What changed in this filing

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Item 1. Financial Statements

2023-11-02 compared with 2023-08-03 · 166 added, 178 removed, 1197 unchanged (22% of the section changed)

3 unchanged sentences

(dollars in thousands, except per share data)

September 30,

2023 December 31,

32 unchanged sentences

4,000,000 shares authorized;

115,000 Series A shares, $ 1,000 per share liquidation preference, issued and outstanding at June 30, 2023 and December 31, 2022, respectively

115,000 Series A shares, $ 1,000 per share liquidation preference, issued and outstanding at September 30, 2023 and December 31, 2022, respectively

110,548 110,548

1 unchanged sentence

40,000,000 shares authorized;

21,854,800 and 22,214,913 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively

21,594,546 and 22,214,913 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively

Capital surplus 437,566 449,196

4 unchanged sentences

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

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MIDLAND STATES BANCORP, INC.

1 unchanged sentence

(dollars in thousands, except per share data)

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

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

2023 2022 2023 2022

57 unchanged sentences

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

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MIDLAND STATES BANCORP, INC.

1 unchanged sentence

(dollars in thousands)

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

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

2023 2022 2023 2022

15 unchanged sentences

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

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MIDLAND STATES BANCORP, INC.

8 unchanged sentences

shareholders'

Balances, March 31, 2023 $ 110,548 $ 221 $ 447,471 $ 295,200 $ ( 77,797 ) $ 775,643

Balances, June 30, 2023 $ 110,548 $ 218 $ 442,886 $ 307,888 $ ( 84,719 ) $ 776,821

Net income — — — 18,042 — 18,042

7 unchanged sentences

Issuance of common stock under employee benefit plans — 1 131 — — 132

Balances, June 30, 2023 $ 110,548 $ 218 $ 442,886 $ 307,888 $ ( 84,719 ) $ 776,821

Balances, September 30, 2023 $ 110,548 $ 216 $ 437,566 $ 317,101 $ ( 101,181 ) $ 764,250

Balances, December 31, 2022 $ 110,548 $ 222 $ 449,196 $ 282,405 $ ( 83,797 ) $ 758,574

8 unchanged sentences

Issuance of common stock under employee benefit plans — 1 1,592 — — 1,593

Balances, September 30, 2023 $ 110,548 $ 216 $ 437,566 $ 317,101 $ ( 101,181 ) $ 764,250

Balances, June 30, 2022 $ — $ 221 $ 446,894 $ 242,170 $ ( 53,097 ) $ 636,188

Balances, March 31, 2022 $ — $ 220 $ 446,044 $ 226,757 $ ( 28,035 ) $ 644,986

Net income — — — 23,521 — 23,521

Other comprehensive loss — — — — ( 25,286 ) ( 25,286 )

Issuance of preferred stock, net of offering costs 110,548 — — — — 110,548

Common dividends declared ($ 0.29 per share)

2 unchanged sentences

Issuance of common stock under employee benefit plans — — 277 — — 277

Balances, June 30, 2022 $ — $ 221 $ 446,894 $ 242,170 $ ( 53,097 ) $ 636,188

Balances, September 30, 2022 $ 110,548 $ 221 $ 447,672 $ 259,221 $ ( 78,383 ) $ 739,279

Balances, December 31, 2021 $ — $ 221 $ 445,907 $ 212,472 $ 5,237 $ 663,837

1 unchanged sentence

Other comprehensive loss — — — — ( 83,620 ) ( 83,620 )

Issuance of preferred stock, net of offering costs 110,548 — — — — 110,548

Common dividends declared ($ 0.87 per share)

3 unchanged sentences

Issuance of common stock under employee benefit plans — 1 1,326 — — 1,327

Balances, June 30, 2022 $ — $ 221 $ 446,894 $ 242,170 $ ( 53,097 ) $ 636,188

Balances, September 30, 2022 $ 110,548 $ 221 $ 447,672 $ 259,221 $ ( 78,383 ) $ 739,279

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

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MIDLAND STATES BANCORP, INC.

1 unchanged sentence

(dollars in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Cash flows from operating activities:

12 unchanged sentences

Gain on repurchase of subordinated debt ( 676 ) —

Gain on sales of other real estate owned ( 819 ) 120

(Loss) gain on sales of other real estate owned ( 819 ) 131

Impairment on other real estate owned — 743

20 unchanged sentences

Proceeds from sales of other real estate owned 7,346 561

Proceeds from settlements of company-owned life insurance — 1,337

(Purchases of) proceeds from company-owned life insurance, net ( 48,622 ) 1,518

Net cash acquired in acquisitions — 60,275

1 unchanged sentence

Cash flows from financing activities:

Net increase (decrease) in deposits 61,896 ( 6,004 )

Net increase in deposits 40,350 204,810

Net decrease in short-term borrowings ( 24,313 ) ( 18,285 )

2 unchanged sentences

Payments made on subordinated debt ( 5,845 ) —

Proceeds from issuance of preferred stock — 110,548

Cash dividends paid on preferred stock ( 6,685 ) —

3 unchanged sentences

Proceeds from issuance of common stock under employee benefit plans 1,593 1,327

Net cash provided by (used in) financing activities 125,153 ( 53,282 )

Net increase (decrease) in cash and cash equivalents 64 ( 410,254 )

Net cash provided by financing activities 48,067 327,716

Net decrease in cash and cash equivalents ( 28,499 ) ( 367,183 )

Cash and cash equivalents:

9 unchanged sentences

Right of use assets obtained in exchange for lease obligations 2,459 502

Transfer of loan servicing rights, at lower of cost or market to loan servicing rights held for sale — 23,995

Transfer of loan servicing rights held for sale to loan servicing rights, at lower of cost or market 20,745 —

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

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MIDLAND STATES BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (UNAUDITED)

Business Description 7

Basis of Presentation and Summary of Significant Accounting Policies 7

Investment Securities 8

Premises, Equipment and Leases 25

Loan Servicing Rights 26

Derivative Instruments 26

Short-Term Borrowings 28

FHLB Advances and Other Borrowings 28

Subordinated Debt 29

Earnings Per Common Share 29

Fair Value of Financial Instruments 30

Commitments, Contingencies and Credit Risk 35

Segment Information 36

Revenue From Contracts with Customers 38

NOTE 1 – BUSINESS DESCRIPTION

36 unchanged sentences

In 2021, the UK Financial Conduct Authority delayed the intended cessation date of certain tenors of LIBOR to June 30, 2023.

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In December 2022, to ensure the relief in Topic 848 covers the period of time during which a significant number of modifications may take place, the FASB issued ASU No.

7 unchanged sentences

Investment Securities Available for Sale

Investment securities available for sale at June 30, 2023 and December 31, 2022 were as follows:

June 30, 2023

Investment securities available for sale at September 30, 2023 and December 31, 2022 were as follows:

September 30, 2023

(dollars in thousands) Amortized

21 unchanged sentences

Total available for sale securities $ 873,023 $ 601 $ 105,390 $ 768,234

The following is a summary of the amortized cost and fair value of the investment securities available for sale, by maturity, at June 30, 2023.

Expected maturities may differ from contractual maturities in mortgage-backed securities because

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the mortgages underlying the securities may be prepaid without penalties.

The following is a summary of the amortized cost and fair value of the investment securities available for sale, by maturity, at September 30, 2023.

Expected maturities may differ from contractual maturities in mortgage-backed securities because the mortgages underlying the securities may be prepaid without penalties.

The maturities of all other investment securities available for sale are based on final contractual maturity.

7 unchanged sentences

Total available for sale securities $ 963,281 $ 835,009

Proceeds and gross realized gains and losses on sales of investment securities available for sale for the three and six months ended June 30, 2023 and 2022 are summarized as follows:

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

Proceeds and gross realized gains and losses on sales of investment securities available for sale for the three and nine months ended September 30, 2023 and 2022 are summarized as follows:

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

(dollars in thousands) 2023 2022 2023 2022

3 unchanged sentences

Gross realized losses on sales ( 4,961 ) ( 242 ) ( 6,816 ) ( 1,059 )

Unrealized losses and fair values for investment securities available for sale as of June 30, 2023 and December 31, 2022, for which an allowance for credit losses has not been recorded, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, are summarized as follows:

June 30, 2023

Unrealized losses and fair values for investment securities available for sale as of September 30, 2023 and December 31, 2022, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, are summarized as follows:

September 30, 2023

Less than 12 Months 12 Months or more Total

10 unchanged sentences

State and municipal securities 48,303 9,787 — — 48,303 9,787

Collateralized loan obligations 22,385 277 — — 22,385 277

Corporate securities — — 82,230 12,894 82,230 12,894

Total available for sale securities $ 352,726 $ 20,773 $ 462,751 $ 107,699 $ 815,477 $ 128,472

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December 31, 2022

13 unchanged sentences

Total available for sale securities $ 241,906 $ 15,132 $ 463,399 $ 90,258 $ 705,305 $ 105,390

At June 30, 2023, 320 investment securities available for sale had unrealized losses with aggregate depreciation of 11.93 % from their amortized cost basis.

At September 30, 2023, 321 investment securities available for sale had unrealized losses with aggregate depreciation of 13.50 % from their amortized cost basis.

For all of the above investment securities, the unrealized losses were generally due to changes in interest rates, and unrealized losses were considered to be temporary as the fair value is expected to recover as the securities approach their respective maturity dates.

2 unchanged sentences

NOTE 4 – LOANS

The following table presents total loans outstanding by portfolio class, as of June 30, 2023 and December 31, 2022:

(dollars in thousands) June 30,

The following table presents total loans outstanding by portfolio class, as of September 30, 2023 and December 31, 2022:

(dollars in thousands) September 30,

2023 December 31,

15 unchanged sentences

Total loans $ 6,280,883 $ 6,306,467

Total loans include net deferred loan costs of $ 5.7 million and $ 4.4 million at June 30, 2023 and December 31, 2022, respectively, and unearned discounts of $ 67.5 million and $ 62.6 million within the lease financing portfolio at June 30, 2023 and December 31, 2022, respectively.

At June 30, 2023, the Company had residential real estate loans held for sale totaling $ 5.6 million, compared to $ 1.3 million at December 31, 2022.

The Company sold loans and leases with proceeds totaling $ 28.0 million and $ 34.3 million during the three and six months ended June 30, 2023, respectively, and $ 100.4 million and $ 203.5 million during the three and six months ended June 30, 2022, respectively.

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Total loans include net deferred loan costs of $ 5.1 million and $ 4.4 million at September 30, 2023 and December 31, 2022, respectively, and unearned discounts of $ 67.1 million and $ 62.6 million within the lease financing portfolio at September 30, 2023 and December 31, 2022, respectively.

At September 30, 2023, the Company had residential real estate loans held for sale totaling $ 6.1 million, compared to $ 1.3 million at December 31, 2022.

The Company sold loans and leases with proceeds totaling $ 28.0 million and $ 65.3 million during the three and nine months ended September 30, 2023, respectively, and $ 48.5 million and $ 252.1 million during the three and nine months ended September 30, 2022, respectively.

Classifications of Loan Portfolio

4 unchanged sentences

Commercial loans are predominately secured by equipment, inventory, accounts receivable, and other sources of repayment.

Commercial FHA warehouse lines of $ 30.5 million and $ 25.0 million as of June 30, 2023 and December 31, 2022, respectively, were included in this classification.

Commercial FHA warehouse lines of $ 48.5 million and $ 25.0 million as of September 30, 2023 and December 31, 2022, respectively, were included in this classification.

Commercial real estate —Loans secured by real estate occupied by the borrower for ongoing operations, including loans to borrowers engaged in agricultural production, and non-owner occupied real estate leased to one or more tenants, including commercial office, industrial, special purpose, retail and multi-family residential real estate loans.

2 unchanged sentences

Secured development loans are made to borrowers for the purpose of infrastructure improvements to vacant land to create finished marketable residential and commercial lots/land.

Most land development loans are originated with the intention that the loans will be paid through the sale of developed lots/land by the developers within twelve months of the completion date.

Most land development loans are originated with the intention that the loans

will be paid through the sale of developed lots/land by the developers within twelve months of the completion date.

Interest reserves may be established on real estate construction loans.

9 unchanged sentences

These loans were made in the ordinary course of business upon substantially the same terms, including collateralization and interest rates prevailing at the time.

The aggregate loans outstanding to the Company's directors, executive officers, principal shareholders and their affiliates totaled $ 21.6 million and $ 19.8 million at June 30, 2023 and December 31, 2022, respectively.

The new loans, other additions, repayments and other reductions for the three and six months ended June 30, 2023 and 2022, are summarized as follows:

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

The aggregate loans outstanding to the Company's directors, executive officers, principal shareholders and their affiliates totaled $ 21.3 million and $ 19.8 million at September 30, 2023 and December 31, 2022, respectively.

The new loans, other additions, repayments and other reductions for the three and nine months ended September 30, 2023 and 2022, are summarized as follows:

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

(dollars in thousands) 2023 2022 2023 2022

3 unchanged sentences

Ending balance $ 21,282 $ 20,016 $ 21,282 $ 20,016

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The following table represents, by loan portfolio segment, a summary of changes in the allowance for credit losses on loans for the three and six months ended June 30, 2023 and 2022:

The following table represents, by loan portfolio segment, a summary of changes in the allowance for credit losses on loans for the three and nine months ended September 30, 2023 and 2022:

Commercial Loan Portfolio Other Loan Portfolio

4 unchanged sentences

financing Total

Changes in allowance for credit losses on loans for the three months ended June 30, 2023:

Changes in allowance for credit losses on loans for the three months ended September 30, 2023:

Balance, beginning of period $ 15,290 $ 29,425 $ 3,189 $ 5,551 $ 3,953 $ 7,542 $ 64,950

3 unchanged sentences

Balance, end of period $ 19,410 $ 24,611 $ 3,530 $ 5,698 $ 3,984 $ 9,436 $ 66,669

Changes in allowance for credit losses on loans for the six months ended June 30, 2023:

Changes in allowance for credit losses on loans for the nine months ended September 30, 2023:

Balance, beginning of period $ 14,639 $ 29,290 $ 2,435 $ 4,301 $ 3,599 $ 6,787 $ 61,051

3 unchanged sentences

Balance, end of period $ 19,410 $ 24,611 $ 3,530 $ 5,698 $ 3,984 $ 9,436 $ 66,669

Changes in allowance for credit losses on loans for the three months ended June 30, 2022:

Changes in allowance for credit losses on loans for the three months ended September 30, 2022:

Balance, beginning of period $ 12,748 $ 27,874 $ 1,101 $ 3,416 $ 2,994 $ 6,765 $ 54,898

3 unchanged sentences

Balance, end of period $ 14,364 $ 28,430 $ 1,591 $ 4,171 $ 3,405 $ 6,678 $ 58,639

Changes in allowance for credit losses on loans for the six months ended June 30, 2022:

Changes in allowance for credit losses on loans for the nine months ended September 30, 2022:

Balance, beginning of period $ 14,375 $ 22,993 $ 972 $ 2,695 $ 2,558 $ 7,469 $ 51,062

14 unchanged sentences

Multiplying one by

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the other gives the Company its loss rate, which is then applied to the loan portfolio balance to determine expected future losses.

23 unchanged sentences

In calculating expected credit losses, the Company individually evaluates loans on nonaccrual status with a balance greater than $ 500,000 , loans past due 90 days or more and still accruing interest, and loans that do not share risk characteristics

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with other loans in the pool.

The following table presents amortized cost basis of individually evaluated loans on nonaccrual status as of June 30, 2023 and December 31, 2022:

June 30, 2023 December 31, 2022

The following table presents amortized cost basis of individually evaluated loans on nonaccrual status as of September 30, 2023 and December 31, 2022:

September 30, 2023 December 31, 2022

(dollars in thousands) Nonaccrual with allowance Nonaccrual with no allowance Total nonaccrual Nonaccrual with allowance Nonaccrual with no allowance Total nonaccrual

14 unchanged sentences

Total loans $ 24,123 $ 31,058 $ 55,181 $ 19,445 $ 22,531 $ 41,976

There was no interest income recognized on nonaccrual loans during the three and six months ended June 30, 2023 and 2022 while the loans were in nonaccrual status.

Additional interest income that would have been recorded on nonaccrual loans had they been current in accordance with their original terms was $ 0.8 million and $ 1.6 million for the three and six months ended June 30, 2023 and $ 0.5 million and $ 1.3 million for the three and six months ended June 30, 2022, respectively.

There was no interest income recognized on nonaccrual loans during the three and nine months ended September 30, 2023 and 2022 while the loans were in nonaccrual status.

Additional interest income that would have been recorded on nonaccrual loans had they been current in accordance with their original terms was $ 0.8 million and $ 2.5 million for the three and nine months ended September 30, 2023, respectively, and $ 0.8 million and $ 1.9 million for the three and nine months ended September 30, 2022, respectively.

Collateral Dependent Financial Assets

3 unchanged sentences

and the nature and degree of

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protection provided by the cash flow and value of any underlying collateral.

However, as other sources of repayment become inadequate over time, the significance of the collateral’s value increases and the loan may become collateral dependent.

The table below presents the value of individually evaluated, collateral dependent loans by loan class, for borrowers experiencing financial difficulty, as of June 30, 2023 and December 31, 2022:

The table below presents the value of individually evaluated, collateral dependent loans by loan class, for borrowers experiencing financial difficulty, as of September 30, 2023 and December 31, 2022:

Type of Collateral

(dollars in thousands) Real Estate Blanket Lien Equipment Total

June 30, 2023

September 30, 2023

Commercial $ — $ — $ 1,973 $ 1,973

Commercial other — — 344 344

Commercial real estate:

2 unchanged sentences

Multi-family 2,642 — — 2,642

Lease financing — — 955 955

Construction and land development 2,021 — — 2,021

Total collateral dependent loans $ 31,453 $ — $ 2,317 $ 33,770

8 unchanged sentences

Total collateral dependent loans $ 26,077 $ 1,604 $ — $ 27,681

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The aging status of the recorded investment in loans by portfolio as of June 30, 2023 was as follows:

The aging status of the recorded investment in loans by portfolio as of September 30, 2023 was as follows:

Accruing loans

43 unchanged sentences

Total loans $ 17,328 $ 15,044 $ 1,173 $ 33,545 $ 41,976 $ 6,230,946 $ 6,306,467

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Loan Restructurings

The Company adopted the accounting guidance in ASU No.

2022-02, effective as of January 1, 2023, which eliminates the recognition and measurement of a troubled debt restructuring ("TDR").

2022-02, effective as of January 1, 2023, which eliminated the recognition and measurement of a troubled debt restructuring ("TDR").

Due to the removal of the TDR designation, the Company evaluates all loan restructurings according to the accounting guidance for loan modifications to determine if the restructuring results in a new loan or a continuation of the existing loan.

13 unchanged sentences

If the borrower continues to experience financial difficulty, another concession such as an interest rate reduction or principal forgiveness, may be granted.

During the three months ended June 30, 2023 the Company restructured three loans for borrowers experiencing financial difficulties with principal balances totaling $ 0.5 million.

Two of the restructured loans were provided a term extension with the other receiving an interest rate reduction and a term extension.

During the six months ended June 30, 2023 the Company restructured five loans for borrowers experiencing financial difficulties with principal balances totaling $ 0.6 million.

Three of the restructured loans were provided a term extension with the other two receiving an interest rate reduction and a term extension.

During the three months ended September 30, 2023 the Company restructured two loans and one lease for borrowers experiencing financial difficulties with principal balances totaling $ 0.5 million.

The restructured loans were provided term extensions and the restructured lease was provided a term extension with an increased interest rate.

During the nine months ended September 30, 2023 the Company restructured seven loans and one lease for borrowers experiencing financial difficulties with principal balances totaling $ 1.2 million.

Five of the restructured loans were provided a term extension with the other two receiving an interest rate reduction and a term extension.

The lease was provided a term extension with an increased interest rate.

Credit Quality Monitoring

13 unchanged sentences

Loans in the commercial loan portfolio tend to be larger and more complex than those in the other loan portfolio, and therefore, are subject to more intensive monitoring.

All loans in the commercial loan portfolio have an assigned relationship manager, and most borrowers provide periodic financial and operating information that allows the relationship managers to stay abreast of credit quality during the life of the loans.

The risk ratings of loans in the commercial loan portfolio are reassessed at

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least annually, with loans below an acceptable risk rating reassessed more frequently and reviewed by various individuals within the Company at least quarterly.

All loans in the commercial loan portfolio have an assigned relationship manager, and most borrowers provide periodic financial and operating information that allows the relationship managers to stay

abreast of credit quality during the life of the loans.

The risk ratings of loans in the commercial loan portfolio are reassessed at least annually, with loans below an acceptable risk rating reassessed more frequently and reviewed by various individuals within the Company at least quarterly.

The Company maintains a centralized independent loan review function that monitors the approval process and ongoing asset quality of the loan portfolio, including the accuracy of loan grades.

11 unchanged sentences

Loans not graded in the commercial loan portfolio are monitored by aging status and payment activity.

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The following tables present the recorded investment of the commercial loan portfolio by risk category as of June 30, 2023 and December 31, 2022:

June 30, 2023

The following tables present the recorded investment of the commercial loan portfolio by risk category as of September 30, 2023 and December 31, 2022:

September 30, 2023

Amortized Cost Basis by Origination Year

56 unchanged sentences

Total commercial loans $ 611,764 $ 1,476,915 $ 835,334 $ 338,288 $ 210,124 $ 401,647 $ 526,132 $ 4,400,204

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December 31, 2022

57 unchanged sentences

Total commercial loans $ 1,546,160 $ 927,973 $ 440,732 $ 266,582 $ 121,697 $ 408,276 $ 557,195 $ 4,268,615

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The following table presents the gross charge-offs by class of loan and year of origination on the commercial loan portfolio for the three and six months ended June 30, 2023:

The following table presents the gross charge-offs by class of loan and year of origination on the commercial loan portfolio for the three and nine months ended September 30, 2023:

Term Loans by Origination Year

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

For the three months ended June 30, 2023

For the three months ended September 30, 2023

Commercial Commercial $ — $ — $ — $ 28 $ 49 $ — $ 2,122 $ 2,199

7 unchanged sentences

Total gross commercial charge-offs $ 1 $ 728 $ 106 $ 103 $ 212 $ 2,337 $ 2,122 $ 5,609

For the six months ended June 30, 2023

For the nine months ended September 30, 2023

Commercial Commercial $ — $ — $ — $ 49 $ 78 $ 21 $ 2,122 $ 2,270

9 unchanged sentences

Accordingly, loans on nonaccrual status and loans past due 90 days or more and still accruing interest are considered to be nonperforming for purposes

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of credit quality evaluation.

The following tables present the recorded investment of our other loan portfolio based on the credit risk profile of loans that are performing and loans that are nonperforming as of June 30, 2023 and December 31, 2022:

June 30, 2023

September 30, 2023

Amortized Cost Basis by Origination Year

18 unchanged sentences

Total other loans $ 426,785 $ 682,854 $ 318,467 $ 159,138 $ 83,998 $ 151,680 $ 57,757 $ 1,880,679

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December 31, 2022

19 unchanged sentences

Total other loans $ 994,715 $ 450,870 $ 218,964 $ 115,741 $ 55,631 $ 139,156 $ 62,775 $ 2,037,852

The following table presents the gross charge-offs by class of loan and year of origination on the other loan portfolio for the three and six months ended June 30, 2023:

The following table presents the gross charge-offs by class of loan and year of origination on the other loan portfolio for the three and nine months ended September 30, 2023:

Term Loans by Origination Year

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

For the three months ended June 30, 2023

For the three months ended September 30, 2023

Residential real estate Residential first lien $ — $ — $ — $ 33 $ 10 $ 52 $ — $ 95

4 unchanged sentences

Total gross other charge-offs $ 242 $ 746 $ 24 $ 48 $ 337 $ 342 $ — $ 1,739

For the six months ended June 30, 2023

For the nine months ended September 30, 2023

Residential real estate Residential first lien $ — $ — $ 9 $ 36 $ 17 $ 52 $ — $ 114

4 unchanged sentences

Total gross other charge-offs $ 260 $ 1,224 $ 616 $ 212 $ 429 $ 710 $ 57 $ 3,508

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NOTE 5 – PREMISES, EQUIPMENT AND LEASES

A summary of premises and equipment at June 30, 2023 and December 31, 2022 is as follows:

June 30, December 31,

A summary of premises and equipment at September 30, 2023 and December 31, 2022 is as follows:

September 30, December 31,

(dollars in thousands) 2023 2022

6 unchanged sentences

Premises and equipment, net $ 82,741 $ 78,293

Depreciation expense for the three and six months ended June 30, 2023 was $ 1.2 million and $ 2.4 million, respectively, and $ 1.2 million and $ 2.4 million for the three and six months ended June 30, 2022, respectively.

Depreciation expense for the three and nine months ended September 30, 2023 was $ 1.1 million and $ 3.6 million, respectively, and $ 1.2 million and $ 3.7 million for the three and nine months ended September 30, 2022, respectively.

The Company has entered into operating leases, primarily for banking offices and operating facilities, which have remaining lease terms of 5 months to 14 years, some of which may include options to extend the lease terms for up to an additional 10 years.

The options to extend are included if they are reasonably certain to be exercised.

The Company had operating lease right-of-use assets of $ 7.5 million and $ 7.0 million as of June 30, 2023 and December 31, 2022, respectively, included in premises and equipment on our consolidated balance sheets.

The operating lease liabilities of the Company were $ 9.3 million and $ 8.9 million as of June 30, 2023 and December 31, 2022, respectively, and are included in accrued interest payable and other liabilities on our consolidated balance sheets.

Information related to operating leases for the three and six months ended June 30, 2023 and 2022 was as follows:

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

The Company had operating lease right-of-use assets of $ 8.1 million and $ 7.0 million as of September 30, 2023 and December 31, 2022, respectively, included in premises and equipment on our consolidated balance sheets.

The operating lease liabilities of the Company were $ 9.8 million and $ 8.9 million as of September 30, 2023 and December 31, 2022, respectively, and are included in accrued interest payable and other liabilities on our consolidated balance sheets.

Information related to operating leases for the three and nine months ended September 30, 2023 and 2022 was as follows:

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

(dollars in thousands) 2023 2022 2023 2022

4 unchanged sentences

Weighted average discount rate 3.39 % 2.88 % 3.39 % 2.88 %

The projected minimum rental payments under the terms of the leases as of June 30, 2023 were as follows:

The projected minimum rental payments under the terms of the leases as of September 30, 2023 were as follows:

(dollars in thousands) Amount

5 unchanged sentences

Total operating lease liabilities $ 9,775

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NOTE 6 – LOAN SERVICING RIGHTS

A summary of loan servicing rights at June 30, 2023 and December 31, 2022 is as follows:

June 30, 2023 December 31, 2022

A summary of loan servicing rights at September 30, 2023 and December 31, 2022 is as follows:

September 30, 2023 December 31, 2022

(dollars in thousands) Serviced Loans Carrying Value Serviced Loans Carrying Value

8 unchanged sentences

NOTE 7 – DERIVATIVE INSTRUMENTS

As part of the Company’s overall management of interest rate sensitivity, the Company utilizes derivative instruments to minimize significant, unanticipated earnings fluctuations caused by interest rate volatility, including interest rate lock commitments, forward commitments to sell mortgage-backed securities, cash flow hedges and interest rate swap contracts.

As part of the Company’s overall interest rate risk management, the Company utilizes derivative instruments to minimize significant, unanticipated earnings fluctuations caused by interest rate volatility, including interest rate lock commitments, forward commitments to sell mortgage-backed securities, cash flow hedges and interest rate swap contracts.

The notional amount does not represent amounts exchanged by the parties, rather the amount exchanged is determined by reference to the notional amount and the other terms of the individual agreements.

Interest Rate Lock Commitments / Forward Commitments to Sell Mortgage-Backed Securities

3 unchanged sentences

Changes in the fair value of derivative financial instruments are recognized in commercial FHA revenue and residential mortgage banking revenue in the consolidated statements of income.

The following table summarizes the interest rate lock commitments and forward commitments to sell mortgage-backed securities held by the Company, their notional amount and estimated fair values at June 30, 2023 and December 31, 2022:

Notional amount Fair value gain

(dollars in thousands) June 30,

(dollars in thousands) September 30,

2023 December 31,

2022 June 30,

2022 September 30,

2023 December 31,

4 unchanged sentences

Notional amount Fair value loss

(dollars in thousands) June 30,

(dollars in thousands) September 30,

2023 December 31,

2022 June 30,

2022 September 30,

2023 December 31,

3 unchanged sentences

Total $ — $ 11,088 $ — $ 15

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During both the three and six months ended June 30, 2023, the Company recognized net gains of $ 0.1 million on derivative instruments in commercial FHA revenue and residential mortgage banking revenue in the consolidated statements of income.

During the three and six months ended June 30, 2022, the Company recognized net losses of $ 0.4 million and $ 0.3 million, respectively, on derivative instruments in commercial FHA revenue and residential mortgage banking revenue in the consolidated statements of income.

During the nine months ended September 30, 2023, the Company recognized net gains of $ 0.1 million on derivative instruments in commercial FHA revenue and residential mortgage banking revenue in the consolidated statements of income.

During the three and nine months ended September 30, 2022, the Company recognized net losses of $ 0.2 million and $ 0.6 million, respectively, on derivative instruments in commercial FHA revenue and residential mortgage banking revenue in the consolidated statements of income.

Cash Flow Hedges

In the first quarter of 2022, the Company entered into interest rate swap agreements, which qualify as cash flow hedges, to manage the risk of changes in future cash flows due to interest rate fluctuations.

The following table summarizes the Company's receive-fixed, pay-variable interest rate swaps on certain pools of loans indexed to prime at June 30, 2023 and December 31, 2022:

(dollars in thousands) June 30,

The Company periodically enters into interest rate swap agreements, which qualify as cash flow hedges, to manage the risk of changes in future cash flows due to interest rate fluctuations.

The following table summarizes the Company's receive-fixed, pay-variable interest rate swaps on certain pools of loans indexed to prime at September 30, 2023 and December 31, 2022:

(dollars in thousands) September 30,

2023 December 31,

10 unchanged sentences

These derivative contracts do not qualify for hedge accounting.

The notional amounts of the customer derivative instruments and the offsetting counterparty derivative instruments were $ 7.2 million and $ 7.4 million at June 30, 2023 and December 31, 2022, respectively.

The fair value of the customer derivative instruments and the offsetting counterparty derivative instruments was $ 0.5 million at both June 30, 2023 and December 31, 2022, which are included in other assets and other liabilities, respectively, on the consolidated balance sheets.

The notional amounts of the customer derivative instruments and the offsetting counterparty derivative instruments were $ 7.0 million and $ 7.4 million at September 30, 2023 and December 31, 2022, respectively.

The fair value of the customer derivative instruments and the offsetting counterparty derivative instruments was $ 0.5 million at both September 30, 2023 and December 31, 2022, which are included in other assets and other liabilities, respectively, on the consolidated balance sheets.

NOTE 8 – DEPOSITS

The following table summarizes the classification of deposits as of June 30, 2023 and December 31, 2022:

(dollars in thousands) June 30, 2023 December 31, 2022

The following table summarizes the classification of deposits as of September 30, 2023 and December 31, 2022:

(dollars in thousands) September 30, 2023 December 31, 2022

Noninterest-bearing demand $ 1,154,515 $ 1,362,158

5 unchanged sentences

Total deposits $ 6,405,002 $ 6,364,652

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NOTE 9 – SHORT-TERM BORROWINGS

The following table presents the distribution of short-term borrowings and related weighted average interest rates as of June 30, 2023 and December 31, 2022:

The following table presents the distribution of short-term borrowings and related weighted average interest rates as of September 30, 2023 and December 31, 2022:

Repurchase agreements

(dollars in thousands) As of and for the six months ended June 30, 2023 As of and for the Year Ended December 31,2022

(dollars in thousands) As of and for the nine months ended September 30, 2023 As of and for the year ended December 31,2022

Outstanding at period-end $ 17,998 $ 42,311

7 unchanged sentences

The Bank may be required to provide additional collateral based on the fair value of the underlying securities.

Investment securities with a carrying amount of $ 28.8 million and $ 46.1 million at June 30, 2023 and December 31, 2022, respectively, were pledged for securities sold under agreements to repurchase.

The Company had available lines of credit of $ 184.1 million and $ 12.2 million at June 30, 2023 and December 31, 2022, respectively, from the Federal Reserve Discount Window.

The lines are collateralized by a collateral agreement with respect to a pool of commercial loans and investment securities totaling $ 211.2 million and $ 14.3 million at June 30, 2023 and December 31, 2022, respectively.

There were no outstanding borrowings under these lines at June 30, 2023 and 2022.

At June 30, 2023, the Company had available federal funds lines of credit totaling $ 339.0 million.

These lines of credit were unused at June 30, 2023.

Investment securities with a carrying amount of $ 27.8 million and $ 46.1 million at September 30, 2023 and December 31, 2022, respectively, were pledged for securities sold under agreements to repurchase.

The Company had available lines of credit of $ 759.8 million and $ 12.2 million at September 30, 2023 and December 31, 2022, respectively, from the Federal Reserve Discount Window.

The lines are collateralized by a collateral agreement with respect to a pool of commercial loans and investment securities totaling $ 914.5 million and $ 14.3 million at September 30, 2023 and December 31, 2022, respectively.

There were no outstanding borrowings under these lines at September 30, 2023 and December 31, 2022.

At September 30, 2023, the Company had available federal funds lines of credit totaling $ 364.0 million.

These lines of credit were unused at September 30, 2023.

NOTE 10 – FHLB ADVANCES AND OTHER BORROWINGS

The following table summarizes our FHLB advances and other borrowings as of June 30, 2023 and December 31, 2022:

(dollars in thousands) June 30, 2023 December 31, 2022

FHLB advances – fixed rate, fixed term at rates averaging 4.18 % at June 30, 2023 - maturing in February 2028

FHLB advances – putable fixed rate at rates averaging 2.70 % and 2.35 % at June 30, 2023 and December 31, 2022, respectively – maturing through February 2028 with call provisions through February 2024

The following table summarizes our FHLB advances and other borrowings as of September 30, 2023 and December 31, 2022:

(dollars in thousands) September 30, 2023 December 31, 2022

FHLB advances – fixed rate, fixed term at rates averaging 4.18 % at September 30, 2023 - maturing through February 2028

FHLB advances – putable fixed rate at rates averaging 2.76 % and 2.35 % at September 30, 2023 and December 31, 2022, respectively – maturing through August 2028 with call provisions through February 2024

160,000 110,000

FHLB advances –SOFR floater at rates averaging 6.68 % and 5.92 % at June 30, 2023 and December 31, 2022, respectively – maturing in October 2023

FHLB advances –SOFR floater at rates averaging 6.94 % and 5.92 % at September 30, 2023 and December 31, 2022, respectively – maturing in October 2023

100,000 100,000

FHLB advances – Short term fixed rate at rates averaging 5.18 % and 4.31 % at June 30, 2023 and December 31, 2022, respectively– maturing in July 2023

FHLB advances – Short term fixed rate at rates averaging 5.46 % and 4.31 % at September 30, 2023 and December 31, 2022, respectively– maturing in October 2023

223,000 250,000

Total FHLB advances and other borrowings $ 538,000 $ 460,000

The Company’s advances from the FHLB are collateralized by a blanket collateral agreement of qualifying mortgage and home equity line of credit loans and certain commercial real estate loans totaling approximately $ 2.97 billion and $ 2.90 billion at June 30, 2023 and December 31, 2022, respectively.

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NOTE 11 – SUBORDINATED DEBT

The following table summarizes the Company’s subordinated debt at June 30, 2023 and December 31, 2022:

The following table summarizes the Company’s subordinated debt at September 30, 2023 and December 31, 2022:

Subordinated debt

1 unchanged sentence

(dollars in thousands) Issued September 2019 Issued September 2019 Issued June 2015 Total

At June 30, 2023

At September 30, 2023

Outstanding amount $ 66,750 $ 27,250 $ — $ 94,000

21 unchanged sentences

Diluted earnings per common share is calculated by dividing the sum of distributed earnings to common shareholders and undistributed earnings allocated to common shareholders by the weighted average number of shares adjusted for the dilutive effect of common stock awards.

The diluted earnings per common share computation for the three and six months ended June 30, 2023 and 2022 excluded antidilutive stock options of 375,912 and 60,698 , respectively, because the exercise prices of these stock options exceeded the average market

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prices of the Company’s common shares for those respective periods.

Presented below are the calculations for basic and diluted earnings per common share for the three and six months ended June 30, 2023 and 2022:

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

below are the calculations for basic and diluted earnings per common share for the three and nine months ended September 30, 2023 and 2022:

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

(dollars in thousands, except per share data) 2023 2022 2023 2022

19 unchanged sentences

Diluted earnings per common share 0.71 1.04 2.43 2.92

Antidilutive stock options (1)

305,051 45,698 305,051 45,698

(1) The diluted earnings per common share computation excludes antidilutive stock options because the exercise prices of these stock options exceeded the average market prices of the Company's common shares for those respective periods.

NOTE 13 – FAIR VALUE OF FINANCIAL INSTRUMENTS

8 unchanged sentences

For investment securities available for sale where quoted prices are not available, fair values are calculated based on market prices of similar securities (Level 2).

For investment securities available for sale where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows or other market indicators (Level 3).

For investment securities available for sale where quoted

prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows or other market indicators (Level 3).

Securities classified as Level 3 are not actively traded, and as a result, fair value is determined utilizing third-party valuation services through consensus pricing.

There were no transfers between Levels 1, 2 or 3 during the

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three and six months ended June 30, 2023 or December 31, 2022 for assets measured at fair value on a recurring basis.

There were no transfers between Levels 1, 2 or 3 during the period presented for assets measured at fair value on a recurring basis.

The fair value of equity securities is determined using quoted prices or market prices for similar securities (Level 2).

26 unchanged sentences

The fair value of the assets held for sale was based on estimated market prices from independently prepared current appraisals (Level 2).

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Assets and liabilities measured and recorded at fair value, including financial assets for which the Company has elected the fair value option, on a recurring and nonrecurring basis at June 30, 2023 and December 31, 2022, are summarized below:

June 30, 2023

Assets and liabilities measured and recorded at fair value, including financial assets for which the Company has elected the fair value option, on a recurring and nonrecurring basis at September 30, 2023 and December 31, 2022, are summarized below:

September 30, 2023

(dollars in thousands) Carrying

24 unchanged sentences

Assets held for sale 182 — 182 —

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December 31, 2022

25 unchanged sentences

Assets held for sale 356 — 356 —

There were no assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and six months ended June 30, 2023 and 2022.

The following table presents losses recognized on assets measured on a nonrecurring basis for the three and six months ended June 30, 2023 and 2022:

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

There were no assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and nine months ended September 30, 2023 and 2022.

The following table presents losses recognized on assets measured on a nonrecurring basis for the three and nine months ended September 30, 2023 and 2022:

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

(dollars in thousands) 2023 2022 2023 2022

3 unchanged sentences

Total losses on assets measured on a nonrecurring basis $ 10,085 $ 1,762 $ 14,761 $ 8,387

The following tables present quantitative information about significant unobservable inputs used in fair value measurements of Level 3 assets measured on a nonrecurring basis at June 30, 2023 and December 31, 2022:

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(dollars in thousands) Fair value Valuation

1 unchanged sentence

input / assumptions Range (weighted average) (1)

June 30, 2023

September 30, 2023

Loan servicing rights:

Commercial FHA servicing rights 30,914 Discounted cash flow Prepayment speed 4.00 % - 100.00 % ( 8.26 %)

Discount rate 8.00 % - 15.00 % ( 8.19 %)

SBA servicing rights $ 818 Discounted cash flow Prepayment speed 15.62 % - 16.02 % ( 15.87 %)

15 unchanged sentences

to mitigate accounting mismatches in cases where hedge accounting is complex and to achieve operational simplification.

The following table presents the difference between the aggregate fair value and the aggregate remaining principal balance for loans for which the fair value option has been elected as of June 30, 2023 and December 31, 2022:

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

(dollars in thousands) Aggregate

3 unchanged sentences

Residential loans held for sale $ 6,089 $ 142 $ 5,947 $ 1,286 $ 42 $ 1,244

The following table presents the amount of gains (losses) from fair value changes included in income before income taxes for financial assets carried at fair value for the three and six months ended June 30, 2023 and 2022:

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

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

(dollars in thousands) 2023 2022 2023 2022

Commercial loans held for sale $ — $ ( 18 ) $ — $ —

Residential loans held for sale ( 37 ) ( 280 ) 112 ( 557 )

Total loans held for sale $ ( 37 ) $ ( 280 ) $ 112 $ ( 557 )

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The carrying values and estimated fair value of certain financial instruments not carried at fair value at June 30, 2023 and December 31, 2022 were as follows:

June 30, 2023

The carrying values and estimated fair value of certain financial instruments not carried at fair value at September 30, 2023 and December 31, 2022 were as follows:

September 30, 2023

(dollars in thousands) Carrying

27 unchanged sentences

Trust preferred debentures 49,975 54,668 — 54,668 —

The methods utilized to measure fair value of financial instruments at June 30, 2023 and December 31, 2022 represent an approximation of exit price;

The methods utilized to measure fair value of financial instruments at September 30, 2023 and December 31, 2022 represent an approximation of exit price;

however, an actual exit price may differ.

5 unchanged sentences

Those instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the balance

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The contract amounts of those instruments reflect the extent of involvement we have in particular classes of financial instruments.

2 unchanged sentences

The commitments are principally tied to variable rates.

Loan commitments as of June 30, 2023 and December 31, 2022 were as follows:

(dollars in thousands) June 30, 2023 December 31, 2022

Loan commitments as of September 30, 2023 and December 31, 2022 were as follows:

(dollars in thousands) September 30, 2023 December 31, 2022

Commitments to extend credit $ 1,001,228 $ 1,276,263

4 unchanged sentences

Subsequent to repurchase, such loans are carried in loans receivable.

There were no losses as a result of make-whole requests and loan repurchases for the three and six months ended June 30, 2023 and 2022.

The liability for unresolved repurchase demands totaled $ 0.2 million at June 30, 2023 and December 31, 2022.

There were no losses as a result of make-whole requests and loan repurchases for the three and nine months ended September 30, 2023 and 2022.

The liability for unresolved repurchase demands totaled $ 0.2 million at September 30, 2023 and December 31, 2022.

NOTE 15 – SEGMENT INFORMATION

10 unchanged sentences

The Other segment includes the operating results of the parent company, our captive insurance business unit, and the elimination of intercompany transactions.

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Selected business segment financial information for the three and six months ended June 30, 2023 and 2022 were as follows:

Selected business segment financial information for the three and nine months ended September 30, 2023 and 2022 were as follows:

(dollars in thousands) Banking Wealth

Management Other Total

Three Months Ended June 30, 2023

Three Months Ended September 30, 2023

Net interest income (expense) $ 60,817 $ ( 3 ) $ ( 2,218 ) $ 58,596

6 unchanged sentences

Total assets $ 7,964,147 $ 30,860 $ ( 19,082 ) $ 7,975,925

Six Months Ended June 30, 2023

Nine Months Ended September 30, 2023

Net interest income (expense) $ 184,460 $ ( 3 ) $ ( 6,517 ) $ 177,940

6 unchanged sentences

Total assets $ 7,964,147 $ 30,860 $ ( 19,082 ) $ 7,975,925

Three Months Ended June 30, 2022

Three Months Ended September 30, 2022

Net interest income (expense) $ 66,846 $ — $ ( 2,822 ) $ 64,024

6 unchanged sentences

Total assets $ 7,809,280 $ 29,166 $ ( 16,569 ) $ 7,821,877

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

Net interest income (expense) $ 190,162 $ — $ ( 7,977 ) $ 182,185

6 unchanged sentences

Total assets $ 7,809,280 $ 29,166 $ ( 16,569 ) $ 7,821,877

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NOTE 16 – REVENUE FROM CONTRACTS WITH CUSTOMERS

The Company’s revenue from contracts with customers in the scope of Topic 606 is recognized within noninterest income in the consolidated statements of income.

The following presents noninterest income, segregated by revenue streams in-scope and out-of-scope of Topic 606, for the three and six months ended June 30, 2023 and 2022.

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

The following presents noninterest income, segregated by revenue streams in-scope and out-of-scope of Topic 606, for the three and nine months ended September 30, 2023 and 2022.

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

(dollars in thousands) 2023 2022 2023 2022

34 unchanged sentences

Payment for service charges on deposit accounts is typically received immediately or in the following month through a direct charge to a customer’s account.

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Interchange Revenue

12 unchanged sentences

Fees related to the other components of other noninterest income within the scope of Topic 606 are largely transactional based, and therefore, the Company’s performance obligation is satisfied and related revenue recognized, at the point in time the customer uses the selected service to execute a transaction.

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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