What changed in this filing

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Item 1. Financial Statements

2022-10-26 compared with 2022-08-03 · 117 added, 99 removed, 1056 unchanged (17% of the section changed)

1 unchanged sentence

CONSOLIDATED BALANCE SHEETS (dollars in thousands, except share data)

September 30,

2022 December 31,

24 unchanged sentences

90,000,000 shares authorized, no par value

25,816,997 shares issued and 25,345,162 outstanding as of June 30, 2022

25,825,127 shares issued and 25,350,134 outstanding as of September 30, 2022

25,777,609 shares issued and 25,300,793 outstanding as of December 31, 2021

2 unchanged sentences

Accumulated other comprehensive income (loss) ( 221,729 ) 16,093

Treasury stock at cost ( 471,835 shares as of June 30, 2022, 476,816 shares as of December 31, 2021)

Treasury stock at cost ( 474,993 shares as of September 30, 2022, 476,816 shares as of December 31, 2021)

( 15,309 ) ( 15,025 )

6 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

14 unchanged sentences

NET INTEREST INCOME 52,492 45,741 146,050 133,081

Provision (Reversal) for credit losses 0 ( 1,700 ) 417 ( 223 )

Provision for credit losses 0 1,300 417 1,077

NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES 52,492 44,441 145,633 132,004

7 unchanged sentences

Interest rate swap fee income 88 180 492 934

Mortgage banking income 351 415 860 1,788

Mortgage banking income (loss) ( 89 ) ( 32 ) 771 1,756

Net securities gains 0 0 0 797

20 unchanged sentences

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (unaudited - dollars in thousands)

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

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

2022 2021 2022 2021

24 unchanged sentences

Interest Total

Balance at April 1, 2021

Balance at July 1, 2021

25,289,966 $ 117,796 $ 552,063 $ 22,271 $ ( 14,748 ) $ 677,382 $ 89 $ 677,471

8 unchanged sentences

Stock based compensation expense 1,785 1,785 1,785

Balance at June 30, 2021 25,289,966 $ 117,796 $ 552,063 $ 22,271 $ ( 14,748 ) $ 677,382 $ 89 $ 677,471

Balance at April 1, 2022

Balance at September 30, 2021 25,299,178 $ 119,625 $ 567,518 $ 10,932 $ ( 14,962 ) $ 683,113 $ 89 $ 683,202

Balance at July 1, 2022

25,345,162 $ 123,571 $ 612,026 $ ( 158,534 ) $ ( 15,089 ) $ 561,974 $ 89 $ 562,063

8 unchanged sentences

Stock based compensation expense 2,093 2,093 2,093

Balance at June 30, 2022 25,345,162 $ 123,571 $ 612,026 $ ( 158,534 ) $ ( 15,089 ) $ 561,974 $ 89 $ 562,063

Six Months Ended

Balance at September 30, 2022 25,350,134 $ 125,832 $ 630,337 $ ( 221,729 ) $ ( 15,309 ) $ 519,131 $ 89 $ 519,220

Nine Months Ended

Common Stock Retained

16 unchanged sentences

Stock based compensation expense 6,135 6,135 6,135

Balance at June 30, 2021 25,289,966 $ 117,796 $ 552,063 $ 22,271 $ ( 14,748 ) $ 677,382 $ 89 $ 677,471

Balance at September 30, 2021

25,299,178 $ 119,625 $ 567,518 $ 10,932 $ ( 14,962 ) $ 683,113 $ 89 $ 683,202

Balance at January 1, 2022

9 unchanged sentences

Stock based compensation expense 6,713 6,713 6,713

Balance at June 30, 2022 25,345,162 $ 123,571 $ 612,026 $ ( 158,534 ) $ ( 15,089 ) $ 561,974 $ 89 $ 562,063

Balance at September 30, 2022

25,350,134 $ 125,832 $ 630,337 $ ( 221,729 ) $ ( 15,309 ) $ 519,131 $ 89 $ 519,220

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

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited - in thousands)

Six Months Ended June 30, 2022 2021

Nine Months Ended September 30, 2022 2021

Cash flows from operating activities:

2 unchanged sentences

Depreciation 4,494 4,555

Provision (Reversal) for credit losses 417 ( 223 )

Provision for credit losses 417 1,077

Gain on sale and write down of other real estate owned 0 ( 53 )

4 unchanged sentences

Proceeds from sale of loans, including participations 34,299 98,655

Net (gain) loss on sales of premises and equipment 1 ( 1 )

Net loss on sales of premises and equipment 3 4

Net gain on sales and calls of securities available-for-sale 0 ( 797 )

22 unchanged sentences

Cash flows from financing activities:

Net increase in total deposits ( 113,823 ) 357,859

Net increase (decrease) in total deposits ( 71,274 ) 377,833

Net increase (decrease) in short-term borrowings 0 ( 10,500 )

28 unchanged sentences

In the opinion of management, all adjustments (all of which are normal and recurring in nature) considered necessary for a fair presentation have been included.

Operating results for the three and six months ended June 30, 2022 are not necessarily indicative of the results that may be expected for any subsequent reporting periods, including the year ending December 31, 2022.

Operating results for the three and nine months ended September 30, 2022 are not necessarily indicative of the results that may be expected for any subsequent reporting periods, including the year ending December 31, 2022.

The Company’s 2021 Annual Report on Form 10-K should be read in conjunction with these statements.

Newly Issued But Not Yet Effective Accounting Standards

Newly Issued Accounting Standards

On March 12, 2020, the FASB issued Accounting Standards Update (ASU) 2020-04, " Reference Rate Reform (ASC 848):

6 unchanged sentences

The Company discontinued the use of new LIBOR-based loans by December 31, 2021, according to regulatory guidelines.

The Company plans to transition LIBOR-based loans to an alternative reference rate on or before June 30, 2023.

The Company is working to transition LIBOR-based loans to an alternative reference rate on or before June 30, 2023.

The guidance under ASC 848 will be available for a limited time, generally through December 31, 2024.

The Company expects to adopt the LIBOR transition relief allowed under this standard, and does not expect such adoption to have a material impact on the consolidated financial statements.

In March 2022, the FASB issued ASU 2022-01, " Derivatives and Hedging (ASC 815):

The Company adopted the LIBOR transition relief allowed under this standard, and does not expect final adoption to have a material impact on the consolidated financial statements.

On March 28, 2022, the FASB issued ASU 2022-01, " Derivatives and Hedging (ASC 815):

Fair Value Hedging - Portfolio Layer Method.

4 unchanged sentences

The Company does not expect the adoption of this standard to have a material impact on the consolidated financial statements.

In March 2022, the FASB issued ASU 2022-02, " Financial Instruments - Credit Losses (ASC 326):

On March 31, 2022, the FASB issued ASU 2022-02, " Financial Instruments - Credit Losses (ASC 326):

Troubled Debt Restructurings (TDRs) and Vintage Disclosures.

10 unchanged sentences

however, the Company does not expect the adoption of this portion of the standard to have a material impact on the consolidated financial statements.

Newly Proposed Accounting Standards

On August 22, 2022, the FASB issued a proposed ASU, "Investments - Equity Method and Joint Ventures (Topic 323):

Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method (a consensus of the Emerging Issues Task Force)." The amendments in this proposed update would permit reporting entities to account for their tax equity investments, regardless of the program from which the tax credits are received, using the proportional amortization method if certain conditions are met.

Under the proportional amortization method, an entity amortizes the initial cost of the investment in proportion to the income tax credits and other income tax benefits received and recognizes the net amortization and income tax credits and other income tax benefits in the income statement as a component of income tax expense (benefit).

A reporting entity would make an accounting policy election to apply the proportional amortization method on a tax-credit-program-by-tax-credit-program basis rather than to apply the proportional amortization method at the reporting entity level or to individual investments.

The proposal would require specific disclosures for all tax equity investments in a program to which an entity has elected to apply the proportional amortization method.

The amendments in the proposed update are proposed to be applied on either a modified prospective or a retrospective basis.

The proposed ASU does not yet include an effective date.

The Company plans to assess the impact of the proposed amendments on the consolidated financial statements once final guidance is issued.

On October 6, 2022, the FASB issued a proposed ASU, "Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures." The amendments in this proposed update would improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses on an interim and annual basis.

Significant expense categories and amounts subject to disclosure would be derived from expenses that are (1) regularly reported to an entity's chief operating decision-maker (CODM) and (2) included in a segment's reported measure of profit or loss.

Public entities would also be required to disclose an amount for other segment items by reportable segment and a description of composition.

The other segment items category is the difference between segment revenue less the significant expenses disclosed under the significant expense principle and each reported measure of segment profit or loss.

The amendment would also require all annual disclosures about a reportable segment's profit or loss and assets currently required by Topic 280 to be disclosed in interim periods.

Additionally, the proposed amendments would also require the disclosure of the name and title of the CODM.

The amendments in the proposed update are proposed to be applied retrospectively.

The proposed ASU does not yet include an effective date.

The Company plans to assess the impact of the proposed amendments on the consolidated financial statements once final guidance is issued.

Reclassification

7 unchanged sentences

Cost Gross Unrealized Gain Gross Unrealized Losses Allowance for Credit Losses Fair Value

June 30, 2022

September 30, 2022

Treasury securities $ 1,994 $ 0 $ ( 26 ) $ 0 $ 1,968

17 unchanged sentences

Cost Gross Unrealized Gain Gross Unrealized Losses Allowance for Credit Losses Fair Value

June 30, 2022

September 30, 2022

State and municipal securities $ 127,820 $ 0 $ ( 24,494 ) $ 0 $ 103,326

On April 1, 2022, the Company elected to transfer securities from available-for-sale to held-to-maturity due to overall balance sheet management strategies.

On April 1, 2022, the Company elected to transfer securities from available-for-sale to held-to-maturity due to overall balance sheet management strategy.

The fair value of securities transferred was $ 127.0 million from available-for-sale to held-to-maturity.

The unrealized loss on the securities transferred from available-for-sale to held-to-maturity was $ 24.4 million ($ 19.3 million, net of tax) at the date of the transfer based on the fair value of the securities on the transfer date.

The unrealized loss on the securities transferred from available-for-sale to held-to-maturity was $ 24.4 million ($ 19.3 million, net of tax) based on the fair value of the securities on the transfer date.

The Company has the current intent and ability to hold the transferred securities until maturity.

Any net unrealized gain or loss on the transferred securities included in accumulated other comprehensive income (loss) at the time of the transfer will be amortized over the remaining life of the underlying security as an adjustment to the yield on those securities.

There were no securities transferred from available-for-sale to held-to-maturity during the six months ended June 30, 2021 and there were no securities classified as held-to-maturity at December 31, 2021.

Information regarding the fair value and amortized cost of available-for-sale and held-to-maturity debt securities by maturity as of June 30, 2022 is presented below.

There were no securities transferred from available-for-sale to held-to-maturity during the nine months ended September 30, 2021 and there were no securities classified as held-to-maturity at December 31, 2021.

Information regarding the amortized cost and fair value of available-for-sale and held-to-maturity debt securities by maturity as of September 30, 2022 is presented below.

Maturity information is based on contractual maturity for all securities other than mortgage-backed securities.

11 unchanged sentences

Available-for-sale securities proceeds, gross gains and gross losses are presented below.

Three months ended June 30, Six Months Ended June 30,

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

(dollars in thousands) 2022 2021 2022 2021

7 unchanged sentences

Gains and losses on sales are based on the amortized cost of the security sold and recorded on the trade date.

Securities with fair values of $ 253.3 million and $ 300.8 million were pledged as of June 30, 2022 and December 31, 2021, respectively, as collateral for borrowings from the Federal Home Loan Bank and Federal Reserve Bank and for other purposes as permitted or required by law.

Securities with fair values of $ 239.5 million and $ 300.8 million were pledged as of September 30, 2022 and December 31, 2021, respectively, as collateral for borrowings from the Federal Home Loan Bank ("FHLB") and Federal Reserve Bank and for other purposes as permitted or required by law.

Unrealized Loss Analysis on Available-for-Sale and Held-to-Maturity Securities

Information regarding available-for-sale securities with unrealized losses as of June 30, 2022 and December 31, 2021 is presented on the following page.

Information regarding available-for-sale securities with unrealized losses as of September 30, 2022 and December 31, 2021 is presented on the following page.

The tables divide the securities between those with unrealized losses for less than twelve months and those with unrealized losses for twelve months or more.

4 unchanged sentences

Value Unrealized

June 30, 2022

September 30, 2022

Treasury securities $ 1,968 $ 26 $ 0 $ 0 $ 1,968 $ 26

10 unchanged sentences

Total available-for-sale $ 496,891 $ 6,714 $ 51,468 $ 1,941 $ 548,359 $ 8,655

Information regarding held-to-maturity securities with unrealized losses as of June 30, 2022 is presented below.

Information regarding held-to-maturity securities with unrealized losses as of September 30, 2022 is presented below.

The table divides the securities between those with unrealized losses for less than twelve months and those with unrealized losses for twelve months or more.

5 unchanged sentences

Value Unrealized

June 30, 2022

September 30, 2022

State and municipal securities $ 103,326 $ ( 24,494 ) $ 0 $ 0 $ 103,326 $ ( 24,494 )

The total number of securities with unrealized losses as of June 30, 2022 and December 31, 2021 is presented below.

The total number of securities with unrealized losses as of September 30, 2022 and December 31, 2021 is presented below.

Available-for-sale Held-to-maturity

3 unchanged sentences

or more Total

June 30, 2022

September 30, 2022

Treasury securities 5 0 5 0 0 0

2 unchanged sentences

residential 114 24 138 0 0 0

Mortgage-backed securities:

commercial 0 0 0 0 0 0

State and municipal securities 507 54 561 41 0 41

10 unchanged sentences

For available-for-sale debt securities that do not meet the above criteria and for held-to-maturity securities, management evaluates whether the decline in fair value has resulted from credit losses or other factors.

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

related to the security and the issuer, among other factors.

In making this assessment, management considers the extent to which fair value is

less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security and the issuer, among other factors.

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

1 unchanged sentence

For available-for-sale debt securities, any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income (loss), net of applicable taxes.

No allowance for credit losses for available-for-sale debt securities was recorded at June 30, 2022 or December 31, 2021.

No allowance for credit losses for held-to-maturity debt securities was recorded at June 30, 2022.

Accrued interest receivable on securities totaled $ 9.5 million and $ 7.4 million at June 30, 2022 and December 31, 2021, respectively, and is excluded from the estimate of credit losses.

No allowance for credit losses for available-for-sale debt securities was recorded at September 30, 2022 or December 31, 2021.

No allowance for credit losses for held-to-maturity debt securities was recorded at September 30, 2022.

Accrued interest receivable on securities totaled $ 8.8 million and $ 7.4 million at September 30, 2022 and December 31, 2021, respectively, and is excluded from the estimate of credit losses.

government sponsored agencies and mortgage-backed securities are either explicitly or implicitly guaranteed by the U.S.

2 unchanged sentences

State and municipal securities credit losses are benchmarked against highly rated municipal securities of similar duration, as published by Moody's, resulting in an immaterial allowance for credit losses.

(dollars in thousands) June 30,

(dollars in thousands) September 30,

2022 December 31,

27 unchanged sentences

Loans, net $ 4,422,596 $ 4,220,068

The recorded investment in loans does not include accrued interest, which totaled $ 11.0 million and $ 10.0 million at June 30, 2022 and December 31, 2021, respectively.

The Company h ad $ 320,000 and $ 350,000 in residential real estate loans in the process of foreclosure as of June 30, 2022 and December 31, 2021, respectively.

The recorded investment in loans does not include accrued interest, which totaled $ 13.6 million and $ 10.0 million at September 30, 2022 and December 31, 2021, respectively.

The Company h ad $ 180,000 and $ 350,000 in residential real estate loans in the process of foreclosure as of September 30, 2022 and December 31, 2021, respectively.

ALLOWANCE FOR CREDIT LOSSES AND CREDIT QUALITY

53 unchanged sentences

Due to the imprecise nature of estimating the allowance for credit losses, the Company’s allowance for credit losses includes an unallocated component.

The unallocated component of the allowance for credit losses incorporates the Company’s judgmental determination of potential expected losses that may not be fully reflected in other allocations, including factors such as the level of classified credits, economic uncertainties, industry trends impacting specific portfolio segments, broad portfolio quality trends, and trends in the composition of the Company’s large commercial loan portfolio and related large dollar exposures to individual borrowers.

The unallocated component of the allowance for credit losses incorporates the Company’s judgmental determination of potential expected losses that may not be fully reflected in other allocations.

As a practical expedient, the Company has elected to disclose accrued interest separately from loan principal balances on the consolidated balance sheet.

3 unchanged sentences

(dollars in thousands) Commercial and Industrial Commercial Real Estate and Multifamily Residential Agri-business and Agricultural Other Commercial Consumer 1-4 Family Mortgage Other Consumer Unallocated Total

Three Months Ended June 30, 2022

Beginning balance, April 1 $ 31,322 $ 26,257 $ 4,761 $ 1,058 $ 2,606 $ 1,040 $ 482 $ 67,526

Three Months Ended September 30, 2022

Beginning balance, July 1 $ 31,195 $ 26,448 $ 4,753 $ 713 $ 2,674 $ 1,093 $ 647 $ 67,523

Provision for credit losses 1,357 ( 678 ) ( 547 ) 16 ( 197 ) 71 ( 22 ) 0

4 unchanged sentences

Three Months Ended June 30, 2021

Beginning balance, April 1 $ 32,052 $ 29,445 $ 3,901 $ 1,172 $ 3,384 $ 1,293 $ 597 $ 71,844

Three Months Ended September 30, 2021

Beginning balance, July 1 $ 33,130 $ 28,291 $ 3,930 $ 1,298 $ 3,165 $ 1,393 $ 506 $ 71,713

Provision for credit losses 3,507 ( 1,545 ) ( 244 ) 89 ( 265 ) ( 116 ) ( 126 ) 1,300

4 unchanged sentences

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

Beginning balance, January 1 $ 30,595 $ 26,535 $ 5,034 $ 1,146 $ 2,866 $ 1,147 $ 450 $ 67,773

5 unchanged sentences

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2021

Beginning balance, January 1 $ 28,333 $ 22,907 $ 3,043 $ 416 $ 2,619 $ 951 $ 3,139 $ 61,408

20 unchanged sentences

Loans listed as Not Rated are consumer loans or commercial loans with consumer characteristics included in groups of homogenous loans which are analyzed for credit quality indicators utilizing delinquency status.

The following table summarizes the risk category of loans by loan segment and origination date as of June 30, 2022:

The following table summarizes the risk category of loans by loan segment and origination date as of September 30, 2022:

(dollars in thousands) 2022 2021 2020 2019 2018 Prior Term Total Revolving Total

14 unchanged sentences

Pass 23,795 19,247 20,833 422 0 0 64,297 401,951 466,248

Special Mention 360 0 0 0 0 0 360 0 360

Total 16,644 34,046 20,426 489 554 0 72,159 344,051 416,210

Owner occupied loans:

28 unchanged sentences

Pass 6,500 13,063 12,601 4,881 4,727 4,054 45,826 5,618 51,444

Special Mention 0 0 560 0 0 0 560 0 560

Substandard 0 0 0 0 0 1,749 1,749 0 1,749

3 unchanged sentences

Pass 0 631 362 77 77 0 1,147 5,129 6,276

Substandard 0 0 0 0 48 2 50 61 111

Not Rated 39,296 15,143 3,445 4,014 1,918 2,456 66,272 102,641 168,913

9 unchanged sentences

TOTAL $ 680,463 $ 692,971 $ 587,343 $ 321,196 $ 148,135 $ 323,289 $ 2,753,397 $ 1,736,438 $ 4,489,835

As of June 30, 2022, $ 5.2 million in PPP loans were included in the "Pass" category of non-working capital commercial and industrial loans.

As of September 30, 2022, $ 1.6 million in PPP loans were included in the "Pass" category of non-working capital commercial and industrial loans.

These loans were included in this risk rating category because they are fully guaranteed by the SBA.

72 unchanged sentences

Loans may be returned to accrual status when all the principal and interest amounts contractually due are brought current, remain current for a prescribed period, and future payments are reasonably assured.

The following table presents the aging of the amortized cost basis in past due loans as of June 30, 2022 by class of loans and loans past due 90 days or more and still accruing by class of loan:

The following table presents the aging of the amortized cost basis in past due loans as of September 30, 2022 by class of loans and loans past due 90 days or more and still accruing by class of loan:

(dollars in thousands) Loans Not Past Due 30-89 Days Past Due Greater than 89 Days Past Due and Accruing Total Accruing Total Nonaccrual Nonaccrual With No Allowance For Credit Loss Total

17 unchanged sentences

Total $ 4,488,891 $ 919 $ 25 $ 4,479,945 $ 9,890 $ 2,878 $ 4,489,835

As of June 30, 2022 there were an insignificant number of loans 30-89 days past due or greater than 89 days past due on nonaccrual.

Additionally, interest income recognized on nonaccrual loans was insignificant during the six month period ended June 30, 2022.

As of September 30, 2022 there were an insignificant number of loans 30-89 days past due or greater than 89 days past due on nonaccrual.

Additionally, interest income recognized on nonaccrual loans was insignificant during the nine month period ended September 30, 2022.

The following table presents the aging of the amortized cost basis in past due loans as of December 31, 2021 by class of loans and loans past due 90 days or more and still accruing by class of loan:

25 unchanged sentences

The following tables present the amortized cost basis of collateral dependent loans by class of loan as of:

June 30, 2022

September 30, 2022

(dollars in thousands) Real Estate General

29 unchanged sentences

The allowance for credit losses incorporates an estimate of lifetime expected credit losses and is recorded on each asset upon origination.

The starting point for the estimate of the allowance for credit losses is historical loss information, which includes loses from modifications of receivables to borrowers experiencing financial difficulty.

The starting point for the estimate of the allowance for credit losses is historical loss information, which includes losses from modifications of receivables to borrowers experiencing financial difficulty.

The Company uses a probability of default/loss given default model to determine the allowance for credit losses.

4 unchanged sentences

Additionally, the Company may allow a loan to go interest only for a specified period of time.

During the three and six months ended June 30, 2022, no loans received a material modification based on borrower financial difficulty.

During the three and nine months ended September 30, 2022, no loans received a material modification based on borrower financial difficulty.

Troubled Debt Restructurings (Prior to January 1, 2022):

8 unchanged sentences

Total troubled debt restructured loans $ 11,339

During the three and six months ended June 30, 2021, no loans were modified as troubled debt restructurings.

No advances were outstanding with the Federal Home Loan Bank ("FHLB") as of June 30, 2022.

For the period ended December 31, 2021, the Company had an advance outstanding from the Federal Home Loan Bank (“FHLB”) in the amount of $ 75.0 million.

During the three and nine months ended September 30, 2021, no loans were modified as troubled debt restructurings.

No advances were outstanding with the FHLB as of September 30, 2022.

For the period ended December 31, 2021, the Company had an advance of $ 75.0 million outstanding from the FHLB.

The advance was a ten-year fixed-rate putable advance with an interest rate of 0.39 % and a maturity date of March 4, 2030.

3 unchanged sentences

this credit agreement was subsequently amended and renewed on July 30, 2022.

Funds provided under the agreement may be used to repurchase shares of the Company’s common stock under the share repurchase program, which was reauthorized by the Company’s board of directors on April 13, 2021, and for general operations.

The credit agreement includes a negative pledge agreement whereby the Company agrees not to pledge or otherwise encumber the stock of the Bank.

The credit agreement has a one year term which may be amended, extended, modified or renewed.

There were no outstanding borrowings on the credit agreement at June 30, 2022 and December 31, 2021.

There were no outstanding borrowings on the credit agreement at September 30, 2022 and December 31, 2021.

FAIR VALUE DISCLOSURES

48 unchanged sentences

Mortgage servicing rights:

As of June 30, 2022, the fair value of the Company’s Level 3 servicing assets for residential mortgage loans (“MSRs”) was $ 3.0 million, carried at amortized cost of $ 3.0 million less a $ 14,000 valuation reserve.

As of September 30, 2022, the fair value of the Company’s Level 3 servicing assets for residential mortgage loans (“MSRs”) was $ 2.8 million, carried at amortized cost of $ 2.8 million less a $ 7,000 valuation reserve.

These residential mortgage loans have a weighted average interest rate of 3.44 %, a weighted average maturity of 21 years and are secured by homes generally within the Company’s market area of Northern Indiana and Indianapolis.

5 unchanged sentences

The most significant unobservable assumption is the discount rate.

At June 30, 2022, the constant prepayment speed (“PSA”) used was 178 and discount rate used was 9.0 %.

At September 30, 2022, the constant prepayment speed (“PSA”) used was 172 and discount rate used was 9.0 %.

At December 31, 2021, the PSA used was 249 and the discount rate used was 9.5 %.

8 unchanged sentences

Real estate mortgage loans held-for-sale are carried at the lower of cost or fair value, as determined by outstanding commitments, from third party investors, and result in a Level 2 classification.

The tables below presents the balances of assets measured at fair value on a recurring basis:

June 30, 2022

The tables below present the balances of assets measured at fair value on a recurring basis:

September 30, 2022

Fair Value Measurements Using Assets

6 unchanged sentences

State and municipal securities 0 550,888 3,319 554,207

Total securities available-for-sale 2,234 1,294,746 3,600 1,300,580

Total securities 1,968 1,186,899 3,319 1,192,186

Mortgage banking derivative 0 83 0 83

23 unchanged sentences

The fair value of Level 3 available-for-sale securities was immaterial and thus did not require additional recurring fair value disclosure.

The tables below presents the balances of assets measured at fair value on a nonrecurring basis:

June 30, 2022

The tables below present the balances of assets measured at fair value on a nonrecurring basis:

September 30, 2022

Fair Value Measurements Using Assets

27 unchanged sentences

Total assets $ 0 $ 0 $ 6,560 $ 6,560

The following table presents the valuation methodology and unobservable inputs for Level 3 assets measured at fair value on a non-recurring basis at June 30, 2022:

The following table presents the valuation methodology and unobservable inputs for Level 3 assets measured at fair value on a non-recurring basis at September 30, 2022:

(dollars in thousands) Fair Value Valuation Methodology Unobservable Inputs Average Range of Inputs

16 unchanged sentences

The following tables contain the estimated fair values and the related carrying values of the Company’s financial instruments.

Items which are not financial instruments are not included.

June 30, 2022

Items that are not financial instruments are not included.

September 30, 2022

Value Estimated Fair Value

38 unchanged sentences

OFFSETTING ASSETS AND LIABILITIES

The following tables summarize gross and net information about financial instruments and derivative instruments that are offset in the statement of financial position or that are subject to an enforceable master netting arrangement at June 30, 2022 and December 31, 2021.

June 30, 2022

September 30, 2022

Gross Amounts of Recognized Assets/Liabilities Gross Amounts Offset in the Statement of Financial Position Net Amounts presented in the Statement of Financial Position Gross Amounts Not Offset in the Statement of Financial Position Net Amount

16 unchanged sentences

Diluted earnings per common share includes the dilutive effect of additional potential common shares issuable under stock based awards and warrants, none of which were antidilutive.

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

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

2022 2021 2022 2021

4 unchanged sentences

Diluted earnings per common share $ 1.11 $ 0.94 $ 3.03 $ 2.79

ACCUMULATED OTHER COMPREHENSIVE INCOME

The following tables summarize the changes within each classification of accumulated other comprehensive income (loss) for the three months ended June 30, 2022 and 2021, all shown net of tax:

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following tables summarize the changes within each classification of accumulated other comprehensive income (loss) for the three months ended September 30, 2022 and 2021, all shown net of tax:

(dollars in thousands) Unrealized Gains and Losses on Available-

for-Sales Securities Defined Benefit Pension Items Total

Balance at April 1, 2022

Balance at July 1, 2022

$ ( 157,625 ) $ ( 909 ) $ ( 158,534 )

2 unchanged sentences

Net current period other comprehensive income (loss) ( 63,222 ) 27 ( 63,195 )

Balance at June 30, 2022 $ ( 157,625 ) $ ( 909 ) $ ( 158,534 )

Balance at September 30, 2022 $ ( 220,847 ) $ ( 882 ) $ ( 221,729 )

(dollars in thousands) Unrealized Gains and Losses on Available-

for-Sales Securities Defined Benefit Pension Items Total

Balance at April 1, 2021

Balance at July 1, 2021

$ 23,619 $ ( 1,348 ) $ 22,271

2 unchanged sentences

Net current period other comprehensive income (loss) ( 11,385 ) 46 ( 11,339 )

Balance at June 30, 2021 $ 23,619 $ ( 1,348 ) $ 22,271

The following tables summarize the changes within each classification of accumulated other comprehensive income (loss) for the six months ended June 30, 2022 and 2021, all shown net of tax:

Balance at September 30, 2021 $ 12,234 $ ( 1,302 ) $ 10,932

The following tables summarize the changes within each classification of accumulated other comprehensive income (loss) for the nine months ended September 30, 2022 and 2021, all shown net of tax:

(dollars in thousands) Unrealized Gains and Losses on Available-

5 unchanged sentences

Net current period other comprehensive income (loss) ( 237,903 ) 81 ( 237,822 )

Balance at June 30, 2022 $ ( 157,625 ) $ ( 909 ) $ ( 158,534 )

Balance at September 30, 2022 $ ( 220,847 ) $ ( 882 ) $ ( 221,729 )

(dollars in thousands) Unrealized Gains and Losses on Available-

5 unchanged sentences

Net current period other comprehensive income (loss) ( 16,948 ) 136 ( 16,812 )

Balance at June 30, 2021 $ 23,619 $ ( 1,348 ) $ 22,271

Reclassifications out of other accumulated comprehensive loss for the three months ended June 30, 2022 are as follows:

Balance at September 30, 2021 $ 12,234 $ ( 1,302 ) $ 10,932

Reclassifications out of other accumulated comprehensive loss for the three months ended September 30, 2022 are as follows:

Details about

12 unchanged sentences

Total reclassifications for the period $ ( 425 ) Net income

Reclassifications out of other accumulated comprehensive income for the three months ended June 30, 2021 are as follows:

Reclassifications out of other accumulated comprehensive income for the three months ended September 30, 2021 are as follows:

Details about

7 unchanged sentences

Tax effect 0 Income tax expense

35 Net of tax

Amortization of defined benefit pension items ( 61 ) Other expense

2 unchanged sentences

Total reclassifications for the period $ ( 46 ) Net income

Reclassifications out of other accumulated comprehensive loss for the six months ended June 30, 2022 are as follows:

Reclassifications out of other accumulated comprehensive loss for the nine months ended September 30, 2022 are as follows:

Details about

12 unchanged sentences

Total reclassifications for the period $ ( 867 ) Net income

Reclassifications out of other accumulated comprehensive income for the six months ended June 30, 2021 are as follows:

Reclassifications out of other accumulated comprehensive income for the nine months ended September 30, 2021 are as follows:

Details about

28 unchanged sentences

The Company recognizes short-term leases on a straight-line basis and does not record a related lease asset or liability for such leases, as allowed as a practical expedient of the standard.

The following is a maturity analysis of the operating lease liabilities as of June 30, 2022:

The following is a maturity analysis of the operating lease liabilities as of September 30, 2022:

Years ending December 31, (in thousands) Operating Lease Obligation

4 unchanged sentences

Right-of-use asset $ 5,441

Three months ended June 30, Six Months Ended June 30,

Three months ended September 30, Nine Months Ended September 30,

(dollars in thousands) 2022 2021 2022 2021

10 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements