What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-08-02 compared with 2023-04-26 · 222 added, 83 removed, 1017 unchanged (23% of the section changed)

30 unchanged sentences

90,000,000 shares authorized, no par value

25,896,764 shares issued and 25,430,917 outstanding as of March 31, 2023

25,896,764 shares issued and 25,429,216 outstanding as of June 30, 2023

25,825,127 shares issued and 25,349,225 outstanding as of December 31, 2022

2 unchanged sentences

Accumulated other comprehensive income (loss) ( 177,645 ) ( 188,923 )

Treasury stock at cost ( 465,847 shares as of March 31, 2023, 475,902 shares as of December 31, 2022)

Treasury stock at cost ( 467,548 shares as of June 30, 2023, 475,902 shares as of December 31, 2022)

( 15,263 ) ( 15,383 )

6 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

NET INTEREST INCOME

35 unchanged sentences

Professional fees 2,049 1,414 4,170 2,973

Wire fraud loss 18,058 0 18,058 0

Other expense 2,571 3,299 5,133 6,538

9 unchanged sentences

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

Three Months Ended March 31,

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

2023 2022 2023 2022

Net income $ 14,611 $ 25,673 $ 38,889 $ 49,315

23 unchanged sentences

Interest Total

Balance at April 1, 2022

25,346,149 $ 121,138 $ 596,578 $ ( 93,687 ) $ ( 15,016 ) $ 609,013 $ 89 $ 609,102

Comprehensive loss:

Net income 25,673 25,673 25,673

Other comprehensive income (loss), net of tax ( 64,847 ) ( 64,847 ) ( 64,847 )

Cash dividends declared and paid, $ 0.40 per share

( 10,225 ) ( 10,225 ) ( 10,225 )

Treasury shares purchased under deferred directors' plan ( 987 ) 73 ( 73 ) 0 0

Treasury shares sold and distributed under deferred directors' plan 0 0

Stock activity under equity compensation plans 0 0

Stock based compensation expense 2,360 2,360 2,360

Balance at June 30, 2022

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

Balance at April 1, 2023

25,430,917 $ 125,840 $ 658,629 $ ( 167,370 ) $ ( 15,182 ) $ 601,917 $ 89 $ 602,006

Comprehensive income:

Net income 14,611 14,611 14,611

Other comprehensive income (loss), net of tax ( 10,275 ) ( 10,275 ) ( 10,275 )

Cash dividends declared and paid, $ 0.46 per share

( 11,793 ) ( 11,793 ) ( 11,793 )

Treasury shares purchased under deferred directors' plan ( 1,701 ) 81 ( 81 ) 0 0

Treasury shares sold and distributed under deferred directors' plan 0 0

Stock activity under equity compensation plans 0 0

Stock based compensation expense ( 2,554 ) ( 2,554 ) ( 2,554 )

Balance at June 30, 2023

25,429,216 $ 123,367 $ 661,447 $ ( 177,645 ) $ ( 15,263 ) $ 591,906 $ 89 $ 591,995

Six Months Ended

Common Stock Retained

Earnings Accumulated Other Comprehensive

Income (Loss) Treasury

Stock Total Stockholders’

Equity Noncontrolling

Interest Total

Balance at January 1, 2022

9 unchanged sentences

Stock based compensation expense 4,620 4,620 4,620

Balance at March 31, 2022 25,346,149 $ 121,138 $ 596,578 $ ( 93,687 ) $ ( 15,016 ) $ 609,013 $ 89 $ 609,102

Balance at June 30, 2022

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

Balance at January 1, 2023

9 unchanged sentences

Stock based compensation expense ( 393 ) ( 393 ) ( 393 )

Balance at March 31, 2023 25,430,917 $ 125,840 $ 658,629 $ ( 167,370 ) $ ( 15,182 ) $ 601,917 $ 89 $ 602,006

Balance at June 30, 2023

25,429,216 $ 123,367 $ 661,447 $ ( 177,645 ) $ ( 15,263 ) $ 591,906 $ 89 $ 591,995

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

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited - in thousands)

Three Months Ended March 31, 2023 2022

Six Months Ended June 30, 2023 2022

Cash flows from operating activities:

27 unchanged sentences

Purchases of land, premises and equipment ( 3,823 ) ( 2,314 )

Purchase of Federal Home Loan Bank stock ( 5,625 ) 0

Proceeds from redemption of Federal Home Loan Bank stock 0 932

3 unchanged sentences

Net increase (decrease) in short-term borrowings ( 22,000 ) 0

Payments on long-term FHLB borrowings 0 ( 75,000 )

Proceeds from short-term FHLB borrowings 125,000 0

Common dividends paid ( 23,529 ) ( 20,410 )

Preferred dividends paid ( 13 ) ( 13 )

Payments related to equity incentive plans ( 3,124 ) ( 1,728 )

7 unchanged sentences

Interest $ 57,011 $ 8,768

Income taxes 7,125 7,065

Supplemental non-cash disclosures:

Securities purchases payable 0 2,146

Loans transferred to other real estate owned 284 0

Right-of-use assets obtained in exchange for lease liabilities 0 1,612

11 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 months ended March 31, 2023 are not necessarily indicative of the results that may be expected for any subsequent reporting periods, including the year ending December 31, 2023.

Operating results for the three and six months ended June 30, 2023 are not necessarily indicative of the results that may be expected for any subsequent reporting periods, including the year ending December 31, 2023.

The Company’s 2022 Annual Report on Form 10-K should be read in conjunction with these statements.

1 unchanged sentence

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

Troubled Debt Restructurings (TDRs) and Vintage Disclosures ." The guidance amends ASC 326 to eliminate the accounting guidance for TDRs by creditors, while enhancing disclosure requirements for certain loan refinancing and restructuring activities by creditors when a borrower is experiencing financial difficulty.

Troubled Debt Restructurings (TDRs) and Vintage Disclosures ." The update amends ASC 326 to eliminate the accounting guidance for TDRs by creditors, while enhancing disclosure requirements for certain loan refinancing and restructuring activities by creditors when a borrower is experiencing financial difficulty.

Specifically, rather than applying TDR recognition and measurement guidance, creditors will determine whether a modification results in a new loan or continuation of an existing loan.

1 unchanged sentence

Additionally, the amendments to ASC 326 require that an entity disclose current-period gross write-offs by year of origination within the vintage disclosures, which requires that an entity disclose the amortized cost basis of financing receivables by credit quality indicator and and class of financing receivable by year of origination.

The guidance is only for entities that have adopted the amendments in update 2016-13 for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022.

The update is available for entities that have adopted the amendments in update 2016-13 for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022.

The Company elected to early adopt the provisions of the ASU related to the discontinuance of TDR reporting, with retrospective application of modification reporting effective starting January 1, 2022.

5 unchanged sentences

That expanded scope allows an entity to apply the same portfolio hedging method to both prepayable and nonprepayable financial assets, thereby allowing consistent accounting for similar hedges.

The guidance became effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022.

The update became effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022.

The Company adopted ASU 2022-01 on January 1, 2023, which did not have a material impact on the consolidated financial statements.

7 unchanged sentences

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

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

The Company transitioned LIBOR-based loans to an alternative reference rate before June 30, 2023.

On December 22, 2022, the FASB issued ASU 2022-06, " Reference Rate Reform (ASC 848):

8 unchanged sentences

Equity investments in other tax credit structures are typically accounted for using the equity method, which results in investment income, gains and losses, and tax credits being presented gross on the income statement in their respective line items.

The amendments in this update permit reporting entities to elect to account for their tax equity investments, regardless of the tax credit program from which the income tax credits are received, using the proportional amortization method if certain conditions are met.

The amendments in this update permit reporting entities to elect to account for certain tax equity investments, regardless of the tax credit program from which the income tax credits are received, using the proportional amortization method if certain conditions are met.

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

14 unchanged sentences

Early adoption is permitted in any interim period.

If early adoption is elected, it shall adopt them as of the beginning of the fiscal year that includes the interim period of adoption.

If early adoption is elected, the provisions shall be adopted as of the beginning of the fiscal year that includes the interim period of adoption.

The amendments in this update must be applied on either a modified retrospective or a retrospective basis.

9 unchanged sentences

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

March 31, 2023

June 30, 2023

Treasury securities $ 3,251 $ 0 $ ( 19 ) $ 0 $ 3,232

15 unchanged sentences

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

March 31, 2023

June 30, 2023

State and municipal securities $ 129,070 $ 0 $ ( 14,806 ) $ 0 $ 114,264

3 unchanged sentences

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) based on the fair value of the securities on the transfer date and was $ 22.4 million ($ 17.7 million, net of tax) at March 31, 2023.

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 and was $ 21.9 million ($ 17.3 million, net of tax) at June 30, 2023.

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 three months ended March 31, 2023 or March 31, 2022.

Information regarding the amortized cost and fair value of available-for-sale and held-to-maturity debt securities by maturity as of March 31, 2023 is presented below.

There have been no subsequent transfers of securities from available-for-sale to held-to-maturity.

Information regarding the amortized cost and fair value of available-for-sale and held-to-maturity debt securities by maturity as of June 30, 2023 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 March 31, Three Months Ended March 31,

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

(dollars in thousands) 2023 2022 2023 2022

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 $ 855.0 million and $ 298.2 million were pledged as of March 31, 2023 and December 31, 2022, 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.

Securities with fair values of $ 811.1 million and $ 298.2 million were pledged as of June 30, 2023 and December 31, 2022, 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 March 31, 2023 and December 31, 2022 is presented on the following page.

Information regarding available-for-sale securities with unrealized losses as of June 30, 2023 and December 31, 2022 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

March 31, 2023

June 30, 2023

Treasury securities $ 2,836 $ 17 $ 396 $ 2 $ 3,232 $ 19

11 unchanged sentences

Total available-for-sale $ 455,318 $ 53,415 $ 686,704 $ 162,064 $ 1,142,022 $ 215,479

Information regarding held-to-maturity securities with unrealized losses as of March 31, 2023 is presented below.

Information regarding held-to-maturity securities with unrealized losses as of June 30, 2023 and December 31, 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.

4 unchanged sentences

Value Unrealized

March 31, 2023

June 30, 2023

State and municipal securities $ 0 $ 0 $ 114,264 $ 14,806 $ 114,264 $ 14,806

1 unchanged sentence

State and municipal securities $ 0 $ 0 $ 111,029 $ 17,213 $ 111,029 $ 17,213

The total number of securities with unrealized losses as of March 31, 2023 and December 31, 2022 is presented below.

The total number of securities with unrealized losses as of June 30, 2023 and December 31, 2022 is presented below.

Available-for-sale Held-to-maturity

3 unchanged sentences

or more Total

March 31, 2023

June 30, 2023

Treasury securities 8 1 9 0 0 0

19 unchanged sentences

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 or held-to-maturity debt securities was recorded at March 31, 2023 or December 31, 2022.

Accrued interest receivable on securities totaled $ 7.6 million and $ 8.9 million at March 31, 2023 and December 31, 2022, respectively, and is excluded from the estimate of credit losses.

No allowance for credit losses for available-for-sale or held-to-maturity debt securities was recorded at June 30, 2023 or December 31, 2022.

Accrued interest receivable on securities totaled $ 7.9 million and $ 8.9 million at June 30, 2023 and December 31, 2022, 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) March 31,

(dollars in thousands) June 30,

2023 December 31,

27 unchanged sentences

Loans, net $ 4,790,202 $ 4,637,790

The recorded investment in loans does not include accrued interest, which totaled $ 18.4 million at both March 31, 2023 and December 31, 2022.

The Company h ad $ 558,000 and $ 306,000 in residential real estate loans in the process of foreclosure as of March 31, 2023 and December 31, 2022, respectively.

The recorded investment in loans does not include accrued interest, which totaled $ 18.5 million and $ 18.4 million as of June 30, 2023 and December 31, 2022, respectively.

The Company h ad $ 471,000 and $ 306,000 in residential real estate loans in the process of foreclosure as of June 30, 2023 and December 31, 2022, respectively.

ALLOWANCE FOR CREDIT LOSSES AND CREDIT QUALITY

59 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 March 31, 2023

Three Months Ended June 30, 2023

Beginning balance, April 1 $ 31,190 $ 29,036 $ 4,621 $ 1,034 $ 3,398 $ 1,096 $ 840 $ 71,215

Provision for credit losses ( 272 ) 1,593 ( 219 ) 86 51 50 ( 489 ) 800

Loans charged-off ( 7 ) 0 0 0 ( 14 ) ( 369 ) 0 ( 390 )

Recoveries 67 284 0 0 13 69 0 433

Net loans (charged-off) recovered 60 284 0 0 ( 1 ) ( 300 ) 0 43

Ending balance $ 30,978 $ 30,913 $ 4,402 $ 1,120 $ 3,448 $ 846 $ 351 $ 72,058

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

Provision for credit losses ( 139 ) 191 ( 8 ) ( 345 ) 34 102 165 0

Loans charged-off ( 13 ) 0 0 0 0 ( 85 ) 0 ( 98 )

Recoveries 25 0 0 0 34 36 0 95

Net loans (charged-off) recovered 12 0 0 0 34 ( 49 ) 0 ( 3 )

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

Six Months Ended June 30, 2023

Beginning balance, January 1 $ 35,290 $ 27,394 $ 4,429 $ 917 $ 3,001 $ 1,021 $ 554 $ 72,606

5 unchanged sentences

Three Months Ended March 31, 2022

Six Months Ended June 30, 2022

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

19 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 March 31, 2023:

The following table summarizes the risk category of loans by loan segment and origination date as of June 30, 2023:

(dollars in thousands) 2023 2022 2021 2020 2019 Prior Term Total Revolving Total

18 unchanged sentences

Pass 23,520 15,289 10,218 13,306 179 0 62,512 511,070 573,582

Special Mention 0 0 0 0 0 0 0 14,521 14,521

Total 23,520 15,289 10,218 13,306 179 0 62,512 525,591 588,103

70 unchanged sentences

Total Loans $ 498,867 $ 834,003 $ 606,781 $ 513,510 $ 263,486 $ 354,007 $ 3,070,654 $ 1,791,606 $ 4,862,260

As of March 31, 2023, $ 1.5 million in PPP loans were included in the "Pass" category of non-working capital commercial and industrial loans.

As of June 30, 2023, $ 1.5 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 Small Business Administration ("SBA").

73 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 March 31, 2023 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 June 30, 2023 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 $ 4,843,040 $ 1,207 $ 8 $ 4,826,250 $ 18,005 $ 2,764 $ 4,862,260

As of March 31, 2023 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 three month period ended March 31, 2023.

As of June 30, 2023 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 three and six month periods ended June 30, 2023.

The following table presents the aging of the amortized cost basis in past due loans as of December 31, 2022 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:

March 31, 2023

June 30, 2023

(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 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.

An assessment of whether a borrower is experiencing financial difficulty is made at the time of a modification.

Because the effect of most modifications made to borrowers experiencing financial difficulty is already included in the allowance for credit losses, a change to the allowance for credit losses is generally not recorded upon modification.

Occasionally, the Company modifies loans by providing principal forgiveness that is deemed to be uncollectible;

therefore, that portion of the loan is written off, resulting in a reduction of the amortized cost basis and a corresponding adjustment to the allowance for credit losses.

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

During the three months ended March 31, 2023 and March 31, 2022, no loans received a material modification based on borrower financial difficulty.

For the period ended March 31, 2023, the Company had an advance outstanding from the Federal Home Loan Bank ("FHLB") in the amount of $ 200.0 million.

The outstanding advance was a fixed rate bullet advance with an interest rate of 4.86 % and matured April 4, 2023.

For the period ended December 31, 2022, the Company had a fixed rate bullet advance from the FHLB with an interest rate of 4.21 % of $ 275.0 million that matured on January 5, 2023.

The starting point to determine estimate such credit losses is historical loss information.

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

Occasionally, the Company subsequently modifies loans for borrowers experiencing financial distress by providing the following forms of relief:

forgiveness of loan principal, extension of repayment terms, or an interest rate reduction, among other possible concessions.

In some instances, the Company provides multiple types of concessions for such modifications.

Because the effect of most modifications to borrowers experiencing financial difficulty is already included in the allowance for credit losses, no change to the allowance for credit losses is generally recorded for these modifications.

The following tables present the amortized cost basis of loans that were experiencing financial difficulty and received a modification of terms during the three and six months ended June 30, 2023, by class and type of modification.

The percentage of the amortized cost basis of loans that were modified to borrowers in financial distress as compared to the amortized cost basis of each class of financing receivables is also presented below:

(dollars in thousands) Combination Principal Forgiveness, Term Extension and Interest Rate Reduction Total Class of Financing Receivable

Three Months Ended June 30, 2023

Commercial and industrial loans:

Non-working capital loans $ 1,600 0.20 %

(dollars in thousands) Combination Principal Forgiveness, Term Extension and Interest Rate Reduction Total Class of Financing Receivable

Six Months Ended June 30, 2023

Commercial and industrial loans:

Non-working capital loans $ 1,600 0.20 %

The Company has no material commitments to lend additional funds to borrowers included in the previous tables.

The following tables present the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty for the three and six months ended June 30, 2023:

(dollars in thousands) Principal Forgiveness Weighted-Average Interest Rate Reduction Weighted-Average Term Extension Total Class of Financing Receivable

Three Months Ended June 30, 2023

Commercial and industrial loans:

Non-working capital loans $ 9,380 Prime+ 0.75 %

260 months 0.20 %

(dollars in thousands) Principal Forgiveness Weighted-Average Interest Rate Reduction Weighted-Average Term Extension Total Class of Financing Receivable

Six Months Ended June 30, 2023

Commercial and industrial loans:

Non-working capital loans $ 9,380 Prime+ 0.75 %

260 months 0.20 %

During the three and six months ended June 30, 2022, no modifications were made to loans for borrowers experiencing financial difficulty.

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

At June 30, 2023, no loans receiving such a modification within the last twelve months were 30 days or greater past due.

At June 30, 2023, no loans receiving a modification due to borrower financial difficulty within the last twelve months experienced a payment default.

Upon the Company's determination that a modified loan (or portion thereof) has subsequently been deemed uncollectible, the loan (or a portion thereof) is written off.

Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the allowance for credit losses is adjusted by the same amount.

For the period ended June 30, 2023, the Company had an advance outstanding from the Federal Home Loan Bank ("FHLB") in the amount of $ 400.0 million.

The outstanding advance was a fixed rate bullet advance with an interest rate of 5.17 % and matured July 13, 2023.

For the period ended December 31, 2022, the Company had a fixed rate bullet advance from the FHLB with an interest rate of 4.21 % in the amount of $ 275.0 million that matured on January 5, 2023.

On August 2, 2019 the Company entered into an unsecured revolving credit agreement with another financial institution allowing the Company to borrow up to $ 30.0 million;

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

this credit agreement was subsequently amended and renewed on July 29, 2023 for $ 12.5 million.

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 11, 2023 and expires on April 30, 2025, and for general operations.

1 unchanged sentence

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 March 31, 2023 and December 31, 2022.

There were no outstanding borrowings on the credit agreement at June 30, 2023 and December 31, 2022.

FAIR VALUE DISCLOSURES

47 unchanged sentences

Mortgage servicing rights:

As of March 31, 2023, the fair value of the Company’s Level 3 servicing assets for residential mortgage loans (“MSRs”) was $ 2.5 million, carried at amortized cost and no valuation reserve.

As of June 30, 2023, the fair value of the Company’s Level 3 servicing assets for residential mortgage loans (“MSRs”) was $ 2.4 million, carried at amortized cost and no valuation reserve.

These residential mortgage loans have a weighted average interest rate of 3.5 %, a weighted average maturity of 20 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 March 31, 2023, the constant prepayment speed (“PSA”) used was 157 and discount rate used was 9.5 %.

At June 30, 2023, the constant prepayment speed (“PSA”) used was 150 and used a discount rate range of 9.50 %- 11.50 %.

At December 31, 2022, the PSA used was 159 and the discount rate used was 9.5 %.

9 unchanged sentences

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

March 31, 2023

June 30, 2023

Fair Value Measurements Using Assets

10 unchanged sentences

Total assets $ 3,232 $ 1,091,548 $ 3,017 $ 1,097,797

Mortgage banking derivative $ 0 $ 4 $ 0 $ 4

Interest rate swap derivative 0 35,661 0 35,661

13 unchanged sentences

Total assets $ 3,034 $ 1,217,382 $ 2,075 $ 1,222,491

Mortgage banking derivative $ 0 $ 0 $ 0 $ 0

Interest rate swap derivative 0 36,921 0 36,921

2 unchanged sentences

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

March 31, 2023

June 30, 2023

Fair Value Measurements Using Assets

27 unchanged sentences

Total assets $ 0 $ 0 $ 12,092 $ 12,092

The following table presents the valuation methodology and unobservable inputs for Level 3 assets measured at fair value on a non-recurring basis at March 31, 2023:

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, 2023:

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

17 unchanged sentences

Items that are not financial instruments are not included.

March 31, 2023

June 30, 2023

Value Estimated Fair Value

13 unchanged sentences

All other deposits 4,600,262 4,600,262 0 0 4,600,262

Mortgage banking derivative 4 0 4 0 4

Federal Home Loan Bank advances 400,000 400,003 0 0 400,003

Interest rate swap derivative 35,661 0 35,661 0 35,661

23 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 March 31, 2023 and December 31, 2022.

March 31, 2023

June 30, 2023

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 March 31,

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

2023 2022 2023 2022

Weighted average shares outstanding for basic earnings per common share 25,607,663 25,527,896 25,595,412 25,521,618

4 unchanged sentences

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 March 31, 2023 and 2022, all shown net of tax:

The following tables summarize the changes within each classification of accumulated other comprehensive income (loss) for the three months ended June 30, 2023 and 2022, all shown net of tax:

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

for-Sales Securities Defined Benefit Pension Items Total

Balance at January 1, 2023

Balance at April 1, 2023

$ ( 166,612 ) $ ( 758 ) $ ( 167,370 )

2 unchanged sentences

Net current period other comprehensive income (loss) ( 10,286 ) 11 ( 10,275 )

Balance at March 31, 2023 $ ( 166,612 ) $ ( 758 ) $ ( 167,370 )

Balance at June 30, 2023 $ ( 176,898 ) $ ( 747 ) $ ( 177,645 )

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

for-Sales Securities Defined Benefit Pension Items Total

Balance at April 1, 2022

$ ( 92,751 ) $ ( 936 ) $ ( 93,687 )

Other comprehensive income (loss) before reclassification ( 65,179 ) 0 ( 65,179 )

Amounts reclassified from accumulated other comprehensive income (loss) 305 27 332

Net current period other comprehensive income (loss) ( 64,874 ) 27 ( 64,847 )

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

The following tables summarize the changes within each classification of accumulated other comprehensive income (loss) for the six months ended June 30, 2023 and 2022, all shown net of tax:

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

for-Sales Securities Defined Benefit Pension Items Total

Balance at January 1, 2023 $ ( 188,154 ) $ ( 769 ) $ ( 188,923 )

Other comprehensive income (loss) before reclassification 10,493 0 10,493

Amounts reclassified from accumulated other comprehensive income (loss) 763 22 785

Net current period other comprehensive income (loss) 11,256 22 11,278

Balance at June 30, 2023

$ ( 176,898 ) $ ( 747 ) $ ( 177,645 )

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

for-Sales Securities Defined Benefit Pension Items Total

Balance at January 1, 2022 $ 17,056 $ ( 963 ) $ 16,093

Other comprehensive income (loss) before reclassification ( 174,986 ) 0 ( 174,986 )

1 unchanged sentence

Net current period other comprehensive income (loss) ( 174,681 ) 54 ( 174,627 )

Balance at March 31, 2022 $ ( 92,751 ) $ ( 936 ) $ ( 93,687 )

Reclassifications out of other accumulated comprehensive loss for the three months ended March 31, 2023 are as follows:

Balance at June 30, 2022

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

Reclassifications out of other accumulated other comprehensive income (loss) for the three months ended June 30, 2023 are as follows:

Details about

2 unchanged sentences

Income (Loss) Components Amount

Reclassified From Accumulated Other Comprehensive Income Affected Line Item

Reclassified From Accumulated Other Comprehensive Income (Loss) Affected Line Item

in the Statement Where Net Income is Presented

8 unchanged sentences

Total reclassifications for the period $ ( 399 ) Net income

Reclassifications out of other accumulated comprehensive income for the three months ended March 31, 2022 are as follows:

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

Details about

2 unchanged sentences

Income (Loss) Components Amount

Reclassified From Accumulated Other Comprehensive Income Affected Line Item

Reclassified From Accumulated Other Comprehensive Income (Loss) Affected Line Item

in the Statement Where Net Income is Presented

(dollars in thousands)

Amortization of unrealized losses on held-to-maturity securities $ ( 386 ) Interest income

Tax effect 81 Income tax expense

( 305 ) Net of tax

Amortization of defined benefit pension items ( 36 ) Other expense

2 unchanged sentences

Total reclassifications for the period $ ( 332 ) Net income

Reclassifications out of accumulated comprehensive loss for the six months ended June 30, 2023 are as follows:

Details about

Accumulated Other

Comprehensive

Income (Loss) Components Amount

Reclassified From Accumulated Other Comprehensive Income (Loss) Affected Line Item

in the Statement Where Net Income is Presented

(dollars in thousands)

Amortization of unrealized losses on held-to-maturity securities $ ( 985 ) Interest income

Realized gains and (losses) on available-for-sale securities 19 Net securities gains

Tax effect 203 Income tax expense

( 763 ) Net of tax

Amortization of defined benefit pension items ( 30 ) Other expense

Tax effect 8 Income tax expense

( 22 ) Net of tax

Total reclassifications for the period $ ( 785 ) Net income

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

Details about

Accumulated Other

Comprehensive

Income (Loss) Components Amount

Reclassified From Accumulated Other Comprehensive Income (Loss) Affected Line Item

in the Statement Where Net Income is Presented

(dollars in thousands)

Amortization of unrealized losses on held-to-maturity securities $ ( 386 ) Interest income

Tax effect 81 Income tax expense

( 305 ) Net of tax

Amortization of defined benefit pension items ( 72 ) Other expense

Tax effect 18 Income tax expense

( 54 ) Net of tax

Total reclassifications for the period $ ( 359 ) Net income

The Company leases certain office facilities under long-term operating lease agreements.

14 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 March 31, 2023:

The following is a maturity analysis of the operating lease liabilities as of June 30, 2023:

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

4 unchanged sentences

Right-of-use asset $ 4,999

Three Months Ended March 31,

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

(dollars in thousands) 2023 2022 2023 2022

4 unchanged sentences

Operating cash outflows from operating leases $ 300 $ 163 $ 478 $ 333

Weighted-average remaining lease term - operating leases 7.0 years 8.9 years

Weighted-average remaining lease term - operating leases 6.8 years 8.5 years 6.8 years 8.5 years

Weighted average discount rate - operating leases 2.5 % 2.5 % 2.5 % 2.5 %

9 unchanged sentences

On August 31, 2022, the trustee filed his amended complaint against the former client, the Bank, the Company, four officers of the Bank and one independent director of the Bank.

The amended complaint alleges that the former client engaged in a check kiting scheme involving multiple banks.

The amended complaint alleges that a series of business transactions among the client, his related entities and the Bank are voidable under applicable bankruptcy and state laws.

The amended complaint also alleges that the Bank, the Company and the five individual bank representatives who are named as defendants violated various federal and state laws in assisting the former client in his check kiting scheme.

The amended complaint alleged that the former client engaged in a check kiting scheme involving multiple banks.

The amended complaint alleged that a series of business transactions among the client, his related entities and the Bank are voidable under applicable bankruptcy and state laws.

The amended complaint also alleged that the Bank, the Company and the five individual bank representatives who are named as defendants violated various federal and state laws in assisting the former client in his check kiting scheme.

On October 26, 2022, the trustee filed his second amended complaint which was virtually identical to his amended complaint.

On January 5, 2023, the Bank, the Company and the five individual bank representatives filed motions to dismiss the second amended complaint.

The motions are being briefed and will then be considered by the court.

The hearing for the parties to argue the Company's motion to dismiss the Trustee's second amended complaint was held on April 17, 2023.

The judge took the matter under advisement and a ruling is expected within 30 days of the hearing.

Based on current information, we have determined that a material loss is neither probable nor estimable at this time, and the Bank, the Company and the five individual Bank representatives who are named as defendants intend to vigorously defend themselves against all allegations asserted in this amended complaint.

On May 30, 2023, the court issued its decision granting the defendants’ motion to dismiss in part and denying it in part.

The court dismissed all claims against the Company and the Bank’s independent director.

The court dismissed several of the claims against the defendants but granted the trustee the right to file an amended complaint.

On June 20, 2023, the trustee filed his third amended complaint.

The trustee alleges many of the same claims that were alleged in his second amended complaint.

The defendants will file a motion to dismiss the third amended complaint on July 25, 2023.

Based on current information, we have determined that a material loss is neither probable nor estimable at this time, and the Bank, and the four individual Bank representatives who are named as defendants in the third amended complaint intend to vigorously defend themselves against all allegations asserted in the third amended complaint.

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