What changed in this filing

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Item 1. Financial Statements

2024-11-07 compared with 2024-08-06 · 159 added, 163 removed, 1354 unchanged (19% of the section changed)

3 unchanged sentences

(In thousands, except share data;

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

Cash and due from banks $ 110,141 $ 81,626

3 unchanged sentences

Marketable equity securities 2,690 2,634

Trading securities 2,789 —

Available for sale debt securities, at fair value (amortized cost of $ 2,159,708 and $ 2,384,325 )

29 unchanged sentences

Preferred stock, no par value:

1,000,000 shares authorized, zero issued and outstanding at June 30, 2024 and December 31, 2023

1,000,000 shares authorized, zero issued and outstanding at September 30, 2024 and December 31, 2023

Common stock, no par value:

50,000,000 shares authorized;

32,989,327 and 33,268,102 issued and outstanding at June 30, 2024 and December 31, 2023, respectively

33,000,508 and 33,268,102 issued and outstanding at September 30, 2024 and December 31, 2023, respectively

693,176 697,349

8 unchanged sentences

Three months ended

June 30, Six months ended

September 30, Nine months ended

September 30,

2024 2023 2024 2023

17 unchanged sentences

Gain on sale of loans 549 382 1,198 883

Loss on sale or exchange of investment securities ( 45 ) — ( 45 ) ( 164 )

(Loss) gain on sale or exchange of investment securities 2 — ( 43 ) ( 164 )

Asset management and commission income 1,502 1,141 3,989 3,233

13 unchanged sentences

Dividends per share $ 0.33 $ 0.30 $ 0.99 $ 0.90

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)

(In thousands;

Three months ended

June 30, Six months ended

September 30, Nine months ended

September 30,

2024 2023 2024 2023

5 unchanged sentences

Other comprehensive income (loss) 44,538 ( 44,040 ) 36,192 ( 31,511 )

Comprehensive income $ 31,886 $ 12,977 $ 48,437 $ 73,254

Comprehensive income (loss) $ 73,589 $ ( 13,450 ) $ 122,026 $ 59,804

See accompanying notes to unaudited condensed consolidated financial statements.

5 unchanged sentences

Comprehensive Income (Loss) Total

Balance at April 1, 2023 33,195,250 $ 695,168 $ 564,538 $ ( 169,461 ) $ 1,090,245

Balance at July 1, 2023 33,259,260 $ 695,305 $ 578,852 $ ( 181,376 ) $ 1,092,781

Net income 30,590 30,590

Other comprehensive income ( 11,915 ) ( 11,915 )

Stock options exercised 4,000 78 78

Other comprehensive income (loss) ( 44,040 ) ( 44,040 )

RSU vesting 728 728

1 unchanged sentence

RSUs released 5,061 —

PSUs released 55,928 —

Repurchase of common stock ( 997 ) ( 19 ) ( 15 ) ( 34 )

1 unchanged sentence

( 9,979 ) ( 9,979 )

Three months ended June 30, 2023 33,259,260 $ 695,305 $ 578,852 $ ( 181,376 ) $ 1,092,781

Balance at April 1, 2024 33,168,770 $ 696,464 $ 630,954 $ ( 164,367 ) $ 1,163,051

Three months ended September 30, 2023 33,263,324 $ 696,369 $ 599,448 $ ( 225,416 ) $ 1,070,401

Balance at July 1, 2024 32,989,327 $ 691,878 $ 644,687 $ ( 161,515 ) $ 1,175,050

Net income 29,051 29,051

Other comprehensive loss 2,852 2,852

Other comprehensive income (loss) 44,538 44,538

Stock options exercised 7,500 174 174

6 unchanged sentences

( 10,888 ) ( 10,888 )

Three months ended June 30, 2024 32,989,327 $ 691,878 $ 644,687 $ ( 161,515 ) $ 1,175,050

Three months ended September 30, 2024 33,000,508 $ 693,176 $ 662,816 $ ( 116,977 ) $ 1,239,015

Balance at January 1, 2023 33,331,513 $ 697,448 $ 542,873 $ ( 193,905 ) $ 1,046,416

Net income 91,315 91,315

Other comprehensive income 12,529 12,529

Other comprehensive income (loss) ( 31,511 ) ( 31,511 )

Stock options exercised 8,000 156 156

6 unchanged sentences

( 29,921 ) ( 29,921 )

Six months ended June 30, 2023 33,259,260 $ 695,305 $ 578,852 $ ( 181,376 ) $ 1,092,781

Nine months ended September 30, 2023 33,263,324 $ 696,369 $ 599,448 $ ( 225,416 ) $ 1,070,401

Balance at January 1, 2024 33,268,102 $ 697,349 $ 615,502 $ ( 153,169 ) $ 1,159,682

Net income 85,834 85,834

Other comprehensive loss ( 8,346 ) ( 8,346 )

Other comprehensive income (loss) 36,192 36,192

Stock options exercised 7,500 174 174

6 unchanged sentences

( 32,766 ) ( 32,766 )

Six months ended June 30, 2024 32,989,327 $ 691,878 $ 644,687 $ ( 161,515 ) $ 1,175,050

Nine months ended September 30, 2024 33,000,508 $ 693,176 $ 662,816 $ ( 116,977 ) $ 1,239,015

See accompanying notes to unaudited condensed consolidated financial statements.

2 unchanged sentences

(In thousands;

For the six months ended June 30,

For the nine months ended September 30,

Operating activities:

12 unchanged sentences

Gain on transfer of loans to foreclosed assets ( 38 ) ( 114 )

Loss (gain) on sale of foreclosed assets 26 ( 38 )

Change in the market value of foreclosed assets 262 —

Operating lease expense payments ( 4,658 ) ( 4,840 )

1 unchanged sentence

Increase in cash value of life insurance ( 2,420 ) ( 2,274 )

Loss on marketable and trading equity securities 149 —

Loss (gain) on marketable and trading equity securities ( 121 ) 81

Equity compensation vesting expense 3,550 3,054

10 unchanged sentences

Loan origination and principal collections, net 107,690 ( 258,183 )

Loans purchased — ( 6,423 )

Proceeds from sale of other real estate owned 149 165

Purchases of premises and equipment ( 3,250 ) ( 3,885 )

55 unchanged sentences

The Company measures expected credit losses on HTM debt securities on a collective basis by major security type, then further disaggregated by sector and bond rating.

Accrued interest receivable on HTM debt securities was considered insignificant at June 30, 2024 and December 31, 2023 and is therefore excluded from the estimate of credit losses.

Accrued interest receivable on HTM debt securities was considered insignificant at September 30, 2024 and December 31, 2023 and is therefore excluded from the estimate of credit losses.

The estimate of expected credit losses considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts based on current and expected changes in credit ratings and default rates.

11 unchanged sentences

Losses are charged against the ACL when management believes the uncollectability of an available for sale debt security is confirmed or when either of the criteria regarding intent or requirement to sell is met.

No security credit losses were recognized during the six month periods ended June 30, 2024 and 2023, respectively.

No security credit losses were recognized during the nine month periods ended September 30, 2024 and 2023, respectively.

Loans that management has the intent and ability to hold until maturity or payoff are reported at principal amount outstanding, net of deferred loan fees and costs.

91 unchanged sentences

ASU 2023-07 - Segment Reporting (Topic 280):

Improvement to Reportable Segments • Requires disclosure of the position and title of the CODM and significant segment expenses that the CODM is regularly provided.

Improvement to Reportable Segments • Requires disclosure of the position and title of the chief operating decision maker (CODM) and significant segment expenses that the CODM is regularly provided.

• Requires the disclosure of other segment items representing the difference between segment revenue and expense and the profit and loss measure of the segment.

15 unchanged sentences

The amortized cost, estimated fair values and allowance for credit losses of investments in debt securities are summarized in the following tables:

June 30, 2024

September 30, 2024

(in thousands) Amortized

29 unchanged sentences

Total debt securities held to maturity $ 133,494 $ 6 $ ( 8,374 ) $ 125,126

Proceeds from the sale of available for sale investment securities totaled $ 28.6 million for the three and six months ended June 30, 2024, resulting in gross realized losses of $ 2.9 million.

Proceeds from the sale of investment securities totaled $ 24.2 million for the six months ended June 30, 2023, resulting in gross realized losses of $ 0.2 million.

In addition, during the three months ended June 30, 2024, the Company participated in and completed an exchange offering with Visa, which resulted in a gain of $ 2.9 million.

Proceeds from the sale of available for sale investment securities totaled $ 28.6 million and $ 24.2 million for the nine months ended September 30, 2024 and 2023, respectively, resulting in gross realized losses of $ 2.9 million and $ 0.2 million, respectively.

In addition, during the nine months ended September 30, 2024, the Company participated in and completed an exchange offering with Visa, which resulted in a gain of $ 2.9 million.

See further discussion in Note 9 - Commitments and Contingencies .

There were no sales of investment securities during the three months ended June 30, 2023.

Investment securities with an aggregate carrying value of $ 755.0 million and $ 702.2 million at June 30, 2024 and December 31, 2023, respectively, were pledged as collateral for specific borrowings, lines of credit or local agency deposits.

The amortized cost and estimated fair value of debt securities at June 30, 2024 by contractual maturity are shown below.

There were no sales of investment securities during the three months ended September 30, 2024 or 2023.

Investment securities with an aggregate carrying value of $ 761.6 million and $ 702.2 million at September 30, 2024 and December 31, 2023, respectively, were pledged as collateral for specific borrowings, lines of credit or local agency deposits.

The amortized cost and estimated fair value of debt securities at September 30, 2024 by contractual maturity are shown below.

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

At June 30, 2024, obligations of U.S.

At September 30, 2024, obligations of U.S.

government corporations and agencies with a cost basis totaling $ 1.3 billion consist almost entirely of residential real estate mortgage-backed securities whose contractual maturity, or principal repayment, will follow the repayment of the underlying mortgages.

1 unchanged sentence

government corporations and agencies is categorized based on final maturity date.

At June 30, 2024, the Company estimates the average remaining life of these mortgage-backed securities issued by U.S.

At September 30, 2024, the Company estimates the average remaining life of these mortgage-backed securities issued by U.S.

government corporations and agencies to be approximately 6.67 years.

Average remaining life is defined as the time span after which the principal balance has been reduced by half.

As of June 30, 2024, the contractual final maturity for available for sale and held to maturity investment securities is as follows:

As of September 30, 2024, the contractual final maturity for available for sale and held to maturity investment securities is as follows:

Debt Securities Available for Sale Held to Maturity

8 unchanged sentences

Totals $ 2,159,708 $ 1,979,270 $ 117,259 $ 111,987

Based on an evaluation of available information including security type, counterparty credit quality, past events, current conditions, and reasonable and supportable forecasts that are relevant to collectability of cash flows, as of June 30, 2024, the Company has concluded that it expects to receive all contractual cash flows from each security held in its AFS and HTM debt securities portfolio.

There was no allowance for credit losses related to investment securities as of June 30, 2024 or December 31, 2023.

Based on an evaluation of available information including security type, counterparty credit quality, past events, current conditions, and reasonable and supportable forecasts that are relevant to collectability of cash flows, as of September 30, 2024, the Company has concluded that it expects to receive all contractual cash flows from each security held in its AFS and HTM debt securities portfolio.

There was no allowance for credit losses related to investment securities as of September 30, 2024 or December 31, 2023.

Gross unrealized losses on debt 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, were as follows:

June 30, 2024:

September 30, 2024:

Less than 12 months 12 months or more Total

41 unchanged sentences

Government Sponsored Entities (principally Fannie Mae and Freddie Mac).

It is expected that the securities would not be settled at a price less than the amortized cost of

the investment.

Because management believes the decline in fair value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell and more likely than not will not be required to sell, there is no impairment on these securities and there has been no credit losses recorded as of June 30, 2024.

At June 30, 2024, 157 debt securities representing obligations of U.S.

It is expected that the securities would not be settled at a price less than the amortized cost of the investment.

and there has been no credit losses recorded as of September 30, 2024.

At September 30, 2024, 144 debt securities representing obligations of U.S.

government agencies had unrealized losses with aggregate depreciation of 10.79 % from the Company’s amortized cost basis.

2 unchanged sentences

It is expected that the securities would not be settled at a price less than the amortized cost of the investment.

At June 30, 2024, 155 debt securities representing obligations of states and political subdivisions had unrealized losses with aggregate depreciation of 11.96 % from the Company’s amortized cost basis.

At September 30, 2024, 148 debt securities representing obligations of states and political subdivisions had unrealized losses with aggregate depreciation of 8.66 % from the Company’s amortized cost basis.

Corporate bonds:

1 unchanged sentence

It is expected that the securities would not be settled at a price less than the amortized cost of the investment.

At June 30, 2024, 6 debt securities representing corporate bonds had unrealized losses with aggregate depreciation of 5.94 % from the Company’s amortized cost basis.

At September 30, 2024, 5 debt securities representing corporate bonds had unrealized losses with aggregate depreciation of 6.81 % from the Company’s amortized cost basis.

Asset backed securities:

The unrealized losses on investments in asset backed securities were caused by increases in required yields by investors for these types of securities.

At the time of purchase, each of these securities was rated AA or AAA and through June 30, 2024 has not experienced any deterioration in credit rating.

At June 30, 2024, 18 asset backed securities had unrealized losses with aggregate depreciation of 1.03 % from the Company’s amortized cost basis.

At the time of purchase, each of these securities was rated AA or AAA and through September 30, 2024 has not experienced any deterioration in credit rating.

At September 30, 2024, 24 asset backed securities had unrealized losses with aggregate depreciation of 0.69 % from the Company’s amortized cost basis.

The Company continues to monitor these securities for changes in credit rating or other indications of credit deterioration.

Non-agency collateralized mortgage obligations:

1 unchanged sentence

It is expected that the securities would not be settled at a price less than the amortized cost of the investment.

At June 30, 2024, 19 asset backed securities had unrealized losses with aggregate depreciation of 11.23 % from the Company’s amortized cost basis.

At September 30, 2024, 18 asset backed securities had unrealized losses with aggregate depreciation of 9.94 % from the Company’s amortized cost basis.

The Company monitors credit quality of debt securities held-to-maturity through the use of credit rating.

1 unchanged sentence

The following table summarizes the amortized cost of debt securities held-to-maturity at the dates indicated, aggregated by credit quality indicator:

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

(in thousands)

6 unchanged sentences

A summary of loan balances at amortized cost are as follows:

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

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

Commercial real estate:

20 unchanged sentences

For the periods indicated, the following tables summarize the activity in the allowance for credit losses on loans which is recorded as a contra asset, and the reserve for unfunded commitments which is recorded on the balance sheet within other liabilities:

Allowance for credit losses – Three months ended June 30, 2024

Allowance for credit losses – Three months ended September 30, 2024

(in thousands) Beginning

17 unchanged sentences

Total $ 129,727 $ ( 444 ) $ 367 $ 220 $ 129,870

Allowance for credit losses – Six months ended June 30, 2024

Allowance for credit losses – Nine months ended September 30, 2024

(in thousands) Beginning

24 unchanged sentences

This forecast data continues to evolve and includes improving shifts in the magnitude of changes for both the unemployment and GDP factors leading up to the balance sheet date.

Despite continued declines on a year over year comparative basis, core inflation remains elevated from wage pressures, and higher living costs such as housing, energy and food prices.

Management notes that the recent cumulative increase in interest rates by the Federal Reserve may create repricing risk for certain borrowers and further, continued inversion of the yield curve, creates informed expectations of the US potentially entering a recession within 12 months.

While projected cuts in interest rates from the Federal Reserve during 2024 may improve this outlook, the uncertainty associated with the extent and timing of these potential reductions has inhibited a change to forecasted reserve levels.

As a result, management continues to believe that certain credit weaknesses are likely present in the overall economy and that it is appropriate to maintain a reserve level that incorporates such risk factors.

Core inflation is slowing but prices remain elevated relative to wage increases, as reflected by higher living costs such as housing, energy and general services.

Actions by the Federal Reserve to cut rates during 2024 and beyond may help improve this outlook overall, but the uncertainty associated with the extent and timing of these potential reductions has inhibited a material change to forecasted reserve levels.

Furthermore, geopolitical risks remain elevated and appear to be getting worse, which may lead to further negative effects on domestic economic outcomes.

As a result, management continues to believe that certain credit weaknesses are present in the overall economy and that it is appropriate to maintain a reserve level that incorporates such risk factors.

20 unchanged sentences

Total $ 109,995 $ ( 8,140 ) $ 1,527 $ 23,990 $ 127,372

Allowance for credit losses – Three months ended June 30, 2023

Allowance for credit losses – Three months ended September 30, 2023

(in thousands) Beginning

18 unchanged sentences

Total $ 122,194 $ ( 5,357 ) $ 720 $ 4,155 $ 121,712

Allowance for credit losses – Six months ended June 30, 2023

Allowance for credit losses – Nine months ended September 30, 2023

(in thousands) Beginning

43 unchanged sentences

Based on the most recent analysis performed, the risk category of loans by class of loans is as follows for the period indicated:

Term Loans Amortized Cost Basis by Origination Year – As of June 30, 2024 Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total

Term Loans Amortized Cost Basis by Origination Year – As of September 30, 2024 Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total

(in thousands) 2024 2023 2022 2021 2020 Prior

15 unchanged sentences

Year-to-date gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —

Term Loans Amortized Cost Basis by Origination Year – As of June 30, 2024 Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total

Term Loans Amortized Cost Basis by Origination Year – As of September 30, 2024 Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total

(in thousands) 2024 2023 2022 2021 2020 Prior

39 unchanged sentences

Year-to-date gross charge-offs $ 285 $ 67 $ 16 $ 74 $ 28 $ 56 $ 12 $ — $ 538

Term Loans Amortized Cost Basis by Origination Year – As of June 30, 2024 Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total

Term Loans Amortized Cost Basis by Origination Year – As of September 30, 2024 Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total

(in thousands) 2024 2023 2022 2021 2020 Prior

138 unchanged sentences

The following table shows the ending balance of current and past due originated loans by loan category as of the date indicated:

Analysis of Past Due Loans - As of June 30, 2024

Analysis of Past Due Loans - As of September 30, 2024

(in thousands) 30-59 days 60-89 days > 90 days Total Past

35 unchanged sentences

Non Accrual Loans

As of June 30, 2024 As of December 31, 2023

As of September 30, 2024 As of December 31, 2023

(in thousands) Non accrual with no allowance for credit losses Total non accrual Past due 90 days or more and still accruing Non accrual with no allowance for credit losses Total non accrual Past due 90 days or more and still accruing

16 unchanged sentences

Total, net $ 31,371 $ 41,551 $ 86 $ 18,822 $ 31,003 $ 10

Interest income on non accrual loans that would have been recognized during the three months ended June 30, 2024 and 2023, if all such loans had been current in accordance with their original terms, totaled $ 0.6 million and $ 1.0 million, respectively.

Interest income actually recognized on these originated loans during the three months ended June 30, 2024 and 2023 was $ 0.0 million and $ 0.68 million, respectively.

Interest income on non accrual loans that would have been recognized during the six months ended June 30, 2024 and 2023, if all such loans had been current in accordance with their original terms, totaled $ 1.4 million and $ 1.3 million, respectively.

Interest income actually recognized on these originated loans during the six months ended June 30, 2024 and 2023 was $ 0.1 million and $ 0.7 million, respectively.

Interest income on non accrual loans that would have been recognized during the three months ended September 30, 2024 and 2023, if all such loans had been current in accordance with their original terms, totaled $ 1.6 million and $ 0.4 million, respectively.

Interest income actually recognized on these originated loans during the three months ended September 30, 2024 and 2023 was $ 0.5 million and $ 0.1 million, respectively.

Interest income on non accrual loans that would have been recognized during the nine months ended September 30, 2024 and 2023, if all such loans had been current in accordance with their original terms, totaled $ 3.0 million and $ 1.7 million, respectively.

Interest income actually recognized on these originated loans during the nine months ended September 30, 2024 and 2023 was $ 0.6 million and $ 0.8 million, respectively.

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

As of June 30, 2024

As of September 30, 2024

(in thousands) Retail Office Warehouse Other Multifamily Farmland SFR-1st Deed SFR-2nd Deed Automobile/Truck A/R and Inventory Equipment Total

35 unchanged sentences

For the three months ended

June 30, 2024 June 30, 2023

(in thousands) Combination - Term Extension/Rate Change Payment Delay/Term Extension Total % of Loans Outstanding Payment Delay/Term Extension Total % of Loans Outstanding

Multifamily $ — $ 295 0.03 % $ — — %

September 30, 2024 September 30, 2023

(in thousands) Combination - Term Extension/Rate Change Payment Delay/Term Extension Total % of Loans Outstanding Payment Delay/Term Extension Payment Delay/Term Reduction Total % of Loans Outstanding

Farmland — — — — $ 1,043 0.37 %

Commercial and industrial — 326 0.07 45 — 0.01

Total $ — $ 326 — % $ 45 $ 1,043 0.02 %

For the six months ended

June 30, 2024 June 30, 2023

(in thousands) Combination - Term Extension/Rate Change Payment Delay/Term Extension Total % of Loans Outstanding Payment Delay/Term Extension Total % of Loans Outstanding

For the nine months ended

September 30, 2024 September 30, 2023

CRE non-owner occupied $ 211 $ — 0.01 % $ — $ — — %

Multifamily — 295 0.29 — — —

Farmland — — — — 1,043 0.37

SFR HELOCs and junior liens — 41 0.01 — — —

1 unchanged sentence

Total $ 211 $ 1,344 0.02 % $ 206 $ 1,043 0.02 %

The following table presents the financial effect of loan modifications made to borrowers experiencing financial difficulty during the three and six months ended June 30, 2024.

Three months ended June 30, 2024

The following table presents the financial effect of loan modifications made to borrowers experiencing financial difficulty during the three and nine months ended September 30, 2024.

Three months ended September 30, 2024

Modification Type Loan Type Financial Effect

1 unchanged sentence

Payment delay / term extension Commercial and industrial Added a weighted average 60 months to the life of the loans

Six months ended June 30, 2024

Nine months ended September 30, 2024

Modification Type Loan Type Financial Effect

3 unchanged sentences

Payment delay / term extension Commercial and industrial Added a weighted average 53 months to the life of the loans

The following table presents the financial effect of loan modifications made to borrowers experiencing financial difficulty during the three and six months ended June 30, 2023.

The following table presents the financial effect of loan modifications made to borrowers experiencing financial difficulty during the nine months ended September 30, 2023.

Modification Type Loan Type Financial Effect

Payment delay / term reduction Farmland Reduced term by 12 months;

changed from amortizing to interest only

Payment delay / term extension Commercial and industrial Added 12 months to the life of the loan to delay balloon repayment

During the six months ended June 30, 2024 and June 30, 2023, respectively, there were no loans with payment defaults by borrowers experiencing financial difficulty which had material modifications in rate, term or principal forgiveness during the twelve months prior to default.

Payment delay / term extension Commercial and industrial Added 12 months to the life of the loan;

changed from amortizing to interest only

During the nine months ended September 30, 2024 and September 30, 2023, respectively, there were no loans with payment defaults by borrowers experiencing financial difficulty which had material modifications in rate, term or principal forgiveness during the twelve months prior to default.

Note 5 - Leases

15 unchanged sentences

The following table presents the components of lease expense for the periods ended:

Three months ended June 30, Six months ended June 30,

Three months ended September 30, Nine months ended September 30,

(in thousands) 2024 2023 2024 2023

1 unchanged sentence

Short-term lease cost 52 43 159 279

Variable lease cost 10 9 23 21

Sublease income — — — —

Variable lease cost (income) ( 15 ) 9 8 29

Total lease cost $ 1,453 $ 1,503 $ 4,482 $ 4,861

The following table presents supplemental cash flow information related to leases for the periods ended:

Three months ended June 30, Six months ended June 30,

Three months ended September 30, Nine months ended September 30,

(in thousands) 2024 2023 2024 2023

3 unchanged sentences

The following table presents the weighted average operating lease term and discount rate as of the period ended:

September 30,

Weighted-average remaining lease term (years) 7.7 8.1

Weighted-average discount rate 3.50 % 3.31 %

At June 30, 2024, future expected operating lease payments are as follows:

At September 30, 2024, future expected operating lease payments are as follows:

(in thousands)

2 unchanged sentences

Discount for present value of expected cash flows ( 3,910 )

Lease liability at June 30, 2024 $ 27,122

Lease liability at September 30, 2024 $ 26,668

Note 6 - Deposits

A summary of the balances of deposits follows:

(in thousands) June 30,

(in thousands) September 30,

2024 December 31,

5 unchanged sentences

Total deposits $ 8,037,091 $ 7,834,038

Certificate of deposit balances of $ 100.0 million and $ 50.0 million from the State of California were included in time certificates, over $250,000, at June 30, 2024 and December 31, 2023, respectively.

Certificate of deposit balances of $ 100.0 million and $ 50.0 million from the State of California were included in time certificates, over $250,000, at September 30, 2024 and December 31, 2023, respectively.

The Company participates in a deposit program offered by the State of California whereby the State may make deposits at the Company’s request subject to collateral and credit worthiness constraints.

The negotiated rates on these State deposits are generally more favorable than other wholesale funding sources available to the Company.

Overdrawn deposit balances of $ 2.2 million and $ 1.8 million were classified as consumer loans at June 30, 2024 and December 31, 2023, respectively.

Overdrawn deposit balances of $ 2.0 million and $ 1.8 million were classified as consumer loans at September 30, 2024 and December 31, 2023, respectively.

Note 7 - Other Borrowings

A summary of the balances of other borrowings follows:

September 30,

2024 December 31,

(in thousands)

Term borrowing at FHLB, fixed rate of 5.59 %, payable on July 8, 2024

Term borrowing at FHLB, fixed rate of 5.46 %, payable on October 7, 2024

2 unchanged sentences

Overnight borrowing at FHLB, fixed rate of 5.70 %, payable on January 2, 2024

Other collateralized borrowings, fixed rate, as of June 30, 2024 and December 31, 2023 of 0.05 %, payable on July 1, 2024 and January 2, 2024, respectively

Overnight borrowing at FHLB, fixed rate, as of September 30, 2024 of 5.21 %, payable on October 1, 2024

Other collateralized borrowings, fixed rate, as of September 30, 2024 and December 31, 2023 of 0.05 %, payable on October 1, 2024 and January 2, 2024, respectively

16,767 32,582

3 unchanged sentences

(in thousands) Coupon Rate (Variable) 3 mo.

SOFR + As of June 30, 2024 As of December 31, 2023

SOFR + As of September 30, 2024 As of December 31, 2023

Subordinated Debt Series Maturity

14 unchanged sentences

The following table presents a summary of the Bank’s commitments and contingent liabilities:

(in thousands) June 30,

(in thousands) September 30,

2024 December 31,

9 unchanged sentences

announced the commencement of an exchange offer for Visa Class B-1 common stock and the Company subsequently tendered all of its Visa Class B-1 common stock in exchange for a combination of Visa Class B-2 common stock and Visa Class C common stock.

Completion of the exchange resulted in a gain of $ 2.9 million relating to the Visa Class C common stock, which is held at fair value on the June 30, 2024 balance sheet as trading securities in the amount of $ 2.8 million.

Completion of the exchange resulted in a gain of $ 2.9 million relating to the Visa Class C common stock.

Visa Class B-2 common stock continues to be carried at zero.

1 unchanged sentence

which may be convertible into Class A common stock at a conversion ratio of 1.5875 per Class B-2 share.

As of June 30, 2024, the value of the Class A shares was $ 262.47 per share.

Utilizing the conversion ratio, the value of unredeemed Class A equivalent shares owned by the Bank was $ 2,791,000 as of June 30, 2024, and has not been reflected in the accompanying consolidated financial statements.

As of September 30, 2024, the value of the Class A shares was $ 274.95 per share.

Utilizing the conversion ratio, the value of unredeemed Class A equivalent shares owned by the Bank was $ 2.9 million as of September 30, 2024, and has not been reflected in the accompanying consolidated financial statements.

The shares of Visa Class B-2 common stock are restricted and may not be transferred.

6 unchanged sentences

Dividends Paid

The Bank paid to the Company cash dividends in the aggregate amounts of $ 23.4 million and $ 11.6 million during the three months ended June 30, 2024 and 2023, respectively and $ 43.9 million and $ 29.8 million during the equivalent six month periods then ended, respectively.

The Bank paid to the Company cash dividends in the aggregate amounts of $ 10.5 million and $ 11.5 million during the three months ended September 30, 2024 and 2023, respectively and $ 54.4 million and $ 41.4 million during the equivalent nine month periods then ended, respectively.

The Bank is regulated by the FDIC and the DFPI.

4 unchanged sentences

The 2021 Repurchase Plan has no expiration date (in accordance with applicable laws and regulations).

During the three and six months ended June 30, 2024, the Company repurchased 244,992 and 344,324 shares with market values of $ 9.1 million and $ 12.5 million, respectively.

During the three and six months ended June 30, 2023, the Company repurchased zero and 150,000 shares with market values of zero and $ 7.0 million, respectively.

During the three and nine months ended September 30, 2024, the Company repurchased zero and 344,324 shares with market values of $ 0.0 million and $ 12.5 million, respectively.

During the three and nine months ended September 30, 2023, the Company repurchased zero and 150,000 shares with market values of zero and $ 7.0 million, respectively.

Stock Repurchased Under Equity Compensation Plans

The Company's shareholder-approved equity compensation plans permit employees to tender recently vested shares in lieu of cash for the payment of exercise price, if applicable, and the tax withholding on such shares.

During the three and six months ended June 30, 2023, exercising option holders tendered 2,506 shares of the Company’s common stock in connection with option exercises.

There were no option exercises during the six months ended June 30, 2024.

Employees also tendered 30,510 and 39,080 shares in connection with the tax withholding requirements of other share-based awards during the three months ended June 30, 2024 and 2023, respectively, and 30,510 and 51,461 during the six months ended June 30, 2024 and 2023, respectively.

In total, shares of the Company's common stock tendered had market values of $ 1.1 million and $ 1.5 million during the quarters ended June 30, 2024 and 2023, respectively and $ 1.1 million and $ 2.1 million, respectively during the year to date periods then ended.

During the three and nine months ended September 30, 2023, exercising option holders tendered zero and 2,506 shares, respectively, of the Company’s common stock in connection with option exercises.

There were no option exercises during the nine months ended September 30, 2024.

Employees also tendered 1,551 and 976 shares in connection with the tax withholding requirements of other share-based awards during the three months ended September 30, 2024 and 2023, respectively, and 32,061 and 52,437 during the nine months ended September 30, 2024 and 2023, respectively.

In total, shares of the Company's common stock tendered had market values of $ 0.1 million and $ 0.03 million during the quarters ended September 30, 2024 and 2023, respectively and $ 1.2 million and $ 2.1 million, respectively during the year to date periods then ended.

The tendered shares were retired.

7 unchanged sentences

While no new awards can be granted under the 2019 Plan or 2009 Plan, existing grants continue to be governed by the terms, conditions and procedures set forth in any applicable award agreement.

Stock option activity during the six months ended June 30, 2024, is summarized in the following table:

Stock option activity during the nine months ended September 30, 2024, is summarized in the following table:

of Shares Weighted

4 unchanged sentences

Options forfeited — —

Outstanding at June 30, 2024 7,500 $ 23.21

The following table shows the number, weighted-average exercise price, intrinsic value, and weighted average remaining contractual life of options exercisable, options not yet exercisable and total options outstanding as of June 30, 2024:

Exercisable Currently Not

Exercisable Total

Number of options 7,500 — 7,500

Weighted average exercise price $ 23.21 $ — $ 23.21

Intrinsic value (in thousands) $ 123 $ — $ 123

Weighted average remaining contractual term (yrs.) 0.3 n/a 0.3

As of June 30, 2024, all options outstanding are fully vested and are expected to be exercised prior to expiration.

The Company did not modify any option grants during the six months ended June 30, 2024 or 2023.

Activity related to restricted stock unit awards during the six months ended June 30, 2024 is summarized in the following table:

Outstanding at September 30, 2024 — $ —

The Company did not modify any option grants during the nine months ended September 30, 2024 or 2023.

Activity related to restricted stock unit awards during the nine months ended September 30, 2024 is summarized in the following table:

Vesting RSUs Market Plus

4 unchanged sentences

RSUs forfeited ( 4,001 ) ( 2,458 )

Outstanding at June 30, 2024 168,290 146,973

The 168,290 of service condition vesting RSUs outstanding as of June 30, 2024 include a feature whereby each RSU outstanding is credited with a dividend amount equal to any common stock cash dividend declared and paid, and the credited amount is divided by the closing price of the Company’s stock on the dividend payable date to arrive at an additional amount of RSUs outstanding under the original grant.

Outstanding at September 30, 2024 162,164 146,448

The 162,164 of service condition vesting RSUs outstanding as of September 30, 2024 include a feature whereby each RSU outstanding is credited with a dividend amount equal to any common stock cash dividend declared and paid, and the credited amount is divided by the closing price of the Company’s stock on the dividend payable date to arrive at an additional amount of RSUs outstanding under the original grant.

The dividend credits follow the same vesting requirements as the RSU awards and are not considered participating securities.

The 168,290 of service condition vesting RSUs outstanding as of June 30, 2024 are expected to vest, and be released, on a weighted-average basis, over the next 1.9 years.

The Company expects to recognize $ 5.3 million of pre-tax compensation costs related to these service condition vesting RSUs between June 30, 2024 and their vesting dates.

The Company did not modify any service condition vesting RSUs during the six months ended June 30, 2024 or 2023.

The 146,973 of market plus service condition vesting RSUs outstanding as of June 30, 2024 are expected to vest, and be released, on a weighted-average basis, over the next 2.1 years.

The Company expects to recognize $ 2.6 million of pre-tax compensation costs related to these RSUs between June 30, 2024 and their vesting dates.

As of June 30, 2024, the number of market plus service condition vesting RSUs outstanding that will actually vest, and be released, may be reduced to zero or increased to 220,460 depending on the total return of the Company’s common stock versus the total return of an index of bank stocks from the grant date to the vesting date.

The Company did not modify any market plus service condition vesting RSUs during the six months ended June 30, 2024 or 2023.

The 162,164 of service condition vesting RSUs outstanding as of September 30, 2024 are expected to vest, and be released, on a weighted-average basis, over the next 1.7 years.

The Company expects to recognize $ 4.4 million of pre-tax compensation costs related to these service condition vesting RSUs between September 30, 2024 and their vesting dates.

The Company did not modify any service condition vesting RSUs during the nine months ended September 30, 2024 or 2023.

The 146,448 of market plus service condition vesting RSUs outstanding as of September 30, 2024 are expected to vest, and be released, on a weighted-average basis, over the next 1.8 years.

The Company expects to recognize $ 2.3 million of pre-tax compensation costs related to these RSUs between September 30, 2024 and their vesting dates.

As of September 30, 2024, the number of market plus service condition vesting RSUs outstanding that will actually vest, and be released, may be reduced to zero or increased to 219,672 depending on the total return of the Company’s common stock versus the total return of an index of bank stocks from the grant date to the vesting date.

The Company did not modify any market plus service condition vesting RSUs during the nine months ended September 30, 2024 or 2023.

Note 12 - Non-interest Income and Expense

1 unchanged sentence

Three months ended

June 30, Six months ended

September 30, Nine months ended

September 30,

(in thousands) 2024 2023 2024 2023

10 unchanged sentences

Sale of customer checks 303 396 916 1,091

Loss on sale or exchange of investment securities ( 45 ) — ( 45 ) ( 164 )

Loss on marketable equity securities ( 121 ) ( 42 ) ( 149 ) —

(Loss) gain on sale or exchange of investment securities 2 — ( 43 ) ( 164 )

(Loss) gain on marketable equity securities 356 ( 81 ) 207 ( 81 )

Other 153 227 853 552

3 unchanged sentences

Three months ended

June 30, Six months ended

September 30, Nine months ended

September 30,

(in thousands) 2024 2023 2024 2023

15 unchanged sentences

Courier service 542 492 1,581 1,314

Gain on sale or acquisition of foreclosed assets — — ( 38 ) —

(Gain) loss on sale or acquisition of foreclosed assets 26 ( 152 ) ( 12 ) ( 152 )

Loss on disposal of fixed assets 6 4 12 22

8 unchanged sentences

Earnings per share have been computed based on the following:

Three months ended June 30,

Three months ended September 30,

(in thousands) 2024 2023

4 unchanged sentences

Options excluded from diluted earnings per share because of their antidilutive effect — —

Six months ended June 30,

Nine months ended September 30,

(in thousands) 2024 2023

8 unchanged sentences

The components of other comprehensive income (loss) and related tax effects are as follows:

Three months ended June 30, Six months ended June 30,

Three months ended September 30, Nine months ended September 30,

(in thousands) 2024 2023 2024 2023

1 unchanged sentence

Amounts reclassified out of AOCI:

Realized loss on debt securities 2,945 — 2,945 164

Realized gain (loss) on debt securities ( 2 ) — 2,945 164

Unrealized holding gains (losses) on available for sale securities after reclassifications 63,230 ( 62,525 ) 51,383 ( 44,737 )

14 unchanged sentences

The components of accumulated other comprehensive loss, included in shareholders’ equity, are as follows:

(in thousands) June 30,

(in thousands) September 30,

2024 December 31,

53 unchanged sentences

The table below presents the recorded amount of assets and liabilities measured at fair value on a recurring basis (in thousands):

Fair value at June 30, 2024 Total Level 1 Level 2 Level 3

Fair value at September 30, 2024 Total Level 1 Level 2 Level 3

Marketable equity securities $ 2,690 $ 2,690 $ — $ —

Trading securities 2,789 2,789 — —

Debt securities available for sale:

21 unchanged sentences

Transfers between levels of the fair value hierarchy are recognized on the actual date of the event or circumstances that caused the transfer, which generally corresponds with the Company’s quarterly valuation process.

There were no transfers between any levels during the six months ended June 30, 2024 or June 30, 2023, respectively.

There were no transfers between any levels during the nine months ended September 30, 2024 or September 30, 2023, respectively.

The following table provides a reconciliation of assets and liabilities measured at fair value using significant unobservable inputs (Level 3) on a recurring basis during the time periods indicated.

Had there been any transfer into or out of Level 3 during the time periods indicated, the amount included in the “Transfers into (out of) Level 3” column would represent the beginning balance of an item in the period (interim quarter) during which it was transferred (in thousands):

Three months ended June 30, Beginning

Three months ended September 30, Beginning

Balance Transfers

6 unchanged sentences

$ 6,741 — $ ( 91 ) $ 142 $ 6,792

Six months ended June 30, Beginning

Nine months ended September 30, Beginning

Balance Transfers

9 unchanged sentences

Conversely, a decrease in the mortgage prepayment speed and discount rate will result in a positive fair value adjustment (and increase in the fair value measurement).

The following table presents quantitative information about recurring Level 3 fair value measurements at June 30, 2024 and December 31, 2023:

As of June 30, 2024:

The following table presents quantitative information about recurring Level 3 fair value measurements at September 30, 2024 and December 31, 2023:

As of September 30, 2024:

(in thousands) Valuation

7 unchanged sentences

The tables below present the recorded investment in assets and liabilities measured at fair value on a nonrecurring basis, as of the dates indicated, that had a write-down or an additional allowance provided during the periods indicated (in thousands):

June 30, 2024 Total Level 1 Level 2 Level 3

September 30, 2024 Total Level 1 Level 2 Level 3

Collateral dependent loans $ 8,384 — — $ 8,384

Foreclosed assets — — — —

Total assets measured at fair value $ 6,619 — — $ 6,619

December 31, 2023 Total Level 1 Level 2 Level 3

3 unchanged sentences

The tables below present the gains (losses) resulting from non-recurring fair value adjustments of assets and liabilities for the periods indicated (in thousands):

Three months ended June 30, Six months ended June 30,

Three months ended September 30, Nine months ended September 30,

2024 2023 2024 2023

10 unchanged sentences

Foreclosed assets represent real estate which the Company has taken control of in partial or full satisfaction of loans.

At the time of foreclosure, other real estate owned is

recorded at fair value less costs to sell, which becomes the property’s new basis.

At the time of foreclosure, other real estate owned is recorded at fair value less costs to sell, which becomes the property’s new basis.

Any write-downs based on the asset’s fair value at the date of acquisition are charged to the allowance for credit losses.

After foreclosure, management periodically performs valuations such that the real estate is carried at the lower of its new cost basis or fair value, net of estimated costs to sell.

After foreclosure, management periodically performs valuations such that the

real estate is carried at the lower of its new cost basis or fair value, net of estimated costs to sell.

Fair value adjustments on other real estate owned are recognized within net loss on real estate owned.

5 unchanged sentences

Under certain circumstances, management discounts are applied based on specific characteristics of an individual property.

The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a nonrecurring basis at June 30, 2024:

June 30, 2024 Fair Value

The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a nonrecurring basis at September 30, 2024:

September 30, 2024 Fair Value

(in thousands) Valuation

5 unchanged sentences

Capitalization rate Not meaningful

Foreclosed assets (Residential real estate) $ — Sales comparison

approach Adjustment for differences between

comparable sales Not meaningful

The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a nonrecurring basis at December 31, 2023:

15 unchanged sentences

Further, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on the fair value estimates and have not been considered in any of these estimates.

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

(in thousands) Carrying

21 unchanged sentences

Quantitative measures established by regulation to ensure capital adequacy require the Company to maintain minimum amounts and ratios (set forth in the table below) of total, Tier 1, and common equity Tier 1 capital to risk-weighted assets, and of Tier 1 capital to average assets.

The following tables present actual and required capital ratios as of June 30, 2024 and December 31, 2023 for the Company and the Bank under applicable Basel III Capital Rules.

The minimum capital amounts presented include the minimum required capital levels as of June 30, 2024 and December 31, 2023 based on the then phased-in provisions of the Basel III Capital Rules.

The following tables present actual and required capital ratios as of September 30, 2024 and December 31, 2023 for the Company and the Bank under applicable Basel III Capital Rules.

The minimum capital amounts presented include the minimum required capital levels as of September 30, 2024 and December 31, 2023 based on the then phased-in provisions of the Basel III Capital Rules.

Capital levels required to be considered well capitalized are based upon prompt corrective action regulations, as amended to reflect the changes under the Basel III Capital Rules.

1 unchanged sentence

Considered Well

As of June 30, 2024:

As of September 30, 2024:

Amount Ratio Amount Ratio Amount Ratio

29 unchanged sentences

Tri Counties Bank $ 1,088,717 11.12 % $ 391,574 4.00 % $ 489,468 5.00 %

As of June 30, 2024 and December 31, 2023, capital levels at the Company and the Bank exceed all capital adequacy requirements under the Basel III Capital Rules.

Also, at June 30, 2024 and December 31, 2023, the Bank’s capital levels exceeded the minimum amounts necessary to be considered well capitalized under the current regulatory framework for prompt corrective action.

As of September 30, 2024 and December 31, 2023, capital levels at the Company and the Bank exceed all capital adequacy requirements under the Basel III Capital Rules.

Also, at September 30, 2024 and December 31, 2023, the Bank’s capital levels exceeded the minimum amounts necessary to be considered well capitalized under the current regulatory framework for prompt corrective action.

The Basel III Capital Rules require for all banking organizations to maintain a capital conservation buffer above the minimum risk-based capital requirements in order to avoid certain limitations on capital distributions, stock repurchases and discretionary bonus payments to executive officers.

The capital conservation buffer is exclusively composed of common equity tier 1 capital, and it applies to each of the risk-based capital ratios but not the leverage ratio.

At June 30, 2024, the Company and the Bank are in compliance with the capital conservation buffer requirement.

At September 30, 2024, the Company and the Bank are in compliance with the capital conservation buffer requirement.

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