What changed in this filing

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Item 1. Financial Statements

2023-05-05 compared with 2022-11-04 · 158 added, 255 removed, 838 unchanged (33% of the section changed)

3 unchanged sentences

Consolidated Balance Sheets

September 30,

2023 December 31,

33 unchanged sentences

Preferred stock, $ 1 par value, 2,500,000 shares authorized, none issued or outstanding

Common stock, $ 1 par value, 10,000,000 shares authorized, 5,681,089 and 6,014,813 issued and outstanding at September 30, 2022 and December 31, 2021, respectively

Common stock, $ 1 par value, 10,000,000 shares authorized, 5,672,841 and 5,700,728 issued and outstanding at March 31, 2023 and December 31, 2022, respectively

Additional paid-in capital 16,625 17,784

6 unchanged sentences

Consolidated Statements of Income

Three Months Ended Nine Months Ended

September 30, September 30,

Three Months Ended

(In Thousands, Except Per Share Data) 2023 2022

13 unchanged sentences

Net Interest Income 25,032 19,304

Benefit for credit losses ( 353 ) ( 1,106 ) ( 40 ) ( 3,021 )

Net Interest Income After Benefit for Credit Losses 26,664 21,538 67,867 62,138

Provision (benefit) for credit losses 360 ( 150 )

Net Interest Income After Provision (Benefit) for Credit Losses 24,672 19,454

Other Operating Income

Mortgage banking income 2,008 6,982

Bankcard fees 992 878 2,723 2,497

Purchased receivable income 977 402

Bankcard fees 908 804

Service charges on deposit accounts 457 374

Unrealized (loss) gain on marketable equity securities ( 223 ) ( 422 )

Gain on sale of marketable equity securities, net — 36 — 67

Keyman life insurance proceeds — 2,002

6 unchanged sentences

Professional and outside services 722 722

Insurance expense 545 322 1,627 965

Marketing expense 564 425

Insurance expense 557 566

OREO expense, net rental income and gains on sale 26 ( 12 )

12 unchanged sentences

Consolidated Statements of Comprehensive Income

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

Three Months Ended March 31,

(In Thousands) 2023 2022

2 unchanged sentences

Securities available for sale:

Unrealized holding (losses) arising during the period ($ 17,518 ) ($ 533 ) ($ 41,535 ) ($ 2,141 )

Unrealized holding gains (losses) arising during the period $ 8,119 ($ 16,302 )

Derivatives and hedging activities:

1 unchanged sentence

Income tax benefit related to unrealized (gains) and losses ( 2,223 ) 4,371

Other comprehensive (loss), net of tax ( 12,048 ) ( 265 ) ( 27,982 ) ( 934 )

Comprehensive (loss) income ($ 1,923 ) $ 8,612 ($ 5,836 ) $ 28,469

Other comprehensive income (loss), net of tax 5,597 ( 11,004 )

Comprehensive income (loss) $ 10,427 ($ 3,778 )

See notes to consolidated financial statements

8 unchanged sentences

Stock-based compensation expense — — 187 — — 187

Exercise of stock options and vesting of restricted stock units, net 17 17 ( 295 ) — — ( 278 )

Repurchase of common stock ( 133 ) ( 133 ) ( 5,790 ) — — ( 5,923 )

Other comprehensive loss, net of tax — — — — ( 11,004 ) ( 11,004 )

Cumulative effect of adoption of ASU 2016-13 — — — 2,400 — 2,400

Net income — — — 7,226 — 7,226

9 unchanged sentences

Stock-based compensation expense — — 191 — — 191

Repurchase of common stock ( 30 ) ( 30 ) ( 1,174 ) — — ( 1,204 )

Other comprehensive loss, net of tax — — — — ( 12,048 ) ( 12,048 )

5 unchanged sentences

Exercise of stock options and vesting of restricted stock units, net 20 20 ( 297 ) — — ( 277 )

Repurchase of common stock ( 188 ) ( 188 ) ( 7,930 ) — — ( 8,118 )

Other comprehensive loss, net of tax — — — — 2,307 2,307

15 unchanged sentences

Balance as of March 31, 2023 5,673 $ 5,673 $ 16,625 $ 225,611 ($ 23,484 ) $ 224,425

Cash dividend on common stock ($ 0.41 per share)

— — — ( 2,364 ) — ( 2,364 )

Stock-based compensation expense — — 190 — — 190

Repurchase of common stock ( 201 ) ( 201 ) ( 8,033 ) — — ( 8,234 )

Other comprehensive loss, net of tax — — — — ( 4,930 ) ( 4,930 )

Net income — — — 4,795 — 4,795

Balance as of June 30, 2022 5,681 $ 5,681 $ 17,716 $ 211,232 ($ 19,340 ) $ 215,289

Cash dividend on common stock ($ 0.50 per share)

— — — ( 2,858 ) — ( 2,858 )

Stock-based compensation expense — — 191 — — 191

Other comprehensive loss, net of tax — — — — ( 12,048 ) ( 12,048 )

Net income — — — 10,125 — 10,125

Balance as of September 30, 2022 5,681 $ 5,681 $ 17,907 $ 218,499 ($ 31,388 ) $ 210,699

See notes to consolidated financial statements

1 unchanged sentence

Consolidated Statements of Cash Flows

Nine Months Ended September 30,

Three Months Ended March 31,

(In Thousands) 2023 2022

2 unchanged sentences

Adjustments to Reconcile Net Income to Net Cash Provided (Used) by Operating Activities:

Gain on sale of securities, net — ( 67 )

Depreciation and amortization of premises and equipment 789 798

2 unchanged sentences

Amortization of investment security premium, net of discount accretion 130 174

Unrealized loss (gain) on marketable equity securities 1,199 ( 27 )

Deferred tax (benefit) expense — 958

Unrealized loss on marketable equity securities 223 422

Stock-based compensation 140 187

Deferred loan fees and amortization, net of costs 15 ( 2,162 )

Benefit for credit losses ( 40 ) ( 3,021 )

Provision (benefit) for credit losses 360 ( 150 )

Additions to home mortgage servicing rights carried at fair value ( 463 ) ( 987 )

4 unchanged sentences

Origination of loans held for sale ( 50,725 ) ( 143,575 )

Gain on sale of other real estate owned — ( 577 )

Proceeds from keyman life insurance — ( 2,002 )

7 unchanged sentences

Purchases of investment securities available for sale ( 6,000 ) ( 78,139 )

Purchases of marketable equity securities ( 3,933 ) ( 493 )

Purchases of FHLB stock ( 6 ) ( 726 )

1 unchanged sentence

Proceeds from sales/calls/maturities of securities available for sale 13,285 —

Proceeds from sales of marketable equity securities — 1,017

Proceeds from redemption of FHLB stock 70 5

(Increase) decrease in purchased receivables, net 2,202 ( 6,196 )

Decrease (increase) in loans, net 11,230 ( 9,990 )

Proceeds from sale of other real estate owned — 2,228

(Increase) in purchased receivables, net ( 1,196 ) ( 1,565 )

(Increase) decrease in loans, net ( 33,630 ) 38,399

Proceeds from keyman life insurance — 2,002

3 unchanged sentences

Financing Activities:

Increase in deposits 17,704 471,560

(Decrease) in deposits ( 90,938 ) ( 78,565 )

(Decrease) in borrowings ( 104 ) ( 104 )

Repurchase of common stock ( 1,327 ) ( 5,923 )

Proceeds from the issuance of common stock — 1,381

Cash dividends paid ( 3,421 ) ( 2,448 )

Net Cash (Used) Provided by Financing Activities ( 4,380 ) 462,367

Net Cash Used by Financing Activities ( 95,790 ) ( 87,040 )

Net Change in Cash and Cash Equivalents ( 120,139 ) ( 113,019 )

2 unchanged sentences

Supplemental Information:

Income taxes paid $ 640 $ 4,577

Interest paid $ 4,650 $ 726

Transfer of loans to other real estate owned $ 273 $ —

Loans made to facilitate sales of other real estate owned $ — $ 1,012

Non-cash lease liability arising from obtaining right of use assets $ 160 $ —

Cash dividends declared but not paid $ 23 $ 23

Cumulative effect adjustment to retained earnings $ — $ 2,400

See notes to consolidated financial statements

10 unchanged sentences

The Company has evaluated subsequent events and transactions for potential recognition or disclosure.

Operating results for the interim period ended September 30, 2022 are not necessarily indicative of the results anticipated for the year ending December 31, 2022.

Operating results for the interim period ended March 31, 2023 are not necessarily indicative of the results anticipated for the year ending December 31, 2023.

These consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

5 unchanged sentences

Recent Accounting Pronouncements

Accounting pronouncements implemented in 2023

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

Troubled Debt Restructurings and Vintage Disclosures ("ASU 2022-02").

The amendments in ASU 2022-02 eliminate the accounting guidance for troubled debt restructurings ("TDRs") by creditors while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty.

Specifically, rather than applying the recognition and measurement guidance for TDRs which includes an assessment of whether the creditor has granted a concession, an entity must evaluate whether the modification represents a new loan or a continuation of an existing loan.

The amendments enhance existing disclosure requirements and introduce new requirements related to certain modifications of receivables made to borrowers experiencing financial difficulty.

Additionally, for public business entities, ASU 2022-02 requires that an entity disclose current-period gross writeoffs by year of origination for financing receivables and net investments in leases within the scope of Subtopic 326-20, Financial Instruments-Credit Losses-Measured at Amortized Cost in the vintage disclosures required by paragraph 326-20-50-6.

The Company adopted ASU 2022-02 on January 1, 2023.

The Company elected to adopt the updated guidance on TDR recognition and measurement prospectively;

therefore the guidance is applied to modifications occurring after the date of adoption.

The amendments on TDR disclosures and vintage disclosures must be adopted prospectively.

The adoption of ASU 2022-02 did not have a material impact on the Company's consolidated financial position or results of operations.

Accounting pronouncements to be implemented in future periods

5 unchanged sentences

The expedients are in effect from March 12, 2020, through December 31, 2022.

The Company will be able to use the expedients in this guidance to manage through the transition away from LIBOR, specifically for our loan portfolio, derivative contracts, and bond portfolio.

The Company will be able to use the expedients in

this guidance to manage through the transition away from LIBOR, specifically for our loan portfolio, derivative contracts, and bond portfolio.

In January 2021, the FASB issued ASU No.

5 unchanged sentences

The administrator of LIBOR, ICE Benchmark Administration, ceased the publication of one-week and two-month LIBOR, as well as all non-US Dollar LIBOR tenors as of January 1, 2022.

1-month, 3-month, 6-month, and 12-month US Dollar LIBOR will continue to be published through and will remain available for use in legacy contracts or as otherwise enumerated by financial regulators until June 30, 2023.

1-month, 3-month, 6-month, and 12-month US Dollar LIBOR will continue to be published and will remain available for use in legacy contracts or as otherwise enumerated by financial regulators until June 30, 2023.

The Company has some assets and liabilities referenced to 1-month, 3-month, and 12-month US Dollar LIBOR, such as commercial loans, derivatives, debt securities, and junior subordinated debentures.

As of September 30, 2022, we had approximately $ 159.9 million of assets, including $ 83.8 million in commercial loans and $ 76.1 million in debt securities, and $ 10.0 million of liabilities in the form of our junior subordinated debentures linked to USD LIBOR.

As of March 31, 2023, we had approximately $ 133.0 million of assets, including $ 78.2 million in commercial loans and $ 54.8 million in debt securities, and $ 10.0 million of liabilities in the form of our junior subordinated debentures linked to USD LIBOR.

These amounts exclude derivative assets and liabilities on our consolidated balance sheet.

As of September 30, 2022, the notional amount of our USD LIBOR-linked interest rate derivative contracts was $ 148.4 million.

As of March 31, 2023, the notional amount of our USD LIBOR-linked interest rate derivative contracts was $ 145.0 million.

Of this amount, $ 67.5 million in notional value represent commercial loan interest rate swap agreements with commercial banking customers.

An additional $ 67.5 million in notional value represent corresponding swap agreements with third party financial institutions that offset the commercial loan swaps.

Swap agreements with third party institutions are $ 79.2 million, including an interest rate swap agreement for $ 10.0 million in notional value related to our junior subordinated debentures.

The Company has one additional interest rate swap agreement with a third party institution for $ 10.0 million in notional value related to our junior subordinated debentures.

Each of the USD LIBOR-linked amounts referenced above are expected to vary in future periods as current contracts expire with potential replacement contracts using an alternative reference rate.

2 unchanged sentences

ASU 2021-01 is not expected to have a material impact on the Company's consolidated financial statements.

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

Troubled Debt Restructurings and Vintage Disclosures ("ASU 2022-02").

The amendments enhance existing disclosure requirements and introduce new requirements related to certain modifications of receivables made to borrowers experiencing financial difficulty.

ASU 2022-02 is effective for the Company for fiscal years beginning after December 15, 2022.

The Company may elect to apply the updated guidance on TDR recognition and measurement by using a modified retrospective transition method, which would result in a cumulative-effect adjustment to retained earnings, or to adopt the amendments prospectively.

The Company intends to elect to adopt the updated guidance on TDR recognition and measurement prospectively;

therefore the guidance will be applied to modifications occurring after the date of adoption.

The amendments on TDR disclosures and vintage disclosures must be adopted prospectively.

In March 2023, the FASB issued ASU 2023-02, Investments - Equity Method and Joint Ventures (Topic 323):

Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method ("ASU 2023-02").

Under current GAAP, an entity can only elect to apply the proportional amortization method to investments in low income housing tax credit ("LIHTC") structures.

The amendments in ASU 2023-02 allow entities to elect to account for equity investments made primarily for the purpose of receiving income tax credits using the proportional amortization method, regardless of the tax credit program through which the investment earns income tax credits, if certain conditions are met.

ASU 2023-02 provides amendments to paragraph 323-740-25-1, which sets forth the conditions needed to apply the proportional amortization method.

The amendments make certain limited changes to those conditions to clarify their application to a broader group of tax credit investment programs.

However, the conditions in substance remain consistent with current GAAP.

The amendments in this ASU 2023-02 also eliminate certain LIHTC-specific guidance to align the accounting more closely for LIHTCs with the accounting for other equity investments in tax credit structures and require that the delayed equity contribution guidance in paragraph 323-740-25-3 apply only to tax equity investments accounted for using the proportional amortization method.

ASU 2023-02 is effective for the Company for fiscal years beginning after December 15, 2023 and must be applied on either a modified retrospective or a retrospective basis.

The Company does not have any equity investments made primarily for the purpose of receiving income tax credits except for LIHTC structures, which it accounts for using the proportional amortization method.

The Company does not believe that ASU 2023-02 will have a material impact on the Company's consolidated financial statements.

1 unchanged sentence

Marketable Equity Securities

The Company held marketable equity securities with fair values of $ 11.1 million and $ 8.4 million at September 30, 2022 and December 31, 2021, respectively.

The Company held marketable equity securities with fair values of $ 10.5 million and $ 10.7 million at March 31, 2023 and December 31, 2022, respectively.

The gross realized and unrealized gains (losses) recognized on marketable equity securities in other operating income in the Company's Consolidated Statements of Income were as follows:

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

Three Months Ended March 31,

(In Thousands) 2023 2022

6 unchanged sentences

(In Thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Allowance for Credit Losses Fair Value

September 30, 2022

March 31, 2023

Securities available for sale

5 unchanged sentences

(In Thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value

September 30, 2022

March 31, 2023

Securities held to maturity

16 unchanged sentences

Total securities held to maturity, net of ACL $ 36,750 $ — ($ 4,111 ) $ 32,639

Gross unrealized losses on available for sale securities and the fair value of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at September 30, 2022 and December 31, 2021 were as follows:

Gross unrealized losses on available for sale securities and the fair value of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at March 31, 2023 and December 31, 2022 were as follows:

Less Than 12 Months More Than 12 Months Total

(In Thousands) Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses

September 30, 2022

March 31, 2023

Securities available for sale

9 unchanged sentences

Collateralized loan obligations 22,309 ( 632 ) 35,120 ( 1,373 ) 57,429 ( 2,005 )

Municipal securities 795 ( 25 ) — — 795 ( 25 )

Total $ 318,639 ($ 9,576 ) $ 342,354 ($ 32,550 ) $ 660,993 ($ 42,126 )

1 unchanged sentence

Consideration is given to the extent to which the fair value is less than cost, the financial condition and near-term prospects of the issuer, and the intent and ability of the Company to retain its investment in the security for a period of time sufficient to allow for any anticipated recovery in fair value.

At September 30, 2022, the Company had 86 available for sale securities in an unrealized loss position without an ACL.

At September 30, 2022, the Company had five held to maturity securities in an unrealized loss position without an ACL.

At March 31, 2023, the Company had 85 available for sale securities in an unrealized loss position without an ACL.

At March 31, 2023, the Company had five held to maturity securities in an unrealized loss position without an ACL.

Management does not have the intent to sell any of these securities and believes that it is more likely than not that the Company will not have to sell any such securities before a recovery of cost.

The fair value is expected to recover as the securities approach their maturity date or repricing date or if market yields for such investments decline.

Accordingly, as of September 30, 2022, management believes that the unrealized losses detailed in the previous table are due to noncredit-related factors, including changes in interest rates and other market conditions, and therefore no losses have been recognized in the Company's Consolidated Statements of Income.

At September 30, 2022 and December 31, 2021, $ 54.7 million and $ 59.5 million in securities were pledged for deposits and borrowings, respectively.

The amortized cost and estimated fair values of debt securities at September 30, 2022, are distributed by contractual maturity as shown below.

Accordingly, as of March 31, 2023, management believes that the unrealized losses detailed in the previous table are due to noncredit-related factors, primarily changes in interest rates, and therefore no losses have been recognized in the Company's Consolidated Statements of Income.

At March 31, 2023 and December 31, 2022, carrying amounts of $ 108.2 million and $ 59.3 million in securities were pledged for deposits and borrowings, respectively.

The amortized cost and estimated fair values of debt securities at March 31, 2023, are distributed by contractual maturity as shown below.

Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

5 unchanged sentences

Corporate bonds

Within 1 year $ 2,000 $ 1,951

1-5 years 24,018 22,570

3 unchanged sentences

5-10 years $ 24,914 $ 24,561

5-10 years 26,940 26,214

Over 10 years 35,493 34,582

1 unchanged sentence

Municipal securities

1-5 years $ 820 $ 796

Within 1 year $ 820 $ 802

Total $ 820 $ 802

There were no proceeds from sales of investment securities for the three and nine-month periods ending September 30, 2022 and 2021.

A summary of interest income for the three and nine-month periods ending September 30, 2022 and 2021, on available for sale investment securities are as follows:

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

There were no proceeds from sales of investment securities for the three-month periods ending March 31, 2023 and 2022.

A summary of interest income for the three-month periods ending March 31, 2023 and 2022, on available for sale investment securities are as follows:

Three Months Ended March 31,

(In Thousands) 2023 2022

7 unchanged sentences

Loans Held for Sale

Loans held for sale are comprised entirely of 1-4 family residential mortgage loans as of September 30, 2022 and December 31, 2021.

Loans held for sale are comprised entirely of 1-4 family residential mortgage loans as of March 31, 2023 and December 31, 2022.

Loans Held for Investment

The following table presents amortized cost and unpaid principal balance of loans for the periods indicated:

September 30, 2022 December 31, 2021

The following table presents amortized cost and unpaid principal balance of loans, categorized by the segments used in the Company's CECL methodology to assess credit risk, for the periods indicated:

March 31, 2023 December 31, 2022

(In Thousands) Amortized Cost Unpaid Principal Difference Amortized Cost Unpaid Principal Difference

15 unchanged sentences

$ 1,521,030 $ 1,543,812 ($ 8,625 ) $ 1,487,947 $ 1,510,395 ($ 8,610 )

The difference between the amortized cost and unpaid principal balance is net deferred origination fees totaling $ 8.0 million and $ 11.5 million at September 30, 2022 and December 31, 2021, respectively.

Accrued interest on loans, which is excluded from the amortized cost of loans held for investment, totaled $ 4.6 million and $ 5.5 million at September 30, 2022 and December 31, 2021, respectively, and was included in other assets in the Consolidated Balance Sheets.

Amortized cost in the above table includes $ 11.3 million and $ 118.2 million as of September 30, 2022 and December 31, 2021, respectively, in Paycheck Protection Program ("PPP") loans administered by the U.S.

The difference between the amortized cost and unpaid principal balance is net deferred origination fees totaling $ 8.6 million at both March 31, 2023 and December 31, 2022.

Accrued interest on loans, which is excluded from the amortized cost of loans held for investment, totaled $ 6.5 million and $ 5.5 million at March 31, 2023 and December 31, 2022, respectively, and was included in other assets in the Consolidated Balance Sheets.

Amortized cost in the above table includes $ 4.2 million and $ 7.1 million as of March 31, 2023 and December 31, 2022, respectively, in Paycheck Protection Program loans administered by the U.S.

Small Business Administration ("SBA") within the Commercial & industrial loan segment.

1 unchanged sentence

The activity in the ACL related to loans held for investment is as follows:

Three Months Ended September 30, Beginning Balance Credit Loss Expense (Benefit) Charge-offs Recoveries Ending Balance

Three Months Ended March 31, Beginning Balance Credit Loss Expense (Benefit) Charge-offs Recoveries Ending Balance

(In Thousands)

27 unchanged sentences

Total $ 11,739 ($ 167 ) ($ 295 ) $ 33 $ 11,310

Nine Months Ended September 30, Beginning Balance Credit Loss Expense (Benefit) Charge-offs Recoveries Ending Balance

(In Thousands)

Commercial & industrial loans $ 3,027 ($ 1,065 ) ($ 506 ) $ 1,441 $ 2,897

Commercial real estate:

Owner occupied properties 3,176 ( 471 ) — 55 2,760

Non-owner occupied and multifamily properties 2,930 297 — — 3,227

Residential real estate:

1-4 family residential properties secured by first liens 439 254 — 5 698

1-4 family residential properties secured by junior liens and revolving secured by 1-4 family first liens 215 121 — 30 366

1-4 family residential construction loans 120 161 — — 281

Other construction, land development and raw land loans 1,635 ( 158 ) — — 1,477

Obligations of states and political subdivisions in the US 32 31 — — 63

Agricultural production, including commercial fishing 91 34 — 15 140

Consumer loans 67 ( 1 ) ( 3 ) 3 66

Other loans 7 — — — 7

Total $ 11,739 ($ 797 ) ($ 509 ) $ 1,549 $ 11,982

The following table shows gross charge-offs by grade and by year of loan origination for the periods indicated:

Three Months Ended March 31,

(In Thousands) 2023 2022 2021 2020 2019 Prior Total

Commercial & industrial loans $ — $ — $ — $ — $ — $ — $ —

12 unchanged sentences

Total $ — $ 1 $ — $ — $ — $ 13 $ 14

The ACL on loans increased at September 30, 2022, as compared to June 30, 2022 primarily due to an increase in the Company's forecasted unemployment rate over the reasonable and supportable forecast period, and this increase was only partially offset by a decrease in non-government guaranteed loan balances.

The ACL on loans also increased at September 30, 2022, as compared to December 31, 2021;

however, this increase was primarily due to an increase in non-government guaranteed loan balances.

Credit Quality Information

25 unchanged sentences

Generally, current period renewals of credit are re-underwritten at the point of renewal and considered current period originations for purposes of the table below.

September 30, 2022 2022 2021 2020 2019 2018 Prior Total

March 31, 2023 2023 2022 2021 2020 2019 Prior Total

(In Thousands)

116 unchanged sentences

Due Current Total Greater Than 90 Days Past Due Still Accruing

September 30, 2022

March 31, 2023

Commercial & industrial loans $ 238 $ — $ 449 $ 687 $ 363,422 $ 364,109 $ —

28 unchanged sentences

Nonaccrual loans:

Nonaccrual loans net of government guarantees totaled $ 6.5 million and $ 10.7 million at September 30, 2022 and December 31, 2021, respectively.

Nonaccrual loans net of government guarantees totaled $ 6.1 million and $ 6.4 million at March 31, 2023 and December 31, 2022, respectively.

The following table presents loans on nonaccrual status and loans on nonaccrual

1 unchanged sentence

All loans with no ACL are individually evaluated for credit losses in the Company's Current Expected Credit Losses methodology.

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

(In Thousands) Nonaccrual Nonaccrual With No ACL Nonaccrual Nonaccrual With No ACL

12 unchanged sentences

Net nonaccrual loans $ 6,083 $ 5,749 $ 6,430 $ 6,368

There was no interest on nonaccrual loans reversed through interest income during three-month period ending September 30, 2022 and $ 2,000 in interest on nonaccrual loans reversed through interest income during the nine-month period ending September 30, 2022.

There was no interest on nonaccrual loans reversed through interest income during the three and nine-month periods ending September 30, 2021.

There was no interest earned on nonaccrual loans with a principal balance during either the three and nine-month periods ending September 30, 2022 and September 30, 2021.

However, the Company recognized interest income of $ 1.2 million and $ 419,000 in the three-month periods ending September 30, 2022 and 2021, respectively, and $ 2.1 million and $ 785,000 in the nine-month periods ending September 30, 2022 and 2021, respectively, related to interest collected on nonaccrual loans whose principal had been paid down to zero.

Troubled Debt Restructurings:

Loans classified as TDRs totaled $ 8.1 million and $ 10.6 million at September 30, 2022 and December 31, 2021, respectively.

A TDR is a loan to a borrower that is experiencing financial difficulty that has been modified from its original terms and conditions in such a way that the Company is granting the borrower a concession that it would not grant otherwise.

The provisions of the Coronavirus Aid, Relief, and Economic Security ("CARES") Act included an election to not apply the guidance on accounting for TDRs to loan modifications, such as extensions or deferrals, related to COVID-19 made between March 1, 2020 and December 31, 2021.

There was no interest on nonaccrual loans reversed through interest income during three-month period ending March 31, 2023.

There was $ 2,000 interest on nonaccrual loans reversed through interest income during the three-month period ending March 31, 2022.

There was no interest earned on nonaccrual loans with a principal balance during the three-month periods ending March 31, 2023 and March 31, 2022.

However, the Company recognized interest income of $ 179,000 and $ 57,000 in the three-month periods ending March 31, 2023 and 2022, respectively, related to interest collected on nonaccrual loans whose principal had been paid down to zero.

Loan Modifications:

The Company modifies loans to borrowers experiencing financial difficulty as a normal part of our business.

These modifications include providing term extensions/modifications, payment modifications, interest rate modifications, or, on rare occasions, principal forgiveness.

When principal forgiveness is provided, the amount of forgiveness is charged-off against the ACL.

The Company may provide multiple types of concessions on one loan.

There were no loans that were both experiencing financial difficulty and modified during the first quarter of 2023.

As noted in Note 1, the Company adopted ASU 2022-02 effective January 1, 2023.

ASU 2022-02 eliminates the accounting guidance for loans classified as TDRs.

TDRs totaled $ 5.1 million at December 31, 2022.

The relief can only be applied to modifications for borrowers that were not more than 30 days past due as of December 31, 2019.

The Company elected to adopt these provisions of the CARES Act.

The Company has made the following types of loan modifications related to COVID-19, which are not classified as TDRs with principal balance outstanding of:

Loan Modifications due to COVID-19 as of September 30, 2022

(Dollars in thousands) Interest Only Full Payment Deferral Total

Portfolio loans $ 8,439 $ — $ 8,439

Number of modifications 2 — 2

Loan Modifications due to COVID-19 as of December 31, 2021

The Company has elected to adopt these provisions of the CARES Act.

As of March 31, 2023 and December 31, 2022, the Company has made the following types of loan modifications related to COVID-19, which are not classified as TDRs principal balance outstanding of:

Loan Modifications due to COVID-19 as of March 31, 2023 and December 31, 2022

(Dollars in thousands) Interest Only Full Payment Deferral Total

1 unchanged sentence

Number of modifications 1 — 1

The $ 8.4 million in COVID-19 loan accommodations as of September 30, 2022 are scheduled to return to normal principal and interest payments in the fourth quarter of 2022.

The Company has granted a variety of concessions to borrowers in the form of loan modifications.

The modifications granted can generally be described in the following categories:

Rate Modification :

A modification in which the interest rate is changed.

Term Modification :

A modification in which the maturity date, timing of payments, or frequency of payments is changed.

Payment Modification :

A modification in which the dollar amount of the payment is changed, or in which a loan is converted to interest only payments for a period of time is included in this category.

Combination Modification :

Any other type of modification, including the use of multiple categories above.

There were no newly restructured loans that occurred during the nine months ended September 30, 2022.

As discussed above, the CARES Act provided banks an option to elect to not account for certain loan modifications related to COVID-19 between March 1, 2020 and December 31, 2021 as TDRs as long as the borrowers were not more than 30 days past due as of December 31, 2019.

The disclosed loan restructurings on the table below were not related to COVID-19 modifications.

Accrual Status Nonaccrual Status Total Modifications

(In Thousands)

Troubled Debt Restructurings $ 3,033 $ 5,075 $ 8,108

Total $ 3,033 $ 5,075 $ 8,108

The following table presents newly restructured loans that occurred during the nine months ended September 30, 2021, by concession (terms modified):

September 30, 2021

Number of Contracts Rate Modification Term Modification Payment Modification Combination Modification Total Modifications

(In Thousands)

Pre-Modification Outstanding Recorded Investment:

Commercial - AQR substandard 1 $ — $ 254 $ — $ — $ 254

Commercial real estate:

Owner occupied properties 1 — 360 — — 360

Other construction, land development and raw land loans 1 — 577 — — 577

Total 3 $ — $ 1,191 $ — $ — $ 1,191

Post-Modification Outstanding Recorded Investment:

Commercial - AQR substandard 1 $ — $ 249 $ — $ — $ 249

Commercial real estate:

Owner occupied properties 1 — 360 — — 360

Other construction, land development and raw land loans 1 — 577 — — 577

Total 3 $ — $ 1,186 $ — $ — $ 1,186

The Company had no commitments to extend additional credit to borrowers whose terms have been modified in TDRs.

There were no charge-offs in the nine months ended September 30, 2022 on loans that were newly classified as TDRs during the same period.

There were no loans that defaulted during the nine months ended September 30, 2022 and 2021, respectively, that were restructured in the previous twelve months.

Purchased Receivables

Purchased receivables are carried at their principal amount outstanding, net of an ACL, and have a maturity of less than one year .

There were no purchased receivables past due at September 30, 2022 or December 31, 2021, and there were no restructured purchased receivables at September 30, 2022 or December 31, 2021.

There were no purchased receivables past due at March 31, 2023 or December 31, 2022, and there were no restructured purchased receivables at March 31, 2023 or December 31, 2022.

Income on purchased receivables is accrued and recognized on the principal amount outstanding using an effective interest method except when management believes doubt exists as to the collectability of the income or principal.

There were no nonperforming purchased receivables as of September 30, 2022 or December 31, 2021.

There was no activity and no balance in the ACL for purchased receivables as of September 30, 2022 or December 31, 2021.

There were no nonperforming purchased receivables as of March 31, 2023 or December 31, 2022.

There was no activity and no balance in the ACL for purchased receivables as of March 31, 2023 or December 31, 2022.

The following table summarizes the components of net purchased receivables for the dates indicated:

(In Thousands) September 30, 2022 December 31, 2021

(In Thousands) March 31, 2023 December 31, 2022

Purchased receivables $ 21,190 $ 19,994

3 unchanged sentences

Mortgage servicing rights

The following table details the activity in the Company's mortgage servicing rights ("MSR") for the three and nine-month periods ended September 30, 2022 and 2021:

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

The following table details the activity in the Company's mortgage servicing rights ("MSR") for the three-month periods ended March 31, 2023 and 2022:

Three Months Ended March 31,

(In Thousands) 2023 2022

8 unchanged sentences

(2) Represents changes due to collection/realization of expected cash flows over time.

The following table details information related to our serviced mortgage loan portfolio as of September 30, 2022 and December 31, 2021:

(In Thousands) September 30, 2022 December 31, 2021

The following table details information related to our serviced mortgage loan portfolio as of March 31, 2023 and December 31, 2022:

(In Thousands) March 31, 2023 December 31, 2022

Balance of mortgage loans serviced for others $ 911,065 $ 898,840

MSR as a percentage of serviced loans 2.01 % 2.07 %

The Company recognized servicing fees of $ 858,000 and $ 745,000 during the three-month periods ending September 30, 2022 and 2021, respectively, and $ 2.4 million and $ 2.2 million during the nine-month periods ending September 30, 2022 and 2021, respectively, which includes contractually specified servicing fees and ancillary fees as a component of other noninterest income in the Company's Consolidated Statements of Income.

The following table outlines the weighted average key assumptions used in measuring the fair value of MSR as of September 30, 2022 and December 31, 2021:

September 30, 2022 December 31, 2021

The Company recognized servicing fees of $ 905,000 and $ 783,000 during the three-month periods ending March 31, 2023 and 2022, respectively, which includes contractually specified servicing fees and ancillary fees as a component of other noninterest income in the Company's Consolidated Statements of Income.

The following table outlines the weighted average key assumptions used in measuring the fair value of MSR as of March 31, 2023 and December 31, 2022:

March 31, 2023 December 31, 2022

Constant prepayment rate 5.67 % 6.64 %

Discount rate 10.97 % 11.25 %

Key economic assumptions and the sensitivity of the current fair value for MSR to immediate adverse changes in those assumptions at September 30, 2022 and December 31, 2021 were as follows:

(In Thousands) September 30, 2022 December 31, 2021

Key economic assumptions and the sensitivity of the current fair value for MSR to immediate adverse changes in those assumptions at March 31, 2023 and December 31, 2022 were as follows:

(In Thousands) March 31, 2023 December 31, 2022

Aggregate portfolio principal balance $ 911,065 $ 898,840

Weighted average rate of note 3.54 % 3.47 %

September 30, 2022 Base 1.0% Adverse Rate Change 2.0% Adverse Rate Change

March 31, 2023 Base 1.0% Adverse Rate Change 2.0% Adverse Rate Change

Constant prepayment rate 5.67 % 5.71 % 7.15 %

18 unchanged sentences

Commercial servicing rights

The commercial servicing rights asset ("CSR") has a carrying value of $ 1.1 million at both September 30, 2022 and December 31, 2021, and is included in other assets and carried at fair value on the Company's Consolidated Balance Sheets.

Total commercial loans serviced for others were $ 255.9 million and $ 259.8 million at September 30, 2022 and December 31, 2021, respectively.

Key assumptions used in measuring the fair value of the CSR as of September 30, 2022 and December 31, 2021 include a constant prepayment rate of 16.08 % and a discount rate of 9.94 %.

The commercial servicing rights asset ("CSR") has a carrying value of $ 2.2 million at March 31, 2023 and $ 2.1 million at December 31, 2022, and is included in other assets and carried at fair value on the Company's Consolidated Balance Sheets.

Total commercial loans serviced for others were $ 290.8 million and $ 285.3 million at March 31, 2023 and December 31, 2022, respectively.

Key assumptions used in measuring the fair value of the CSR as of March 31, 2023 and December 31, 2022 include a constant prepayment rate of 10.19 % and a discount rate of 12.00 %.

The Company's lease commitments consist primarily of agreements to lease land and office facilities that it occupies to operate several of its retail branch locations that are classified as operating leases and are recognized on the balance sheet as right-of-use ("ROU") assets and lease liabilities.

As of September 30, 2022, the Company has operating lease ROU assets of $ 10.4 million and operating lease liabilities of $ 10.4 million.

As of March 31, 2023, the Company has operating lease ROU assets of $ 9.5 million and operating lease liabilities of $ 9.5 million.

As of December 31, 2022, the Company had operating lease ROU assets of $ 9.9 million and operating lease liabilities of $ 9.9 million.

The Company did not have any agreements that are classified as finance leases as of September 30, 2022 or December 31, 2021.

The Company did not have any agreements that are classified as finance leases as of March 31, 2023 or December 31, 2022.

The following table presents additional information about the Company's operating leases:

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

Three Months Ended March 31,

(In Thousands) 2023 2022

Operating lease cost (1)

$ 693 $ 688 $ 2,046 $ 2,106

Short term lease cost (1)

7 unchanged sentences

(In Thousands) Operating Leases

2022 (Three months) $ 645

2023 (Nine months) $ 1,921

Thereafter 4,137

7 unchanged sentences

Similarly, the Company could be required to settle its obligations under the agreement if specific regulatory events occur, such as if the Company were issued a prompt corrective action directive or a cease and desist order, or if certain regulatory ratios fall below specified levels.

The Company pledged $ 549,000 as of September 30, 2022 and $ 8.2 million as of December 31, 2021 in available for sale securities to collateralize fair value shortfalls on interest rate swap agreements.

The Company had interest rate swaps related to commercial loans with an aggregate notional amount of $ 211.0 million and $ 212.6 million at September 30, 2022 and December 31, 2021, respectively.

At September 30, 2022, the notional amount of interest rate swaps is made up of 19 variable to fixed rate swaps to commercial loan customers totaling $ 105.5 million, and 19 fixed to variable rate swaps with a counterparty totaling $ 105.5 million.

Changes in fair value from these 19 interest rate swaps offset each other in the first nine months of 2022.

The Company recognized zero and $ 90,000 in fee income related to interest rate swaps in the three and nine-month periods ending September 30, 2022, respectively, and $ 195,000 and $ 390,000 in fee income related to interest rate swaps in the three and nine-month periods ending September 30, 2021, respectively.

The Company pledged $ 561,000 as of March 31, 2023 and $ 553,000 as of December 31, 2022 in available for sale securities to collateralize fair value shortfalls on interest rate swap agreements.

The Company had interest rate swaps related to commercial loans with an aggregate notional amount of $ 223.8 million and $ 226.2 million at March 31, 2023 and December 31, 2022, respectively.

At March 31, 2023, the notional amount of interest rate swaps is made up of 21 variable to fixed rate swaps to commercial loan customers totaling $ 111.9 million, and 21 fixed to variable rate swaps with a counterparty totaling $ 111.9 million.

Changes in fair value from these 21 interest rate swaps offset each other in the first three months of 2023.

The Company recognized zero and $ 3,000 in fee income related to interest rate swaps in the three-month periods ending March 31, 2023 and 2022, respectively.

Interest rate swap income is recorded in other operating income on the Consolidated Statements of Income.

4 unchanged sentences

The floating rate that the dealer pays is equal to the three month LIBOR plus 1.37 % which reprices quarterly on the payment date.

This rate was 4.66 % as of September 30, 2022.

The Company pledged $ 130,000 in cash to collateralize initial margin and fair value exposure of our counterparty on this interest rate swap as of September 30, 2022 and $ 2.9 million as of December 31, 2021.

This rate was 6.24 % as of March 31, 2023.

The Company pledged $ 130,000 in cash to collateralize initial margin and fair value exposure of our counterparty on this interest rate swap as of March 31, 2023 and $ 130,000 as of December 31, 2022.

Changes in the fair value of this interest rate swap are reported in other comprehensive income on the Consolidated Statements of Income.

The unrealized gain on this interest rate swap was $ 1.5 million as of September 30, 2022 and the unrealized loss was $ 1.0 million as of December 31, 2021.

The unrealized gain on this interest rate swap was $ 1.2 million as of March 31, 2023 and the unrealized loss was $ 1.5 million as of December 31, 2022.

Derivatives related to home mortgage banking activities

4 unchanged sentences

Market risk with respect to commitments to originate loans arises from changes in the value of contractual positions due to changes in interest rates.

RML had commitments to originate mortgage loans held for sale totaling $ 74.7 million and $ 81.6 million at September 30, 2022 and December 31, 2021, respectively.

RML had commitments to originate mortgage loans held for sale totaling $ 41.1 million and $ 29.1 million at March 31, 2023 and December 31, 2022, respectively.

Changes in the value of RML's interest rate derivatives are recorded in mortgage banking income on the Consolidated Statements of Income.

None of these derivatives are designated as hedging instruments.

The following table presents the fair value of derivatives not designated as hedging instruments at September 30, 2022 and December 31, 2021:

The following table presents the fair value of derivatives not designated as hedging instruments at March 31, 2023 and December 31, 2022:

(In Thousands) Asset Derivatives

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Balance Sheet Location Fair Value Fair Value

1 unchanged sentence

Interest rate lock commitments Other assets 685 440

Retail interest rate contracts Other assets 593 166

Total $ 11,368 $ 13,165

(In Thousands) Liability Derivatives

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Balance Sheet Location Fair Value Fair Value

Interest rate swaps Other liabilities $ 10,683 $ 12,725

Retail interest rate contracts Other liabilities 107 3

Total $ 10,790 $ 12,728

The following table presents the net gains (losses) of derivatives not designated as hedging instruments for periods indicated below:

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

Three Months Ended March 31,

(In Thousands) Income Statement Location 2023 2022

5 unchanged sentences

We do not offset such financial instruments for financial reporting purposes.

The following table summarizes the derivatives that have a right of offset as of September 30, 2022 and December 31, 2021:

September 30, 2022 Gross amounts not offset in the Statement of Financial Position

The following table summarizes the derivatives that have a right of offset as of March 31, 2023 and December 31, 2022:

March 31, 2023 Gross amounts not offset in the Statement of Financial Position

(In Thousands) Gross amounts of recognized assets and liabilities Gross amounts offset in the Statement of Financial Position Net amounts of assets and liabilities presented in the Statement of Financial Position Financial Instruments Collateral Posted Net Amount

1 unchanged sentence

Interest rate swaps $ 10,683 $ — $ 10,683 $ — $ — $ 10,683

Retail interest rate contracts 593 — 593 — — 593

Liability Derivatives

Interest rate swaps $ 10,683 $ — $ 10,683 $ — $ 10,683 $ —

Retail interest rate contracts 107 — 107 — — 107

December 31, 2022 Gross amounts not offset in the Statement of Financial Position

2 unchanged sentences

Interest rate swaps $ 12,725 $ — $ 12,725 $ — $ — $ 12,725

Retail interest rate contracts 166 — 166 — — 166

Liability Derivatives

Interest rate swaps $ 12,725 $ — $ 12,725 $ — $ 12,725 $ —

Retail interest rate contracts 3 — 3 — — 3

Fair Value Measurements

15 unchanged sentences

majority of inputs used to value its interest rate derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties.

However, as of September 30, 2022, the Company has assessed the significance of the impact of these adjustments on the overall valuation of its interest rate positions and has determined that they are not significant to the overall valuation of its interest rate derivatives.

However, as of March 31, 2023, the Company has assessed the significance of the impact of these adjustments on the overall valuation of its interest rate positions and has determined that they are not significant to the overall valuation of its interest rate derivatives.

As a result, the Company has classified its interest rate derivative valuations in Level 2 of the fair value hierarchy.

17 unchanged sentences

Estimated fair values as of the periods indicated are as follows:

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

(In Thousands) Carrying Amount Fair Value Carrying Amount Fair Value

8 unchanged sentences

Loans held for sale 23,985 23,985 27,538 27,538

Accrued interest receivable 8,495 8,495 6,846 6,846

Interest rate swaps 12,165 12,165 14,179 14,179

Retail interest rate contracts 593 593 166 166

Level 3 inputs:

9 unchanged sentences

Borrowings 13,991 12,116 14,095 12,382

Accrued interest payable 135 135 31 31

Interest rate swaps 10,683 10,683 12,725 12,725

Retail interest rate contracts 107 107 3 3

Level 3 inputs:

2 unchanged sentences

(In Thousands) Total Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3)

September 30, 2022

March 31, 2023

Available for sale securities

10 unchanged sentences

Commercial servicing rights 2,170 — — 2,170

Retail interest rate contracts 593 — — 593

Total other assets $ 32,996 $ — $ 11,838 $ 21,158

Interest rate swaps $ 10,683 $ — $ 10,683 $ —

Retail interest rate contracts 107 — 107 —

Total other liabilities $ 10,790 $ — $ 10,790 $ —

12 unchanged sentences

Commercial servicing rights 2,129 — — 2,129

Retail interest rate contracts 166 — 166 —

Total other assets $ 35,382 $ — $ 14,178 $ 21,204

Interest rate swaps $ 12,725 $ — $ 12,725 $ —

Retail interest rate contracts 3 — 3 —

Total other liabilities $ 12,728 $ — $ 12,728 $ —

The following tables provide a reconciliation of the assets and liabilities measured at fair value using significant unobservable inputs (Level 3) on a recurring basis during the three and nine-month periods ended September 30, 2022 and 2021:

(In Thousands) Beginning balance Change included in earnings Purchases and issuances Sales and settlements Ending balance Net change in unrealized gains (losses) relating to items held at end of period

Three Months Ended September 30, 2022

Three Months Ended March 31, 2023

Interest rate lock commitments $ 440 ($ 174 ) $ 1,497 ($ 1,078 ) $ 685 $ 685

2 unchanged sentences

Total $ 21,204 ($ 1,018 ) $ 2,050 ($ 1,078 ) $ 21,158 $ 685

Three Months Ended September 30, 2021

Three Months Ended March 31, 2022

Interest rate lock commitments $ 1,387 ($ 509 ) $ 4,350 ($ 4,263 ) $ 965 $ 965

2 unchanged sentences

Total $ 16,195 $ 176 $ 5,370 ($ 4,263 ) $ 17,478 $ 965

Nine Months Ended September 30, 2022

Interest rate lock commitments $ 1,387 ($ 1,399 ) $ 11,189 ($ 10,823 ) $ 354 $ 354

Mortgage servicing rights 13,724 607 3,378 — 17,709 —

Commercial servicing rights 1,084 ( 123 ) 106 — 1,067 —

There were no changes in unrealized gains and losses for the three-month periods ending March 31, 2023 and 2022 included in other comprehensive income for recurring Level 3 fair value measurements.

As of and for the periods ending March 31, 2023 and December 31, 2022, except for certain assets as shown in the following table, no impairment or valuation adjustment was recognized for assets recognized at fair value on a nonrecurring basis.

For loans individually measured for credit losses, the Company classifies fair value measurements using observable inputs, such as external appraisals, as Level 2 valuations in the fair value hierarchy, and unobservable inputs, such as in-house evaluations, as Level 3 valuations in the fair value hierarchy.

(In Thousands) Total Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3)

March 31, 2023

Loans individually measured for credit losses $ 2,822 $ — $ — $ 2,822

Total $ 2,822 $ — $ — $ 2,822

Nine Months Ended September 30, 2021

Interest rate lock commitments $ 4,034 ($ 2,881 ) $ 23,879 ($ 21,784 ) $ 3,248 $ 3,248

Mortgage servicing rights 11,218 ( 3,034 ) 4,896 — 13,080 —

Commercial servicing rights 1,310 ( 134 ) 102 — 1,278 —

December 31, 2022

Loans individually measured for credit losses $ — $ — $ — $ —

Total $ — $ — $ — $ —

There were no changes in unrealized gains and losses for the three and nine-month periods ending September 30, 2022 and 2021 included in other comprehensive income for recurring Level 3 fair value measurements.

As of and for the periods ending September 30, 2022 and December 31, 2021, no impairment or valuation adjustment was recognized for assets recognized at fair value on a nonrecurring basis.

The following table presents the (gains) losses resulting from nonrecurring fair value adjustments for the three and nine-month periods ended September 30, 2022 and 2021:

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

The following table presents the (gains) losses resulting from nonrecurring fair value adjustments for the three-month periods ended March 31, 2023 and 2022:

Three Months Ended March 31,

(In Thousands) 2023 2022

2 unchanged sentences

Assets and Liabilities Measured at Fair Value Using Significant Unobservable Inputs (Level 3)

The following table provides a description of the valuation technique, unobservable input, and qualitative information about the unobservable inputs for the Company’s assets and liabilities classified as Level 3 and measured at fair value on a recurring and nonrecurring basis at September 30, 2022 and December 31, 2021:

Financial Instrument Valuation Technique Unobservable Input Weighted Average Rate Range

September 30, 2022

March 31, 2023

Interest rate lock commitment External pricing model Pull through rate 91.28 %

13 unchanged sentences

The Community Banking segment's principal business focus is the offering of loan and deposit products to business and consumer customers in its primary market areas.

As of September 30, 2022, the Community Banking segment operated 17 branches throughout Alaska.

As of March 31, 2023, the Community Banking segment operated 19 branches throughout Alaska.

The Home Mortgage Lending segment's principal business focus is the origination and sale of mortgage loans for 1-4 family residential properties.

Summarized financial information for the Company's reportable segments and the reconciliation to the consolidated financial results is shown in the following tables:

Three Months Ended September 30, 2022

(In Thousands) Community Banking Home Mortgage Lending Consolidated

Interest income $ 26,900 $ 659 $ 27,559

Interest expense 1,232 16 1,248

Net interest income 25,668 643 26,311

Benefit for credit losses ( 353 ) — ( 353 )

Other operating income 2,938 5,734 8,672

Other operating expense 15,977 6,309 22,286

Income before provision for income taxes 12,982 68 13,050

Provision for income taxes 2,911 14 2,925

Net income $ 10,071 $ 54 $ 10,125

Three Months Ended September 30, 2021

(In Thousands) Community Banking Home Mortgage Lending Consolidated

Interest income $ 20,541 $ 741 $ 21,282

Interest expense 813 37 850

Net interest income 19,728 704 20,432

Benefit for credit losses ( 1,106 ) — ( 1,106 )

Other operating income 2,765 9,893 12,658

Other operating expense 14,849 7,685 22,534

Income before provision for income taxes 8,750 2,912 11,662

Provision for income taxes 1,955 830 2,785

Net income $ 6,795 $ 2,082 $ 8,877

Nine Months Ended September 30, 2022

Three Months Ended March 31, 2023

(In Thousands) Community Banking Home Mortgage Lending Consolidated

8 unchanged sentences

Net income $ 7,560 ($ 2,730 ) $ 4,830

Nine Months Ended September 30, 2021

Three Months Ended March 31, 2022

(In Thousands) Community Banking Home Mortgage Lending Consolidated

8 unchanged sentences

Net income $ 6,428 $ 798 $ 7,226

September 30, 2022

March 31, 2023

(In Thousands) Community Banking Home Mortgage Lending Consolidated

6 unchanged sentences

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

What changed 10-Q

Item 1. Financial Statements