UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(MARK ONE)
☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2023
OR
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to

Commission file number 000-23877

Heritage Commerce Corp

(Exact name of Registrant as Specified in its Charter)

California (State or Other Jurisdiction of Incorporation or Organization)	77-0469558 (I.R.S. Employer Identification No.)
224 Airport Parkway, San Jose, California (Address of Principal Executive Offices)	95110 (Zip Code)

(408) 947-6900

(Registrant’s Telephone Number, Including Area Code)

N/A

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class:	Trading Symbol:	Name of each exchange on which registered:
Common Stock, No Par Value	HTBK	The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES ☒ NO ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). YES ☒ NO ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☒	Non-accelerated filer ☐ ​	Smaller reporting company ☐
			Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐  NO ☒

The Registrant had 60,970,338 shares of Common Stock outstanding on April 28, 2023.

HERITAGE COMMERCE CORP

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS

		Page No.
Cautionary Note on Forward-Looking Statements		3
Part I. FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements (unaudited)	5
	Consolidated Balance Sheets	5
	Consolidated Statements of Income	6
	Consolidated Statements of Comprehensive Income	7
	Consolidated Statements of Changes in Shareholders’ Equity	8
	Consolidated Statements of Cash Flows	9
	Notes to Unaudited Consolidated Financial Statements	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	41
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	70
Item 4.	Controls and Procedures	70
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	70
Item 1A.	Risk Factors	70
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	71
Item 3.	Defaults Upon Senior Securities	71
Item 4.	Mine Safety Disclosures	71
Item 5.	Other Information	71
Item 6.	Exhibits	72
SIGNATURES		73

2

Cautionary Note Regarding Forward-Looking Statements

This Report on Form 10-Q contains various statements that may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Rule 175 promulgated thereunder, and Section 21E of the Securities Exchange Act of 1934, as amended, Rule 3b-6 promulgated thereunder and are intended to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements about our expectations, beliefs, plans, objectives, assumptions or future events or performance are not historical facts and may be forward-looking. These forward-looking statements often can be, but are not always, identified by the use of words such as “assume,” “expect,” “intend,” “plan,” “project,” “believe,” “estimate,” “predict,” “anticipate,” “may,” “might,” “should,” “could,” “goal,” “potential” and similar expressions. We base these forward-looking statements on our current expectations and projections about future events, our assumptions regarding these events and our knowledge of facts at the time the statements are made. These statements include statements relating to our projected growth, anticipated future financial performance, and management’s long-term performance goals, as well as statements relating to the anticipated effects on results of operations and financial condition.

These forward-looking statements are subject to various risks and uncertainties that may be outside our control and our actual results could differ materially from our projected results. Risks and uncertainties that could cause our financial performance to differ materially from our goals, plans, expectations and projections expressed in forward-looking statements include those set forth in our filings with the Securities and Exchange Commission (“SEC”), Item 1A of the Heritage Commerce Corp’s (“the Company”) Annual Report on Form 10-K for the year ended December 31, 2022, and including, but not limited to the following:

● geopolitical and domestic political developments that can increase levels of political and economic unpredictability, contribute to rising energy and commodity prices, and increase the volatility of financial markets;

● current and future economic and market conditions in the United States generally or in the communities we serve, including the effects of declines in property values and overall slowdowns in economic growth should these events occur;

● effects of and changes in trade, monetary and fiscal policies and laws, including the interest rate policies of the Federal Open Market Committee of the Federal Reserve Board;

● inflationary pressures and changes in the interest rate environment that reduce our margins and yields, the fair value of financial instruments or our level of loan originations, or increase the level of defaults, losses and prepayments on loans we have made and make, whether held in the portfolio or in the secondary market;

● our ability to mitigate and manage deposit liabilities in a manner that balances the need to meet current and expected withdrawals while investing a sufficient portion of our assets to promote strong earning capacity;

● changes in the level of nonperforming assets and charge offs and other credit quality measures, and their impact on the adequacy of our allowance for credit losses and our provision for credit losses;

● volatility in credit and equity markets and its effect on the global economy;

● conditions relating to the impact of the COVID-19 pandemic, and other infectious illness outbreaks that may arise in the future, our customers, employees, businesses, liquidity, financial results and overall condition including severity and duration of the associated uncertainties in U.S. and global markets;

● our ability to effectively compete with other banks and financial services companies and the effects of competition in the financial services industry on our business;

● our ability to achieve loan growth and attract deposits in our market area, the impact of the cost of deposits and our ability to retain deposits;

● risks associated with concentrations in real estate related loans;

3

● the relative strength or weakness of the commercial and real estate markets where our borrowers are located, including related vacancy rates, and asset and market prices;

● credit related impairment charges to our securities portfolio;

● increased capital requirements for our continual growth or as imposed by banking regulators, which may require us to raise capital at a time when capital is not available on favorable terms or at all;

● regulatory limits on Heritage Bank of Commerce’s ability to pay dividends to the Company;

● operational issues stemming from, and/or capital spending necessitated by, the potential need to adapt to industry changes in information technology systems, on which we are highly dependent;

● our inability to attract, recruit, and retain qualified officers and other personnel could harm our ability to implement our strategic plan, impair our relationships with customers and adversely affect our business, results of operations and growth prospects;

● possible adjustment of the valuation of our deferred tax assets;

● our ability to keep pace with technological changes, including our ability to identify and address cyber-security risks such as data security breaches, “denial of service” attacks, “hacking” and identity theft;

● inability of our framework to manage risks associated with our business, including operational risk and credit risk;

● risks of loss of funding of Small Business Administration (“SBA”) or SBA loan programs, or changes in those programs;

● compliance with applicable laws and governmental and regulatory requirements, including the Dodd-Frank Act and others relating to banking, consumer protection, securities, accounting and tax matters;

● effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Public Company Accounting Oversight Board, the Financial Accounting Standards Board and other accounting standard setters;

● the expense and uncertain resolution of litigation matters whether occurring in the ordinary course of business or otherwise;

● availability of and competition for acquisition opportunities;

● risks resulting from domestic terrorism;

● risks resulting from social unrest and protests;

● risks of natural disasters (including earthquakes, fires, and flooding) and other events beyond our control; and

● our success in managing the risks involved in the foregoing factors.

Forward-looking statements speak only as of the date they are made. The Company does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made or to reflect the occurrence of unanticipated events. You should consider any forward looking statements in light of this explanation, and we caution you about relying on forward-looking statements.

4

Part I—FINANCIAL INFORMATION

ITEM 1—CONSOLIDATED FINANCIAL STATEMENTS

HERITAGE COMMERCE CORP

CONSOLIDATED BALANCE SHEETS

(Unaudited)

	March 31,		December 31,
	2023		2022
	(Dollars in thousands)
Assets
Cash and due from banks	$	41,318	$	27,595
Other investments and interest-bearing deposits in other financial institutions		698,690		279,008
Total cash and cash equivalents		740,008		306,603
Securities available-for-sale, at fair value		491,751		489,596
Securities held-to-maturity, at amortized cost, net of allowance for credit losses of $14 at both March 31, 2023
and December 31, 2022 (fair value of $607,986 at March 31, 2023 and $614,452 at December 31, 2022)		698,231		714,990
Loans held-for-sale - SBA, at lower of cost or fair value, including deferred costs		2,792		2,456
Loans, net of deferred fees		3,261,915		3,298,550
Allowance for credit losses on loans		(47,273)		(47,512)
Loans, net		3,214,642		3,251,038
Federal Home Loan Bank ("FHLB"), Federal Reserve Bank ("FRB") stock and other investments, at cost		32,526		32,522
Company-owned life insurance		79,438		78,945
Premises and equipment, net		9,142		9,301
Goodwill		167,631		167,631
Other intangible assets		10,431		11,033
Accrued interest receivable and other assets		89,948		93,465
Total assets	$	5,536,540	$	5,157,580
Liabilities and Shareholders' Equity
Liabilities:
Deposits:
Demand, noninterest-bearing	$	1,469,081	$	1,736,722
Demand, interest-bearing		1,196,789		1,196,427
Savings and money market		1,264,567		1,285,444
Time deposits - under $250		37,884		32,445
Time deposits - $250 and over		172,070		108,192
ICS/CDARS - interest-bearing demand, money market and time deposits		304,147		30,374
Total deposits		4,444,538		4,389,604
Other short-term borrowings		300,000		—
Subordinated debt, net of issuance costs		39,387		39,350
Accrued interest payable and other liabilities		105,407		96,170
Total liabilities		4,889,332		4,525,124
Shareholders' equity:
Preferred stock, no par value; 10,000,000 shares authorized; none issued and outstanding
at March 31, 2023 and December 31, 2022		—		—
Common stock, no par value; 100,000,000 shares authorized;
60,948,607 shares issued and outstanding at March 31, 2023 and
60,852,723 shares issued and outstanding at December 31, 2022		504,135		502,923
Retained earnings		157,390		146,389
Accumulated other comprehensive loss		(14,317)		(16,856)
Total shareholders' equity		647,208		632,456
Total liabilities and shareholders' equity	$	5,536,540	$	5,157,580

See notes to consolidated financial statements (unaudited).

5

HERITAGE COMMERCE CORP

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

	Three Months Ended
	March 31,
	2023		2022
	(Dollars in thousands, except per share amounts)
Interest income:
Loans, including fees	$	44,112	$	35,101
Securities, taxable		7,056		3,444
Securities, exempt from Federal tax		247		297
Other investments, interest-bearing deposits
in other financial institutions and Federal funds sold		4,859		1,064
Total interest income		56,274		39,906
Interest expense:
Deposits		5,901		1,114
Short-term borrowings		578		—
Subordinated debt		537		571
Total interest expense		7,016		1,685
Net interest income before provision for credit losses on loans		49,258		38,221
Provision for (recapture of) credit losses on loans		32		(567)
Net interest income after provision for credit losses on loans		49,226		38,788
Noninterest income:
Service charges and fees on deposit accounts		1,743		612
Increase in cash surrender value of life insurance		493		480
Servicing income		131		106
Gain on sales of SBA loans		76		156
Termination fees		11		—
Gain on warrants		—		637
Other		312		469
Total noninterest income		2,766		2,460
Noninterest expense:
Salaries and employee benefits		14,809		13,821
Occupancy and equipment		2,400		2,437
Professional fees		1,399		1,080
Other		6,793		5,914
Total noninterest expense		25,401		23,252
Income before income taxes		26,591		17,996
Income tax expense		7,674		5,130
Net income	$	18,917	$	12,866
Earnings per common share:
Basic	$	0.31		0.21
Diluted	$	0.31		0.21

See notes to consolidated financial statements (unaudited).

6

HERITAGE COMMERCE CORP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

	Three Months Ended
	March 31,
	2023		2022
		(Dollars in thousands)
Net income	$	18,917	$	12,866
Other comprehensive income (loss):
Change in net unrealized holding gains (losses) on available-for-sale
securities and I/O strips		3,631		(4,405)
Deferred income taxes		(1,054)		1,277
Change in unrealized gains (losses) on securities and I/O strips, net of
deferred income taxes		2,577		(3,128)
Change in net pension and other benefit plan liability adjustment		(34)		104
Deferred income taxes		(4)		(34)
Change in pension and other benefit plan liability, net of
deferred income taxes		(38)		70
Other comprehensive income (loss)		2,539		(3,058)
Total comprehensive income	$	21,456	$	9,808

See notes to consolidated financial statements (unaudited).

7

HERITAGE COMMERCE CORP

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited)

						Accumulated
						Other		Total
	Common Stock			Retained		Comprehensive		Shareholders’
	Shares	Amount		Earnings		Loss		Equity
	(Dollars in thousands, except per share amounts)
Balance, January 1, 2022	60,339,837	$	497,695	$	111,329	$	(10,996)	$	598,028
Net income	—		—		12,866		—		12,866
Other comprehensive loss	—		—		—		(3,058)		(3,058)
Amortization of restricted stock awards,
net of forfeitures and taxes	—		518		—		—		518
Cash dividend declared $0.13 per share	—		—		(7,848)		—		(7,848)
Stock option expense, net of forfeitures and taxes	—		149		—		—		149
Stock options exercised	68,009		401		—		—		401
Balance March 31, 2022	60,407,846	$	498,763	$	116,347	$	(14,054)	$	601,056
Balance, January 1, 2023	60,852,723	$	502,923	$	146,389	$	(16,856)	$	632,456
Net income	—		—		18,917		—		18,917
Other comprehensive income	—		—		—		2,539		2,539
Amortization of restricted stock awards,
net of forfeitures and taxes	—		382		—		—		382
Cash dividend declared $0.13 per share	—		—		(7,916)		—		(7,916)
Stock option expense, net of forfeitures and taxes	—		147		—		—		147
Stock options exercised	95,884		683		—		—		683
Balance March 31, 2023	60,948,607	$	504,135	$	157,390	$	(14,317)	$	647,208

See notes to consolidated financial statements (unaudited).

8

HERITAGE COMMERCE CORP

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Three Months Ended
	March 31,
	2023		2022
	(Dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	18,917	$	12,866
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of discounts and premiums on securities		(1,258)		675
Gain on sale of SBA loans		(76)		(156)
Proceeds from sale of SBA loans originated for sale		1,045		2,146
SBA loans originated for sale		(1,305)		(934)
Provision for (recapture of) credit losses on loans		32		(567)
Increase in cash surrender value of life insurance		(493)		(480)
Depreciation and amortization		272		283
Amortization of other intangible assets		602		659
Stock option expense, net		147		149
Amortization of restricted stock awards, net		382		518
Amortization of subordinated debt issuance costs		37		46
Effect of changes in:
Accrued interest receivable and other assets		(519)		7,053
Accrued interest payable and other liabilities		12,175		(5,475)
Net cash provided by operating activities		29,958		16,783
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of securities available-for-sale		—		(21,656)
Purchase of securities held-to-maturity		—		(109,610)
Maturities/paydowns/calls of securities available-for-sale		3,014		8,099
Maturities/paydowns/calls of securities held-to-maturity		16,485		30,709
Net change in loans		36,364		63,807
Changes in FHLB stock and other investments		(4)		(5)
Purchase of premises and equipment		(113)		(224)
Net cash provided by (used in) investing activities		55,746		(28,880)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in deposits		54,934		(69,507)
Net change in short-term borrowings		300,000		—
Exercise of stock options		683		401
Payment of cash dividends		(7,916)		(7,848)
Net cash provided by (used in) financing activities		347,701		(76,954)
Net increase in cash and cash equivalents		433,405		(89,051)
Cash and cash equivalents, beginning of period		306,603		1,306,216
Cash and cash equivalents, end of period	$	740,008	$	1,217,165
Supplemental disclosures of cash flow information:
Interest paid	$	5,657	$	1,112
Income taxes paid (refunds), net	$	—	$	(654)
Supplemental schedule of non-cash activity:
Recording of right to use assets in exchange for lease obligations	$	384	$	—
Transfer of loans held-for-sale to loan portfolio	$	—	$	480

See notes to consolidated financial statements (unaudited).

9

HERITAGE COMMERCE CORP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2023

(Unaudited)

1) Basis of Presentation

The unaudited consolidated financial statements of Heritage Commerce Corp (the “Company” or “HCC”) and its wholly owned subsidiary, Heritage Bank of Commerce (the “Bank” or “HBC”), have been prepared pursuant to the rules and regulations for reporting on Form 10-Q. Accordingly, certain information and notes required by accounting principles generally accepted in the United States of America (“GAAP”) for annual financial statements are not included herein. The interim statements should be read in conjunction with the consolidated financial statements and notes that were included in the Company’s Form 10-K for the year ended December 31, 2022.

HBC is a commercial bank serving customers primarily located in Alameda, Contra Costa, Marin, San Benito, San Francisco, San Mateo, and Santa Clara counties of California. CSNK Working Capital Finance Corp. a California corporation, dba Bay View Funding (“Bay View Funding”) is a wholly owned subsidiary of HBC, and provides business-essential working capital factoring financing to various industries throughout the United States. No customer accounts for more than 10% of revenue for HBC or the Company. The Company reports its results for two segments: banking and factoring. The Company’s management uses segment results in its operating and strategic planning.

In management’s opinion, all adjustments necessary for a fair presentation of these consolidated financial statements have been included and are of a normal and recurring nature. All intercompany transactions and balances have been eliminated.

The preparation of financial statements in accordance with the accounting principles generally accepted in the United States (“U.S. GAAP”) requires management to make a number of judgments, estimates and assumptions that affect the reported amount of assets, liabilities, income and expense in the financial statements. Various elements of our accounting policies, by their nature, involve the application of highly sensitive and judgmental estimates and assumptions. Some of these policies and estimates relate to matters that are highly complex and contain inherent uncertainties. Material estimates that are particularly susceptible to significant change include the determination of the allowance for credit losses and any impairment of goodwill or intangible assets. It is possible that, in some instances, different estimates and assumptions could reasonably have been made and used by management, instead of those we applied, which might have produced different results that could have had a material effect on the financial statements.

The results for the three months ended March 31, 2023 are not necessarily indicative of the results expected for any subsequent period or for the entire year ending December 31, 2023.

Reclassifications

              Certain reclassifications of prior year balances have been made to conform to the current year presentation. These reclassifications had no impact on the Company’s consolidated financial position, results of operations or net change in cash and cash equivalents.

Adoption of New Accounting Standards

In March 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2022-02 Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures, which 1) eliminates the accounting guidance for troubled debt restructurings ("TDRs") by creditors while enhancing the disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty; and 2) requires that an entity disclose current-period gross writeoffs by year of origination for financing receivables and net investments in leases. The Company adopted the guidance of ASU 2022-02 on January 1, 2023 and the amendments were applied prospectively. The adoption of this new guidance did not impact the financial position or results of operations.

10

Accounting Guidance Issued But Not Yet Adopted

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The ASU provides optional expedients and exceptions for applying GAAP to loan and lease agreements, derivative contracts, and other transactions affected by the anticipated transition away from London Inter-Bank Offered Rate (“LIBOR”) toward new interest rate benchmarks. For transactions that are modified because of reference rate reform and that meet certain scope guidance (i) modifications of loan agreements should be accounted for by prospectively adjusting the effective interest rate and the modification will be considered "minor" so that any existing unamortized origination fees/costs would carry forward and continue to be amortized and (ii) modifications of lease agreements should be accounted for as a continuation of the existing agreement with no reassessments of the lease classification and the discount rate or remeasurements of lease payments that otherwise would be required for modifications not accounted for as separate contracts. ASU 2020-04 also provides numerous optional expedients for derivative accounting. ASU 2020-04 is effective March 12, 2020 through December 31, 2024. An entity may elect to apply ASU 2020-04 for contract modifications as of January 1, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements are available to be issued. Once elected for a Topic or an Industry Subtopic within the Codification, the amendments in this ASU must be applied prospectively for all eligible contract modifications for that Topic or Industry Subtopic. The Company does not expect any material impact on its consolidated financial statements since the Company has an insignificant number of financial instruments applicable to this ASU.

2) Earnings Per Share

Basic earnings per common share is computed by dividing net income by the weighted average common shares outstanding. Diluted earnings per share reflect potential dilution from outstanding stock options using the treasury stock method. There were 1,303,068 and 1,048,267 weighted average stock options outstanding for the three months ended March 31, 2023 and 2022, respectively, considered to be antidilutive and excluded from the computation of diluted earnings per share. A reconciliation of these factors used in computing basic and diluted earnings per common share is as follows:

	Three Months Ended
	March 31,
	2023		2022
	(Dollars in thousands, except per share amounts)
Net income	$	18,917	$	12,866
Weighted average common shares outstanding for basic
earnings per common share		60,908,221		60,393,883
Dilutive potential common shares		359,851		527,952
Shares used in computing diluted earnings per common share		61,268,072		60,921,835
Basic earnings per share	$	0.31	$	0.21
Diluted earnings per share	$	0.31	$	0.21

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3) Accumulated Other Comprehensive Income (Loss) (“AOCI”)

The following table reflects the changes in AOCI by component for the periods indicated:

	Three Months Ended March 31, 2023 and 2022
	Unrealized
	Gains (Losses) on
	Available-		Defined
	for-Sale		Benefit
	Securities		Pension
	and I/O		Plan
	Strips		Items(1)		Total
	(Dollars in thousands)
Beginning balance January 1, 2023, net of taxes	$	(11,394)	$	(5,462)	$	(16,856)
Other comprehensive income (loss) before reclassification,
net of taxes		2,577		(14)		2,563
Amounts reclassified from other comprehensive income (loss),
net of taxes		—		(24)		(24)
Net current period other comprehensive income (loss),
net of taxes		2,577		(38)		2,539
Ending balance March 31, 2023, net of taxes	$	(8,817)	$	(5,500)	$	(14,317)
Beginning balance January 1, 2022, net of taxes	$	2,153	$	(13,149)	$	(10,996)
Other comprehensive income (loss) before reclassification,
net of taxes		(3,128)		(3)		(3,131)
Amounts reclassified from other comprehensive income (loss),
net of taxes		—		73		73
Net current period other comprehensive income (loss),
net of taxes		(3,128)		70		(3,058)
Ending balance March 31, 2022, net of taxes	$	(975)	$	(13,079)	$	(14,054)

(1) This AOCI component is included in the computation of net periodic benefit cost (see Note 8—Benefit Plans) and includes split-dollar life insurance benefit plan.

	Amounts Reclassified from
	AOCI
	Three Months Ended
	March 31,				Affected Line Item Where
Details About AOCI Components	2023		2022		Net Income is Presented
	(Dollars in thousands)
Amortization of defined benefit pension plan items (1)
Prior transition obligation and actuarial losses (2)	$	47	$	11
Prior service cost and actuarial losses (3)		(13)		(114)
		34		(103)	Other noninterest expense
		(10)		30	Income tax benefit
		24		(73)	Net of tax
Total reclassification from AOCI for the period	$	24	$	(73)

(1) This AOCI component is included in the computation of net periodic benefit cost (see Note 8—Benefit Plans).

(2) This is related to the split dollar life insurance benefit plan.

(3) This is related to the supplemental executive retirement plan.

12

4) Securities

The amortized cost and estimated fair value of securities were as follows for the periods indicated:

			Gross		Gross		Allowance		Estimated
	Amortized		Unrealized		Unrealized		for Credit		Fair
March 31, 2023	Cost		Gains		(Losses)		Losses		Value
	(Dollars in thousands)
Securities available-for-sale:
U.S. Treasury	$	430,413		—		(7,510)		—	$	422,903
Agency mortgage-backed securities		73,817		—