3) 99,416 (3) 76,728 (4) 99,551 (4) Foreign exchange contracts 1,405 2,220 1,356 2,183 Risk participation agreements 168 200 32 44 Mortgage Derivatives Interest rate lock commitments 430 168 — — Forward sale loan commitments 53 17 — — Forward sale hedge commitments — — 44 — Total derivatives not designated as hedges 78,654 102,021 78,160 101,778 Total 79,033 103,948 95,645 133,868 Netting Adjustments (5) ( 35,328 ) ( 48,253 ) 15,820 25,360 Net Derivatives on the Balance Sheet 43,705 55,695 79,825 108,508 Financial instruments (6) 9,557 12,018 9,557 12,018 Cash collateral pledged (received) ( 10,740 ) ( 17,076 ) 2,796 — Net Derivative Amounts $ 23,408 $ 26,601 $ 67,472 $ 96,490 (1) All asset derivatives are reflected in other assets on the balance sheet. (2) All liability derivatives are reflected in other liabilities on the balance sheet. (3) Approximately $ 96,000 of accrued interest payable and $ 2.1 million of accrued interest receivable is included in the fair value of interest rate and loan level derivative assets, respectively, at September 30, 2024, in comparison to accrued interest receivable of approximately $ 316,000 and $ 3.0 million, respectively, at December 31, 2023. (4) Approximately $ 777,000 and $ 2.1 million of accrued interest payable is included in the fair value of interest rate and loan level derivative liabilities, respectively, at September 30, 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. (6) Reflects offsetting derivative positions with the same counterparty that are not netted on the balance sheet. 36 Table of Contents 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 2024 2023 2024 2023 (Dollars in thousands) Derivatives designated as hedges Gain in OCI on derivatives (effective portion), net of tax $ 8,753 $ 202 $ 9,000 $ 4,917 Loss reclassified from OCI into interest income or interest expense (effective portion) $ ( 4,902 ) $ ( 7,547 ) $ ( 15,788 ) $ ( 20,806 ) Derivatives not designated as hedges Changes in fair value of customer related positions Other income $ 76 $ 29 $ 142 $ 399 Other expense ( 14 ) ( 300 ) ( 119 ) ( 585 ) Changes in fair value of mortgage derivatives Mortgage banking income ( 114 ) ( 6 ) 254 146 Total $ ( 52 ) $ ( 277 ) $ 277 $ ( 40 ) The Company’s derivative agreements with institutional counterparties contain various credit-risk related contingent provisions, such as requiring the Company to maintain a well-capitalized capital position. 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, 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. Should a counterparty fail to perform under the terms of a derivative contract, the Company’s credit exposure on interest rate swaps is limited to the net positive fair value and accrued interest of all swaps with each counterparty. The Company seeks to minimize counterparty credit risk through credit approvals, limits, monitoring procedures, and obtaining collateral, where appropriate. Institutional counterparties must have an investment grade credit rating and be approved by the Company’s Board of Directors. 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 $ 66.0 million and $ 95.8 million at September 30, 2024 and December 31, 2023, respectively. The Company’s exposure relating to customer counterparties was approximately $ 11.0 million and $ 5.6 million at September 30, 2024 and December 31, 2023, respectively. Credit exposure may be reduced by the value of collateral pledged by the counterparty. NOTE 6 - FAIR VALUE MEASUREMENTS Fair value is a market-based measure considered from the perspective of a market participant rather than an entity-specific measure. Therefore, even when market assumptions are not readily available, the assumptions applied by the Company when determining fair value reflect those that the Company determines market participants would use to price the asset or liability at the measurement date. 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 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. In periods of market dislocation, the observability of prices and other inputs may be reduced for certain instruments, or not available at all. The unavailability or reduced availability of pricing or other input information could cause an instrument to be reclassified from one level to another. The Fair Value Measurements and Disclosures Topic of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“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 37 Table of Contents measurements). The three levels of the fair value hierarchy under the Fair Value Measurements and Disclosures Topic of the FASB ASC are described below: Level 1 – Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2 – Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly. Level 3 – Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation Techniques There were no changes in the valuation techniques used during the nine months ended September 30, 2024. Securities Trading and Equity Securities These equity securities are valued based on market quoted prices. These securities are categorized in Level 1 as they are actively traded and no valuation adjustments have been applied. U.S. Government Agency and U.S. Treasury Securities Fair value is estimated using either multi-dimensional spread tables or benchmarks. The inputs used include benchmark yields, reported trades, and broker/dealer quotes. These securities are classified as Level 2. Agency Mortgage-Backed Securities Fair value is estimated using either a matrix or benchmarks. The inputs used include benchmark yields, reported trades, broker/dealer quotes, and issuer spreads. These securities are categorized as Level 2. Agency Collateralized Mortgage Obligations and Small Business Administration Pooled Securities The valuation model for these securities is volatility-driven and ratings based, and uses multi-dimensional spread tables. The inputs used include benchmark yields, reported trades, new issue data, broker dealer quotes, and collateral performance. If there is at least one significant model assumption or input that is not observable, these securities are categorized as Level 3 within the fair value hierarchy; otherwise, they are classified as Level 2. State, County, and Municipal Securities The fair value is estimated using a valuation matrix with inputs including bond interest rate tables, recent transactions, and yield relationships. These securities are categorized as Level 2. Single and Pooled Issuer Trust Preferred Securities The fair value of trust preferred securities, including pooled and single issuer preferred securities, is estimated using external pricing models, discounted cash flow methodologies or similar techniques. The inputs used in these valuations include benchmark yields, reported trades, new issue data, broker dealer quotes, and collateral performance. If there is at least one significant model assumption or input that is not observable, these securities are classified as Level 3 within the fair value hierarchy; otherwise, they are classified as Level 2. Loans Held for Sale The Company has elected the fair value option to account for originated closed loans intended for sale. The fair value is measured on an individual loan basis using quoted market prices and when not available, comparable market value or discounted cash flow analysis may be utilized. These assets are typically classified as Level 2. 38 Table of Contents Derivative Instruments Derivatives 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 volatilities. The Company incorporates credit valuation adjustments to appropriately reflect nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings. Additionally, in conjunction with fair value measurement guidance, the Company has made an accounting policy election to measure the credit risk of its derivative financial instruments that are subject to master netting agreements on a net basis by counterparty portfolio. 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, 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. Mortgage Derivatives The fair value of mortgage derivatives is determined based on current market prices for similar assets in the secondary market and, therefore, classified as Level 2 within the fair value hierarchy. Individually Assessed Collateral Dependent Loans In accordance with the CECL standard, expected credit losses on individually assessed loans deemed to be collateral dependent are valued based upon the lower of amortized cost or fair value of the underlying collateral less costs to sell. The inputs used in the appraisals of the collateral are not always observable, and in such cases the loans may be classified as Level 3 within the fair value hierarchy; otherwise, they are classified as Level 2. Other Real Estate Owned and Other Foreclosed Assets 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. Certain inputs used in appraisals are not always observable, and therefore OREO and Other Foreclosed Assets may be classified as Level 3 within the fair value hierarchy. Goodwill and Other Intangible Assets Goodwill and other intangible assets are subject to impairment testing. The Company conducts an annual impairment test of goodwill in the third quarter of each year, or more frequently if necessary. Other intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. To estimate the fair value of goodwill and, if necessary, other intangible assets, the Company utilizes both a comparable analysis of relevant price multiples in recent market transactions and a discounted cash flow analysis. Both valuation models require a significant degree of management judgment. In the event the fair value as determined by the valuation model is less than the carrying value, the intangibles may be impaired. If the impairment testing resulted in impairment, the Company would classify the impaired goodwill and other intangible assets subjected to nonrecurring fair value adjustments as Level 3. 39 Table of Contents Assets and liabilities measured at fair value on a recurring and nonrecurring basis were as follows at the dates indicated: Fair Value Measurements at Reporting Date Using Balance Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) September 30, 2024 (Dollars in thousands) Recurring fair value measurements Assets Trading securities $ 4,410 $ 4,410 $ — $ — Equity securities 21,639 21,639 — — Securities available for sale U.S. government agency securities 213,084 — 213,084 — U.S. treasury securities 640,913 — 640,913 — Agency mortgage-backed securities 317,709 — 317,709 — Agency collateralized mortgage obligations 30,639 — 30,639 — State, county, and municipal securities 196 — 196 — Pooled trust preferred securities issued by banks and insurers 1,027 — 1,027 — Small business administration pooled securities 43,643 — 43,643 — Loans held for sale 16,259 — 16,259 — Derivative instruments 79,033 — 79,033 — Liabilities Derivative instruments 95,645 — 95,645 — Total recurring fair value measurements $ 1,272,907 $ 26,049 $ 1,246,858 $ — Nonrecurring fair value measurements Assets Individually assessed collateral dependent loans (1) $ 50,772 $ — $ — $ 50,772 Total nonrecurring fair value measurements $ 50,772 $ — $ — $ 50,772 40 Table of Contents Fair Value Measurements at Reporting Date Using Balance Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) December 31, 2023 (Dollars in thousands) Recurring fair value measurements Assets Trading securities $ 4,987 $ 4,987 $ — $ — Equity securities 22,510 22,510 — — Securities available for sale U.S. government agency securities 207,138 — 207,138 — U.S. treasury securities 769,102 — 769,102 — Agency mortgage-backed securities 277,047 — 277,047 — Agency collateralized mortgage obligations 33,189 — 33,189 — State, county, and municipal securities 190 — 190 — Pooled trust preferred securities issued by banks and insurers 1,018 — 1,018 — Small business administration pooled securities 46,572 — 46,572 — Loans held for sale 6,368 — 6,368 — Derivative instruments 103,948 — 103,948 — Liabilities Derivative instruments 133,868 — 133,868 — Total recurring fair value measurements, net $ 1,338,201 $ 27,497 $ 1,310,704 $ — Nonrecurring fair value measurements Assets Individually assessed collateral dependent loans (1) $ 28,881 $ — $ — $ 28,881 Total nonrecurring fair value measurements $ 28,881 $ — $ — $ 28,881 (1) The carrying value of individually assessed collateral dependent loans is based on the lower of amortized cost or fair value of the underlying collateral less costs to sell. The fair value of the underlying collateral is generally determined through independent appraisals, which generally include various Level 3 inputs which are not identifiable. Appraisals may be adjusted by management for qualitative factors such as economic factors and estimated liquidation expenses. The range of these possible adjustments may vary. 41 Table of Contents The estimated fair values and related carrying amounts for assets and liabilities for which fair value is only disclosed are shown below at the dates indicated: Fair Value Measurements at Reporting Date Using Carrying Value Fair Value Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) September 30, 2024 (Dollars in thousands) Financial assets Securities held to maturity (a) U.S. government agency securities $ 28,218 $ 28,062 $ — $ 28,062 $ — U.S. treasury securities 100,772 94,190 — 94,190 — Agency mortgage-backed securities 798,919 751,519 — 751,519 — Agency collateralized mortgage obligations 437,552 380,343 — 380,343 — Single issuer trust preferred securities issued by banks 1,500 1,451 — 1,451 — Small business administration pooled securities 125,354 121,900 — 121,900 — Loans, net of allowance for credit losses (b) 14,146,339 13,193,575 — — 13,193,575 Federal Home Loan Bank stock (c) 29,926 29,926 — 29,926 — Cash surrender value of life insurance policies (d) 302,132 302,132 — 302,132 — Financial liabilities Deposit liabilities, other than time deposits (e) $ 12,677,604 $ 12,677,604 $ — $ 12,677,604 $ — Time certificates of deposits (f) 2,763,419 2,758,600 — 2,758,600 — Federal Home Loan Bank borrowings (f) 600,521 600,733 — 600,733 — Junior subordinated debentures (g) 62,859 61,160 — 61,160 — 42 Table of Contents Fair Value Measurements at Reporting Date Using Carrying Value Fair Value Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) December 31, 2023 (Dollars in thousands) Financial assets Securities held to maturity (a) U.S. government agency securities $ 29,521 $ 28,408 $ — $ 28,408 $ — U.S. treasury securities 100,712 91,535 — 91,535 — Agency mortgage-backed securities 829,431 763,728 — 763,728 — Agency collateralized mortgage obligations 477,517 407,911 — 407,911 — Single issuer trust preferred securities issued by banks 1,500 1,373 — 1,373 — Small business administration pooled securities 130,426 124,653 — 124,653 — Loans, net of allowance for credit losses (b) 14,106,967 13,079,368 — — 13,079,368 Federal Home Loan Bank stock (c) 43,557 43,557 — 43,557 — Cash surrender value of life insurance policies (d) 297,387 297,387 — 297,387 — Financial liabilities Deposit liabilities, other than time deposits (e) $ 12,684,068 $ 12,684,068 $ — $ 12,684,068 $ — Time certificates of deposits (f) 2,181,479 2,166,573 — 2,166,573 — Federal Home Loan Bank borrowings (f) 1,105,541 1,103,845 — 1,103,845 — Junior subordinated debentures (g) 62,858 58,911 — 58,911 — Subordinated debentures (f) 49,980 49,613 — — 49,613 (a) The fair values presented are based on quoted market prices, where available. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments and/or discounted cash flow analysis. (b) Fair value of loans is measured using the exit price valuation method, determined primarily by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities or cash flows, while incorporating liquidity and credit assumptions. Additionally, this amount excludes individually assessed collateral dependent loans, which are deemed to be marked to fair value on a nonrecurring basis. (c) Federal Home Loan Bank stock has no quoted market value and is carried at cost; therefore, the carrying amount approximates fair value. (d) Cash surrender value of life insurance policies is recorded at its cash surrender value (or the amount that can be realized upon surrender of the policy), therefore, carrying amount approximates fair value. (e) Fair value of demand deposits, savings and interest checking accounts and money market deposits is the amount payable on demand at the reporting date. (f) Fair value was determined by discounting anticipated future cash payments using rates currently available for instruments with similar remaining maturities. (g) Fair value was determined based upon market prices of securities with similar terms and maturities. This summary excludes certain financial assets and liabilities for which the carrying value approximates fair value. For financial assets, these may include cash and due from banks, federal funds sold and short-term investments. For financial liabilities, these may include federal funds purchased. These instruments would all be considered to be classified as Level 1 within the fair value hierarchy. Also excluded from the summary are financial instruments measured at fair value on a recurring and nonrecurring basis, as previously described. The Company considers its current use of financial instruments to be the highest and best use of the instruments. 43 Table of Contents NOTE 7 - REVENUE RECOGNITION 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 accounts for such revenues in accordance with ASC 606 - Revenue from Contracts with Customers and 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: 1. Identify the contract(s) with customers 2. Identify the performance obligations 3. Determine the transaction price 4. Allocate the transaction price to the performance obligations 5. Recognize revenue when (or as) the entity satisfies a performance obligation The Company has disaggregated its revenue from contracts with customers into categories that depict how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors. The following table presents the revenue streams that the Company has disaggregated as of the periods indicated: Three Months Ended Nine Months Ended September 30 2024 September 30 2023 September 30 2024 September 30 2023 (Dollars in thousands) Deposit account fees (inclusive of cash management fees) $ 6,779 $ 5,936 $ 19,339 $ 17,360 Interchange fees 3,259 3,026 9,255 8,822 ATM fees 1,241 1,202 3,449 3,140 Investment management - wealth management and advisory services 9,664 8,674 28,378 25,717 Investment management - retail investments and insurance revenue 1,369 1,572 3,583 4,656 Payment processing income 434 370 1,421 1,272 Credit card income 592 536 1,721 1,584 Other noninterest income 1,519 1,407 3,999 4,412 Total noninterest income in-scope of ASC 606 24,857 22,723 71,145 66,963 Total noninterest income out-of-scope of ASC 606 8,692 10,820 24,677 25,579 Total noninterest income $ 33,549 $ 33,543 $ 95,822 $ 92,542 In each of the revenue streams identified above, there were no significant judgments made in determining or allocating the transaction price, as the consideration and service requirements are generally explicitly identified in the associated contracts. Additional information related to each of the revenue streams is further noted below. Deposit Account Fees The Company offers various deposit account products to its customers governed by specific deposit agreements applicable to either personal customers or business customers. These agreements identify the general conditions and obligations of both parties, and include standard information regarding deposit account related fees. Deposit account services include providing access to deposit accounts as well as access to the various deposit transactional services of the Company. These transactional services are primarily those that are identified in the standard fee schedule, and include, but are not limited to, services such as overdraft protection, wire transfer, and check collection. Revenue is recognized in conjunction with the various services being provided. For example, the Company may assess monthly fixed service fees associated with the customer having access to a deposit account, which can vary depending on the account type and daily account balance. In addition, the Company may also assess separate fixed fees associated with and at the time specific transactions are entered into by the customer. As such, the Company considers its performance obligations to be met concurrently with providing the account access or completing the requested deposit transaction. 44 Table of Contents Cash Management Cash management services are a subset of the Deposit account fees revenue stream. These services primarily include ACH transaction processing, positive pay and remote deposit services. These services are also governed by separate agreements entered into with the customer. The fee arrangement for these services is structured to assess fees under one of two scenarios, either a per transaction fee arrangement or an earnings credit analysis arrangement. Under the per transaction fee arrangement, fixed fees are assessed concurrently with customers executing the transactions, and as such, the Company considers its performance obligations to be met concurrently with completing the requested transaction. Under the earnings credit analysis arrangement, the Company provides a monthly earnings credit to the customer that is negotiated and determined based on various factors. The credit is then available to absorb the per transaction fees that are assessed on the customer's deposit account activity for the month. Any amount of the transactional fees in excess of the earnings credit is recognized as revenue in that month. Interchange Fees The Company earns interchange revenue from its issuance of credit and debit cards granted through its membership in various card payment networks. The Company provides credit cards and debit cards to its customers which are authorized and settled through these payment networks, and in exchange, the Company earns revenue as determined by each payment network's interchange program. The revenue is recognized concurrently with the settlement of card transactions within each network. ATM Fees The Company deploys automated teller machines (ATMs) as part of its overall branch network. Certain transactions performed at the ATMs require customers to acknowledge and pay a fee for the requested service. Certain ATM fees are disclosed in the deposit account agreement fee schedules, whereas those assessed to non-Rockland Trust deposit holders are solely determined during the transaction at the machine. The ATM fee is a fixed dollar per transaction amount, and as such, is recognized concurrently with the overall daily processing and settlement of the ATM activity. Investment Management - Wealth Management and Advisory Services The Company offers investment management and trust services to individuals, institutions, small businesses and charitable institutions. Each investment management product is governed by its own contract along with a separate identifiable fee schedule unique to that product. The Company also offers additional services, such as estate settlement, financial planning, tax services and other special services quoted at the client's request. 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. As such, all revenue is recognized in correlation to the monthly management fee determinations or as transactional services are provided. Due to the fact that payments are primarily made subsequent to the valuation period, the Company records a receivable for revenue earned but not received. The following table provides the amount of investment management revenue earned but not received as of the dates indicated: September 30, 2024 December 31, 2023 (Dollars in thousands) Receivables, included in other assets $ 5,794 $ 5,509 Investment Management - Retail Investments and Insurance Revenue 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 45 Table of Contents products and services. To a lesser degree, production bonus commissions can also be earned based upon the Company meeting certain volume thresholds. 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. 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. 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 The Company provides consumer and business credit card solutions to its customers by soliciting new accounts on behalf of a third party credit card provider in exchange for a fee. The income earned is comprised of new account incentive payments as well as a percentage of interchange income earned by the third party provider offering the consumer and business purpose revolving credit accounts. The credit card income is recognized in conjunction with the establishment of each new credit card member or as the interchange is earned by the third party in connection with net purchase transactions made by the credit card member. Other Noninterest Income The Company earns various types of other noninterest income that fall within the scope of the new revenue recognition rules, and have been aggregated into one general revenue stream in the table noted above. This amount includes, but is not limited to, the following types of revenue with customers: Safe Deposit Rent The Company rents out the use of safe deposit boxes to its customers, which can be accessed when the bank is open for business. The safe deposit box rental fee is paid upfront and is recognized as revenue ratably over the annual term of the contract. Foreign Currency The Company earns fee income associated with various transactions related to foreign currency product offerings, including foreign currency bank notes and drafts and foreign currency wires. The majority of this income is derived from commissions earned related to customers executing the above-mentioned foreign currency transactions through arrangements with third party correspondents. 46 Table of Contents NOTE 8 - OTHER COMPREHENSIVE INCOME (LOSS) The following tables present a reconciliation of the changes in the components of other comprehensive income (loss) for the periods indicated, including the amount of income tax (expense) benefit allocated to each component of other comprehensive income (loss): Three Months Ended September 30, 2024 Nine Months Ended September 30, 2024 Pre-Tax Amount Tax (Expense) Benefit After Tax Amount Pre-Tax Amount Tax (Expense) Benefit After Tax Amount (Dollars in thousands) Change in fair value of securities available for sale $ 36,678 $ ( 8,392 ) $ 28,286 $ 38,084 $ ( 9,414 ) $ 28,670 Less: net security losses reclassified into other noninterest expense — — — — — — Net change in fair value of securities available for sale 36,678 ( 8,392 ) 28,286 38,084 ( 9,414 ) 28,670 Change in fair value of cash flow hedges 7,144 ( 1,953 ) 5,191 ( 3,402 ) 930 ( 2,472 ) Less: net cash flow hedge losses reclassified into interest income or interest expense ( 4,902 ) 1,340 ( 3,562 ) ( 15,788 ) 4,316 ( 11,472 ) Net change in fair value of cash flow hedges 12,046 ( 3,293 ) 8,753 12,386 ( 3,386 ) 9,000 Amortization of net actuarial gains ( 24 ) 6 ( 18 ) ( 74 ) 20 ( 54 ) Amortization of net prior service costs 4 ( 2 ) 2 13 ( 4 ) 9 Net change in other comprehensive income for defined benefit postretirement plans (1) ( 20 ) 4 ( 16 ) ( 61 ) 16 ( 45 ) Total other comprehensive income (loss) $ 48,704 $ ( 11,681 ) $ 37,023 $ 50,409 $ ( 12,784 ) $ 37,625 Three Months Ended September 30, 2023 Nine Months Ended September 30, 2023 Pre-Tax Amount Tax (Expense) Benefit After Tax Amount Pre-Tax Amount Tax (Expense) Benefit After Tax Amount (Dollars in thousands) Change in fair value of securities available for sale $ ( 10,378 ) $ 2,457 $ ( 7,921 ) $ ( 3,186 ) $ 882 $ ( 2,304 ) Less: net security losses reclassified into other noninterest expense — — — — — — Net change in fair value of securities available for sale ( 10,378 ) 2,457 ( 7,921 ) ( 3,186 ) 882 ( 2,304 ) Change in fair value of cash flow hedges ( 7,266 ) 2,043 ( 5,223 ) ( 13,966 ) 3,927 ( 10,039 ) Less: net cash flow hedge losses reclassified into interest income or interest expense ( 7,547 ) 2,122 ( 5,425 ) ( 20,806 ) 5,850 ( 14,956 ) Net change in fair value of cash flow hedges 281 ( 79 ) 202 6,840 ( 1,923 ) 4,917 Amortization of net actuarial gains ( 137 ) 38 ( 99 ) ( 411 ) 115 ( 296 ) Amortization of net prior service costs 10 ( 3 ) 7 29 ( 8 ) 21 Net change in other comprehensive income for defined benefit postretirement plans (1) ( 127 ) 35 ( 92 ) ( 382 ) 107 ( 275 ) Total other comprehensive (loss) income $ ( 10,224 ) $ 2,413 $ ( 7,811 ) $ 3,272 $ ( 934 ) $ 2,338 (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. 47 Table of Contents Information on the Company’s accumulated other comprehensive income (loss), net of tax, is comprised of the following components as of the dates indicated: Unrealized Gain (Loss) on Securities Unrealized Gain (Loss) on Cash Flow Hedge Defined Benefit Postretirement Plans Accumulated Other Comprehensive Income (Loss) (Dollars in thousands) 2024 Beginning balance: January 1, 2024 $ ( 96,231 ) $ ( 20,575 ) $ 1,979 $ ( 114,827 ) Net change in other comprehensive income (loss) 28,670 9,000 ( 45 ) 37,625 Ending balance: September 30, 2024 $ ( 67,561 ) $ ( 11,575 ) $ 1,934 $ ( 77,202 ) 2023 Beginning balance: January 1, 2023 $ ( 128,657 ) $ ( 36,630 ) $ 2,203 $ ( 163,084 ) Net change in other comprehensive (loss) income ( 2,304 ) 4,917 ( 275 ) 2,338 Ending balance: September 30, 2023 $ ( 130,961 ) $ ( 31,713 ) $ 1,928 $ ( 160,746 ) NOTE 9 - COMMITMENTS AND CONTINGENCIES Financial Instruments with Off-Balance Sheet Risk In the normal course of business, the Company enters into various transactions to meet the financing needs of its customers, which, in accordance with GAAP, are not included in its consolidated balance sheets. These transactions include commitments to extend credit and standby letters of credit, and loan exposures with recourse, which involve, to varying degrees, elements of credit risk and interest rate risk in excess of the amounts recognized in the consolidated balance sheets. The Company minimizes its exposure to loss under these commitments by subjecting them to credit approval and monitoring procedures. The Company enters into contractual commitments to extend credit, normally with fixed expiration dates or termination clauses, at specified rates and for specific purposes. Substantially all of these commitments to extend credit are contingent upon customers maintaining specific credit standards at the time of loan funding. The Company has certain loan exposures for which there is recourse. These loan relationships could require the Company to repurchase or cover certain losses per agreements for certain loans that are either sold or referred to third parties. Standby letters of credit are written conditional commitments issued to guarantee the performance of a customer to a third party. In the event the customer does not perform in accordance with the terms of the agreement with the third party, the Company would be required to fund the commitment. The maximum potential amount of future payments the Company could be required to make is represented by the contractual amount of the commitment. If the commitment were funded, the Company would be entitled to seek recovery from the customer. The Company’s policies generally require that standby letter of credit arrangements contain security and debt covenants similar to those contained in loan agreements. The fees collected in connection with the issuance of standby letters of credit are representative of the fair value of the Company's obligation undertaken in issuing the guarantee. In accordance with applicable accounting standards related to guarantees, fees collected in connection with the issuance of standby letters of credit are deferred. The fees are then recognized in income proportionately over the life of the standby letter of credit agreement. The deferred standby letter of credit fees represent the fair value of the Company's potential obligations under the standby letter of credit guarantees. The following table summarizes the above financial instruments at the dates indicated: September 30, 2024 December 31, 2023 (Dollars in thousands) Commitments to extend credit $ 4,751,358 $ 4,632,105 Loan exposures sold with recourse 144,251 153,850 Standby letters of credit 23,484 21,427 Deferred standby letter of credit fees 224 155 48 Table of Contents Lease Commitments 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. There has been no significant change in the future minimum lease payments payable by the Company since December 31, 2023. See the Company's 2023 Form 10-K for information regarding leases and other commitments. Other Contingencies At September 30, 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. 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.