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Item 1. Financial Statements

2024-11-07 compared with 2024-08-09 · 277 added, 389 removed, 887 unchanged (43% of the section changed)

2 unchanged sentences

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data) June 30, 2024 December 31, 2023

($ in thousands, except per share data) September 30, 2024 December 31, 2023

ASSETS (Unaudited)

18 unchanged sentences

Other real estate owned, net 179 179

Repossessed properties 1,560 —

Repossessed assets 306 —

Assets held for sale 1,387 —

9 unchanged sentences

Total deposits 5,225,723 5,386,120

Advances from FHLB - short-term 31,000 —

Advances from FHLB - long-term 50,000 —

14 unchanged sentences

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 5,917,704 $ 6,010,918

See accompanying notes to Consolidated Financial Statements.

See accompanying notes to unaudited Consolidated Financial Statements.

SHORE BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

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

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

($ in thousands, except per share data) 2024 2023 2024 2023

3 unchanged sentences

Interest and dividends on tax-exempt investment securities 6 27 18 41

Interest on federal funds sold — 92 — 92

Interest on deposits with other banks 564 1,213 2,102 1,546

11 unchanged sentences

Trust and investment fee income 880 1,933 2,510 2,764

Loss on sales and calls of investment securities — ( 2,166 ) — ( 2,166 )

Interchange credits 1,711 1,557 5,015 4,081

1 unchanged sentence

Title Company revenue 100 89 344 412

Bargain purchase gain — 8,816 — 8,816

Other noninterest income 1,876 1,873 5,921 4,317

9 unchanged sentences

FDIC insurance premium expense 1,160 618 3,400 1,747

Other real estate owned expenses, net — — — ( 1 )

Legal and professional fees 1,362 1,217 4,315 2,926

4 unchanged sentences

Total noninterest expense 34,114 47,158 104,311 89,661

Income before income taxes 15,000 5,513 25,597 14,405

Income tax expense 3,766 1,495 6,179 3,930

NET INCOME $ 11,234 $ 4,018 $ 19,418 $ 10,475

Basic and diluted net income per common share $ 0.34 $ 0.20 $ 0.58 $ 0.53

Income (loss) before income taxes 14,966 ( 14,728 ) 40,563 ( 322 )

Income tax expense (benefit) 3,777 ( 4,991 ) 9,956 ( 1,060 )

NET INCOME (LOSS) $ 11,189 $ ( 9,737 ) $ 30,607 $ 738

Basic net income (loss) per common share $ 0.34 $ ( 0.29 ) $ 0.92 $ 0.03

Diluted net income (loss) per common share $ 0.34 $ ( 0.29 ) $ 0.92 $ 0.03

Dividends paid per common share $ 0.12 $ 0.12 $ 0.36 $ 0.36

____________________________________

(1) Fraud losses includes $ 4.3 million of credit card fraud losses for the six months ended June 30, 2024 .

See accompanying notes to Consolidated Financial Statements.

(1) Fraud losses includes $ 337 thousand and $ 4.7 million of credit card fraud losses for the three and nine months ended September 30, 2024, respectively .

See accompanying notes to unaudited Consolidated Financial Statements.

SHORE BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

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

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

($ in thousands) 2024 2023 2024 2023

Net income $ 11,234 $ 4,018 $ 19,418 $ 10,475

Net income (loss) $ 11,189 $ ( 9,737 ) $ 30,607 $ 738

Other comprehensive income (loss):

3 unchanged sentences

Total other comprehensive income (loss) 2,734 ( 1,548 ) 1,968 ( 1,088 )

Comprehensive income $ 11,032 $ 3,618 $ 18,652 $ 10,935

See accompanying notes to Consolidated Financial Statements.

Comprehensive income (loss) $ 13,923 $ ( 11,285 ) $ 32,575 $ ( 350 )

See accompanying notes to unaudited Consolidated Financial Statements.

SHORE BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (Unaudited)

For the Three and Six Months Ended June 30, 2024 and 2023

For the Three and Nine Months Ended September 30, 2024 and 2023

($ in thousands) Common Stock Additional Paid in Capital Retained Earnings Accumulated Other Comprehensive Loss

13 unchanged sentences

Balances, June 30, 2024 333 356,994 173,716 ( 8,260 ) 522,783

Net income — — 11,189 — 11,189

Other comprehensive income — — — 2,734 2,734

Common shares issued for employee stock purchase plan — 98 — — 98

Stock-based compensation — 488 — — 488

Cash dividends declared — — ( 4,021 ) — ( 4,021 )

Balances, September 30, 2024 $ 333 $ 357,580 $ 180,884 $ ( 5,526 ) $ 533,271

SHORE BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (Unaudited) - Continued

(In thousands) Common Stock Additional Paid in Capital Retained Earnings Accumulated Other Comprehensive (Loss) Income Total Stockholders’ Equity

($ in thousands) Common Stock Additional Paid in Capital Retained Earnings Accumulated Other Comprehensive Loss Total Stockholders’ Equity

Balances, January 1, 2023 $ 199 $ 201,494 $ 171,613 $ ( 9,021 ) $ 364,285

12 unchanged sentences

Balances, June 30, 2023 199 202,008 169,494 ( 8,561 ) 363,140

See accompanying notes to Consolidated Financial Statements.

Net loss — — ( 9,737 ) — ( 9,737 )

Other comprehensive loss — — — ( 1,548 ) ( 1,548 )

TCFC acquisition 132 152,955 — — 153,087

Common shares issued for employee stock purchase plan — 83 — — 83

Stock-based compensation — 529 — — 529

Cash dividends declared — — ( 3,976 ) — ( 3,976 )

Balances, September 30, 2023 $ 331 $ 355,575 $ 155,781 $ ( 10,109 ) $ 501,578

See accompanying notes to unaudited Consolidated Financial Statements.

SHORE BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

For Six Months Ended June 30,

For Nine Months Ended September 30,

($ in thousands) 2024 2023

7 unchanged sentences

Amortization of debt issuance costs 91 92

Bargain purchase gain — ( 8,816 )

Gain on mortgage banking activities ( 2,897 ) ( 2,602 )

3 unchanged sentences

Deferred income tax expense (benefit) 7,776 ( 934 )

Losses on sales and calls of securities — 2,166

Loss on sales of repossessed assets 375 —

Loss on valuation adjustments on mortgage servicing rights 129 40

(Gain) loss on valuation adjustments on mortgage servicing rights ( 253 ) 5

Loss on disposal of fixed assets 10 —

Valuation adjustments on premises transferred to held for sale 2 271

8 unchanged sentences

Other liabilities ( 4,435 ) ( 20,662 )

Net cash provided by operating activities 5,418 10,650

Net cash provided by (used in) operating activities 14,468 ( 13,355 )

CASH FLOWS FROM INVESTING ACTIVITIES:

Proceeds from maturities and principal payments of investment securities available for sale 64,896 12,304

Proceeds from the sale of acquired AFS securities — 434,215

Proceeds from maturities and principal payments of investment securities held to maturity 39,653 35,023

2 unchanged sentences

Purchases of investment securities held to maturity ( 11,449 ) —

Proceeds from the sale of loans held for investment — 8,611

Purchases of equity securities ( 123 ) ( 41 )

7 unchanged sentences

Proceeds from disposal of premises held for sale — 721

Net cash (used in) investing activities $ ( 74,157 ) $ ( 179,653 )

Cash acquired in the acquisition of TCFC, net of cash paid — 25,372

Net cash (used in) provided by investing activities $ ( 80,096 ) $ 216,534

SHORE BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - Continued

For Six Months Ended June 30,

For Nine Months Ended September 30,

($ in thousands) 2024 2023

7 unchanged sentences

Issuance of common stock 321 272

Net cash (used in) provided by financing activities ( 164,791 ) 159,331

Net decrease in cash and cash equivalents ( 233,530 ) ( 9,672 )

Net cash used in financing activities ( 123,164 ) ( 149,969 )

Net (decrease) increase in cash and cash equivalents ( 188,792 ) 53,210

Cash and cash equivalents at beginning of period 372,413 55,499

4 unchanged sentences

Recognition (remeasurement) of lease liabilities arising from right-of-use assets $ 25 $ 45

Transfers from loans to repossessed properties $ 1,845 $ —

Unrealized (losses) gains on securities available for sale $ ( 1,054 ) $ 634

Transfers from loans to repossessed assets $ 2,488 $ —

Unrealized gains (losses) on available for sale securities $ 2,708 $ ( 1,498 )

Transfer of premises to held for sale (included in other assets) $ 1,387 $ 750

See accompanying notes to Consolidated Financial Statements.

See accompanying notes to unaudited Consolidated Financial Statements.

Shore Bancshares, Inc.

Notes to Consolidated Financial Statements

For the Three and Six Months Ended June 30, 2024 and 2023

For the Three and Nine Months Ended September 30, 2024 and 2023

Note 1 – Basis of Presentation

3 unchanged sentences

The accompanying interim financial statements are unaudited;

however, in the opinion of management all adjustments necessary to present fairly the consolidated financial position at June 30, 2024, the consolidated results of income and comprehensive income for the three and six months ended June 30, 2024 and 2023, changes in stockholders’ equity for the three and six months ended June 30, 2024 and 2023 and cash flows for the six months ended June 30, 2024 and 2023, have been included.

however, in the opinion of management all adjustments necessary to present fairly the consolidated financial position at September 30, 2024, the consolidated results of income and comprehensive income for the three and nine months ended September 30, 2024 and 2023, changes in stockholders’ equity for the three and nine months ended September 30, 2024 and 2023 and cash flows for the nine months ended September 30, 2024 and 2023, have been included.

All such adjustments were of a normal recurring nature.

The amounts as of December 31, 2023 were derived from the 2023 audited financial statements.

The results of operations for the three and six months ended June 30, 2024 are not necessarily indicative of the results to be expected for any other interim period or for the full year.

The results of operations for the three and nine months ended September 30, 2024 are not necessarily indicative of the results to be expected for any other interim period or for the full year.

This Quarterly Report on Form 10-Q should be read in conjunction with the Annual Report of Shore Bancshares, Inc.

25 unchanged sentences

Note 2 – Business Combinations

On July 1, 2023 (the “Acquisition Date”), the Company completed the acquisition of TCFC, a Maryland corporation, in accordance with the definitive agreement that was entered into on December 14, 2022, by and among the Company and TCFC.

The primary reasons for the merger included:

expansion of the branch network and commanding market share positions in attractive Maryland markets and a growing presence in Virginia and Delaware;

attractive low-cost funding base;

strong cultural alignment and a deep commitment to stockholders, customers, employees, and communities served by the Company and TCFC, meaningful value creation to shareholders;

and increased trading liquidity for both companies and increased dividends for TCFC shareholders.

In connection with the completion of the merger, former TCFC shareholders received 2.3287 shares of the Company’s common stock.

The value of the total transaction consideration was approximately $ 153.6 million.

The consideration included the issuance of 13,201,693 shares of the Company’s common stock, which had a value of $ 11.56 per share, which was the closing price of the Company’s common stock on June 30, 2023, the last trading day prior to the consummation of the acquisition.

Also included in the total consideration were cash in lieu of any fractional shares, converted share-based payment awards, and debt of TCFC that was effectively settled upon closing.

The acquisition of TCFC was accounted for as a business combination using the acquisition method of accounting and, accordingly, assets acquired, liabilities assumed, and consideration paid are recorded at estimated fair values on the Acquisition Date.

The provisional amount of bargain purchase gain as of the Acquisition Date was approximately $ 8.8 million.

The exchange ratio was determined at the time of announcement of the merger between the Company and TCFC in December of 2022 when the stock price of the Company was much higher than at the legal merger date.

The decline in the Company’s stock price was the primary driver in recording a bargain purchase gain on this transaction.

The decline in stock price for the Company was comparable to other financial institutions similar to the Company leading up to the merger due to bank failures in the first quarter of 2023 and increases to overnight borrowing rates by the Fed which resulted in continued pressure on net interest margins.

The Company will continue to keep the measurement of bargain purchase gain open for any additional adjustments to the fair value of certain accounts, for example loans, that may arise during the Company’s final review procedures of any updated information.

If considered necessary, any subsequent adjustments to the fair value of assets acquired and liabilities assumed, identifiable intangible assets, or other purchase accounting adjustments will result in adjustments to bargain purchase gain within the first 12 months following the Acquisition Date.

The bargain purchase gain is not included as taxable income for tax purposes.

As a result of the integration of operations of TCFC, it is not practicable to determine revenue or net income included in the Company’s consolidated operating results relating to TCFC since the Acquisition Date, as TCFC’s results cannot be separately identified.

Comparative pro-forma financial statements for the prior year period were not presented, as adjustments to those statements would not be indicative of what would have occurred had the acquisition taken place on January 1, 2022.

In particular, adjustments that would have been necessary to be made to record the loans at fair value, the provision of credit losses or the core deposit intangible would not be practical to estimate.

(Dollars in thousands)

Purchase Price Consideration:

Fair value of common shares issued ( 13,201,693 shares) based on Shore Bancshares, Inc.

share price of $ 11.56

Effective settlement of pre-existing debt (1)

Cash consideration (cash in lieu for fractional shares) 5

Fair value of converted restricted stock units (2)

Total purchase price $ 153,592

Identifiable assets:

Cash and cash equivalents $ 25,377

Total securities 454,468

Loans, net 1,765,255

Premises and equipment, net 29,277

Core deposit intangible, net 48,648

Other assets 89,808

Total identifiable assets $ 2,412,833

Identifiable Liabilities

Deposits $ 2,131,141

Total debt 97,545

Other liabilities 21,739

Total identifiable liabilities $ 2,250,425

Provisional fair value of net assets acquired $ 162,408

Provisional bargain purchase gain $ ( 8,816 )

____________________________________

(1) The Company held $ 500,000 in subordinated debt of TCFC.

The debt was effectively settled.

(2) Represents the number of TCFC restricted stock units outstanding and the equity exchange ratio, further multiplied by the price per share of the Company’s common stock of $ 11.56 and the estimated ratio of the completed service period relative to the total service period of the underlying awards.

The acquired assets and assumed liabilities of TCFC were measured at fair value as of the Acquisition Date.

Management made significant estimates and exercised significant judgement in accounting for the acquisition of TCFC.

The following is a brief description of the valuation methodologies used to estimate the fair values of major categories of assets acquired and liabilities assumed.

The Company utilized a valuation specialist to assist with the determination of fair values for certain acquired assets and assumed liabilities.

The Company recorded all loans acquired at the estimated fair value on the Acquisition Date with no carryover of the related allowance for credit losses.

The Company determined the net discounted value of cash flows on gross loans totaling $ 1.9 billion, including 3,858 of Non-PCD loans and 323 PCD loans.

The valuation took into consideration the loans’ underlying characteristics, including account types, remaining terms, annual interest rates, interest types, past delinquencies, timing of principal and interest payments, current market rates and remaining balances.

Valuations also considered default rates, loss severity estimates, and estimates related to expected prepayments over the contractual lives of the loans.

The effect of the valuation process was a total net discount $ 120.9 million at the Acquisition Date.

The core deposit intangible was valued using an income approach focused on cost savings, which recognizes the cost savings represented by the expense of maintaining the core deposit base versus the cost of an alternative funding source.

The valuation incorporates assumptions related to account retention, discount rates, deposit interest rates, deposit maintenance costs and alternative funding rates.

The fair value of premises acquired was based on recent third-party appraised values of the properties, with fair value adjustments made to both the buildings and any associated parcels of land.

Acquired equipment was based on the remaining net book value of TCFC, which approximated fair value.

The fair value of noninterest bearing demand deposits, interest checking, money market and savings deposit accounts from TCFC were assumed to approximate the carrying value as these accounts have no stated maturity and are payable on demand.

Certificates of deposit were valued at the present value of the certificates’ expected contractual payments discounted at market rates for certificates with similar terms.

The estimated fair value of the acquired portfolio of debt securities was based on quoted market prices and dealer quotes.

Substantially all the acquired portfolio was sold following the acquisition.

The estimated fair value of short-term borrowings was determined to approximate their stated value.

Subordinated debt and trust preferred debt were valued using a discounted cash flow approach incorporating a discount rate that considered market terms, maturities, and credit ratings.

The Company accounts for business combinations utilizing the acquisition method of accounting, which necessitates that purchased assets and assumed liabilities be recorded at their respective fair values.

In numerous instances, the fair values of acquired assets and assumed liabilities are ascertained by estimating the anticipated cash flows from those assets and liabilities and discounting them at appropriate market rates.

The Company determines the fair values of loans, core deposit intangibles, and deposits with the assistance of a third-party vendor.

Loans acquired in business combinations are recorded in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 805, “Business Combinations.” Accordingly, acquired loans are segregated between purchase credit impaired (“PCI”) loans (ASC 310-30) and Non-PCI loans (ASC-310-20) and are recorded at fair value without the carryover of the related allowance for loan losses.

The excess of expected cash flows above the fair value of the majority of loans will be accreted to interest income over the remaining lives of the loans in accordance with FASB ASC 310-20.

The estimated fair values are subject to refinement as additional information regarding the closing date fair values becomes available through the measurement period.

Although significant changes to the closing date fair values are not anticipated, any information pertinent to changes in these fair values will be evaluated to determine if such changes are attributable to events and circumstances that existed as of the acquisition date.

During the measurement period, any such changes will be recorded as part of the closing date fair value.

The Company completed the acquisition of The Community Financial Corporation (“TCFC”), a Maryland corporation, on July 1, 2023 (the “Acquisition Date”).

This followed the definitive agreement signed on December 14, 2022, by both the Company and TCFC.

The merger was motivated by several primary reasons:

extending the branch network and securing dominant market share positions in attractive Maryland markets, along with expanding in Virginia and Delaware;

benefiting from a favorable low-cost funding base;

ensuring strong cultural alignment and a deep commitment to stockholders, customers, employees, and communities served by both organizations;

generating substantial value for shareholders;

and improving trading liquidity for both companies while boosting dividends for TCFC shareholders.

Following the merger’s completion, TCFC’s former shareholders were granted 2.3287 shares of the Company’s common stock.

The total transaction consideration amounted to approximately $ 153.6 million.

It included the issuance of 13,201,693 shares of the Company’s common stock, each valued at $ 11.56 , based on the closing price on June 30, 2023, the final trading day before the acquisition’s finalization.

The total consideration also comprised cash for any fractional shares, converted share-based payment awards, and TCFC’s debt, which was effectively settled at closing.

The Company's 2023 Annual Report on Form 10-K, filed with the U.S.

Securities and Exchange Commission (“SEC”) and accessible on the SEC’s website (http://www.sec.gov), discusses the acquisition of TCFC.

This acquisition was treated as a business combination under the acquisition method of accounting, with assets acquired, liabilities assumed, and consideration paid all recorded at their estimated fair values on the Acquisition Date.

Note 3 – Investment Securities

On January 1, 2023, the Company adopted ASC 326, which made changes to accounting for AFS debt securities whereby credit losses should be presented as an allowance, rather than as a write-down when management does not intend to sell and does not believe that it is more likely than not they will be required to sell prior to maturity.

In addition, ASC 326 requires an ACL to be recorded on HTM debt securities measured at amortized cost.

All securities information presented as of June 30, 2024 and as of December 31, 2023 are in accordance with ASC 326, except ACL on HTM securities were presented as of three and six months ended June 30, 2024 and June 30, 2023.

The following table summarizes the activity in the ACL on HTM securities as of three and six months ended June 30, 2024 and June 30, 2023.

(Dollars in thousands) Three Months Ended June 30, 2024 Three Months Ended June 30, 2023 Six Months Ended June 30, 2024 Six Months Ended June 30, 2023

Balance, beginning of period $ 116 $ — $ 94 $ —

Other debt securities, provision for credit losses ( 8 ) 163 14 163

Balance, end of period $ 108 $ 163 $ 108 $ 163

A provision for credit losses of $ 8,000 and $ 0.2 million, $ 14,000 and $ 0.2 million was recorded for the three and six months ended June 30, 2024 and June 30, 2023, respectively.

The following tables provide information on the amortized cost and estimated fair values of debt securities.

(Dollars in thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value

($ in thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value

Available-for-sale securities:

June 30, 2024

September 30, 2024

Treasury and government agencies $ 23,047 $ 6 $ 2,363 $ 20,690

7 unchanged sentences

Total $ 120,832 $ 69 $ 10,380 $ 110,521

No AFS securities were sold during the three and six months ended June 30, 2024 and 2023.

(Dollars in thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value Allowance for Credit Losses

No AFS securities were sold during the three and nine months ended September 30, 2024 and 2023.

($ in thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value Allowance for Credit Losses

Held-to-maturity securities:

June 30, 2024

September 30, 2024

Treasury and government agencies $ 132,870 $ 3 $ 7,375 $ 125,498 $ —

9 unchanged sentences

Total $ 513,282 $ 57 $ 55,509 $ 457,830 $ 94

Equity securities with an aggregate fair value of $ 5.7 million at June 30, 2024 and $ 5.7 million at December 31, 2023 are presented separately on the balance sheet.

The fair value adjustment recorded through earnings totaled loss of $ 0.2 million for the six months ended June 30, 2024 and loss of $ 3,000 for the six months ended June 30, 2023, respectively.

Credit Quality Information

The Company monitors the credit quality of HTM securities through credit ratings provided by Standard & Poor’s Rating Services and Moody’s Investor Services.

Credit ratings express opinions about the credit quality of a security, and are updated at each quarter end.

Investment grade securities are rated BBB- or higher by S&P and Baa3 or higher by Moody’s and are generally considered by the rating agencies and market participants to be of low credit risk.

Conversely, securities rated below investment grade, which are labeled as speculative grade by the rating agencies, are considered to have distinctively higher credit risk than investment grade securities.

There were no speculative grade HTM securities at June 30, 2024 or December 31, 2023.

HTM securities that are not rated are agency mortgage-backed securities sponsored by U.S.

government agencies, as well as direct obligations of the agencies, with the remainder being sub-debt of other banks.

The following table shows the amortized cost of HTM securities based on their lowest publicly available credit rating as of June 30, 2024.

June 30, 2024

Investment Grade

(Dollars in thousands) Aaa Aa1 A3 Baa1 Baa2 NR Total

Treasury and government agencies $ 139,594 $ — $ — $ — $ — $ 3,571 $ 143,165

Mortgage-backed-residential 344,406 — — — — — 344,406

States and political subdivisions — 1,468 — — — — 1,468

Other debt securities — — 4,000 4,000 500 2,000 10,500

Total held-to maturity securities $ 484,000 $ 1,468 $ 4,000 $ 4,000 $ 500 $ 5,571 $ 499,539

The following table shows the amortized cost of HTM securities based on their lowest publicly available credit rating as of December 31, 2023.

December 31, 2023

Investment Grade

(Dollars in thousands) Aaa Aa1 A3 Baa1 Baa2 NR Total

Treasury and government agencies $ 140,761 $ — $ — $ — $ — $ 2,681 $ 143,442

Mortgage-backed securities 357,870 — — — — — 357,870

Obligations of states and political subdivisions — 1,470 — — — — 1,470

Other debt securities — — 4,000 4,000 500 2,000 10,500

Total held-to-maturity securities $ 498,631 $ 1,470 $ 4,000 $ 4,000 $ 500 $ 4,681 $ 513,282

The following tables provide information about gross unrealized losses and fair value by length of time that the individual securities have been in a continuous unrealized loss position at June 30, 2024 and December 31, 2023.

Equity securities with an aggregate fair value of $ 6.0 million at September 30, 2024 and $ 5.7 million at December 31, 2023 are presented separately on the balance sheet.

The fair value adjustment recorded through earnings totaled a gain of $ 79 thousand for the three months ended September 30, 2024 and a gain of $ 151 thousand for the three months ended September 30, 2023.

The fair value adjustment recorded through earnings totaled a gain of $ 38 thousand for the nine months ended September 30, 2024 and a gain of $ 300 thousand for the nine months ended September 30, 2023.

On January 1, 2023, the Company adopted ASC 326, which made changes to accounting for AFS debt securities whereby credit losses are presented as an allowance, rather than as a write-down when management does not intend to sell and does not believe that it is more likely than not they will be required to sell prior to maturity.

In addition, ASC 326 requires an ACL to be recorded on HTM debt securities measured at amortized cost.

The following table summarizes the activity in the ACL on HTM securities as of the three and nine months ended September 30, 2024 and September 30, 2023.

($ in thousands) Three Months Ended September 30, 2024 Three Months Ended September 30, 2023 Nine Months Ended September 30, 2024 Nine Months Ended September 30, 2023

Balance, beginning of period $ 108 $ 163 $ 94 $ —

Other debt securities, (reversal of) provision for credit losses ( 7 ) ( 37 ) 7 126

Balance, end of period $ 101 $ 126 $ 101 $ 126

Less than 12 Months More than 12 Months Total

(Dollars in thousands) Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses

June 30, 2024

($ in thousands) Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses

September 30, 2024

Available-for-sale securities:

4 unchanged sentences

Less than 12 Months More than 12 Months Total

(Dollars in thousands) Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses

($ in thousands) Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses

December 31, 2023

4 unchanged sentences

Total $ 24,479 $ 150 $ 72,504 $ 10,230 $ 96,983 $ 10,380

There were 110 AFS debt securities with a fair value below the amortized cost basis, totaling $ 11.4 million of aggregate fair value as of June 30, 2024.

The Company concluded that a credit loss does not exist in its AFS securities portfolio as of June 30, 2024, and no impairment loss has been recognized based on the fact that (1) changes in fair value were caused primarily by fluctuations in interest rates, (2) securities with unrealized losses had generally high credit quality, (3) the Company intends to hold these investments in debt securities to maturity and it is more-likely-than-not the Company will not be required to sell these investments before a recovery of its investment, and (4) issuers have continued to make timely payments of principal and interest.

There were 101 AFS debt securities with a fair value below the amortized cost basis, totaling $ 8.2 million of aggregate fair value as of September 30, 2024.

The Company concluded that a credit loss does not exist in its AFS securities portfolio as of September 30, 2024, and no impairment loss has been recognized based on the fact that (1) changes in fair value were caused primarily by fluctuations in interest rates, (2) securities with unrealized losses had generally high credit quality, (3) the Company intends to hold these investments in debt securities to maturity and it is more-likely-than-not the Company will not be required to sell these investments before a recovery of its investment, and (4) issuers have continued to make timely payments of principal and interest.

Additionally, the Company’s mortgage-back securities are issued by either U.S.

3 unchanged sentences

government, that investors in such mortgage-backed securities will receive timely principal and interest payments.

All HTM and AFS securities were current with no securities past due or on nonaccrual as of June 30, 2024.

All HTM and AFS securities were current with no securities past due or on nonaccrual as of September 30, 2024.

The Company has securities which have been pledged as collateral for obligations to federal, state, and local government agencies, and other purpose as required or permitted by law, or sold under agreements to repurchase.

At June 30, 2024, the carrying value of pledged AFS securities was $ 53.8 million and $ 199.7 million of pledged HTM securities.

At September 30, 2024, the carrying value of pledged AFS securities was $ 54.1 million and $ 191.4 million of pledged HTM securities.

The comparable amounts for December 31, 2023 were $ 54.5 million and $ 185.9 million, respectively.

There were no obligations of states or political subdivisions with carrying values, as to any issuer, exceeding 10% of stockholders’ equity at June 30, 2024 or December 31, 2023.

The following table provides information on the amortized cost and estimated fair values of investment securities by maturity date at June 30, 2024.

There were no obligations of states or political subdivisions with carrying values, as to any issuer, exceeding 10% of stockholders’ equity at September 30, 2024 or December 31, 2023.

The following table provides information on the amortized cost and estimated fair values of investment securities by maturity date at September 30, 2024.

Available for sale Held to maturity

(Dollars in thousands) Amortized Cost Fair Value Amortized Cost Fair Value

($ in thousands) Amortized Cost Fair Value Amortized Cost Fair Value

Due in one year or less $ 2,495 $ 2,498 $ 7,057 $ 7,016

8 unchanged sentences

For further discussion on the most significant accounting policies that the Company follows see Note 1 – Summary of Significant Accounting Policies of the Company’s 2023 Annual Report.

The Company makes residential mortgage, commercial, and consumer loans to customers primarily in Anne Arundel County, Baltimore County, Charles County, Calvert County, St Mary’s County, Howard County, Kent County, Queen Anne’s County, Caroline County, Talbot County, Dorchester County and Worcester County in Maryland, Kent and Sussex County, Delaware and in Accomack County, Stafford County, Spotsylvania County and Fredericksburg City in Virginia.

The following table provides information about the principal classes of the loan portfolio at June 30, 2024 and December 31, 2023.

(Dollars in thousands) June 30, 2024 % of Total Loans December 31, 2023 % of Total Loans

The following table provides information about the principal classes of the loan portfolio at September 30, 2024 and December 31, 2023.

($ in thousands) September 30, 2024 % of Total Loans December 31, 2023 % of Total Loans

Construction $ 337,113 7.12 % $ 299,000 6.40 %

7 unchanged sentences

Total loans, net $ 4,675,240 $ 4,583,659

Loans are stated at their principal amount outstanding net of any purchase premiums/discounts, deferred fees and costs.

Included in loans were deferred costs, net of fees, of $ 3.2 million and $ 2.2 million at June 30, 2024 and December 31, 2023.

At June 30, 2024 and December 31, 2023 included in total loans were $ 1,558.9 million and $ 1,643.4 million in loans acquired as part of the acquisition of TCFC, effective July 1, 2023.

These balances were presented net of the related discount which totaled $ 96.6 million and $ 108.4 million at June 30, 2024 and December 31, 2023, respectively.

At June 30, 2024 and December 31, 2023, included in total loans were $ 273.5 million and $ 297.9 million in loans, acquired as part of the acquisition of Severn Bancorp, Inc.

Loans are stated at their principal amount outstanding including any purchase premiums/discounts, deferred fees and costs.

Included in loans were deferred costs, net of fees, of $ 3.4 million and $ 2.2 million at September 30, 2024 and December 31, 2023.

At September 30, 2024 and December 31, 2023 included in total loans were $ 1.52 billion and $ 1.64 billion in loans acquired as part of the acquisition of TCFC, effective July 1, 2023.

These balances were presented net of the related discount which totaled $ 92.3 million and $ 108.4 million at September 30, 2024 and December 31, 2023, respectively.

At September 30, 2024 and December 31, 2023, included in total loans were $ 263.4 million and $ 297.9 million in loans, acquired as part of the acquisition of Severn Bancorp, Inc.

(“Severn”), effective October 31, 2021.

These balances were presented net of the related discount which totaled $ 4.0 million and $ 4.7 million at June 30, 2024 and December 31, 2023, respectively.

At June 30, 2024, the Bank was servicing $ 368.0 million in loans for the Federal National Mortgage Association and $ 120.1 million in loans for Freddie Mac.

The following table provides information on nonaccrual loans by loan class as of June 30, 2024 and December 31, 2023.

(Dollars in thousands) Non-Accrual with no allowance for credit loss Non-Accrual with an allowance for credit loss Total Non-Accrual Loans

June 30, 2024

These balances were presented net of the related discount which totaled $ 3.6 million and $ 4.7 million at September 30, 2024 and December 31, 2023, respectively.

At September 30, 2024, the Bank was servicing $ 368.0 million in loans for the Federal National Mortgage Association and $ 118.5 million in loans for Freddie Mac.

The following table provides information on nonaccrual loans by loan class as of September 30, 2024 and December 31, 2023.

($ in thousands) Non-Accrual with no allowance for credit loss Non-Accrual with an allowance for credit loss Total Non-Accrual Loans

September 30, 2024

Nonaccrual loans:

7 unchanged sentences

Interest income $ 174 $ 57 $ 231

(Dollars in thousands) Non-Accrual with no allowance for credit loss Non-Accrual with an allowance for credit loss Total Non-Accrual Loans

($ in thousands) Non-Accrual with no allowance for credit loss Non-Accrual with an allowance for credit loss Total Non-Accrual Loans

December 31, 2023

5 unchanged sentences

Consumer 216 689 905

Credit Cards — — —

Total $ 11,247 $ 1,537 $ 12,784

Interest income $ 399 $ 53 $ 452

(Dollars in thousands) Non-Accrual Delinquent Loans Non-Accrual Current Loans Total Non-Accrual Loans

June 30, 2024

($ in thousands) Non-Accrual Delinquent Loans Non-Accrual Current Loans Total Non-Accrual Loans

September 30, 2024

Nonaccrual loans:

1 unchanged sentence

Residential real estate 4,516 2,422 6,938

Residential rentals — — —

Commercial real estate 2,810 2,876 5,686

3 unchanged sentences

Total $ 8,454 $ 6,390 $ 14,844

(Dollars in thousands) Non-Accrual Delinquent Loans Non-Accrual Current Loans Total Non-Accrual Loans

($ in thousands) Non-Accrual Delinquent Loans Non-Accrual Current Loans Total Non-Accrual Loans

December 31, 2023

2 unchanged sentences

Residential real estate 4,137 2,208 6,345

Residential rentals — — —

Commercial real estate 1,215 3,149 4,364

1 unchanged sentence

Consumer 903 2 905

Credit Cards — — —

Total $ 6,504 $ 6,280 $ 12,784

3 unchanged sentences

Consumer credit cards are monitored based on a borrower payment history.

Credit card loans are classified as performing and are typically charged off no later than 180 days past due when, in the opinion of management, the collection of principal or interest is considered doubtful.

As of June 30, 2024, there were 7 credit cards that were evaluated based on economic conditions specific to the loans or borrowers, and were downgraded to substandard and non-performing.

Credit card loans are classified as performing and are typically charged off no later than 180 days past due when, or in the opinion of management, the collection of principal or interest is considered doubtful.

As of September 30, 2024, there w ere 7 cred it cards that were evaluated based on economic conditions specific to the loans or borrowers, and were downgraded to substandard and non-performing.

Loans subject to risk ratings are graded on a scale of one to ten.

6 unchanged sentences

Substandard loans are the first adversely classified loans on the Bank's watchlist.

These assets have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt.

These assets have a

well-defined weakness or weaknesses that jeopardize the liquidation of the debt.

They are characterized by the possibility that the Bank will sustain some loss if the deficiencies are not corrected.

13 unchanged sentences

Rating 10 – Loss – Loss assets are uncollectible or of little value.

The following tables provides information on loan risk ratings as of June 30, 2024 and gross write-offs during the six months ended June 30, 2024.

The following tables provides information on loan risk ratings as of September 30, 2024 and gross write-offs during the nine months ended September 30, 2024.

Term Loans by Origination Year Revolving Loans Revolving Converted to Term Loans Total

(Dollars in thousands) Prior 2020 2021 2022 2023 2024

June 30, 2024

($ in thousands) Prior 2020 2021 2022 2023 2024

September 30, 2024

Pass $ 33,471 $ 10,572 $ 24,666 $ 79,428 $ 90,132 $ 76,594 $ 20,283 $ 1,760 $ 336,906

30 unchanged sentences

Term Loans by Origination Year Revolving Loans Revolving Converted to Term Loans Total

(Dollars in thousands) Prior 2020 2021 2022 2023 2024

June 30, 2024

($ in thousands) Prior 2020 2021 2022 2023 2024

September 30, 2024

Performing $ — $ — $ — $ — $ — $ — $ 7,006 $ — $ 7,006

9 unchanged sentences

term loans Total

(Dollars in thousands) Prior 2019 2020 2021 2022 2023

($ in thousands) Prior 2019 2020 2021 2022 2023

December 31, 2023

32 unchanged sentences

Performing $ — $ — $ — $ — $ — $ — $ 6,583 $ — $ 6,583

Non-Performing — — — — — — — — —

Total $ — $ — $ — $ — $ — $ — $ 6,583 $ — $ 6,583

5 unchanged sentences

Investment $ 1,059,173 $ 277,491 $ 461,213 $ 837,657 $ 1,107,579 $ 670,765 $ 201,381 $ 25,751 $ 4,641,010

The following tables provide information on the aging of the loan portfolio as of June 30, 2024 and December 31, 2023.

(Dollars in thousands) 30‑59 days past due 60‑89 days past due 90 days past due and still accruing 30-89 days past due and not accruing 90 days past due and not accruing Total past due Current Accrual Loans Current Non-Accrual Loans Total

June 30, 2024

The following tables provide information on the aging of the loan portfolio as of September 30, 2024 and December 31, 2023.

($ in thousands) 30‑59 days past due 60‑89 days past due 90 days past due and still accruing 30-89 days past due and not accruing 90 days past due and not accruing Total past due Current Accrual Loans (1)

Current Non-Accrual Loans Total

September 30, 2024

Construction $ 410 $ — $ — $ — $ 207 $ 617 $ 336,496 $ — $ 337,113

6 unchanged sentences

Percent of total loans 0.07 % 0.12 % 0.01 % 0.11 % 0.07 % 0.38 % 99.49 % 0.13 % 100.0 %

(1) Includes loans measured at fair value of $ 9.5 million at June 30, 2024.

____________________________________

(1) Includes loans measured at fair value of $ 10.0 million at September 30, 2024.

Current Non-Accrual Loans Total

December 31, 2023

7 unchanged sentences

Percent of total loans 0.17 % 0.04 % 0.02 % 0.03 % 0.11 % 0.36 % 99.50 % 0.14 % 100.00 %

____________________________________

(1) Includes loans measured at fair value of $ 9.9 million at December 31, 2023.

The following tables provide a summary of the activity in the ACL allocated by loan class for the three and six months ended June 30, 2024 and June 30, 2023.

The following tables provide a summary of the activity in the ACL allocated by loan class for the three and nine months ended September 30, 2024 and September 30, 2023.

Allocation of a portion of the allowance to one loan class does not preclude its availability to absorb losses in other loan classes.

(Dollars in thousands) Beginning Balance Charge-offs Recoveries Net (charge-offs) recoveries Provisions Ending Balance

For three months ended June 30, 2024

($ in thousands) Beginning Balance Charge-offs Recoveries Net (charge-offs) recoveries Provisions Ending Balance

For three months ended September 30, 2024

Construction $ 3,471 $ — $ 1 $ 1 $ ( 578 ) $ 2,894

5 unchanged sentences

Total $ 58,478 $ ( 1,379 ) $ 91 $ ( 1,288 ) $ 1,479 $ 58,669

(1) Gross charge-offs of consumer loans for the three months ended June 30, 2024 included $ 0.4 million of demand deposit overdrafts.

(Dollars in thousands) Beginning Balance Impact of ASC326 Adoption Charge-offs Recoveries Net (charge-offs) recoveries Provisions Ending Balance

For Three Months Ended June 30, 2023

____________________________________

(1) Gross charge-offs of consumer loans for the three months ended September 30, 2024 included $ 156 thousand of demand deposit overdrafts.

($ in thousands) Beginning Balance Merger Adjustments (2)

Charge-offs Recoveries Net (charge-offs) recoveries Provisions Ending Balance

For Three Months Ended September 30, 2023

Construction $ 2,386 $ 3 $ — $ 3 $ 3 $ 1,439 $ 3,831

2 unchanged sentences

Commercial 1,956 278 — 2 2 2,101 4,337

Consumer 5,249 — ( 177 ) 119 ( 58 ) 63 5,254

5,254 14 ( 115 ) 45 ( 70 ) 1,658 6,856

Credit Card — 18 ( 60 ) — ( 60 ) 94 52

Total $ 29,014 $ 1,513 $ ( 1,502 ) $ 53 $ ( 1,449 ) $ 27,973 $ 57,051

(Dollars in thousands) Beginning

____________________________________

(1) Gross charge-offs of consumer loans for the three months ended September 30, 2023 included $ 1.5 million of demand deposit overdrafts.

(2) Merger adjustments consist of gross-up for acquired PCD loans in the TCFC merger.

($ in thousands) Beginning

Balance Charge-

1 unchanged sentence

recoveries Provisions Ending

For Six Months Ended June 30, 2024

For Nine Months Ended September 30, 2024

Construction $ 3,935 $ ( 12 ) $ 7 $ ( 5 ) $ ( 1,036 ) $ 2,894

2 unchanged sentences

Commercial 2,671 ( 177 ) 4 ( 173 ) 727 3,225

Consumer 7,601 ( 1,386 ) 144 ( 1,242 ) 1,786 8,145

7,601 ( 2,401 ) 232 ( 2,169 ) 1,822 7,254

Credit Card 220 ( 405 ) 9 ( 396 ) 666 490

Total $ 57,351 $ ( 2,996 ) $ 257 $ ( 2,739 ) $ 4,057 $ 58,669

(Dollars in thousands) Beginning

Balance Impact of

Adoption Merger

Adjustments Charge-

offs Recoveries Net

(charge-offs)

recoveries Provisions Ending

For Six Months Ended June 30, 2023

____________________________________

(1) Gross charge-offs of consumer loans for the nine months ended September 30, 2024 included $ 512 thousands of demand deposit overdrafts.

($ in thousands) Beginning Balance Impact of ASC 326 Adoption Merger Adjustments (2)

Charge-offs Recoveries Net (charge-offs) recoveries Provisions Ending Balance

For Nine Months Ended September 30, 2023

Construction $ 2,973 $ 1,222 $ 3 $ — 10 $ 10 $ ( 377 ) $ 3,831

Residential real estate 2,622 4,974 215 — 37 37 11,327 19,175

Residential rentals — — — — — — — —

Commercial real estate 4,899 3,742 985 ( 1,327 ) — ( 1,327 ) 14,501 22,800

Commercial 1,652 401 278 — 10 10 1,996 4,337

Consumer 4,497 452 — ( 284 ) 165 ( 119 ) 424 5,254

4,497 452 14 ( 399 ) 210 ( 189 ) 2,082 6,856

Credit Card — — 18 ( 60 ) — ( 60 ) 94 52

Total $ 16,643 $ 10,791 $ 1,513 $ ( 1,786 ) $ 267 $ ( 1,519 ) $ 29,623 $ 57,051

____________________________________

(1) Gross charge-offs of consumer loans for the nine months ended September 30, 2023 included $ 1.8 million of demand deposit overdrafts.

(2) Merger adjustments consist of gross-up for acquired PCD loans in the TCFC merger.

The following table presents the amortized cost basis of collateral-dependent loans by loan portfolio segment.

June 30, 2024

(Dollars in thousands) Real Estate Collateral Other Collateral Total

September 30, 2024

($ in thousands) Real Estate Collateral Other Collateral Total

Construction $ 207 $ — $ 207

5 unchanged sentences

December 31, 2023

(Dollars in thousands) Real Estate Collateral Other Collateral Total

($ in thousands) Real Estate Collateral Other Collateral Total

Construction $ 662 $ — $ 662

4 unchanged sentences

Total $ 14,843 $ 2,010 $ 16,853

The Company did not identify any significant changes in the extent to which collateral secures its collateral dependent loans, whether in the form of general deterioration or from other factors during the period ended June 30, 2024.

Loan Modifications to Borrowers Experiencing Financial Difficulty

Modifications to borrowers experiencing financial difficulty may include interest rate reduction, principal or interest forgiveness, forbearance, term extensions, and other actions intended to minimize economic loss and to avoid foreclosure or repossession of collateral.

The following illustrates the most common loan modifications by loan classes offered by the Company that are required to be disclosed pursuant to the requirements of ASU 2022-02:

Loan Classes Modification Types

Commercial Real Estate Term extension greater than three months .

Commercial Term extension greater than three months .

The following table presents the amortized cost basis of loan modifications made to borrowers experiencing financial difficulty during three months ended June 30, 2024, and there were no modifications to loans for borrowers experiencing financial difficulty during the three months ended December 31, 2023.

(dollars in thousands) Term Extension Interest Rate Reduction Payment Delay and Term Extension Term Extension and Interest Rate Reduction Payment Delay Total % of Total Portfolio Segment

June 30, 2024

Construction $ — $ — $ — $ — $ — $ — — %

Residential real estate — — — — — — — %

Residential rentals — — — — — — — %

Commercial real estate 108 — — — — 108 0.01 %

Commercial 222 — — — — 222 0.10 %

Consumer — — — — — — — %

Credit Cards — — — — — — — %

Total $ 330 $ — $ — $ — $ — $ 330 0.01 %

(dollars in thousands) Term Extension Interest Rate Reduction Payment Delay and Term Extension Term Extension and Interest Rate Reduction Payment Delay Total % of Total Portfolio Segment

December 31, 2023

Construction $ — $ — $ — $ — $ — $ — — %

Residential real estate — — — — — — — %

Residential rentals — — — — — — — %

Commercial real estate 125 — — — — 125 0.01 %

Commercial 242 — — — — 242 0.11 %

Consumer — — — — — — — %

Credit Cards — — — — — — — %

Total $ 367 $ — $ — $ — $ — $ 367 0.01 %

The following table presents the financial effect of loan modifications made to borrowers experiencing financial difficulty during the three months ended June 30, 2024, and there were no modifications to loans for borrowers experiencing financial difficulty during the three months ended December 31, 2023.

(dollars in thousands) Weighted-Average Months of Term Extension

June 30, 2024

Commercial real estate 12 months

Commercial 12 months

(dollars in thousands) Weighted-Average Months of Term Extension

December 31, 2023

Commercial real estate 1.0 year

Commercial 1.0 year

During the three months ended June 30, 2024 and December 31, 2023, there were no defaults on loan modifications made to borrowers experiencing financial difficulty.

The following table present the aging analysis of loan modifications made to borrowers experiencing financial difficulty as of June 30, 2024, and there were no loan modifications made to borrowers experiencing financial difficulty at December 31, 2023.

(Dollars in thousands) 30‑59 days past due 60‑89 days past due 90 days past due and still accruing 90 days past due and not accruing Total past due Current Accrual Current Non-Accrual Total Recorded Investment

June 30, 2024

Construction $ — $ — $ — $ — $ — $ — $ — $ —

Residential real estate — — — — — — — —

Commercial real estate — — — — — — 108 108

Commercial — — — — — — 222 222

Consumer — — — — — — — —

Credit Cards — — — — — — — —

Total $ — $ — $ — $ — $ — $ — $ 330 $ 330

December 31, 2023

Construction $ — $ — $ — $ — $ — $ — $ — $ —

Residential real estate — — — — — — — —

Residential rentals — — — — — — — —

Commercial real estate — — — — — — 125 125

Commercial — — — — — 153 89 242

Consumer — — — — — — — —

Credit Cards — — — — — — — —

Total $ — $ — $ — $ — $ — $ 153 $ 214 $ 367

During the three and nine months ended September 30, 2024 and 2023, no loan modifications were made to borrowers experiencing financial difficulty.

During the three and nine months ended September 30, 2024 and 2023, there were no defaults on loan modifications made to borrowers experiencing financial difficulty.

As of September 30, 2024, all loan modification balances with borrowers experiencing financial difficulty that were modified during the preceding 12 months were classified as current non-accrual, of which $ 98 thousand were for commercial real estate loans and $ 216 thousand were for commercial loans.

Foreclosure Proceedings

There were $ 0.2 million of consumer mortgage loans collateralized by residential real estate property that were in the process of foreclosure as of June 30, 2024 and $ 0.2 million as of December 31, 2023, respectively.

There were no residential real estate properties included in the balance of other real estate owned (“OREO”) at June 30, 2024 and December 31, 2023.

There were $ 127 thousand of consumer mortgage loans collateralized by residential real estate property and $ 552 thousand of Commercial Real Estate loans collateralized by Owner Occupied nonfarm nonresidential properties that were in the process of foreclosure as of September 30, 2024 and $ 175 thousand as of December 31, 2023, respectively.

There were no residential real estate properties included in the balance of other real estate owned (“OREO”) at September 30, 2024 and December 31, 2023.

Note 5 – Goodwill and Other Intangibles

The following table provides information on the significant components of goodwill and other acquired intangible assets at June 30, 2024 and December 31, 2023.

June 30, 2024

(Dollars in thousands) Gross Carrying Amount Additions Accumulated Impairment Charges Accumulated Amortization Net Carrying Amount Weighted Average Remaining Life (in years)

Goodwill $ 65,476 $ — $ ( 1,543 ) $ ( 667 ) $ 63,266 0.0 years

Other intangible assets

Core deposit intangible $ 59,151 $ — $ — $ ( 16,206 ) $ 42,945 3.6 years

Total other intangible assets $ 59,151 $ — $ — $ ( 16,206 ) $ 42,945

The following table provides information on the significant components of goodwill and other acquired intangible assets at September 30, 2024 and December 31, 2023.

September 30, 2024

($ in thousands) Goodwill Core Deposit Intangible

Gross Carrying Amount $ 65,476 $ 59,151

Additions — —

Accumulated Impairment Charges ( 1,543 ) —

Accumulated Amortization ( 667 ) ( 18,542 )

Net Carrying Amount $ 63,266 $ 40,609

Weighted Average Remaining Life (in years) 0.00 years 3.60 years

December 31, 2023

(Dollars in thousands) Gross Carrying Amount Additions Accumulated Impairment Charges Accumulated Amortization Net Carrying Amount Weighted Average Remaining Life

Goodwill $ 65,476 $ — $ ( 1,543 ) $ ( 667 ) $ 63,266 0.0 years

Other intangible assets

Core deposit intangible $ 10,503 48,648 $ — $ ( 11,061 ) $ 48,090 3.7 years

Total other intangible assets $ 10,503 $ 48,648 $ — $ ( 11,061 ) $ 48,090

The aggregate amortization expense was $ 5.1 million for the six months ended June 30, 2024 and $ 0.9 million for the six months ended June 30, 2023.

At June 30, 2024, estimated future remaining amortization for amortizing core deposit intangibles within the years ending December 31, is as follows:

(Dollars in thousands) Amortization Expense

($ in thousands) Goodwill Core Deposit Intangible

Gross Carrying Amount $ 65,476 $ 10,503

Additions — 48,648

Accumulated Impairment Charges ( 1,543 ) —

Accumulated Amortization ( 667 ) ( 11,061 )

Net Carrying Amount $ 63,266 $ 48,090

Weighted Average Remaining Life (in years) 0.00 years 3.70 years

The aggregate amortization expense was $ 2.3 million for the three months ended September 30, 2024 and $ 2.6 million for the three months ended September 30, 2023.

The aggregate amortization expense was $ 7.5 million for the nine months ended September 30, 2024 and $ 3.5 million for the nine months ended September 30, 2023.

At September 30, 2024, estimated future remaining amortization for amortizing core deposit intangibles within the years ending December 31, is as follows:

($ in thousands) Amortization Expense

Thereafter 11,056

8 unchanged sentences

The following tables present information about the Company’s leases.

(Dollars in thousands) June 30, 2024 December 31, 2023

($ in thousands) September 30, 2024 December 31, 2023

Lease liabilities $ 11,816 $ 12,857

4 unchanged sentences

Remaining lease term - max 16.93 years 17.68 years

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

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

Lease cost ($ in thousands)

2024 2023 2024 2023

Operating lease cost $ 473 $ 485 $ 1,445 $ 1,153

2 unchanged sentences

A maturity analysis of operating lease liabilities and reconciliation of the undiscounted cash flows to the total of operating lease liabilities is as follows:

Lease payments due (in thousands) As of June 30, 2024

Six months ending December 31, 2024 $ 899

Lease payments due ($ in thousands)

As of September 30, 2024

Three months ending December 31, 2024 $ 431

Thereafter 7,233

2 unchanged sentences

Lease liabilities $ 11,816

Total gross rental income was $ 0.3 million and $ 0.3 million for the three months ended June 30, 2024 and 2023, respectively.

Total gross rental income was $ 0.5 million and $ 0.7 million for the six months ended June 30, 2024 and 2023, respectively.

The following table presents our minimum future annual rental income on such leases as of June 30, 2024.

(In thousands) As of June 30, 2024

Six months ending December 31, 2024 $ 446

Total gross rental income was $ 266 thousand and $ 253 thousand for the three months ended September 30, 2024 and 2023, respectively.

Total gross rental income was $ 799 thousand and $ 937 thousand for the nine months ended September 30, 2024 and 2023, respectively.

The following table presents our minimum future annual rental income on such leases as of September 30, 2024.

($ in thousands) As of September 30, 2024

Three months ending December 31, 2024 $ 224

Thereafter 2,478

2 unchanged sentences

Deposits consist of the following categories as of the dates indicated:

(dollars in thousands) June 30, 2024 December 31, 2023

($ in thousands) September 30, 2024 December 31, 2023

Balance % Balance %

7 unchanged sentences

Total Deposits $ 5,225,723 100.00 % $ 5,386,120 100.00 %

At June 30, 2024, the scheduled contractual maturities of certificates of deposit are as follows:

(dollars in thousands) June 30, 2024

At September 30, 2024, the scheduled contractual maturities of certificates of deposit are as follows:

($ in thousands) September 30, 2024

Within one year $ 1,083,147

1 unchanged sentence

Year 3 15,407

The aggregate amount of certificates of deposit that met or exceeded the FDIC insurance limit of $250,000 at June 30, 2024 and December 31, 2023 was $ 372.7 million and $ 354.6 million, respectively.

The aggregate amount of certificates of deposit that met or exceeded the FDIC insurance limit of $250,000 at September 30, 2024 and December 31, 2023 was $ 417.8 million and $ 354.6 million, respectively.

Note 8 - Borrowings

Long-term debt consisted of the following:

(dollars in thousands) June 30, 2024 December 31, 2023 Issue Date Stated Maturity Date Earliest Call Date Interest Rate

($ in thousands) September 30, 2024 December 31, 2023 Issue Date Stated Maturity Date Earliest Call Date Interest Rate

FHLB Advances $ 50,000 — 2024 2025 4.786 %

9 unchanged sentences

Total long-term debt $ 123,456 $ 72,669

At June 30, 2024, subordinated notes consisted of $ 25.0 million of long-term debt issued by the Company in August 2020, and $ 19.5 million of long-term debt assumed as a result of the merger with TCFC.

At September 30, 2024, subordinated notes consisted of $ 25.0 million of long-term debt issued by the Company in August 2020, and $ 19.5 million of long-term debt assumed as a result of the merger with TCFC.

The recorded balance of subordinated debt issued in 2020 and the assumed subordinated debt from TCFC, net of unamortized issuance costs and fair value discounts, respectively, were $ 24.9 million and $ 18.8 million, respectively.

1 unchanged sentence

Trust preferred securities consisted of $ 20.6 million issued to Severn Capital Trust I, $ 7.2 million issued by Tri-County Capital Trust I and $ 5.2 million issued by Tri-County Capital Trust II.

The recorded balance of the debt acquired from Severn at June 30, 2024 was $ 18.7 million, net of the unamortized fair value adjustment of $ 1.9 million.

At June 30, 2024, the junior subordinated debt securities of Tri-County Capital Trust I and Tri-County Capital Trust II had a recorded balance of $ 6.4 million and $ 4.2 million, which are presented as net of the unamortized fair value adjustment of $ 0.6 million and $ 0.8 million, respectively.

The recorded balance of the debt acquired from Severn at September 30, 2024 was $ 18.7 million, net of the unamortized fair value adjustment of $ 1.9 million.

At September 30, 2024, the junior subordinated debt securities of Tri-County Capital Trust I and Tri-County Capital Trust II had a recorded balance of $ 6.6 million and $ 4.4 million, which are presented as net of the unamortized fair value adjustment of $ 583 thousand and $ 748 thousand, respectively.

The Company may periodically borrow from a correspondent federal funds line of credit arrangement, under a secured reverse repurchase agreement, or from the Federal Home Loan Bank (“FHLB”) to meet short-term liquidity needs.

There were $ 50.0 million outstanding long-term borrowings from the FHLB at June 30, 2024 and zero at December 31, 2023.

The Company also had short-term borrowings from FHLB of $ 31.0 million at June 30, 2024 and zero at December 31, 2023, respectively.

There were $ 50.0 million outstanding long-term borrowings from the FHLB at September 30, 2024 and zero at December 31, 2023.

The Company did not have any short-term borrowings from the FHLB at September 30, 2024 and December 31, 2023.

Further information on these obligations is provided in the Company’s 2023 Annual Report.

7 unchanged sentences

Stock-based compensation expense based on the grant date fair value is recognized ratably over the requisite service period for all awards and reflects forfeitures as they occur.

The 2016 Equity Plan originally reserved 750,000 shares of common stock for grant, and 190,166 shares remained available for grant at June 30, 2024.

The 2016 Equity Plan originally reserved 750,000 shares of common stock for grant, and 190,166 shares remained available for grant at September 30, 2024.

The Company assumed 3,977 shares of restricted stock and 90,783 of restricted stock units at a fair market value of $ 11.56 per share as a result of the merger with TCFC.

1 unchanged sentence

Restricted stock units and performance stock units vesting period is between one to three years .

The recipients of the restricted stock units and

performance stock units do not have any stockholder rights, including voting, dividend, or liquidation rights, with respect to the shares underlying awarded restricted stock units until the recipient becomes the record holder of those shares.

At June 30, 2024, the Bank could pay dividends to the Company to the extent of its earnings so long as it maintained required capital ratios.

The following table summarizes restricted stock award and restricted stock unit activity for the Company under the 2016 Equity Plan for the six months ended June 30, 2024.

The recipients of the restricted stock units and performance stock units do not have any stockholder rights, including voting, dividend, or liquidation rights, with respect to the shares underlying awarded restricted stock units until the recipient becomes the record holder of those shares.

The following table summarizes restricted stock award and restricted stock unit activity for the Company under the 2016 Equity Plan for the nine months ended September 30, 2024.

Restricted Stock Restricted Stock Units Performance Stock Units

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Nonvested at end of period 52,277 $ 11.52 135,525 $ 11.46 43,651 $ 11.32

The fair value of restricted stock awards that vested during the first six months of 2024 and 2023 was $ 0.3 million and $ 0.5 million, respectively.

The fair value of restricted stock units vested during the first six months of 2024 and 2023 was $ 0.4 million and zero .

The fair value of restricted stock awards that vested during the three months ended September 30, 2024 and 2023 was $ 241 thousand and $ 12 thousand, respectively.

The fair value of restricted stock units vested during the three months ended September 30, 2024 and 2023 was $ 505 thousand and $ 122 thousand respectively.

The fair value of restricted stock awards vested during the nine months ended September 30, 2024 and 2023 was $ 577 thousand and $ 535 thousand, respectively.

The fair value of restricted stock units that vested during the nine months ended September 30, 2024 and 2023 was $ 907 thousand and $ 122 thousand, respectively.

There were no performance stock units that vested during the three and nine months ended September 30, 2024 and 2023.

Note 10 – Derivatives

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These assets and liabilities are included in the Consolidated Balance Sheets in other assets and accrued expenses and other liabilities, respectively.

The following table provides information pertaining to the carrying amounts of our derivative financial instruments at June 30, 2024 and December 31, 2023.

June 30, 2024 December 31, 2023

(Dollars in thousands) Notional Amount Estimated Fair Value Notional Amount Estimated Fair Value

The following table provides information pertaining to the carrying amounts of our derivative financial instruments at September 30, 2024 and December 31, 2023.

September 30, 2024 December 31, 2023

($ in thousands) Notional Amount Estimated Fair Value Notional Amount Estimated Fair Value

Asset - IRLCs $ 14,199 $ 219 $ 6,785 $ 110

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The Company records unrealized holding gains (losses), net of tax, on investment securities AFS as accumulated other comprehensive income (loss), a separate component of stockholders’ equity.

The following table provides information on the changes in the component of accumulated other comprehensive income (loss) for the three and six months ended June 30, 2024 and 2023.

Three Months Ended June 30, 2024 Three Months Ended June 30, 2023 Six Months Ended June 30, 2024 Six Months Ended June 30, 2023

(Dollars in thousands) Net Unrealized Losses Net Unrealized Losses Net Unrealized Losses Net Unrealized Gains And (Losses)

The following table provides information on the changes in the component of accumulated other comprehensive income (loss) for the three and nine months ended September 30, 2024 and 2023.

Three Months Ended September 30, 2024 Three Months Ended September 30, 2023 Nine Months Ended September 30, 2024 Nine Months Ended September 30, 2023

($ in thousands) Net Unrealized Gains (Losses) Net Unrealized Losses Net Unrealized Gains (Losses) Net Unrealized Losses

Beginning of period $ ( 8,260 ) $ ( 8,561 ) $ ( 7,494 ) $ ( 9,021 )

Other comprehensive (loss) income, net of tax ( 202 ) ( 400 ) ( 766 ) 460

Other comprehensive income (loss), net of tax 2,734 ( 1,548 ) 1,968 ( 1,088 )

End of period $ ( 5,526 ) $ ( 10,109 ) $ ( 5,526 ) $ ( 10,109 )

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Quantitative measures established by regulation to ensure capital adequacy require the Company and Bank to maintain amounts and ratios (set forth in the table below) of Common Equity Tier 1, Tier 1 and total capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 capital (as defined) to average assets (leverage ratio).

As of June 30, 2024 and December 31, 2023, management believes that the Company and the Bank met all capital adequacy requirements to which they were subject.

As of September 30, 2024 and December 31, 2023, management believes that the Company and the Bank met all capital adequacy requirements to which they were subject.

As of December 31, 2023, the most recent notification from our primary regulator categorized the Bank, as well capitalized under the regulatory framework for prompt corrective action.

At June 30, 2024, there were no conditions or events since that notification that management believes would change the Bank’s classification.

At September 30, 2024, there were no conditions or events since that notification that management believes would change the Bank’s classification.

To be categorized as well capitalized, the Bank must maintain minimum common equity Tier 1, Tier 1 risk-based and total risk-based capital ratios, and Tier 1 leverage ratios, which are described below.

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To be categorized as well capitalized, a bank must maintain minimum ratios of 6.50 %, 8.00 %, 10.00 % and 5.00 % for its common equity Tier 1, Tier 1 risk-based capital, total risk-based capital and leverage ratios, respectively.

The table presents the actual and required capital ratios for the Company and Bank as of June 30, 2024 and December 31, 2023.

(dollars in thousands) Actual Regulatory Min.

Ratio + CCB (1)

Required To Be Considered Well Capitalized

June 30, 2024 Amount Ratio Amount Ratio Amount Ratio

The table presents the actual and required capital ratios for the Company and the Bank as of September 30, 2024 and December 31, 2023.

The Company The Bank Regulatory min ratio + CCB (1)

To Be Well-Capitalized Under Prompt Corrective Action Regulation (5)

($ in thousands) Amount Ratio Amount Ratio

September 30, 2024

Common Tier 1 Capital to RWA $ 446,402 9.27 % 509,511 10.60 % 7.00 % 6.50 %

The Company $ 435,238 9.06 % $ 336,226 7.00 % $ 312,210 6.50 %

The Bank 501,003 10.45 % 335,756 7.00 % 311,773 6.50 %

Tier 1 Capital to RWA 476,170 9.89 % 509,511 10.60 % 8.50 % 8.00 %

The Company 464,554 9.67 % 408,275 8.50 % 384,258 8.00 %

The Bank 501,003 10.45 % 407,704 8.50 % 383,721 8.00 %

Total Capital to RWA 579,664 12.04 % 569,317 11.84 % 10.50 % 10.00 %

The Company 567,680 11.82 % 504,339 10.50 % 480,323 10.00 %

The Bank 560,625 11.69 % 503,634 10.50 % 479,651 10.00 %

Tier 1 Capital to AA (Leverage) (2)

The Company 464,554 8.07 % 230,250 4.00 % 287,813 5.00 %

The Bank 501,003 8.71 % 230,024 4.00 % 287,530 5.00 %

476,170 8.31 % 509,511 8.90 % 4.00 % 5.00 %

December 31, 2023

Common Tier 1 Capital to RWA $ 408,317 8.69 % 470,200 10.02 % 7.00 % 6.50 %

The Company $ 408,317 8.69 % $ 328,825 7.00 % $ 305,338 6.50 %

The Bank 470,200 10.02 % 328,511 7.00 % 305,046 6.50 %

Tier 1 Capital to RWA 437,847 9.32 % 470,200 10.02 % 8.50 % 8.00 %

The Company 437,475 9.31 % 399,288 8.50 % 375,800 8.00 %

The Bank 470,200 10.02 % 398,906 8.50 % 375,441 8.00 %

Total Capital to RWA 539,572 11.49 % 528,786 11.27 % 10.50 % 10.00 %

The Company 539,200 11.48 % 493,238 10.50 % 469,750 10.00 %

The Bank 528,786 11.27 % 492,766 10.50 % 469,301 10.00 %

Tier 1 Capital to AA (Leverage) (2)

The Company 437,475 7.74 % 225,965 4.00 % 282,456 5.00 %

The Bank 470,200 8.33 % 225,797 4.00 % 282,247 5.00 %

The following tables present the capital amounts as of June 30, 2024 and December 31, 2023.

437,847 7.75 % 470,200 8.33 % 4.00 % 5.00 %

Regulatory Capital and Ratios The Company The Bank

(dollars in thousands) June 30, 2024 December 31, 2023 June 30, 2024 December 31, 2023

($ in thousands) September 30, 2024 December 31, 2023 September 30, 2024 December 31, 2023

Common equity $ 533,271 $ 511,135 $ 595,954 $ 570,100

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(4) Goodwill is net of deferred tax liability.

(5) Applies to the Bank only.

Bank and holding company regulations impose certain restrictions on dividend payments by the Bank, as well as restricting extensions of credit and transfers of assets between the Bank and the Company.

At June 30, 2024, the Bank could pay dividends to the Company to the extent of its earnings so long as it maintained required capital ratios.

At September 30, 2024, the Bank could pay dividends to the Company to the extent of its current period earnings plus the earnings of the preceding two years, so long as it maintained required capital ratios.

Note 13 – Fair Value Measurements

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Fair value is adjusted for the estimated probability of the loan closing with the borrower (Level 3).

(Dollars in thousands) Fair Value Valuation Technique Unobservable Input Range

June 30, 2024

($ in thousands) Fair Value Valuation Technique Unobservable Input Range

September 30, 2024

$ 5,309 Market Approach Weighted average prepayment speed (PSA) (2)

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Average pull through rate 97 %

(Dollars in thousands) Fair Value Valuation Technique Unobservable Input Range

($ in thousands) Fair Value Valuation Technique Unobservable Input Range

December 31, 2023

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(2) PSA = Public Securities Association Standard Prepayment Model.

The following table presents activity in MSRs for the three and six months ended June 30, 2024.

(Dollars in thousands) Three Months Ended June 30, 2024 Six Months Ended June 30, 2024

The following table presents activity in MSRs for the three and nine months ended September 30, 2024.

($ in thousands) Three Months Ended September 30, 2024 Nine Months Ended September 30, 2024

Beginning balance $ 5,995 $ 5,926

2 unchanged sentences

Ending balance $ 5,309 $ 5,309

The following table presents activity in the IRLCs - net asset for the three and six months ended June 30, 2024.

(Dollars in thousands) Three Months Ended June 30, 2024 Six Months Ended June 30, 2024

The following table presents activity in the IRLCs - net asset for the three and nine months ended September 30, 2024.

($ in thousands) Three Months Ended September 30, 2024 Nine Months Ended September 30, 2024

Beginning balance $ 208 $ 110

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Additionally market assumptions such as spec pool payups may result in a significantly higher fair value measurement at time of loan allocation to specific trades.

The following tables present the recorded amount of assets measured at fair value on a recurring basis at June 30, 2024 and December 31, 2023.

No assets were transferred from one hierarchy level to another during the first six months of 2024 or 2023.

(Dollars in thousands) Fair Value Quoted Prices

The following tables present the recorded amount of assets measured at fair value on a recurring basis at September 30, 2024 and December 31, 2023.

No assets were transferred from one hierarchy level to another during the first nine months of 2024 or 2023.

($ in thousands) Fair Value Quoted Prices

(Level 1) Significant Other Observable Inputs

(Level 2) Significant Unobservable Inputs

June 30, 2024

September 30, 2024

Securities available for sale:

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Total liabilities at fair value $ 37 $ — $ 37 $ —

(Dollars in thousands) Fair Value Quoted Prices

($ in thousands) Fair Value Quoted Prices

(Level 1) Significant Other Observable Inputs

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Valuation techniques are consistent with those techniques applied in prior periods.

Repossessed Properties

Repossessed Assets

The Company records repossessed assets at fair value on a nonrecurring basis.

All repossessed properties are recorded at lower of the estimated fair value of the properties, less expected selling costs, or the carrying amount of the defaulted loans.

From time to time, nonrecurring fair value adjustments are recorded to reflect partial write-downs based on current appraised value of property.

The Company considers any valuation inputs related to repossessed properties to be Level 3 inputs.

The following tables set forth the Company’s financial and nonfinancial assets subject to fair value adjustments (impairment) on a nonrecurring basis at June 30, 2024 and December 31, 2023.

All repossessed assets are recorded at lower of the estimated fair value of the properties, less expected selling costs, or the carrying amount of the defaulted loans.

From time to time, nonrecurring fair value adjustments are recorded to reflect partial write-downs based on current appraised value of an asset.

The Company considers any valuation inputs related to repossessed assets to be Level 3 inputs.

The following tables set forth the Company’s financial and nonfinancial assets subject to fair value adjustments (impairment) on a nonrecurring basis at September 30, 2024 and December 31, 2023.

Assets are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

Quantitative Information about Level 3 Fair Value Measurements

(Dollars in thousands) Fair Value Valuation Technique Unobservable Input Range Weighted Average (1)

June 30, 2024

($ in thousands) Fair Value Valuation Technique Unobservable Input Range Weighted Average (1)

September 30, 2024

Nonrecurring measurements:

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Appraisal adjustment (2)

Repossessed properties $ 1,560 Appraisal of collateral (1)

Repossessed assets $ 306 Appraisal of collateral (1)

Appraisal adjustment (2)

Quantitative Information about Level 3 Fair Value Measurements

(Dollars in thousands) Fair Value Valuation Technique Unobservable Input Range Weighted Average

($ in thousands) Fair Value Valuation Technique Unobservable Input Range Weighted Average

December 31, 2023

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(1) Unobservable inputs were weighted by the relative fair value of the instruments.

No range is presented only when one instrument was available

(2) Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses.

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The carrying amounts and estimated fair values of the Company’s financial instruments are presented in the following table.

Fair values for June 30, 2024 and December 31, 2023 were estimated using an exit price notion.

June 30, 2024 Carrying Amount Fair Value Fair Value Measurements

Description of Asset (dollars in thousands)

Fair values for September 30, 2024 and December 31, 2023 were estimated using an exit price notion.

September 30, 2024 Carrying Amount Fair Value Fair Value Measurements

Description of Asset ($ in thousands)

Level 1 Level 2 Level 3

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TBA Securities 37 37 — 37 —

IRLCs — — — — —

December 31, 2023 Carrying Amount Fair Value Fair Value Measurements

Description of Asset (dollars in thousands)

Description of Asset ($ in thousands)

Level 1 Level 2 Level 3

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Because many of the letters of credit and commitments are expected to expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements.

The following table provides information on commitments outstanding at June 30, 2024 and December 31, 2023.

(Dollars in thousands) June 30, 2024 December 31, 2023

The following table provides information on commitments outstanding at September 30, 2024 and December 31, 2023.

($ in thousands) September 30, 2024 December 31, 2023

Commitments to extend credit $ 695,887 $ 613,266

1 unchanged sentence

Total $ 723,070 $ 641,785

The Company provides banking services to customers who do business in the cannabis industry.

While the Company is providing banking services to customers that are engaged in the growing, processing, and sales of cannabis in a manner that complies with applicable state law, such customers engaged in those activities currently violate Federal laws.

The Company may be deemed to be aiding and abetting illegal activities through the services that it provides to these customers.

While we are not aware of any instance of a federally-insured financial institution being subject to such aiding and abetting liability, the strict enforcement of Federal laws regarding cannabis would likely result in the Company’s inability to continue to provide banking services to these customers and the Company could have legal action taken against it by the Federal government, including imprisonment and fines.

There is an uncertainty of the potential impact to the Company’s Consolidated Financial Statements if the Federal government takes actions against the Company.

As of June 30, 2024, the Company had not accrued an amount for the potential impact of any such actions.

Following is a summary of the level of business activities with our cannabis industry customers:

• Deposit and loan balances at June 30, 2024 were approximately $ 202.3 million, or 3.9 % of total deposits, and $ 73.6 million, or 1.6 % of total gross loans, respectively.

• Interest and noninterest income for the six months ended June 30, 2024, were approximately $ 2.0 million and $ 0.6 million, respectively.

In the normal course of business, the Company may become involved in litigation arising from banking, financial, and other activities.

4 unchanged sentences

The following table provides information relating to the calculation of earnings per common share.

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

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

(In thousands, except per share data) 2024 2023 2024 2023

Net Income $ 11,234 $ 4,018 $ 19,418 $ 10,475

Net income (loss) $ 11,189 $ ( 9,737 ) $ 30,607 $ 738

Average number of common shares outstanding 33,318 33,129 33,247 24,354

Dilutive effect of common stock equivalents 21 — 7 —

Average number of shares used to calculate diluted EPS 33,234 19,903 33,212 19,895

Average number of common shares used to calculate diluted EPS 33,339 33,129 33,254 24,354

Anti-dilutive shares — 219 — 219

Earnings per common share

Earnings (loss) per common share

Basic $ 0.34 $ ( 0.29 ) $ 0.92 $ 0.03

Diluted $ 0.34 $ ( 0.29 ) $ 0.92 $ 0.03

As of three and six months ended June 30, 2024 there were 9,000 and 5,000 , respectively, of unvested restricted stock and performance stock unit awards which were excluded from the calculation as their effect would be anti-dilutive.

There were no antidilutive awards that were excluded from the calculation for the three and six months ended June 30, 2023.

There were 0 and 219 thousand anti-dilutive unvested restricted stock and performance stock unit awards excluded from the calculation of diluted earnings (loss) per share for the three months ended September 30, 2024 and 2023, respectively.

There were 0 and 219 thousand anti-dilutive unvested restricted stock and performance stock unit awards excluded from the calculation of diluted earnings per share for the nine months ended September 30, 2024 and 2023, respectively.

Note 17 – Revenue Recognition

21 unchanged sentences

All contract issuance costs are expensed as incurred.

We had no contract assets or liabilities at June 30, 2024.

We had no contract assets or liabilities at September 30, 2024.

Other Noninterest Income

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The Company determined that rentals and renewals of safe deposit boxes will be recognized on a monthly basis consistent with the duration of the performance obligation.

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, 2024 and 2023.

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

(Dollars in thousands) 2024 2023 2024 2023

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, 2024 and 2023.

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

($ in thousands) 2024 2023 2024 2023

Noninterest Income

9 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