sasr-20240331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2024

☐ 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: 0-19065

SANDY SPRING BANCORP, INC.

(Exact name of registrant as specified in its charter)


Maryland						52-1532952
(State of incorporation)						(I.R.S. Employer Identification Number)


17801 Georgia Avenue, Olney, Maryland						20832
(Address of principal executive office)						(Zip Code)

301-774-6400

(Registrant’s telephone number, including area code)

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

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Common Stock, par value $1.00 per share

SASR

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 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 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 number of outstanding shares of common stock as of April 30, 2024

Common stock, $1.00 par value – 45,061,353 shares

SANDY SPRING BANCORP, INC.

TABLE OF CONTENTS


			Page
PART I - FINANCIAL INFORMATION

Item 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Condensed Consolidated Statements of Condition - Unaudited as of March 31, 2024 and December 31, 2023			3

Condensed Consolidated Statements of Income - Unaudited for the Three Months Ended March 3 1 , 202 4 and 20 23			4

Condensed Consolidated Statements of Comprehensive Income – Unaudited for the Three Months Ended March 3 1 , 202 4 and 20 23			5

Condensed Consolidated Statements of Changes in Stockholders’ Equity – Unaudited for the Three Months Ended March 3 1 , 202 4 and 202 3			6

Condensed Consolidated Statements of Cash Flows – Unaudited for the Three Months Ended March 3 1 , 202 4 and 202 3			7

Notes to the Condensed Consolidated Financial Statements			8

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			36

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			61

Item 4. CONTROLS AND PROCEDURES			61

PART II - OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS			62

Item 1A. RISK FACTORS			62

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS			62

Item 3. DEFAULTS UPON SENIOR SECURITIES			62

Item 4. MINE SAFETY DISCLOSURES			62

Item 5. OTHER INFORMATION			62

Item 6. EXHIBITS			63

SIGNATURES			64

Part I

Item 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SANDY SPRING BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CONDITION – UNAUDITED


	March 31,		December 31,
(Dollars in thousands)	2024		2023
Assets:
Cash and due from banks	$	79,305	$	82,257
Federal funds sold	243		245
Interest-bearing deposits with banks	330,842		463,396
Cash and cash equivalents	410,390		545,898
Residential mortgage loans held for sale (at fair value)	16,627		10,836
Investments held-to-maturity, at cost (fair value of $192,798 and $200,411, respectively)	231,354		236,165
Investments available-for-sale (at fair value)	1,100,741		1,102,681
Other investments, at cost	73,395		75,607
Total loans	11,364,284		11,366,989
Less: allowance for credit losses - loans	(123,096)		(120,865)
Net loans	11,241,188		11,246,124
Premises and equipment, net	59,843		59,490
Other real estate owned	2,700		—
Accrued interest receivable	47,152		46,583
Goodwill	363,436		363,436
Other intangible assets, net	29,864		28,301
Other assets	311,443		313,051
Total assets	$	13,888,133	$	14,028,172

Liabilities:
Noninterest-bearing deposits	$	2,817,928	$	2,914,161
Interest-bearing deposits	8,409,272		8,082,377
Total deposits	11,227,200		10,996,538
Securities sold under retail repurchase agreements	71,529		75,032

Federal Reserve Bank borrowings	—		300,000
Advances from FHLB	500,000		550,000
Subordinated debt	370,952		370,803
Total borrowings	942,481		1,295,835
Accrued interest payable and other liabilities	129,088		147,657
Total liabilities	12,298,769		12,440,030

Stockholders' equity:
Common stock -- par value $1.00; shares authorized 100,000,000; shares issued and outstanding
44,940,147 and 44,913,561 at March 31, 2024 and December 31, 2023, respectively	44,940		44,914
Additional paid in capital	743,850		742,243
Retained earnings	903,377		898,316
Accumulated other comprehensive loss	(102,803)		(97,331)
Total stockholders' equity	1,589,364		1,588,142
Total liabilities and stockholders' equity	$	13,888,133	$	14,028,172

The accompanying notes are an integral part of these statements

SANDY SPRING BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME – UNAUDITED


	Three Months Ended
	March 31,
(Dollars in thousands, except per share data)	2024		2023
Interest income:
Interest and fees on loans	$	150,635	$	139,727
Interest on loans held for sale	128		152
Interest on deposits with banks	6,786		2,686
Interest and dividend income on investment securities:
Taxable	6,663		7,008
Tax-advantaged	1,797		1,770
Interest on federal funds sold	5		4
Total interest income	166,014		151,347
Interest expense:
Interest on deposits	73,366		40,788
Interest on retail repurchase agreements and federal funds purchased	3,386		2,104
Interest on advances from FHLB	5,973		7,207
Interest on subordinated debt	3,946		3,946
Total interest expense	86,671		54,045
Net interest income	79,343		97,302
Provision/ (credit) for credit losses	2,388		(21,536)
Net interest income after provision/ (credit) for credit losses	76,955		118,838
Non-interest income:
Investment securities gains	—		—

Service charges on deposit accounts	2,817		2,388
Mortgage banking activities	1,374		1,245
Wealth management income	9,958		8,992

Income from bank owned life insurance	1,160		907
Bank card fees	413		418
Other income	2,645		2,001
Total non-interest income	18,367		15,951
Non-interest expense:
Salaries and employee benefits	36,698		38,926
Occupancy expense of premises	4,816		4,847
Equipment expense	3,963		4,117
Marketing	742		1,543
Outside data services	3,103		2,514
FDIC insurance	2,911		2,138
Amortization of intangible assets	2,069		1,306

Professional fees and services	4,880		3,684
Other expenses	8,824		7,230
Total non-interest expense	68,006		66,305
Income before income tax expense	27,316		68,484
Income tax expense	6,944		17,231
Net income	$	20,372	$	51,253

Per share information:
Basic net income per common share	$	0.45	$	1.14
Diluted net income per common share	$	0.45	$	1.14
Dividends declared per share	$	0.34	$	0.34

The accompanying notes are an integral part of these statements

SANDY SPRING BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/ (LOSS) – UNAUDITED


	Three Months Ended
	March 31,
(In thousands)	2024		2023
Net income	$	20,372	$	51,253
Other comprehensive income/ (loss):
Investments available-for-sale:
Net change in unrealized gains/ (losses) on investments available-for-sale	(7,703)		20,784
Related income tax (expense)/ benefit	1,954		(5,294)
Net investment gains reclassified into earnings	—		—
Related income tax expense	—		—
Net effect on other comprehensive income/ (loss)	(5,749)		15,490

Investments held-to-maturity:
Amortization of unrealized loss transferred from investments available-for-sale	371		405
Related income tax benefit	(94)		(103)
Net effect on other comprehensive income/ (loss)	277		302

Defined benefit pension plan:
Amortization of net loss	—		225
Related income tax benefit	—		(57)
Net effect on other comprehensive income/ (loss)	—		168
Total other comprehensive income/ (loss)	(5,472)		15,960
Comprehensive income	$	14,900	$	67,213

The accompanying notes are an integral part of these statements

SANDY SPRING BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY – UNAUDITED


(Dollars in thousands, except per share data)	Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income/ (Loss)		Total Stockholders' Equity
Balances at January 1, 2024	$	44,914	$	742,243	$	898,316	$	(97,331)	$	1,588,142
Net income	—		—		20,372		—		20,372
Other comprehensive loss, net of tax	—		—		—		(5,472)		(5,472)
Total comprehensive income									14,900
Common stock dividends - $0.34 per share	—		—		(15,311)		—		(15,311)
Stock compensation expense	—		1,230		—		—		1,230
Common stock issued pursuant to:

Stock option plan - 9,938 shares	10		99		—		—		109


Employee stock purchase plan - 16,648 shares	16		335		—		—		351
Restricted stock vesting, net of tax withholding	—		(57)		—		—		(57)


Balances at March 31, 2024	$	44,940	$	743,850	$	903,377	$	(102,803)	$	1,589,364

Balances at January 1, 2023	$	44,657	$	734,273	$	836,789	$	(131,951)	$	1,483,768
Net income	—		—		51,253		—		51,253
Other comprehensive income, net of tax	—		—		—		15,960		15,960
Total comprehensive income									67,213
Common stock dividends - $0.34 per share	—		—		(15,407)		—		(15,407)
Stock compensation expense	—		1,241		—		—		1,241
Common stock issued pursuant to:


Stock option plan - 7,530 shares	7		144		—		—		151

Employee stock purchase plan - 11,821 shares	12		399		—		—		411
Restricted stock vesting, net of tax withholding- 36,092 shares	36		(548)		—		—		(512)


Balances at March 31, 2023	$	44,712	$	735,509	$	872,635	$	(115,991)	$	1,536,865

The accompanying notes are an integral part of these statements

SANDY SPRING BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS – UNAUDITED


	Three Months Ended March 31,
(Dollars in thousands)	2024		2023
Operating activities:
Net income	$	20,372	$	51,253
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	6,343		5,689
Provision/ (credit) for credit losses	2,388		(21,536)
Share based compensation expense	1,230		1,241

Deferred income tax expense	2,189		8,498
Originations of loans held for sale	(67,801)		(67,837)
Proceeds from sales of loans held for sale	62,871		64,025
Gains on sales of loans held for sale	(861)		(744)

Investment securities gains	—		—

Tax (benefit)/ deficiency associated with share based compensation	130		(78)
Net increase in accrued interest receivable	(569)		(1,060)
Net decrease in other assets	567		6,236
Net decrease in accrued expenses and other liabilities	(19,643)		(14,345)
Other, net	(138)		80
Net cash provided by operating activities	7,078		31,422
Investing activities:
Sales/ (purchases) of other investments	2,211		(9,171)
Purchases of investments available-for-sale	(46,375)		—
Proceeds from sales of investment available-for-sale	—		—
Proceeds from maturities, calls and principal payments of investments available-for-sale	40,026		38,760

Proceeds from maturities, calls and principal payments of investments held-to-maturity	5,107		5,558
Net (increase)/ decrease in loans	(270)		2,330






Expenditures for premises and equipment	(5,727)		(3,833)
Net cash provided by/ (used in) investing activities	(5,028)		33,644
Financing activities:
Net increase in deposits	230,853		122,956
Net decrease in retail repurchase agreements, federal funds purchased and Federal Reserve Bank borrowings	(303,503)		(69,340)
Proceeds from FHLB advances	—		1,480,000
Repayment of FHLB advances	(50,000)		(1,280,000)


Proceeds from issuance of common stock	460		720
Stock tendered for payment of withholding taxes	(57)		(670)

Cash dividends paid	(15,311)		(15,249)
Net cash provided by/ (used in) financing activities	(137,558)		238,417
Net increase/ (decrease) in cash and cash equivalents	(135,508)		303,483
Cash and cash equivalents at beginning of period	545,898		192,232
Cash and cash equivalents at end of period	$	410,390	$	495,715

Supplemental disclosures:
Interest payments	$	94,959	$	52,919


Transfers from loans to other real estate owned	2,700		—

The accompanying notes are an integral part of these statements

SANDY SPRING BANCORP, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

Sandy Spring Bancorp, Inc. ("Bancorp" or, together with its subsidiaries, the "Company"), a Maryland corporation, is the bank holding company for Sandy Spring Bank (the “Bank”). Independent and community-oriented, the Bank offers a broad range of commercial banking, retail banking, mortgage services and trust services throughout central Maryland, Northern Virginia, and the greater Washington, D.C. market. The Bank also offers a comprehensive menu of wealth management services through its subsidiaries, West Financial Services, Inc. (“West Financial”) and SSB Wealth Management, Inc. (d/b/a Rembert Pendleton Jackson, "RPJ”).

Basis of Presentation

The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America (“GAAP”), prevailing practices within the financial services industry for interim financial information and Rule 10-01 of Regulation S-X. Accordingly, the interim financial statements do not include all of the information and notes required for complete financial statements. The following summary of significant accounting policies of the Company is presented to assist the reader in understanding the financial and other data presented in this report. Operating results for the three months ended March 31, 2024 are not necessarily indicative of the results that may be expected for any future periods or for the year ending December 31, 2024. In the opinion of management, all adjustments necessary for a fair presentation of the results of the interim periods have been included. Certain prior period amounts have been reclassified to conform to the current period presentation. Such reclassifications had no impact on the Company's net income and shareholders' equity. The Company has evaluated subsequent events through the date of the issuance of its financial statements.

These statements should be read in conjunction with the financial statements and accompanying notes included in the Company’s 2023 Annual Report on Form 10-K as filed with the Securities and Exchange Commission (“SEC”) on February 20, 2024. There have been no significant changes to any of the Company’s accounting policies as disclosed in the 2023 Annual Report on Form 10-K.

Principles of Consolidation

The unaudited Condensed Consolidated Financial Statements include the accounts of the Company and its wholly-owned subsidiary, Sandy Spring Bank, and its subsidiaries. Consolidation has resulted in the elimination of all intercompany accounts and transactions.

Use of Estimates

The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements, in addition to affecting the reported amounts of revenues earned and expenses incurred during the reporting period. Actual results could differ from those estimates. Estimates that could change significantly relate to the provision for credit losses and the related allowance, potential impairment of goodwill or other intangible assets, valuation of investment securities and the determination of whether available-for-sale debt securities with fair values less than amortized costs are impaired and require an allowance for credit losses, valuation of other real estate owned, valuation of share based compensation, the assessment that a liability should be recognized with respect to any matters under litigation, the calculation of current and deferred income taxes, and the actuarial projections related to pension expense and the related liability.

Cash Flows

For purposes of reporting cash flows, cash and cash equivalents include cash and due from banks, federal funds sold and interest-bearing deposits with banks (items with stated original maturity of three months or less).

Revenue from Contracts with Customers

The Company’s revenue includes net interest income on financial instruments and non-interest income. Specific categories of revenue are presented in the Condensed Consolidated Statements of Income. Most of the Company’s revenue is not within the scope of Accounting Standard Codification (“ASC”) 606 – Revenue from Contracts with Customers. For revenue within the scope of ASC 606, the Company provides services to customers and has related performance obligations. The revenue from such services is recognized upon satisfaction of all contractual performance obligations. The following discusses key revenue streams within the scope of this revenue recognition guidance.

West Financial and RPJ provide comprehensive investment management and financial planning services. Wealth management income is comprised of income for providing trust, estate and investment management services. Trust services include acting as a trustee for corporate or personal trusts. Investment management services include investment management, record-keeping and reporting of security portfolios. Fees for these services are recognized based on a contractually-agreed fixed percentage applied to net assets under management at the end of each reporting period. The Company does not charge/recognize any performance-based fees.

Service charges on deposit accounts are earned on depository accounts for consumer and commercial account holders and include fees for account and overdraft services. Account services include fees for event-driven services and periodic account maintenance activities. An obligation for event-driven services is satisfied at the time of the event when service is delivered and revenue recognized as earned. Obligation for maintenance activities is satisfied over the course of each month and revenue is recognized at month end. The overdraft services obligation is satisfied at the time of the overdraft and revenue is recognized as earned.

Loan Financing Receivables

The Company’s financing receivables consist primarily of loans that are stated at their principal balance outstanding, net of any unearned income, acquisition fair value marks and deferred loan origination fees and costs. Interest income on loans is accrued at the contractual rate based on the principal balance outstanding. Loan origination fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the related loan yield using the interest method.

Loans are considered past due or delinquent when the principal or interest due in accordance with the contractual terms of the loan agreement or any portion thereof remains unpaid after the due date of the scheduled payment. Immaterial shortfalls in payment amounts do not necessarily result in a loan being considered delinquent or past due. If any payments are past due and subsequent payments are resumed without payment of the delinquent amount, the loan shall continue to be considered past due. Whenever any loan is reported delinquent on a principal or interest payment or portion thereof, the amount reported as delinquent is the outstanding principal balance of the loan.

Loans, except for consumer installment loans, are placed into non-accrual status when any portion of the loan principal or interest becomes 90 days past due. Management may determine that certain circumstances warrant earlier discontinuance of interest accruals on specific loans if an evaluation of other relevant factors (such as bankruptcy, interruption of cash flows, etc.) indicates collection of amounts contractually due is unlikely. These loans are considered, collectively, to be non-performing loans. Consumer installment loans that are not secured by real estate are not placed on non-accrual, but are charged down to their net realizable value when they are four months past due. Loans designated as non-accrual have all previously accrued but unpaid interest reversed. Interest income is not recognized on non-accrual loans. All payments received on non-accrual loans are applied using a cost-recovery method to reduce the outstanding principal balance until the loan returns to accrual status. Loans may be returned to accrual status when all principal and interest amounts contractually due are brought current and future payments are reasonably assured.

On January 1, 2023, the Company adopted provisions of ASU 2022-02, "Financial Instruments - Credit Losses (Topic 326)", which eliminated accounting guidance for TDRs by creditors. Prior to the effective adoption date, the Company considered loans to be TDRs if their terms were restructured (e.g., interest rates, loan maturity date, payment and amortization period, etc.) in circumstances that provided a payment concession to a borrower experiencing financial difficulty. Loans could be removed from a TDR category if the borrower no longer experienced financial difficulty, a re-underwriting event took place, and the revised loan terms of the subsequent restructuring agreement were considered to be consistent with terms that could be obtained in the market for loans with comparable credit risk. Subsequent to the effective adoption date, the Company continues to offer modifications to certain borrowers experiencing financial difficulty, mainly in the form of interest rate concessions or term extensions, without classifying and accounting for them as TDRs.

Allowance for Credit Losses

The allowance for credit losses (“allowance” or “ACL”) represents an amount which, in management's judgment, reflects the lifetime expected losses that may be sustained on outstanding loans at the balance sheet date based on the evaluation of the size and current risk characteristics of the loan portfolio, past events, current conditions, reasonable and supportable forecasts of future economic conditions and prepayment experience. The allowance is measured and recorded upon the initial recognition of a financial asset. The allowance is reduced by charge-offs, net of recoveries of previous losses, and is increased or decreased by a provision or credit for credit losses, which is recorded as a current period expense.

Determination of the appropriateness of the allowance is inherently complex and requires the use of significant and highly subjective estimates. The reasonableness of the allowance is reviewed by the Risk Committee of the Board of Directors and formally approved quarterly by that same committee of the Board.

The Company’s methodology for estimating the allowance includes: (1) a collective quantified reserve that reflects the Company’s historical default and loss experience adjusted for expected economic conditions throughout a reasonable and supportable period, which management has determined to be two years, followed by a two year reversion period, and the Company’s prepayment and curtailment rates; (2) collective qualitative factors that consider the expected impact of certain factors not fully captured in the collective quantified reserve, including concentrations of the loan portfolio, expected changes to the economic forecasts, large relationships, early delinquencies, and factors related to credit administration, including, among others, loan-to-value ratios, borrowers’ risk rating and credit score migrations; and (3) individual allowances on collateral-dependent loans where borrowers are experiencing financial difficulty or when the Company determines that the foreclosure is probable. The Company excludes accrued interest from the measurement of the allowance as the Company has a non-accrual policy to reverse any accrued, uncollected interest income as loans are moved to non-accrual status.

Loans are pooled into segments based on the similar risk characteristics of the underlying borrowers, in addition to consideration of collateral type, industry and business purpose of the loans. Portfolio segments used to estimate the allowance are the same as portfolio segments used for general credit risk management purposes. Refer to Note 3 for more details on the Company’s portfolio segments.

The Company applies two calculation methodologies to estimate the collective quantified component of the allowance: expected loss method and weighted average remaining life method. Allowance estimates on commercial acquisition, development and construction (“AD&C”) and residential construction segments are based on the weighted average remaining life method. Allowance estimates on all other portfolio segments are based on the expected loss method. Collective calculation methodologies utilize the Company’s historical default and loss experience adjusted for future economic forecasts. The reasonable and supportable forecast period represents a two-year economic outlook for the applicable economic variables. Following the end of the reasonable and supportable forecast period expected losses revert back to the historical mean over the next two years on a straight-line basis. Economic variables that have the most significant impact on the allowance include: unemployment rate, gross domestic product, commercial real estate price index, residential real estate house price index and business bankruptcies. Contractual loan level cash flows within the expected loss methodology are adjusted for the Company’s historical prepayment and curtailment rate experience.

The individual reserve assessment is applied to collateral dependent loans where borrowers are experiencing financial difficulty or when the Company determines that a foreclosure is probable. The determination of the fair value of the collateral depends on whether a repayment of the loan is expected to be from the sale or the operation of the collateral. When a repayment is expected from the operation of the collateral, the Company uses the present value of expected cash flows from the operation of the collateral as the fair value. When the repayment of the loan is expected from the sale of the collateral the fair value of the collateral is based on an observable market price or the collateral’s appraised value, less estimated costs to sell. Third-party appraisals used in the individual reserve assessment are conducted at least annually with underlying assumptions that are reviewed by management. Third-party appraisals may be obtained on a more frequent basis if deemed necessary. Internal evaluations of collateral value are conducted quarterly to ensure any further deterioration of the collateral value is recognized on a timely basis. During the individual reserve assessment, management also considers the potential future changes in the value of the collateral over the remainder of the loan’s remaining life. The Company may receive updated appraisals which contradict the preliminary determination of fair value used to establish an individual allowance on a loan. In these instances the individual allowance is adjusted to reflect the Company’s evaluation of the updated appraised fair value. In the event a loss was previously determined and the loan was charged down to the estimated fair value based on a previous appraisal, the balance of the partially charged-off loan is not subsequently increased, but could be further decreased depending on the direction of the change in fair value. Payments on fully or partially charged-off loans are accounted for under the cost-recovery method. Under this method, all payments received are applied on a cash basis to reduce the outstanding principal balance, then to recognize a recovery of all previously charged-off amounts before any interest income may be recognized. Based on the individual reserve assessment, if the Company determines that the fair value of the collateral is less than the amortized cost basis of the loan, an individual allowance will be established measured as the difference between the fair value of the collateral (less costs to sell) and the amortized cost basis of the loan. Once a loss has been determined, the loan is charged-down to its estimated fair value.

Large groups of smaller non-accrual homogeneous loans are not individually evaluated for allowance and include residential permanent and construction mortgages and consumer installment loans. These portfolios are reserved for on a collective basis using historical loss rates of similar loans over the weighted average life of each portfolio.

Unfunded lending commitments are reviewed to determine if they are considered unconditionally cancellable. The Company establishes reserves for unfunded commitments that do not meet that criteria as a liability in the Condensed Consolidated Statements of Condition. Changes to the liability are recorded through the provision for credit losses in the Condensed

Consolidated Statements of Income. The establishment of the reserves for unfunded commitments considers both the likelihood that the funding will occur and an estimate of the expected credit losses over the life of the respective commitments.

Management believes it uses relevant information available to make determinations about the allowance and reserve for unfunded commitments and that it has established the existing reserves in accordance with GAAP. However, the determination of the allowance requires significant judgment, and estimates of expected lifetime losses in the loan portfolio can vary significantly from the amounts actually observed. While management uses available information to recognize expected losses, future additions to the allowance may be necessary based on changes in the loans comprising the portfolio, changes in the current and forecasted economic conditions, changes to the interest rate environment which may directly impact prepayment and curtailment rate assumptions, and changes in the financial condition of borrowers.

Held-to-maturity debt securities

Debt securities that are purchased with the positive intent and ability to be held until their maturity are classified as held-to-maturity (“HTM”). HTM debt securities are recorded at cost adjusted for amortization of premiums and accretion of discounts. Transfers of debt securities from available-for-sale ("AFS") category to HTM category are made at fair value as of the transfer date. The unrealized gain or loss at the date of transfer continues to be reported in accumulated other comprehensive income and in the carrying amount of the HTM securities. Both amounts are amortized over the remaining life of the security as a yield adjustment in interest income and effectively offset each other.

Leases

The Company determines if an arrangement is a lease at inception. All of the Company’s leases are currently classified as operating leases and are included in other assets and other liabilities on the Company’s Condensed Consolidated Statements of Condition. Periodic operating lease costs are recorded in occupancy expenses of premises on the Company's Condensed Consolidated Statements of Income.

Right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset for the lease term, and lease liabilities represent the Company’s obligation to make lease payments arising from the lease arrangements. Operating lease ROU assets and liabilities are recognized at the lease commencement date based on the present value of the expected future lease payments over the remaining lease term. In determining the present value of future lease payments, the Company uses its incremental borrowing rate based on the information available at the lease commencement date. The operating ROU assets are adjusted for any lease payments made at or before the lease commencement date, initial direct costs, any lease incentives received and, for acquired leases, any favorable or unfavorable fair value adjustments. The present value of the lease liability may include the impact of options to extend or terminate the lease when it is reasonably certain that the Company will exercise such options provided in the lease terms. Lease expense is recognized on a straight-line basis over the expected lease term. Lease agreements that include lease and non-lease components, such as common area maintenance charges, are accounted for separately.

Segment Reporting

Operating segments are components of a business about which separate financial information is available and evaluated regularly by the chief operating decision maker in deciding how to allocate resources and assessing performance. The Bank is the Company’s only reportable operating segment upon which management makes decisions regarding how to allocate resources and assess performance. While the Company’s chief operating decision maker has some limited financial information about the Bank's various financial products and services, that information is not complete since it does not include a full allocation of revenue, costs, and capital from key corporate functions; therefore, the Company evaluates financial performance on the Company-wide basis. Management continues to evaluate these business units for separate reporting as facts and circumstances change.

Goodwill and Other Intangible Assets

Goodwill represents the excess purchase price paid over the fair value of the net assets acquired in a business combination. Goodwill is not amortized but is tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. The current accounting guidance provides the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. The Company assesses qualitative factors on a quarterly basis. Based on the assessment of these qualitative factors, if it is determined that it is more likely than not that the fair value of a reporting unit remains in excess of the carrying value, then performing a quantitative impairment test is not necessary. However, if it is determined that it is more likely than not that the carrying value exceeds the fair value, a quantitative analysis is required to determine whether an impairment exists.

As of October 1, 2023, the Company’s annual goodwill impairment assessment date, the Company performed an impairment test for its two reporting units: Community Banking and Investment Management. The results of the 2023 annual goodwill

impairment test for the two reporting units, which included both qualitative and quantitative assessments, indicated that the estimated fair value of each reporting unit exceeded its carrying amount and that the goodwill assigned to the Community Banking reporting unit may be at risk of impairment in future periods. The Company provided detailed disclosures regarding the 2023 impairment analysis and the results of the testing in its annual financial statements for the year ended December 31, 2023 in its 2023 Annual Report on Form 10-K. In addition to the annual impairment testing process, on a quarterly basis, the Company monitors each reporting unit for any triggering events and performs qualitative assessments of impairment indicators.

During the first quarter of 2024, the Company determined that there were no triggering events and completed the qualitative assessment of impairment indicators, which included an assessment of changes in macroeconomic conditions and comparison of the actual operating performance to the forecast used in the most recent annual impairment test. Based on these considerations, the Company concluded that it was more-likely-than-not that the fair value of our reporting units remained above the respective carrying amounts as of March 31, 2024.

Other intangible assets have finite lives and are reviewed for impairment annually. These assets are amortized over their estimated useful lives on a straight-line or sum-of-the-years basis over varying periods that initially did not exceed 15 years. Intangible assets are reviewed or analyzed periodically to determine if it appears that their value has diminished beyond the value in the financial statements. The review or analysis of the intangible assets did not indicate that any impairment occurred during the first quarter of 2024.

Adopted Accounting Pronouncements

In March 2023, the FASB issued ASU 2023-02, "Investments—Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method". ASU 2023-02 allows reporting entities to elect to account for qualifying tax equity investments using the proportional amortization method, regardless of the program giving rise to the related income tax credits. The amendment in this ASU also removes the specialized guidance for low-income-housing tax credit investments that are not accounted for using the proportional amortization method and instead require that those LIHTC investments be accounted for using the guidance in other GAAP. The Company fully adopted this update effective January 1, 2024 on a prospective basis. The adoption of this pronouncement did not have a material impact on the Condensed Consolidated Financial Statements.

Pending Accounting Pronouncements applicable to the Company

In November 2023, the FASB issued ASU 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures", which requires public entities to disclose information about their reportable segments' significant expenses on an interim and annual basis. The ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Entities must adopt this ASU on a retrospective basis. Early adoption is permitted. Currently, the Company does not expect that the adoption of this standard will have a material impact on its Consolidated Financial Statements.

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures”. ASU 2023-09 improves the transparency of income tax disclosures by requiring entities to provide greater disaggregation of information on income taxes paid and on the rate reconciliation disclosures. This pronouncement also requires qualitative discussion of the primary state and local jurisdictions for income taxes and the type of reconciling categories. For public business entities, this ASU is effective for fiscal years beginning after December 15, 2024. The guidance will be applied on a prospective basis with the option to apply the standard retrospectively. Early adoption is permitted. The Company does not expect that the adoption of this standard will have a material impact on its Consolidated Financial Statements.

NOTE 2 – INVESTMENTS

Investments available-for-sale and held-to-maturity

The amortized cost and estimated fair values of investments available-for-sale and held-to-maturity at the dates indicated are presented in the following table:


	March 31, 2024								December 31, 2023
(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Available-for-sale debt securities:
U.S. treasuries and government agencies	$	96,866	$	—	$	(4,630)	$	92,236	$	101,678	$	—	$	(4,751)	$	96,927
State and municipal	310,502		—		(46,516)		263,986		311,505		1		(43,292)		268,214
Mortgage-backed and asset-backed	819,214		83		(74,778)		744,519		807,636		181		(70,277)		737,540




Total available-for-sale debt securities	$	1,226,582	$	83	$	(125,924)	$	1,100,741	$	1,220,819	$	182	$	(118,320)	$	1,102,681
Held-to-maturity debt securities:


Mortgage-backed and asset-backed	231,354		—		(38,556)		192,798		236,165		—		(35,754)		200,411
Total held-to-maturity debt securities	$	231,354	$	—	$	(38,556)	$	192,798	$	236,165	$	—	$	(35,754)	$	200,411
Total debt securities	$	1,457,936	$	83	$	(164,480)	$	1,293,539	$	1,456,984	$	182	$	(154,074)	$	1,303,092

Any unrealized losses in the U.S. treasuries and government agencies, state and municipal, mortgage-backed and asset-backed available-for-sale debt securities at March 31, 2024 are due to changes in interest rates and not credit-related events. As such, no allowance for credit losses is required at March 31, 2024. Unrealized losses on available-for-sale debt securities are expected to recover over time as these securities approach maturity. The Company does not intend to sell, nor is it more likely than not it will be required to sell, these securities and has sufficient liquidity to hold these securities for an adequate period of time, which may be maturity, to allow for any anticipated recovery in fair value.

All held-to-maturity investments are either issued by a direct governmental entity or a government-sponsored entity and have no historical evidence supporting expected credit losses. Therefore, the Company has estimated these losses at zero and will monitor this assumption in the future for any economic or governmental policies that could affect this assumption.

The available-for-sale and held-to-maturity mortgage-backed securities portfolio at March 31, 2024 is composed entirely of either the most senior tranches of GNMA, FNMA or FHLMC collateralized mortgage obligations ($451.9 million), GNMA, FNMA or FHLMC mortgage-backed securities ($557.9 million) or SBA asset-backed securities ($40.8 million).

Gross unrealized losses and fair value by length of time that the individual available-for-sale debt securities have been in an unrealized loss position at the dates indicated are presented in the following table:


	March 31, 2024
	Number of Securities	Less Than 12 Months				12 Months or More				Total
(Dollars in thousands)		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. treasuries and government agencies	9	$	—	$	—	$	92,236	$	4,630	$	92,236	$	4,630
State and municipal	123	3,789		48		258,977		46,468		262,766		46,516
Mortgage-backed and asset-backed	332	55,845		436		664,980		74,342		720,825		74,778

Total	464	$	59,634	$	484	$	1,016,193	$	125,440	$	1,075,827	$	125,924


	December 31, 2023
	Number of Securities	Less Than 12 Months				12 Months or More				Total
(Dollars in thousands)		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. treasuries and government agencies	10	$	—	$	—	$	96,927	$	4,751	$	96,927	$	4,751
State and municipal	123	4,162		84		262,081		43,208		266,243		43,292
Mortgage-backed and asset-backed	321	22,731		106		691,281		70,171		714,012		70,277

Total	454	$	26,893	$	190	$	1,050,289	$	118,130	$	1,077,182	$	118,320

The Company has allocated mortgage-backed securities into the four maturity groupings reflected in the following tables using the expected average life of the individual securities based on statistics provided by independent third-party industry sources.

Expected maturities will differ from contractual maturities as borrowers may have the right to prepay obligations with or without prepayment penalties.

The estimated fair values and amortized costs of available-for-sale and held-to-maturity debt securities by contractual maturity are provided in the following tables:


	March 31, 2024				December 31, 2023
(In thousands)	Fair Value		Amortized Cost		Fair Value		Amortized Cost
Available-for-sale debt securities
U.S. treasuries and government agencies:
One year or less	$	12,922	$	12,988	$	17,798	$	17,979
One to five years	79,314		83,878		79,129		83,699
Five to ten years	—		—		—		—
After ten years	—		—		—		—
State and municipal:
One year or less	28,318		28,739		22,345		22,793
One to five years	28,586		29,770		33,282		34,288
Five to ten years	48,992		57,965		46,355		54,487
After ten years	158,090		194,028		166,232		199,937
Mortgage-backed and asset-backed:
One year or less	26,396		26,704		20,814		21,111
One to five years	27,290		28,067		29,823		30,666
Five to ten years	267,178		292,078		256,924		280,209
After ten years	423,655		472,365		429,979		475,650










Total available-for-sale debt securities	$	1,100,741	$	1,226,582	$	1,102,681	$	1,220,819


	March 31, 2024				December 31, 2023
(In thousands)	Fair Value		Amortized Cost		Fair Value		Amortized Cost
Held-to-maturity debt securities










Mortgage-backed and asset-backed:
One year or less	$	—	$	—	$	—	$	—
One to five years	—		—		—		—
Five to ten years	30,070		33,326		31,434		34,458
After ten years	162,728		198,028		168,977		201,707
Total held-to-maturity debt securities	$	192,798	$	231,354	$	200,411	$	236,165

At March 31, 2024 and December 31, 2023, available-for-sale and held-to-maturity debt securities with a book value of $489.0 million and $729.0 million, respectively, were pledged and designated as collateral for certain government deposits, public and trust funds, securities sold under repurchase agreements and other purposes as required or permitted by law. The outstanding balance of no single issuer, except for U.S. Agencies securities, exceeded ten percent of stockholders' equity at March 31, 2024 and December 31, 2023.

Other investments

Other investments are presented in the following table:


(In thousands)	March 31, 2024		December 31, 2023
Federal Reserve Bank stock, at cost	$	39,152	$	39,125
Federal Home Loan Bank of Atlanta stock, at cost	33,566		35,805
Other	677		677
Total other investments, at cost	$	73,395	$	75,607

NOTE 3 – LOANS

Outstanding loan balances at March 31, 2024 and December 31, 2023 are net of unearned income, including net deferred loan fees of $7.6 million and $7.0 million, respectively, at the end of each period.

The loan portfolio segment balances at the dates indicated are presented in the following table:


(In thousands)	March 31, 2024		December 31, 2023
Commercial real estate:
Commercial investor real estate	$	4,997,879	$	5,104,425
Commercial owner-occupied real estate	1,741,113		1,755,235
Commercial AD&C	1,090,259		988,967
Commercial business	1,509,592		1,504,880
Total commercial loans	9,338,843		9,353,507
Residential real estate:
Residential mortgage	1,511,624		1,474,521
Residential construction	97,685		121,419
Consumer	416,132		417,542
Total residential and consumer loans	2,025,441		2,013,482
Total loans	$	11,364,284	$	11,366,989

Portfolio Segments

The Company currently manages its credit products and the respective exposure to credit losses (credit risk) by the following specific portfolio segments (classes) which are levels at which the Company develops and documents its systematic methodology to determine the allowance for credit losses attributable to each respective portfolio segment. These segments are:

•Commercial investor real estate loans - Commercial investor real estate loans consist of loans secured by nonowner-occupied properties where an established banking relationship exists and involves investment properties for warehouse, retail, and office space with a history of occupancy and cash flow. This commercial investor real estate category contains mortgage loans to the developers and owners of commercial real estate where the borrower intends to operate or sell the property at a profit and use the income stream or proceeds from the sale(s) to repay the loan.

•Commercial owner-occupied real estate loans - Commercial owner-occupied real estate loans consist of commercial mortgage loans secured by owner-occupied properties where an established banking relationship exists and involves a variety of property types to conduct the borrower’s operations. The decision to extend a loan is based upon the borrower’s financial health and the ability of the borrower and the business to repay. The primary source of repayment for this type of loan is the cash flow from the operations of the business.

•Commercial acquisition, development and construction loans - Commercial acquisition, development and construction loans are intended to finance the construction of commercial properties and include loans for the acquisition and development of land. Construction loans represent a higher degree of risk than permanent real estate loans and may be affected by a variety of additional factors such as the borrower’s ability to control costs and adhere to time schedules and the risk that constructed units may not be absorbed by the market within the anticipated time frame or at the anticipated price. The loan commitment on these loans often includes an interest reserve that allows the lender to periodically advance loan funds to pay interest charges on the outstanding balance of the loan.

•Commercial business loans - Commercial business loans are made to provide funds for equipment and general corporate needs. Repayment of a loan primarily comes from the funds obtained from the operation of the borrower’s business. Commercial business loans also include lines of credit that are utilized to finance a borrower’s short-term credit needs and/or to finance a percentage of eligible receivables and inventory.

•Residential mortgage loans - The residential mortgage loans category contains permanent mortgage loans principally to consumers secured by residential real estate. Residential real estate loans are evaluated for the adequacy of repayment sources at the time of approval, based upon measures including credit scores, debt-to-income ratios, and collateral values. Loans may be either conforming or non-conforming.

•Residential construction loans - The Company makes residential construction loans generally to provide interim financing on residential property during the construction period. Borrowers are typically individuals who will ultimately occupy the single-family dwelling. Loan funds are disbursed periodically as pre-specified stages of completion are attained based upon site inspections.

•Consumer loans - This category of loans includes primarily home equity loans and lines, installment loans, personal lines of credit, and other loans. The home equity category consists mainly of revolving lines of credit to consumers which are secured by residential real estate. These loans are typically secured with second mortgages on the homes. Other consumer loans include installment loans used by customers to purchase automobiles, boats and recreational vehicles.

NOTE 4 – CREDIT QUALITY ASSESSMENT

Allowance for Credit Losses

Summary information on the allowance for credit losses on loans for the period indicated is provided in the following table:


	Three Months Ended March 31,
(In thousands)	2024		2023
Balance at beginning of period	$	120,865	$	136,242



Provision/ (credit) for credit losses - loans (1)	3,331		(18,945)
Loan charge-offs	(1,620)		(171)
Loan recoveries	520		487
Net charge-offs	(1,100)		316
Balance at period end	$	123,096	$	117,613

(1) Excludes the total credit to the provision on unfunded loan commitments for the three months ended March 31, 2024 and March 31, 2023 of $0.9 million and $2.6 million, respectively.

The following table provides summary information regarding collateral dependent loans individually evaluated for credit loss at the dates indicated:


(In thousands)	March 31, 2024		December 31, 2023
Collateral dependent loans individually evaluated for credit loss with an allowance	$	69,068	$	72,179
Collateral dependent loans individually evaluated for credit loss without an allowance	12,047		15,989
Total individually evaluated collateral dependent loans	$	81,115	$	88,168

Allowance for credit losses related to loans evaluated individually	$	20,889	$	24,000
Allowance for credit losses related to loans evaluated collectively	102,207		96,865
Total allowance for credit losses - loans	$	123,096	$	120,865

The following tables provide information on the activity in the allowance for credit losses by the respective loan portfolio segment for the period indicated:


	For the Three Months Ended March 31, 2024
	Commercial Real Estate												Residential Real Estate
(Dollars in thousands)	Commercial Investor R/E			Commercial Owner- Occupied R/E			Commercial AD&C			Commercial Business			Residential Mortgage			Residential Construction			Consumer			Total
Balance at beginning of period	$	61,439		$	7,536		$	8,287		$	31,932		$	8,890		$	729		$	2,052		$	120,865
Provision/ (credit) for credit losses - loans	2,858			(656)			2,275			(1,345)			195			(306)			310			3,331
Charge-offs	(1)			—			—			(1,551)			—			—			(68)			(1,620)
Recoveries	3			27			283			1			6			—			200			520
Net (charge-offs)/ recoveries	2			27			283			(1,550)			6			—			132			(1,100)
Balance at end of period	$	64,299		$	6,907		$	10,845		$	29,037		$	9,091		$	423		$	2,494		$	123,096

Total loans	$	4,997,879		$	1,741,113		$	1,090,259		$	1,509,592		$	1,511,624		$	97,685		$	416,132		$	11,364,284
Allowance for credit losses on loans to total loans ratio	1.29		%	0.40		%	0.99		%	1.92		%	0.60		%	0.43		%	0.60		%	1.08		%

Average loans	$	5,057,334		$	1,746,042		$	1,030,763		$	1,508,336		$	1,491,277		$	110,456		$	417,539		$	11,361,747
Annualized net charge-offs/ (recoveries) to average loans	—		%	(0.01)		%	(0.11)		%	0.41		%	—		%	—		%	(0.13)		%	0.04		%

Balance of loans individually evaluated for credit loss	$	69,000		$	4,394		$	557		$	7,164		$	—		$	—		$	—		$	81,115
Allowance related to loans evaluated individually	$	14,874		$	1,126		$	102		$	4,787		$	—		$	—		$	—		$	20,889
Individual allowance to loans evaluated individually ratio	21.56		%	25.63		%	18.31		%	66.82		%	—		%	—		%	—		%	25.75		%
Contractual balance of individually evaluated loans	$	69,831		$	5,416		$	581		$	9,535		$	—		$	—		$	—		$	85,363

Balance of loans collectively evaluated for credit loss	$	4,928,879		$	1,736,719		$	1,089,702		$	1,502,428		$	1,511,624		$	97,685		$	416,132		$	11,283,169
Allowance related to loans evaluated collectively	$	49,425		$	5,781		$	10,743		$	24,250		$	9,091		$	423		$	2,494		$	102,207
Collective allowance to loans evaluated collectively ratio	1.00		%	0.33		%	0.99		%	1.61		%	0.60		%	0.43		%	0.60		%	0.91		%


	For the Year Ended December 31, 2023
	Commercial Real Estate												Residential Real Estate
(Dollars in thousands)	Commercial Investor R/E			Commercial Owner- Occupied R/E			Commercial AD&C			Commercial Business			Residential Mortgage			Residential Construction			Consumer			Total
Balance at beginning of period	$	64,737		$	11,646		$	18,646		$	28,027		$	9,424		$	1,337		$	2,425		$	136,242



Provision for credit losses - loans	(3,323)			(4,215)			(10,359)			4,051			(488)			(608)			1,048			(13,894)
Charge-offs	—			—			—			(449)			(160)			—			(2,005)			(2,614)
Recoveries	25			105			—			303			114			—			584			1,131
Net (charge-offs)/ recoveries	25			105			—			(146)			(46)			—			(1,421)			(1,483)
Balance at end of period	$	61,439		$	7,536		$	8,287		$	31,932		$	8,890		$	729		$	2,052		$	120,865

Total loans	$	5,104,425		$	1,755,235		$	988,967		$	1,504,880		$	1,474,521		$	121,419		$	417,542		$	11,366,989
Allowance for credit losses on loans to total loans ratio	1.20		%	0.43		%	0.84		%	2.12		%	0.60		%	0.60		%	0.49		%	1.06		%

Average loans	$	5,133,279		$	1,766,839		$	1,023,669		$	1,440,382		$	1,380,496		$	187,599		$	421,963		$	11,354,227
Net charge-offs/ (recoveries) to average loans	—		%	(0.01)		%	—		%	0.01		%	—		%	—		%	0.34		%	0.01		%

Balance of loans individually evaluated for credit loss	$	72,218		$	4,640		$	1,259		$	10,051		$	—		$	—		$	—		$	88,168
Allowance related to loans evaluated individually	$	15,353		$	1,159		$	102		$	7,386		$	—		$	—		$	—		$	24,000
Individual allowance to loans evaluated individually ratio	21.26		%	24.98		%	8.10		%	73.49		%	—		%	—		%	—		%	27.22		%
Contractual balance of individually evaluated loans	$	72,712		$	5,623		$	1,270		$	11,500		$	—		$	—		$	—		$	91,105

Balance of loans collectively evaluated for credit loss	$	5,032,207		$	1,750,595		$	987,708		$	1,494,829		$	1,474,521		$	121,419		$	417,542		$	11,278,821
Allowance related to loans evaluated collectively	$	46,086		$	6,377		$	8,185		$	24,546		$	8,890		$	729		$	2,052		$	96,865
Collective allowance to loans evaluated collectively ratio	0.92		%	0.36		%	0.83		%	1.64		%	0.60		%	0.60		%	0.49		%	0.86		%

Credit Quality

The following tables provide information on the credit quality of the loan portfolio for the periods indicated below:


	For the Three Months Ended March 31, 2024
	Commercial Real Estate								Residential Real Estate
(In thousands)	Commercial Investor R/E		Commercial Owner- Occupied R/E		Commercial AD&C		Commercial Business		Residential Mortgage		Residential Construction		Consumer		Total
Analysis of non-accrual loan activity:
Balance at beginning of period	$	58,658	$	4,640	$	1,259	$	10,051	$	12,332	$	443	$	4,102	$	91,485
Loans placed on non-accrual	715		—		—		25		362		—		388		1,490
Non-accrual balances transferred to OREO	(2,700)		—		—		—		—		—		—		(2,700)
Non-accrual balances charged-off	(1)		—		—		(1,549)		—		—		—		(1,550)
Net payments or draws	(1,093)		(246)		(703)		(1,363)		(288)		99		(423)		(4,017)
Non-accrual loans brought current	—		—		—		—		(571)		—		(56)		(627)
Balance at end of period	$	55,579	$	4,394	$	556	$	7,164	$	11,835	$	542	$	4,011	$	84,081


	For the Year Ended December 31, 2023
	Commercial Real Estate								Residential Real Estate
(In thousands)	Commercial Investor R/E		Commercial Owner- Occupied R/E		Commercial AD&C		Commercial Business		Residential Mortgage		Residential Construction		Consumer		Total
Analysis of non-accrual loan activity:
Balance at beginning of period	$	9,943	$	5,019	$	—	$	7,322	$	7,439	$	—	$	5,059	$	34,782

Loans placed on non-accrual	62,725		—		2,111		6,271		7,871		449		2,450		81,877
Non-accrual balances transferred to OREO	—		—		—		—		—		—		—		—
Non-accrual balances charged-off	—		—		—		(441)		(160)		—		(1,757)		(2,358)
Net payments or draws	(14,010)		(379)		(852)		(2,588)		(1,667)		(6)		(1,528)		(21,030)
Non-accrual loans brought current	—		—		—		(513)		(1,151)		—		(122)		(1,786)
Balance at end of period	$	58,658	$	4,640	$	1,259	$	10,051	$	12,332	$	443	$	4,102	$	91,485


	March 31, 2024
	Commercial Real Estate								Residential Real Estate
(In thousands)	Commercial Investor R/E		Commercial Owner- Occupied R/E		Commercial AD&C		Commercial Business		Residential Mortgage		Residential Construction		Consumer		Total
Performing loans:
Current	$	4,932,570	$	1,729,205	$	1,083,907	$	1,499,245	$	1,486,341	$	96,404	$	410,662	$	11,238,334
30-59 days	9,681		1,538		5,796		1,658		12,336		739		989		32,737
60-89 days	49		5,976		—		1,505		772		—		470		8,772
Total performing loans	4,942,300		1,736,719		1,089,703		1,502,408		1,499,449		97,143		412,121		11,279,843
Non-performing loans:
Non-accrual loans	55,579		4,394		556		7,164		11,835		542		4,011		84,081
Loans greater than 90 days past due	—		—		—		20		340		—		—		360

Total non-performing loans	55,579		4,394		556		7,184		12,175		542		4,011		84,441
Total loans	$	4,997,879	$	1,741,113	$	1,090,259	$	1,509,592	$	1,511,624	$	97,685	$	416,132	$	11,364,284


	December 31, 2023
	Commercial Real Estate								Residential Real Estate
(In thousands)	Commercial Investor R/E		Commercial Owner- Occupied R/E		Commercial AD&C		Commercial Business		Residential Mortgage		Residential Construction		Consumer		Total
Performing loans:
Current	$	5,044,647	$	1,748,449	$	986,859	$	1,494,426	$	1,445,785	$	118,976	$	409,607	$	11,248,749
30-59 days	1,120		2,056		849		383		14,026		2,000		3,298		23,732
60-89 days	—		90		—		—		2,036		—		535		2,661
Total performing loans	5,045,767		1,750,595		987,708		1,494,809		1,461,847		120,976		413,440		11,275,142
Non-performing loans:
Non-accrual loans	58,658		4,640		1,259		10,051		12,332		443		4,102		91,485
Loans greater than 90 days past due	—		—		—		20		342		—		—		362

Total non-performing loans	58,658		4,640		1,259		10,071		12,674		443		4,102		91,847
Total loans	$	5,104,425	$	1,755,235	$	988,967	$	1,504,880	$	1,474,521	$	121,419	$	417,542	$	11,366,989

The following tables present the average principal balance of total non-accrual loans and contractual interest due on non-accrual loans for the periods indicated below:


	For the Three Months Ended March 31, 2024
	Commercial Real Estate								Residential Real Estate
(In thousands)	Commercial Investor R/E		Commercial Owner- Occupied R/E		Commercial AD&C		Commercial Business		Residential Mortgage		Residential Construction		Consumer		Total
Average non-accrual loans for the period	$	57,119	$	4,517	$	908	$	8,608	$	12,084	$	493	$	4,057	$	87,786
Contractual interest income due on non- accrual loans during the period	$	923	$	71	$	14	$	154	$	149	$	6	$	97	$	1,414


	For the Year Ended December 31, 2023
	Commercial Real Estate								Residential Real Estate
(In thousands)	Commercial Investor R/E		Commercial Owner- Occupied R/E		Commercial AD&C		Commercial Business		Residential Mortgage		Residential Construction		Consumer		Total
Average non-accrual loans for the period	$	28,650	$	4,795	$	812	$	9,640	$	10,547	$	223	$	4,146	$	58,813
Contractual interest income due on non- accrual loans during the period	$	760	$	298	$	41	$	716	$	432	$	6	$	299	$	2,552

There was no interest income recognized on non-accrual loans during the three months ended March 31, 2024. See Note 1 for additional information on the Company's policies for non-accrual loans. Loans designated as non-accrual have all previously accrued but unpaid interest reversed from interest income. During the three months ended March 31, 2024 new loans placed on non-accrual status totaled $1.5 million and the related amount of reversed uncollected accrued interest was insignificant.

The credit quality indicators for commercial loans are developed through review of individual borrowers on an ongoing basis. Each borrower is evaluated at least annually with more frequent evaluations of classified and criticized loans. The indicators represent the rating for loans as of the date presented and are based on the most recent credit review performed. These credit quality indicators are defined as follows:

Pass - A pass rated credit is not adversely classified because it does not display any of the characteristics for adverse classification.

Special mention – A special mention credit has potential weaknesses that deserve management’s close attention. If uncorrected, such weaknesses may result in deterioration of the repayment prospects or collateral position at some future date. Special mention assets are not adversely classified and do not warrant adverse classification.

Substandard – A substandard loan is inadequately protected by the current net worth and payment capacity of the obligor or of the collateral pledged, if any. Loans classified as substandard generally have a well-defined weakness, or weaknesses, that jeopardize the liquidation of the debt. These loans are characterized by the distinct possibility of loss if the deficiencies are not corrected.

Doubtful – A loan that is classified as doubtful has all the weaknesses inherent in a loan classified as substandard with added characteristics that the weaknesses make collection or liquidation in full highly questionable and improbable, on the basis of currently existing facts, conditions and values.

Loss – Loans classified as a loss are considered uncollectible and of such little value that their continuing to be carried as a loan is not warranted. This classification is not necessarily equivalent to no potential for recovery or salvage value, but rather that it is not appropriate to defer a full write-off even though partial recovery may be effected in the future.

The following table provides information about credit quality indicators by the year of origination as of March 31, 2024:


	March 31, 2024
	Term Loans by Origination Year												Revolving
(In thousands)	2024		2023		2022		2021		2020		Prior		Loans		Total
Commercial Investor R/E:
Pass	$	109,352	$	361,098	$	1,345,217	$	1,168,206	$	599,290	$	1,294,814	$	26,478	$	4,904,455
Special Mention	861		6,229		—		723		1,005		7,148		—		15,966
Substandard	24,391		10,166		461		28,036		—		14,404		—		77,458
Doubtful	—		—		—		—		—		—		—		—
Total	$	134,604	$	377,493	$	1,345,678	$	1,196,965	$	600,295	$	1,316,366	$	26,478	$	4,997,879
Current period gross charge-offs	$	—	$	—	$	—	$	1	$	—	$	—	$	—	$	1

Commercial Owner-Occupied R/E:
Pass	$	35,074	$	121,759	$	355,379	$	311,954	$	236,043	$	649,493	$	5,644	$	1,715,346
Special Mention	—		2,162		69		2,234		872		5,108		—		10,445
Substandard	—		586		2,858		797		340		10,741		—		15,322
Doubtful	—		—		—		—		—		—		—		—
Total	$	35,074	$	124,507	$	358,306	$	314,985	$	237,255	$	665,342	$	5,644	$	1,741,113
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Commercial AD&C:
Pass	$	92,911	$	327,688	$	356,865	$	172,284	$	5,429	$	—	$	133,678	$	1,088,855
Special Mention	—		—		—		—		—		—		525		525
Substandard	122		323		434		—		—		—		—		879
Doubtful	—		—		—		—		—		—		—		—
Total	$	93,033	$	328,011	$	357,299	$	172,284	$	5,429	$	—	$	134,203	$	1,090,259
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Commercial Business:
Pass	$	78,623	$	217,077	$	335,793	$	176,699	$	86,378	$	171,698	$	418,680	$	1,484,948
Special Mention	177		647		130		491		762		1,198		3,350		6,755
Substandard	87		5,339		1,072		2,234		949		2,590		5,618		17,889
Doubtful	—		—		—		—		—		—		—		—
Total	$	78,887	$	223,063	$	336,995	$	179,424	$	88,089	$	175,486	$	427,648	$	1,509,592
Current period gross charge-offs	$	—	$	—	$	612	$	—	$	—	$	939	$	—	$	1,551

Residential Mortgage:
Beacon score:
660-850	$	7,224	$	38,452	$	498,423	$	394,110	$	162,827	$	304,763	$	—	$	1,405,799
600-659	293		613		15,375		17,473		4,305		24,462		—		62,521
540-599	—		1,203		357		3,566		2,437		9,714		—		17,277
less than 540	278		227		2,032		4,892		1,623		16,975		—		26,027
Total	$	7,795	$	40,495	$	516,187	$	420,041	$	171,192	$	355,914	$	—	$	1,511,624
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Residential Construction:
Beacon score:
660-850	$	1,768	$	25,593	$	42,790	$	19,872	$	1,956	$	1,458	$	—	$	93,437
600-659	542		346		1,817		—		1,500		—		—		4,205
540-599	43		—		—		—		—		—		—		43
less than 540	—		—		—		—		—		—		—		—
Total	$	2,353	$	25,939	$	44,607	$	19,872	$	3,456	$	1,458	$	—	$	97,685
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Consumer:
Beacon score:
660-850	$	1,409	$	10,606	$	4,476	$	1,717	$	740	$	25,997	$	331,206	$	376,151
600-659	11		1,154		357		94		241		3,873		14,047		19,777
540-599	13		477		284		73		34		2,298		4,460		7,639
less than 540	76		356		332		298		117		2,760		8,626		12,565
Total	$	1,509	$	12,593	$	5,449	$	2,182	$	1,132	$	34,928	$	358,339	$	416,132
Current period gross charge-offs	$	—	$	—	$	—	$	5	$	—	$	11	$	52	$	68

Total loans	$	353,255	$	1,132,101	$	2,964,521	$	2,305,753	$	1,106,848	$	2,549,494	$	952,312	$	11,364,284

The following table provides information about credit quality indicators by the year of origination as of December 31, 2023:


	December 31, 2023
	Term Loans by Origination Year												Revolving
(In thousands)	2023		2022		2021		2020		2019		Prior		Loans		Total
Commercial Investor R/E:
Pass	$	405,740	$	1,395,973	$	1,195,708	$	634,361	$	511,146	$	848,958	$	23,653	$	5,015,539
Special Mention	9,250		—		316		—		—		1,978		—		11,544
Substandard	30,792		465		30,927		—		—		14,410		748		77,342
Doubtful	—		—		—		—		—		—		—		—
Total	$	445,782	$	1,396,438	$	1,226,951	$	634,361	$	511,146	$	865,346	$	24,401	$	5,104,425
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Commercial Owner-Occupied R/E:
Pass	$	136,072	$	361,247	$	318,269	$	238,761	$	235,145	$	428,846	$	5,621	$	1,723,961
Special Mention	406		70		2,240		875		2,267		8,616		—		14,474
Substandard	2,562		3,634		801		343		5,866		3,594		—		16,800
Doubtful	—		—		—		—		—		—		—		—
Total	$	139,040	$	364,951	$	321,310	$	239,979	$	243,278	$	441,056	$	5,621	$	1,755,235
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Commercial AD&C:
Pass	$	334,918	$	288,732	$	178,889	$	28,954	$	—	$	—	$	155,889	$	987,382
Special Mention	—		—		—		—		—		—		—		—
Substandard	1,016		569		—		—		—		—		—		1,585
Doubtful	—		—		—		—		—		—		—		—
Total	$	335,934	$	289,301	$	178,889	$	28,954	$	—	$	—	$	155,889	$	988,967
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Commercial Business:
Pass	$	247,081	$	344,034	$	202,020	$	92,198	$	62,413	$	118,061	$	410,856	$	1,476,663
Special Mention	532		45		180		1,037		1,040		294		3,635		6,763
Substandard	6,725		2,073		2,281		917		1,925		1,571		5,962		21,454
Doubtful	—		—		—		—		—		—		—		—
Total	$	254,338	$	346,152	$	204,481	$	94,152	$	65,378	$	119,926	$	420,453	$	1,504,880
Current period gross charge-offs	$	—	$	9	$	324	$	—	$	—	$	116	$	—	$	449

Residential Mortgage:
Beacon score:
660-850	$	31,853	$	476,631	$	394,414	$	166,387	$	41,473	$	266,927	$	—	$	1,377,685
600-659	781		7,022		18,284		2,009		1,882		24,040		—		54,018
540-599	—		1,545		2,698		2,371		1,891		9,377		—		17,882
less than 540	229		2,042		3,351		2,424		2,533		14,357		—		24,936
Total	$	32,863	$	487,240	$	418,747	$	173,191	$	47,779	$	314,701	$	—	$	1,474,521
Current period gross charge-offs	$	—	$	—	$	43	$	—	$	10	$	107	$	—	$	160

Residential Construction:
Beacon score:
660-850	$	21,975	$	68,273	$	21,897	$	2,478	$	150	$	—	$	—	$	114,773
600-659	1,641		500		1,319		1,500		—		1,243		—		6,203
540-599	443		—		—		—		—		—		—		443
less than 540	—		—		—		—		—		—		—		—
Total	$	24,059	$	68,773	$	23,216	$	3,978	$	150	$	1,243	$	—	$	121,419
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Consumer:
Beacon score:
660-850	$	11,452	$	4,960	$	1,823	$	519	$	1,662	$	24,543	$	333,382	$	378,341
600-659	1,209		192		237		425		209		3,954		12,668		18,894
540-599	24		374		87		47		500		2,868		5,920		9,820
less than 540	384		215		132		50		288		2,803		6,615		10,487
Total	$	13,069	$	5,741	$	2,279	$	1,041	$	2,659	$	34,168	$	358,585	$	417,542
Current period gross charge-offs	$	—	$	20	$	28	$	—	$	15	$	1,735	$	207	$	2,005

Total loans	$	1,245,085	$	2,958,596	$	2,375,873	$	1,175,656	$	870,390	$	1,776,440	$	964,949	$	11,366,989

Modifications to Borrowers Experiencing Financial Difficulty

As a part of our risk management practices, we may consider modifying a loan for a borrower experiencing a financial difficulty that provides a certain degree of a payment relief. Modification types primarily include a reduction in the interest rate or an extension of the existing term. We do not provide modifications that result in the reduction of the outstanding principal balance.

The following table presents the amount of the loans modified during the periods indicated below to borrowers experiencing financial difficulty, disaggregated by the loan portfolio segment, type of modification granted and the financial effect of loans modified:


	For the Three Months Ended March 31, 2024
	Interest rate reduction		Term extension		Rate reduction & Term extension		Total				Interest rate reduction		Term extension
(in thousands)	Amount		Amount		Amount		Amount		% of total loan segment		Weighted Average		Weighted Average
Commercial Investor R/E	$	—	$	25,252	$	—	$	25,252	0.5	%	—	%	6 Months
Commercial Owner-Occupied R/E	—		—		—		—		—	%	—	%	—
Commercial AD&C	—		122		—		122		—	%	—	%	17 Months
Commercial Business	—		87		143		230		—	%	0.4	%	27 Months
All Other loans	—		542		—		542		—	%	—	%	9 Months
Total	$	—	$	26,003	$	143	$	26,146	0.2	%


	For the Three Months Ended March 31, 2023
	Interest rate reduction		Term extension		Rate reduction & Term extension		Total				Interest rate reduction		Term extension
(in thousands)	Amount		Amount		Amount		Amount		% of total loan segment		Weighted Average		Weighted Average
Commercial Investor R/E	$	—	$	68	$	—	$	68	—	%	—	%	6 Months
Commercial Owner-Occupied R/E	—		—		—		—		—	%	—	%	—
Commercial AD&C	—		—		—		—		—	%	—	%	—
Commercial Business	—		94		—		94		—	%	—	%	12 Months
All Other loans	—		—		—		—		—	%	—	%	—
Total	$	—	$	162	$	—	$	162	—	%

Unfunded loan commitments on modifications for borrowers experiencing financial difficulty totaled $0.1 million at March 31, 2024. These commitments are not included in the table above.

The following table presents the performance of loans that have been modified during the periods indicated:


	For the three months ended March 31, 2024
(in thousands)	Current		30-89 days past due		90+ days past due		Non-accrual		Total
Commercial Investor R/E	$	25,252	$	—	$	—	$	—	$	25,252
Commercial Owner-Occupied R/E	—		—		—		—		—
Commercial AD&C	122		—		—		—		122
Commercial Business	230		—		—		—		230
All Other loans	542		—		—		—		542
Total	$	26,146	$	—	$	—	$	—	$	26,146


	For the three months ended March 31, 2023
(in thousands)	Current		30-89 days past due		90+ days past due		Non-accrual		Total
Commercial Investor R/E	$	68	$	—	$	—	$	—	$	68
Commercial Owner-Occupied R/E	—		—		—		—		—
Commercial AD&C	—		—		—		—		—
Commercial Business	94		—		—		—		94
All Other loans	—		—		—		—		—
Total	$	162	$	—	$	—	$	—	$	162

There were no loans that defaulted (defined as new non-accrual or 90 days past due) during the three months ended March 31, 2024 and that had been modified in the form of principal forgiveness, an interest rate reduction, an other-than-insignificant payment delay, or a term extension (or a combination thereof) within the previous 12 months preceding the payment default when the debtor was experiencing financial difficulty at the time of the modification.

Other Real Estate Owned

Other real estate owned ("OREO") totaled $2.7 million at March 31, 2024 as compared to none at December 31, 2023. There were $0.2 million in consumer mortgage loans secured by residential real estate property for which formal foreclosure proceedings were in process as of March 31, 2024.

NOTE 5 – GOODWILL AND OTHER INTANGIBLE ASSETS

The amount of goodwill by reporting units is presented in the following table:


(In thousands)	Community Banking		Investment Management		Total
Balances at December 31, 2023	$	331,689	$	31,747	$	363,436

No activity	—		—		—
Balances at March 31, 2024	$	331,689	$	31,747	$	363,436

The gross carrying amounts and accumulated amortization of intangible assets and goodwill are presented at the dates indicated in the following table:


	March 31, 2024						Weighted Average Remaining Life	December 31, 2023						Weighted Average Remaining Life
(Dollars in thousands)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount			Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Amortizing intangible assets:
Core deposit intangibles	$	29,038	$	(20,943)	$	8,095	5.3 years	$	29,038	$	(20,181)	$	8,857	5.5 years
Software intangibles	12,228		(1,134)		11,094		4.1 years	10,422		(183)		10,239		4.8 years
Other identifiable intangibles	13,906		(8,305)		5,601		7.5 years	13,906		(7,949)		5,957		7.7 years
Total amortizing intangible assets	$	55,172	$	(30,382)	$	24,790		$	53,366	$	(28,313)	$	25,053
Non-amortizing intangible assets:
Intangible projects in process(1)	5,074		—		5,074			$	3,248	$	—	$	3,248
Total intangible assets	$	60,246	$	(30,382)	$	29,864		$	56,614	$	(28,313)	$	28,301

Goodwill	$	363,436			$	363,436		$	363,436			$	363,436

(1) Capitalized costs on internal-use licensed software-related projects that are currently in the development/implementation phase.

The following table presents the estimated future amortization expense for amortizing intangible assets within the years ending December 31:


(In thousands)	Amount
Remaining 2024	$	6,154
2025	5,741
2026	4,890
2027	3,880
2028	2,970
Thereafter	1,155
Total amortizing intangible assets	$	24,790

NOTE 6 – DEPOSITS

The following table presents the composition of deposits at the dates indicated:


(In thousands)	March 31, 2024		December 31, 2023
Noninterest-bearing deposits	$	2,817,928	$	2,914,161
Interest-bearing deposits:
Demand	1,528,184		1,463,679
Money market savings	2,680,474		2,628,918
Regular savings	1,579,104		1,275,225


Time deposits of less than $250,000	1,978,545		2,068,259
Time deposits of $250,000 or more	642,965		646,296
Total interest-bearing deposits	8,409,272		8,082,377
Total deposits	$	11,227,200	$	10,996,538

NOTE 7 – BORROWINGS

Subordinated Debt

On March 15, 2022, the Company completed an offering of $200.0 million aggregate principal amount Fixed to Floating Rate Subordinated Notes due in 2032. The notes bear a fixed interest rate of 3.875% per year through March 29, 2027. Commencing on March 30, 2027, the notes will bear interest at a floating rate per annum equal to the benchmark rate (which is expected to be the three-month SOFR rate) plus a spread of 196.5 basis points, payable quarterly in arrears. The total amount of debt issuance costs incurred was $3.1 million, which are being amortized through the contractual life of the debt. The entire amount of the subordinated debt is considered Tier 2 capital under current regulatory guidelines.

On November 5, 2019, the Company completed an offering of $175.0 million aggregate principal amount Fixed to Floating Rate Subordinated Notes due in 2029. The notes bear a fixed interest rate of 4.25% per year through November 14, 2024. Beginning November 15, 2024, the interest rate will become a floating rate equal to three-month SOFR plus 288 basis points (including a benchmark adjustment of 26 basis points) through the remaining maturity or early redemption date of the notes. The interest will be paid in arrears semi-annually during the fixed rate period and quarterly during the floating rate period. The Company incurred $2.9 million of debt issuance costs, which are being amortized through the contractual life of the debt. The entire amount of the subordinated debt is considered Tier 2 capital under current regulatory guidelines.

The following table provides information on subordinated debt as of the date indicated:


(In thousands)	March 31, 2024		December 31, 2023
Fixed to floating rate subordinated debt, 3.875%	$	200,000	$	200,000
Fixed to floating rate subordinated debt, 4.25%	175,000		175,000


Total subordinated debt	375,000		375,000


Less: Debt issuance costs	(4,048)		(4,197)




Long-term borrowings	$	370,952	$	370,803

Other Borrowings

At March 31, 2024 and December 31, 2023, the Company had $71.5 million and $75.0 million, respectively, of outstanding retail repurchase agreements.

The Company had no outstanding federal funds purchased at both March 31, 2024 and December 31, 2023. The available borrowing federal funds capacity under unsecured lines of credit with correspondent banks was $1.2 billion at both March 31, 2024 and December 31, 2023. During the first quarter of 2024, the Company fully paid off $300.0 million of outstanding borrowings through Federal Reserve's Bank Term Funding Program.

At March 31, 2024, the Company had the ability to pledge collateral at prevailing market rates under a line of credit with the FHLB of $3.6 billion. FHLB availability based on pledged collateral at March 31, 2024 amounted to $3.1 billion, with $500.0 million outstanding. At December 31, 2023, the Company had the ability to pledge collateral at prevailing market rates under a line of credit with the FHLB of $3.6 billion. The availability of FHLB borrowings based on the collateral pledged at December 31, 2023 was $3.1 billion with $550.0 million outstanding.

Under a blanket lien, the Company has pledged qualifying residential mortgage loans amounting to $1.4 billion, commercial real estate loans amounting to $3.9 billion, home equity lines of credit (“HELOC”) amounting to $210.8 million, and multifamily loans amounting to $502.5 million at March 31, 2024, as collateral under the borrowing agreement with the FHLB. At December 31, 2023, the Company had pledged collateral of qualifying mortgage loans of $1.4 billion, commercial real estate loans of $4.0 billion, HELOC loans of $209.2 million, and multifamily loans of $538.6 million under the FHLB borrowing agreement.

The Company had secured lines of credit available from the Federal Reserve Bank and correspondent banks of $734.4 million and $651.3 million at March 31, 2024 and December 31, 2023, respectively, collateralized by loans, with no borrowings outstanding at the end of either period.

NOTE 8 – STOCKHOLDERS' EQUITY

On March 30, 2022, the Company's Board of Directors authorized a stock repurchase plan that permits the repurchase of up to $50.0 million of the Company's common stock. During 2022, the Company repurchased and retired 625,710 common shares at an average price of $39.93 per share for the total cost of $25.0 million. The Company did not repurchase any shares of its common stock during 2023 or during the quarter ended March 31, 2024. Under the current authorization, common stock with a total value of up to $25.0 million remains available to be repurchased.

NOTE 9 – SHARE BASED COMPENSATION

The Company’s 2015 Omnibus Incentive Plan ("Omnibus Incentive Plan" or "Plan") was approved on May 6, 2015 and provides for the granting of incentive stock options, non-qualifying stock options, stock appreciation rights, restricted stock grants, restricted stock units and performance share units to selected directors and employees on a periodic basis at the discretion of the Company’s Board of Directors. The Omnibus Incentive Plan authorizes the issuance of up to 1,500,000 shares of common stock, has a term of 10 years, and is administered by a committee of at least three directors appointed by the Board of Directors. There were no shares available for issuance under the Plan at March 31, 2024. Options granted under the Plan have an exercise price which may not be less than 100% of the fair market value of the common stock on the date of the grant and must be exercised within seven or 10 years from the date of grant depending on the terms of the grant agreement. The exercise price of stock options must be paid for in full in cash or shares of common stock, or a combination of both. The board committee has the discretion when making a grant of stock options to impose restrictions on the shares to be purchased upon the exercise of such options. The Company generally issues authorized but previously unissued shares to satisfy option exercises.

Compensation expense is recognized on a straight-line basis over the vesting period of the respective stock option, restricted stock, restricted stock unit grant or performance share units. The Company recognized compensation expense of $1.2 million for both the three months ended March 31, 2024 and 2023, respectively, related to restricted stock award grants, restricted stock unit grants and performance share unit grants. There was no unrecognized compensation cost related to stock options as of March 31, 2024. The total of unrecognized compensation cost related to restricted stock awards, restricted stock unit grants, and performance share unit grants was approximately $11.1 million as of March 31, 2024. That cost is expected to be recognized over a weighted average period of approximately 2.46 years.

During the three months ended March 31, 2024, the Company granted 317,735 restricted stock units and performance share units, of which 83,691 units are subject to achievement of certain performance conditions measured over a three-year performance period and 234,044 restricted stock units are subject to a three year vesting schedule. The Company did not grant any stock options under the Omnibus Incentive Plan during the three months ended March 31, 2024.

A summary of the activity for the Company’s restricted stock, restricted stock units and performance share units for the period indicated is presented in the following table:


	Number of Common Shares/Units	Weighted Average Grant-Date Fair Value
Non-vested at January 1, 2024	458,929	$	32.90
Granted	317,735	$	22.12
Vested	(46,420)	$	38.59
Forfeited/ cancelled	(2,772)	$	32.69
Non-vested at March 31, 2024	727,472	$	28.04

A summary of share option activity for the period indicated is reflected in the following table:


	Number of Common Shares	Weighted Average Exercise Share Price		Weighted Average Contractual Remaining Life (Years)	Aggregate Intrinsic Value (in thousands)
Balance at January 1, 2024	80,195	$	19.07	1.2 years	$	621
Granted	—	$	—

Exercised	(9,938)	$	10.96		$	135
Forfeited	—	$	—
Expired	(6,163)	$	42.48
Balance at March 31, 2024	64,094	$	18.07	1.2 years	$	516

Exercisable at March 31, 2024	64,094	$	18.07	1.2 years	$	516

NOTE 10 – PENSION PLAN

Defined Benefit Pension Plan

Prior to September 30, 2023, the Company has maintained a qualified noncontributory, defined benefit pension plan (the “Plan”).

On March 30, 2022, the Board of Directors approved the termination of the Plan to be effective as of June 30, 2022. The Company executed plan amendments regarding the Plan termination and received a determination letter from the Internal Revenue Service (“IRS”) as to the tax-qualified status of the Plan at the time of termination. The Company also filed appropriate notices and documents related to the Plan’s termination and wind-down with the Pension Benefit Guaranty Corporation (“PBGC”).

Plan participants made elections for lump-sum distributions or annuity benefits. Both lump-sum distributions and transfer of annuity benefits to a highly-rated insurance company were completed in August 2023. In order to fully fund the Plan, the Company made a $1.3 million cash contribution. As a result of the pension termination, the Company incurred a one-time settlement expense of $8.2 million, which was recognized in salaries and employee benefits expense in 2023.

The components of net periodic benefit cost for the periods indicated are presented in the following table:


	Three Months Ended March 31,
(In thousands)	2024		2023
Interest cost on projected benefit obligation	$	—	$	438
Expected return on plan assets	—		(373)
Recognized net actuarial loss	—		225


Net periodic benefit cost	$	—	$	290

NOTE 11 – NET INCOME PER COMMON SHARE

The calculation of net income per common share for the periods indicated is presented in the following table:


	Three Months Ended March 31,
(Dollars and amounts in thousands, except per share data)	2024		2023
Net income	$	20,372	$	51,253
Distributed and undistributed earnings allocated to participating securities	(26)		(169)
Net income attributable to common shareholders	$	20,346	$	51,084

Total weighted average outstanding shares	44,990		44,825
Less: Weighted average participating securities	(58)		(148)
Basic weighted average common shares	44,932		44,677
Dilutive weighted average common stock equivalents	155		195
Diluted weighted average common shares	45,087		44,872

Basic net income per common share	$	0.45	$	1.14
Diluted net income per common share	$	0.45	$	1.14

Anti-dilutive shares	29		15

NOTE 12 – ACCUMULATED OTHER COMPREHENSIVE INCOME/ (LOSS)

Comprehensive income/ (loss) is defined as net income/ (loss) plus transactions and other occurrences that are the result of non-owner changes in equity. For Condensed Consolidated Financial Statements presented for the Company, non-owner changes in equity are comprised of unrealized gains or losses on investments available-for-sale and held-to-maturity, and any minimum pension liability adjustments.

The following table presents the activity in net accumulated other comprehensive income/ (loss) and the components of the activity for the periods indicated:


(In thousands)	Unrealized Gains/(Losses) on Debt Securities Available-for-Sale		Defined Benefit Pension Plan		Unrealized Losses on Debt Securities Transferred from Available-for-Sale to Held-to-Maturity		Total
Balance at January 1, 2024	$	(88,169)	$	—	$	(9,162)	$	(97,331)
Other comprehensive loss before reclassification from accumulated other comprehensive loss, net of tax	(5,749)		—		—		(5,749)

Reclassifications from accumulated other comprehensive loss to earnings, net of tax	—		—		277		277
Current period change in other comprehensive loss, net of tax	(5,749)		—		277		(5,472)
Balance at March 31, 2024	$	(93,918)	$	—	$	(8,885)	$	(102,803)


(In thousands)	Unrealized Gains/ (Losses) on Debt Securities Available-for-Sale		Defined Benefit Pension Plan		Unrealized Losses on Debt Securities Transferred from Available-for-Sale to Held-to-Maturity		Total
Balance at January 1, 2023	$	(113,513)	$	(8,002)	$	(10,436)	$	(131,951)
Other comprehensive income before reclassification, net of tax	15,490		—		—		15,490
Reclassifications from accumulated other comprehensive income, net of tax	—		168		302		470
Current period change in other comprehensive income, net of tax	15,490		168		302		15,960
Balance at March 31, 2023	$	(98,023)	$	(7,834)	$	(10,134)	$	(115,991)

The following table provides the information on the reclassification adjustments out of accumulated other comprehensive income/ (loss) for the periods indicated that had an impact on the Condensed Consolidated Statements of Income:


	Three Months Ended March 31,
(In thousands)	2024		2023
Unrealized gains on available-for-sale debt securities:
Affected line item in the Statements of Income:
Investment securities gains	$	—	$	—
Income before taxes	—		—
Tax expense	—		—
Net income	$	—	$	—

Amortization of unrealized losses on debt securities transferred from available-for-sale to held-to-maturity:
Affected line item in the Statements of Income:
Interest and dividends on investment securities (1)	$	(371)	$	(405)
Income before taxes	(371)		(405)
Tax benefit	94		103
Net loss	$	(277)	$	(302)

Amortization of defined benefit pension plan items:
Affected line item in the Statements of Income:
Recognized actuarial loss (2)	$	—	$	(225)

Income before taxes	—		(225)
Tax benefit	—		57
Net loss	$	—	$	(168)

(1)Amortization of unrealized losses on held-to-maturity debt securities is fully offset by accretion of a discount on held-to-maturity debt securities with no overall impact on net income and yield.

(2)This amount is included in the computation of net periodic benefit cost. See Note 10 for additional information on the pension plan.

NOTE 13 – LEASES

The Company leases real estate properties for its network of bank branches, financial centers and corporate offices. All of the Company’s leases are currently classified as operating. Most lease agreements include one or more options to renew, with renewal terms that can extend the original lease term from one to twenty years or more. The Company does not sublease any of its leased real estate properties.

The following table provides information regarding the Company's leases as of the dates indicated:


	Three Months Ended March 31,
			2024			2023
Components of lease expense:
Operating lease cost (resulting from lease payments)			$	2,565		$	2,715




Supplemental cash flow information related to leases:
Operating cash flows from operating leases			$	2,824		$	2,889
ROU assets obtained in the exchange for lease liabilities due to:
New leases			$	995		$	703
Acquisitions			$	—		$	—

			March 31, 2024			December 31, 2023
Supplemental balance sheet information related to leases:
Operating lease ROU assets			$	39,814		$	40,362
Operating lease liabilities			$	47,251		$	48,058

Other information related to leases:
Weighted average remaining lease term of operating leases		5.4 years			5.6 years
Weighted average discount rate of operating leases			3.67%			3.61%

ROU assets and lease liabilities are recorded in other assets and other liabilities, respectively, in the Condensed Consolidated Statements of Condition. Operating lease cost is recorded in the occupancy expense of premises in the Condensed Consolidated Statements of Income.

At March 31, 2024, the maturities of the Company’s operating lease liabilities were as follows:


(In thousands)	Amount
Maturity:
Remaining 2024	$	8,343
2025	10,458
2026	9,734
2027	8,300
2028	6,799
Thereafter	8,631
Total undiscounted lease payments	52,265
Less: Present value discount	(5,014)
Lease liability	$	47,251

The Company had no operating lease that has not yet commenced operations at March 31, 2024. The Company does not have any lease arrangements with any of its related parties as of March 31, 2024.

NOTE 14 – DERIVATIVES

Customer Interest Rate Swaps

The Company has entered into interest rate swaps (“swaps”) with qualifying commercial banking customers to facilitate their risk management strategies and financing needs. These swaps provide customers with the ability to convert variable rates into fixed rates. They are economically hedged by offsetting interest rate swaps that the Company executes with derivative counterparties in order to offset its exposure on the fixed components of the customers' swaps. Swaps qualify as derivatives, but are not designated as hedging instruments. Fair values of the swaps are carried as both gross assets and gross liabilities in other assets and other liabilities, respectively, in the Condensed Consolidated Statements of Condition. The associated changes in fair values of gross assets and gross liabilities net to zero in the Condensed Consolidated Statements of Income.

Mortgage Banking Derivatives

The Company enters into interest rate lock commitments, which are commitments to originate loans where the interest rate on the loan is determined prior to funding and the customers have locked into that interest rate. The loans are sold to the secondary market on either a mandatory or best efforts basis. Loans sold on a mandatory basis are not committed to an investor until the loan is closed with the borrower. The Company enters into forward to-be-announced (“TBA”) sales contracts to manage the interest rate risk between the interest rate lock commitment and the funding of those loans. Loans sold on a best efforts basis are committed to an investor simultaneous to the interest rate lock commitment with the borrower, and as a result, the Company does not enter into a separate forward TBA contract to offset the fair value risk as the investor accepts such risk. Interest rate lock commitments and commitments to deliver loans to investors are considered derivatives but are not designated as hedging instruments.

Fair Values of Derivative Instruments on the Balance Sheet

Derivatives are carried at fair value and are classified under other assets and other liabilities in the Condensed Consolidated Statements of Condition. Changes in fair value are recognized in earnings. None of the Company's derivatives are designated in a qualifying hedging relationship.

The table below presents the fair value of the Company’s derivative financial instruments as of March 31, 2024 and December 31, 2023:


	March 31, 2024						December 31, 2023
(In thousands)	Notional		Asset		Liability		Notional		Asset		Liability
Derivatives


Loan Swaps:
Interest Rate Swaps	$	502,766	$	17,758	$	17,758	$	495,750	$	15,867	$	15,867
Mortgage Banking Derivatives:
Interest Rate Lock Commitments	40,488		673		—		16,608		358		—
Forward TBA Contracts	35,500		—		111		11,750		—		102
Total Derivatives	$	578,754	$	18,431	$	17,869	$	524,108	$	16,225	$	15,969

Effect of Derivatives on the Income Statement

The table below presents the changes in the fair value of the Company’s derivative financial instruments reflected within non-interest income on the Condensed Consolidated Statements of Income for the three months ended March 31, 2024 and 2023, respectively.


		Three Months Ended March 31,
(In thousands)	Location of Gain/(Loss)	2024		2023
Interest rate lock commitments	Mortgage banking activities	$	1,778	$	1,452
Forward TBA contracts	Mortgage banking activities	(1,472)		(1,247)
Total		$	306	$	205

NOTE 15 – LITIGATION

In the ordinary course of business, the Company and its subsidiaries are subject to various pending or threatened legal proceedings in which claims for monetary damages are asserted. After consultation with legal counsel, management does not anticipate that the ultimate liability, if any, arising out of these legal matters will have a material adverse effect on the Company's financial condition, operating results or liquidity.

NOTE 16 – FAIR VALUE

GAAP provides entities the option to measure eligible financial assets, financial liabilities and commitments at fair value (i.e. the fair value option), on an instrument-by-instrument basis, that are otherwise not permitted to be accounted for at fair value under other accounting standards. The election to use the fair value option is available when an entity first recognizes a financial asset or financial liability or upon entering into a commitment. Subsequent changes in fair value must be recorded in earnings. The Company applies the fair value option on residential mortgage loans held for sale. The fair value option on residential mortgage loans held for sale allows the recognition of gains on the sale of mortgage loans to more accurately reflect the timing and economics of the transaction.

The standard for fair value measurement establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below.

Basis of Fair Value Measurement:

Level 1- Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2- Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; and

Level 3- Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e. supported by little or no market activity).

A financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.

Changes to interest rates may result in changes in the cash flows due to prepayments or extinguishments. Accordingly, changes to interest rates could result in higher or lower measurements of the fair values.

Assets and Liabilities

Residential mortgage loans held for sale

Residential mortgage loans held for sale are valued based on quotations from the secondary market for similar instruments and are classified as Level 2 in the fair value hierarchy.

Investment securities available-for-sale

U.S. treasuries and government agencies securities and mortgage-backed and asset-backed securities

Valuations are based on active market data and use of evaluated broker pricing models that vary based by asset class and includes available trade, bid, and other market information. Generally, the methodology includes broker quotes, proprietary models, descriptive terms, and databases coupled with extensive quality control programs. Quality control evaluation processes use available market, credit and deal level information to support the evaluation of the security. Additionally, proprietary models and pricing systems, mathematical tools, actual transacted prices, integration of market developments and experienced evaluators are used to determine the value of a security based on a hierarchy of market information regarding a security or securities with similar characteristics. The Company does not adjust the quoted price for such securities. Such instruments are classified within Level 2 in the fair value hierarchy.

State and municipal securities

The Company primarily uses prices obtained from third-party pricing services to determine the fair value of securities. The Company independently evaluates and corroborates the fair value received from pricing services through various methods and techniques, including references to dealer or other market quotes, by reviewing valuations of comparable instruments, and by comparing the prices realized on the sale of similar securities. Such securities are classified within Level 2 in the fair value hierarchy.

Interest rate swap agreements

Interest rate swap agreements are measured by alternative pricing sources using a discounted cash flow method that incorporates current market interest rates. Based on the complex nature of interest rate swap agreements, the markets these instruments trade in are not as efficient and are less liquid than that of the more mature Level 1 markets. These characteristics classify interest rate swap agreements as Level 2 in the fair value hierarchy.

Assets Measured at Fair Value on a Recurring Basis

The following tables set forth the Company’s financial assets and liabilities at the dates indicated that were accounted for or disclosed at fair value. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement:


	March 31, 2024
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
(In thousands)	(Level 1)		(Level 2)		(Level 3)		Total
Assets:
Residential mortgage loans held for sale (1)	$	—	$	16,627	$	—	$	16,627
Available-for-sale debt securities:
U.S. treasuries and government agencies	—		92,236		—		92,236
State and municipal	—		263,986		—		263,986
Mortgage-backed and asset-backed	—		744,519		—		744,519

Total available-for-sale debt securities	—		1,100,741		—		1,100,741
Interest rate swap agreements	—		17,758		—		17,758
Total assets	$	—	$	1,135,126	$	—	$	1,135,126

Liabilities:
Interest rate swap agreements	$	—	$	(17,758)	$	—	$	(17,758)
Total liabilities	$	—	$	(17,758)	$	—	$	(17,758)

(1) The outstanding principal balance for residential loans held for sale as of March 31, 2024 was $16.4 million.


	December 31, 2023
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
(In thousands)	(Level 1)		(Level 2)		(Level 3)		Total
Assets:
Residential mortgage loans held for sale (1)	$	—	$	10,836	$	—	$	10,836
Investments available-for-sale:
U.S. treasuries and government agencies	—		96,927		—		96,927
State and municipal	—		268,214		—		268,214
Mortgage-backed and asset-backed	—		737,540		—		737,540




Total investments available-for-sale	—		1,102,681		—		1,102,681
Interest rate swap agreements	—		15,867		—		15,867
Total assets	$	—	$	1,129,384	$	—	$	1,129,384

Liabilities:
Interest rate swap agreements	$	—	$	(15,867)	$	—	$	(15,867)
Total liabilities	$	—	$	(15,867)	$	—	$	(15,867)

(1) The outstanding principal balance for residential loans held for sale as of December 31, 2023 was $10.5 million.

Assets Measured at Fair Value on a Nonrecurring Basis

The following tables set forth the Company’s financial assets subject to fair value adjustments on a nonrecurring basis at the date indicated that are valued at the lower of cost or market. Assets are classified in their entirety based on the lowest level of input that is significant to the fair value measurement:


	March 31, 2024
(In thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total		Total Losses
Loans(1)	$	—	$	—	$	—	$	—	$	—
Other real estate owned	—		—		2,700		2,700		—
Total	$	—	$	—	$	2,700	$	2,700	$	—

December 31, 2023

(In thousands)

Quoted Prices in
Active Markets
for Identical
Assets (Level 1)

Significant
Other
Observable
Inputs (Level 2)

Significant
Unobservable
Inputs (Level 3)

Total

Total Losses

Loans (1)

—

Other real estate owned

—

Total

—

(1) Represent outstanding collateral-dependent non-accrual loans that were written down to the fair value of the underlying collateral. Fair values are determined using actual market prices (Level 2), independent third-party valuations and borrower records, discounted as appropriate (Level 3).

At March 31, 2024, collateral dependent loans totaling $81.1 million had an estimated fair value of $60.2 million as a result of individual credit loss allowances of $20.9 million based on the most recent value of the collateral. Collateral dependent loans totaling $88.2 million had an estimated fair value of $64.2 million at December 31, 2023 as a result of individual credit loss allowances of $24.0 million.

Fair value of the collateral dependent loans is measured based on the loan’s observable market price or the fair value of the collateral (less estimated selling costs). Collateral may be real estate and/or business assets such as equipment, inventory and/or accounts receivable. The value of business equipment, inventory and accounts receivable collateral is based on net book value on the business’ financial statements and, if necessary, discounted based on management’s review and analysis. Appraised and reported values may be discounted based on management’s historical experience, changes in market conditions from the time of valuation, and/or management’s expertise and knowledge of the client and client’s business. Collateral dependent loans are reviewed and evaluated on at least a quarterly basis for additional individual reserve and adjusted accordingly, based on the factors identified above.

OREO is adjusted to fair value upon acquisition of the real estate collateral. Subsequently, OREO is carried at the lower of carrying value or fair value. The estimated fair value for OREO included in Level 3 is determined by independent market based appraisals and other available market information, less costs to sell, that may be reduced further based on market expectations or an executed sales agreement. If the fair value of the collateral deteriorates subsequent to initial recognition, the Company records the OREO as a nonrecurring Level 3 adjustment. Valuation techniques are consistent with those techniques applied in prior periods.

Fair Value of Financial Instruments

The Company discloses fair value information, based on the exit price notion, of financial instruments that are not measured at fair value in the financial statements. Fair value is the amount at which a financial instrument could be exchanged in a current transaction between willing parties, other than in a forced sale or liquidation, and is best evidenced by a quoted market price, if one exists.

Quoted market prices, where available, are shown as estimates of fair market values. Because no quoted market prices are available for a significant portion of the Company's financial instruments, the fair value of such instruments has been derived based on the amount and timing of future cash flows and estimated discount rates based on observable inputs (“Level 2”) or unobservable inputs (“Level 3”).

Present value techniques used in estimating the fair value of many of the Company's financial instruments are significantly affected by the assumptions used. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate cash settlement of the instrument. Additionally, the accompanying estimates of fair values are only representative of the fair values of the individual financial assets and liabilities, and should not be considered an indication of the fair value of the Company. Management utilizes internal models used in asset

liability management to determine the fair values disclosed below. Other investments include FRB and FHLB stock, whose carrying amounts approximate fair values based on the redemption provisions of each entity.

The carrying amounts and fair values of the Company’s financial instruments at the dates indicated are presented in the following tables:


					Fair Value Measurements
	March 31, 2024				Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
(In thousands)	Carrying Amount		Estimated Fair Value
Financial assets:
Cash and cash equivalents	$	410,390	$	410,390	$	410,390	$	—	$	—
Residential mortgage loans held for sale	16,627		16,627		—		16,627		—
Available-for-sale debt securities	1,100,741		1,100,741		—		1,100,741		—
Held-to-maturity debt securities	231,354		192,798		—		192,798		—
Other investments	73,395		73,395		—		73,395		—
Loans, net of allowance	11,241,188		10,410,156		—		—		10,410,156
Interest rate swap agreements	17,758		17,758		—		17,758		—
Accrued interest receivable	47,152		47,152		47,152		—		—
Bank owned life insurance	163,381		163,381		—		163,381		—

Financial liabilities:
Time deposits	$	2,621,510	$	2,607,502	$	—	$	2,607,502	$	—
Other deposits	8,605,690		8,605,690		8,605,690		—		—
Securities sold under retail repurchase agreements and
federal funds purchased	71,529		71,529		—		71,529		—
Advances from FHLB	500,000		494,226		—		494,226		—
Subordinated debt	370,952		347,396		—		—		347,396
Interest rate swap agreements	17,758		17,758		—		17,758		—
Accrued interest payable	22,080		22,080		22,080		—		—


					Fair Value Measurements
	December 31, 2023				Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
(In thousands)	Carrying Amount		Estimated Fair Value
Financial assets:
Cash and cash equivalents	$	545,898	$	545,898	$	545,898	$	—	$	—
Residential mortgage loans held for sale	10,836		10,836		—		10,836		—
Investments available-for-sale	1,102,681		1,102,681		—		1,102,681		—
Held-to-maturity debt securities	236,165		200,411		—		200,411		—
Other investments	75,607		75,607		—		75,607		—
Loans, net of allowance	11,246,124		10,476,059		—		—		10,476,059
Interest rate swap agreements	15,867		15,867		—		15,867		—
Accrued interest receivable	46,583		46,583		46,583		—		—
Bank owned life insurance	158,921		158,921		—		158,921		—

Financial liabilities:
Time deposits	$	2,714,555	$	2,704,013	$	—	$	2,704,013	$	—
Other deposits	8,281,983		8,281,983		8,281,983		—		—
Securities sold under retail repurchase agreements and
federal funds purchased	375,032		375,032		—		375,032		—

Advances from FHLB	550,000		547,271		—		547,271		—
Subordinated debt	370,803		348,185		—		—		348,185
Interest rate swap agreements	15,867		15,867		—		15,867		—
Accrued interest payable	30,367		30,367		30,367		—		—

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

This report, as well as other periodic reports filed with the Securities and Exchange Commission, and written or oral communications made from time to time by or on behalf of Sandy Spring Bancorp, Inc. and its subsidiaries (the “Company”), may contain statements relating to future events or future results of the Company that are considered “forward-looking statements” under the Private Securities Litigation Reform Act of 1995. These forward-looking statements may be identified by the use of words such as “believe,” “expect,” “anticipate,” “plan,” “estimate,” “intend” and “potential,” or words of similar meaning, or future or conditional verbs such as “should,” “could,” or “may.” Forward-looking statements include statements of our goals, intentions and expectations; statements regarding our business plans, prospects, growth and operating strategies; statements regarding the quality of our loan and investment portfolios; and estimates of our risks and future costs and benefits.

Forward-looking statements reflect our expectation or prediction of future conditions, events or results based on information currently available. These forward-looking statements are subject to significant risks and uncertainties that may cause actual results to differ materially from those in such statements. These principal risks and uncertainties include, but are not limited to, the risks identified in Item 1A of the Company’s 2023 Annual Report on Form 10-K, Item 1A of Part II of this report and the following:

•changes in general business and economic conditions nationally or in the markets that we serve;

•changes in consumer and business confidence, investor sentiment, or consumer spending or savings behavior;

•changes in the level of inflation;

•changes in the demand for loans, deposits and other financial services that we provide;

•the possibility that future credit losses may be higher than currently expected;

•the impact of the interest rate environment on our business, financial condition and results of operations;

•the impact of compliance with changes in laws, regulations and regulatory interpretations, including changes in income taxes;

•changes in credit ratings assigned to us or our subsidiaries;

•the ability to realize benefits and cost savings from, and limit any unexpected liabilities associated with, any business combinations;

•competitive pressures among financial services companies;

•the ability to attract, develop and retain qualified employees;

•our ability to maintain the security of our data processing and information technology systems;

•the impact of changes in accounting policies, including the introduction of new accounting standards;

•the impact of judicial or regulatory proceedings;

•the impact of fiscal and governmental policies of the United States federal government;

•the impact of health emergencies, epidemics or pandemics;

•the effects of climate change; and

•the impact of natural disasters, extreme weather events, military conflict, terrorism or other geopolitical events.

Forward-looking statements speak only as of the date of this report. The Company does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date of this report or to reflect the occurrence of unanticipated events except as required by federal securities laws.

The Company

Sandy Spring Bancorp, Inc. is the bank holding company for Sandy Spring Bank. Throughout this report, references to the

“Company,” “we,” “our,” “us,” and similar terms refer to the consolidated entity consisting of Sandy Spring Bancorp, Inc. and its subsidiaries. “Bancorp” refers solely to the parent holding company, and the “Bank” refers solely to Bancorp’s subsidiary bank, Sandy Spring Bank. Bancorp is the bank holding company for the Bank, which is a community banking organization that focuses its lending and other services on businesses and consumers in the local market area. At March 31, 2024, the Company had $13.9 billion in total assets, compared to $14.0 billion at December 31, 2023. Bancorp is registered as a bank holding company pursuant to the Bank Holding Company Act of 1956, as amended, and is subject to supervision and regulation by the Board of Governors of the Federal Reserve System (the “Federal Reserve”).

The Bank is an independent and community-oriented bank that offers a broad range of commercial banking, retail banking, mortgage and trust services throughout central Maryland, Virginia, and the greater Washington, D.C. market. Through its subsidiaries, West Financial Services, Inc. ("West") and SSB Wealth Management, Inc. (d/b/a Rembert Pendleton Jackson, "RPJ”), the Bank also offers wealth management services.

The Bank is a state-chartered bank subject to supervision and regulation by the Federal Reserve and the State of Maryland. Deposit accounts of the Bank are insured by the Deposit Insurance Fund administered by the Federal Deposit Insurance Corporation (the “FDIC”) to the maximum amount permitted by law. The Bank is a member of the Federal Reserve System and is an Equal Housing Lender. Bancorp, the Bank, and its other subsidiaries are Affirmative Action/Equal Opportunity Employers.

Current Quarter Financial Overview

For the quarter ended March 31, 2024, we reported net income of $20.4 million ($0.45 per diluted common share), compared to net income of $51.3 million ($1.14 per diluted common share) for the first quarter of 2023 and $26.1 million ($0.58 per diluted common share) for the fourth quarter of 2023. Current quarter core earnings were $21.9 million ($0.49 per diluted common share), compared to $27.1 million ($0.60 per diluted common share) for the quarter ended December 31, 2023 and $52.3 million ($1.16 per diluted common share) for the quarter ended March 31, 2023. Core earnings exclude the after-tax impact of amortization of intangibles, investment securities gains or losses and other non-recurring or extraordinary items. The year-over-year and quarter-over-quarter declines in net income and core earnings were driven primarily by the higher provision for credit losses and the declines in net interest income from both periods.

The current quarter reflects the following:

•Total assets at March 31, 2024 decreased by 1% to $13.9 billion compared to $14.0 billion at December 31, 2023.

•Total loans remained level at $11.4 billion at March 31, 2024 compared to December 31, 2023. During the current quarter, we reduced our concentration in the investor commercial real estate segment by $106.5 million, while the AD&C portfolio increased by $101.3 million, mainly as a result of draws on existing loans. Total commercial business loans and lines and mortgage and consumer loan portfolios remained relatively unchanged during this period.

•Deposits increased $230.7 million or 2% to $11.2 billion at March 31, 2024 compared to $11.0 billion at December 31, 2023, as interest-bearing deposits increased $326.9 million, while noninterest-bearing deposits declined $96.2 million. Strong growth in the interest-bearing deposit categories was mainly experienced within savings accounts, which grew by $303.9 million compared to the linked quarter. Interest checking and money market accounts increased $64.5 million and $51.6 million, respectively, while time deposits decreased $93.0 million. Decline within noninterest-bearing deposit categories was driven by lower balances in commercial and small business checking accounts.

•The ratio of non-performing loans to total loans was 0.74% at March 31, 2024 compared to 0.81% at December 31, 2023 and 0.41% at March 31, 2023. The current quarter's reduction in non-performing loans was related to full payoffs of several non-accrual loans in combination with the movement of one investment commercial real estate loan from a non-accrual category into the other real estate owned. Net charge-offs for the current quarter totaled $1.1 million.

•Total borrowings declined in the current quarter by $353.4 million or 27% over the amounts at December 31, 2023, mainly due to the full payoff of $300.0 million of outstanding borrowings through the Federal Reserve Bank's Bank Term Funding Program and a $50.0 million reduction in FHLB advances.

•Net interest income for the first quarter of 2024 declined $2.4 million or 3% compared to the previous quarter and $18.0 million or 18% compared to the first quarter of 2023. During the recent quarter, the $0.4 million growth in interest income was more than offset by the $2.7 million increase in interest expense.

•The net interest margin was 2.41% for the first quarter of 2024 compared to 2.45% for the fourth quarter of 2023 and 2.99% for the first quarter of 2023. Overall, the rate of net interest margin contraction slowed down during the current quarter and we experienced a margin increase during the last month of the current quarter. Compared to the linked quarter, the rate paid on interest-bearing liabilities rose 10 basis points, while the yield on interest-earning assets increased 9 basis points.

•Provision for credit losses directly attributable to the funded loan portfolio was $3.3 million for the current quarter compared to a credit of $2.6 million in the previous quarter and a credit of $18.9 million in the prior year quarter. The increase in the provision during the current quarter was attributable to the risk adjustments applied to specific industries within the commercial real estate segment, partially offset by lower individual reserves, the result of several payoffs of non-accrual loans, and reduced probability of an economic recession. In addition, during the current

quarter, the reserve for unfunded commitments decreased by $0.9 million, a result of higher utilization rates on lines of credit.

•Non-interest income for the first quarter of 2024 increased by 11% or $1.8 million compared to the linked quarter and grew by 15% or $2.4 million compared to the prior year quarter. The quarter-over-quarter increase was mainly driven by higher wealth management income, due to a 3% increase in assets under management and the overall favorable market performance, along with higher income from mortgage banking activities and other income, generated by higher credit-related fees.

•Non-interest expense for the first quarter of 2024 increased $0.9 million or 1% compared to the fourth quarter of 2023 and $1.7 million or 3% compared to the prior year quarter. The current quarter's increase in non-interest expense as compared to the linked quarter was primarily due to higher salaries and benefits as more employees were subject to the employer-related payroll taxes during the current quarter as compared to the linked quarter, partially offset by lower professional fees and lower marketing expense.

•Return on average assets (“ROA”) for the quarter ended March 31, 2024 was 0.58% and return on average tangible common equity (“ROTCE”) was 7.39% compared to 0.73% and 9.26%, respectively, for the fourth quarter of 2023 and 1.49% and 19.10%, respectively, for the first quarter of 2023. On a non-GAAP basis, the current quarter's core ROA was 0.63% and core ROTCE was 7.39% compared to 0.76% and 9.26%, respectively, for the previous quarter and 1.52% and 19.11%, respectively, for the first quarter of 2023.

•The GAAP efficiency ratio was 69.60% for the first quarter of 2024, compared to 68.33% for the fourth quarter of 2023 and 58.55% for the first quarter of 2023. The non-GAAP efficiency ratio was 66.73% for the first quarter of 2024 compared to 66.16% for the fourth quarter of 2023 and 56.87% for the first quarter of 2023. The increase in both the GAAP and non-GAAP efficiency ratios (reflecting a decrease in efficiency) in the current quarter compared to the previous quarter and the first quarter of 2023 was the result of declines in net revenue from the prior periods coupled with the growth in non-interest expense.

Summary of Comparative First Quarter Results

Balance Sheet and Credit Quality

Total assets were $13.9 billion at March 31, 2024, as compared to $14.1 billion at March 31, 2023. Total loans stayed relatively unchanged at $11.4 billion at March 31, 2024 compared to March 31, 2023. Total commercial real estate and business loans declined $82.7 million or 1% due to a $169.6 million or 3% decline in the investor commercial real estate loan portfolio, while AD&C and business loans and lines grew $43.6 million or 4% and $72.1 million or 5%, respectively. Total residential mortgage loans grew $183.1 million or 14% due to the retention of organic loan production, in addition to the migration of construction loans into the residential mortgage portfolio.

Deposits increased $151.2 million or 1% to $11.2 billion at March 31, 2024 compared to $11.1 billion at March 31, 2023. During this period, total interest-bearing deposits increased $562.0 million or 7%, while noninterest-bearing deposits declined $410.7 million or 13%. Growth within interest-bearing deposit categories was driven by savings accounts, which increased by $1.1 billion, which was partially offset by the $530.2 million decrease in money market accounts. Core deposits, which exclude brokered deposits, increased $627.3 million or 6% year-over-year and represented 93% of total deposits as of March 31, 2024 compared to 88% at March 31, 2023, reflecting the stability and strength of the core deposit base. The deposit growth experienced during the preceding twelve months resulted in the loan to deposit ratio declining to 101% at March 31, 2024 from 103% at March 31, 2023. Total uninsured deposits at March 31, 2024 were approximately 33% of total deposits. The Company offers its customers reciprocal deposit arrangements, which provide FDIC deposit insurance for accounts that would otherwise exceed deposit insurance limits. At March 31, 2024 balances in the Company's reciprocal deposit accounts increased by $625.2 million during the previous twelve months.

Total borrowings declined by $430.5 million or 31% at March 31, 2024 as compared to the previous year. During the previous twelve months, FHLB advances and federal funds purchased declined $250.0 million and $205.0 million, respectively. At March 31, 2024, contingent liquidity, which consists of available FHLB borrowings, fed funds, available funds through the Federal Reserve Bank's discount window, as well as excess cash and unpledged investment securities totaled $6.3 billion or 170% of uninsured deposits. At March 31, 2024, total cash and cash equivalents were $410.4 million, a decrease of $85.3 million or 17% compared to March 31, 2023.

The tangible common equity ratio increased to 8.86% of tangible assets at March 31, 2024, compared to 8.40% at March 31, 2023. This increase reflected the effect of tangible capital growth of 4% in combination with a 2% decline in tangible assets during the period.

At March 31, 2024, the Company had a total risk-based capital ratio of 15.05%, a common equity tier 1 risk-based capital ratio of 10.96%, a tier 1 risk-based capital ratio of 10.96%, and a tier 1 leverage ratio of 9.56%.

Non-performing loans include non-accrual loans and accruing loans 90 days or more past due. Overall credit quality remained stable, as the ratio of non-performing loans to total loans was 0.74% at March 31, 2024 compared to 0.81% at December 31, 2023. These levels of non-performing loans compare to 0.41% at March 31, 2023. At March 31, 2024, non-performing loans totaled $84.4 million, compared to $91.8 million at December 31, 2023 and $47.2 million at March 31, 2023. The current quarter's decrease in non-performing loans was mainly related to several full payoffs, charge-offs and the transfer of one commercial real estate loan into other real estate owned. The majority of the non-accrual loans fully paid off during the current quarter were previously adequately reserved for, which provided a benefit to the current quarter's provision expense as the respective individual reserves were released upon the full payoff. Additionally, during the current quarter, we foreclosed on and transferred one investment commercial real estate property out of non-accrual loan category into other real estate owned category. Total net charge-offs for the current quarter amounted to $1.1 million compared to net recoveries of $0.1 million for the fourth quarter of 2023 and $0.3 million of net recoveries for the first quarter of 2023.

At March 31, 2024, the allowance for credit losses was $123.1 million or 1.08% of outstanding loans and 146% of non-performing loans, compared to $120.9 million or 1.06% of outstanding loans and 132% of non-performing loans at the end of the previous quarter, and $117.6 million or 1.03% of outstanding loans and 249% of non-performing loans at the end of the first quarter of 2023. The increase in the allowance for the current quarter compared to the previous quarter mainly reflects updates to the qualitative risk adjustments applied to specific industries within the commercial real estate segment, partially offset by lower individual reserves due to non-accrual loan payoffs and the reduced probability of an economic recession.

Quarterly Results of Operations

Net income was $20.4 million ($0.45 per diluted common share) for the three months ended March 31, 2024 compared to $51.3 million ($1.14 per diluted common share) for the prior year quarter. The decline in quarterly net income was primarily attributable to the year-over-year decline in net interest income as a result of the significant increase in funding cost and higher provision for credit losses.

Net interest income decreased $18.0 million or 18% for the first quarter of 2024 compared to the first quarter of 2023, as the $14.7 million growth in interest income was more than offset by interest expense growth of $32.6 million. The provision for credit losses was $2.4 million for the first quarter of 2024 compared to a credit of $21.5 million for the first quarter of 2023. Non-interest income for the current quarter increased by 15% or $2.4 million compared to the prior year quarter. This increase was the cumulative result of the increase in wealth management income driven by market performance, higher service charges on deposits and an increase in credit-related fees. Non-interest expense increased $1.7 million or 3% for the first quarter of 2023, compared to the prior year quarter driven primarily by higher professional expenses coupled with general operating expenses, partially offset by lower compensation and marketing expenses.

Results of Operations

For the Three Months Ended March 31, 2024 Compared to the Three Months Ended March 31, 2023

We recorded net income of $20.4 million for the three months ended March 31, 2024 compared to net income of $51.3 million for the same period in the prior year. Core earnings were $21.9 million for the three months ended March 31, 2024 compared to $52.3 million for the same period in the prior year. Core earnings exclude the after-tax impact of amortization of intangibles, investment securities gains or losses and other non-recurring or extraordinary items. Year-to-date net income declined as a result of an increase in the provision for credit losses along with lower net interest income, partially offset by the higher non-interest income. Pre-tax, pre-provision net income declined to $29.7 million for the three months ended March 31, 2024 compared to $46.9 million for the prior year period as a result of the lower net interest income.

Net Interest Income

For the three months ended March 31, 2024, net interest income decreased $18.0 million compared to the prior year period as a result of the $32.6 million increase in interest expense, partially offset by the $14.7 million increase in interest income. Interest expense growth was primarily due to the additional interest expense associated with savings, time deposit and money market accounts. On a tax-equivalent basis, net interest income for the three months ended March 31, 2024 declined to $80.4 million compared to $98.3 million for the three months ended March 31, 2023 as a result of the aforementioned increase in interest expense outpacing the growth in interest income.

Our net interest margin declined to 2.41% for the three months ended March 31, 2024, compared to 2.99% for the prior year period, primarily as a result of higher funding cost due to the rising interest rate environment and market competition for deposits over the period. For the comparative period, the average yield on earning assets improved 38 basis points while the average rate paid on interest-bearing liabilities rose 115 basis points, resulting in margin compression of 58 basis points. During the comparative period, average interest-earning assets increased by 1% and average interest-bearing liabilities grew by 9%.

At March 31, 2024, average total loans comprised 85% of average interest-earnings assets compared to 86% at March 31, 2023, with an average yield of 5.35% and 4.99%, respectively. In addition, the average yield on investment securities increased to 2.32% for the current quarter compared to 2.20% for the prior year quarter. These portfolio yield movements resulted in the rise in the overall yield on interest-earnings assets to 5.01% at March 31, 2024 from 4.63% at March 31, 2023.

Average rate paid on average interest-bearing liabilities grew by 115 basis points as the average rate increased from 2.49% for the first quarter of 2023 to 3.64% for the first quarter of 2024 driven by the 134 basis point increase in the average rate paid on interest-bearing deposits. Average rates paid on interest-bearing deposits increased in all deposit categories. Average interest-bearing deposits increased 10% for the current quarter compared to the same period for the prior year, driven by a 186% increase in savings accounts. The percentage of average noninterest-bearing deposits to total average deposits decreased to 25% in the current quarter compared to 31% in the first quarter of 2023 due to declines in commercial and small business checking deposit balances.

Consolidated Average Balances, Yields and Rates


	Three Months Ended March 31,
	2024						2023
(Dollars in thousands and tax-equivalent)	Average Balances		Interest (1)		Annualized Average Yield/Rate		Average Balances		Interest (1)		Annualized Average Yield/Rate
Assets:
Commercial investor real estate loans	$	5,057,334	$	59,642	4.74	%	$	5,136,204	$	57,801	4.56	%
Commercial owner-occupied real estate loans	1,746,042		20,718		4.77		1,769,680		19,598		4.49
Commercial AD&C loans	1,030,763		21,253		8.29		1,082,791		19,839		7.43
Commercial business loans	1,508,336		26,061		6.95		1,444,588		22,200		6.23
Total commercial loans	9,342,475		127,674		5.50		9,433,263		119,438		5.13
Residential mortgage loans	1,491,277		13,805		3.70		1,307,761		11,418		3.49
Residential construction loans	110,456		1,256		4.57		223,313		1,814		3.29
Consumer loans	417,539		8,541		8.23		424,122		7,587		7.25
Total residential and consumer loans	2,019,272		23,602		4.69		1,955,196		20,819		4.29
Total loans (2)	11,361,747		151,276		5.35		11,388,459		140,257		4.99
Loans held for sale	8,142		128		6.29		8,324		152		7.29
Taxable securities	1,188,446		6,663		2.24		1,297,769		7,008		2.16
Tax-advantaged securities	347,681		2,255		2.60		381,824		2,210		2.32
Total investment securities (3)	1,536,127		8,918		2.32		1,679,593		9,218		2.20
Interest-bearing deposits with banks	505,461		6,786		5.40		239,459		2,686		4.55
Federal funds sold	333		5		5.50		330		4		4.69
Total interest-earning assets	13,411,810		167,113		5.01		13,316,165		152,317		4.63

Less: allowance for credit losses - loans	(119,487)						(136,899)
Cash and due from banks	82,667						95,057
Premises and equipment, net	59,776						67,696
Other assets	627,169						607,257
Total assets	$	14,061,935					$	13,949,276

Liabilities and Stockholders' Equity:
Interest-bearing demand deposits	$	1,476,961	$	5,901	1.61	%	$	1,381,858	$	2,630	0.77	%
Regular savings deposits	1,444,713		12,880		3.59		505,364		363		0.29
Money market savings deposits	2,731,291		24,646		3.63		3,299,794		21,338		2.62
Time deposits	2,702,885		29,939		4.45		2,382,542		16,457		2.80
Total interest-bearing deposits	8,355,850		73,366		3.53		7,569,558		40,788		2.19
Federal funds purchased and Federal Reserve Bank borrowings	237,373		2,992		5.07		171,222		2,083		4.93
Repurchase agreements	72,836		394		2.17		60,626		21		0.14
Advances from FHLB	546,154		5,973		4.40		635,056		7,207		4.60
Subordinated debentures	370,861		3,946		4.26		370,258		3,946		4.26
Total borrowings	1,227,224		13,305		4.36		1,237,162		13,257		4.35
Total interest-bearing liabilities	9,583,074		86,671		3.64		8,806,720		54,045		2.49

Noninterest-bearing demand deposits	2,730,295						3,480,433
Other liabilities	163,664						170,194
Stockholders' equity	1,584,902						1,491,929
Total liabilities and stockholders' equity	$	14,061,935					$	13,949,276

Tax-equivalent net interest income and spread			$	80,442	1.37	%			$	98,272	2.14	%
Less: tax-equivalent adjustment			1,099						970
Net interest income			$	79,343					$	97,302

Interest income/earning assets					5.01	%					4.63	%
Interest expense/earning assets					2.60						1.64
Net interest margin					2.41	%					2.99	%

(1)Tax-equivalent income has been adjusted using the combined marginal federal and state rate of 25.37% and 25.47% for 2024 and 2023, respectively. The annualized taxable-equivalent adjustments utilized in the above table to compute yields aggregated to $1.1 million and $1.0 million in 2024 and 2023, respectively.

(2)Non-accrual loans are included in the average balances.

(3)Investments available-for-sale are presented at amortized cost.

Effect of Volume and Rate Changes on Tax-Equivalent Net Interest Income

The following table analyzes the reasons for the changes from year-to-year in the principal elements that comprise tax-equivalent net interest income:


	2024 vs. 2023						2023 vs. 2022
	Increase Or (Decrease)		Due to Change In Average:*				Increase Or (Decrease)		Due to Change In Average:*
(Dollars in thousands and tax equivalent)			Volume		Rate				Volume		Rate
Interest income from earning assets:
Commercial investor real estate loans	$	1,841	$	(772)	$	2,613	$	16,167	$	9,828	$	6,339
Commercial owner-occupied real estate loans	1,120		(237)		1,357		1,166		956		210
Commercial AD&C loans	1,414		(944)		2,358		9,246		(194)		9,440
Commercial business loans	3,861		1,067		2,794		5,846		894		4,952
Residential mortgage loans	2,387		1,671		716		3,644		2,973		671
Residential construction loans	(558)		(1,118)		560		257		212		45
Consumer loans	954		(115)		1,069		3,998		(6)		4,004
Loans held for sale	(24)		(3)		(21)		(46)		(132)		86
Taxable securities	(345)		(598)		253		2,901		512		2,389
Tax-exempt securities	45		(207)		252		(341)		(406)		65
Interest-bearing deposits with banks	4,100		3,510		590		2,573		(9)		2,582
Federal funds sold	1		—		1		4		—		4
Total tax-equivalent interest income	14,796		2,254		12,542		45,415		14,628		30,787

Interest expense on funding of earning assets:
Interest-bearing demand deposits	3,271		194		3,077		2,472		(13)		2,485
Regular savings deposits	12,517		1,758		10,759		344		(1)		345
Money market savings deposits	3,308		(4,097)		7,405		20,713		(23)		20,736
Time deposits	13,482		2,505		10,977		14,966		2,081		12,885
Federal funds purchased and Federal Reserve Bank borrowings	909		847		62		2,068		144		1,924
Repurchase agreements	373		5		368		(18)		(24)		6
Advances from FHLB	(1,234)		(942)		(292)		7,207		7,207		—
Subordinated debentures	—		—		—		1,708		1,779		(71)
Total interest expense	32,626		270		32,356		49,460		11,150		38,310
Tax-equivalent net interest income	$	(17,830)	$	1,984	$	(19,814)	$	(4,045)	$	3,478	$	(7,523)

*Variances that are the combined effect of volume and rate, but cannot be separately identified, are allocated to the volume and rate variances based on their respective relative amounts.

Interest Income

The Company’s total tax-equivalent interest income increased 10% to $167.1 million for the first three months of 2024 compared to $152.3 million for the prior year period as interest income increased in most of the major earning asset categories led by the $8.2 million interest income growth in commercial loans and, to a lesser extent, the $4.1 million growth in interest income earned in interest-bearing deposits with banks. The increase in interest income was driven by commercial loans, predominantly from business loans and lines segment, and, to a lesser degree commercial real estate loans.

Average interest-earning assets rose 1% for the three months ended March 31, 2024 compared to the same period for 2023. During the comparative period, total average commercial real estate loans declined 2%, while average commercial business loans rose 4%. Average residential mortgage loans increased 14% during the same time period as a greater number of one-year ARM loans were retained in the portfolio. Compared to the prior year, the yield on average loans increased 36 basis points. The average balance of the investment portfolio decreased 9% for the first three months of 2024 compared to the first three months of 2023. Interest income from the investment securities portfolio decreased 3%, as a result of lower average investment portfolio balances.

Overall, the average yield on interest-earning assets grew to 5.01% for the first three month of 2024 compared to 4.63% for the prior year period as average yields on loans and investment securities increased compared to the same period of the prior year, reflecting general market interest rates during the previous twelve months.

Interest Expense

For the first three months of 2024, interest expense increased $32.6 million compared to the first three months of 2023, purely driven by the year-over-year increase in deposit interest expense. This increase from period to period was due to the increase in market interest rates coupled with the increase in average balances of interest-bearing deposits. The impact of the rise in rates resulted in the average rate paid on interest-bearing liabilities for the year-to-date rising to 3.64% from 2.49% for the prior year period. During this period, the average balance of saving accounts grew significantly, as our customers moved their funds from noninterest-bearing products to higher yielding deposits accounts to take advantage of competitive deposit rates.

Non-interest Income

Non-interest income amounts and trends are presented in the following table for the periods indicated:


	Three Months Ended March 31,				2024/2023		2024/2023
(Dollars in thousands)	2024		2023		$ Change		% Change
Securities gains	$	—	$	—	$	—	N/M

Service charges on deposit accounts	2,817		2,388		429		18.0
Mortgage banking activities	1,374		1,245		129		10.4
Wealth management income	9,958		8,992		966		10.7

Income from bank owned life insurance	1,160		907		253		27.9
Bank card fees	413		418		(5)		(1.2)
Other income	2,645		2,001		644		32.2
Total non-interest income	$	18,367	$	15,951	$	2,416	15.1

N/M - Not meaningful

For the three months ended March 31, 2024, non-interest income increased 15% to $18.4 million compared to $16.0 million for the three months ended March 31, 2023. This increase is mainly the cumulative result of higher wealth management income driven by higher assets under management and overall favorable market performance during the current quarter, increased other income due to credit-related fees and higher service fees on deposit accounts.

Further detail of non-interest income activity for the first three months of 2024 versus 2023 is provided as follows:

•Service charges on deposit accounts increased 18% as the growth in service charge income on commercial demand deposit accounts increased 26% along with the 17% increase in returned check charges.

•Income from mortgage banking activities increased 10% as a result of higher margins generated on loan sales during the current quarter as compared to the prior year quarter.

•Wealth management income, comprised of income from trust and estate services and investment management fees earned by the Company’s investment management subsidiaries increased by 11% due to favorable market performance and an increase in assets under management. Overall, total assets under management increased to $6.2 billion at March 31, 2024 compared to $5.5 billion at March 31, 2023.

•Bank-owned life insurance income increased 28% as a result of company owned life insurance policy returns tied to deferred compensation plans.

•Bank card fee income was level during the current quarter compared to the first quarter of the prior year.

•Other income increased by 32% or $0.6 million, as a result of the increase in credit-related fees.

Non-interest Expense

Non-interest expense amounts and trends are presented in the following table for the periods indicated:


	Three Months Ended March 31,				2024/2023		2024/2023
(Dollars in thousands)	2024		2023		$ Change		% Change
Salaries and employee benefits	$	36,698	$	38,926	$	(2,228)	(5.7)	%
Occupancy expense of premises	4,816		4,847		(31)		(0.6)
Equipment expense	3,963		4,117		(154)		(3.7)
Marketing	742		1,543		(801)		(51.9)
Outside data services	3,103		2,514		589		23.4
FDIC insurance	2,911		2,138		773		36.2
Amortization of intangible assets	2,069		1,306		763		58.4

Professional fees and services	4,880		3,684		1,196		32.5
Other expenses	8,824		7,230		1,594		22.0
Total non-interest expense	$	68,006	$	66,305	$	1,701	2.6

Non-interest expense increased 3% to $68.0 million for the three months ended March 31, 2024, compared to $66.3 million for the first quarter of 2023. The drivers of the increase in non-interest expense were a $1.6 million increase in other operating expenses, a $1.2 million increase in professional fees, $0.8 million increases in each of amortization of intangible assets and FDIC expense, and a $0.6 million increase in outside data services. These increases were partially offset by a $2.2 million decrease in salaries and employee benefits and a $0.8 million decrease in marketing expense.

Further detail by category of non-interest expense activity for the first three months of 2024 versus 2023 is provided as follows:

•Salaries and employee benefits, the largest component of non-interest expense, decreased 6% or $2.2 million as a result of the decline in employer-related taxes along with lower employer match contributions to the 401(k) plan.

•Combined occupancy and equipment expenses decreased 2% due to lower rental expense and depreciation of equipment.

•Marketing expense decreased 52% due to the prior period's higher advertising costs, which focused on deposit gathering efforts.

•Outside data services expense increased 23% due to the increase in volume-based components of contractual-based services.

•FDIC insurance increased 36% for 2024 as a result of the changes in company specific risk measure values used in the determination of the assessment rate.

•Amortization of intangible assets increased as a result of higher amortization of software licensed intangible assets.

•Professional fees and services grew 32% mainly as a result of an increase in utilization of IT consulting services to assist in the implementation of enhanced data capabilities and various other software platforms.

•Other non-interest expenses increased $1.6 million due to a variety of miscellaneous operating costs.

Income Taxes

The Company had income tax expense of $6.9 million in the first three months of 2024, compared to income tax expense of $17.2 million in the first three months of 2023, as a result of the decrease in current year-to-date pre-tax earnings compared to the prior year's pre-tax earnings. The effective tax rate for the first three months of 2024 was 25.4%, compared to a tax rate of 25.2% for the same period in 2023. The increase in the current year's effective tax rate is the result of pre-tax income containing a lower proportion of income permanently excludable for income tax purposes compared to the prior year period.

Operating Expense Performance

Management views the GAAP efficiency ratio as an important financial measure of expense performance and cost management. The ratio expresses the level of non-interest expense as a percentage of total revenue (net interest income plus total non-interest income). Lower ratios indicate improved productivity.

Non-GAAP Financial Measures

We also use a traditional efficiency ratio that is a non-GAAP financial measure of operating expense control and efficiency of operations. Management believes that its traditional efficiency ratio better focuses attention on the operating performance over time than does a GAAP efficiency ratio, and that it is highly useful in comparing period-to-period operating performance of our core business operations. It is used by management as part of its assessment of its performance in managing non-interest expense. However, this measure is supplemental, and is not a substitute for an analysis of performance based on GAAP

measures. The reader is cautioned that the non-GAAP efficiency ratio used by us may not be comparable to GAAP or non-GAAP efficiency ratios reported by other financial institutions.

In general, the efficiency ratio is non-interest expense as a percentage of net interest income plus non-interest income. Non-interest expense used in the calculation of the non-GAAP efficiency ratio excludes the amortization of intangibles, and other non-core expenses, such as contingent payment expense. Income for the non-GAAP efficiency ratio includes the favorable effect of tax-exempt income, and excludes securities gains and losses, which vary widely from period to period without appreciably affecting operating expenses, and other non-recurring gains (if any). For the three months ended March 31, 2024, the GAAP efficiency ratio was 69.60% compared to 58.55% for the same period in 2023. The current period's erosion in the GAAP efficiency ratio compared to the prior year period is directly related to the decline in revenues and the rise in non-interest expense during the period. The non-GAAP efficiency ratio for the current year was 66.73% compared to 56.87% for the prior year. The current year’s non-GAAP efficiency ratio compared to the prior year indicates a decline in efficiency and is the result of the 13% decrease in non-GAAP revenue combined with the 1% growth in non-GAAP non-interest expense.

In addition, we use pre-tax, pre-provision net income, as a measure of the level of certain recurring income before taxes. Management believes this provides financial statement users with a useful metric of the run-rate of revenues and expenses that is readily comparable to other financial institutions. This measure is calculated by adding/ (subtracting) the provision (credit) for credit losses and the provision for income taxes back to/from net income. This metric declined for the first three months of 2024 compared to the same period for 2023, due primarily to the decline in net interest income.

We have presented core earnings, core earnings per share, core return on average assets ("core ROA") and core return on average tangible common equity ("core ROTCE") in order to present metrics that are more comparable to prior periods to provide an indication of the core performance of the Company year over year. Core earnings reflect net income exclusive of amortization of intangible assets, investment securities gains or losses and non-recurring or extraordinary items, such as contingent payment expense, all net of tax. Core earnings were $21.9 million ($0.49 per diluted common share) for the three months ended March 31, 2024, compared to $52.3 million ($1.16 per diluted common share) for the three months ended March 31, 2023. Average tangible assets and average tangible common equity represent average assets and average stockholders’ equity adjusted for average goodwill and average intangible assets. The ROA for the first three months of 2024 was 0.58% compared to 1.49% for the same period of the prior year. For the three months ended March 31, 2024, the non-GAAP core ROA was 0.63% compared to 1.52% for the same period in the prior year. ROTCE was 7.39% for the first three months of 2024 compared to 19.10% for the first three months of 2023. The non-GAAP core ROTCE was 7.39% for the first three months of 2024 compared to 19.11% for the first three months of 2023.

GAAP and Non-GAAP Efficiency Ratios and Measures


	Three Months Ended March 31,
(Dollars in thousands)	2024			2023
Pre-tax pre-provision net income:
Net income	$	20,372		$	51,253
Plus/ (less) non-GAAP adjustments:
Income tax expense	6,944			17,231
Provision/ (credit) for credit losses	2,388			(21,536)
Pre-tax pre-provision net income	$	29,704		$	46,948

Efficiency ratio (GAAP):
Non-interest expense	$	68,006		$	66,305

Net interest income plus non-interest income	$	97,710		$	113,253

Efficiency ratio (GAAP)	69.60		%	58.55		%

Efficiency ratio (non-GAAP):
Non-interest expense	$	68,006		$	66,305
Less non-GAAP adjustments:
Amortization of intangible assets	2,069			1,306




Contingent payment expense	—			36
Non-interest expense - as adjusted	$	65,937		$	64,963

Net interest income plus non-interest income	$	97,710		$	113,253
Plus non-GAAP adjustment:
Tax-equivalent income	1,099			970
Less non-GAAP adjustment:
Securities gains	—			—

Net interest income plus non-interest income - as adjusted	$	98,809		$	114,223

Efficiency ratio (non-GAAP)	66.73		%	56.87		%

GAAP and Non-GAAP Performance Ratios


	Three Months Ended March 31,
(Dollars in thousands)	2024			2023
Core earnings (non-GAAP):
Net income	$	20,372		$	51,253
Plus/ (less) non-GAAP adjustments (net of tax):

Amortization of intangible assets	1,544			973




Investment securities gains	—			—
Contingent payment expense	—			27
Core earnings (non-GAAP)	$	21,916		$	52,253

Core earnings per common share (non-GAAP):
Weighted-average common shares outstanding - diluted (GAAP)	45,086,471			44,872,582



Earnings per diluted common share (GAAP)	$	0.45		$	1.14
Core earnings per diluted common share (non-GAAP)	$	0.49		$	1.16

Core return on average assets (non-GAAP):
Average assets (GAAP)	$	14,061,935		$	13,949,276



Return on average assets (GAAP)	0.58		%	1.49		%
Core return on average assets (non-GAAP)	0.63		%	1.52		%

Return/ Core return on average tangible common equity (non-GAAP):
Net Income (GAAP)	$	20,372		$	51,253
Plus: Amortization of intangible assets (net of tax)	1,544			973
Net income before amortization of intangible assets	$	21,916		$	52,226

Core return on average tangible common equity (non-GAAP):
Average assets (GAAP)	$	14,061,935		$	13,949,276
Average goodwill	(363,436)			(363,436)
Average other intangible assets, net	(29,260)			(19,380)
Average tangible assets (non-GAAP)	$	13,669,239		$	13,566,460

Average total stockholders' equity (GAAP)	$	1,584,902		$	1,491,929
Average goodwill	(363,436)			(363,436)
Average other intangible assets, net	(29,260)			(19,380)
Average tangible common equity (non-GAAP)	$	1,192,206		$	1,109,113

Return on average tangible common equity (non-GAAP)	7.39		%	19.10		%
Core return on average tangible common equity (non-GAAP)	7.39		%	19.11		%

Average tangible common equity to average tangible assets (non-GAAP)	8.72		%	8.18		%

FINANCIAL CONDITION

Total assets at March 31, 2024 decreased 1% to $13.9 billion compared to $14.0 billion at December 31, 2023. Total loan balances were relatively unchanged at the end of the current quarter as compared to the previous quarter. Investment commercial real estate loans decreased $106.5 million or 2% quarter-over-quarter, while AD&C portfolio grew $101.3 million or 10% during this period. Commercial business loan and lines and total mortgage and consumer loan portfolios remained relatively unchanged. Deposit balances increased to $11.2 billion at March 31, 2024 compared to $11.0 billion at December 31, 2023. The availability of competitive high yields in savings and time deposit products resulted in noninterest-bearing deposits declining 3%. This run-off was more than compensated for by offering higher yielding savings accounts along with the growth in interest checking and money market accounts resulting in a 4% increase in interest-bearing deposits. The increase in deposits along with the stability of loan balances resulted in the loan to deposit ratio declining to 101% at March 31, 2024 from 103% at December 31, 2023.

Analysis of Loans

A comparison of the loan portfolio at the dates indicated is presented in the following table:


	March 31, 2024				December 31, 2023				Period-to-Period Change
(Dollars in thousands)	Amount		%		Amount		%		Amount		%
Commercial real estate:
Commercial investor real estate	$	4,997,879	44.0	%	$	5,104,425	44.9	%	$	(106,546)	(2.1)
Commercial owner-occupied real estate	1,741,113		15.3		1,755,235		15.4		(14,122)		(0.8)
Commercial AD&C	1,090,259		9.6		988,967		8.7		101,292		10.2
Commercial business	1,509,592		13.3		1,504,880		13.3		4,712		0.3
Total commercial loans	9,338,843		82.2		9,353,507		82.3		(14,664)		(0.2)
Residential real estate:
Residential mortgage	1,511,624		13.3		1,474,521		13.0		37,103		2.5
Residential construction	97,685		0.9		121,419		1.1		(23,734)		(19.5)
Consumer	416,132		3.6		417,542		3.6		(1,410)		(0.3)
Total residential and consumer loans	2,025,441		17.8		2,013,482		17.7		11,959		0.6
Total loans	$	11,364,284	100.0	%	$	11,366,989	100.0	%	$	(2,705)	—

Total loans remained level at $11.4 billion at March 31, 2024 compared to December 31, 2023. Portfolio mix during the first three months of 2024 remained relatively unchanged compared to the prior year-end. During the current year, commercial AD&C portfolio increased by 10% mainly due to draws on existing loans, while investor commercial real estate declined by 2%. Residential mortgage portfolio increased by 3% mainly due to migration of residential construction loans into the residential permanent portfolio, as a number of construction projects were completed. Overall, the lack of loan demand combined with lower payoff activity during the first three months of 2024, as a result of the interest rate environment, resulted in no growth in total loans compared to the prior year-end.

Analysis of Investment Securities

The composition of investment securities at the periods indicated is presented in the following table:


	March 31, 2024				December 31, 2023				Period-to-Period Change
(Dollars in thousands)	Amount		%		Amount		%		Amount		%
Available-for-sale debt securities, at fair value:
U.S. treasuries and government agencies	$	92,236	6.5	%	$	96,927	6.9	%	$	(4,691)	(4.8)	%
State and municipal	263,986		18.8		268,214		19.0		(4,228)		(1.6)
Mortgage-backed and asset-backed	744,519		53.0		737,540		52.1		6,979		0.9



Total available-for-sale debt securities	1,100,741		78.3		1,102,681		78.0		(1,940)		(0.2)

Held-to-maturity debt securities, at amortized cost:


Mortgage-backed and asset-backed	231,354		16.5		236,165		16.7		(4,811)		(2.0)
Total held-to-maturity debt securities	231,354		16.5		236,165		16.7		(4,811)		(2.0)

Other investments, at cost:
Federal Reserve Bank stock	39,152		2.8		39,125		2.8		27		0.1
Federal Home Loan Bank of Atlanta stock	33,566		2.4		35,805		2.5		(2,239)		(6.3)
Other	677		—		677		—		—		—
Total other investments	73,395		5.2		75,607		5.3		(2,212)		(2.9)
Total securities	$	1,405,490	100.0	%	$	1,414,453	100.0	%	$	(8,963)	(0.6)

The investment portfolio consists primarily of U.S. Treasuries, U.S. Agency securities, U.S. Agency mortgage-backed securities, U.S. Agency collateralized mortgage obligations, asset-backed securities and state and municipal securities. Total investment securities, which are a source of liquidity for the Company and a contributor to interest income, decreased 1% from December 31, 2023 to March 31, 2024. Total gross unrealized losses on investments available-for-sale increased $7.7 million, from $118.1 million at December 31, 2023 to $125.8 million at March 31, 2024, due to higher market interest rates. Unrealized losses on available-for-sale debt securities at March 31, 2024 are due to changes in interest rates and not credit-related events. As such, no allowance for credit losses is required at March 31, 2024. These unrealized losses are expected to recover over time as available-for-sale securities approach maturity. We do not intend to sell, nor is it more likely than not that we will be required to sell, these securities, and we have sufficient liquidity to hold these securities for an adequate period of time, which may be maturity, to allow for any anticipated recovery in fair value.

At March 31, 2024, 99% of the available-for-sale and held-to-maturity debt securities were invested in Aaa/AAA or Aa/AA-rated securities. The average duration of the portfolio was 4.4 years at March 31, 2024 as compared to 4.6 years at December 31, 2023. Weighted average tax equivalent yield of the total debt securities portfolio was 2.32% at March 31, 2024. The composition and duration of the investment portfolio has resulted in a portfolio with low credit risk that is expected to provide the liquidity needed to meet lending and other funding demands. The portfolio is monitored on a continual basis with consideration given to interest rate trends and the structure of the yield curve and with constant assessment of economic projections and analysis.

Other Earning Assets

Residential mortgage loans held for sale increased to $16.6 million at March 31, 2024, compared to $10.8 million at December 31, 2023, as a result of the associated timing of origination and sale volumes that has occurred during the period. We continue to sell a portion of our residential mortgage loan production in the secondary market. The aggregate of interest-bearing deposits with banks and federal funds sold decreased by $132.6 million to $331.1 million at March 31, 2024 compared to December 31, 2023, as, during the current quarter, we fully paid off $300.0 million in outstanding borrowings through the Federal Reserve Bank's Bank Term Funding Program.

Deposits

The composition of deposits for the periods indicated is presented in the following table:


	March 31, 2024				December 31, 2023				Period-to-Period Change
(Dollars in thousands)	Amount		%		Amount		%		Amount		%
Noninterest-bearing deposits	$	2,817,928	25.1	%	$	2,914,161	26.5	%	$	(96,233)	(3.3)	%
Interest-bearing deposits:
Demand	1,528,184		13.6		1,463,679		13.3		64,505		4.4
Money market savings	2,680,474		23.9		2,628,918		23.9		51,556		2.0
Regular savings	1,579,104		14.1		1,275,225		11.6		303,879		23.8
Time deposits of less than $250,000	1,978,545		17.6		2,068,259		18.8		(89,714)		(4.3)
Time deposits of $250,000 or more	642,965		5.7		646,296		5.9		(3,331)		(0.5)
Total interest-bearing deposits	8,409,272		74.9		8,082,377		73.5		326,895		4.0
Total deposits	$	11,227,200	100.0	%	$	10,996,538	100.0	%	$	230,662	2.1

Deposits and Borrowings

Total deposits increased $230.7 million or 2% to $11.2 billion at March 31, 2024 from December 31, 2023, as interest-bearing deposits grew $326.9 million or 4%, while noninterest-bearing deposits declined $96.2 million or 3%. The growth in interest-bearing deposits was mainly attributable to savings accounts, which increased $303.9 million during the current quarter. The decline in noninterest-bearing deposits was mainly observed within commercial checking and small business checking categories. Core deposits, which exclude brokered relationships, represented 93% of total deposits at the end of the current quarter as compared to 92% at December 31, 2023, reflecting strength and stability of the core deposit base. At March 31, 2024, retail accounts represented 43% of core deposits while business accounts accounted for 57% of core deposits. No single commercial or retail client represented more than two percent of total deposits at the end of the current period.

The total amount of deposits that exceeded the $250,000 insured limit provided by the FDIC was approximately $3.7 billion or 33% of total deposits at March 31, 2024. This estimate is based on the determination of known deposit account relationships of each depositor and the insurance guidelines provided by the FDIC. Commercial accounts represented 73% of uninsured deposits, while retail accounts accounted for 27% of the uninsured deposit total. The commercial deposit mix continues to be well diversified with no significant concentration in one particular industry or single client. Management established strategies to mitigate outflows of uninsured deposits by providing reciprocal deposit arrangements, which provide FDIC deposit insurance for accounts that would otherwise exceed deposit insurance limits. These deposits increased $88.5 million or 9% during the first three months of 2024.

Total borrowings during the first three months of 2024 decreased by $353.4 million compared to amounts at December 31, 2023, driven by a full payoff of $300.0 million in outstanding borrowings through the Federal Reserve Bank's Bank Term Funding Program facility. In addition, FHLB advances were reduced by $50.0 million during the current quarter. The Company currently carries $371.0 million in subordinated debt, which is accounted for as Tier 2 capital in accordance with regulatory guidelines. At March 31, 2024, contingent liquidity, which consists of available FHLB borrowings, fed funds, funds through the Federal Reserve Bank's discount window, as well as excess cash and unpledged investment securities, totaled $6.3 billion or 170% of uninsured deposits.

Capital Management

Management monitors historical and projected earnings, dividends, and asset growth, as well as risks associated with the various types of on and off-balance sheet assets and liabilities, in order to determine appropriate capital levels. Total stockholders' equity totaled $1.6 billion at both March 31, 2024 and December 31, 2023. The ratio of average equity to average assets was 11.27% for the three months ended March 31, 2024, as compared to 10.97% for the three months ended December 31, 2023.

Risk-Based Capital Ratios

Bank holding companies and banks are required to maintain capital ratios in accordance with guidelines adopted by the federal bank regulators. These guidelines are commonly known as risk-based capital guidelines. The actual regulatory ratios and required ratios for capital adequacy are summarized for the Company in the following table.


	Ratios at		Minimum Value(1)	Well-Capitalized(2)
	March 31, 2024	December 31, 2023
Tier 1 leverage	9.56%	9.51%	4.00%	5.00%

Common equity Tier 1	10.96%	10.90%	4.50%	6.50%

Tier 1 capital to risk-weighted assets	10.96%	10.90%	6.00%	8.00%

Total capital to risk-weighted assets	15.05%	14.92%	8.00%	10.00%

(1) Minimum requirements to remain adequately capitalized.

(2) Well-capitalized under prompt corrective action regulations.

As of March 31, 2024, the most recent notification from our primary regulator categorized the Bank as a "well-capitalized" institution under the prompt corrective action rules of the Federal Deposit Insurance Act. Designation as a well-capitalized institution under these regulations is not a recommendation or endorsement of the Company or the Bank by federal bank regulators.

The minimum capital level requirements applicable to the Company and the Bank are: (1) a common equity Tier 1 capital ratio of 4.5%; (2) a Tier 1 capital ratio of 6%; (3) a total capital ratio of 8%; and (4) a Tier 1 leverage ratio of 4%. The rules also establish a “capital conservation buffer” of 2.5% above the regulatory minimum capital requirements, which must consist entirely of common equity Tier 1 capital. An institution would be subject to limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses to executive officers if its capital level falls below the buffer amount. These limitations establish a maximum percentage of eligible retained income that could be utilized for such actions.

Our total capital ratio increased at March 31, 2024 from December 31, 2023 as a result of an increase in Tier 1 capital, which resulted from net income exceeding the declared common dividends during this period coupled with a decrease in risk weighted assets as unused loan commitments declined from December 31, 2023. The Tier 1 ratios and the leverage ratio also improved due to the growth of Tier 1 capital.

Tangible Common Equity

Tangible common equity, tangible assets, and tangible book value per share are non-GAAP financial measures calculated using GAAP amounts. Tangible common equity and tangible assets exclude the balances of goodwill and other intangible assets from total stockholders' equity and total assets. Management believes that this non-GAAP financial measure provides information to investors that may be useful in understanding our financial condition. Because not all companies use the same calculation of tangible common equity and tangible assets, this presentation may not be comparable to other similarly titled measures calculated by other companies.

Tangible common equity increased to 8.86% of tangible assets at March 31, 2024, compared to 8.77% at December 31, 2023. This increase reflected the impact of a $141.6 million reduction in tangible assets, while tangible common equity remained level during the current quarter.

A reconciliation of total stockholders’ equity to tangible common equity and total assets to tangible assets along with tangible book value per share, book value per share and related non-GAAP tangible common equity ratio are provided in the following table:

Tangible Common Equity Ratio – Non-GAAP


(Dollars in thousands, except per share data)	March 31, 2024			December 31, 2023
Tangible common equity ratio:
Total stockholders' equity	$	1,589,364		$	1,588,142
Goodwill	(363,436)			(363,436)
Other intangible assets, net	(29,864)			(28,301)
Tangible common equity	$	1,196,064		$	1,196,405

Total assets	$	13,888,133		$	14,028,172
Goodwill	(363,436)			(363,436)
Other intangible assets, net	(29,864)			(28,301)
Tangible assets	$	13,494,833		$	13,636,435

Outstanding common shares	44,940,147			44,913,561

Tangible common equity ratio	8.86		%	8.77		%
Book value per common share	$	35.37		$	35.36
Tangible book value per common share	$	26.61		$	26.64

Credit Risk

Our fundamental lending business is based on understanding, measuring and controlling the credit risk inherent in the loan portfolio. Accordingly, our loan portfolio is subject to varying degrees of credit risk. Credit risk entails both general risks, which are inherent in the process of lending, and risk specific to individual borrowers. Our credit risk is mitigated through portfolio diversification, which limits exposure to any single customer, industry or collateral type. Typically, each consumer and residential lending product has a generally predictable level of credit losses based on historical loss experience. Residential mortgage and home equity loans and lines generally have the lowest credit loss experience. Loans secured by personal property, such as auto loans, generally experience medium credit losses. Unsecured loan products, such as personal revolving credit, have the highest credit loss experience and, for that reason, we have chosen not to engage in a significant amount of this type of lending. Credit risk in commercial lending can vary significantly, as losses as a percentage of outstanding loans can shift widely during economic cycles and are particularly sensitive to changing economic conditions. Generally, improving economic conditions result in improved operating results on the part of commercial customers, enhancing their ability to meet their particular debt service requirements. Improvements, if any, in operating cash flows can be offset by the impact of rising interest rates that may occur during improved economic times. Inconsistent economic conditions may have an adverse effect on the operating results of commercial customers, reducing their ability to meet debt service obligations.

To control and manage credit risk, management has a credit process in place to reasonably ensure that credit standards are maintained along with an in-house loan administration, accompanied by various oversight and review procedures. The primary purpose of loan underwriting is the evaluation of specific lending risks and involves the analysis of the borrower’s ability to service the debt as well as the assessment of the value of the underlying collateral. Oversight and review procedures include monitoring the credit quality of the portfolio, providing early identification of potential problem credits and proactive management of problem credits.

We recognize a lending relationship as non-performing when either the loan becomes 90 days delinquent or as a result of factors, such as bankruptcy, interruption of cash flows, etc., considered at a monthly credit committee meeting. Classification as a non-accrual loan is based on a determination that we may not collect all principal and/or interest payments according to contractual terms. When a loan is placed on non-accrual status, all previously accrued but unpaid interest is reversed from interest income. Payments received on non-accrual loans are first applied to the remaining principal balance of the loans. Additional recoveries are credited to the allowance up to the amount of all previous charge-offs.

The level of non-performing loans to total loans decreased to 0.74% at March 31, 2024 compared to 0.81% at December 31, 2023. Non-performing loans were $84.4 million at March 31, 2024 compared to $91.8 million at December 31, 2023. Loans greater than 90 days or more were $0.4 million at both March 31, 2024 and December 31, 2023.

While the diversification of the lending portfolio among different commercial, residential and consumer product lines along with different market conditions of the D.C. suburbs, Northern Virginia and Baltimore metropolitan area has mitigated some of the risks in the portfolio, local economic conditions and levels of non-performing loans may continue to be influenced by the conditions being experienced in various business sectors of the economy on both a regional and national level.

Our methodology for evaluating whether a loan shall be placed on non-accrual status begins with risk-rating credits on an individual basis and includes consideration of the borrower’s overall financial condition, payment record and available cash resources that may include the sufficiency of collateral value and, in a select few cases, verifiable support from financial guarantors. In measuring an allowance on an individual basis, we evaluate primarily the value of the collateral (adjusted for estimated costs to sell) or projected cash flows generated by the operation of the collateral as the primary sources of repayment of the loan. Consideration is given to the existence of guarantees and the financial strength and wherewithal of the guarantors involved in any loan relationship. Guarantees may be considered as a source of repayment based on the guarantor’s financial condition and payment capacity. Accordingly, absent a verifiable payment capacity, a guarantee alone would not be sufficient to avoid classifying the loan as non-accrual.

Management has established a credit process that dictates that structured procedures be performed to monitor these loans between the receipt of an original appraisal and the updated appraisal. These procedures include the following:

•An internal evaluation is updated periodically to include borrower financial statements and/or cash flow projections.

•The borrower may be contacted for a meeting to discuss an updated or revised action plan which may include a request for additional collateral.

•Re-verification of the documentation supporting our position with respect to the collateral securing the loan.

•At a monthly credit committee meeting, the loan may be downgraded and a specific allowance may be decided upon in advance of the receipt of the appraisal.

•Upon receipt of the updated appraisal (or based on an updated internal financial evaluation) the loan balance is compared to the appraisal and a specific allowance is decided upon for the particular loan, typically for the amount of the difference between the appraised value (adjusted for estimated costs to sell) and the loan balance.

•Evaluation of whether adverse changes in the value of the collateral are expected over the remainder of the loan’s expected life.

•We individually assess the allowance for credit losses based on the fair value of the collateral for any collateral dependent loans where the borrower is experiencing financial difficulty or when we determine that the foreclosure is probable. We will charge-off the excess of the loan amount over the fair value of the collateral adjusted for the estimated selling costs.

We may extend the maturity of a performing or current loan that may have some inherent weakness associated with the loan. However, we generally follow a policy of not extending maturities on non-performing loans under existing terms. Maturity date extensions only occur under revised terms that clearly place us in a position to increase the likelihood of or assure full collection of the loan under the contractual terms and/or terms at the time of the extension that may eliminate or mitigate the inherent weakness in the loan. These terms may incorporate, but are not limited to additional assignment of collateral, significant balance curtailments/liquidations and assignments of additional project cash flows. Guarantees may be a consideration in the extension of loan maturities. As a general matter, we do not view the extension of a loan to be a satisfactory approach to resolving non-performing credits. On an exception basis, certain performing loans that have displayed some inherent weakness in the underlying collateral values, an inability to comply with certain loan covenants which are not affecting the performance of the credit or other identified weakness may be extended.

We sell a portion of our fixed-rate residential mortgage originations in the secondary mortgage market. Concurrent with such sales, we are required to make customary representations and warranties to the purchasers about the mortgage loans and the manner in which they were originated. The related sale agreements grant the purchasers recourse back to us, which could require us to repurchase loans or to share in any losses incurred by the purchasers. This recourse exposure typically extends for a period of six to twelve months after the sale of the loan although the time frame for repurchase requests can extend for an indefinite period. Such transactions could be due to a number of causes including borrower fraud or early payment default. We have received a very limited number of repurchase and indemnity demands from purchasers for such events and routinely monitor our exposure. We maintain a liability of $0.5 million for probable losses due to repurchases.

Mortgage loan servicing rights are accounted for at amortized cost and are monitored for impairment on an ongoing basis. The amortized cost of our mortgage loan servicing rights was $0.3 million at both March 31, 2024 and December 31, 2023.

Analysis of Credit Risk

The following table presents information with respect to non-performing assets and 90-day delinquencies as of the periods indicated:


(Dollars in thousands)	March 31, 2024			December 31, 2023
Non-accrual loans:
Commercial real estate:
Commercial investor real estate	$	55,579		$	58,658
Commercial owner-occupied real estate	4,394			4,640
Commercial AD&C	556			1,259
Commercial business	7,164			10,051
Residential real estate:
Residential mortgage	11,835			12,332
Residential construction	542			443
Consumer	4,011			4,102
Total non-accrual loans	84,081			91,485

Loans 90 days past due:
Commercial real estate:
Commercial investor real estate	—			—
Commercial owner-occupied real estate	—			—
Commercial AD&C	—			—
Commercial business	20			20
Residential real estate:
Residential mortgage	340			342
Residential construction	—			—
Consumer	—			—
Total 90 days past due loans	360			362


Total non-performing loans	84,441			91,847
Other real estate owned, net	2,700			—
Total non-performing assets	$	87,141		$	91,847

Non-accrual loans to total loans	0.74		%	0.80		%
Non-performing loans to total loans	0.74		%	0.81		%
Non-performing assets to total assets	0.63		%	0.65		%
Allowance for credit losses to non-accrual loans	146.40		%	132.11		%
Allowance for credit losses to non-performing loans	145.78		%	131.59		%

Allowance for Credit Losses - Loans

The allowance for credit losses represents management’s estimate of the portion of our loans’ amortized cost basis not expected to be collected over the loans’ contractual life. As a part of the credit oversight and review process, we maintain an allowance for credit losses (the “allowance”). The following allowance section should be read in conjunction with “Allowance for Credit Losses” section in Note 1 – Significant Accounting Policies in the Notes to the Condensed Consolidated Financial Statements. We exclude accrued interest from the measurement of the allowance as the Company has a non-accrual policy to reverse any accrued, uncollected interest income when loans are placed on non-accrual status.

The appropriateness of the allowance is determined through ongoing evaluation of the credit portfolio, and involves consideration of a number of factors. Determination of the allowance is inherently subjective and requires significant estimates, including consideration of current conditions and future economic forecasts, which may be susceptible to significant volatility. The forecasted economic metrics with the greatest impact are the expected future unemployment rate, the expected level of business bankruptcies, gross domestic product, and, to a lesser degree, the commercial real estate price index and residential real estate house price index. In addition to these metrics, management has included the potential impact of the recession among the qualitative factors applied in the determination of the allowance. Expected losses can vary significantly from the amounts actually observed. Loans deemed uncollectible are charged off against the allowance, while recoveries are credited to

the allowance when received. Management adjusts the level of the allowance through the provision for credit losses in the Condensed Consolidated Statement of Income.

For the three months ended March 31, 2024, provision for credit losses was $2.4 million as compared to a credit of $21.5 million for the same period in 2023. The current quarter's provision is mainly a reflection of adjustments applied to specific industries within the commercial real estate segment, partially offset by lower individual reserves due to full payoffs of several non-accrual loans along with the lower probability of an economic recession.

At March 31, 2024, the allowance for credit losses was $123.1 million as compared to $120.9 million at December 31, 2023. The allowance for credit losses as a percent of total loans was 1.08% and 1.06% at March 31, 2024 and December 31, 2023, respectively. The allowance for credit losses represented 146% of non-performing loans at March 31, 2024 as compared to 132% at December 31, 2023. The allowance attributable to the commercial portfolio represented 1.19% of total commercial loans while the portion attributable to total combined consumer and mortgage loans was 0.59%. With respect to the total commercial portion of the allowance, 26% of this portion is allocated to the commercial business loan portfolio, resulting in the ratio of the allowance for commercial business loans to total commercial business loans of 1.92%. The allowance coverage ratio for the investor real estate portfolio increased to 1.29% at March 31, 2024 compared to 1.20% at December 31, 2023 as a result of the incorporation of adjustments to the risk factors related to specific industries. The ratio of the allowance attributable to AD&C loans was 0.99% at the end of the current quarter, compared to 0.84% at December 31, 2023. This increase in the allowance ratio was predominantly the result of the growth in AD&C loan portfolio balances.

The current methodology for assessing the appropriate allowance includes: (1) a collective quantified reserve that reflects our historical default and loss experience adjusted for expected economic conditions over a reasonable and supportable forecast period and our prepayment and curtailment rates, (2) collective qualitative factors that consider concentrations of the loan portfolio, expected changes to the economic forecasts, large lending relationships, early delinquencies, and factors related to credit administration, including, among others, loan-to-value ratios, borrowers’ risk rating and credit score migrations, and (3) individual allowances on collateral-dependent loans where borrowers are experiencing financial difficulty or where we determined that foreclosure is probable. Under the current methodology, 57% of the total allowance is attributable to the historical default and loss experience coupled with individual reserves, while 43% of the allowance is attributable to the collective qualitative factors applied to determine the allowance.

The quantified collective portion of the allowance is determined by pooling loans into segments based on the similar risk characteristics of the underlying borrowers, in addition to consideration of collateral type, industry and business purpose of the loans. We selected two collective methodologies, the expected loss and weighted average remaining life methodologies. Collective calculation methodologies use our historical default and loss experience adjusted for future economic forecasts. The reasonable and supportable forecast period represents a two year economic outlook for the applicable economic variables. Following the end of the reasonable and supportable forecast period expected losses revert back to the historical mean over the next two years on a straight-line basis.

Economic variables which have the most significant impact on the allowance include:

•unemployment rate;

•gross domestic product;

•number of business bankruptcies; and

•commercial real estate price index and residential real estate house price index.

The collective quantified component of the allowance is supplemented by a qualitative component to address various risk characteristics of our loan portfolio including:

•trends in early delinquencies;

•changes in the risk profile related to large loans in the portfolio;

•concentrations of loans to specific industry segments;

•expected changes in economic conditions;

•changes in our credit administration and loan portfolio management processes; and

•probability of the near-term recession and its impact on estimated losses.

The individual reserve assessment is applied to collateral dependent loans where borrowers are experiencing financial difficulty or when we determined that foreclosure is probable. The determination of the fair value of the collateral depends on whether a repayment of the loan is expected to be from the sale or the operation of the collateral. When repayment is expected from the operation of the collateral, we use the present value of expected cash flows from the operation of the collateral as the fair value. When repayment of the loan is expected from the sale of the collateral the fair value of the collateral is based on an observable market price or the appraised value less estimated cost to sell. During the individual reserve assessment, management also

considers the potential future changes in the value of the collateral over the remainder of the loan’s life. The balance of collateral-dependent loans individually assessed for the allowance was $81.1 million, with individual allowances of $20.9 million against those loans at March 31, 2024.

If an updated appraisal is received subsequent to the preliminary determination of an individual allowance or partial charge-off, and it is less than the initial appraisal used in the initial assessment, an additional individual allowance or charge-off is taken on the related credit. Partially charged-off loans are not written back up based on updated appraisals and always remain on non-accrual with any and all subsequent payments first applied to the remaining balance of the loan as principal reductions. No interest income is recognized on loans that have been partially charged-off.

A current appraisal on large loans is usually obtained if the appraisal on file is more than 12 months old and there has been a material change in market conditions, zoning, physical use or the adequacy of the collateral based on an internal evaluation. Our policy is to strictly adhere to regulatory appraisal standards. If an appraisal is ordered, no more than a 30 day turnaround is requested from the appraiser, who is selected by Credit Administration from an approved appraiser list. After receipt of the updated appraisal and completion of the internal review, the assigned credit officer will recommend to the Chief Credit Officer whether an individual allowance or a charge-off should be taken. The Chief Credit Officer has the authority to approve an individual allowance or charge-off between monthly credit committee meetings to ensure that there are no significant time lapses during this process. The Company's borrowers are concentrated in nine counties in Maryland, three counties in Virginia and in Washington D.C. Commercial and residential mortgages, including home equity loans and lines, represented 87% of total loans at both March 31, 2024 and at December 31, 2023. Certain loan terms may create concentrations of credit risk and increase our exposure to loss. These include terms that permit the deferral of principal payments or payments that are smaller than normal interest accruals (negative amortization); loans with high loan-to-value ratios; loans, such as option adjustable-rate mortgages, that may expose the borrower to future increases in repayments that are in excess of increases that would result solely from increases in market interest rates; and interest-only loans. We do not make loans that provide for negative amortization or option adjustable-rate mortgages.

The following table presents an allocation of the allowance for credit losses by portfolio as of each period end. The allowance is allocated in the following table to various loan categories based on the methodology used to estimate credit losses; however, the allocation does not restrict the usage of the allowance for any specific loan category.


(In thousands)	March 31, 2024				December 31, 2023
Commercial real estate:	Amount		% of loans to total loans		Amount		% of loans to total loans
Commercial investor real estate	$	64,299	44.0	%	$	61,439	44.9	%
Commercial owner-occupied real estate	6,907		15.3		7,536		15.4
Commercial AD&C	10,845		9.6		8,287		8.7
Commercial business	29,037		13.3		31,932		13.3
Total commercial	111,088		82.2		109,194		82.3
Residential real estate:
Residential mortgage	9,091		13.3		8,890		13.0
Residential construction	423		0.9		729		1.1
Consumer	2,494		3.6		2,052		3.6
Total residential and consumer	12,008		17.8		11,671		17.7
Total allowance for credit losses - loans	$	123,096	100.0	%	$	120,865	100.0	%

Summary of Loan Credit Loss Experience

The following table presents the activity in the allowance for credit losses on loans for the periods indicated:


	Three Months Ended			Year Ended
(Dollars in thousands)	March 31, 2024			December 31, 2023
Balance, January 1	$	120,865		$	136,242



Provision/ (credit) for credit losses - loans	3,331			(13,894)
Loan charge-offs:
Commercial real estate:
Commercial investor real estate	(1)			—
Commercial owner-occupied real estate	—			—
Commercial AD&C	—			—
Commercial business	(1,551)			(449)
Residential real estate:
Residential mortgage	—			(160)
Residential construction	—			—
Consumer	(68)			(2,005)
Total charge-offs	(1,620)			(2,614)
Loan recoveries:
Commercial real estate:
Commercial investor real estate	3			25
Commercial owner-occupied real estate	27			105
Commercial AD&C	283			—
Commercial business	1			303
Residential real estate:
Residential mortgage	6			114
Residential construction	—			—
Consumer	200			584
Total recoveries	520			1,131
Net (charge-offs)/ recoveries	(1,100)			(1,483)
Balance, period end	$	123,096		$	120,865

Annualized net charge-offs/ (recoveries) to average loans	0.04		%	0.01		%
Allowance for credit losses on loans to loans	1.08		%	1.06		%

Market Risk Management

Our net income is largely dependent on our net interest income. Net interest income is susceptible to interest rate risk to the extent that interest-bearing liabilities mature or re-price on a different basis than interest-earning assets. When interest-bearing liabilities mature or re-price more quickly than interest-earning assets in a given period, a significant increase in market rates of interest could adversely affect net interest income. Similarly, when interest-earning assets mature or re-price more quickly than interest-bearing liabilities, falling interest rates could result in a decrease in net interest income. Net interest income is also affected by changes in the portion of interest-earning assets that are funded by interest-bearing liabilities rather than by other sources of funds, such as noninterest-bearing deposits and stockholders' equity.

Our interest rate risk management goals are (1) to increase net interest income at a growth rate consistent with the growth rate of total assets, and (2) to minimize fluctuations in net interest income as a percentage of interest-earning assets. Management attempts to achieve these goals by balancing, within policy limits, the volume of floating-rate liabilities with a similar volume of floating-rate assets; by keeping the average maturity of fixed-rate asset and liability contracts reasonably matched; by maintaining a pool of administered core deposits; and by adjusting pricing rates to market conditions on a continuing basis.

Our Board of Directors has established a comprehensive interest rate risk management policy, which is administered by management’s Asset Liability Management Committee (“ALCO”). The policy establishes limits on risk, which are quantitative measures of the percentage change in net interest income (a measure of net interest income or “NII” at risk) and the fair value of equity capital (a measure of economic value of equity or “EVE” at risk) resulting from a hypothetical change in U.S. Treasury interest rates for maturities from one day to thirty years. Management measures the potential adverse impacts that changing interest rates may have on its short-term earnings, long-term value, and liquidity by employing simulation analysis through the

use of computer modeling. The simulation model captures optionality factors such as call features and interest rate caps and floors embedded in investment and loan portfolio contracts. As with any method of gauging interest rate risk, there are certain shortcomings inherent in the interest rate modeling methodology used by us. When interest rates change, actual movements in different categories of interest-earning assets and interest-bearing liabilities, loan prepayments, and withdrawals of time and other deposits, may deviate significantly from assumptions used in the model. As an example, certain types of money market deposit accounts are assumed to reprice at 40 to 100% of the interest rate change in each of the up rate shock scenarios even though this is not a contractual requirement. As a practical matter, management would likely lag the impact of any upward movement in market rates on these accounts as a mechanism to manage our net interest margin. Finally, the methodology does not measure or reflect the impact that higher rates may have on adjustable-rate loan customers’ ability to service their debts, or the impact of rate changes on demand for loan and deposit products.

We prepare a current base case and multiple alternative simulations at least once per quarter and report the analysis to the Board of Directors. In addition, more frequent forecasts are produced when interest rates are particularly uncertain or when other business conditions, such as periods of economic uncertainty or market liquidity concerns, so dictate.

Our statement of condition is subject to quarterly testing for eight alternative interest rate shock possibilities to indicate the inherent interest rate risk. Average interest rates are shocked by +/- 100, 200, 300, and 400 basis points (“bp”), although we may elect not to use particular scenarios if they are determined to be impractical in a current rate environment. It is management’s goal to structure the statement of condition so that net interest income at risk over a twelve-month period and the economic value of equity at risk do not exceed policy guidelines at the various interest rate shock levels.

Measures of net interest income at risk produced by simulation analysis are indicators of an institution’s short-term performance in alternative rate environments. These measures are typically based upon a relatively brief period, usually one year. They do not necessarily indicate the long-term prospects or economic value of the institution.

The following table presents estimated changes in net interest income utilizing an instantaneous parallel rate shocks in various interest rate scenarios:


Estimated Changes in Net Interest Income
Change in Interest Rates:	+ 400 bp	+ 300 bp	+ 200 bp	+ 100 bp	- 100 bp	- 200 bp	-300 bp	-400 bp
Policy Limit	23.50%	17.50%	15.00%	10.00%	10.00%	15.00%	17.50%	23.50%
March 31, 2024	(1.86%)	(1.35%)	(0.83%)	(0.31%)	0.88%	1.81%	2.75%	3.84%
December 31, 2023	(2.42%)	(1.71%)	(0.99%)	(0.40%)	1.13%	2.09%	2.84%	3.87%

As reflected in the table above, the measures of net interest income at risk at March 31, 2024 stayed relatively stable as compared to December 31, 2023. The modest decreases in net interest income at risk during the current year are the result of a higher interest income generated from the variable rate loan portfolio along with less interest expense on federal reserve borrowings offset by an increase in deposit expense due to higher interest rates and less interest income from interest bearing deposits with other banks.

We augment our quarterly interest rate shock analysis with alternative external interest rate scenarios on a monthly basis. These alternative interest rate scenarios may include parallel rate ramps and non-parallel yield curve twists. If a measure of risk produced by the alternative simulations of the entire statement of condition violates policy guidelines, ALCO is required to develop a plan to restore the measure of risk to a level that complies with policy limits within two quarters.

The following table presents estimated changes in net interest income utilizing parallel rate ramps in various interest rate scenarios:


Estimated Changes in Net Interest Income
Change in Interest Rates:	+ 400 bp	+ 300 bp	+ 200 bp	+ 100 bp	- 100 bp	- 200 bp	-300 bp	-400 bp
March 31, 2024	(3.18%)	(2.32%)	(1.47%)	(0.64%)	0.99%	2.05%	3.16%	4.29%
December 31, 2023	(1.81%)	(1.24%)	(0.68%)	(0.25%)	0.81%	1.54%	2.22%	2.87%

The measures of equity value at risk indicate our ongoing economic value by considering the effects of changes in interest rates on all of our cash flows, and by discounting the cash flows to estimate the present value of assets and liabilities. The difference between these discounted values of the assets and liabilities is the economic value of equity, which, in theory, approximates the fair value of our net assets.


Estimated Changes in Economic Value of Equity at Risk
Change in Interest Rates:	+ 400 bp	+ 300 bp	+ 200 bp	+ 100 bp	- 100 bp	- 200 bp	-300 bp	-400 bp
Policy Limit	35.00%	25.00%	20.00%	10.00%	10.00%	20.00%	25.00%	35.00%
March 31, 2024	(26.34%)	(19.52%)	(12.70%)	(6.08%)	5.65%	10.27%	13.56%	15.42%
December 31, 2023	(24.78%)	(18.31%)	(11.90%)	(5.75%)	5.55%	9.92%	12.93%	12.49%

Overall, the measure of the economic value of equity ("EVE") at risk remained relatively stable in most of the rising rate change scenarios from December 31, 2023 to March 31, 2024. The slight increase in EVE at risk is a reflection of the impact of lower balances of noninterest-bearing deposits and smaller premium on FHLB advances due to shorter durations.

Liquidity Management

Liquidity is measured by a financial institution's ability to raise funds through loan repayments, maturing investments, deposit growth, borrowed funds, capital and the sale of highly marketable assets such as investment securities and residential mortgage loans. In assessing liquidity, management considers operating requirements, the seasonality of deposit flows, investment, loan and deposit maturities and calls, expected funding of loans and deposit withdrawals, and the market values of available-for-sale investments, so that sufficient funds are available on a short notice to meet obligations as they arise and to ensure that the we are able to pursue new business opportunities. Accordingly, management evaluates these metrics on a monthly basis to ensure that policy parameters are adequately addressed. We perform liquidity stress testing at least quarterly which includes systemic and idiosyncratic scenarios. Testing at the end of the first quarter of 2024 indicated that the Company demonstrates sufficient liquidity in most severe scenarios. At March 31, 2024, our liquidity position, considering both internal and external sources available, exceeded anticipated short-term and long-term needs.

Liquidity is measured using an approach designed to take into account core deposits, in addition to factors already discussed above. Management considers core deposits, defined to include all deposits other than brokered and outsourced deposits, to be a relatively stable funding source. Core deposits, which exclude brokered deposit relationships, equaled 93% of total deposits at March 31, 2024. At March 31, 2024, contingent liquidity, which consists of available FHLB borrowings, fed funds, funds through the Federal Reserve Bank's discount window and the Bank Term Funding Program, as well as excess cash and unpledged investment securities totaled $6.3 billion or 170% of uninsured deposits. Although this amount of contingent liquidity does not include any consideration of the held-to-maturity or the available-for-sale investment portfolios, management also considers changes in the liquidity of the investment portfolio due to fluctuations in interest rates when considering total liquidity of the Company. Under this approach, implemented by the Funding and Liquidity Subcommittee of ALCO under formal policy guidelines, our liquidity position is measured weekly, looking forward at thirty day intervals from 30 to 360 days. The measurement is based upon the projection of funds sold or purchased position, along with ratios and trends developed to measure dependence on purchased funds and core growth. At March 31, 2024, our liquidity and funds availability provides it with the requisite flexibility in funding and other liquidity demands.

Our external sources of funds available that can be drawn upon when required are available lines of credit with the FHLB and the Federal Reserve Bank and correspondent banks. At March 31, 2024, we had the ability to pledge collateral at prevailing market rates under a line of credit with the FHLB of $3.6 billion. FHLB availability based on pledged collateral at March 31, 2024 amounted to $3.1 billion, with $500.0 million outstanding against it. The secured lines of credit at the Federal Reserve Bank and correspondent banks totaled $734.4 million, all of which was available for borrowing based on pledged collateral, with no borrowings against it as of March 31, 2024. In addition, we have federal funds borrowing capacity under unsecured lines of credit with correspondent banks of $1.2 billion with no amount outstanding at March 31, 2024. Based upon its liquidity analysis, including external sources of liquidity available, management believes the liquidity position was appropriate at March 31, 2024.

Bancorp is a separate legal entity from the Bank and must provide for its own liquidity. In addition to its operating expenses, Bancorp is responsible for paying any dividends declared to its common shareholders and interest and principal on outstanding debt. Bancorp’s primary source of income is dividends received from the Bank. The amount of dividends that the Bank may declare and pay to Bancorp in any calendar year, without the receipt of prior approval from the Federal Reserve Bank, cannot exceed net income for that year to date period plus retained net income (as defined) for the preceding two calendar years. Quarterly, management evaluates the capacity to pay dividends under various stress scenarios and provides that recommendation to the Board of Directors. Based on this requirement, as of March 31, 2024, the Bank could have declared a dividend of up to $134.4 million to Bancorp. At March 31, 2024, Bancorp had liquid assets of $129.4 million.

Arrangements to fund credit products or guarantee financing take the form of loan commitments (including lines of credit on revolving credit structures) and letters of credit. Approvals for these arrangements are obtained in the same manner as loans. Generally, cash flows, collateral value and risk assessment are considered when determining the amount and structure of credit arrangements.

Commitments to extend credit in the form of consumer, commercial real estate and business at the dates indicated were as follows:


(In thousands)	March 31, 2024		December 31, 2023
Commercial real estate development and construction	$	491,817	$	572,540
Residential real estate-development and construction	651,882		713,903
Real estate-residential mortgage	40,488		16,608
Lines of credit, principally home equity and business lines	2,425,004		2,405,150
Standby letters of credit	77,423		71,817
Total commitments to extend credit and available credit lines	$	3,686,614	$	3,780,018

Commitments to extend credit are agreements to provide financing to a customer with the provision that there are no violations of any condition established in the agreement. Commitments generally have interest rates determined by current market rates, expiration dates or other termination clauses and may require payment of a fee. Lines of credit typically represent unused portions of lines of credit that were provided and remain available as long as customers comply with the requisite contractual conditions. Commitments to extend credit are evaluated, processed and/or renewed regularly on a case by case basis, as part of the credit management process. The total commitment amount or line of credit amounts do not necessarily represent future cash requirements, as it is highly unlikely that all customers would draw on their lines of credit in full at one time.

As of March 31, 2024, the total reserve for unfunded commitments was $3.4 million and is accounted for in other liabilities in the Condensed Consolidated Statements of Financial Condition. See Note 1 – Significant Accounting Policies in the Notes to the Condensed Consolidated Financial Statements for more information on the accounting policy for the allowance for unfunded commitments.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

See “Financial Condition - Market Risk Management” in Management’s Discussion and Analysis of Financial Condition and Results of Operations, above, which is incorporated herein by reference.

Item 4. CONTROLS AND PROCEDURES

The Company’s management, under the supervision and with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, evaluated as of the last day of the period covered by this report, the effectiveness of the design and operation of the Company’s disclosure controls and procedures, as defined in Rule 13a-15 under the Securities Exchange Act of 1934. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective. There were no changes in the Company’s internal controls over financial reporting (as defined in Rule 13a-15 under the Securities Act of 1934) during the three months ended March 31, 2024 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

In the normal course of business, we become involved in litigation arising from the banking, financial and other activities we conduct. Management, after consultation with legal counsel, does not anticipate that the ultimate liability, if any, arising from these matters will have a material effect on our financial condition, operating results or liquidity.

Item 1A. Risk Factors

The most significant risk factors affecting our business include the factors discussed in our Annual Report on Form 10-K for the year ended December 31, 2023 under Item 1A, “Risk Factors” and there have been no material changes in the risk factors discussed in such report.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

On March 30, 2022, our Board of Directors authorized a stock repurchase plan that permits the repurchase of up to $50.0 million of the Company's common stock. During 2022, the Company repurchased 625,710 shares of its common stock at an average price of $39.93 per share. The Company did not repurchase any shares of its common stock during 2023 or the quarter ended March 31, 2024. Under the current authorization, common stock with a total value of up to $25.0 million remains available to be repurchased.

Item 3. Defaults Upon Senior Securities – None

Item 4. Mine Safety Disclosures – Not applicable

Item 5. Other Information

During the fiscal quarter ended March 31, 2024, none of our directors or officers informed us of the adoption or termination of a “Rule 10b5-1 trading arrangement or “non-Rule 10b5-1 trading arrangement,” as those terms are defined in Item 408 of Regulation S-K.

Item 6. Exhibits


Exhibit 31(a)						Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a)
Exhibit 31(b)						Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a)
Exhibit 32(a)						Certification of Chief Executive Officer pursuant to 18 U.S. Section 1350
Exhibit 32(b)						Certification of Chief Financial Officer pursuant to 18 U.S. Section 1350
Exhibit 101.SCH						XBRL Taxonomy Extension Schema Document
Exhibit 101.CAL						XBRL Taxonomy Extension Calculation Linkbase Document
Exhibit 101.DEF						XBRL Taxonomy Extension Definition Linkbase Document
Exhibit 101.LAB						XBRL Taxonomy Extension Label Linkbase Document
Exhibit 101.PRE						XBRL Taxonomy Extension Presentation Linkbase Document
Exhibit 104						Cover Page Interactive Data File (embedded within the Inline XBRL document)

Signatures

Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the Registrant has duly caused this quarterly report to be signed on its behalf by the undersigned, thereunto duly authorized.

SANDY SPRING BANCORP, INC.

(Registrant)

By: /s/ Daniel J. Schrider

Daniel J. Schrider

President and Chief Executive Officer

Date: May 3, 2024

By: /s/ Philip J. Mantua

Philip J. Mantua

Executive Vice President and Chief Financial Officer

Date: May 3, 2024