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 ~~September~~June 30, ~~2020~~ 2021


☐☐			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: 001-35913

___________

TRISTATE CAPITAL HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

___________

Pennsylvania

20-4929029

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

One Oxford Centre

(412)

304-0304

301 Grant Street, Suite 2700

(~~Registrant’s~~Registrant’s telephone number, including area code)

Pittsburgh,

Pennsylvania

15219

(Address of principal executive offices)

(Zip 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, no par value

TSC

Nasdaq Global Select Market

Depositary Shares, Each Representing a 1/40th Interest in a Share of 6.75% Fixed-to-Floating Rate Series A Non-Cumulative Perpetual Preferred Stock

TSCAP

Nasdaq Global Select Market

Depositary Shares, Each Representing a 1/40th Interest in a Share of 6.375% Fixed-to-Floating Rate Series B Non-Cumulative Perpetual Preferred Stock

TSCBP

Nasdaq Global Select Market

___________

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

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

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

Large accelerated filer

☐☐

Accelerated filer

ýý

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 ýý No

___________

As of ~~October~~July 31, ~~2020,~~2021, there were ~~29,825,057~~33,156,729 shares of the ~~registrant’s~~registrant’s common stock, no par value, outstanding.

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TRISTATE CAPITAL HOLDINGS, INC. AND SUBSIDIARIES

TABLE OF CONTENTS


CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS		4
PART I –– FINANCIAL INFORMATION
	ITEM 1. FINANCIAL STATEMENTS	6
	UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION	6
	UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME	7
	UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME	8
	UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN ~~SHAREHOLDERS’~~SHAREHOLDERS’ EQUITY	9
	UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS	10
	NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	12
	ITEM 2. ~~MANAGEMENT’S~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	4447
	ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	8081
	ITEM 4. CONTROLS AND PROCEDURES	8081
PART II –– OTHER INFORMATION
	ITEM 1. LEGAL PROCEEDINGS	8082
	ITEM 1A. RISK FACTORS	8082
	ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	8283
	ITEM 3. DEFAULTS UPON SENIOR SECURITIES	8284
	ITEM 4. MINE SAFETY DISCLOSURES	8284
	ITEM 5. OTHER INFORMATION	8284
	ITEM 6. EXHIBITS	8385
SIGNATURES		8486

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains ~~“forward-looking statements”~~“forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the ~~“Exchange Act”~~“Exchange Act”). These forward-looking statements reflect our current views with respect to, among other things, future events, and our financial performance, as well as our goals and objectives for future operations, financial and business trends, business prospects ~~our expected sale of securities to Stone Point Capital LLC~~ and ~~management’s~~management’s outlook or expectations for earnings, revenues, expenses, capital levels, liquidity levels, asset quality or other measures of future financial or business performance, strategies, or expectations. These statements are often, but not always, indicated through the use of words or phrases such as “achieve,” “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “maintain,” “may,” “opportunity,” “outlook,” “plan,” “potential,” “predict,” “projection,” “seek,” “should,” “sustain,” “target,” “trend,” “will,” “will“achieve,” “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “maintain,” “may,” “opportunity,” “outlook,” “plan,” “potential,” “predict,” “projection,” “seek,” “should,” “sustain,” “target,” “trend,” “will,” “will likely result,”” and ~~“would,”~~“would,” or the negative version of those words or other comparable statements of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry and beliefs or assumptions made by management, many of which, by their nature, are inherently uncertain. Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions and uncertainties that change over time and are difficult to predict, including, but not limited to, the following:

••risks associated with COVID-19 and their expected impact and duration, including effects on our operations, our clients, economic conditions and the demand for our products and services;

•~~the failure or inability to complete our recently announced private placement of securities due to the failure to satisfy any conditions to closing of the transaction or otherwise;~~

••our ability to prudently manage our growth and execute our strategy; including the successful integration of past and future acquisitions, our ability to fully realize the cost savings and other benefits of our acquisitions, manage risks related to business disruption following those acquisitions, and manage customer disintermediation;

••deterioration of our asset quality;

••our level of non-performing assets and the costs associated with resolving problem loans, including litigation and other costs;

••possible additional loan and lease losses and impairment, changes in the value of collateral securing our loans and leases and the collectability of loans and ~~leases;~~leases, particularly as a result of the COVID-19 pandemic and the programs implemented by the Coronavirus Aid, Relief, and Economic Security ~~(“CARES”~~(“CARES”) Act, including its automatic loan forbearance provisions;

••possible changes in the speed of loan prepayments by customers and loan origination or sales volumes;

••business and economic conditions and trends generally and in the financial services industry, nationally and within our local market areas, including the effects of an increase in unemployment levels, slowdowns in economic growth and changes in demand for products or services or the value of assets under management;

••our ability to maintain important deposit customer relationships, our reputation and otherwise avoid liquidity risks;

••changes in management personnel;

••our ability to recruit and retain key employees;

••volatility and direction of interest rates;

••risks related to the phasing out of LIBOR and changes in the manner of calculating reference rates, as well as the impact of the phase out of LIBOR and introduction of alternative reference rates on the value of loans and other financial instruments we hold that are linked to LIBOR;

••changes in accounting policies, accounting standards, or authoritative accounting ~~guidance, including the current expected credit loss (“CECL”) model, which may increase the level of our allowance for credit losses upon adoption;~~guidance;

••any impairment of our goodwill or other intangible assets;

••our ability to develop and provide competitive products and services that appeal to our customers and target markets;

••our ability to provide investment management performance competitive with our peers and benchmarks;

••fluctuations in the carrying value of the assets under management held by our Chartwell Investment Partners, LLC subsidiary, as well as the relative and absolute investment performance of such ~~subsidiary’s~~subsidiary’s investment products;

••operational risks associated with our business, including technology and cyber-security related risks;

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••increased competition in the financial services industry, particularly from regional and national institutions;

••negative perceptions or publicity with respect to any products or services we offer;

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•adverse judgments or other resolutions of pending and future legal proceedings, and costs incurred in defending such proceedings;

••changes in the laws, rules, regulations, interpretations or policies relating to financial institutions, accounting, tax, trade, monetary and fiscal matters, including economic stimulus programs, and potential expenses associated with complying with such laws and regulations;

••our ability to comply with applicable capital and liquidity requirements, including our ability to generate liquidity internally or raise capital on favorable terms;

••regulatory limits on our ability to receive dividends from our subsidiaries and pay dividends to shareholders;

••changes and direction of government policy toward and intervention in the U.S. financial system;

••natural disasters and adverse weather, acts of terrorism, regional or national civil unrest, cyber-attacks, an outbreak of hostilities, a public health outbreak (such as COVID-19) or other international or domestic calamities, and other matters beyond our control;

••the effects of any reputation, credit, interest rate, market, operational, legal, liquidity, regulatory or compliance risk resulting from developments related to any of the risks discussed above; and

••other factors that are discussed in the section entitled ““Risk Factors”” in our Annual Report on Form 10-K, filed with the SEC, which is accessible at www.sec.gov.

The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in this document. If one or more events related to these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may differ materially from what we anticipate. Accordingly, you should not place undue reliance on any such forward-looking statements. New factors emerge from time to time, and it is not possible for us to predict which will arise. Any forward-looking statement speaks only as of the date on which it is made, and we do not undertake any obligation to update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

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PART I –– FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

TRISTATE CAPITAL HOLDINGS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION


(Dollars in thousands)	(Dollars in thousands)	September 30, 2020		December 31, 2019		(Dollars in thousands)	June 30, 2021		December 31, 2020
ASSETS	ASSETS					ASSETS

Cash	Cash	$	356	$	357	Cash	$	341	$	341
Interest-earning deposits with other institutions	Interest-earning deposits with other institutions	602,676		395,860		Interest-earning deposits with other institutions	518,002		429,639
Federal funds sold	Federal funds sold	5,270		7,638		Federal funds sold	11,110		5,462
Cash and cash equivalents	Cash and cash equivalents	608,302		403,855		Cash and cash equivalents	529,453		435,442
Debt securities available-for-sale, at fair value	Debt securities available-for-sale, at fair value	552,898		248,782		Debt securities available-for-sale, at fair value	311,129		617,570
Debt securities held-to-maturity, at cost		254,041		196,044
Debt securities held-to-maturity, at amortized cost, net						Debt securities held-to-maturity, at amortized cost, net	1,014,712		211,691

Federal Home Loan Bank stock	Federal Home Loan Bank stock	13,284		24,324		Federal Home Loan Bank stock	11,817		13,284
Total investment securities	Total investment securities	820,223		469,150		Total investment securities	1,337,658		842,545

Loans and leases held-for-investment	Loans and leases held-for-investment	7,654,446		6,577,559		Loans and leases held-for-investment	9,282,922		8,237,418
Allowance for loan and lease losses		(30,706)		(14,108)
Allowance for credit losses on loans and leases						Allowance for credit losses on loans and leases	(32,577)		(34,630)
Loans and leases held-for-investment, net	Loans and leases held-for-investment, net	7,623,740		6,563,451		Loans and leases held-for-investment, net	9,250,345		8,202,788
Accrued interest receivable	Accrued interest receivable	18,282		22,326		Accrued interest receivable	19,814		18,783
Investment management fees receivable, net	Investment management fees receivable, net	7,627		7,560		Investment management fees receivable, net	8,580		7,935
Goodwill	Goodwill	41,660		41,660		Goodwill	41,660		41,660
Intangible assets, net of accumulated amortization of $11,903 and $10,437, respectively		22,729		24,194
Office properties and equipment, net of accumulated depreciation of $15,597 and $13,976, respectively		11,666		9,569
Intangible assets, net of accumulated amortization of $13,336 and $12,381, respectively						Intangible assets, net of accumulated amortization of $13,336 and $12,381, respectively	21,295		22,251
Office properties and equipment, net of accumulated depreciation of $17,622 and $16,241, respectively						Office properties and equipment, net of accumulated depreciation of $17,622 and $16,241, respectively	15,398		12,369
Operating lease right-of-use asset	Operating lease right-of-use asset	21,783		22,589		Operating lease right-of-use asset	22,416		21,294

Bank owned life insurance	Bank owned life insurance	71,342		70,044		Bank owned life insurance	97,695		71,787

Prepaid expenses and other assets	Prepaid expenses and other assets	246,436		131,412		Prepaid expenses and other assets	196,858		219,962
Total assets	Total assets	$	9,493,790	$	7,765,810	Total assets	$	11,541,172	$	9,896,816

LIABILITIES AND SHAREHOLDERS’ EQUITY
LIABILITIES AND SHAREHOLDERS’ EQUITY						LIABILITIES AND SHAREHOLDERS’ EQUITY

Liabilities:	Liabilities:					Liabilities:
Deposits	Deposits	$	8,183,713	$	6,634,613	Deposits	$	10,191,433	$	8,489,089
Borrowings, net	Borrowings, net	395,439		355,000		Borrowings, net	345,600		400,493
Accrued interest payable on deposits and borrowings	Accrued interest payable on deposits and borrowings	4,312		5,490		Accrued interest payable on deposits and borrowings	1,832		3,057
Deferred tax liability, net	Deferred tax liability, net	5,577		6,931		Deferred tax liability, net	6,815		5,676

Operating lease liability	Operating lease liability	23,341		23,644		Operating lease liability	23,959		22,958
Other accrued expenses and other liabilities	Other accrued expenses and other liabilities	238,208		118,851		Other accrued expenses and other liabilities	176,965		218,398
Total liabilities	Total liabilities	8,850,590		7,144,529		Total liabilities	10,746,604		9,139,671

Shareholders’ Equity:
Preferred stock, no par value;Shares authorized - 150,000; Series A Shares issued and outstanding - 40,250 and 40,250, respectively		38,468		38,468
Shareholders’ Equity:						Shareholders’ Equity:
Preferred stock, no par value; Shares authorized - 150,000; Series A Shares issued and outstanding - 40,250 and 40,250, respectively						Preferred stock, no par value; Shares authorized - 150,000; Series A Shares issued and outstanding - 40,250 and 40,250, respectively	38,468		38,468
Series B Shares issued and outstanding - 80,500 and 80,500, respectively	Series B Shares issued and outstanding - 80,500 and 80,500, respectively	77,611		77,611		Series B Shares issued and outstanding - 80,500 and 80,500, respectively	77,611		77,611
Common stock, no par value; Shares authorized - 45,000,000; Shares issued - 32,108,733 and 31,482,408, respectively; Shares outstanding - 29,828,143 and 29,355,986, respectively		295,937		295,349
Series C Shares issued and outstanding - 661 and 650, respectively						Series C Shares issued and outstanding - 661 and 650, respectively	63,264		61,064
Common stock voting, no par value; Shares authorized - 47,770,083; Shares issued -35,553,911 and 34,919,572, respectively; Shares outstanding - 33,176,934 and 32,620,150, respectively						Common stock voting, no par value; Shares authorized - 47,770,083; Shares issued -35,553,911 and 34,919,572, respectively; Shares outstanding - 33,176,934 and 32,620,150, respectively	332,307		331,098
Common stock non- voting, no par value; Shares authorized - 6,653,347; Shares issued - NaN						Common stock non- voting, no par value; Shares authorized - 6,653,347; Shares issued - NaN	0		0
Additional paid-in capital	Additional paid-in capital	27,523		23,095		Additional paid-in capital	38,496		33,824
Retained earnings	Retained earnings	245,162		218,449		Retained earnings	282,898		254,054
Accumulated other comprehensive income (loss), net		(5,470)		1,132
Treasury stock (2,280,590 and 2,126,422 shares, respectively)		(36,031)		(32,823)
Total shareholders’ equity		643,200		621,281
Total liabilities and shareholders’ equity		$	9,493,790	$	7,765,810
Accumulated other comprehensive loss, net						Accumulated other comprehensive loss, net	(632)		(2,697)
Treasury stock (2,376,977 and 2,299,422 shares, respectively)						Treasury stock (2,376,977 and 2,299,422 shares, respectively)	(37,844)		(36,277)
Total shareholders’ equity						Total shareholders’ equity	794,568		757,145
Total liabilities and shareholders’ equity						Total liabilities and shareholders’ equity	$	11,541,172	$	9,896,816

See accompanying notes to unaudited condensed consolidated financial statements.

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TRISTATE CAPITAL HOLDINGS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
(Dollars in thousands, except per share data)	(Dollars in thousands, except per share data)	2020		2019		2020		2019		(Dollars in thousands, except per share data)	2021		2020		2021		2020

Interest income:	Interest income:									Interest income:
Loans and leases	Loans and leases	$	46,256	$	61,551	$	152,551	$	179,392	Loans and leases	$	51,702	$	47,377	$	100,888	$	106,295
Investments	Investments	3,687		3,993		11,528		12,497		Investments	3,737		3,940		6,383		7,841
Interest-earning deposits	Interest-earning deposits	279		2,188		2,006		5,084		Interest-earning deposits	116		344		276		1,727
Total interest income	Total interest income	50,222		67,732		166,085		196,973		Total interest income	55,555		51,661		107,547		115,863

Interest expense:	Interest expense:									Interest expense:
Deposits	Deposits	13,898		34,114		57,095		95,602		Deposits	10,106		15,953		20,860		43,197
Borrowings	Borrowings	2,850		1,302		7,110		7,380		Borrowings	2,537		2,224		5,119		4,260
Total interest expense	Total interest expense	16,748		35,416		64,205		102,982		Total interest expense	12,643		18,177		25,979		47,457
Net interest income	Net interest income	33,474		32,316		101,880		93,991		Net interest income	42,912		33,484		81,568		68,406
Provision (credit) for loan and lease losses		7,430		(607)		16,428		(1,696)
Net interest income after provision for loan and lease losses		26,044		32,923		85,452		95,687
Provision for credit losses										Provision for credit losses	96		6,005		320		8,998
Net interest income after provision for credit losses										Net interest income after provision for credit losses	42,816		27,479		81,248		59,408
Non-interest income:	Non-interest income:									Non-interest income:
Investment management fees	Investment management fees	8,095		8,902		23,471		27,580		Investment management fees	9,451		7,738		18,451		15,376
Service charges on deposits	Service charges on deposits	235		129		763		343		Service charges on deposits	325		315		641		528
Net gain on the sale and call of debt securities	Net gain on the sale and call of debt securities	3,744		206		3,815		346		Net gain on the sale and call of debt securities	98		14		97		71
Swap fees	Swap fees	3,953		4,171		12,179		7,666		Swap fees	3,913		3,853		6,624		8,226
Commitment and other loan fees	Commitment and other loan fees	381		464		1,262		1,251		Commitment and other loan fees	564		462		890		881
Bank owned life insurance income										Bank owned life insurance income	480		429		909		857
Other income	Other income	481		371		1,712		2,105		Other income	13		186		883		374
Total non-interest income	Total non-interest income	16,889		14,243		43,202		39,291		Total non-interest income	14,844		12,997		28,495		26,313
Non-interest expense:	Non-interest expense:									Non-interest expense:
Compensation and employee benefits	Compensation and employee benefits	18,524		18,707		52,539		52,467		Compensation and employee benefits	20,937		16,569		40,858		34,015
Premises and equipment expense	Premises and equipment expense	1,488		1,420		4,389		3,866		Premises and equipment expense	1,173		1,515		2,579		2,901
Professional fees	Professional fees	1,596		1,305		4,175		3,706		Professional fees	2,124		1,109		3,448		2,579
FDIC insurance expense	FDIC insurance expense	3,030		994		7,760		3,462		FDIC insurance expense	1,125		2,560		2,250		4,730
General insurance expense	General insurance expense	294		258		834		811		General insurance expense	341		278		639		540
State capital shares tax expense (benefit)		366		(720)		1,115		40
State capital shares tax expense										State capital shares tax expense	777		366		1,427		749
Travel and entertainment expense	Travel and entertainment expense	592		1,339		1,735		3,214		Travel and entertainment expense	639		279		1,080		1,143
Technology and data services	Technology and data services	2,576		2,082		7,294		6,246		Technology and data services	3,687		2,414		6,787		4,717
Intangible amortization expense	Intangible amortization expense	478		502		1,466		1,506		Intangible amortization expense	478		486		956		988

Marketing and advertising	Marketing and advertising	394		518		1,694		1,661		Marketing and advertising	898		686		1,582		1,300
Other operating expenses	Other operating expenses	2,089		1,368		5,667		5,051		Other operating expenses	2,246		1,834		4,097		3,578
Total non-interest expense	Total non-interest expense	31,427		27,773		88,668		82,030		Total non-interest expense	34,425		28,096		65,703		57,240
Income before tax	Income before tax	11,506		19,393		39,986		52,948		Income before tax	23,235		12,380		44,040		28,481
Income tax expense	Income tax expense	2,177		3,059		7,362		7,359		Income tax expense	4,455		1,979		9,060		5,185
Net income	Net income	$	9,329	$	16,334	$	32,624	$	45,589	Net income	$	18,780	$	10,401	$	34,980	$	23,296
Preferred stock dividends	Preferred stock dividends	1,962		1,962		5,886		3,791		Preferred stock dividends	3,077		1,962		6,136		3,924
Net income available to common shareholders	Net income available to common shareholders	$	7,367	$	14,372	$	26,738	$	41,798	Net income available to common shareholders	$	15,703	$	8,439	$	28,844	$	19,372

Earnings per common share:	Earnings per common share:									Earnings per common share:
Basic	Basic	$	0.26	$	0.52	$	0.95	$	1.50	Basic	$	0.42	$	0.30	$	0.78	$	0.69
Diluted	Diluted	$	0.26	$	0.50	$	0.93	$	1.45	Diluted	$	0.41	$	0.30	$	0.76	$	0.68

See accompanying notes to unaudited condensed consolidated financial statements.

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TRISTATE CAPITAL HOLDINGS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three Months Ended September 30, Nine Months Ended September 30,
(Dollars in thousands) 2020 2019 2020 2019
Net income $ 9,329 $ 16,334 $ 32,624 $ 45,589
Other comprehensive income (loss):
Unrealized holding gains on debt securities, net of tax expense of $856, $272, $651 and $1,466, respectively 3,088 787 2,041 4,477
Reclassification adjustment for gains included in net income on debt securities, net of tax expense of $(904), $(32), $(909) and $(62), respectively (2,835) (101) (2,852) (198)
Unrealized holding gains (losses) on derivatives, net of tax expense (benefit) of $5, $(231), $(2,218) and $(787), respectively 27 (736) (7,040) (2,506)
Reclassification adjustment for losses (gains) included in net income on derivatives, net of tax benefit (expense) of $248, $(37), $398 and $(305), respectively 780 (120) 1,249 (972)
Other comprehensive income (loss) 1,060 (170) (6,602) 801
Total comprehensive income $ 10,389 $ 16,164 $ 26,022 $ 46,390


	Three Months Ended June 30,				Six Months Ended June 30,
(Dollars in thousands)	2021		2020		2021		2020

Net income	$	18,780	$	10,401	$	34,980	$	23,296

Other comprehensive income (loss):

Unrealized holding gains (losses) on debt securities, net of tax expense (benefit) of $(88), $(2,791), $(216) and $206, respectively	273		8,375		(681)		(1,048)

Reclassification adjustment for losses (gains) included in net income on debt securities, net of tax benefit (expense) of $24, $(2), $24 and $(5), respectively	75		(5)		74		(16)

Unrealized holding gains (losses) on derivatives, net of tax expense (benefit) of $(98), $(379), $466 and $(2,223), respectively	(311)		(1,200)		1,372		(7,067)

Reclassification adjustment for losses included in net income on derivatives, net of tax benefit of $209, $111, $413 and $150, respectively	658		349		1,300		469

Other comprehensive income (loss), net of tax	695		7,519		2,065		(7,662)

Total comprehensive income	$	19,475	$	17,920	$	37,045	$	15,634

See accompanying notes to unaudited condensed consolidated financial statements.

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TRISTATE CAPITAL HOLDINGS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN ~~SHAREHOLDERS’~~SHAREHOLDERS’ EQUITY


(Dollars in thousands)	Preferred Stock		Common Stock		Additional Paid-in-Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss), Net		Treasury Stock		Total Shareholders’ Equity
Balance, March 31, 2020	$	116,079	$	295,587	$	22,783	$	229,382	$	(14,049)	$	(35,402)	$	614,380
Net income	—		—		—		10,401		—		—		10,401
Other comprehensive income	—		—		—		—		7,519		—		7,519
Preferred stock dividends	0		—		—		(1,962)		—		—		(1,962)
Exercise of stock options	—		233		(113)		0		—		—		120
Purchase of treasury stock	—		0		0		—		—		(155)		(155)
Treasury stock reissuance	—		—		—		(25)		—		135		110

Stock-based compensation	—		—		2,418		—		—		—		2,418
Balance, June 30, 2020	$	116,079	$	295,820	$	25,088	$	237,796	$	(6,530)	$	(35,422)	$	632,831

Balance, March 31, 2021	$	178,243	$	332,070	$	35,853	$	267,195	$	(1,327)	$	(37,748)	$	774,286
Net income	—		—		—		18,780		—		—		18,780
Other comprehensive income	—		—		—		—		695		—		695

Preferred stock dividends	1,100		0		0		(3,077)		—		—		(1,977)
Exercise of stock options	—		237		(145)		—		—		0		92
Purchase of treasury stock	—		—		—		0		—		(96)		(96)

Stock-based compensation	—		—		2,788		—		—		—		2,788
Balance, June 30, 2021	$	179,343	$	332,307	$	38,496	$	282,898	$	(632)	$	(37,844)	$	794,568


(Dollars in thousands)	(Dollars in thousands)	Preferred Stock		Common Stock		Additional Paid-in-Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss), Net		Treasury Stock		Total Shareholders’ Equity		(Dollars in thousands)	Preferred Stock		Common Stock		Additional Paid-in-Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss), Net		Treasury Stock		Total Shareholders’ Equity
Balance, June 30, 2019		$	116,142	$	293,837	$	19,182	$	191,435	$	(360)	$	(31,255)	$	588,981
Balance, December 31, 2019																Balance, December 31, 2019	$	116,079	$	295,349	$	23,095	$	218,449	$	1,132	$	(32,823)	$	621,281
Net income	Net income	—		—		—		16,334		—		—		16,334		Net income	—		—		—		23,296		—		—		23,296
Other comprehensive loss	Other comprehensive loss	—		—		—		—		(170)		—		(170)		Other comprehensive loss	—		—		—		—		(7,662)		—		(7,662)
Issuance of preferred stock (net of offering costs of $78)		(78)		—		—		—		—		—		(78)
Preferred stock dividends	Preferred stock dividends	—		—		—		(1,962)		—		—		(1,962)		Preferred stock dividends	—		0		0		(3,924)		—		—		(3,924)
Exercise of stock options	Exercise of stock options	—		351		(150)		—		—		—		201		Exercise of stock options	—		471		(260)		—		—		0		211
Purchase of treasury stock	Purchase of treasury stock	—		—		—		—		—		(1,247)		(1,247)		Purchase of treasury stock	—		—		—		0		—		(2,734)		(2,734)
Treasury stock reissuance																Treasury stock reissuance	—		—		—		(25)		—		135		110
Cancellation of stock options																Cancellation of stock options	—		—		(2,484)		—		—		—		(2,484)
Stock-based compensation																Stock-based compensation	—		—		4,737		—		—		—		4,737
Balance, June 30, 2020																Balance, June 30, 2020	$	116,079	$	295,820	$	25,088	$	237,796	$	(6,530)	$	(35,422)	$	632,831

Stock-based compensation		—		—		2,448		—		—		—		2,448
Balance, September 30, 2019		$	116,064	$	294,188	$	21,480	$	205,807	$	(530)	$	(32,502)	$	604,507
Balance, December 31, 2020																Balance, December 31, 2020	$	177,143	$	331,098	$	33,824	$	254,054	$	(2,697)	$	(36,277)	$	757,145

Balance, June 30, 2020		$	116,079	$	295,820	$	25,088	$	237,795	$	(6,530)	$	(35,422)	$	632,830
Net income	Net income	—		—		—		9,329		—		—		9,329		Net income	—		—		—		34,980		—		—		34,980
Other comprehensive income	Other comprehensive income	—		—		—		—		1,060		—		1,060		Other comprehensive income	—		—		—		—		2,065		—		2,065

Preferred stock dividends	Preferred stock dividends	—		—		—		(1,962)		—		—		(1,962)		Preferred stock dividends	2,200		—		—		(6,136)		—		—		(3,936)
Exercise of stock options	Exercise of stock options	—		117		(43)		—		—		—		74		Exercise of stock options	—		1,209		(722)		—		—		—		487
Purchase of treasury stock	Purchase of treasury stock	—		—		—		—		—		(609)		(609)		Purchase of treasury stock	—		—		—		—		—		(1,567)		(1,567)

Stock-based compensation	Stock-based compensation	—		—		2,478		—		—		—		2,478		Stock-based compensation	—		—		5,394		—		—		—		5,394
Balance, September 30, 2020		$	116,079	$	295,937	$	27,523	$	245,162	$	(5,470)	$	(36,031)	$	643,200
Balance, June 30, 2021																Balance, June 30, 2021	$	179,343	$	332,307	$	38,496	$	282,898	$	(632)	$	(37,844)	$	794,568

(Dollars in thousands) Preferred Stock Common
Stock Additional
Paid-in-Capital Retained Earnings Accumulated Other Comprehensive Income (Loss), Net Treasury Stock Total Shareholders’ Equity
Balance, December 31, 2018 $ 38,468 $ 293,355 $ 15,364 $ 164,009 $ (1,331) $ (30,511) $ 479,354
Net income — — — 45,589 — — 45,589
Other comprehensive income — — — — 801 — 801
Issuance of preferred stock (net of offering costs of $2,904) 77,596 — — — — — 77,596
Preferred stock dividends — — — (3,791) — — (3,791)
Exercise of stock options — 833 (375) — — — 458
Purchase of treasury stock — — — — — (1,991) (1,991)
Stock-based compensation — — 6,491 — — — 6,491
Balance, September 30, 2019 $ 116,064 $ 294,188 $ 21,480 $ 205,807 $ (530) $ (32,502) $ 604,507
Balance, December 31, 2019 $ 116,079 $ 295,349 $ 23,095 $ 218,449 $ 1,132 $ (32,823) $ 621,281
Net income — — — 32,624 — — 32,624
Other comprehensive loss — — — — (6,602) — (6,602)
Preferred stock dividends — — — (5,886) — — (5,886)
Exercise of stock options — 588 (303) — — — 285
Purchase of treasury stock — — — — — (3,343) (3,343)
Treasury stock reissuance — — — (25) — 135 110
Cancellation of stock options — — (2,484) — — — (2,484)
Stock-based compensation — — 7,215 — — — 7,215
Balance, September 30, 2020 $ 116,079 $ 295,937 $ 27,523 $ 245,162 $ (5,470) $ (36,031) $ 643,200

See accompanying notes to unaudited condensed consolidated financial statements.

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TRISTATE CAPITAL HOLDINGS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


		Nine Months Ended September 30,					Six Months Ended June 30,
(Dollars in thousands)	(Dollars in thousands)	2020		2019		(Dollars in thousands)	2021		2020
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income	Net income	$	32,624	$	45,589	Net income	$	34,980	$	23,296
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and intangible amortization expense	Depreciation and intangible amortization expense	3,087		2,711		Depreciation and intangible amortization expense	2,336		2,022
Amortization of deferred financing costs	Amortization of deferred financing costs	90		84		Amortization of deferred financing costs	108		33
Provision (credit) for loan and lease losses		16,428		(1,696)

Provision for credit losses						Provision for credit losses	320		8,998
Stock-based compensation expense	Stock-based compensation expense	7,215		6,491		Stock-based compensation expense	5,394		4,737
Net gain on the sale or call of debt securities available-for-sale	Net gain on the sale or call of debt securities available-for-sale	(3,762)		(260)		Net gain on the sale or call of debt securities available-for-sale	(97)		(22)
Net gain on the call of debt securities held-to-maturity	Net gain on the call of debt securities held-to-maturity	(53)		(86)		Net gain on the call of debt securities held-to-maturity	0		(49)
Income from equity securities		0		(881)
Income from debt securities trading		(239)		0

Gains from debt securities trading						Gains from debt securities trading	(105)		(239)
Purchase of debt securities trading	Purchase of debt securities trading	(20,932)		0		Purchase of debt securities trading	(9,440)		(20,932)
Proceeds from the sale of debt securities trading	Proceeds from the sale of debt securities trading	21,171		0		Proceeds from the sale of debt securities trading	9,545		21,171
Net amortization of premiums and discounts on debt securities	Net amortization of premiums and discounts on debt securities	1,555		40		Net amortization of premiums and discounts on debt securities	6,438		295
Increase in investment management fees receivable, net		(67)		(154)
Decrease (increase) in investment management fees receivable, net						Decrease (increase) in investment management fees receivable, net	(645)		653
Decrease (increase) in accrued interest receivable	Decrease (increase) in accrued interest receivable	4,044		(1,455)		Decrease (increase) in accrued interest receivable	(1,031)		3,792
Increase (decrease) in accrued interest payable		(1,178)		501
Decrease in accrued interest payable						Decrease in accrued interest payable	(1,225)		(1,719)
Bank owned life insurance income	Bank owned life insurance income	(1,298)		(1,298)		Bank owned life insurance income	(909)		(857)
Increase in income taxes payable	Increase in income taxes payable	2,812		1,997		Increase in income taxes payable	4,137		455
Decrease in prepaid income taxes	Decrease in prepaid income taxes	3,163		9,130		Decrease in prepaid income taxes	1,186		3,941
Deferred tax provision	Deferred tax provision	724		705		Deferred tax provision	452		482
Decrease in accounts payable and other accrued expenses	Decrease in accounts payable and other accrued expenses	(1,901)		(9,951)		Decrease in accounts payable and other accrued expenses	(4,999)		(9,388)

Cash received for reimbursement of leasehold improvements	Cash received for reimbursement of leasehold improvements	2,196		0		Cash received for reimbursement of leasehold improvements	0		2,196
Other, net	Other, net	(1,600)		(2,735)		Other, net	(9,152)		(1,701)
Net cash provided by operating activities	Net cash provided by operating activities	64,079		48,732		Net cash provided by operating activities	37,293		37,164
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Purchase of debt securities available-for-sale	Purchase of debt securities available-for-sale	(467,245)		(59,110)		Purchase of debt securities available-for-sale	(294,277)		(400,451)
Purchase of debt securities held-to-maturity	Purchase of debt securities held-to-maturity	(436,768)		(174,614)		Purchase of debt securities held-to-maturity	(481,630)		(287,826)

Proceeds from the sale of debt securities available-for-sale	Proceeds from the sale of debt securities available-for-sale	120,400		4,993		Proceeds from the sale of debt securities available-for-sale	74,710		56,038
Proceeds from the sale of equity securities		0		8,844

Principal repayments and maturities of debt securities available-for-sale	Principal repayments and maturities of debt securities available-for-sale	44,322		32,171		Principal repayments and maturities of debt securities available-for-sale	44,104		27,993
Principal repayments and maturities of debt securities held-to-maturity	Principal repayments and maturities of debt securities held-to-maturity	378,367		183,585		Principal repayments and maturities of debt securities held-to-maturity	153,451		248,714

Purchase of bank owned life insurance						Purchase of bank owned life insurance	(25,000)		0
Investment in low income housing and historic tax credits	Investment in low income housing and historic tax credits	(8,160)		(12,201)		Investment in low income housing and historic tax credits	(5,487)		(6,194)
Investment in small business investment companies	Investment in small business investment companies	(811)		(1,043)		Investment in small business investment companies	(582)		(150)
Net redemption of Federal Home Loan Bank stock	Net redemption of Federal Home Loan Bank stock	11,040		9,147		Net redemption of Federal Home Loan Bank stock	1,467		11,043
Net increase in loans and leases	Net increase in loans and leases	(1,076,716)		(881,944)		Net increase in loans and leases	(1,047,956)		(593,041)

Proceeds from the sale of other real estate owned	Proceeds from the sale of other real estate owned	1,527		0		Proceeds from the sale of other real estate owned	0		1,527
Additions to office properties and equipment	Additions to office properties and equipment	(3,719)		(3,843)		Additions to office properties and equipment	(4,410)		(2,285)

Net cash used in investing activities	Net cash used in investing activities	(1,437,763)		(894,015)		Net cash used in investing activities	(1,585,610)		(944,632)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Net increase in deposit accounts	Net increase in deposit accounts	1,549,100		1,044,144		Net increase in deposit accounts	1,702,344		1,196,858
Net decrease in Federal Home Loan Bank advances	Net decrease in Federal Home Loan Bank advances	(55,000)		(35,000)		Net decrease in Federal Home Loan Bank advances	(50,000)		(55,000)
Net decrease in line of credit advances	Net decrease in line of credit advances	0		(4,250)		Net decrease in line of credit advances	(5,000)		0
Net proceeds from issuance of subordinated notes payable	Net proceeds from issuance of subordinated notes payable	95,349		0		Net proceeds from issuance of subordinated notes payable	0		95,518

Net proceeds from issuance of preferred stock		0		77,596
Repayment of subordinated debt		0		(35,000)

Net proceeds from exercise of stock options	Net proceeds from exercise of stock options	285		458		Net proceeds from exercise of stock options	487		211
Cancellation of stock options	Cancellation of stock options	(2,484)		0		Cancellation of stock options	0		(2,484)
Payment of contingent consideration		0		(2,920)
Purchase of treasury stock, net of reissuance		(3,233)		(1,991)

Purchase of treasury stock						Purchase of treasury stock	(1,567)		(2,624)

Dividends paid on preferred stock	Dividends paid on preferred stock	(5,886)		(3,791)		Dividends paid on preferred stock	(3,936)		(3,924)
Net cash provided by financing activities	Net cash provided by financing activities	1,578,131		1,039,246		Net cash provided by financing activities	1,642,328		1,228,555
Net change in cash and cash equivalents during the period	Net change in cash and cash equivalents during the period	204,447		193,963		Net change in cash and cash equivalents during the period	94,011		321,087
Cash and cash equivalents at beginning of the period	Cash and cash equivalents at beginning of the period	403,855		189,985		Cash and cash equivalents at beginning of the period	435,442		403,855
Cash and cash equivalents at end of the period	Cash and cash equivalents at end of the period	$	608,302	$	383,948	Cash and cash equivalents at end of the period	$	529,453	$	724,942

Table of Contents


		Nine Months Ended September 30,					Six Months Ended June 30,
(Dollars in thousands)	(Dollars in thousands)	2020		2019		(Dollars in thousands)	2021		2020
Supplemental disclosure of cash flow information:	Supplemental disclosure of cash flow information:					Supplemental disclosure of cash flow information:
Cash paid (received) during the period for:
Cash paid during the period for:						Cash paid during the period for:
Interest expense	Interest expense	$	65,424	$	102,397	Interest expense	$	27,096	$	49,274
Income taxes	Income taxes	$	663	$	(4,473)	Income taxes	$	3,254	$	307

Other non-cash activity:	Other non-cash activity:					Other non-cash activity:
Operating lease right-of-use asset adjustment		$	0	$	23,088
Loan foreclosures and repossessions		$	0	$	1,492

Transfer of debt securities available-for-sale to held-to-maturity						Transfer of debt securities available-for-sale to held-to-maturity	$	480,769	$	0

Series C dividend distributable						Series C dividend distributable	$	2,200	$	0

See accompanying notes to unaudited condensed consolidated financial statements.

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TRISTATE CAPITAL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

[1] BASIS OF INFORMATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF OPERATION

TriState Capital Holdings, Inc. (““we,~~” “us,” “our,”~~” “us,” “our,” the ~~“holding~~“holding company,”” the ~~“parent~~“parent company,”” or the ~~“Company”~~“Company”) is a registered bank holding company pursuant to the Bank Holding Company Act of 1956, as amended. The Company has 3 wholly owned subsidiaries: TriState Capital Bank, a Pennsylvania-chartered state bank (the ~~“Bank”~~“Bank”); Chartwell Investment Partners, LLC, a registered investment adviser ~~(“Chartwell”~~(“Chartwell”); and Chartwell TSC Securities Corp., a registered ~~broker/dealer (“~~broker-dealer (“CTSC ~~Securities”~~Securities”).

The Bank was established to serve the commercial banking needs of ~~regionally located~~ middle-market businesses and financial services providers and ~~the~~focused private banking needs of high-net-worth individuals nation-wide. The Bank has 2 wholly owned subsidiaries: TSC Equipment Finance LLC (“(“TSC Equipment ~~Finance”~~Finance”), established to hold and manage loans and leases of our equipment finance business, and Meadowood Asset Management, LLC ~~(“Meadowood”~~(“Meadowood”), established to hold and manage other real estate owned by the ~~bank~~Bank and/or foreclosed properties for the Bank.

Chartwell provides investment management services primarily to institutional investors, mutual funds and individual investors. CTSC Securities supports marketing efforts for the proprietary investment products provided by Chartwell, including shares of mutual funds advised and/or administered by Chartwell.

The Company and the Bank are subject to regulatory examination and supervision by the Federal Deposit Insurance Corporation ~~(“FDIC”~~(“FDIC”), the Pennsylvania Department of Banking and Securities and the Board of Governors of the Federal Reserve System (“Federal Reserve”). In addition, if the Bank’s consolidated total assets exceed $10 billion for four consecutive quarters, the Company and ~~its Reserve Banks, which we refer~~the Bank will become subject to the regulatory examination and supervision of the Consumer Financial Protection Bureau (“CFPB”) with respect to certain consumer protection laws. The Bank’s quarter-end consolidated assets exceeded $10 billion for two consecutive quarters as ~~the Federal Reserve.~~of June 30, 2021. Chartwell is a registered investment adviser regulated by the U.S. Securities and Exchange Commission ~~(“SEC”~~(“SEC”). CTSC Securities is regulated by the SEC and the Financial Industry Regulatory Authority, Inc. ~~(“FINRA”~~(“FINRA”).

The Bank conducts business through its main office located in Pittsburgh, Pennsylvania, as well as its 4 additional representative offices in Cleveland, Ohio; Philadelphia, Pennsylvania; Edison, New Jersey; and New York, New York. Chartwell conducts business through its office located in Berwyn, Pennsylvania, and CTSC Securities conducts business through its office located in Pittsburgh, Pennsylvania.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted accounting principles ~~(“GAAP”~~(“GAAP”) in the United States of America requires management to make estimates and assumptions that affect the reported amounts of certain assets and liabilities, disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of related revenues and expenses during the reporting period. Although our current estimates contemplate current conditions and how we expect them to change in the future, it is reasonably possible that actual conditions could be different than those anticipated in the estimates, which could materially affect the financial results of our operations and financial condition.

Material estimates that are particularly susceptible to significant changes relate to the determination of the allowance for ~~loan~~credit losses on loans and ~~lease losses,~~leases, valuation of goodwill and other intangible assets and their evaluation for impairment, fair value measurements and deferred income taxes and their related recoverability, each of which is discussed later in this section.

CONSOLIDATION

Our consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, the Bank, Chartwell and CTSC Securities, after elimination of inter-company accounts and transactions. The accounts of the Bank, in turn, include its wholly owned subsidiaries, TSC Equipment Finance and Meadowood, after elimination of inter-company accounts and transactions. The unaudited condensed consolidated financial statements of the Company presented herein have been prepared pursuant to SEC rules for Quarterly Reports on Form 10-Q and do not include all of the information and note disclosures required by GAAP for a full year presentation. In the opinion of management, all adjustments (consisting of normal, recurring adjustments) and disclosures considered necessary for the fair presentation of the accompanying unaudited condensed consolidated financial statements have been included. Interim results are not necessarily reflective of the results of the entire year. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements of the Company and the related notes for the fiscal year ended December 31, ~~2019,~~2020, included in the ~~Company’s~~Company’s Annual Report on Form 10-K filed with the SEC on February ~~24, 2020.~~

25, 2021.

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CASH AND CASH EQUIVALENTS

For purposes of reporting cash flows, the Company has defined cash and cash equivalents as cash, interest-earning deposits with other institutions, federal funds sold and short-term investments that have an original maturity of 90 days or less. Under agreements with certain of its derivative counterparties, the Company is required to maintain minimum cash collateral posting thresholds with such counterparties. The cash subject to these agreements is considered restricted for these purposes.

BUSINESS COMBINATIONS

The Company accounts for business combinations using the acquisition method of accounting. Under this method of accounting, the acquired ~~company’s~~company’s net assets are recorded at fair value as of the date of acquisition, and the results of operations of the acquired company are combined with our results from that date forward. Acquisition costs are expensed when incurred. The difference between the purchase price, which includes an initial measurement of any contingent earn out, and the fair value of the net assets acquired (including identified intangibles) is recorded as goodwill in the consolidated statements of financial condition. A change in the initial estimate of any contingent earn out amount is recorded to non-interest expense in the consolidated statements of income.

INVESTMENT SECURITIES

The ~~Company’s~~Company’s investments are classified as either: (1) held-to-maturity, which are debt securities that the Company intends to hold until maturity and are reported at amortized cost; (2) trading, which are debt securities bought and held principally for the purpose of selling them in the near term and reported at fair value, with unrealized gains and losses included in non-interest income; (3) available-for-sale, which are debt securities not classified as either held-to-maturity or trading securities and reported at fair value, with unrealized gains and losses reported as a component of accumulated other comprehensive income (loss), on an after-tax basis; or (4) equity securities, which are reported at fair value, with unrealized gains and losses included in non-interest income.

The cost of securities sold is determined on a specific identification basis. Amortization of premiums and accretion of discounts are recorded to interest income on investments over the estimated life of the security utilizing the level yield method. ~~We evaluate impaired~~Management evaluates expected credit losses on held-to-maturity debt securities on a collective or pool basis, by investment category and credit rating. The Company measures credit losses by comparing the present value of cash flows expected to be collected to the amortized cost basis of the security that considers historical credit loss information, adjusted for current conditions and reasonable and supportable economic forecasts. The Company’s investment securities can be classified into the following pools based on similar risk characteristics: (1) U.S. government agencies, (2) state and local municipalities, (3) domestic corporations, including trust preferred securities, and (4) non-agency securitizations.The Company’s U.S. government agency securities are issued by U.S. government entities and agencies and are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by major rating agencies and have a long history of no credit losses.For the remaining pools of securities, the credit rating of the issuers, the investment’s cash flow characteristics and the underlying instruments securitizing certain bonds are the most relevant risk characteristics of the investment portfolio.The Company’s investment policy only allows for purchases of investments with investment grade credit ratings and the Company continuously monitors for changes in credit ratings. Probability of default and loss given default rates are based on historical averages for each investment pool, adjusted to reflect the impact of a single, forward-looking forecast of certain macroeconomic variables, such as unemployment rates and interest rate spreads, which management considers to be both reasonable and supportable. The forecast of these macroeconomic variables is applied over a period of two years and reverts to historical averages over a three-year reversion period.

Management evaluates available-for-sale debt securities in an unrealized loss position quarterly ~~to determine if impairments are temporary or other-than-temporary. For impaired debt and equity securities, management~~for expected credit losses. Management first determines whether it intends to sell or if it is more likely than not that it will be required to sell the impaired securities. This determination considers current and forecasted liquidity requirements, regulatory and capital requirements, and securities portfolio management. If the Company intends to sell aan available-for-sale security with a fair value below amortized cost or if it is more likely than not that it will be required to sell such a security before recovery, ~~an other-than-temporary impairment (“OTTI”) charge~~the security’s amortized cost is ~~recorded~~written down to fair value through current period ~~earnings for the full decline in fair value below amortized cost.~~earnings. For available-for-sale debt securities that the Company does not intend to sell or it is more likely than not that it will not be required to sell before recovery, ~~an OTTI charge~~a provision for credit losses is recorded through current period earnings for the amount of the valuation decline below amortized cost that is attributable to credit losses. Management considers the extent to which fair value is less than amortized cost, credit ratings and other factors related to the security in assessing whether credit loss exists. The Company measures credit loss by comparing the present value of cash flows expected to be collected to the amortized cost basis of the security. An allowance for credit losses is recorded by the difference that the present value of cash flows expected to be collected is less than the amortized cost basis, limited by the amount that the fair value is less than the amortized cost basis. The remaining difference between the ~~security’s~~security’s fair value and amortized cost (that is, the decline in fair value not attributable to credit losses) is recognized in other comprehensive income (loss), in the consolidated statements of comprehensive income and the ~~shareholders’~~shareholders’ equity section of the consolidated statements of financial condition, on an after-tax basis. Changes in the allowance for credit losses are recorded as provision for credit losses. Losses are

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charged against the allowance when management believes the security is uncollectible or management intends to sell or is required to sell the security.

The recognition of interest income on a debt security is discontinued when any principal or interest payment becomes 90 days past due, at which time the debt security is placed on non-accrual status. All accrued and unpaid interest on such debt security is then reversed. Accrued interest receivable is excluded from the estimate of expected credit losses.

FEDERAL HOME LOAN BANK STOCK

The ~~Company~~Bank is a member of the Federal Home Loan Bank ~~(“FHLB”~~(“FHLB”) of Pittsburgh. Member institutions are required to invest in FHLB stock. The stock is carried at cost, which approximates its liquidation value, and it is evaluated for impairment based on the ultimate recoverability of the par value. The following matters are considered by management when evaluating the FHLB stock for impairment: the ability of the FHLB to make payments required by law or regulation and the level of such payments in relation to the operating performance of the FHLB; the impact of legislative and regulatory changes on the institution and its customer base; and the ~~Company’s~~Company’s intent and ability to hold its FHLB stock for the foreseeable future. Management believes the ~~Company’s~~Company’s holdings in the FHLB stock were recoverable at par value as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019.~~2020. Cash and stock dividends are reported as interest income on investments in the consolidated statements of income.

LOANS AND LEASES

Loans and leases held-for-investment are stated at amortized cost. Amortized cost is the unpaid principal ~~balances,~~balance, net of deferred loan fees and costs. Loans held-for-sale are stated at the lower of cost or fair value. Interest income on loans is accrued at the contractual rate on the principal amount outstanding. Deferred loan fees and costs are amortized to interest income over the estimated life of the loan, taking into consideration scheduled payments and prepayments.

The Company considers a loan to be a troubled debt restructuring ~~(“TDR”~~(“TDR”) when there is a concession made to a financially troubled borrower without adequate consideration provided to the Company. The Company evaluates any loan reasonably expected to become a TDR, regardless of whether the loan is on accrual or non-accrual status. Once a loan is deemed to be a TDR, the Company considers whether the loan should be placed on non-accrual status. In assessing accrual status, the Company considers the likelihood that repayment and performance according to the original contractual terms will be achieved, as well as the ~~borrower’s~~borrower’s historical payment performance. A loan is designated and reported as a TDR until such loan is either paid off or sold unless the

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restructuring agreement specifies an interest rate equal to or greater than the rate that would be accepted at the time of the restructuring for a new loan with comparable risk and it is fully expected that the remaining principal and interest will be collected according to the restructured agreement.

The recognition of interest income on a loan is discontinued when, in ~~management’s~~management’s opinion, it is probable the borrower is unable to meet payments as they become due or when the loan becomes 90 days past due, whichever occurs first, at which time the loan is placed on non-accrual status. All accrued and unpaid interest on such loans is then reversed. The interest ultimately collected is applied to reduce principal if there is doubt about the collectability of principal. If a borrower brings a loan current for which accrued interest has been reversed, then the recognition of interest income on the loan is resumed once the loan has been current for a period of six consecutive months or greater.

The Company is a party to financial instruments with off-balance sheet risk, such as commitments to extend credit, in the normal course of business to meet the financing needs of its customers. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the lending agreement with such customer. Commitments generally have fixed expiration dates or other termination clauses ~~(i.e.~~(e.g., loans due on demand) and may require payment of a fee. Since some of the commitments are expected to expire without being drawn upon, the unfunded commitment amount does not necessarily represent future cash requirements. The Company evaluates each ~~customer’s credit-worthiness~~customer’s creditworthiness on a case-by-case basis using the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments. The amount of collateral obtained, if deemed necessary by the Company upon extension of a commitment, is based on ~~management’s~~management’s credit evaluation of the borrower.

OTHER REAL ESTATE OWNED

Real estate owned, other than bank premises, is recorded at fair value less estimated selling costs. Fair value is determined based on an independent appraisal. Expenses related to holding the property are charged against earnings when incurred. Depreciation is not recorded on other real estate owned ~~(“OREO”~~(“OREO”) properties.

ALLOWANCE FOR ~~LOAN~~CREDIT LOSSES ON LOANS AND ~~LEASE LOSSES~~LEASES

The allowance for ~~loan~~credit losses is a valuation account that is deducted from the amortized cost basis of loans and ~~lease~~leases to present management’s best estimate of the net amount expected to be collected. Adjustments to the allowance for credit losses isare established through provisions for ~~loan and lease~~credit losses that are recorded in the consolidated statements of income. Loans and leases are charged off against the allowance for ~~loan and lease~~credit losses when management believes that the principal is uncollectible. If, at a later

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time, amounts are recovered with respect to loans and leases previously charged off, the recovered amount is credited to ~~the~~ allowance for ~~loan and lease~~credit losses. Accrued interest receivable is excluded from the estimate of expected credit losses.

The allowance for credit losses represent estimates of expected credit losses for homogeneous loan pools that share similar risk characteristics such as commercial and industrial (“C&I”) loans and leases, commercial real estate (“CRE”) loans, and private banking loans which include consumer lines of credit and residential mortgages. The Company periodically reassesses each loan pool to ensure that the loans within the pool continue to share similar risk characteristics. Non-accrual loans and loans designated as TDRs are assessed individually using a discounted cash flow method or, where a loan is collateral dependent, based upon the fair value of the collateral less estimated selling costs.

The collateral on our private banking loans that is secured by cash, marketable securities and/or cash value life insurance is monitored daily and requires borrowers to continually replenish collateral as a result of fair value changes. Therefore, it is expected that the fair value of the collateral securing each loan will exceed the loan’s amortized cost basis and no allowance for the off-balance sheet exposure would be required under Accounting Standard Codification (“ASC”) 326-20-35-6, “Financial Assets Secured by Collateral Maintenance Provisions.”

In ~~management’s judgment,~~estimating the general allowance ~~was appropriate~~for credit losses for loans evaluated on a collective or pool basis, management considers past events, current conditions, and reasonable and supportable economic forecasts, including historical charge-offs and subsequent recoveries. Management also considers qualitative factors that influence our credit quality, including, but not limited to, ~~cover probable~~delinquency and non-performing loan trends, changes in loan underwriting guidelines and credit policies, and the results of internal loan reviews. Finally, management considers the impact of changes in current and forecasted local and regional economic conditions in the markets that we serve.

Management bases the computation of the general allowance for credit losses on two factors: the primary factor and the secondary factor. The primary factor is based on the inherent risk identified by management within each of the Company’s 3 loan portfolios based on the historical loss experience of each loan portfolio. Management has developed a methodology that is applied to each of the 3 primary loan portfolios: C&I loans and leases, CRE loans and private banking loans (other than those secured by cash, marketable securities and/or cash value life insurance).

For each portfolio, management estimates expected credit losses over the life of each loan utilizing lifetime or cumulative loss rate methodology, which identifies macroeconomic factors and asset-specific characteristics that are correlated with credit loss experience, including loan age, loan type, leverage, risk rating, interest rate spread and industry. The lifetime loss rate is applied to the amortized cost of the loan. This methodology builds on default and recovery probabilities by utilizing pool-specific historical loss rates to calculate expected credit losses. These pool-specific historical loss rates may be adjusted for a forecast of certain macroeconomic variables, as further discussed below, and other factors such as differences in underwriting standards, portfolio mix, or when historical asset terms do not reflect the contractual terms of the financial assets being evaluated as of the measurement date. Each time the Company measures expected credit losses, the Company assesses the relevancy of historical loss information and considers any necessary adjustments to address any differences in asset-specific characteristics.

The allowance for credit losses represents management’s current estimate of expected credit losses in the loan and lease ~~portfolio as~~portfolio. Expected credit losses are estimated over the contractual term of ~~September 30, 2020~~the loans, which includes extension or renewal options that are not unconditionally cancellable by the Company and ~~December 31, 2019. Management’s~~are adjusted for expected prepayments when appropriate. Management’s judgment takes into consideration past events, current conditions and reasonable and supportable economic forecasts including general economic conditions, diversification and seasoning of the loan portfolio, historic loss experience, identified credit problems, delinquency levels and adequacy of collateral. Although management believes it has used the best information available ~~to it~~ in making such determinations, and that the present allowance for ~~loan and lease~~credit losses ~~is adequate,~~represents management’s best estimate of current expected credit losses, future adjustments to the allowance may be necessary, and net income may be adversely affected if circumstances differ substantially from the assumptions used in determining the level of the allowance. In addition, as an integral part of their periodic examination, certain regulatory agencies review the adequacy of the Bank’s allowance for loan and lease losses and may direct the Bank to make additions to the allowance based on their judgments about information available to them at the time of their examination.

The lifetime loss rates are estimated by analyzing a combination of internal and external data related to historical performance of each loan pool over a complete economic cycle. Loss rates are based on historical averages for each loan pool, adjusted to reflect the impact of a single, forward-looking forecast of certain macroeconomic variables such as gross domestic product (“GDP”), unemployment rates, corporate bond credit spreads and commercial property values, which management considers to be both reasonable and supportable. The single, forward-looking forecast of these macroeconomic variables is applied over the remaining life of the loan pools. The development of the reasonable and supportable forecast incorporates an assumption that each macroeconomic variable will revert to a long-term expectation starting in years two ~~components~~to four of the forecast and largely completing within the first five years of the forecast.

The secondary factor is intended to capture additional risks related to events and circumstances that management believes have an impact on the performance of the loan portfolio that are not considered as part of the primary factor. Although this factor is more

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subjective in nature, the methodology focuses on internal and external trends in pre-specified categories, or risk factors, and applies a quantitative percentage that drives the secondary factor. Nine risk factors have been identified and each risk factor is assigned an allowance level based on management’s judgment as to the expected impact of each risk factor on each loan portfolio and is monitored on a quarterly basis. As the trend in any risk factor changes, management evaluates the need for a corresponding change to occur in the allowance associated with each respective risk factor to provide the most appropriate estimate of allowance for credit losses on loans and leases.

The Company also maintains an allowance for credit losses on off-balance sheet credit exposures for unfunded loan commitments. This allowance is reflected as a component of other liabilities which represents management’s current estimate of expected losses in the unfunded loan commitments. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life based on management’s consideration of past events, current conditions and reasonable and supportable economic forecasts. Management tracks the level and trends in unused commitments and takes into consideration the same factors as those considered for purposes of the allowance for ~~loan and lease~~credit losses ~~represent estimates~~on outstanding loans. Unconditionally cancellable loans are excluded from the calculation of ~~general reserves based upon Accounting Standards Codification (“~~allowance for credit losses on off-balance sheet credit exposures.

Results for the six months ended June 30, 2021 are presented under the current expected credit loss (“CECL”) methodology, in accordance with ASC”) Topic 326, while prior period amounts continue to be reported in accordance with ASC Topic 450,~~Contingencies;~~ “Contingencies,” and specific reserves based upon ASC Topic 310,~~Receivables.~~ “Receivables.” ASC Topic 450 applies to homogeneous loan pools such as commercial loans, consumer lines of credit and residential mortgages that are not individually evaluated for impairment. ASC Topic 310 is applied to commercial and consumer loans that are individually evaluated for impairment.

In management’s opinion, a loan or lease is impaired, based upon current information and events, when it is probable that the loan or lease will not be repaid according to its original contractual terms, including both principal and interest, or if a loan is designated as a TDR. Management performs individual assessments of impaired loans and leases to determine the existence of loss exposure based upon a discounted cash flows method or where a loan is collateral dependent, based upon the fair value of the collateral less estimated selling costs. During the nine months ended September 30, 2020, certain loan modifications were done in accordance with Section 4013 of the CARES Act and the Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus. Accordingly, these loans and leases were not categorized as TDRs.

In estimating probable loan and lease loss of general reserves, management considers numerous factors, including historical charge-offs and subsequent recoveries. Management also considers qualitative factors that influence our credit quality, including, but not limited to, delinquency and non-performing loan trends, changes in loan underwriting guidelines and credit policies, and

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~~the results of internal loan reviews. Finally, management considers the impact of changes in current local and regional economic conditions in the markets that we serve.~~

Management bases the computation of the allowance for loan and lease losses of general reserves on two factors: the primary factor and the secondary factor. The primary factor is based on the inherent risk identified by management within each of the Company’s 3 loan portfolios based on the historical loss experience of each loan portfolio in addition to the loss emergence period. Management has developed a methodology that is applied to each of the 3 primary loan portfolios: private banking loans, commercial and industrial (“C&I”) loans and leases, and commercial real estate (“CRE”) loans. As the loan loss history, mix and risk ratings of each loan portfolio change, the primary factor adjusts accordingly. The allowance for loan and lease losses related to the primary factor is based on our estimates as to probable losses for each loan portfolio. The secondary factor is intended to capture risks related to events and circumstances that management believes have an impact on the future performance of the loan portfolio. Although this factor is more subjective in nature, the methodology focuses on internal and external trends in pre-specified categories, or risk factors, and applies a quantitative percentage that drives the secondary factor. Nine risk factors have been identified and each risk factor is assigned a reserve level based on management’s judgment as to the probable impact of each risk factor on each loan portfolio and is monitored on a quarterly basis. As the trend in any risk factor changes, a corresponding change occurs in the reserve associated with each respective risk factor, such that the secondary factor remains current to changes in each loan portfolio.

The Company also maintains a reserve for losses on unfunded commitments. This reserve is reflected as a component of other liabilities and, in management’s judgment, is sufficient to cover probable losses inherent in the loan commitments. Management tracks the level and trends in unused commitments and takes into consideration the same factors as those considered for purposes of the allowance for loan and lease losses on outstanding loans.

INVESTMENT MANAGEMENT FEES

The Company recognizes investment management fee revenue when advisory services are performed. Fees are based on assets under management and are calculated pursuant to individual client contracts. Investment management fees are generally received on a quarterly basis. Certain incremental costs incurred to acquire some of our investment management contracts are deferred and amortized to non-interest expense over the estimated life of the contract.

Investment management fees receivable represent amounts due for contractual investment management services provided to the ~~Company’s~~Company’s clients, primarily institutional investors, mutual funds and individual investors. Management performs credit evaluations of its ~~customers’~~customers’ financial condition when it is deemed to be necessary and does not require collateral. The Company provides an allowance for uncollectible accounts based on specifically identified receivables. ~~Bad debt expense is recorded to other non-interest expense~~The Company has not experienced any losses on ~~the consolidated statements of income and the allowance~~receivables for ~~uncollectible accounts is recorded to~~ investment management fees receivable, net on the consolidated statements of financial position. Investment management fees receivable are considered delinquent when payment is not received within contractual terms and are charged off against the allowance for uncollectible accounts when management determines that recovery is unlikely and the Company ceases its collection efforts. There was 0 bad debt expense recorded for the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, and ~~2019 and~~2020. The Company had 0 allowance for ~~uncollectible accounts~~credit losses on investment management fees as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019.~~2020.

GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill represents the excess of the cost of an acquisition over the fair value of the net assets acquired. Goodwill is not amortized and is subject to at least annual assessments for impairment by applying a fair ~~value based~~value-based test. The Company reviews goodwill annually and again at any quarter-end if a material event occurs during the quarter that may affect goodwill. If goodwill testing is required, an assessment of qualitative factors can be completed before performing a goodwill impairment test. If an assessment of qualitative factors determines it is more likely than not that the fair value of a reporting unit exceeds its carrying amount, then a goodwill impairment test is not required. ~~Goodwill is evaluated for potential impairment by determining if the fair value has fallen below carrying value.~~

Other intangible assets represent purchased assets that may lack physical substance but can be distinguished from goodwill because of contractual or other legal rights. The Company has determined that certain of its acquired mutual fund client relationships meet the criteria to be considered indefinite-lived assets because the Company expects both the renewal of these contracts and the cash flows generated by these assets to continue indefinitely. Accordingly, the Company does not amortize these intangible assets, but instead reviews these assets annually or more frequently whenever events or circumstances occur indicating that the recorded indefinite-lived assets may be impaired. Each reporting period, the Company assesses whether events or circumstances have occurred which indicate that the indefinite life criteria are no longer met. If the indefinite life criteria are no longer met, the Company assesses whether the carrying value of these assets exceeds its fair value. If the carrying value exceeds the fair value of the ~~asset,~~assets, an impairment loss is recorded in an amount equal to any such excess and the assets are reclassified to finite-lived. Other intangible assets that the Company has determined to have finite lives, such as its trade names, client lists and non-compete agreements are amortized over their estimated useful lives. These finite-lived intangible assets are

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amortized on a straight-line basis over their estimated useful lives, which range from four to 25 years. Finite-lived intangibles are evaluated for impairment on an annual basis or more frequently whenever events or circumstances occur indicating that the carrying amount of such assets may not be recoverable.

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OFFICE PROPERTIES AND EQUIPMENT

Office properties and equipment are stated at cost less accumulated depreciation. Office properties include furniture, fixtures and leasehold improvements. Equipment includes computer equipment and internal use software. Depreciation is computed utilizing the straight-line method over the estimated useful lives of the related assets, except for leasehold improvements, which are amortized over the terms of the respective leases or the estimated useful lives of the improvements, whichever is shorter. Estimated useful lives are dependent upon the nature and condition of the asset and range from three to 10 years. Repairs and maintenance are charged to expense as incurred, while improvements that extend the useful life of the assets are capitalized and depreciated to non-interest expense over the estimated remaining life of the asset.

OPERATING LEASES

The Company is a lessee in noncancellable operating leases, primarily for its office spaces and other office equipment. The Company accounts for leases in accordance with ASC Topic 842, ~~“Leases,”~~“Leases,” and records operating leases as a right-of-use asset and an offsetting lease liability in the consolidated statements of financial condition at the present value of the unpaid lease payments. The Company generally uses its incremental borrowing rate as the discount rate for operating leases. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for lease payments made at or before the lease commencement date, plus any initial direct costs incurred less any lease incentives received. For operating leases, the right-of-use asset is subsequently measured throughout the lease term at the carrying amount of the lease liability, plus initial direct costs, plus (minus) any prepaid (accrued) lease payments, less the unamortized balance of lease incentives received. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

BANK OWNED LIFE INSURANCE

Bank owned life insurance ~~(“BOLI”~~(“BOLI”) policies on certain officers and employees are recorded at net cash surrender value on the consolidated statements of financial condition. Upon termination of a BOLI policy, the Company receives the cash surrender value. BOLI benefits are payable to the Company upon the death of the insured. Changes in net cash surrender value are recognized as non-interest income in the consolidated statements of income.

DEPOSITS

Deposits are stated at principal outstanding. Interest on deposits is accrued and charged to interest expense daily and is paid or credited in accordance with the terms of the respective accounts.

BORROWINGS

The Company records FHLB advances, line of credit borrowings and subordinated notes payable at their principal amount net of debt issuance costs. Interest expense is recognized based on the coupon rate of the obligations. Costs associated with the acquisition of subordinated notes payable are amortized to interest expense over the expected term of the borrowing.

INCOME TAXES

The Company utilizes the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the tax effects of differences between the financial statement and tax basis of assets and liabilities. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities with regard to a change in tax rates is recognized in income in the period that includes the enactment date. Management assesses all available evidence to determine the amount of deferred tax assets that are more likely than not to be realized. The available evidence used in connection with the assessments includes taxable income in prior periods, projected taxable income, potential tax planning strategies and projected reversals of deferred tax items. These assessments involve a degree of subjectivity and may undergo significant change. Changes to the evidence used in the assessments could have a material adverse effect on the ~~Company’s~~Company’s results of operations in the period in which they occur. The Company considers uncertain tax positions that it has taken or expects to take on a tax return. Any interest and penalties related to unrecognized tax benefits would be recognized in income tax expense in the consolidated statements of income.

EARNINGS PER COMMON SHARE

Earnings per common share ~~(“EPS”~~(“EPS”) is computed using the two-class method. The two-class method ~~where~~is an earnings allocation formula that determines earnings per share for common stock and participating securities, according to dividends and participation rights in undistributed earnings. Under this method, net earnings is reduced by the amount of dividends declared in the current period for common shareholders and participating security holders. The remaining earnings or “undistributed earnings” are allocated between common stock and participating securities to the extent that each security may share in earnings as if all the earnings for the period had been distributed.

The two-class method requires that the Company’s Series C perpetual non-cumulative convertible non-voting preferred stock (the “Series C Preferred Stock”) and outstanding warrants to be treated as participating classes of securities in the computation of EPS. In addition, net income is reduced by dividends declared on ~~our~~all series of preferred stock to derive net income available to common

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shareholders. Basic EPS is computed by dividing net income ~~available~~allocable to common shareholders by the weighted average number of the Company’s common shares outstanding for the period, excluding non-vested restricted stock. Diluted EPS reflects the potential dilution upon the exercise of stock options and warrants, and the vesting of restricted stock awards granted utilizing the treasury stock method.

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STOCK-BASED COMPENSATION

The Company accounts for its stock-based compensation awards based on estimated fair values of stock-based awards made to employees and directors. Compensation cost for all stock-based payments is based on the estimated grant-date fair value. The value of the portion of the award that is ultimately expected to vest is included in compensation and employee benefits expense in the consolidated statements of income and recorded as a component of additional paid-in capital. Compensation expense for all awards is recognized on a straight-line basis over the requisite service period for the entire grant.

DERIVATIVES AND HEDGING ACTIVITIES

All derivatives are evaluated at inception as to whether ~~or not~~ they are hedging or non-hedging activities. All derivatives are recognized as either assets or liabilities on the consolidated statements of financial condition and measured at fair value. For derivatives designated as fair value hedges, changes in the fair value of the derivative and the hedged item related to the hedged risk are recognized in earnings. Any hedge ineffectiveness would be recognized in the income statement line item pertaining to the hedged item. For derivatives designated as cash flow hedges, changes in fair value of the effective portion of the cash flow hedges are reported in accumulated other comprehensive income (loss). When the cash flows associated with the hedged item are realized, the gain or loss included in accumulated other comprehensive income (loss) is recognized in the consolidated statements of income. The Company also has interest rate derivative positions that are not designated as hedging instruments. Changes in the fair value of derivatives not designated in hedging relationships are recorded directly in earnings. The Company is required to have minimum collateral posting thresholds with certain of its derivative counterparties, ~~which~~and this collateral is considered restricted cash.

The Company executes interest rate derivatives with its commercial banking customers to facilitate their respective risk management ~~strategies which generate~~strategies. The Company generates swap fee ~~income. Those~~income through these transactions. These derivatives are simultaneously and economically hedged by offsetting derivatives that the Company executes with a third party, such that the Company generally eliminates its interest rate exposure resulting from such transactions and these derivatives are not designated as hedging instruments. Swap fees are based on the notional amount and weighted maturity of each individual transaction and are collected and recorded to non-interest income in the consolidated statements of income when the transaction is executed.

FAIR VALUE MEASUREMENT

Fair value is defined as the exchange price that would be received to sell an asset or paid to transfer a liability in a principal or most advantageous market for the asset or liability in an orderly transaction between market participants as of the measurement date, using assumptions market participants would use when pricing such an asset or liability. An orderly transaction assumes exposure to the market for a customary period for marketing activities prior to the measurement date and not a forced liquidation or distressed sale. Fair value measurement and disclosure guidance provides a three-level hierarchy that prioritizes the inputs of valuation techniques used to measure fair value into three broad categories:

••Level 1 –– Unadjusted quoted prices in active markets for identical assets or liabilities.

••Level 2 –– Observable inputs such as quoted prices for similar assets and liabilities in active markets, quoted prices for similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.

••Level 3 –– Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies, and similar techniques that use significant unobservable inputs.

Fair value must be recorded for certain assets and liabilities every reporting period on a recurring basis or, under certain circumstances, on a non-recurring basis.

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Unrealized holding gains and the non-credit component of unrealized losses on the ~~Company’s~~Company’s debt securities available-for-sale are included in accumulated other comprehensive income (loss), net of applicable income taxes. Also included in accumulated other comprehensive income (loss) is the remaining unamortized balance of the unrealized holding gains (non-credit losses), net of applicable income taxes, that existed on the transfer date for debt securities reclassified into the held-to-maturity category from the available-for-sale category.

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Unrealized holding gains (losses) on the effective portion of the ~~Company’s~~Company’s cash flow hedge derivatives are included in accumulated other comprehensive income (loss), net of applicable income taxes, which will be reclassified to interest expense as interest payments are made on the ~~Company’s~~Company’s debt.

Income tax effects in accumulated other comprehensive income (loss) are released as investments are sold or ~~matured~~mature and as liabilities are extinguished.

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TREASURY STOCK

The repurchase of the ~~Company’s~~Company’s common stock is recorded at cost. At the time of reissuance, the treasury stock account is reduced using the average cost method. Gains and losses on the reissuance of common stock are recorded in additional paid-in capital, to the extent additional paid-in capital from any previous net gains on treasury share transactions exists. Any net deficiency is charged to retained earnings.

RECLASSIFICATION

Certain items previously reported have been reclassified to conform with the current ~~year’s~~year’s reporting presentation and are considered immaterial.

During the nine months ended September 30, 2020, the Company made changes to certain Non-Interest Expense line items appearing on the Unaudited Condensed Consolidated Statement of Income to better align with and provide additional clarity on how management views the business. All prior periods have been adjusted to conform the changes and provide comparability to the new presentation.

[2] INVESTMENT SECURITIES

~~Marketing and Advertising, which was previously a component of Other Operating Expenses, is now presented separately.~~

Technology and Data Services is also presented separately and includes data processing expense, data and information services and certain software costs. These costs were previously included in Premises and Equipment.

Telephone expense, which was previously reported as Other Operating Expense, is now presented in Premises and Equipment Expense. Finally Premises and Occupancy Costs was renamed to Premise and Equipment Expense.

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~~[2] INVESTMENT SECURITIES~~

Debt securities available-for-sale and held-to-maturity were comprised of the ~~following:~~following as of June 30, 2021:


	June 30, 2021
(Dollars in thousands)	Amortized Cost		Gross Unrealized Appreciation		Gross Unrealized Depreciation		Allowance for Credit Losses (1)		Estimated Fair Value
Debt securities available-for-sale:

Corporate bonds	$	135,853	$	1,606	$	289	$	0	$	137,170
Residential mortgage-backed securities	97,572		78		99		0		97,551


Trust preferred securities	18,300		312		186		0		18,426
Agency collateralized mortgage obligations	19,050		86		0		0		19,136
Agency mortgage-backed securities	25,263		30		1		0		25,292
Agency debentures	7,598		748		0		0		8,346
Municipal bonds	5,204		4		0		0		5,208
Total debt securities available-for-sale	$	308,840	$	2,864	$	575	$	0	$	311,129

(1)Available-for-sale securities are recorded on the consolidated statements of financial condition at estimated fair value, net of allowance for credit losses, if applicable.

~~September 30, 2020~~

~~(Dollars in thousands)~~

Amortized
Cost

Gross Unrealized
Appreciation

Gross Unrealized
Depreciation

Estimated
Fair Value

~~Debt securities available-for-sale:~~

~~Corporate bonds~~

~~175,369~~

~~1,375~~

~~607~~

~~176,137~~

~~Trust preferred securities~~

~~18,192~~

~~466~~

~~17,726~~

~~Agency collateralized mortgage obligations~~

~~22,929~~

~~22,954~~

~~Agency mortgage-backed securities~~

~~325,374~~

~~2,117~~

~~667~~

~~326,824~~

~~Agency debentures~~

~~8,436~~

~~821~~

~~9,257~~

~~Total debt securities available-for-sale~~

~~550,300~~

~~4,347~~

~~1,749~~

~~552,898~~

~~Debt securities held-to-maturity:~~

~~Corporate bonds~~

~~23,674~~

~~455~~

~~24,097~~

~~Agency debentures~~

~~79,143~~

~~1,049~~

~~80,174~~

~~Municipal bonds~~

~~7,741~~

—

~~7,825~~

~~Residential mortgage-backed securities~~

~~139,161~~

~~160~~

~~293~~

~~139,028~~

~~Agency mortgage-backed securities~~

~~4,322~~

~~830~~

~~5,152~~

~~Total debt securities held-to-maturity~~

~~254,041~~

~~2,578~~

~~343~~

~~256,276~~

~~Total debt securities~~

~~804,341~~

~~6,925~~

~~2,092~~

~~809,174~~


	June 30, 2021
(Dollars in thousands)	Amortized Cost		Gross Unrealized Appreciation		Gross Unrealized Depreciation		Estimated Fair Value		Allowance for Credit Losses (1)
Debt securities held-to-maturity:
Corporate bonds	$	30,670	$	1,051	$	27	31,694		$	47
Agency debentures	129,998		816		11		130,803		0
Municipal bonds	4,778		10		0		4,788		0
Residential mortgage-backed securities	230,913		285		1,710		229,488		23
Agency mortgage-backed securities	579,374		798		5,480		574,692		0
U.S. treasury notes	39,049		29		409		38,669		0
Total debt securities held-to-maturity	$	1,014,782	$	2,989	$	7,637	$	1,010,134	$	70

~~December 31, 2019~~(1)Held-to-maturity securities are recorded on the consolidated statements of financial condition at amortized cost, net of allowance for credit losses.

~~(Dollars in thousands)~~

Amortized
Cost

Gross Unrealized
Appreciation

Gross Unrealized
Depreciation

Estimated
Fair Value

~~Debt securities available-for-sale:~~

~~Corporate bonds~~

~~172,704~~

~~2,821~~

~~107~~

~~175,418~~

~~Trust preferred securities~~

~~18,092~~

~~216~~

~~18,260~~

~~Agency collateralized mortgage obligations~~

~~27,262~~

~~27,193~~

~~Agency mortgage-backed securities~~

~~18,058~~

~~451~~

~~18,509~~

~~Agency debentures~~

~~8,961~~

~~441~~

~~9,402~~

~~Total debt securities available-for-sale~~

~~245,077~~

~~3,940~~

~~235~~

~~248,782~~

~~Debt securities held-to-maturity:~~

~~Corporate bonds~~

~~24,678~~

~~619~~

~~25,297~~

~~Agency debentures~~

~~149,912~~

~~628~~

~~935~~

~~149,605~~

~~Municipal bonds~~

~~17,094~~

~~144~~

~~17,238~~

~~Agency mortgage-backed securities~~

~~4,360~~

~~255~~

~~4,615~~

~~Total debt securities held-to-maturity~~

~~196,044~~

~~1,646~~

~~935~~

~~196,755~~

~~Total debt securities~~

~~441,121~~

~~5,586~~

~~1,170~~

~~445,537~~

~~Interest income on investment~~During the first quarter of 2021, the Company transferred $480.8 million fair value of previously designated available-for-sale agency mortgage-backed securities ~~was as follows:~~to held-to-maturity designation.

Three Months Ended September 30, Nine Months Ended September 30,
(Dollars in thousands) 2020 2019 2020 2019
Taxable interest income $ 3,436 $ 3,521 $ 10,437 $ 11,034
Non-taxable interest income 55 90 192 295
Dividend income 196 382 899 1,168
Total interest income on investment securities $ 3,687 $ 3,993 $ 11,528 $ 12,497

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Debt securities available-for-sale and held-to-maturity were comprised of the following as of December 31, 2020:


	December 31, 2020
(Dollars in thousands)	Amortized Cost		Gross Unrealized Appreciation		Gross Unrealized Depreciation		Allowance for Credit Losses (1)	Estimated Fair Value
Debt securities available-for-sale:

Corporate bonds	$	157,452	$	1,538	$	526	0	$	158,464
Trust preferred securities	18,228		57		198		0	18,087


Agency collateralized mortgage obligations	22,058		36		5		0	22,089
Agency mortgage-backed securities	406,741		3,595		209		0	410,127
Agency debentures	8,013		790		0		0	8,803
Total debt securities available-for-sale	$	612,492	$	6,016	$	938	0	$	617,570

(1)Available-for-sale securities are recorded on the consolidated statements of financial condition at estimated fair value, net of allowance for credit losses, if applicable.


	December 31, 2020
(Dollars in thousands)	Amortized Cost		Gross Unrealized Appreciation		Gross Unrealized Depreciation		Estimated Fair Value		Allowance for Credit Losses (1)










Debt securities held-to-maturity:
Corporate bonds	$	28,672	$	566	$	1	$	29,237	$	79
Agency debentures	48,130		1,051		0		49,181		0
Municipal bonds	6,577		45		0		6,622		0
Residential mortgage-backed securities	124,152		237		217		124,172		70
Agency mortgage-backed securities	4,309		778		0		5,087		0
Total debt securities held-to-maturity	$	211,840	$	2,677	$	218	$	214,299	$	149

(1)Held-to-maturity securities are recorded on the consolidated statements of financial condition at amortized cost, net of allowance for credit losses.

Interest income on investment securities was as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
(Dollars in thousands)	2021		2020		2021		2020
Taxable interest income	$	3,552	$	3,609	$	5,990	$	7,001
Non-taxable interest income	31		26		57		137
Dividend income	154		305		336		703
Total interest income on investment securities	$	3,737	$	3,940	$	6,383	$	7,841

As of ~~September~~June 30, ~~2020,~~2021, the contractual maturities of the debt securities were:

~~September 30, 2020~~

~~Available-for-Sale~~

~~Held-to-Maturity~~

~~(Dollars in thousands)~~

Amortized
Cost

Estimated
Fair Value

Amortized
Cost

Estimated
Fair Value

~~Due in less than one year~~

~~31,732~~

~~31,915~~

~~2,142~~

~~2,164~~

~~Due from one to five years~~

~~71,226~~

~~72,002~~

~~14,114~~

~~14,433~~

~~Due from five to ten years~~

~~100,560~~

~~100,069~~

~~86,052~~

~~86,322~~

~~Due after ten years~~

~~346,782~~

~~348,912~~

~~151,733~~

~~153,357~~

~~Total debt securities~~

~~550,300~~

~~552,898~~

~~254,041~~

~~256,276~~


	June 30, 2021
	Available-for-Sale				Held-to-Maturity
(Dollars in thousands)	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Due in less than one year	$	27,499	$	27,622	$	1,911	$	1,915
Due from one to five years	46,189		46,953		14,287		14,814
Due from five to ten years	71,638		72,292		198,863		199,664
Due after ten years	163,514		164,262		799,721		793,741
Total debt securities	$	308,840	$	311,129	$	1,014,782	$	1,010,134

The ~~$348.9~~$164.3 million fair value of debt securities available-for-sale with a contractual maturity due after 10 years as of ~~September~~June 30, ~~2020,~~2021, included ~~$32.7~~$29.2 million, or ~~9.4%~~17.8%, that are floating-rate securities. The ~~$86.1~~$198.9 million amortized cost of debt securities held-to-maturity with a contractual maturity due from five to 10 years as of ~~September~~June 30, ~~2020,~~2021, included ~~$14.3~~$19.3 million that have call provisions within the next five years that would either mature, if called, or become floating-rate securities after the call date.

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Prepayments may shorten the contractual lives of the collateralized mortgage obligations, mortgage-backed securities and collateralized loan obligations.

Proceeds from the sale and call of debt securities available-for-sale and held-to-maturity and related gross realized gains and losses were:


		Available-for-Sale				Held-to-Maturity				Available-for-Sale				Held-to-Maturity					Available-for-Sale				Held-to-Maturity				Available-for-Sale				Held-to-Maturity
		Three Months Ended September 30,				Three Months Ended September 30,				Nine Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Three Months Ended June 30,				Six Months Ended June 30,				Six Months Ended June 30,
(Dollars in thousands)	(Dollars in thousands)	2020		2019		2020		2019		2020		2019		2020		2019		(Dollars in thousands)	2021		2020		2021		2020		2021		2020		2021		2020
Proceeds from sales	Proceeds from sales	$	64,363	$	0	$	0	$	0	$	120,400	$	4,993	$	0	$	0	Proceeds from sales	$	74,710	$	6,071	$	0	$	0	$	74,710	$	56,038	$	0	$	0
Proceeds from calls	Proceeds from calls	0		9,435		118,745		63,529		3,580		13,517		366,503		180,824		Proceeds from calls	1,000		3,580		40,000		125,405		13,000		3,580		43,555		247,758
Total proceeds	Total proceeds	$	64,363	$	9,435	$	118,745	$	63,529	$	123,980	$	18,510	$	366,503	$	180,824	Total proceeds	$	75,710	$	9,651	$	40,000	$	125,405	$	87,710	$	59,618	$	43,555	$	247,758

Gross realized gains	Gross realized gains	$	3,740	$	134	$	4	$	72	$	3,762	$	260	$	53	$	86	Gross realized gains	$	98	$	6	$	0	$	8	$	98	$	21	$	0	$	50
Gross realized losses	Gross realized losses	0		0		0		0		0		0		0		0		Gross realized losses	0		0		0		0		1		0		0		0
Net realized gains	Net realized gains	$	3,740	$	134	$	4	$	72	$	3,762	$	260	$	53	$	86	Net realized gains	$	98	$	6	$	0	$	8	$	97	$	21	$	0	$	50

Debt securities available-for-sale of ~~$2.4~~$2.2 million as of ~~September~~June 30, ~~2020,~~2021, were held in safekeeping at the FHLB and were included in the calculation of the Company’s borrowing capacity. Additionally, there were ~~$28.8~~$38.7 million of debt securities held-to-maturity that were pledged as collateral for certain deposit relationships.

2021

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The following tables show a roll-forward of the allowance for credit losses on held-to-maturity securities for the three and six months ended June 30, 2021:


	Three Months Ended June 30, 2021
(Dollars in thousands)	Corporate bonds		Residential mortgage-backed securities		Municipal bonds		Agency debentures and mortgage-backed securities		U.S. treasury notes		Total
Balance, beginning of period	$	55	$	105	$	0	$	0	$	0	$	160

Provision (credit)	(8)		(82)		0		0		0		(90)
Charge-offs	0		0		0		0		0		0
Recoveries	0		0		0		0		0		0
Balance, end of period	$	47	$	23	$	0	$	0	$	0	$	70


	Six Months Ended June 30, 2021
(Dollars in thousands)	Corporate bonds		Residential mortgage-backed securities		Municipal bonds		Agency debentures and mortgage-backed securities		U.S. treasury notes		Total
Balance, beginning of period	$	79	$	70	$	0	$	0	$	0	$	149

Provision (credit)	(32)		(47)		0		0		0		(79)
Charge-offs	0		0		0		0		0		0
Recoveries	0		0		0		0		0		0
Balance, end of period	$	47	$	23	$	0	$	0	$	0	$	70

The following tables show the fair value and gross unrealized losses on ~~temporarily impaired~~ debt securities available-for-sale, ~~and held-to-maturity,~~ by investment category and length of time that the individual securities have been in a continuous unrealized loss position as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019, respectively:~~2020:

~~September 30, 2020~~

~~Less than 12 Months~~

~~12 Months or More~~

~~Total~~

~~(Dollars in thousands)~~

~~Fair value~~

~~Unrealized losses~~

~~Fair value~~

~~Unrealized losses~~

~~Fair value~~

~~Unrealized losses~~

~~Debt securities available-for-sale:~~

~~Corporate bonds~~

~~29,771~~

~~172~~

~~19,565~~

~~435~~

~~49,336~~

~~607~~

~~Trust preferred securities~~

~~17,726~~

~~466~~

~~17,726~~

~~466~~

~~Agency collateralized mortgage obligations~~

~~10,279~~

~~Agency mortgage-backed securities~~

~~155,074~~

~~667~~

~~155,074~~

~~667~~

~~Total debt securities available-for-sale~~

~~202,571~~

~~1,305~~

~~29,844~~

~~444~~

~~232,415~~

~~1,749~~

~~Debt securities held-to-maturity:~~

~~Corporate bonds~~

~~5,968~~

~~Agency debentures~~

~~20,032~~

~~Residential mortgage-backed securities~~

~~75,405~~

~~293~~

~~75,405~~

~~293~~

~~Agency mortgage-backed securities~~

~~Total debt securities held-to-maturity~~

~~101,405~~

~~343~~

~~101,405~~

~~343~~

~~Total temporarily impaired debt securities~~ ~~(1)~~

~~303,976~~

~~1,648~~

~~29,844~~

~~444~~

~~333,820~~

~~2,092~~


	June 30, 2021
	Less than 12 Months				12 Months or More				Total
(Dollars in thousands)	Fair value		Unrealized losses		Fair value		Unrealized losses		Fair value		Unrealized losses
Debt securities available-for-sale:

Corporate bonds	$	9,531	$	93	$	9,804	$	196	$	19,335	$	289
Residential mortgage-backed securities	57,494		99		0		0		57,494		99


Trust preferred securities	0		0		4,304		186		4,304		186

Agency mortgage-backed securities	0		0		92		1		92		1


Total debt securities available-for-sale (1)	$	67,025	$	192	$	14,200	$	383	$	81,225	$	575

(1)The number of investment positions with unrealized losses totaled 2911 for available-for-sale ~~securities and 10 for held-to-maturity~~ securities.

~~December 31, 2019~~

~~Less than 12 Months~~

~~12 Months or More~~

~~Total~~

~~(Dollars in thousands)~~

~~Fair value~~

~~Unrealized losses~~

~~Fair value~~

~~Unrealized losses~~

~~Fair value~~

~~Unrealized losses~~

~~Debt securities available-for-sale:~~

~~Corporate bonds~~

~~4,942~~

~~19,951~~

~~24,893~~

~~107~~

~~Trust preferred securities~~

~~4,417~~

~~Agency collateralized mortgage obligations~~

~~22,117~~

~~2,544~~

~~24,661~~

~~Total debt securities available-for-sale~~

~~27,059~~

~~124~~

~~26,912~~

~~111~~

~~53,971~~

~~235~~

~~Debt securities held-to-maturity:~~

~~Agency debentures~~

~~87,879~~

~~935~~

~~87,879~~

~~935~~

~~Total debt securities held-to-maturity~~

~~87,879~~

~~935~~

~~87,879~~

~~935~~

~~Total temporarily impaired debt securities~~ ~~(1)~~

~~114,938~~

~~1,059~~

~~26,912~~

~~111~~

~~141,850~~

~~1,170~~


	December 31, 2020
	Less than 12 Months				12 Months or More				Total
(Dollars in thousands)	Fair value		Unrealized losses		Fair value		Unrealized losses		Fair value		Unrealized losses
Debt securities available-for-sale:

Corporate bonds	$	28,796	$	277	$	9,751	$	249	$	38,547	$	526
Trust preferred securities	13,313		198		0		0		13,313		198


Agency collateralized mortgage obligations	0		0		9,863		5		9,863		5
Agency mortgage-backed securities	89,931		209		0		0		89,931		209

Total debt securities available-for-sale (1)	$	132,040	$	684	$	19,614	$	254	$	151,654	$	938

(1)The number of investment positions with unrealized losses totaled 8633 for available-for-sale ~~securities and 53 for held-to-maturity~~ securities.

The changes in the fair values of our ~~municipal bonds, agency debentures,~~ agency collateralized mortgage obligations and agency mortgage-backed securities are primarily the result of interest rate fluctuations. These agency securities are either explicitly or implicitly guaranteed by the U.S. government, highly rated, and have a long history of no credit losses. To assess for credit ~~impairment,~~losses on debt securities available-for-sale in unrealized loss position, management evaluates the underlying ~~issuer’s~~issuer’s financial performance and the related credit rating information through a review of publicly available financial statements and other publicly available information. The most recent assessment for credit ~~impairment~~

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losses did not identify any issues related to the ultimate repayment of principal and interest on these debt securities. In addition, the Company has the ability and intent to hold debt securities in an unrealized loss position until recovery of their amortized cost. Based on this, ~~the Company considers all of the~~0 allowance for credit losses has been recognized on debt securities available-for-sale in an unrealized ~~losses to be temporary.~~loss position.

The Company monitors the credit quality of debt securities held-to-maturity including credit ratings quarterly. The following tables present the amortized costs basis of debt securities held-to-maturity by Moody’s bond credit rating.


	June 30, 2021
(Dollars in thousands)	Aaa		Aa		A		Baa		Ba		Total
Debt securities held-to-maturity:
Corporate bonds	$	0	$	0	$	0	$	30,670	$	0	$	30,670
Agency debentures	129,998		0		0		0		0		129,998
Municipal bonds	0		3,988		790		0		0		4,778
Residential mortgage-backed securities	230,913		0		0		0		0		230,913
Agency mortgage-backed securities	579,374		0		0		0		0		579,374
U.S. treasury notes	39,049		0		0		0		0		39,049
Total debt securities held-to-maturity	$	979,334	$	3,988	$	790	$	30,670	$	0	$	1,014,782

Accrued interest receivable of $2.0 million and $697,000 on debt securities held-to-maturity as of June 30, 2021 and December 31, 2020, respectively, was excluded from the amortized cost used in the allowance for credit losses. The Company had 0 debt securities held-to-maturity that were past due as of June 30, 2021.

There were 0 outstanding debt securities classified as trading as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019.~~2020.

There was ~~$13.3~~$11.8 million and ~~$24.3~~$13.3 million in FHLB stock outstanding as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively.

[3] LOANS AND LEASES

The Company generates loans through the private banking and middle-market banking channels. The private banking channel primarily includes loans made to high-net-worth individuals, trusts and businesses that are typically secured by cash, marketable

~~Table of Contents~~

securities and/or cash value life insurance. The middle-market banking channel consists of ~~our~~the Company’s C&I&I loan and lease portfolio and CRE loan portfolio, which serve middle-market businesses and real estate developers in our primary ~~markets and certain financial services companies with whom we have multiple relationship components.~~markets.

Loans and leases held-for-investment were comprised of the following:


		September 30, 2020									June 30, 2021
(Dollars in thousands)	(Dollars in thousands)	Private Banking		Commercial and Industrial		Commercial Real Estate		Total		(Dollars in thousands)	Private Banking		Commercial and Industrial		Commercial Real Estate		Total
Loans and leases held-for-investment, before deferred fees and costs	Loans and leases held-for-investment, before deferred fees and costs	$	4,449,714	$	1,133,478	$	2,062,290	$	7,645,482	Loans and leases held-for-investment, before deferred fees and costs	$	5,701,419	$	1,236,054	$	2,334,051	$	9,271,524
Deferred loan costs (fees)		9,053		4,810		(4,899)		8,964
Net deferred loan costs (fees)										Net deferred loan costs (fees)	12,143		4,863		(5,608)		11,398
Loans and leases held-for-investment, net of deferred fees and costs	Loans and leases held-for-investment, net of deferred fees and costs	4,458,767		1,138,288		2,057,391		7,654,446		Loans and leases held-for-investment, net of deferred fees and costs	5,713,562		1,240,917		2,328,443		9,282,922
Allowance for loan and lease losses		(2,210)		(7,772)		(20,724)		(30,706)
Allowance for credit losses on loans and leases										Allowance for credit losses on loans and leases	(2,107)		(8,969)		(21,501)		(32,577)
Loans and leases held-for-investment, net	Loans and leases held-for-investment, net	$	4,456,557	$	1,130,516	$	2,036,667	$	7,623,740	Loans and leases held-for-investment, net	$	5,711,455	$	1,231,948	$	2,306,942	$	9,250,345


		December 31, 2019									December 31, 2020
(Dollars in thousands)	(Dollars in thousands)	Private Banking		Commercial and Industrial		Commercial Real Estate		Total		(Dollars in thousands)	Private Banking		Commercial and Industrial		Commercial Real Estate		Total
Loans and leases held-for-investment, before deferred fees and costs	Loans and leases held-for-investment, before deferred fees and costs	$	3,688,779	$	1,080,767	$	1,801,375	$	6,570,921	Loans and leases held-for-investment, before deferred fees and costs	$	4,797,881	$	1,269,248	$	2,160,784	$	8,227,913
Deferred loan costs (fees)		6,623		4,942		(4,927)		6,638
Net deferred loan costs (fees)										Net deferred loan costs (fees)	9,919		4,904		(5,318)		9,505
Loans and leases held-for-investment, net of deferred fees and costs	Loans and leases held-for-investment, net of deferred fees and costs	3,695,402		1,085,709		1,796,448		6,577,559		Loans and leases held-for-investment, net of deferred fees and costs	4,807,800		1,274,152		2,155,466		8,237,418
Allowance for loan and lease losses		(1,973)		(5,262)		(6,873)		(14,108)
Allowance for credit losses on loans and leases										Allowance for credit losses on loans and leases	(2,047)		(5,254)		(27,329)		(34,630)
Loans and leases held-for-investment, net	Loans and leases held-for-investment, net	$	3,693,429	$	1,080,447	$	1,789,575	$	6,563,451	Loans and leases held-for-investment, net	$	4,805,753	$	1,268,898	$	2,128,137	$	8,202,788

The ~~Company’s~~Company’s customers have unused loan commitments ~~or other line of credit availability~~ based on the ~~value~~availability of eligible collateral or other terms and conditions under their loan agreements. ~~Often these~~Included in unused loan commitments are unused availability under demand loans for our private

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banking lines secured by cash, marketable securities and/or ~~other line~~cash value life insurance, as well as commitments to fund loans secured by residential properties, commercial real estate, construction loans, business lines of credit ~~availability are not~~and other unused commitments of loans in various stages of funding. Not all commitments will fund or fully ~~utilized and therefore the total amount does not necessarily represent future cash requirements.~~ fund as customers often only draw on a portion of their available credit. The amount of unfunded commitments, ~~or other line of credit availability,~~ including standby letters of credit, as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, was ~~$6.25~~$8.51 billion and ~~$4.91~~$6.73 billion, ~~respectively. These unfunded commitments included $5.09 billion and $3.87 billion of commitments that were due on demand with no stated maturity as of September 30, 2020 and December 31, 2019,~~ respectively. The interest rate for each commitment ~~and demand line of credit~~ is ~~established at origination and may be~~ based on the prevailing ~~index rate~~ market conditions at the time of funding. The reserve for losses on unfunded commitments was $1.4 million and $645,000 as of September 30, 2020 and December 31, 2019, respectively, which includes reserves for probable losses on unfunded loan commitments, including standby letters of credit and also risk participations.

The total unfunded commitments above included loans in the process of origination totaling approximately ~~$61.4~~$48.0 million and ~~$20.7~~$39.6 million as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively, which extend over varying periods of time.

The Company issues standby letters of credit in the normal course of business. Standby letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party. Standby letters of credit generally are contingent upon the failure of the customer to perform according to the terms of the underlying contract with the third party. The Company would be required to perform under a standby letter of credit when drawn upon by the guaranteed party in the case of non-performance by the ~~Company’s~~Company’s customer. Collateral may be obtained based on ~~management’s~~management’s credit assessment of the customer. The amount of unfunded commitments related to standby letters of credit as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, included in the total unfunded commitments above, was ~~$73.1~~$74.7 million and ~~$72.8~~$82.0 million, respectively. Should the Company be obligated to perform under any standby letters of credit, the Company will seek repayment from the customer for amounts paid. During the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, there were draws on letters of credit totaling ~~$49,000~~$5,000 and ~~$135,000,~~$45,000, respectively, which were repaid by the borrowers. Most of these commitments are expected to expire without being drawn upon and the total amount does not necessarily represent future cash requirements.

The ~~potential liability~~allowance for credit losses on off-balance-sheet credit exposures was $3.0 million and $3.4 million as of June 30, 2021 and December 31, 2020, respectively, which includes allowance for credit losses on unfunded loan commitments and standby letters of credit. The Company recorded a credit ~~was included in~~to provision on off-balance sheet exposures as liabilities of $364,000 and provision expense of $396,000 for the ~~reserve for losses on unfunded commitments.~~six months ended June 30, 2021 and 2020, respectively.

The Company has entered into risk participation agreements with financial institution counterparties for interest rate swaps related to loans in which we are a participant. The risk participation agreements provide credit protection to the financial institution counterparties should the customers fail to perform on their interest rate derivative contracts. The potential liability for outstanding obligations was included in the reserve for losses on unfunded commitments.

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[4] ALLOWANCE FOR ~~LOAN~~CREDIT LOSSES ON LOANS AND ~~LEASE LOSSES~~LEASES

Our allowance for ~~loan and lease~~credit losses represents our current estimate of ~~probable loan and lease~~expected credit losses ~~inherent~~ in the portfolio at a specific point in time. This estimate includes credit losses associated with ~~specifically identified~~ loans and leases evaluated on a collective or pool basis, as well as ~~estimated probable~~expected credit losses ~~inherent in the remainder~~ of the loan and lease portfolio. Additions are made to the allowance through both periodic provisions recorded in the consolidated statements of income and recoveries of losses previously incurred. Reductions to the allowance occur asindividually evaluated loans and leases ~~are charged off~~ ~~or when the credit history of any of the Company’s 3 loan portfolios (private banking loans, C&I loans and leases, and CRE loans) improves~~.that do not share similar risk characteristics. Management evaluates the adequacy of the allowance at least quarterly, and in doing so relies on various factors including, but not limited to, assessment of historical loss experience, delinquency and non-accrual trends, portfolio growth, underlying collateral coverage and current economic ~~conditions.~~conditions, and economic forecasts over a reasonable and supportable period of time. This evaluation is subjective and requires material estimates that may change over time. ~~In addition, management evaluates the overall methodology for the allowance for loan and lease losses on an annual basis.~~ The calculation of the allowance for ~~loan~~credit losses on loans and ~~lease losses~~leases takes into consideration the inherent risk identified within each of the ~~Company’s~~Company’s 3 primary loan portfolios. ~~In addition, management considers the~~The lifetime loss rates are estimated by analyzing a combination of internal and external data related to historical ~~loss experience~~performance of each loan ~~portfolio~~pool over a complete economic cycle. Results for the six months ended June 30, 2021, are presented under CECL methodology while prior period amounts continue to ~~ensure that the allowance for loan and lease losses is sufficient to cover probable losses inherent~~be reported in ~~such loan portfolios.~~accordance with previously applicable GAAP. Refer to Note 1, Summary of Significant Accounting Policies, to our unaudited condensed consolidated financial statements for more details on the ~~Company’s~~Company’s policy on allowance for ~~loan~~credit losses on loans and ~~lease losses policy.~~leases.

The following discusses key characteristics and risks within each primary loan portfolio:

Private Banking Loans

Our private banking lending ~~activities are~~business is conducted on a national basis. This loan portfolio primarily includes loans made to high-net-worth individuals, trusts and businesses that are typically secured by ~~cash,~~ marketable securities, cash, and/or cash value life insurance. The Company actively monitors the value of the collateral securing these loans on a daily basis and requires borrowers to continually replenish collateral as a result of fair value changes. Therefore, it is expected that the fair value of the collateral value securing each loan will exceed the loan’s amortized cost basis and no allowance for credit loss is required under ASC 326-20-35-6, “Financial Assets Secured by Collateral Maintenance Provisions.”

This portfolio also has some loans that are secured by residential real estate or other financial assets ~~lines of credit~~ and unsecured loans. The primary sources of repayment for these loans are the income and/or assets of the borrower.

The underlying collateral is the most important indicator of risk for this loan portfolio. The overall lower risk profile of this portfolio is driven by loans secured by cash, marketable securities and/or cash value life insurance, which were ~~98.2%~~98.7% and ~~97.4%~~98.6% of total private banking loans as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively.

Commercial Banking: Commercial and Industrial Loans and Leases

This loan and lease portfolio primarily ~~includes~~include loans and leases made to financial services and other service ~~companies~~ and/or ~~manufacturers~~manufacturing companies generally for the purposes of financing production, operating capacity, accounts receivable, inventory, equipment,

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acquisitions ~~and~~and/or recapitalizations. Cash flow from the ~~borrower’s~~borrower’s operations is the primary source of repayment for these loans and ~~leases, except for certain commercial~~leases; however, most loans ~~that~~ are ~~secured~~collateralized by marketable ~~securities.~~securities or commercial assets.

The ~~borrower’s~~borrower’s industry and local and regional economic conditions are important indicators of risk for this loan portfolio. Collateral for these types of loans at times does not have sufficient value in a distressed or liquidation scenario to satisfy the outstanding debt. C&I&I loans collateralized by marketable securities are treated the same as private banking loans for purposes of the calculation of the allowance for ~~loan~~credit losses on loans and ~~lease loss calculation.~~leases.

Commercial Banking: Commercial Real Estate Loans

This loan portfolio includes loans secured by commercial purpose real estate, including both owner-occupied properties and investment properties for various purposes including office, industrial, multifamily, retail, hospitality, healthcare and self-storage. The primary source of repayment for CRE loans secured by owner-occupied properties is cash flow from the ~~borrower’s~~borrower’s operations. Individual project cash flows, global cash flows and liquidity from the developer, or the sale of the property are the primary sources of repayment for CRE loans secured by investment properties. Also included are commercial construction loans to finance the construction or renovation of structures as well as to finance the acquisition and development of raw land for various purposes. The increased level of risk for these loans is generally confined to the construction period. If problems arise, the project may not be completed and as such, may not provide sufficient cash flow on its own to service the debt or have sufficient value in a liquidation to cover the outstanding principal.

The underlying purpose and collateral of the loans are important indicators of risk for this loan portfolio. Additional risks exist and are dependent on several factors such as the condition of the local and regional economies, whether or not the project is owner-occupied, the type of project, and the experience and resources of the developer.

On a monthly basis, management monitors various credit quality indicators for the loan portfolio, including delinquency, non-performing status, changes in risk ratings, changes in the underlying performance of the borrowers and other relevant factors. On a daily basis, the Company monitors the collateral of loans secured by cash, marketable securities and/or cash value life insurance within the private banking portfolio which further reduces the risk profile of that portfolio. Refer to Note 1, Summary of Significant

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Accounting Policies, to our unaudited condensed consolidated financial statements for the ~~Company’s~~Company’s policy for determining past due status of loans.

Loan risk ratings are assigned based upon the creditworthiness of the borrower and the quality of the collateral for loans secured by marketable securities. Loan risk ratings are reviewed on an ongoing basis according to internal ~~policies.~~policies and applicable regulatory guidance. Loans within the pass rating are believed to have a lower risk of loss than loans that are risk rated as special mention, substandard or doubtful, which are believed to have an increasing risk of loss. ~~Our internal risk ratings are consistent with regulatory guidance.~~ Management also monitors the loan portfolio through a formal periodic review process. All non-pass rated loans are reviewed monthly and higher risk-rated loans within the pass category are reviewed ~~at least annually.~~three times a year.

The ~~Company’s~~Company’s risk ratings are consistent with regulatory guidance and are as follows:

Pass ~~– The~~– A pass loan is currently performing in accordance with its contractual terms.

Special Mention –– A special mention loan has potential weaknesses that warrant ~~management’s~~management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects or in our credit position at some future date. Economic and market conditions beyond the ~~customer’s~~customer’s control may in the future necessitate this classification.

Substandard –– A substandard loan is not adequately protected by the net worth and/or paying capacity of the obligor or by the collateral pledged, if any. Substandard loans have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. These loans are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

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

~~The following tables present the recorded investment in loans by credit quality indicator:~~

~~September 30, 2020~~

~~(Dollars in thousands)~~

Private
Banking

Commercial
and
Industrial

Commercial
Real Estate

~~Total~~

~~Pass~~

~~4,458,228~~

~~1,121,372~~

~~2,036,007~~

~~7,615,607~~

~~Special mention~~

~~16,458~~

~~4,639~~

~~21,097~~

~~Substandard~~

~~539~~

~~458~~

~~16,745~~

~~17,742~~

~~Loans and leases held-for-investment~~

~~4,458,767~~

~~1,138,288~~

~~2,057,391~~

~~7,654,446~~

~~December 31, 2019~~

~~(Dollars in thousands)~~

Private
Banking

Commercial
and
Industrial

Commercial
Real Estate

~~Total~~

~~Pass~~

~~3,691,866~~

~~1,069,932~~

~~1,780,768~~

~~6,542,566~~

~~Special mention~~

~~15,777~~

~~14,284~~

~~30,061~~

~~Substandard~~

~~3,536~~

~~1,396~~

~~4,932~~

~~Loans and leases held-for-investment~~

~~3,695,402~~

~~1,085,709~~

~~1,796,448~~

~~6,577,559~~

~~Changes in the allowance for loan and lease losses were as follows for the three months ended September 30, 2020 and 2019:~~


	~~Three Months Ended September 30, 2020~~
~~(Dollars in thousands)~~	Private Banking		Commercial and Industrial		Commercial Real Estate		~~Total~~
~~Balance, beginning of period~~	$	~~2,151~~	$	~~7,546~~	$	~~13,579~~	$	~~23,276~~
~~Provision for loan and lease losses~~	59		~~226~~		~~7,145~~		~~7,430~~
~~Charge-offs~~	0		0		0		0
~~Recoveries~~	0		0		0		0
~~Balance, end of period~~	$	~~2,210~~	$	~~7,772~~	$	~~20,724~~	$	~~30,706~~

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Three Months Ended September 30, 2019
(Dollars in thousands) Private
Banking Commercial
and
Industrial Commercial
Real Estate Total
Balance, beginning of period $ 2,140 $ 5,911 $ 5,965 $ 14,016
Provision (credit) for loan and lease losses (177) (672) 242 (607)
Charge-offs (112) 0 0 (112)
Recoveries 0 77 0 77
Balance, end of period $ 1,851 $ 5,316 $ 6,207 $ 13,374
The following table presents the amortized cost basis of loans by portfolio, risk rating and year of origination:


	As of June 30, 2021
(Dollars in thousands)	2021		2020		2019		2018		2017		Prior		Revolving Loans (1)		Total
Private Banking:
Pass	$	21,999	$	60,956	$	32,371	$	54,986	$	7,213	$	54,610	$	5,480,937	$	5,713,072
Special Mention	0		0		0		0		0		0		0		0
Substandard	0		0		490		0		0		0		0		490
Doubtful	0		0		0		0		0		0		0		0
Total Private Banking Loans	21,999		60,956		32,861		54,986		7,213		54,610		5,480,937		5,713,562
Commercial and Industrial:
Pass	93,243		201,555		219,185		69,098		40,412		27,868		575,213		1,226,574
Special Mention	0		1,653		0		0		0		0		3,941		5,594
Substandard	0		0		0		0		0		0		124		124
Doubtful	0		750		0		7,875		0		0		0		8,625
Total Commercial and Industrial Loans	93,243		203,958		219,185		76,973		40,412		27,868		579,278		1,240,917
Commercial Real Estate:
Pass	254,610		549,228		572,712		404,876		200,338		299,341		28,100		2,309,205
Special Mention	0		0		0		0		0		2,409		0		2,409
Substandard	0		198		5,395		26		2,399		8,811		0		16,829
Doubtful	0		0		0		0		0		0		0		0
Total Commercial Real Estate Loans	254,610		549,426		578,107		404,902		202,737		310,561		28,100		2,328,443
Loans and leases held-for-investment	$	369,852	$	814,340	$	830,153	$	536,861	$	250,362	$	393,039	$	6,088,315	$	9,282,922

(1)The Company had 0 revolving loans which were converted to term loans included in loans and leases held-for-investment at June 30, 2021.


	As of December 31, 2020
(Dollars in thousands)	2020		2019		2018		2017		2016		Prior		Revolving Loans (1)		Total
Private Banking:
Pass	$	64,829	$	44,210	$	57,081	$	7,736	$	12,040	$	55,092	$	4,566,296	$	4,807,284
Special Mention	0		0		0		0		0		0		0		0
Substandard	0		516		0		0		0		0		0		516
Doubtful	0		0		0		0		0		0		0		0
Total Private Banking Loans	64,829		44,726		57,081		7,736		12,040		55,092		4,566,296		4,807,800
Commercial and Industrial:
Pass	216,459		223,189		88,212		44,575		9,383		20,709		651,900		1,254,427
Special Mention	1,795		0		5,416		0		0		0		3,431		10,642
Substandard	750		0		7,875		0		0		0		458		9,083
Doubtful	0		0		0		0		0		0		0		0
Total Commercial and Industrial Loans	219,004		223,189		101,503		44,575		9,383		20,709		655,789		1,274,152
Commercial Real Estate:
Pass	514,920		617,120		435,708		202,001		181,108		134,700		38,802		2,124,359
Special Mention	446		5,395		4,308		0		1,186		145		0		11,480
Substandard	91		0		6,296		2,926		7,054		3,260		0		19,627
Doubtful	0		0		0		0		0		0		0		0
Total Commercial Real Estate Loans	515,457		622,515		446,312		204,927		189,348		138,105		38,802		2,155,466
Loans and leases held-for-investment	$	799,290	$	890,430	$	604,896	$	257,238	$	210,771	$	213,906	$	5,260,887	$	8,237,418

(1)The Company had 0 revolving loans which were converted to term loans included in loans and leases held-for-investment at December 31, 2020.

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Accrued interest receivable of $16.6 million and $16.4 million on loans and leases as of June 30, 2021 and December 31, 2020, respectively, was excluded from the amortized cost used in the allowance for credit losses.

Changes in the allowance for ~~loan~~credit losses on loans and ~~lease losses~~leases were as follows for the ~~nine~~three and six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019:~~

Nine Months Ended September 30, 2020
(Dollars in thousands) Private
Banking Commercial
and
Industrial Commercial
Real Estate Total
Balance, beginning of period $ 1,973 $ 5,262 $ 6,873 $ 14,108
Provision for loan and lease losses 408 2,169 13,851 16,428
Charge-offs (171) 0 0 (171)
Recoveries 0 341 0 341
Balance, end of period $ 2,210 $ 7,772 $ 20,724 $ 30,706

Nine Months Ended September 30, 2019
(Dollars in thousands) Private
Banking Commercial
and
Industrial Commercial
Real Estate Total
Balance, beginning of period $ 1,942 $ 5,764 $ 5,502 $ 13,208
Provision (credit) for loan and lease losses 21 (2,422) 705 (1,696)
Charge-offs (112) 0 0 (112)
Recoveries 0 1,974 0 1,974
Balance, end of period $ 1,851 $ 5,316 $ 6,207 $ 13,374
2020:


	Three Months Ended June 30, 2021
(Dollars in thousands)	Private Banking		Commercial and Industrial		Commercial Real Estate		Total
Balance, beginning of period	$	1,767	$	8,156	$	24,721	$	34,644
Provision (credit) for credit losses	340		700		(854)		186
Charge-offs	0		0		(2,366)		(2,366)
Recoveries	0		113		0		113
Balance, end of period	$	2,107	$	8,969	$	21,501	$	32,577


	Three Months Ended June 30, 2020
(Dollars in thousands)	Private Banking		Commercial and Industrial		Commercial Real Estate		Total
Balance, beginning of period	$	2,174	$	6,685	$	8,445	$	17,304
Provision for credit losses	148		723		5,134		6,005
Charge-offs	(171)		0		0		(171)
Recoveries	0		138		0		138
Balance, end of period	$	2,151	$	7,546	$	13,579	$	23,276


	Six Months Ended June 30, 2021
(Dollars in thousands)	Private Banking		Commercial and Industrial		Commercial Real Estate		Total
Balance, beginning of period	$	2,047	$	5,254	$	27,329	$	34,630
Provision (credit) for credit losses	60		3,801		(3,462)		399
Charge-offs	0		(199)		(2,366)		(2,565)
Recoveries	0		113		0		113
Balance, end of period	$	2,107	$	8,969	$	21,501	$	32,577


	Six Months Ended June 30, 2020
(Dollars in thousands)	Private Banking		Commercial and Industrial		Commercial Real Estate		Total
Balance, beginning of period	$	1,973	$	5,262	$	6,873	$	14,108
Provision for credit losses	349		1,943		6,706		8,998
Charge-offs	(171)		0		0		(171)
Recoveries	0		341		0		341
Balance, end of period	$	2,151	$	7,546	$	13,579	$	23,276

The following tables present the age analysis of past due loans and leases segregated by class:


	June 30, 2021
(Dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total
Private banking	$	425	$	0	$	43	$	468	$	5,713,094	$	5,713,562
Commercial and industrial	0		0		8,749		8,749		1,232,168		1,240,917
Commercial real estate	2,399		0		26		2,425		2,326,018		2,328,443
Loans and leases held-for-investment	$	2,824	$	0	$	8,818	$	11,642	$	9,271,280	$	9,282,922

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	~~September 30, 2020~~
~~(Dollars in thousands)~~	30-59 Days Past Due		60-89 Days Past Due		~~90 Days or More Past Due~~		~~Total Past Due~~		~~Current~~		~~Total~~
~~Private banking~~	$	0	$	0	$	0	$	0	$	~~4,458,767~~	$	~~4,458,767~~
~~Commercial and industrial~~	0		0		~~458~~		~~458~~		~~1,137,830~~		~~1,138,288~~
~~Commercial real estate~~	0		0		~~6,296~~		~~6,296~~		~~2,051,095~~		~~2,057,391~~
~~Loans and leases held-for-investment~~	$	0	$	0	$	~~6,754~~	$	~~6,754~~	$	~~7,647,692~~	$	~~7,654,446~~


	~~December 31, 2019~~
~~(Dollars in thousands)~~	~~30-59 Days Past Due~~		~~60-89 Days Past Due~~		~~90 Days or More Past Due~~		~~Total Past Due~~		~~Current~~		~~Total~~
~~Private banking~~	$	~~261~~	$	0	$	~~184~~	$	~~445~~	$	~~3,694,957~~	$	~~3,695,402~~
~~Commercial and industrial~~	0		0		0		0		~~1,085,709~~		~~1,085,709~~
~~Commercial real estate~~	0		0		0		0		~~1,796,448~~		~~1,796,448~~
~~Loans and leases held-for-investment~~	$	~~261~~	$	0	$	~~184~~	$	~~445~~	$	~~6,577,114~~	$	~~6,577,559~~


	December 31, 2020
(Dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total
Private banking	$	250	$	0	$	0	$	250	$	4,807,550	$	4,807,800
Commercial and industrial	0		0		458		458		1,273,694		1,274,152
Commercial real estate	2,926		0		6,296		9,222		2,146,244		2,155,466
Loans and leases held-for-investment	$	3,176	$	0	$	6,754	$	9,930	$	8,227,488	$	8,237,418

~~Non-Performing and Impaired~~Individually Evaluated Loans

Management monitors the delinquency status of the ~~Company’s~~Company’s loan portfolio on a monthly basis. Loans are considered non-performing when interest and principal are 90 days or more past due or management has determined that it is probable the borrower is unable to meet payments as they become due. The risk of loss is generally highest for non-performing loans.

The following tables present the Company’s amortized cost basis of individually evaluated loans and related information on those loans for the six months ended June 30, 2021 and 2020:


	As of and for the Six Months Ended June 30, 2021
(Dollars in thousands)	Amortized Cost		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With a related allowance recorded:
Private banking	$	0	$	0	$	0	$	0	$	0
Commercial and industrial	8,750		8,748		5,297		9,028		0
Commercial real estate	2,425		4,637		289		9,176		0
Total with a related allowance recorded	11,175		13,385		5,586		18,204		0
Without a related allowance recorded:
Private banking	0		0		—		0		0
Commercial and industrial	0		0		—		0		0
Commercial real estate	0		0		—		0		0
Total without a related allowance recorded	0		0		—		0		0
Total:
Private banking	0		0		0		0		0
Commercial and industrial	8,750		8,748		5,297		9,028		0
Commercial real estate	2,425		4,637		289		9,176		0
Total	$	11,175	$	13,385	$	5,586	$	18,204	$	0

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Management determines loans to be impaired when, based upon current information and events, it is probable that the loan will not be repaid according to the original contractual terms of the loan agreement, including both principal and interest, or if a loan is designated as a TDR. Refer to Note 1, Summary of Significant Accounting Policies, to our unaudited condensed consolidated financial statements for the Company’s policy on evaluating loans for impairment and interest income.


	As of and for the Twelve Months Ended December 31, 2020
(Dollars in thousands)	Amortized Cost		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With a related allowance recorded:
Private banking	$	0	$	0	$	0	$	0	$	0
Commercial and industrial	458		457		103		458		0
Commercial real estate	9,222		9,251		1,885		9,222		0
Total with a related allowance recorded	9,680		9,708		1,988		9,680		0
Without a related allowance recorded:
Private banking	0		0		—		0		0
Commercial and industrial	0		0		—		0		0
Commercial real estate	0		0		—		0		0
Total without a related allowance recorded	0		0		—		0		0
Total:
Private banking	0		0		0		0		0
Commercial and industrial	458		457		103		458		0
Commercial real estate	9,222		9,251		1,885		9,222		0
Total	$	9,680	$	9,708	$	1,988	$	9,680	$	0

~~The following tables present the Company’s investment in~~Individually evaluated loans ~~considered to be impaired~~were $11.2 million and ~~related information on those impaired loans:~~


	~~As of and for the Nine Months Ended September 30, 2020~~
~~(Dollars in thousands)~~	~~Recorded Investment~~		~~Unpaid Principal Balance~~		~~Related Allowance~~		~~Average Recorded Investment~~		~~Interest Income Recognized~~
~~With a related allowance recorded:~~
~~Private banking~~	$	0	$	0	$	0	$	0	$	0
~~Commercial and industrial~~	~~458~~		~~457~~		~~103~~		~~458~~		0
~~Commercial real estate~~	~~6,296~~		~~6,317~~		~~1,417~~		~~6,300~~		0
~~Total with a related allowance recorded~~	~~6,754~~		~~6,774~~		~~1,520~~		~~6,758~~		0
~~Without a related allowance recorded:~~
~~Private banking~~	0		0		—		0		0
~~Commercial and industrial~~	0		0		—		0		0
~~Commercial real estate~~	0		0		—		0		0
~~Total without a related allowance recorded~~	0		0		—		0		0
~~Total:~~
~~Private banking~~	0		0		0		0		0
~~Commercial and industrial~~	~~458~~		~~457~~		~~103~~		~~458~~		0
~~Commercial real estate~~	~~6,296~~		~~6,317~~		~~1,417~~		~~6,300~~		0
~~Total~~	$	~~6,754~~	$	~~6,774~~	$	~~1,520~~	$	~~6,758~~	$	0


	~~As of and for the Twelve Months Ended December 31, 2019~~
~~(Dollars in thousands)~~	~~Recorded Investment~~		~~Unpaid Principal Balance~~		~~Related Allowance~~		~~Average Recorded Investment~~		~~Interest Income Recognized~~
~~With a related allowance recorded:~~
~~Private banking~~	$	~~171~~	$	~~193~~	$	~~171~~	$	~~171~~	$	0
~~Commercial and industrial~~	0		0		0		0		0
~~Commercial real estate~~	0		0		0		0		0
~~Total with a related allowance recorded~~	~~171~~		~~193~~		~~171~~		~~171~~		0
~~Without a related allowance recorded:~~
~~Private banking~~	13		13		—		13		0
~~Commercial and industrial~~	0		0		—		0		0
~~Commercial real estate~~	0		0		—		0		0
~~Total without a related allowance recorded~~	13		13		—		13		0
~~Total:~~
~~Private banking~~	~~184~~		~~206~~		~~171~~		~~184~~		0
~~Commercial and industrial~~	0		0		0		0		0
~~Commercial real estate~~	0		0		0		0		0
~~Total~~	$	~~184~~	$	~~206~~	$	~~171~~	$	~~184~~	$	0

~~Impaired loans~~$9.7 million as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019, were $6.8 million and $184,000,~~2020, respectively. There was 0 interest income recognized on ~~impaired~~individually evaluated loans that were also on non-accrual status for the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, and the twelve months ended December 31, ~~2019.~~2020. As of ~~September~~June 30, ~~2020~~2021, there was a loan for $43,000 that was 90 days or more past due and still accruing interest income, which was fully secured. As of December 31, ~~2019,~~2020, there were 0 loans 90 days or more past due and still accruing interest income.

~~Table of Contents~~

~~Impaired~~The Company estimates allowance for credit losses individually for loans ~~are evaluated~~that do not share similar risk characteristics, including non-accrual loans and loans designated as TDRs, using a discounted cash flow method or based on the fair value of the collateral less estimated selling costs. Based on those evaluations, there were specific reserves totaling ~~$1.5~~$5.6 million and ~~$171,000~~$2.0 million as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. Refer to Note 1, Summary of Significant Accounting Policies, to our unaudited condensed consolidated financial statements for the Company’s policy on evaluating loans for expected credit losses and interest income.

The following tables present the allowance for ~~loan~~credit losses on loans and ~~lease losses~~leases and ~~recorded investment in loans by class:~~amortized costs basis of individually evaluated loans:


	June 30, 2021
(Dollars in thousands)	Private Banking		Commercial and Industrial		Commercial Real Estate		Total
Allowance for credit losses on loans and leases:
Individually evaluated for impairment	$	0	$	5,297	$	289	$	5,586
Collectively evaluated for impairment	2,107		3,672		21,212		26,991
Total allowance for credit losses on loans and leases	$	2,107	$	8,969	$	21,501	$	32,577
Loans and leases held-for-investment:
Individually evaluated for impairment	$	0	$	8,750	$	2,425	$	11,175
Collectively evaluated for impairment	5,713,562		1,232,167		2,326,018		9,271,747
Loans and leases held-for-investment	$	5,713,562	$	1,240,917	$	2,328,443	$	9,282,922

Table of Contents

~~September 30, 2020~~

~~(Dollars in thousands)~~

Private
Banking

Commercial
and
Industrial

Commercial
Real Estate

~~Total~~

~~Allowance for loan and lease losses:~~

~~Individually evaluated for impairment~~

~~103~~

~~1,417~~

~~1,520~~

~~Collectively evaluated for impairment~~

~~2,210~~

~~7,669~~

~~19,307~~

~~29,186~~

~~Total allowance for loan and lease losses~~

~~2,210~~

~~7,772~~

~~20,724~~

~~30,706~~

~~Loans and leases held-for-investment:~~

~~Individually evaluated for impairment~~

~~458~~

~~6,296~~

~~6,754~~

~~Collectively evaluated for impairment~~

~~4,458,767~~

~~1,137,830~~

~~2,051,095~~

~~7,647,692~~

~~Loans and leases held-for-investment~~

~~4,458,767~~

~~1,138,288~~

~~2,057,391~~

~~7,654,446~~

~~December 31, 2019~~

~~(Dollars in thousands)~~

Private
Banking

Commercial
and
Industrial

Commercial
Real Estate

~~Total~~

~~Allowance for loan and lease losses:~~

~~Individually evaluated for impairment~~

~~171~~

~~Collectively evaluated for impairment~~

~~1,802~~

~~5,262~~

~~6,873~~

~~13,937~~

~~Total allowance for loan and lease losses~~

~~1,973~~

~~5,262~~

~~6,873~~

~~14,108~~

~~Loans and leases held-for-investment:~~

~~Individually evaluated for impairment~~

~~184~~

~~Collectively evaluated for impairment~~

~~3,695,218~~

~~1,085,709~~

~~1,796,448~~

~~6,577,375~~

~~Loans and leases held-for-investment~~

~~3,695,402~~

~~1,085,709~~

~~1,796,448~~

~~6,577,559~~


	December 31, 2020
(Dollars in thousands)	Private Banking		Commercial and Industrial		Commercial Real Estate		Total
Allowance for credit losses on loans and leases:
Individually evaluated for impairment	$	0	$	103	$	1,885	$	1,988
Collectively evaluated for impairment	2,047		5,151		25,444		32,642
Total allowance for credit losses on loans and leases	$	2,047	$	5,254	$	27,329	$	34,630
Loans and leases held-for-investment:
Individually evaluated for impairment	$	0	$	458	$	9,222	$	9,680
Collectively evaluated for impairment	4,807,800		1,273,694		2,146,244		8,227,738
Loans and leases held-for-investment	$	4,807,800	$	1,274,152	$	2,155,466	$	8,237,418

Troubled Debt Restructuring

The aggregate recorded investment of impaired loans with terms modified through a ~~TDR~~troubled debt restructuring was $0$2.4 million and ~~$171,000~~$2.9 million as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively, which were also on ~~non-accrual.~~non-accrual status. There were 0 unused commitments on loans designated as TDRs as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019.~~2020, respectively.

The modifications made to restructured loans typically consist of an extension of the payment terms or the deferral of principal payments. There were 0 loans modified as TDRs within 12 months of the corresponding balance sheet date with a payment ~~default~~defaults during the six months ended June 30, 2021 and 2020.

There were no loans newly designated as TDRs during the three ~~and nine~~ months ended ~~September~~June 30, ~~2020 and 2019.~~2021. The financial effects of our modifications made to loans newly designated as TDRs during the six months ended June 30, 2021, were as follows:


	Six Months Ended June 30, 2021
(Dollars in thousands)	Count	Recorded Investment at the time of Modification		Current Recorded Investment		Allowance for Credit Losses on Loans and Leases at the time of Modification		Current Allowance for Credit Losses on Loans and Leases
Commercial Real Estate:
Extended term, deferred principal	2	$	4,454	$	0	$	445	$	0
Total	2	$	4,454	$	0	$	445	$	0

There were 0 loans newly designated as TDRs during the three and ~~nine~~six months ended ~~September~~June 30, ~~2020 and 2019.~~2020.

Other Real Estate Owned

As of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the balance of OREO was $2.6 million and $2.7 million, respectively. The change in the OREO balance from December 31, 2020 was ~~$2.7 million and $4.3 million, respectively. During the nine months ended September 30, 2020,~~attributable to a ~~property was sold from~~$155,000 write-down on an OREO ~~for $1.5 million with a net gain of $65,000.~~property. There were 0 residential mortgage loans that were in the process of foreclosure as of ~~September~~June 30, ~~2020.~~2021.

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[5] DEPOSITS

As of June 30, 2021 and December 31, 2020, deposits were comprised of the following:


	Interest Rate Range	Weighted Average Interest Rate		Balance
(Dollars in thousands)	June 30, 2021	June 30, 2021	December 31, 2020	June 30, 2021		December 31, 2020
Demand and savings accounts:
Noninterest-bearing checking accounts	—	—	—	$	513,529	$	456,426
Interest-bearing checking accounts	0.05 to 1.70%	0.37%	0.38%	4,371,659		3,068,834
Money market deposit accounts	0.09 to 3.25%	0.48%	0.56%	4,383,597		3,927,797
Total demand and savings accounts				9,268,785		7,453,057
Certificates of deposit	0.02 to 3.22%	0.48%	1.08%	922,648		1,036,032
Total deposits				$	10,191,433	$	8,489,089
Weighted average rate on interest-bearing accounts		0.43%	0.56%

As of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019, deposits were comprised of the following:~~

Interest Rate
Range Weighted Average
Interest Rate Balance
(Dollars in thousands) September 30,
2020 September 30,
2020 December 31,
2019 September 30,
2020 December 31,
2019
Demand and savings accounts:
Noninterest-bearing checking accounts — — — $ 439,878 $ 356,102
Interest-bearing checking accounts 0.05 to 1.70% 0.44% 1.57% 3,024,007 1,398,264
Money market deposit accounts 0.10 to 3.25% 0.73% 1.84% 3,662,860 3,426,745
Total demand and savings accounts 7,126,745 5,181,111
Certificates of deposit 0.06 to 3.22% 1.10% 2.24% 1,056,968 1,453,502
Total deposits $ 8,183,713 $ 6,634,613
Weighted average rate on interest-bearing accounts 0.67% 1.87%

~~As of September 30,~~ 2020, ~~and December 31, 2019,~~ the Bank had total brokered deposits of ~~$528.7 million~~$1.07 billion and ~~$766.6~~$753.3 million, respectively. Reciprocal deposits through Certificate of Deposit Account Registry Service®® (“(“CDARS®®””) and Insured Cash Sweep®® (“(“ICS®®””) totaled ~~$1.71~~$2.01 billion and ~~$857.9 million~~$1.72 billion as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively, and were not considered ~~non-brokered.~~brokered deposits.

As of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, certificates of deposit with balances of $100,000 or more, excluding brokered and reciprocal deposits, totaled ~~$506.9~~$570.8 million and ~~$551.5~~$534.3 million, respectively. As of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, certificates of deposit with balances of $250,000 or more, excluding brokered and reciprocal deposits, totaled ~~$160.4~~$174.3 million and ~~$233.5~~$159.6 million.

The contractual maturity of certificates of deposit was as follows:


~~(Dollars in thousands)~~	September 30, 2020		December 31, 2019
~~12 months or less~~	$	~~946,117~~	$	~~1,244,838~~
~~12 months to 24 months~~	~~101,019~~		~~168,437~~
~~24 months to 36 months~~	~~9,832~~		~~40,227~~



~~Total~~	$	~~1,056,968~~	$	~~1,453,502~~


(Dollars in thousands)	June 30, 2021		December 31, 2020
12 months or less	$	752,274	$	892,427
12 months to 24 months	150,995		132,443
24 months to 36 months	19,379		11,162



Total	$	922,648	$	1,036,032

Interest expense on deposits was as follows:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
(Dollars in thousands)	(Dollars in thousands)	2020		2019		2020		2019		(Dollars in thousands)	2021		2020		2021		2020
Interest-bearing checking accounts	Interest-bearing checking accounts	$	3,280	$	5,795	$	11,213	$	15,303	Interest-bearing checking accounts	$	3,214	$	2,719	$	6,008	$	7,933
Money market deposit accounts	Money market deposit accounts	6,944		18,870		28,975		53,608		Money market deposit accounts	5,636		7,377		11,600		22,031
Certificates of deposit	Certificates of deposit	3,674		9,449		16,907		26,691		Certificates of deposit	1,256		5,857		3,252		13,233
Total interest expense on deposits	Total interest expense on deposits	$	13,898	$	34,114	$	57,095	$	95,602	Total interest expense on deposits	$	10,106	$	15,953	$	20,860	$	43,197

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[6] BORROWINGS

As of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, borrowings were comprised of the following:

~~September 30, 2020~~

~~December 31, 2019~~

~~(Dollars in thousands)~~

~~Interest Rate~~

~~Ending Balance~~

~~Maturity Date~~

~~Interest Rate~~

~~Ending Balance~~

~~Maturity Date~~

~~FHLB borrowings:~~

~~FHLB line of credit~~

—%

—

~~1.81%~~

~~55,000~~

~~5/1/2020~~

~~Issued 7/8/2020~~

~~0.46%~~

~~50,000~~

~~10/8/2020~~

—%

—

~~Issued 9/1/2020~~

~~0.40%~~

~~150,000~~

~~12/1/2020~~

—%

—

~~Issued 9/2/2020~~

~~0.40%~~

~~50,000~~

~~12/2/2020~~

—%

—

~~Issued 9/21/2020~~

~~0.39%~~

~~50,000~~

~~12/21/2020~~

—%

—

~~Issued 12/12/2019~~

—%

—

~~1.85%~~

~~100,000~~

~~1/13/2020~~

~~Issued 12/2/2019~~

—%

—

~~1.91%~~

~~150,000~~

~~3/2/2020~~

~~Issued 10/8/2019~~

—%

—

~~2.00%~~

~~50,000~~

~~1/8/2020~~

~~Subordinated notes payable (net of debt issuance costs of $1,948 and $0, respectively)~~

~~5.75%~~

~~95,439~~

~~5/15/2030~~

—%

—

~~Total borrowings, net~~

~~395,439~~

~~355,000~~


	June 30, 2021				December 31, 2020
(Dollars in thousands)	Interest Rate	Ending Balance		Maturity Date	Interest Rate	Ending Balance		Maturity Date
FHLB borrowings:

Issued 6/21/2021	0.32%	$	50,000	9/20/2021	—%	$	—
Issued 6/2/2021	0.29%	50,000		9/2/2021	—%	—
Issued 6/1/2021	0.29%	150,000		9/1/2021	—%	—
Issued 12/21/2020	—%	—			0.39%	50,000		3/22/2021
Issued 12/2/2020	—%	—			0.33%	50,000		3/2/2021
Issued 12/1/2020	—%	—			0.33%	150,000		3/1/2021
Issued 10/8/2020	—%	—			0.39%	50,000		1/8/2021
Line of credit borrowings	—%	—			4.25%	5,000		10/17/2021
Subordinated notes payable (net of debt issuance costs of $1,900 and $2,007, respectively)	5.75%	95,600		5/15/2030	5.75%	95,493		5/15/2030
Total borrowings, net		$	345,600			$	400,493

~~During the three months ended June 30,~~In 2020, the Company completed ~~a private placement~~underwritten public offerings of subordinated notes ~~payable,~~due 2030, raising aggregate proceeds of $97.5 million. The subordinated notes have a term of 10 years at a fixed-to-floating rate of 5.75%. The subordinated notes ~~qualify under federal regulatory rules as~~constitute Tier 2 capital for the ~~holding company.~~ Company under federal regulatory capital rules.

The ~~Bank’s~~Bank’s FHLB borrowing capacity is based on the collateral value of certain securities held in safekeeping at the FHLB and loans pledged to the FHLB. The Bank submits a quarterly Qualifying Collateral Report ~~(“QCR”~~(“QCR”) to the FHLB to update the value of the loans pledged. As of ~~September~~June 30, ~~2020,~~2021, the ~~Bank’s~~Bank’s borrowing capacity is based on the information provided in ~~the June 30, 2020,~~its March 31, 2021 QCR filing. As of ~~September~~June 30, ~~2020,~~2021, the Bank had securities held in safekeeping at the FHLB with a fair value of ~~$2.4~~$2.2 million, combined with pledged loans of ~~$1.28~~$1.37 billion, for a gross borrowing capacity of ~~$914.3~~$977.3 million, of which ~~$300.0~~$250.0 million was outstanding in advances. As of December 31, ~~2019,~~2020, there was ~~$355.0~~$300.0 million outstanding in advances from the FHLB. When the Bank borrows from the FHLB, interest is charged at the ~~FHLB’s~~FHLB’s posted rates at the time of the borrowing.

The Bank maintains an unsecured line of credit of $10.0 million with M&T&T Bank and an unsecured line of credit of $20.0 million with Texas Capital Bank. As of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, there were 0 outstanding borrowings under these lines of credit, and they are available to the Bank at the ~~lenders’~~lenders’ discretion. In addition, the Bank maintains an $8.0 million unsecured line of credit with PNC Bank for private label credit card facilities for certain existing commercial clients of the Bank, of which ~~$2.6~~$3.2 million in notional value of credit cards have been issued. The clients of the Bank are responsible for repaying any balances due on these credit cards directly to ~~PNC,~~PNC; however, if the customer fails to repay PNC, the Bank could be required to satisfy the obligation to PNC and initiate collection from ~~our~~its customer as part of the existing credit facility of that customer.

The ~~holding company~~Company maintains an unsecured line of credit of $75.0 million with The Huntington National Bank. As of June 30, 2021, there was 0 outstanding balance under this line of credit. As of December 31, 2020, the Company held an unsecured line of credit of $75.0 million with Texas Capital ~~Bank. As~~Bank and had $5.0 million in outstanding borrowings under this line of ~~September 30, 2020~~credit. The Company repaid these borrowings at Texas Capital Bank and ~~December 31, 2019, the unsecured line was $75.0 million with 0 outstanding balance. In October 2020,~~subsequently terminated this line of credit ~~was reduced to $50.0 million.~~on February 18, 2021.

Interest expense on borrowings was as follows:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
(Dollars in thousands)	(Dollars in thousands)	2020		2019		2020		2019		(Dollars in thousands)	2021		2020		2021		2020
FHLB borrowings	FHLB borrowings	$	1,392	$	1,302	$	4,711	$	6,222	FHLB borrowings	$	1,082	$	1,284	$	2,154	$	3,319
Line of credit borrowings	Line of credit borrowings	0		0		261		68		Line of credit borrowings	0		260		55		261
Subordinated notes payable	Subordinated notes payable	1,458		0		2,138		1,090		Subordinated notes payable	1,455		680		2,910		680
Total interest expense on borrowings	Total interest expense on borrowings	$	2,850	$	1,302	$	7,110	$	7,380	Total interest expense on borrowings	$	2,537	$	2,224	$	5,119	$	4,260

~~[7] STOCK TRANSACTIONS~~

In May 2019, the Company completed the issuance and sale of a registered, underwritten public offering of 3,220,000 depositary shares, each representing a 1/40th interest in a share of its 6.375% Fixed-to-Floating Rate Series B Non-Cumulative Perpetual

Table of Contents

[7] STOCK TRANSACTIONS

On December 30, 2020, the Company completed the private placement of securities pursuant to an Investment Agreement, dated October 10, 2020 and amended December 9, 2020, with T-VIII PubOpps LP (“T-VIII PubOpps”), an affiliate of investment funds managed by Stone Point Capital LLC. Pursuant to the Investment Agreement, the Company sold to T-VIII PubOpps (i) 2,770,083 shares of voting common stock for $40.0 million, (ii) 650 shares of Series C Preferred Stock ~~no par value (the “~~for $65.0 million, and (iii) warrants to purchase up to 922,438 shares of voting common stock, or non-voting common stock at an exercise price of $17.50 per share. After two years, the Series BC Preferred Stock~~”), with~~ is convertible into shares of non-voting common stock or, when transferred under certain limited circumstances to a holder other than an affiliate of Stone Point Capital LLC, voting common stock, at a price of 13.75 per share. The Series C Preferred Stock has a liquidation preference of ~~$1,000~~$100,000 per share, ~~(equivalent to $25 per depository share)~~and pays a quarterly dividend at an annualized rate of 6.75%. The Company received gross proceeds of $105.0 million at closing, and may receive up to an additional $16.1 million if the warrants are exercised in full. The net proceeds ~~of $77.6 million from~~were recorded to shareholders’ equity at December 31, 2020 and allocated to the ~~sale of 80,500 shares of its Series B Preferred Stock (equivalent~~3 equity instruments issued using the relative fair value method applied to ~~3,220,000 depositary shares), after deducting underwriting discounts, commissions and direct offering expenses. The~~common stock, preferred stock, ~~provides~~and warrants issued, which were recorded to additional paid-in capital. The net proceeds constitute Tier 1 capital for the ~~holding company~~Company under federal regulatory capital rules.

~~When, as, and if declared by~~During the ~~board of directors (the “Board”) of~~six months ended June 30, 2021, the Company paid dividends ~~will be payable~~of $3.9 million on the Series B Preferred Stock from the date of issuance to, but excluding July 1, 2026, at a rate of 6.375% per annum, payable quarterly, in arrears, and from and including July 1, 2026, dividends will accrue and be payable at a floating rate equal to three-month LIBOR plus a spread of 408.8 basis points per annum (subject to potential adjustment as provided in the definition of three-month LIBOR), payable quarterly, in arrears. The Company may redeem the Series B Preferred Stock at its option, subject to regulatory approval, on or after July 1, 2024, as described in the prospectus supplement relating to the offering filed with the SEC on May 23, 2019.

~~In March 2018, the Company completed the issuance and sale of a registered, underwritten public offering of 1,610,000 depositary shares, each representing a 1/40th interest in a share of~~ its 6.75% Fixed-to-Floating Rate Series A Non-Cumulative Perpetual Preferred Stock, no par value (the ~~“Series~~“Series A Preferred Stock”) and its 6.375% Fixed-to-Floating Rate Series B Non-Cumulative Perpetual Preferred Stock,” no par value (the “Series B Preferred Stock”), ~~with a liquidation preference~~and dividends on its Series C Preferred Stock of ~~$1,000 per share (equivalent to $25 per depository share). The Company received net proceeds of $38.5 million from the sale of 40,250~~11 shares of ~~its~~ Series AC Preferred Stock, ~~(equivalent to 1,610,000 depositary shares), after deducting underwriting discounts, commissions~~paid in kind, and ~~direct offering expenses. The preferred stock provides Tier 1 capital for the holding company under federal regulatory capital rules.~~

~~When, as, and if declared by the Board, dividends will be payable on the Series A Preferred Stock from the date~~cash paid in lieu of ~~issuance to, but excluding April 1, 2023, at~~ a rate of 6.75% per annum, payable quarterly, in arrears, and from and including April 1, 2023, dividends will accrue and be payable at a floating rate equal to three-month LIBOR plus a spread of 398.5 basis points per annum (subject to potential adjustment), payable quarterly, in arrears. The Company may redeem the Series A Preferred Stock at its option, subject to regulatory approval, on or after April 1, 2023, as described in the prospectus supplement relating to the offering filed with the SEC on March 19, 2018.

fractional share. During the ~~nine~~six months ended ~~September~~June 30, 2020, the Company paid dividends of ~~$2.0~~$3.9 million on its Series A Preferred Stock and ~~$3.8 million on its~~ Series B Preferred Stock. ~~During the nine months ended September 30, 2019, the Company paid dividends of $2.0 million on its Series A Preferred Stock and $1.8 million on its Series B Preferred Stock.~~

Under authorization by the Board of Directors of the Company (“Board”), the Company is permitted to repurchase its common stock up to prescribed amounts, of which $9.8 million remained available as of ~~September~~June 30, ~~2020.~~2021. The Board also authorized the Company to utilize some of the share repurchase program authorizations to cancel certain options to purchase shares of its common stock granted by the Company.

During the ~~nine~~six months ended ~~September~~June 30, 2021, treasury shares increased 77,555, or approximately $1.6 million, in connection with the net settlement of equity awards exercised or vested. During the six months ended June 30, 2020, the Company repurchased 40,000 shares of common stock for approximately $670,000, at an average cost of $16.76 per share, which shares are held as treasury stock. ~~During the nine months ended September 30, 2019, the Company repurchased 90,000 shares for approximately $1.8 million, at an average cost of $20.21 per share, which are held as treasury stock.~~

In addition to the shares purchased in the market, treasury shares increased ~~126,148,~~83,988, or approximately ~~$2.7~~$2.1 million, in connection with the net settlement of equity awards exercised or vested during the ~~nine~~six months ended ~~September~~June 30, 2020. ~~The Company also reissued 8,500 shares of treasury stock for approximately $135,000 during the nine months ended September 30, 2020.~~

Under prior authorization of the Board, stock option cancellation programs were approved to allow for certain outstanding and vested stock option awards to be canceled by the option holder at a price based on the closing ~~day’s~~day’s stock price less the option exercise price. During the ~~nine~~six months ended ~~September~~June 30, 2020, there were 212,447 options canceled for approximately $2.5 million, which was recorded as a reduction to additional paid-in capital.

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The tables below show the changes in the ~~Company’s~~Company’s preferred and common shares outstanding during the periods indicated:


	Number of Preferred Shares Outstanding	Number of Common Shares Outstanding	Number of Treasury Shares
~~Balance, December 31, 2018~~	~~40,250~~	~~28,878,674~~	~~2,014,910~~
~~Issuance of preferred stock~~	~~80,500~~	—	—

~~Issuance of restricted common stock~~	—	~~550,453~~	—
~~Forfeitures of restricted common stock~~	—	~~(74,355)~~	—
~~Exercise of stock options~~	—	~~40,580~~	—
~~Purchase of treasury stock through open market transactions~~	—	~~(90,000)~~	~~90,000~~
~~Increase in treasury stock related to equity awards~~	—	~~(8,382)~~	~~8,382~~

~~Balance, September 30, 2019~~	~~120,750~~	~~29,296,970~~	~~2,113,292~~

~~Balance, December 31, 2019~~	~~120,750~~	~~29,355,986~~	~~2,126,422~~


~~Issuance of restricted common stock~~	—	~~607,323~~	—
~~Forfeitures of restricted common stock~~	—	~~(11,018)~~	—
~~Exercise of stock options~~	—	~~33,500~~	—
~~Purchase of treasury stock through open market transactions~~	—	~~(40,000)~~	~~40,000~~
~~Increase in treasury stock related to equity awards~~	—	~~(126,148)~~	~~126,148~~
~~Reissuance of treasury stock~~	—	~~8,500~~	~~(8,500)~~
~~Balance, September 30, 2020~~	~~120,750~~	~~29,828,143~~	~~2,284,070~~


	Number of Preferred Shares Outstanding	Number of Common Shares Outstanding	Number of Treasury Shares
Balance, December 31, 2019	120,750	29,355,986	2,126,422


Issuance of restricted common stock	—	597,070	—
Forfeitures of restricted common stock	—	(11,018)	—
Exercise of stock options	—	25,000	—
Purchase of treasury stock	—	(40,000)	40,000
Increase in treasury stock related to equity awards	—	(83,988)	83,988
Reissuance of treasury stock	—	8,500	(8,500)
Balance, June 30, 2020	120,750	29,851,550	2,241,910

Balance, December 31, 2020	121,400	32,620,150	2,299,422


Issuance of restricted common stock	—	595,386	—
Forfeitures of restricted common stock	—	(10,547)	—
Preferred stock dividend	11	—	—
Exercise of stock options	—	49,500	—

Increase in treasury stock related to equity awards	—	(77,555)	77,555

Balance, June 30, 2021	121,411	33,176,934	2,376,977

[8] REGULATORY CAPITAL

The Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory –– and possibly additional discretionary –– actions by regulators that, if undertaken, could have a direct material effect on the ~~Company’s~~Company’s and the ~~Bank’s~~Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of the ~~Company’s~~Company’s and the ~~Bank’s~~Bank’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The ~~Company’s~~Company’s and the ~~Bank’s~~Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weighting and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios (set forth in the tables below) of Common Equity Tier 1 (“(“CET 1”1”), capital, capital Tier 1 and Total ~~risk-based~~ capital ~~(as~~(each as defined in the regulations) to risk-weighted assets (as ~~defined)~~defined in the regulations), and of Tier 1 capital to average assets (as ~~defined)~~defined in the regulations). As of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, TriState Capital Holdings, Inc. and TriState Capital Bank exceeded all capital adequacy requirements to which they were ~~subjected.~~subject.

~~Financial~~Insured depository institutions are categorized as well capitalized if they meet minimum capital ratios as set forth in the tables below. The Bank exceeded the capital ratios necessary to be well capitalized under the regulatory framework for prompt corrective action. There have been no conditions or events since the filing of the most recent Call Report for the period ending June 30, 2021 that management believes have materially changed the ~~Bank’s~~Bank’s capital, as presented in the tables below.

A banking organization is also subject to certain limitations on capital distributions and discretionary bonus payments to executive officers if the organization does not maintain the necessary capital conservation buffer ~~- a common equity tier~~of CET 1 ~~risk-based~~ capital to risk-weighted assets ratio of 2.5% or more, in addition to the minimum risk-based capital adequacy levels shown in the tables below. Both the Company and the Bank were above the levels required to avoid limitations on capital distributions and discretionary bonus payments.

In 2020, U.S. federal regulatory authorities issued a final rule that provides banking organizations that adopt CECL during the 2020 calendar year with the option to delay the impact of CECL on regulatory capital for up to two years, beginning January 1, 2020, followed by a three-year transition period. The Company elected to utilize the two-year delay of CECL’s impact on its regulatory capital, from January 1, 2020 through December 31, 2021, followed by the three-year transition period of CECL impact on regulatory capital, from January 1, 2022 through December 31, 2024.

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The following tables set forth certain information concerning the ~~Company’s~~Company’s and the ~~Bank’s~~Bank’s regulatory capital as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019:~~2020:

~~September 30, 2020~~

~~Actual~~

~~For Capital Adequacy Purposes~~

~~To be Well Capitalized Under Prompt Corrective Action Provisions~~

~~(Dollars in thousands)~~

~~Amount~~

~~Ratio~~

~~Amount~~

~~Ratio~~

~~Amount~~

~~Ratio~~

~~Total risk-based capital ratio~~

~~Company~~

~~716,731~~

~~12.85~~

~~446,355~~

~~8.00~~

~~N/A~~

~~Bank~~

~~692,957~~

~~12.46~~

~~444,791~~

~~8.00~~

~~555,989~~

~~10.00~~

~~Tier 1 risk-based capital ratio~~

~~Company~~

~~589,176~~

~~10.56~~

~~334,766~~

~~6.00~~

~~N/A~~

~~Bank~~

~~660,841~~

~~11.89~~

~~333,593~~

~~6.00~~

~~444,791~~

~~8.00~~

~~Common equity tier 1 risk-based capital ratio~~

~~Company~~

~~473,097~~

~~8.48~~

~~251,075~~

~~4.50~~

~~N/A~~

~~Bank~~

~~660,841~~

~~11.89~~

~~250,195~~

~~4.50~~

~~361,393~~

~~6.50~~

~~Tier 1 leverage ratio~~

~~Company~~

~~589,176~~

~~6.23~~

~~378,310~~

~~4.00~~

~~N/A~~

~~Bank~~

~~660,841~~

~~7.00~~

~~377,750~~

~~4.00~~

~~472,187~~

~~5.00~~


	June 30, 2021
	Actual				For Capital Adequacy Purposes				To be Well Capitalized Under Prompt Corrective Action Provisions
(Dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio
Total risk-based capital ratio
Company	$	868,225	13.94	%	$	498,423	8.00	%	N/A		N/A
Bank	$	823,458	13.26	%	$	496,642	8.00	%	$	620,802	10.00	%
Tier 1 risk-based capital ratio
Company	$	743,882	11.94	%	$	373,817	6.00	%	N/A		N/A
Bank	$	794,715	12.80	%	$	372,481	6.00	%	$	496,642	8.00	%
Common equity tier 1 risk-based capital ratio
Company	$	564,539	9.06	%	$	280,363	4.50	%	N/A		N/A
Bank	$	794,715	12.80	%	$	279,361	4.50	%	$	403,521	6.50	%
Tier 1 leverage ratio
Company	$	743,882	6.86	%	$	433,567	4.00	%	N/A		N/A
Bank	$	794,715	7.34	%	$	432,885	4.00	%	$	541,106	5.00	%

~~December 31, 2019~~

~~Actual~~

~~For Capital Adequacy Purposes~~

~~To be Well Capitalized Under Prompt Corrective Action Provisions~~

~~(Dollars in thousands)~~

~~Amount~~

~~Ratio~~

~~Amount~~

~~Ratio~~

~~Amount~~

~~Ratio~~

~~Total risk-based capital ratio~~

~~Company~~

~~572,221~~

~~12.05~~

~~379,911~~

~~8.00~~

~~N/A~~

~~Bank~~

~~547,532~~

~~11.57~~

~~378,623~~

~~8.00~~

~~473,279~~

~~10.00~~

~~Tier 1 risk-based capital ratio~~

~~Company~~

~~558,068~~

~~11.75~~

~~284,933~~

~~6.00~~

~~N/A~~

~~Bank~~

~~532,779~~

~~11.26~~

~~283,967~~

~~6.00~~

~~378,623~~

~~8.00~~

~~Common equity tier 1 risk-based capital ratio~~

~~Company~~

~~442,385~~

~~9.32~~

~~213,700~~

~~4.50~~

~~N/A~~

~~Bank~~

~~532,779~~

~~11.26~~

~~212,975~~

~~4.50~~

~~307,631~~

~~6.50~~

~~Tier 1 leverage ratio~~

~~Company~~

~~558,068~~

~~7.54~~

~~296,038~~

~~4.00~~

~~N/A~~

~~Bank~~

~~532,779~~

~~7.22~~

~~295,277~~

~~4.00~~

~~369,097~~

~~5.00~~


	December 31, 2020
	Actual				For Capital Adequacy Purposes				To be Well Capitalized Under Prompt Corrective Action Provisions
(Dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio
Total risk-based capital ratio
Company	$	833,819	14.12	%	$	472,267	8.00	%	N/A		N/A
Bank	$	789,273	13.41	%	$	470,820	8.00	%	$	588,525	10.00	%
Tier 1 risk-based capital ratio
Company	$	707,711	11.99	%	$	354,200	6.00	%	N/A		N/A
Bank	$	758,658	12.89	%	$	353,115	6.00	%	$	470,820	8.00	%
Common equity tier 1 risk-based capital ratio
Company	$	530,568	8.99	%	$	265,650	4.50	%	N/A		N/A
Bank	$	758,658	12.89	%	$	264,836	4.50	%	$	382,542	6.50	%
Tier 1 leverage ratio
Company	$	707,711	7.29	%	$	388,408	4.00	%	N/A		N/A
Bank	$	758,658	7.83	%	$	387,626	4.00	%	$	484,533	5.00	%

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[9] EARNINGS PER COMMON SHARE

The computation of basic and diluted earnings per common share for the periods presented ~~was~~were as follows:

Three Months Ended September 30, Nine Months Ended September 30,
(Dollars in thousands, except per share data) 2020 2019 2020 2019
Net income available to common shareholders $ 7,367 $ 14,372 $ 26,738 $ 41,798
Weighted average common shares outstanding:
Basic 28,286,250 27,863,767 28,230,180 27,861,515
Restricted stock - dilutive 303,138 600,985 313,726 569,260
Stock options - dilutive 85,055 313,919 135,377 328,633
Diluted 28,674,443 28,778,671 28,679,283 28,759,408
Earnings per common share:
Basic $ 0.26 $ 0.52 $ 0.95 $ 1.50
Diluted $ 0.26 $ 0.50 $ 0.93 $ 1.45

Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
Anti-dilutive shares (1)
791,262 9,000 566,498 13,000


	Three Months Ended June 30,					Six Months Ended June 30,
(Dollars in thousands, except per share data)	2021		2020			2021		2020

Basic earnings per common share:
Net income	$	18,780	$	10,401		$	34,980	$	23,296
Less: Preferred dividends on Series A and Series B	$	1,962	$	1,962		3,924		3,924
Less: Preferred dividends on Series C	$	1,115	$	0		2,212		0
Net income available to common shareholders	$	15,703	$	8,439		$	28,844	$	19,372

Allocation of net income available:
Common shareholders	$	13,272	$	8,439		$	24,375	$	19,372
Series C convertible preferred shareholders	$	2,040	$	0		3,749		0
Warrant shareholders	$	391	$	0		720		0
Total	$	15,703	$	8,439		$	28,844	$	19,372

Basic weighted average common shares outstanding:
Basic common shares	31,280,481		28,223,085			31,252,632		28,201,837
Series C convertible preferred stock, as-if converted	4,807,272		0			4,807,272		0
Warrants, as-if exercised	922,438		0			922,438		0

Basic earnings per common share	$	0.42	$	0.30		$	0.78	$	0.69

Diluted earnings per common share:
Income available to common shareholders after allocation	$	13,272	$	8,439		$	24,375	$	19,372

Diluted weighted average common shares outstanding:
Basic common shares	31,280,481		28,223,085			31,252,632		28,201,837
Restricted stock - dilutive	719,504		221,456			871,255		324,498
Stock options - dilutive	147,773		83,420			154,395		161,469
Diluted common shares	32,147,758		28,527,961			32,278,282		28,687,804

Diluted earnings per common share	$	0.41	$	0.30		$	0.76	$	0.68

	Three Months Ended June 30,					Six Months Ended June 30,
Anti-dilutive shares:	2021		2020			2021		2020
Restricted stock	10,750		864,246			12,000		566,498
Stock options	0		5,500			0		0
Series C convertible preferred stock, as-if converted	4,807,272		0			4,807,272		0
Warrants, as-if exercised	922,438		0			922,438		0
Total anti-dilutive shares	5,740,460		869,746		869746	5,741,710		566,498

~~(1)~~
~~Includes~~

The Series C convertible preferred stock ~~options and/or restricted~~and warrants are anti-dilutive under the treasury stock ~~not considered for~~method compared to the basic EPS calculation ~~of diluted EPS as their inclusion would have been anti-dilutive.~~under the two-class method.

[10] DERIVATIVES AND HEDGING ACTIVITY

RISK MANAGEMENT OBJECTIVE OF USING DERIVATIVES

The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity and credit risk, primarily by managing the amount, sources, and duration of its debt funding and through the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The ~~Company’s~~Company’s derivative financial instruments are used to manage differences in the amount, timing and duration of the ~~Company’s~~Company’s known or expected cash payments related to certain of the ~~Company’s~~Company’s FHLB borrowings and to manage the volatility of the change in fair value related to certain of the ~~Company’s~~Company’s equity investments. The Company also has derivatives that are a result of a service the Company provides to certain qualifying ~~customers while at~~customers.

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When providing this service, the ~~same time the~~ Company generally enters into an offsetting derivative transaction in order to eliminate its interest rate risk exposure resulting from such transactions.

FAIR VALUES OF DERIVATIVE INSTRUMENTS ON THE STATEMENTS OF FINANCIAL CONDITION

The tables below present the fair value of the ~~Company’s~~Company’s derivative financial instruments as well as their classification on the unaudited condensed consolidated statements of financial condition as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019:~~2020:

~~Asset Derivatives~~

~~Liability Derivatives~~

~~as of September 30, 2020~~

~~(Dollars in thousands)~~

~~Balance Sheet Location~~

~~Fair Value~~

~~Balance Sheet Location~~

~~Fair Value~~

~~Derivatives designated as hedging instruments:~~

~~Interest rate products~~

~~Other assets~~

~~Other liabilities~~

~~10,239~~

~~Derivatives not designated as hedging instruments:~~

~~Interest rate products~~

~~Other assets~~

~~166,153~~

~~Other liabilities~~

~~166,241~~

~~Total~~

~~Other assets~~

~~166,153~~

~~Other liabilities~~

~~176,480~~

Asset Derivatives

Liability Derivatives

as of June 30, 2021

(Dollars in thousands)

Balance Sheet Location

Fair Value

Balance Sheet Location

Fair Value

Derivatives designated as hedging instruments:

Interest rate products

Other assets

218

Other liabilities

5,554

Derivatives not designated as hedging instruments:

Interest rate products

Other assets

109,156

Other liabilities

109,215

Total

Other assets

109,374

Other liabilities

114,769

~~Table of Contents~~

~~Asset Derivatives~~

~~Liability Derivatives~~

~~as of December 31, 2019~~

~~(Dollars in thousands)~~

~~Balance Sheet Location~~

~~Fair Value~~

~~Balance Sheet Location~~

~~Fair Value~~

~~Derivatives designated as hedging instruments:~~

~~Interest rate products~~

~~Other assets~~

~~Other liabilities~~

~~2,184~~

~~Derivatives not designated as hedging instruments:~~

~~Interest rate products~~

~~Other assets~~

~~55,241~~

~~Other liabilities~~

~~55,289~~

~~Total~~

~~Other assets~~

~~55,241~~

~~Other liabilities~~

~~57,473~~

Asset Derivatives

Liability Derivatives

as of December 31, 2020

(Dollars in thousands)

Balance Sheet Location

Fair Value

Balance Sheet Location

Fair Value

Derivatives designated as hedging instruments:

Interest rate products

Other assets

Other liabilities

9,082

Derivatives not designated as hedging instruments:

Interest rate products

Other assets

144,333

Other liabilities

144,351

Total

Other assets

144,333

Other liabilities

153,433

The following tables show the impact legally enforceable master netting agreements had on the ~~Company’s~~Company’s derivative financial instruments as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019:~~2020:


	~~Offsetting of Derivative Assets~~
	~~Gross Amounts of Recognized Assets~~		~~Gross Amounts Offset in the Statement of Financial Position~~		Net Amounts of Assets presented in the Statement of Financial Position		~~Gross Amounts Not Offset in the Statement of Financial Position~~				~~Net Amount~~

~~(Dollars in thousands)~~							~~Financial Instruments~~		~~Cash Collateral Received~~
~~September 30, 2020~~	$	~~166,153~~	$	0	$	~~166,153~~	$	0	$	0	$	~~166,153~~

~~December 31, 2019~~	$	~~55,241~~	$	0	$	~~55,241~~	$	~~(850)~~	$	0	$	~~54,391~~

Offsetting of Derivative Liabilities
Gross Amounts of Recognized Liabilities Gross Amounts Offset in the Statement of Financial Position Net Amounts of Liabilities
presented in the Statement of Financial Position Gross Amounts Not Offset in the Statement of Financial Position Net Amount
(Dollars in thousands) Financial Instruments Cash Collateral Posted
September 30, 2020 $ 176,480 $ 0 $ 176,480 $ 0 $ (176,480) $ 0
December 31, 2019 $ 57,473 $ 0 $ 57,473 $ (850) $ (55,753) $ 870


	Offsetting of Derivative Assets
	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Statement of Financial Position		Net Amounts of Assets presented in the Statement of Financial Position		Gross Amounts Not Offset in the Statement of Financial Position				Net Amount

(Dollars in thousands)							Financial Instruments		Cash Collateral Received
June 30, 2021	$	109,374	$	0	$	109,374	$	(8,179)	$	0	$	101,195

December 31, 2020	$	144,333	$	0	$	144,333	$	(94)	$	0	$	144,239


	Offsetting of Derivative Liabilities
	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Statement of Financial Position		Net Amounts of Liabilities presented in the Statement of Financial Position		Gross Amounts Not Offset in the Statement of Financial Position				Net Amount

(Dollars in thousands)							Financial Instruments		Cash Collateral Posted
June 30, 2021	$	114,769	$	0	$	114,769	$	(8,179)	$	(95,293)	$	11,297

December 31, 2020	$	153,433	$	0	$	153,433	$	(94)	$	(150,238)	$	3,101

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CASH FLOW HEDGES OF INTEREST RATE RISK

The ~~Company’s~~Company’s objectives in using certain interest rate derivatives are to add stability to net interest income and to manage its exposure to interest rate movements. To accomplish ~~this objective,~~these objectives, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. The Company has entered into derivative contracts to hedge the variable cash flows associated with certain FHLB borrowings. These interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company effectively making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.

The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income (loss) and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings. The ~~Company’s~~Company’s cash flow hedge derivatives did not have any hedge ineffectiveness recognized in earnings during the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021.

~~Table of Contents~~

Characteristics of the ~~Company’s~~Company’s interest rate derivative transactions designated as cash flow hedges of interest rate risk as of ~~September~~June 30, ~~2020,~~2021, were as follows:


(Dollars in thousands)	(Dollars in thousands)	Notional Amount		Effective Rate (1)	Estimated Increase/ (Decrease) to Interest Expense in the Next Twelve Months		Maturity Date	Remaining Term (in Months)	(Dollars in thousands)	Notional Amount		Effective Rate (1)	Estimated Increase/ (Decrease) to Interest Expense in the Next Twelve Months		Maturity Date	Remaining Term (in Months)
Interest rate products:	Interest rate products:								Interest rate products:
Issued 1/8/2018		$	50,000	2.21%	$	271	1/8/2021	3

Issued 5/30/2019	Issued 5/30/2019	50,000		2.05%	926		6/1/2022	20	Issued 5/30/2019	$	50,000	2.05%	$	871	6/1/2022	11
Issued 5/30/2019	Issued 5/30/2019	50,000		2.03%	919		6/1/2023	32	Issued 5/30/2019	50,000		2.03%	938		6/1/2023	23
Issued 5/30/2019	Issued 5/30/2019	50,000		2.04%	925		6/1/2024	44	Issued 5/30/2019	50,000		2.04%	944		6/1/2024	35
Issued 3/2/2020	Issued 3/2/2020	50,000		0.98%	387		3/2/2025	53	Issued 3/2/2020	50,000		0.98%	406		3/2/2025	44
Issued 3/20/2020	Issued 3/20/2020	50,000		0.60%	196		3/20/2025	54	Issued 3/20/2020	50,000		0.60%	214		3/20/2025	45
Total	Total	$	300,000		$	3,624			Total	$	250,000		$	3,373

(1)The effective rate is adjusted for the difference between the three-month FHLB advance rate and three-month LIBOR.

The tables below present the effective portion of the ~~Company’s~~Company’s cash flow hedge instruments in the unaudited condensed consolidated statements of income and accumulated other comprehensive income (loss):


			Three Months Ended September 30,				Three Months Ended September 30,						Three Months Ended June 30,				Three Months Ended June 30,
(Dollars in thousands)	(Dollars in thousands)		2020		2019		2020		2019		(Dollars in thousands)		2021		2020		2021		2020
Derivatives designated as hedging instruments:	Derivatives designated as hedging instruments:	Location of Gain (Loss) Recognized in Income on Derivatives	Realized Gain (Loss) Recognized in Income on Derivatives				Unrealized Gain (Loss) Recognized in Accumulated Other Comprehensive Income on Derivatives				Derivatives designated as hedging instruments:	Location of Gain (Loss) Recognized in Income on Derivatives	Realized Gain (Loss) Recognized in Income on Derivatives				Unrealized Gain (Loss) Recognized in Accumulated Other Comprehensive Income on Derivatives
Interest rate products	Interest rate products	Interest expense	$	(1,028)	$	156	$	32	$	(967)	Interest rate products	Interest expense	$	(867)	$	(460)	$	(409)	$	(1,578)


			Nine Months Ended September 30,				Nine Months Ended September 30,						Six Months Ended June 30,				Six Months Ended June 30,
(Dollars in thousands)	(Dollars in thousands)		2020		2019		2020		2019		(Dollars in thousands)		2021		2020		2021		2020
Derivatives designated as hedging instruments:	Derivatives designated as hedging instruments:	Location of Gain (Loss) Recognized in Income on Derivatives	Realized Gain (Loss) Recognized in Income on Derivatives				Unrealized Gain (Loss) Recognized in Accumulated Other Comprehensive Income on Derivatives				Derivatives designated as hedging instruments:	Location of Gain (Loss) Recognized in Income on Derivatives	Realized Gain (Loss) Recognized in Income on Derivatives				Unrealized Gain (Loss) Recognized in Accumulated Other Comprehensive Income on Derivatives
Interest rate products	Interest rate products	Interest expense	$	(1,647)	$	1,277	$	(9,258)	$	(3,293)	Interest rate products	Interest expense	$	(1,713)	$	(619)	$	1,807	$	(9,290)

NON-DESIGNATED HEDGES

The Company does not use derivatives for trading or speculative purposes. Derivatives not designated as hedges are not speculative and ~~primarily~~ result from a service the Company provides to certain customers. The Company executes interest rate derivatives with its commercial banking customers to facilitate their respective risk management strategies. Those derivatives are simultaneously and economically hedged by offsetting derivatives that the Company executes with a third party, such that the Company generally eliminates its interest rate exposure resulting from such transactions. Changes in the fair value of derivatives not designated in hedging relationships are recorded directly in earnings. As of ~~September~~June 30, ~~2020,~~2021, the Company had interest rate derivative transactions with an aggregate notional amount of ~~$3.52~~$4.33 billion related to this program.

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The table below presents the effect of the ~~Company’s~~Company’s non-designated hedge instruments in the unaudited condensed consolidated statements of income:


			Three Months Ended September 30,				Nine Months Ended September 30,						Three Months Ended June 30,				Six Months Ended June 30,
(Dollars in thousands)	(Dollars in thousands)		2020		2019		2020		2019		(Dollars in thousands)		2021		2020		2021		2020
Derivatives not designated as hedging instruments:	Derivatives not designated as hedging instruments:	Location of Gain (Loss) Recognized in Income on Derivatives	Amount of Gain (Loss) Recognized in Income on Derivatives				Amount of Gain (Loss) Recognized in Income on Derivatives				Derivatives not designated as hedging instruments:	Location of Gain (Loss) Recognized in Income on Derivatives	Amount of Gain (Loss) Recognized in Income on Derivatives				Amount of Gain (Loss) Recognized in Income on Derivatives
Interest rate products	Interest rate products	Non-interest income	$	14	$	(17)	$	(51)	$	(59)	Interest rate products	Non-interest income	$	(8)	$	(4)	$	23	$	(66)
Equity products		Non-interest income	0		(32)		0		(109)
Total			$	14	$	(49)	$	(51)	$	(168)

CREDIT-RISK-RELATED CONTINGENT FEATURES

The Company has agreements with each of its derivative counterparties that contain a provision where, if the Company defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Company could also be declared in default on its derivative obligations.

The Company has agreements with certain of its derivative counterparties that contain a provision where, if either the Company or the counterparty fails to maintain its status as a ~~well/~~well capitalized or adequately capitalized institution, then the Company or the counterparty could be required to terminate any outstanding derivative positions and settle its obligations under the agreement.

As of ~~September~~June 30, ~~2020,~~2021, the termination value of derivatives for which the Company had master netting arrangements with the counterparty and in a net liability position was ~~$176.5~~$95.6 million, including accrued interest. As of ~~September~~June 30, ~~2020,~~2021, the Company has minimum collateral posting thresholds with certain of its derivative counterparties and has posted collateral of ~~$181.2~~$100.9 million which is considered restricted cash. If the Company had breached any of these provisions as of ~~September~~June 30, ~~2020,~~2021, it could have been required to settle its obligations under the agreements at their termination value.

[11] DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair value estimates of financial instruments are based on the present value of expected future cash flows, quoted market prices of similar financial instruments, if available, and other valuation techniques. These valuations are significantly affected by discount rates, cash flow assumptions and risk assumptions used. Therefore, fair value estimates may not be substantiated by comparison to independent markets and are not intended to reflect the proceeds that may be realized in an immediate settlement of instruments. Accordingly, the aggregate fair value amounts presented below do not represent the underlying value of the Company.

FAIR VALUE MEASUREMENTS

In accordance with U.S. GAAP, the Company must account for certain financial assets and liabilities at fair value on a recurring and non-recurring basis. The Company utilizes a three-level fair value hierarchy of valuation techniques to estimate the fair value of its financial assets and liabilities based on whether the inputs to those valuation techniques are observable or unobservable. The fair value hierarchy gives the highest priority to quoted prices with readily available independent data in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable market inputs (Level 3). When various inputs for measurement fall within multiple levels of the fair value hierarchy, the lowest level input that has a significant impact on fair value measurement is used.

Financial assets and liabilities are categorized based upon the following characteristics or inputs to the valuation techniques:

••Level 1 –– Financial assets and liabilities for which inputs are observable and are obtained from reliable quoted prices for identical assets or liabilities in actively traded markets. This is the most reliable fair value measurement and includes, for example, active exchange-traded equity securities.

••Level 2 –– Financial assets and liabilities for which values are based on quoted prices in markets that are not active or for which values are based on similar assets or liabilities that are actively traded. Level 2 also includes pricing models in which the inputs are corroborated by market data, for example, matrix pricing.

••Level 3 –– Financial assets and liabilities for which values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. Level 3 inputs include assumptions of a source independent of the reporting entity or the reporting ~~entity’s~~entity’s own assumptions that are supported by little or no market activity or observable inputs.

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The Company is responsible for the valuation process and as part of this process may use data from outside sources in establishing fair value. The Company performs due diligence to understand the inputs used or how the data was calculated or derived and corroborates the reasonableness of external inputs in the valuation process.

RECURRING FAIR VALUE MEASUREMENTS

The following tables represent assets and liabilities measured at fair value on a recurring basis as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019:~~2020:


	~~September 30, 2020~~
~~(Dollars in thousands)~~	~~Level 1~~		~~Level 2~~		~~Level 3~~		Total Assets / Liabilities at Fair Value
~~Financial assets:~~
~~Debt securities available-for-sale:~~

~~Corporate bonds~~	$	0	$	~~176,137~~	$	0	$	~~176,137~~
~~Trust preferred securities~~	0		~~17,726~~		0		~~17,726~~


~~Agency collateralized mortgage obligations~~	0		~~22,954~~		0		~~22,954~~
~~Agency mortgage-backed securities~~	0		~~326,824~~		0		~~326,824~~
~~Agency debentures~~	0		~~9,257~~		0		~~9,257~~

~~Interest rate swaps~~	0		~~166,153~~		0		~~166,153~~

~~Total financial assets~~	0		~~719,051~~		0		~~719,051~~

~~Financial liabilities:~~
~~Interest rate swaps~~	0		~~176,480~~		0		~~176,480~~


~~Total financial liabilities~~	$	0	$	~~176,480~~	$	0	$	~~176,480~~


	June 30, 2021
(Dollars in thousands)	Level 1		Level 2		Level 3		Total Assets / Liabilities at Fair Value
Financial assets:
Debt securities available-for-sale:

Corporate bonds	$	0	$	137,170	$	0	$	137,170
Residential mortgage-backed securities	0		97,551		0		97,551
Trust preferred securities	0		18,426		0		18,426
Agency collateralized mortgage obligations	0		19,136		0		19,136
Agency mortgage-backed securities	0		25,292		0		25,292
Agency debentures	0		8,346		0		8,346
Municipal bonds	0		5,208		0		5,208

Interest rate swaps	0		109,374		0		109,374

Total financial assets	0		420,503		0		420,503

Financial liabilities:
Interest rate swaps	0		114,769		0		114,769


Total financial liabilities	$	0	$	114,769	$	0	$	114,769


	~~December 31, 2019~~
~~(Dollars in thousands)~~	~~Level 1~~		~~Level 2~~		~~Level 3~~		Total Assets / Liabilities at Fair Value
~~Financial assets:~~
~~Debt securities available-for-sale:~~

~~Corporate bonds~~	$	0	$	~~175,418~~	$	0	$	~~175,418~~
~~Trust preferred securities~~	0		~~18,260~~		0		~~18,260~~


~~Agency collateralized mortgage obligations~~	0		~~27,193~~		0		~~27,193~~
~~Agency mortgage-backed securities~~	0		~~18,509~~		0		~~18,509~~
~~Agency debentures~~	0		~~9,402~~		0		~~9,402~~

~~Interest rate swaps~~	0		~~55,241~~		0		~~55,241~~

~~Total financial assets~~	0		~~304,023~~		0		~~304,023~~

~~Financial liabilities:~~
~~Interest rate swaps~~	0		~~57,473~~		0		~~57,473~~


~~Total financial liabilities~~	$	0	$	~~57,473~~	$	0	$	~~57,473~~


	December 31, 2020
(Dollars in thousands)	Level 1		Level 2		Level 3		Total Assets / Liabilities at Fair Value
Financial assets:
Debt securities available-for-sale:

Corporate bonds	$	0	$	158,464	$	0	$	158,464
Trust preferred securities	0		18,087		0		18,087



Agency collateralized mortgage obligations	0		22,089		0		22,089
Agency mortgage-backed securities	0		410,127		0		410,127
Agency debentures	0		8,803		0		8,803


Interest rate swaps	0		144,333		0		144,333

Total financial assets	0		761,903		0		761,903

Financial liabilities:
Interest rate swaps	0		153,433		0		153,433


Total financial liabilities	$	0	$	153,433	$	0	$	153,433

INVESTMENT SECURITIES

Generally, debt securities are valued using pricing for similar securities, recently executed transactions, and other pricing models utilizing observable inputs and therefore are classified as Level 2.

INTEREST RATE SWAPS

The fair value of interest rate swaps is estimated using inputs that are observable or that can be corroborated by observable market data and therefore are classified as Level 2. These fair value estimations include primarily market observable inputs such as the forward LIBOR swap ~~curve or its ongoing replacement.~~curve.

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NON-RECURRING FAIR VALUE MEASUREMENTS

Certain financial assets and financial liabilities are measured at fair value on a non-recurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances, such as when there is evidence of impairment.

The following tables represent the balances of assets measured at fair value on a non-recurring basis as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019:~~2020:


	~~September 30, 2020~~
~~(Dollars in thousands)~~	~~Level 1~~		~~Level 2~~		~~Level 3~~		Total Assets at Fair Value
~~Loans measured for impairment, net~~	$	0	$	0	$	~~5,234~~	$	~~5,234~~
~~Other real estate owned~~	0		0		~~2,724~~		~~2,724~~
~~Total assets~~	$	0	$	0	$	~~7,958~~	$	~~7,958~~


	June 30, 2021
(Dollars in thousands)	Level 1		Level 2		Level 3		Total Assets at Fair Value
Loans measured for impairment, net	$	0	$	0	$	5,589	$	5,589
Other real estate owned	0		0		2,568		2,568
Total assets	$	0	$	0	$	8,157	$	8,157


	~~December 31, 2019~~
~~(Dollars in thousands)~~	~~Level 1~~		~~Level 2~~		~~Level 3~~		Total Assets at Fair Value
~~Loans measured for impairment, net~~	$	0	$	0	$	13	$	13
~~Other real estate owned~~	0		0		~~4,250~~		~~4,250~~
~~Total assets~~	$	0	$	0	$	~~4,263~~	$	~~4,263~~


	December 31, 2020
(Dollars in thousands)	Level 1		Level 2		Level 3		Total Assets at Fair Value
Loans measured for impairment, net	$	0	$	0	$	7,692	$	7,692
Other real estate owned	0		0		2,724		2,724
Total assets	$	0	$	0	$	10,416	$	10,416

As of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the Company recorded ~~$1.5~~$5.6 million and ~~$171,000,~~$2.0 million, respectively, of specific reserves to allowance for ~~loan~~credit losses on loans and ~~lease losses~~leases as a result of adjusting the fair value of impaired loans.

~~IMPAIRED~~INDIVIDUALLY EVALUATED LOANS

~~A loan is considered impaired when management determines it is probable~~The Company evaluates individually loans that ~~all of the principal~~do not share similar risk characteristics, including non-accrual loans and ~~interest due under the original terms of the loan may not be collected or if a loan is~~loans designated as ~~a TDR. Impairment~~TDRs. Specific allowance for credit losses is measured based on a market approach, discounted cash flow of ongoing operations, discounted at the ~~loan’s~~loan’s original effective interest rate, or a calculation of the fair value of the underlying collateral less estimated selling costs. Our policy is to obtain appraisals on collateral supporting ~~impaired~~individually evaluated loans on an annual basis, unless circumstances dictate a shorter time frame. Appraisals are reduced by estimated costs to sell the collateral, and, under certain circumstances, additional factors that may arise and cause us to believe our recoverable value may be less than the independent appraised value. Accordingly, ~~impaired~~individually evaluated loans are classified as Level 3. ~~The Company measures impairment on all loans as part of the allowance for loan and lease losses.~~

OTHER REAL ESTATE OWNED

OREO is comprised of property acquired through foreclosure or voluntarily conveyed by borrowers. These assets are recorded on the date acquired at fair value, less estimated disposition costs, with the fair value being determined by appraisal. Our policy is to obtain appraisals on collateral supporting OREO on an annual basis, unless circumstances dictate a shorter time frame. Appraisals are reduced by estimated costs to sell the collateral and, under certain circumstances, additional factors that may arise and cause us to believe our recoverable value may be less than the independent appraised value. Accordingly, OREO is classified as Level 3.

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LEVEL 3 VALUATION

The following tables present additional quantitative information about assets measured at fair value on a recurring and non-recurring basis and for which we have utilized Level 3 inputs to determine fair value as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019:~~2020:

~~September 30, 2020~~

~~(Dollars in thousands)~~

~~Fair Value~~

~~Valuation Techniques~~ ~~(1)~~

~~Significant Unobservable Inputs~~

~~Weighted Average Discount Rate~~

~~Loans measured for impairment, net~~

~~5,234~~

~~Collateral~~

~~Appraisal value and discount due to salability conditions~~

~~34%~~

~~Other real estate owned~~

~~2,724~~

~~Collateral~~

~~Appraisal value and discount due to salability conditions~~

~~20%~~

~~(1)~~Fair value is generally determined through independent appraisals of the underlying collateral, which may include Level 3 inputs that are not identifiable, or by using the discounted cash flow of ongoing operations if the loan is not collateral dependent.

~~December 31, 2019~~

~~(Dollars in thousands)~~

~~Fair Value~~

~~Valuation Techniques~~ ~~(1)~~

~~Significant Unobservable Inputs~~

Weighted Average Multiple/
Discount Rate

~~Loans measured for impairment, net~~

~~Collateral~~

~~Appraisal value and discount due to salability conditions~~

~~Other real estate owned~~

~~4,250~~

~~Collateral~~

~~Appraisal value and discount due to salability conditions~~

~~17%~~

June 30, 2021

(Dollars in thousands)

Fair Value

Valuation Techniques (1)(2)

Significant Unobservable Inputs

Weighted Average Discount Rate

Loans measured for impairment, net

2,139

Collateral

Appraisal value and discount due to salability conditions

Loans measured for impairment, net

3,450

Market Approach

Market value and discount due to salability conditions

33%

Other real estate owned

2,568

Collateral

Appraisal value and discount due to salability conditions

17%

(1)Fair value is generally determined through independent appraisals of the underlying collateral, which may include Level 3 inputs that are not identifiable, or by using the discounted cash flow of ongoing operations if the loan is not collateral dependent.

(2)The collateral which is used in the valuation of these loans is commercial real estate.

December 31, 2020

(Dollars in thousands)

Fair Value

Valuation Techniques (1)(2)

Significant Unobservable Inputs

Weighted Average
Discount Rate

Loans measured for impairment, net

7,692

Collateral

Appraisal value and discount due to salability conditions

23%

Other real estate owned

2,724

Collateral

Appraisal value and discount due to salability conditions

12%

(2)The collateral which is used in the valuation of these loans is commercial real estate.

Table of Contents

FAIR VALUE OF FINANCIAL INSTRUMENTS

The following table summarizes of the carrying amounts and estimated fair values of financial instruments:

~~September 30, 2020~~

~~December 31, 2019~~

~~(Dollars in thousands)~~

Fair Value
Level

Carrying
Amount

Estimated
Fair Value

Carrying
Amount

Estimated
Fair Value

~~Financial assets:~~

~~Cash and cash equivalents~~

~~608,302~~

~~403,855~~

~~Debt securities available-for-sale~~

~~552,898~~

~~248,782~~

~~Debt securities held-to-maturity~~

~~254,041~~

~~256,276~~

~~196,044~~

~~196,755~~

~~Federal Home Loan Bank stock~~

~~13,284~~

~~24,324~~

~~Loans and leases held-for-investment, net~~

~~7,623,740~~

~~7,643,405~~

~~6,563,451~~

~~6,548,432~~

~~Accrued interest receivable~~

~~18,282~~

~~22,326~~

~~Investment management fees receivable, net~~

~~7,627~~

~~7,560~~

~~Bank owned life insurance~~

~~71,342~~

~~70,044~~

~~Other real estate owned~~

~~2,724~~

~~4,250~~

~~Interest rate swaps~~

~~166,153~~

~~55,241~~

~~Financial liabilities:~~

~~Deposits~~

~~8,183,713~~

~~8,208,159~~

~~6,634,613~~

~~6,648,546~~

~~Borrowings, net~~

~~395,439~~

~~397,624~~

~~355,000~~

~~355,003~~

~~Interest rate swaps~~

~~176,480~~

~~57,473~~


		June 30, 2021				December 31, 2020
(Dollars in thousands)	Fair Value Level	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Financial assets:
Cash and cash equivalents	1	$	529,453	$	529,453	$	435,442	$	435,442

Debt securities available-for-sale	2	311,129		311,129		617,570		617,570
Debt securities held-to-maturity	2	1,014,712		1,010,135		211,691		214,299


Federal Home Loan Bank stock	2	11,817		11,817		13,284		13,284

Loans and leases held-for-investment, net	3	9,250,345		9,241,724		8,202,788		8,199,922
Accrued interest receivable	2	19,814		19,814		18,783		18,783
Investment management fees receivable, net	2	8,580		8,580		7,935		7,935
Bank owned life insurance	2	97,695		97,695		71,787		71,787
Other real estate owned	3	2,568		2,568		2,724		2,724
Interest rate swaps	2	109,374		109,374		144,333		144,333


Financial liabilities:
Deposits	2	$	10,191,433	$	10,204,889	$	8,489,089	$	8,510,799
Borrowings, net	2	345,600		354,653		400,493		402,714

Interest rate swaps	2	114,769		114,769		153,433		153,433

During the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, there were no transfers between fair value Levels 1, 2 or 3.

The following methods and assumptions were used to estimate the fair value of each class of financial instruments as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019:~~

~~Table of Contents~~

2020:

CASH AND CASH EQUIVALENTS

The carrying amount approximates fair value.

INVESTMENT SECURITIES

The fair values of debt securities available-for-sale, debt securities held-to-maturity, debt securities trading and equity securities are based on quoted market prices for the same or similar securities, recently executed transactions and pricing models.

FEDERAL HOME LOAN BANK STOCK

The carrying value of our FHLB stock, which is carried at cost, approximates fair value.

LOANS AND LEASES HELD-FOR-INVESTMENT

The fair value of loans and leases held-for-investment is estimated by discounting the future cash flows using market rates (utilizing both unobservable and certain observable inputs when applicable) at which similar loans would be made to borrowers with similar credit ratings over the estimated remaining maturities. Impaired loans are generally valued at the fair value of the associated collateral.

ACCRUED INTEREST RECEIVABLE

The carrying amount approximates fair value.

INVESTMENT MANAGEMENT FEES RECEIVABLE

The carrying amount approximates fair value.

BANK OWNED LIFE INSURANCE

The fair value of ~~the~~ general account BOLI is based on the insurance contract net cash surrender value.

OTHER REAL ESTATE OWNED

OREO is ~~recorded~~carried at fair value less estimated ~~disposition costs, with the fair value being determined by appraisal.~~selling costs.

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DEPOSITS

The fair value of demand deposits is the amount payable on demand as of the reporting date, i.e., their carrying amounts. The fair value of fixed maturity deposits is estimated using a discounted cash flow calculation that applies the rates currently offered for deposits of similar remaining maturities.

BORROWINGS

The fair value of borrowings is calculated by discounting scheduled cash flows through the estimated maturity using period end market rates for borrowings of similar remaining maturities.

INTEREST RATE SWAPS

The fair value of interest rate swaps is estimated through the assistance of an independent third party and compared to the fair value determined by the swap counterparty to establish reasonableness.

OFF-BALANCE SHEET INSTRUMENTS

Fair values for the ~~Company’s~~Company’s off-balance sheet instruments, which consist of ~~unfunded~~ lending commitments, ~~demand lines of credit,~~ standby letters of credit and risk participation agreements related to interest rate swap agreements, are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the ~~counterparties’~~counterparties’ credit standing. Management believes that the fair value of these off-balance sheet instruments is not significant.

~~Table of Contents~~

[12] CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following tables show the changes in accumulated other comprehensive income (loss) net of tax, for the periods presented:

Three Months Ended September 30,
2020 2019
(Dollars in thousands) Debt Securities Derivatives Total Debt Securities Derivatives Total
Balance, beginning of period $ 1,692 $ (8,222) $ (6,530) $ 1,230 $ (1,590) $ (360)
Change in unrealized holding gains (losses) 3,088 27 3,115 787 (736) 51
Losses (gains) reclassified from other comprehensive income (2,835) 780 (2,055) (101) (120) (221)
Net other comprehensive income (loss) 253 807 1,060 686 (856) (170)
Balance, end of period $ 1,945 $ (7,415) $ (5,470) $ 1,916 $ (2,446) $ (530)


		Nine Months Ended September 30,													Three Months Ended June 30,
		2020						2019							2021						2020
(Dollars in thousands)	(Dollars in thousands)	Debt Securities		Derivatives		Total		Debt Securities		Derivatives		Total		(Dollars in thousands)	Debt Securities		Derivatives		Total		Debt Securities		Derivatives		Total
Balance, beginning of period	Balance, beginning of period	$	2,756	$	(1,624)	$	1,132	$	(2,363)	$	1,032	$	(1,331)	Balance, beginning of period	$	2,879	$	(4,206)	$	(1,327)	$	(6,678)	$	(7,371)	$	(14,049)
Change in unrealized holding gains (losses)	Change in unrealized holding gains (losses)	2,041		(7,040)		(4,999)		4,477		(2,506)		1,971		Change in unrealized holding gains (losses)	273		(311)		(38)		8,375		(1,200)		7,175
Losses (gains) reclassified from other comprehensive income	Losses (gains) reclassified from other comprehensive income	(2,852)		1,249		(1,603)		(198)		(972)		(1,170)		Losses (gains) reclassified from other comprehensive income	75		658		733		(5)		349		344

Net other comprehensive income (loss)	Net other comprehensive income (loss)	(811)		(5,791)		(6,602)		4,279		(3,478)		801		Net other comprehensive income (loss)	348		347		695		8,370		(851)		7,519
Balance, end of period	Balance, end of period	$	1,945	$	(7,415)	$	(5,470)	$	1,916	$	(2,446)	$	(530)	Balance, end of period	$	3,227	$	(3,859)	$	(632)	$	1,692	$	(8,222)	$	(6,530)


	Six Months Ended June 30,
	2021						2020
(Dollars in thousands)	Debt Securities		Derivatives		Total		Debt Securities		Derivatives		Total
Balance, beginning of period	$	3,834	$	(6,531)	$	(2,697)	$	2,756	$	(1,624)	$	1,132
Change in unrealized holding gains (losses)	(681)		1,372		691		(1,048)		(7,067)		(8,115)
Losses (gains) reclassified from other comprehensive income	74		1,300		1,374		(16)		469		453


Net other comprehensive income (loss)	(607)		2,672		2,065		(1,064)		(6,598)		(7,662)
Balance, end of period	$	3,227	$	(3,859)	$	(632)	$	1,692	$	(8,222)	$	(6,530)

[13] CONTINGENT LIABILITIES

From time to time the Company is a party to various litigation matters incidental to the conduct of its business. The Company is not aware of any material unasserted claims. In the opinion of management, there are no potential claims that would have a material adverse effect on the ~~Company’s~~Company’s financial position, liquidity or results of operations.

[14] SEGMENTS

The Company operates 2 reportable segments: Bank and Investment Management.

••The Bank segment provides commercial banking services to middle-market businesses and private banking services to high-net-worth individuals through the Bank subsidiary.

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•The Investment Management segment provides advisory and sub-advisory investment management services primarily to institutional investors, mutual funds and individual investors through the Chartwell subsidiary. It also supports marketing efforts for ~~Chartwell’s~~Chartwell’s proprietary investment products through the CTSC Securities subsidiary.

The following tables provide financial information for the 2 segments of the Company as of and for the periods indicated. The information provided under the caption ~~“Parent~~“Parent and ~~Other”~~Other” represents general operating activity of the Company not considered to be a reportable segment, which includes parent company activity as well as eliminations and adjustments that are necessary for purposes of reconciliation to the consolidated amounts.


(Dollars in thousands)	June 30, 2021		December 31, 2020
Assets:
Bank	$	11,461,329	$	9,819,719
Investment management	87,221		86,150
Parent and other	(7,378)		(9,053)
Total assets	$	11,541,172	$	9,896,816

(Dollars in thousands) September 30,
2020 December 31,
2019
Assets:
Bank $ 9,414,706 $ 7,686,981
Investment management 81,582 83,295
Parent and other (2,498) (4,466)
Total assets $ 9,493,790 $ 7,765,810


	Three Months Ended June 30, 2021								Three Months Ended June 30, 2020
(Dollars in thousands)	Bank		Investment Management		Parent and Other		Consolidated		Bank		Investment Management		Parent and Other		Consolidated
Income statement data:
Interest income	$	55,555	$	0	$	0	$	55,555	$	51,661	$	0	$	0	$	51,661
Interest expense	11,199		0		1,444		12,643		17,251		0		926		18,177
Net interest income (loss)	44,356		0		(1,444)		42,912		34,410		0		(926)		33,484
Provision for credit losses	96		0		0		96		6,005		0		0		6,005
Net interest income (loss) after provision for credit losses	44,260		0		(1,444)		42,816		28,405		0		(926)		27,479
Non-interest income:
Investment management fees	0		9,774		(323)		9,451		0		7,897		(159)		7,738
Net gain on the sale and call of debt securities	98		0		0		98		14		0		0		14
Other non-interest income	5,283		12		0		5,295		5,215		30		0		5,245
Total non-interest income (loss)	5,381		9,786		(323)		14,844		5,229		7,927		(159)		12,997
Non-interest expense:
Intangible amortization expense	0		478		0		478		0		486		0		486

Other non-interest expense	25,570		7,826		551		33,947		19,967		7,003		640		27,610
Total non-interest expense	25,570		8,304		551		34,425		19,967		7,489		640		28,096
Income (loss) before tax	24,071		1,482		(2,318)		23,235		13,667		438		(1,725)		12,380
Income tax expense (benefit)	4,565		286		(396)		4,455		2,173		102		(296)		1,979
Net income (loss)	$	19,506	$	1,196	$	(1,922)	$	18,780	$	11,494	$	336	$	(1,429)	$	10,401

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Three Months Ended September 30, 2020 Three Months Ended September 30, 2019
(Dollars in thousands) Bank Investment
Management Parent
and Other Consolidated Bank Investment
Management Parent
and Other Consolidated
Income statement data:
Interest income $ 50,222 $ 0 $ 0 $ 50,222 $ 67,720 $ 0 $ 12 $ 67,732
Interest expense 15,297 0 1,451 16,748 35,455 0 (39) 35,416
Net interest income (loss) 34,925 0 (1,451) 33,474 32,265 0 51 32,316
Provision (credit) for loan and lease losses 7,430 0 0 7,430 (607) 0 0 (607)
Net interest income (loss) after provision for loan and lease losses 27,495 0 (1,451) 26,044 32,872 0 51 32,923
Non-interest income:
Investment management fees 0 8,293 (198) 8,095 0 9,016 (114) 8,902
Net gain on the sale and call of debt securities 3,744 0 0 3,744 206 0 0 206
Other non-interest income 5,027 23 0 5,050 5,113 (9) 31 5,135
Total non-interest income (loss) 8,771 8,316 (198) 16,889 5,319 9,007 (83) 14,243
Non-interest expense:
Intangible amortization expense 0 478 0 478 0 502 0 502
Other non-interest expense 23,462 6,868 619 30,949 18,949 8,186 136 27,271
Total non-interest expense 23,462 7,346 619 31,427 18,949 8,688 136 27,773
Income (loss) before tax 12,804 970 (2,268) 11,506 19,242 319 (168) 19,393
Income tax expense (benefit) 2,357 251 (431) 2,177 3,142 3 (86) 3,059
Net income (loss) $ 10,447 $ 719 $ (1,837) $ 9,329 $ 16,100 $ 316 $ (82) $ 16,334


		Nine Months Ended September 30, 2020								Nine Months Ended September 30, 2019									Six Months Ended June 30, 2021								Six Months Ended June 30, 2020
(Dollars in thousands)	(Dollars in thousands)	Bank		Investment Management		Parent and Other		Consolidated		Bank		Investment Management		Parent and Other		Consolidated		(Dollars in thousands)	Bank		Investment Management		Parent and Other		Consolidated		Bank		Investment Management		Parent and Other		Consolidated
Income statement data:	Income statement data:																	Income statement data:
Interest income	Interest income	$	166,085	$	0	$	0	$	166,085	$	196,862	$	0	$	111	$	196,973	Interest income	$	107,547	$	0	$	0	$	107,547	$	115,863	$	0	$	0	$	115,863
Interest expense	Interest expense	61,844		0		2,361		64,205		101,891		0		1,091		102,982		Interest expense	23,038		0		2,941		25,979		46,547		0		910		47,457
Net interest income (loss)	Net interest income (loss)	104,241		0		(2,361)		101,880		94,971		0		(980)		93,991		Net interest income (loss)	84,509		0		(2,941)		81,568		69,316		0		(910)		68,406
Provision (credit) for loan and lease losses		16,428		0		0		16,428		(1,696)		0		0		(1,696)
Net interest income (loss) after provision for loan and lease losses		87,813		0		(2,361)		85,452		96,667		0		(980)		95,687
Provision for credit losses																		Provision for credit losses	320		0		0		320		8,998		0		0		8,998
Net interest income (loss) after provision for credit losses																		Net interest income (loss) after provision for credit losses	84,189		0		(2,941)		81,248		60,318		0		(910)		59,408
Non-interest income:	Non-interest income:																	Non-interest income:
Investment management fees	Investment management fees	0		23,955		(484)		23,471		0		27,912		(332)		27,580		Investment management fees	0		19,009		(558)		18,451		0		15,662		(286)		15,376
Net gain on the sale and call of debt securities	Net gain on the sale and call of debt securities	3,815		0		0		3,815		346		0		0		346		Net gain on the sale and call of debt securities	97		0		0		97		71		0		0		71
Other non-interest income	Other non-interest income	15,893		23		0		15,916		10,467		17		881		11,365		Other non-interest income	9,915		32		0		9,947		10,866		0		0		10,866
Total non-interest income (loss)	Total non-interest income (loss)	19,708		23,978		(484)		43,202		10,813		27,929		549		39,291		Total non-interest income (loss)	10,012		19,041		(558)		28,495		10,937		15,662		(286)		26,313
Non-interest expense:	Non-interest expense:																	Non-interest expense:
Intangible amortization expense	Intangible amortization expense	0		1,466		0		1,466		0		1,506		0		1,506		Intangible amortization expense	0		956		0		956		0		988		0		988

Other non-interest expense	Other non-interest expense	64,462		20,498		2,242		87,202		56,872		23,174		478		80,524		Other non-interest expense	48,225		15,268		1,254		64,747		41,000		13,630		1,622		56,252
Total non-interest expense	Total non-interest expense	64,462		21,964		2,242		88,668		56,872		24,680		478		82,030		Total non-interest expense	48,225		16,224		1,254		65,703		41,000		14,618		1,622		57,240
Income (loss) before tax	Income (loss) before tax	43,059		2,014		(5,087)		39,986		50,608		3,249		(909)		52,948		Income (loss) before tax	45,976		2,817		(4,753)		44,040		30,255		1,044		(2,818)		28,481
Income tax expense (benefit)	Income tax expense (benefit)	7,878		381		(897)		7,362		6,825		830		(296)		7,359		Income tax expense (benefit)	9,294		596		(830)		9,060		5,521		130		(466)		5,185
Net income (loss)	Net income (loss)	$	35,181	$	1,633	$	(4,190)	$	32,624	$	43,783	$	2,419	$	(613)	$	45,589	Net income (loss)	$	36,682	$	2,221	$	(3,923)	$	34,980	$	24,734	$	914	$	(2,352)	$	23,296

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[15] SUBSEQUENT EVENTS

On October 10, 2020, the Company entered into an Investment Agreement with T-VIII PubOpps LP (“T-VIII PubOpps”), an affiliate of investment funds managed by Stone Point Capital LLC. The Company agreed to issue and sell in a private placement to T-VIII PubOpps (i) 2,770,083 shares of common stock for $40.0 million, (ii) 650 shares of Series C Perpetual Non-Cumulative Convertible Preferred Stock (the “Series C Preferred Stock”) for $65.0 million, and (iii) warrants to purchase up to 922,438 shares of a future series of non-voting common stock or, in certain cases subject to certain voting ownership restrictions, voting common stock at an exercise price of $17.50 per share. The Series C Preferred Stock will have a liquidation preference of $100,000 per share, will pay a quarterly dividend at an annualized rate of 6.75% and, subject to shareholder approval, will be convertible into 4,727,273 shares of common stock of a future series of non-voting common stock or, in certain cases subject to certain voting ownership restrictions, voting common stock. A total of 8,419,794 shares of common stock referenced above will be issued or convertible and included in the computation of earnings per share as contemplated by the transaction. The Company expects to receive gross proceeds of $105.0 million, and up to an additional $16.1 million if the warrants are exercised in full. The closing of the transaction is conditioned on customary closing conditions, including the Pennsylvania Department of Banking and Securities approving the transaction or confirming that no such approval is required. The Company expects to complete the transaction in the fourth quarter of 2020.

~~On October~~July 13, ~~2020,~~2021 the Board declared a dividend payable of approximately $679,000, or $0.42 per depositary share, on the ~~Company’s~~Company’s Series A Preferred Stock and a dividend payable of approximately $1.3 million, or $0.40 per depositary share, on the ~~Company’s~~Company’s Series B Preferred Stock, each of which is payable on ~~January 4,~~October 1, 2021, to preferred shareholders of record as of the close of business on ~~December~~September 15, ~~2020.~~2021. The Board also declared a dividend payable of 11 shares of the Company’s Series C Preferred Stock per share, and cash paid in lieu of a fractional share, which is payable on October 1, 2021, to preferred shareholders of record of the Series C Preferred Stock as of the close of business on September 15, 2021.

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ITEM 2. ~~MANAGEMENT’S~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This section presents ~~management’s~~management’s perspective on our financial condition and results of operations and highlights material changes to our financial condition and results of operations as of and for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021. The following discussion and analysis should be read in conjunction with our unaudited condensed consolidated financial statements and related notes contained in Item 1 of this ~~quarterly report~~Quarterly Report on Form 10-Q and our consolidated financial statements and notes thereto and ~~Management’s~~Management’s Discussion and Analysis of Financial Condition and Results of Operations for the fiscal year ended December 31, ~~2019,~~2020, included in the ~~Company’s~~Company’s Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission (the ~~“SEC”~~“SEC”) on February ~~24, 2020.~~25, 2021.

To the extent that this discussion describes prior performance, the descriptions relate only to the periods listed, which may not be indicative of our future financial outcomes. In addition to historical information, this discussion contains forward-looking statements that involve risks, uncertainties and assumptions that could cause results to differ materially from ~~management’s~~management’s expectations. Factors that could cause such differences are discussed in the sections titled ~~“Cautionary~~“Cautionary Note Regarding Forward-Looking ~~Statements”~~Statements” at the beginning of this document and ~~“Item~~“Item 1A. Risk Factors.””

General

~~We are~~TriState Capital Holdings, Inc. (“we,” “us,” “our,” the “holding company,” the “parent company,” or the “Company”) is a bank holding company that operates through two reportable segments: Bank and Investment Management. Through TriState Capital Bank, a Pennsylvania chartered bank (the ~~“Bank”~~“Bank”), the Bank segment provides commercial banking services to middle-market and financial services businesses and private banking services to high-net-worth individuals and trusts. The Bank segment generates most of its revenue from interest on loans and investments, swap fees, loan fees, and liquidity and treasury management related fees. Its primary source of funding for loans is deposits and its secondary source of funding is borrowings. The ~~Bank’s~~Bank’s largest expenses are interest on these deposits and borrowings, and salaries and related employee benefits. Through Chartwell Investment Partners, LLC, an SEC-registered investment adviser ~~(“Chartwell”~~(“Chartwell”), the Investment Management segment provides advisory and sub-advisory investment management services primarily to institutional investors, mutual funds and individual investors. It also supports marketing efforts for ~~Chartwell’s~~Chartwell’s proprietary investment products through Chartwell TSC Securities Corp., our registered ~~broker/dealer~~broker-dealer subsidiary (“(“CTSC ~~Securities”~~Securities”). The Investment Management segment generates its revenue from investment management fees earned on assets under management, and its largest expenses are salaries and related employee benefits.

This discussion and analysis ~~presents~~present our financial condition and results of operations on a consolidated basis, except where significant segment disclosures are necessary to better explain the operations of each segment and related variances. In particular, the discussion and analysis of non-interest income and non-interest expense is reported by segment.

We measure our performance primarily through our net income available to common shareholders, earnings per common share ~~(“EPS”~~(“EPS”) and total revenue (which is a non-GAAP financial measure). Other salient metrics include the ratio of allowance for ~~loan~~credit losses on loans and ~~lease losses~~leases to ~~loans;~~loans and leases; net interest margin; the efficiency ratio of the Bank ~~segment;~~segment (which is a non-GAAP financial measure); return on average assets; return on average common equity; regulatory leverage and risk-based capital ratios, assets under management and EBITDA of the Investment Management ~~segment.~~segment (which is a non-GAAP financial measure).

Executive Overview

~~TriState Capital Holdings, Inc. (“we,” “us,” “our,” the “holding company,” the “parent company,” or the “Company”) is~~We are a bank holding company headquartered in Pittsburgh, Pennsylvania. The Company has three wholly owned subsidiaries: the Bank, Chartwell and CTSC Securities. Through the Bank, we serve middle-market and financial services businesses in our primary markets throughout the states of Pennsylvania, Ohio, New Jersey and New York. We also serve high-net-worth individuals and trusts on a national basis through our private banking channel. We market and distribute our products and services through a scalable, branchless banking model, which creates significant operating leverage throughout our business as we continue to grow. Through Chartwell, our investment management subsidiary, we provide investment management services primarily to institutional investors, mutual funds and individual investors on a national basis. ~~Chartwell’s~~Chartwell’s assets under management were ~~$9.65~~$11.51 billion as of ~~September~~June 30, ~~2020.~~2021. CTSC Securities, our ~~broker/dealer~~broker-dealer subsidiary, supports marketing efforts for ~~Chartwell’s~~Chartwell’s proprietary investment products ~~that require~~and is regulated by the SEC orand the Financial Industry Regulatory Authority, Inc. ~~(“FINRA”~~(“FINRA”) ~~licensing.~~.

~~Recent Business~~ Developments Related to COVID-19

On October 10, 2020, we entered into an Investment Agreement (the “Investment Agreement”) with T-VIII PubOpps LP (“T-VIII PubOpps”), an affiliate of investment funds managed by Stone Point Capital LLC. The Company agreed to issue and sell in a private placement to T-VIII PubOpps (i) 2,770,083 shares of common stock for $40.0 million, (ii) 650 shares of Series C Perpetual Non-Cumulative Convertible Preferred Stock (the “Series C Preferred Stock”) for $65.0 million (iii) warrants to purchase up to 922,438

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shares of a future series of non-voting common stock or, in certain cases subject to certain voting ownership restrictions, voting common stock at an exercise price of $17.50 per share. The Series C Preferred Stock will have a liquidation preference of $100,000 per share, will pay a quarterly dividend at an annualized rate of 6.75% and, subject to shareholder approval, will be convertible into 4,727,273 shares of common stock of a future series of non-voting common stock or, in certain cases subject to certain voting ownership restrictions, voting common stock. A total of 8,419,794 shares of common stock referenced above will be issued or convertible and included in the computation of earnings per share as contemplated by the transaction. The Company expects to receive gross proceeds of $105.0 million, and up to an additional $16.1 million if the warrants are exercised in full. The closing of the transaction is conditioned on customary closing conditions, including the Pennsylvania Department of Banking and Securities approving the transaction or confirming that no such approval is required. The Company expects to complete the transaction in the fourth quarter of 2020.

~~Developments Related to COVID-19~~

In March 2020, the World Health Organization declared the outbreak of ~~the novel coronavirus (“~~COVID-19~~”) as~~ to be a global pandemic. This public health crisis has resulted in unprecedented uncertainty, volatility and disruption in financial markets and in governmental, commercial and consumer activity in the United States and globally, including the markets that we serve. In ~~responses~~response to the crisis, the Board of Governors of the Federal Reserve (the ~~“Federal Reserve”~~“Federal Reserve”) cut benchmark federal fund interest rates to near zero. In addition, in

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March 2020, the ~~Coronavirus Aid, Relief, and Economic Security (“~~CARES”) Act was enacted. The CARES Act, as well as subsequent economic stimulus legislation, contains substantial tax and spending provisions intended to address the impact of the COVID-19 pandemic.

At the onset of the pandemic, we ~~pro-actively~~continually assessed its impact on our businesses. The impacts to Chartwell and private banking were relatively short-term in nature given the rapid recovery in equity markets. For commercial banking, we proactively conducted outreach to all ~~commercial~~ loan customers to understand the potential impact that COVID-19 could have on their business. ~~Through September 2020, we~~We implemented deferral arrangements with some of these customers in accordance with the CARES Act and bank regulatory ~~guidance that represent about 6%~~guidance. The majority of our ~~loan and lease portfolio. Just under half,~~deferrals have already resumed payment. Only four loans representing $41.0 million, or ~~$223.8 million~~0.4% of ~~these~~total loans, have ~~already started resuming~~not yet resumed payment at June 30, 2021, which was ahead of our previous forecasts. While this crisis may have substantial impact on many businesses, we have maintained our disciplined approach of focusing primarily on commercial lending opportunities within our four-state Mid-Atlantic region and with financial services companies where our team has deep experience and relationships. Additionally, we have worked to keep our commercial loan sizes predominately below our preferred hold level of $10.0 million. The Bank is not a qualified lender or additional lender registered with the Small Business Administration and is not participating in the Paycheck Protection Program, established by the CARES Act. We have also deliberately increased our balance sheet liquidity to provide for potential or unforeseen needs of our clients’ during this public health and economic crisis and increased our allowance for loan and lease losses due to the economic uncertainty surrounding COVID-19.

Performance

For the three months ended ~~September~~June 30, ~~2020,~~2021, our net income available to common shareholders was ~~$7.4~~$15.7 million compared to ~~$14.4~~$8.4 million for the same period in ~~2019~~2020, ~~a decrease~~an increase of ~~$7.0~~$7.3 million, or ~~48.7%~~86.1%. ~~The decrease~~This increase in net income available to common shareholders from the same period in 2020 was due ~~to the following: An~~to: an increase in net interest income of ~~$1.2~~$9.4 million, or ~~3.6%;~~28.2%, an increase in non-interest income of ~~$2.6~~$1.8 million, or ~~18.6%; a decrease~~14.2%, and lower provision for credit losses of ~~$882,000~~$5.9 million. The increase was partially offset by an increase of $6.3 million, or 22.5%, in non-interest expense, an increase of $2.5 million in income tax expense,~~; more than offset by~~ ~~higher provision for loan~~ and ~~lease losses of $8.0 million and~~an increase in preferred stock dividends of ~~$3.7 million, or 13.2%, in non-interest expense.~~$1.1 million.

For the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, our net income available to common shareholders was ~~$26.7~~$28.8 million compared to ~~$41.8~~$19.4 million for the same period in ~~2019~~2020, ~~a decrease~~an increase of ~~$15.1~~$9.5 million, or ~~36.0%~~48.9%. The ~~decrease~~increase in net income available to common shareholders from the same period in 2020 was due to ~~the following: An~~an increase in net interest income of ~~$7.9~~$13.2 million, or ~~8.4%;~~19.2%, an increase in non-interest income of ~~$3.9~~$2.2 million, or ~~10.0%; more than~~8.3%, and lower provision for credit losses of $8.7 million, which were partially offset by ~~higher provision for loan and lease losses of $18.1 million;~~ an increase of ~~$6.6~~$8.5 million, or ~~8.1%~~14.8%, in non-interest ~~expense;~~expense, an increase of $3.9 million in income tax expense, and an increase in preferred stock dividends of ~~$2.1~~$2.2 million.

Our diluted EPS was ~~$0.26~~$0.41 for the three months ended ~~September~~June 30, ~~2020,~~2021, compared to ~~$0.50~~$0.30 for the same period in ~~2019~~2020, an increase of $0.11 per share, or 36.7%~~, and $0.93~~. Our diluted EPS was $0.76 for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021, compared to ~~$1.45~~$0.68 for the same period in ~~2019~~2020, an increase of $0.08 per share, or 11.8%. ~~The decrease~~Results for the three and six months ended June 30, 2021, include a higher number of diluted shares outstanding and an increase in ~~diluted~~preferred dividends compared to 2020 results due to the effect of our December 30, 2020 private placement of $105 million of common stock, convertible preferred stock and warrants. EPS is computed using the two-class method, which is an earnings allocation formula that determines EPS for each class of common stock and participating security according to dividends accumulated or declared and participation rights in undistributed earnings. For more information on the ~~nine months ended September 30, 2020, was a result~~Company’s calculation of ~~a decline in~~EPS, refer to Note 1, Summary of Significant Accounting Policies and Note 9, Earnings per Common Share, to our ~~net income available to common shareholders.~~unaudited condensed consolidated financial statements.

~~For~~Net interest income and non-interest income, excluding net gains and losses on the sale of securities, combined to generate total revenue of $57.7 million for the three months ended ~~September~~June 30, ~~2020~~2021, ~~total revenue increased $266,000, or 0.6%, to $46.6 million~~an increase of 24.1% from ~~$46.4~~$46.5 million for the same period in ~~2019.~~2020. For the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, total revenue increased ~~$8.3~~$15.3 million, or ~~6.3%~~16.2%, to ~~$141.3~~$110.0 million from ~~$132.9~~$94.6 million for the same period in ~~2019.~~2020. The increase in total revenue for the ~~nine~~three and six months ended ~~September~~June 30, ~~2020,~~2021, was driven largely by higher net interest income due to decreased funding costs and ~~swap fees for the Bank, both driven by~~ loan growth ~~partially offset by lower~~and increased investment management ~~fees.~~ fees from Chartwell for both periods.

Our annualized net interest margin was ~~1.46%~~1.63% and ~~1.94%~~1.52% for the three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020, respectively, and ~~1.60%~~1.61% and ~~2.02%~~1.67% for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020, respectively. The ~~decrease~~increase in net interest margin for the three months ended ~~September~~June 30, ~~2020~~2021, was driven by a decrease of ~~174~~34 basis points in the yield on loans, ~~partially~~which was more than offset by a decrease of ~~157~~38 basis points in the cost of interest-bearing liabilities. The decrease in net interest margin for the ~~nine~~six months ended

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~~September~~June 30, ~~2020,~~2021, was driven by a decrease of ~~149~~73 basis points in the yield on loans, which was partially offset by a decrease of ~~135~~72 basis points in the cost of interest-bearing liabilities.

The significant reduction in interest rates by the Federal Reserve in response to the COVID-19 pandemic impacted our interest-earning assets and interest-bearing liabilities. Our loans are predominantly variable rate ~~loans~~loans. Many are indexed to ~~1-month~~one-month LIBOR. At the end of the first quarter 2020, we placed interest rate floors on ~~many~~the majority of ~~these~~our floating rate loans, particularly ~~for~~our private banking loans, and we have continued to implement floors on newly originated loans. As a result, approximately 50% of our total loans have floors that are currently benefiting the Bank compared to their contractual index. While we continue to implement floors

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on most newly originated loans, we have transitioned our pricing strategy to focus on wider spreads to achieve loan yield and implement lower floor rates to manage our interest rate sensitivity. Our deposits are a combination of fixed-rate time deposits and variable rate deposits, many of which are indexed to the Effective ~~Federal Funds Rate~~federal funds rate and others that are priced at the ~~Bank’s~~Bank’s discretion. The majority of the floating rate deposits were initially repriced in March 2020, in line with the Federal Reserve rate reduction. In addition, we intentionally increased our liquid assets for the express purpose of carrying more on balance sheet liquidity in anticipation of clients’ needs during the COVID-19 pandemic. These carrying costs resulted in marginally lower returns based on the interest rate environment.

Our non-interest income is largely comprised of investment management fees for Chartwell, which totaled ~~$8.1~~$9.5 million for the three months ended ~~September~~June 30, ~~2020~~,2021, as compared to ~~$8.9~~$7.7 million for the same period in ~~2019,~~2020, and ~~$23.5~~$18.5 million for the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, as compared to ~~$27.6~~$15.4 million for the same period in ~~2019.~~2020. Assets under management were ~~$9.65~~$11.51 billion as of ~~September~~June 30, ~~2020,~~2021, an increase of ~~$38.0 million~~$2.26 billion from ~~September~~June 30, ~~2019,~~2020, driven by net inflows of ~~$71.0~~$553.0 million ~~partially offset by~~and market ~~depreciation~~appreciation of ~~$33.0 million.~~$1.70 billion. Chartwell’s annual run-rate revenue increased to $39.9 million for the six months ended June 30, 2021, compared to $32.0 million for the same period in 2020. For the three months ended June 30, 2021, investment fees have grown $1.9 million, or 23%, while expenses have grown at almost half this rate at $815,000, or just over 10%, generating significant operating leverage. Similarly, for the six months ended June 30, 2021, investment fees have grown $3.4 million, or 22%, while expenses have grown $1.6 million, or just over 10%.

Another large component of our non-interest income ~~are~~is swap fees at the Bank, which totaled $~~4.0~~3.9 million for the three months ended ~~September~~June 30, ~~2020, as compared to $4.2~~2021, and $3.9 million for the same period in ~~2019, and~~2020. Swap fees totaled $~~12.2~~6.6 million for the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, as compared to $~~7.7~~8.2 million for the same period in ~~2019.~~2020. The ~~increase~~decrease in swap fees for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021, was due to ~~an increase~~a decrease in demand from customers for interest rate protection through swaps given recent movement in the yield curve. Although swap fees have decreased for the six months ended June 30, 2021, we have seen increased demand for interest rate protection through swaps from our private banking clients. The number of ~~customer swap transactions~~swaps executed from ~~both new and existing customers.~~

~~We recorded a $3.7 million net gain on the sale and call of debt securities during~~our private banking clients increased almost 40% for the three months ended ~~September~~June 30, ~~2020,~~2021, as a result of our sales efforts. The average maturity of our back-to-back swap portfolio on both our commercial and private banking executed swaps was approximately eight years for the three months ended June 30, 2021, compared to ~~primarily attributable to~~10 years for the repositioning of a portion of the corporate bond portfolio into government agency securities to take advantage of market appreciation and enhance the overall quality of the investment portfolio. Net gain on the sale and call of debt securities was $206,000same period in ~~the prior year quarter.~~2020.

Our annualized ratio of non-interest expense to average assets was ~~1.31%~~1.27% and ~~1.59%~~1.22% for the three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020, respectively, and ~~1.33%~~1.26% and ~~1.69%~~1.34% for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020, respectively. The ~~Bank’s~~Bank’s efficiency ratio was ~~58.73%~~51.51% and ~~50.70%~~50.39% for the three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020, respectively, and ~~53.66%~~51.07% and ~~53.94%~~51.13% for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020, respectively. The ~~Bank’s~~Bank’s efficiency ratio reflects growth in the ~~Bank’s~~Bank’s total revenue of ~~13.9%~~17.8%, partially offset by the growth in the ~~Bank’s~~Bank’s non-interest expense of ~~13.3%~~17.6% for the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~ 2021. The Bank’s efficiency ratio improved for the six months ended June 30, 2021, despite the increase in non-interest expense of 17.6%, demonstrating that we are making worthwhile investments in the technology and people necessary to drive responsible growth.

Our annualized return on average assets (net income to average total assets) was ~~0.39%~~0.69% and ~~0.94%~~0.45% for the three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020, respectively, and ~~0.49%~~0.67% and ~~0.94%~~0.54% for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020, respectively. Our annualized return on average common equity (net income available to common shareholders to average common equity) was ~~5.56%~~10.37% and ~~11.82%~~6.62% for the three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively, and ~~6.90%~~ 9.73% and ~~11.97%~~7.60% for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020, respectively. ~~Both ratios declined due~~The increase in the annualized return on common equity is a result of the productive deployment of capital that was raised in December 2020. Given the recent deployment of new capital and the significant balance sheet growth, return on average assets will lag the improvement in return on equity until those loans and investments are able to generate income for a ~~reduction in earnings during the three and nine~~ ~~months ended September 30, 2020 compared to the same period in 2019.~~full reporting period.

Our total assets were ~~$9.49~~$11.54 billion as of ~~September~~June 30, ~~2020~~2021, an increase of ~~$1.73~~$1.64 billion, or ~~29.7%~~33.5% on an annualized basis, from December 31, ~~2019~~2020, primarily due to an increase in cash and cash equivalents, growth in our loan and lease portfolio and growth in our investment portfolio. Loans and leases held-for-investment grew by ~~$1.08~~$1.05 billion to ~~$7.65~~$9.28 billion as of ~~September~~June 30, ~~2020~~2021, an annualized increase of ~~21.9%,~~25.6% from December 31, ~~2019~~2020, as a result of growth in our commercial and private banking loan portfolios. Cash and cash equivalents increased ~~$204.4~~$94.0 million, or ~~67.6%~~43.5% on an annualized basis, to ~~$608.3 million due to the previously mentioned intentional increase in liquid assets. Total investment securities increased $351.1 million, or 100.0% on an annualized basis to $820.2~~$529.5 million as of ~~September~~June 30, ~~2020~~2021, from December 31, ~~2019~~2020. Total investment securities increased $495.1 million, or 118.5% on an annualized basis, to $1.34 billion as of June 30, 2021, from December 31, 2020. Total deposits increased ~~$1.55~~$1.70 billion, or ~~31.2%~~40.4% on an annualized basis, to ~~$8.18~~$10.19 billion as of ~~September~~June 30, ~~2020~~2021, from December 31, ~~2019.~~2020. We focus ~~only~~ on high quality loan growth and ~~in the absence of this,~~ we aim to increase our assets through ~~cash and cash equivalents as well as~~ adding to our investment portfolio as part of our strategy to build greater ~~on balance~~on-balance sheet liquidity, funded through our deposits.

Our ratio of adverse rated credits to total loans declined to ~~0.51%~~0.37% at ~~September~~June 30, ~~2020~~2021, from ~~0.53%~~0.62% at December 31, ~~2019~~2020, primarily due to the reduction in criticized assets of .$17.3 million. Our ratio of allowance for ~~loan~~credit losses on loans and ~~lease losses~~leases to loans and leases was ~~0.40%~~0.35% and ~~0.21%~~0.42% as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019~~2020, respectively. We ~~had~~recorded provision ~~expense~~ for ~~loan~~ ~~and lease~~ credit losses of ~~$16.4 million~~$320,000 for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021, primarily due to an increase in general reserves in response to the unprecedented speed of the economic slowdown associated with the COVID-19 pandemic and an increase in specific reserves due to an addition of a non-accrual loan, compared to ~~a credit to provision of~~ $~~1.7~~9.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2019.~~ 2020.

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Our book value per common share increased ~~$0.46~~$0.76 to ~~$17.67~~$18.54 as of ~~September~~June 30, ~~2020~~2021, from ~~$17.21~~$17.78 as of December 31, ~~2019~~2020, largely as a result of an increase in our net income available to common shareholders, which was partially offset by the issuance of restricted stock during the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021.

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~~CECL Implementation~~

The CARES Act provided financial institutions with the option to delay the adoption of Accounting Standards Update No. 2016-13, Financial Instruments-Credit Losses, Topic 326: Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which requires companies to replace the incurred loss accounting method for estimating credit losses with the current expected credit losses (“CECL”) method. Relief from implementation of ASU 2016-13 ends on the earlier of the termination date of the national emergency declaration by the President or December 31, 2020. In response to the unprecedented nature of the COVID-19 pandemic and uncertainty regarding its duration and ultimate impact on economic activity, we elected to delay our implementation of the CECL accounting standard. See “Recent Accounting Pronouncements and Developments” for more information on our decision to delay implementation of CECL. We are preparing to implement the CECL accounting standard on December 31, 2020.

Non-GAAP Financial Measures

We report certain financial information determined by methods other than in accordance with GAAP. These non-GAAP financial measures are ~~“tangible~~“tangible common equity,”” ““tangible book value per common share,”” ~~“tangible~~“tangible assets,~~” “tangible~~” “tangible assets excluding private banking loans,~~” “tangible~~” “tangible common equity ratio,~~” “tangible~~” “tangible common equity ratio excluding private banking loans,~~” “total~~” “total revenue,~~” “pre-tax,~~” “pre-tax, pre-provision net revenue,~~” “efficiency ratio”~~” “efficiency ratio” and ~~“EBITDA.”~~“EBITDA.” These non-GAAP financial measures are supplemental measures that we believe provide management and our investors with a more detailed understanding of our performance, although these measures are not necessarily comparable to similar measures that may be presented by other companies. These disclosures should not be viewed as a substitute for financial measures in accordance with GAAP.

The non-GAAP financial measures presented herein are calculated as follows:

““Tangible common ~~equity”~~equity” is defined as common ~~shareholders’~~shareholders’ equity reduced by intangible assets, including goodwill. We believe this measure is important to management and investors so that they can better understand and assess changes from period to period in common ~~shareholders’~~shareholders’ equity exclusive of changes in intangible assets associated with prior acquisitions. Intangible assets are created when we buy businesses that add relationships and revenue to our Company. Intangible assets have the effect of increasing both equity and assets, while not increasing our tangible equity or tangible assets.

““Tangible book value per common ~~share”~~share” is defined as common ~~shareholders’~~shareholders’ equity reduced by intangible assets, including goodwill, divided by common shares outstanding. We believe this measure is important to many investors who are interested in changes from period to period in book value per common share exclusive of changes in intangible assets associated with prior acquisitions.

““Tangible ~~assets”~~assets” is defined as total assets reduced by intangible assets, including goodwill. We believe this measure is important to many investors who are interested in changes from period to period in total assets exclusive of changes in intangible assets.

““Tangible assets excluding private banking ~~loans”~~loans” is defined as total assets reduced by intangible assets, including goodwill, and private banking loans. We believe this measure is important to many investors who are interested in changes from period to period in total assets exclusive of changes in intangible assets and private banking loans.

““Tangible common equity ~~ratio”~~ratio” is defined as (i) common ~~shareholders’~~shareholders’ equity reduced by intangible assets, including goodwill, divided by (ii) total assets reduced by intangible assets, including goodwill. We believe this measure is important to many investors who are interested in changes from period to period in the ratio of common ~~shareholders’~~shareholders’ equity to total assets exclusive of changes in intangible assets.

““Tangible common equity ratio excluding private banking ~~loans”~~loans” is defined as (i) common ~~shareholders’~~shareholders’ equity reduced by intangible assets, including goodwill, divided by (ii) total assets reduced by intangible assets, including goodwill, and private banking loans. We believe this measure is important to many investors who are interested in changes from period to period in the ratio of common ~~shareholders’~~shareholders’ equity to total assets exclusive of changes in intangible assets and private banking loans.

“Total revenue” is defined as net interest income and total non-interest income, excluding gains and losses on the sale and call of debt securities. We believe adjustments made to our operating revenue allow management and investors to better assess our core operating revenue by removing the volatility that is associated with certain items that are unrelated to our core business.

“Pre-tax, pre-provision net revenue” is defined as net interest income and non-interest income, excluding gains and losses on the sale and call of debt securities and total non-interest expense. We believe this measure is important because it allows management and investors to better assess our performance in relation to our core operating revenue, excluding the volatility that is associated with provision for credit losses on loans and leases and changes in our tax rates and other items that are unrelated to our core business.

“Efficiency ratio” is defined as total non-interest expense divided by our total revenue. We believe this measure allows management and investors to better assess our operating expenses in relation to our core operating revenue, particularly at the Bank.

~~“EBITDA”~~“EBITDA” is defined as net income before interest expense, income tax expense, depreciation expense and intangible amortization expense. We use EBITDA particularly to assess the strength of our investment management business. We believe this measure is important because it allows management and investors to better assess our investment management performance in relation to our core operating earnings by excluding certain non-cash items and the volatility that is associated with certain discrete items that are unrelated to our core business.

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Pre-tax, pre-provision net revenue” is defined as net interest income and non-interest income, excluding gains and losses on the sale and call of debt securities and total non-interest expense. We believe this measure is important because it allows management and investors to better assess our performance in relation to our core operating revenue, excluding the volatility that is associated with provision for loan and lease losses and changes in our tax rates and other items that are unrelated to our core business.

The following tables present the financial measures calculated and presented in accordance with GAAP that are most directly comparable to the non-GAAP financial measures and a reconciliation of the differences between the GAAP financial measures and the non-GAAP financial measures.

~~TRISTATE CAPITAL HOLDINGS, INC.~~

~~NON-GAAP FINANCIAL MEASURES~~ ~~(UNAUDITED)~~


~~(Dollars in thousands, except per share data)~~	September 30, 2020		December 31, 2019
~~Tangible common equity and Tangible book value per common share:~~
~~Common shareholders’ equity~~	$	~~527,121~~	$	~~505,202~~
~~Less: goodwill and intangible assets~~	~~64,389~~		~~65,854~~
~~Tangible common equity (numerator)~~	$	~~462,732~~	$	~~439,348~~
~~Common shares outstanding (denominator)~~	~~29,828,143~~		~~29,355,986~~
~~Tangible book value per common share~~	$	~~15.51~~	$	~~14.97~~


~~(Dollars in thousands)~~	September 30, 2020			December 31, 2019
~~Tangible common equity ratio excluding private banking channel loans:~~
~~Common shareholders' equity~~	$	~~527,121~~		$	~~505,202~~
~~Less: goodwill and intangible assets~~	~~64,389~~			~~65,854~~
~~Tangible common equity (numerator)~~	$	~~462,732~~		$	~~439,348~~
~~Total assets~~	~~9,493,790~~			~~7,765,810~~
~~Less: goodwill and intangible assets~~	~~64,389~~			~~65,854~~
~~Tangible assets~~	$	~~9,429,401~~		$	~~7,699,956~~
~~Tangible common equity ratio~~	~~4.91~~		%	~~5.71~~		%
~~Less: private banking loans~~	~~4,458,767~~			~~3,695,402~~
~~Tangible assets excluding private banking loans (denominator)~~	$	~~4,970,634~~		$	~~4,004,554~~
~~Tangible common equity ratio excluding private banking loans~~	~~9.31~~		%	~~10.97~~		%

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TRISTATE CAPITAL HOLDINGS, INC.

NON-GAAP FINANCIAL MEASURES (UNAUDITED)

Three Months Ended September 30, Nine Months Ended September 30,
(Dollars in thousands) 2020 2019 2020 2019
Total revenue and Pre-tax, pre-provision net revenue:
Net interest income $ 33,474 $ 32,316 $ 101,880 $ 93,991
Total non-interest income 16,889 14,243 43,202 39,291
Less: net gain on the sale and call of debt securities 3,744 206 3,815 346
Total revenue $ 46,619 $ 46,353 $ 141,267 $ 132,936
Less: total non-interest expense 31,427 27,773 88,668 82,030
Pre-tax, pre-provision net revenue $ 15,192 $ 18,580 $ 52,599 $ 50,906


(Dollars in thousands, except per share data)	June 30, 2021		December 31, 2020
Tangible common equity and tangible book value per common share:
Common shareholders’ equity	$	615,225	$	580,002
Less: goodwill and intangible assets	62,955		63,911
Tangible common equity (numerator)	$	552,270	$	516,091
Common shares outstanding (denominator)	33,176,934		32,620,150
Tangible book value per common share	$	16.65	$	15.82


(Dollars in thousands)	June 30, 2021			December 31, 2020
Tangible common equity ratio excluding private banking channel loans:
Common shareholders' equity	$	615,225		$	580,002
Less: goodwill and intangible assets	62,955			63,911
Tangible common equity (numerator)	$	552,270		$	516,091
Total assets	11,541,172			9,896,816
Less: goodwill and intangible assets	62,955			63,911
Tangible assets	$	11,478,217		$	9,832,905
Tangible common equity ratio	4.81		%	5.25		%
Less: private banking loans	5,713,562			4,807,800
Tangible assets excluding private banking loans (denominator)	$	5,764,655		$	5,025,105
Tangible common equity ratio excluding private banking loans	9.58		%	10.27		%

TRISTATE CAPITAL HOLDINGS, INC.

NON-GAAP FINANCIAL MEASURES (UNAUDITED)


	Three Months Ended June 30,				Six Months Ended June 30,
(Dollars in thousands)	2021		2020		2021		2020
Total revenue and pre-tax, pre-provision net revenue:
Net interest income	$	42,912	$	33,484	$	81,568	$	68,406
Total non-interest income	14,844		12,997		28,495		26,313
Less: net gain on the sale and call of debt securities	98		14		97		71
Total revenue	$	57,658	$	46,467	$	109,966	$	94,648
Less: total non-interest expense	34,425		28,096		65,703		57,240
Pre-tax, pre-provision net revenue	$	23,233	$	18,371	$	44,263	$	37,408

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BANK SEGMENT


		Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended June 30,						Six Months Ended June 30,
(Dollars in thousands)	(Dollars in thousands)	2020			2019			2020			2019			(Dollars in thousands)	2021			2020			2021			2020
Bank total revenue:	Bank total revenue:													Bank total revenue:
Net interest income	Net interest income	$	34,925		$	32,265		$	104,241		$	94,971		Net interest income	$	44,356		$	34,410		$	84,509		$	69,316
Total non-interest income	Total non-interest income	8,771			5,319			19,708			10,813			Total non-interest income	5,381			5,229			10,012			10,937
Less: net gain on the sale and call of debt securities	Less: net gain on the sale and call of debt securities	3,744			206			3,815			346			Less: net gain on the sale and call of debt securities	98			14			97			71
Bank total revenue	Bank total revenue	$	39,952		$	37,378		$	120,134		$	105,438		Bank total revenue	$	49,639		$	39,625		$	94,424		$	80,182

Bank efficiency ratio:	Bank efficiency ratio:													Bank efficiency ratio:

Total non-interest expense (numerator)	Total non-interest expense (numerator)	$	23,462		$	18,949		$	64,462		$	56,872		Total non-interest expense (numerator)	$	25,570		$	19,967		$	48,225		$	41,000
Total revenue (denominator)	Total revenue (denominator)	$	39,952		$	37,378		$	120,134		$	105,438		Total revenue (denominator)	$	49,639		$	39,625		$	94,424		$	80,182
Bank efficiency ratio	Bank efficiency ratio	58.73		%	50.70		%	53.66		%	53.94		%	Bank efficiency ratio	51.51		%	50.39		%	51.07		%	51.13		%

INVESTMENT MANAGEMENT SEGMENT


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
(Dollars in thousands)	(Dollars in thousands)	2020		2019		2020		2019		(Dollars in thousands)	2021		2020		2021		2020
Investment Management EBITDA:	Investment Management EBITDA:									Investment Management EBITDA:
Net income	Net income	$	719	$	316	$	1,633	$	2,419	Net income	$	1,196	$	336	$	2,221	$	914
Interest expense	Interest expense	—		—		—		—		Interest expense	—		—		—		—
Income tax expense	Income tax expense	251		3		381		830		Income tax expense	286		102		596		130
Depreciation expense	Depreciation expense	103		111		319		355		Depreciation expense	103		107		206		216
Intangible amortization expense	Intangible amortization expense	478		502		1,466		1,506		Intangible amortization expense	478		486		956		988
EBITDA	EBITDA	$	1,551	$	932	$	3,799	$	5,110	EBITDA	$	2,063	$	1,031	$	3,979	$	2,248

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Results of Operations

Net Interest Income

Net interest income represents the difference between the interest received on interest-earning assets and the interest paid on interest-bearing liabilities. Net interest income is affected by changes in the volume of interest-earning assets and interest-bearing liabilities and changes in interest yields earned and interest rates paid. Net interest income comprised ~~72.1%~~74.2% and ~~70.7%~~72.3% of total revenue for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020, respectively.

The table below reflects an analysis of net interest income, on a fully taxable equivalent basis, for the periods indicated. The adjustment to convert certain income to a fully taxable equivalent basis consists of dividing tax-exempt income by one minus the statutory federal income tax rate of 21% for ~~2020~~2021 and ~~2019~~2020.


		Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended June 30,						Six Months Ended June 30,
(Dollars in thousands)	(Dollars in thousands)	2020			2019			2020			2019			(Dollars in thousands)	2021			2020			2021			2020
Interest income	Interest income	$	50,222		$	67,732		$	166,085		$	196,973		Interest income	$	55,555		$	51,661		$	107,547		$	115,863
Fully taxable equivalent adjustment	Fully taxable equivalent adjustment	15			24			51			79			Fully taxable equivalent adjustment	8			6			15			36
Interest income adjusted	Interest income adjusted	50,237			67,756			166,136			197,052			Interest income adjusted	55,563			51,667			107,562			115,899
Less: interest expense	Less: interest expense	16,748			35,416			64,205			102,982			Less: interest expense	12,643			18,177			25,979			47,457
Net interest income adjusted	Net interest income adjusted	$	33,489		$	32,340		$	101,931		$	94,070		Net interest income adjusted	$	42,920		$	33,490		$	81,583		$	68,442

Yield on earning assets (1) (2)	Yield on earning assets (1) (2)	2.20		%	4.06		%	2.60		%	4.23		%	Yield on earning assets (1) (2)	2.11		%	2.35		%	2.13		%	2.83		%
Cost of interest-bearing liabilities (1)	Cost of interest-bearing liabilities (1)	0.81		%	2.38		%	1.12		%	2.47		%	Cost of interest-bearing liabilities (1)	0.54		%	0.92		%	0.57		%	1.29		%
Net interest spread (1) (2)	Net interest spread (1) (2)	1.39		%	1.68		%	1.48		%	1.76		%	Net interest spread (1) (2)	1.57		%	1.43		%	1.56		%	1.54		%
Net interest margin (1) (2)	Net interest margin (1) (2)	1.46		%	1.94		%	1.60		%	2.02		%	Net interest margin (1) (2)	1.63		%	1.52		%	1.61		%	1.67		%

(1)Annualized.

(2)Calculated on a fully taxable equivalent basis.

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The following table provides information regarding the average balances and yields earned on interest-earning assets and the average balances and rates paid on interest-bearing liabilities for the three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020. Non-accrual loans are included in the calculation of average loan balances, while interest collected on non-accrual loans is recorded as a reduction to principal. Where applicable, interest income and yield are reflected on a fully taxable equivalent basis and have been adjusted based on the statutory federal income tax rate of 21% for ~~2020~~2021 and ~~2019~~2020.

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		Three Months Ended September 30,													Three Months Ended June 30,
		2020						2019							2021						2020
(Dollars in thousands)	(Dollars in thousands)	Average Balance		Interest Income (1)/ Expense		Average Yield/ Rate (2)		Average Balance		Interest Income (1)/ Expense		Average Yield/ Rate (2)		(Dollars in thousands)	Average Balance		Interest Income (1)/ Expense		Average Yield/ Rate (2)		Average Balance		Interest Income (1)/ Expense		Average Yield/ Rate (2)
Assets	Assets													Assets
Interest-earning deposits	Interest-earning deposits	$	866,502	$	278	0.13	%	$	388,274	$	2,144	2.19	%	Interest-earning deposits	$	407,627	$	114	0.11	%	$	1,098,510	$	342	0.13	%
Federal funds sold	Federal funds sold	9,071		2		0.09	%	8,424		44		2.07	%	Federal funds sold	11,502		2		0.07	%	7,883		1		0.05	%
Debt securities available-for-sale	Debt securities available-for-sale	561,378		1,804		1.28	%	262,665		2,085		3.15	%	Debt securities available-for-sale	266,264		886		1.33	%	329,015		2,026		2.48	%
Debt securities held-to-maturity	Debt securities held-to-maturity	262,128		1,701		2.58	%	174,331		1,537		3.50	%	Debt securities held-to-maturity	1,040,658		2,705		1.04	%	292,898		1,616		2.22	%

Equity securities		—		—		—	%	4,720		12		1.01	%

FHLB stock	FHLB stock	13,284		196		5.87	%	10,585		382		14.32	%	FHLB stock	11,776		154		5.25	%	13,269		305		9.24	%
Total loans and leases	Total loans and leases	7,386,265		46,256		2.49	%	5,776,652		61,552		4.23	%	Total loans and leases	8,808,775		51,702		2.35	%	7,094,744		47,377		2.69	%
Total interest-earning assets	Total interest-earning assets	9,098,628		50,237		2.20	%	6,625,651		67,756		4.06	%	Total interest-earning assets	10,546,602		55,563		2.11	%	8,836,319		51,667		2.35	%
Other assets	Other assets	420,887						288,216						Other assets	347,923						408,950
Total assets	Total assets	$	9,519,515					$	6,913,867					Total assets	$	10,894,525					$	9,245,269

Liabilities and Shareholders’ Equity
Liabilities and Shareholders’ Equity														Liabilities and Shareholders’ Equity
Interest-bearing deposits:	Interest-bearing deposits:													Interest-bearing deposits:
Interest-bearing checking accounts	Interest-bearing checking accounts	$	2,866,303	$	3,280	0.46	%	$	1,116,624	$	5,795	2.06	%	Interest-bearing checking accounts	$	3,852,078	$	3,214	0.33	%	$	2,327,513	$	2,719	0.47	%
Money market deposit accounts	Money market deposit accounts	3,811,100		6,944		0.72	%	3,106,186		18,870		2.41	%	Money market deposit accounts	4,316,946		5,636		0.52	%	3,862,068		7,377		0.77	%
Certificates of deposit	Certificates of deposit	1,121,824		3,674		1.30	%	1,462,521		9,449		2.56	%	Certificates of deposit	929,906		1,256		0.54	%	1,389,984		5,857		1.69	%
Borrowings:	Borrowings:													Borrowings:
FHLB borrowings	FHLB borrowings	300,000		1,392		1.85	%	224,130		1,302		2.30	%	FHLB borrowings	250,000		1,082		1.74	%	300,000		1,284		1.72	%

Line of credit borrowings														Line of credit borrowings	—		—		—	%	22,747		260		4.60	%
Subordinated notes payable, net	Subordinated notes payable, net	95,601		1,458		6.07	%	—		—		—	%	Subordinated notes payable, net	95,565		1,455		6.11	%	44,417		680		6.16	%
Total interest-bearing liabilities	Total interest-bearing liabilities	8,194,828		16,748		0.81	%	5,909,461		35,416		2.38	%	Total interest-bearing liabilities	9,444,495		12,643		0.54	%	7,946,729		18,177		0.92	%
Noninterest-bearing deposits	Noninterest-bearing deposits	407,079						268,013						Noninterest-bearing deposits	460,601						417,732
Other liabilities	Other liabilities	274,480						137,934						Other liabilities	203,033						252,303
Shareholders’ equity		643,128						598,459
Total liabilities and shareholders’ equity		$	9,519,515					$	6,913,867
Shareholders’ equity														Shareholders’ equity	786,396						628,505
Total liabilities and shareholders’ equity														Total liabilities and shareholders’ equity	$	10,894,525					$	9,245,269

Net interest income (1)	Net interest income (1)			$	33,489					$	32,340			Net interest income (1)			$	42,920					$	33,490
Net interest spread (1)	Net interest spread (1)					1.39	%					1.68	%	Net interest spread (1)					1.57	%					1.43	%
Net interest margin (1)	Net interest margin (1)					1.46	%					1.94	%	Net interest margin (1)					1.63	%					1.52	%

(1)Calculated on a fully taxable equivalent basis.

(2)Annualized.

Net Interest Income for the Three Months Ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020. Net interest income, calculated on a fully taxable equivalent basis, increased ~~$1.1~~$9.4 million, or ~~3.6%~~28.2%, to ~~$33.5~~$42.9 million for the three months ended ~~September~~June 30, ~~2020,~~2021, from ~~$32.3~~$33.5 million for the same period in ~~2019~~2020. The increase in net interest income for the three months ended ~~September~~June 30, ~~2020,~~2021, was ~~primarily attributable to~~comprised of an increase of $3.9 million, or 7.5%, in interest income and a decrease of ~~$18.7~~$5.5 million, or ~~52.7%~~30.4%, in interest ~~expense, partially offset by a decrease of $17.5 million, or 25.9%, in interest income.~~expense. Net interest margin ~~decreased~~increased to ~~1.46%~~1.63% for the three months ended ~~September~~June 30, ~~2020,~~2021, as compared to ~~1.94%~~1.52% for the same period in ~~2019~~2020, driven by ~~a lower yield on our loan portfolio, partially offset by a~~ lower cost of ~~funds.~~funds and higher volume of loans.

The ~~decrease~~increase in interest income on interest-earning assets was primarily the result of an increase in average total loans, which are our primary earning assets, of $1.71 billion, or 24.2%, partially offset by a decrease of ~~174~~34 basis points in yield on our loans, ~~partially offset by an increase in average total loans, which is our primary earning asset, of $1.61 billion, or 27.9%,~~ for the three months ended ~~September~~June 30, ~~2020,~~2021, compared to the same period in ~~2019~~2020. The most significant ~~factor~~factors driving the yield on our loan portfolio was the impact of the ~~decrease~~decreases to the Federal ~~Reserve’s~~Reserve’s target federal funds rate in 2020 on our floating-rate loans as well as increased ~~on balance~~on-balance sheet liquidity. The change in yield is also attributable to our lower-risk, lower-yielding ~~marketable-securities-backed~~marketable-securities-

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backed private banking loans and commercial loans. The overall yield on interest-earning assets declined ~~186~~24 basis points to ~~2.20%~~2.11% for the three months ended ~~September~~June 30, ~~2020,~~2021, as compared to ~~4.06%~~2.35% for the same period in ~~2019~~2020, primarily due to the lower yield on loans.

The decrease in interest expense on interest-bearing liabilities was primarily the result of a decrease of ~~157~~38 basis points in the average rate paid on our interest-bearing ~~liabilities.~~liabilities, partially offset by an increase of ~~$2.29~~$1.50 billion, or ~~38.7%~~18.8%, in average interest-bearing liabilities for the three months ended ~~September~~June 30, ~~2020,~~2021, compared to the same period in ~~2019~~2020. The decrease in the average rate paid

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on our interest-bearing liabilities reflected decreases in rates paid in all deposit categories, ~~and FHLB borrowings,~~ which was largely driven by the ~~recent decrease~~decreases of the Federal ~~Reserve’s~~Reserve’s target ~~Federal Funds Rate,~~federal funds rate in 2020, which impacted our variable-rate liabilities. The change in yield is also a result of our increased ~~on balance~~on-balance sheet liquidity. The increase in average interest-bearing liabilities was driven primarily by an increase of ~~$1.75~~$1.52 billion in average interest-bearing checking accounts and an increase of ~~$704.9~~$454.9 million in average money market deposit accounts, partially offset by a decrease of ~~$340.7~~$460.1 million in average certificates of deposits. The ongoing success of our treasury management business contributed to our growth in our checking account deposit categories.

The following table analyzes the dollar amount of the changes in interest income and interest expense with respect to the primary components of interest-earning assets and interest-bearing liabilities. The table shows the amount of the change in interest income or interest expense caused by either changes in outstanding balances or changes in interest rates for the three months ended ~~September~~June 30, ~~2020,~~2021, compared to the same period in ~~2019~~2020. The effect of a change in balances is measured by applying the average rate during the first period to the balance ~~(“volume”~~(“volume”) change between the two periods. The effect of changes in interest rate is measured by applying the change in rate between the two periods to the average volume during the first period.


		Three Months Ended September 30,							Three Months Ended June 30,
		2020 over 2019							2021 over 2020
(Dollars in thousands)	(Dollars in thousands)	Yield/Rate		Volume		Change(1)		(Dollars in thousands)	Yield/Rate		Volume		Change(1)
Increase (decrease) in:	Increase (decrease) in:							Increase (decrease) in:
Interest income:	Interest income:							Interest income:
Interest-earning deposits	Interest-earning deposits	$	(3,097)	$	1,231	$	(1,866)	Interest-earning deposits	$	(32)	$	(196)	$	(228)
Federal funds sold	Federal funds sold	(45)		3		(42)		Federal funds sold	—		1		1
Debt securities available-for-sale	Debt securities available-for-sale	(1,726)		1,445		(281)		Debt securities available-for-sale	(806)		(334)		(1,140)
Debt securities held-to-maturity	Debt securities held-to-maturity	(476)		640		164		Debt securities held-to-maturity	(1,229)		2,318		1,089

Equity securities		—		(12)		(12)

FHLB stock	FHLB stock	(266)		80		(186)		FHLB stock	(120)		(31)		(151)
Total loans	Total loans	(29,595)		14,299		(15,296)		Total loans	(6,198)		10,523		4,325
Total decrease in interest income		(35,205)		17,686		(17,519)
Total increase (decrease) in interest income								Total increase (decrease) in interest income	(8,385)		12,281		3,896

Interest expense:	Interest expense:							Interest expense:
Interest-bearing deposits:	Interest-bearing deposits:							Interest-bearing deposits:
Interest-bearing checking accounts	Interest-bearing checking accounts	(6,869)		4,354		(2,515)		Interest-bearing checking accounts	(932)		1,427		495
Money market deposit accounts	Money market deposit accounts	(15,474)		3,548		(11,926)		Money market deposit accounts	(2,535)		794		(1,741)
Certificates of deposit	Certificates of deposit	(3,922)		(1,853)		(5,775)		Certificates of deposit	(3,094)		(1,507)		(4,601)
Borrowings:	Borrowings:							Borrowings:
FHLB borrowings	FHLB borrowings	(295)		385		90		FHLB borrowings	14		(216)		(202)

Line of credit borrowings								Line of credit borrowings	—		(260)		(260)
Subordinated notes payable, net	Subordinated notes payable, net	—		1,458		1,458		Subordinated notes payable, net	(4)		779		775
Total decrease in interest expense		(26,560)		7,892		(18,668)
Total increase (decrease) in interest expense								Total increase (decrease) in interest expense	(6,551)		1,017		(5,534)
Total increase (decrease) in net interest income	Total increase (decrease) in net interest income	$	(8,645)	$	9,794	$	1,149	Total increase (decrease) in net interest income	$	(1,834)	$	11,264	$	9,430

(1)The change in interest income and interest expense due to changes in both composition and applicable yields/rates has been allocated to volume and rate changes in proportion to the relationship of the absolute dollar amounts of the change in each.

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The following table provides information regarding the average balances and yields earned on interest-earning assets and the average balances and rates paid on interest-bearing liabilities for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020. Non-accrual loans are included in the calculation of average loan balances, while interest payments collected on non-accrual loans are recorded as a reduction to principal. Where applicable, interest income and yield are reflected on a fully taxable equivalent basis and have been adjusted based on the statutory federal income tax rate of 21% for ~~2020~~2021 and ~~2019.~~2020.

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		Nine Months Ended September 30,													Six Months Ended June 30,
		2020						2019							2021						2020
(Dollars in thousands)	(Dollars in thousands)	Average Balance		Interest Income (1)/ Expense		Average Yield/ Rate (2)		Average Balance		Interest Income (1)/ Expense		Average Yield/ Rate (2)		(Dollars in thousands)	Average Balance		Interest Income (1)/ Expense		Average Yield/ Rate (2)		Average Balance		Interest Income (1)/ Expense		Average Yield/ Rate (2)
Assets	Assets													Assets
Interest-earning deposits	Interest-earning deposits	$	809,978	$	1,983	0.33	%	$	282,828	$	4,942	2.34	%	Interest-earning deposits	$	481,119	$	272	0.11	%	$	781,406	$	1,705	0.44	%
Federal funds sold	Federal funds sold	8,022		23		0.38	%	9,412		142		2.02	%	Federal funds sold	11,032		4		0.07	%	7,491		21		0.56	%
Debt securities available-for-sale	Debt securities available-for-sale	391,377		5,874		2.00	%	249,490		6,125		3.28	%	Debt securities available-for-sale	307,322		1,456		0.96	%	305,442		4,070		2.68	%
Debt securities held-to-maturity	Debt securities held-to-maturity	252,296		4,805		2.54	%	189,083		5,267		3.72	%	Debt securities held-to-maturity	840,302		4,605		1.11	%	247,326		3,104		2.52	%
Debt securities trading	Debt securities trading	76		1		1.76	%	—		—		—	%	Debt securities trading	156		1		1.29	%	115		1		1.75	%
Equity securities		—		—		—	%	8,363		112		1.79	%

FHLB stock	FHLB stock	15,569		899		7.71	%	17,069		1,072		8.40	%	FHLB stock	11,664		336		5.81	%	16,724		703		8.45	%
Total loans and leases	Total loans and leases	7,052,457		152,551		2.89	%	5,474,522		179,392		4.38	%	Total loans and leases	8,543,889		100,888		2.38	%	6,883,718		106,295		3.11	%
Total interest-earning assets	Total interest-earning assets	8,529,775		166,136		2.60	%	6,230,767		197,052		4.23	%	Total interest-earning assets	10,195,484		107,562		2.13	%	8,242,222		115,899		2.83	%
Other assets	Other assets	380,908						266,059						Other assets	361,594						360,699
Total assets	Total assets	$	8,910,683					$	6,496,826					Total assets	$	10,557,078					$	8,602,921

Liabilities and Shareholders’ Equity
Liabilities and Shareholders’ Equity														Liabilities and Shareholders’ Equity
Interest-bearing deposits:	Interest-bearing deposits:													Interest-bearing deposits:
Interest-bearing checking accounts	Interest-bearing checking accounts	$	2,224,827	$	11,213	0.67	%	$	927,198	$	15,303	2.21	%	Interest-bearing checking accounts	$	3,461,202	$	6,008	0.35	%	$	1,900,563	$	7,933	0.84	%
Money market deposit accounts	Money market deposit accounts	3,740,968		28,975		1.03	%	2,883,009		53,608		2.49	%	Money market deposit accounts	4,331,121		11,600		0.54	%	3,705,517		22,031		1.20	%
Certificates of deposit	Certificates of deposit	1,297,637		16,907		1.74	%	1,375,324		26,691		2.59	%	Certificates of deposit	971,155		3,252		0.68	%	1,386,510		13,233		1.92	%
Borrowings:	Borrowings:													Borrowings:
FHLB borrowings	FHLB borrowings	340,493		4,711		1.85	%	370,550		6,222		2.24	%	FHLB borrowings	251,933		2,154		1.72	%	360,962		3,319		1.85	%
Line of credit borrowings	Line of credit borrowings	8,047		261		4.33	%	1,650		68		5.51	%	Line of credit borrowings	2,282		55		4.86	%	12,115		261		4.33	%
Subordinated notes payable, net	Subordinated notes payable, net	46,851		2,138		6.10	%	23,178		1,090		6.29	%	Subordinated notes payable, net	95,538		2,910		6.14	%	22,208		680		6.16	%
Total interest-bearing liabilities	Total interest-bearing liabilities	7,658,823		64,205		1.12	%	5,580,909		102,982		2.47	%	Total interest-bearing liabilities	9,113,231		25,979		0.57	%	7,387,875		47,457		1.29	%
Noninterest-bearing deposits	Noninterest-bearing deposits	391,689						262,056						Noninterest-bearing deposits	442,668						383,909
Other liabilities	Other liabilities	226,838						113,331						Other liabilities	225,223						202,755
Shareholders’ equity		633,333						540,530
Total liabilities and shareholders’ equity		$	8,910,683					$	6,496,826
Shareholders’ equity														Shareholders’ equity	775,956						628,382
Total liabilities and shareholders’ equity														Total liabilities and shareholders’ equity	$	10,557,078					$	8,602,921

Net interest income (1)	Net interest income (1)			$	101,931					$	94,070			Net interest income (1)			$	81,583					$	68,442
Net interest spread (1)	Net interest spread (1)					1.48	%					1.76	%	Net interest spread (1)					1.56	%					1.54	%
Net interest margin (1)	Net interest margin (1)					1.60	%					2.02	%	Net interest margin (1)					1.61	%					1.67	%

(1)Calculated on a fully taxable equivalent basis.

(2)Annualized.

Net Interest Income for the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020. Net interest income, calculated on a fully taxable equivalent basis, increased ~~$7.9~~$13.1 million, or ~~8.4%~~19.2%, to ~~$101.9~~$81.6 million for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021, from ~~$94.1~~$68.4 million for the same period in ~~2019~~2020. This increase in net interest income for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 was ~~primarily attributable to~~comprised of a decrease of ~~$38.8~~$8.3 million, or ~~37.7%~~7.2%, in interest ~~expense, partially~~income, which was more than offset by a decrease of ~~$30.9~~$21.5 million, or ~~15.7%~~45.3%, in interest ~~income.~~expense. Net interest margin was ~~1.60%~~1.61% for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021, compared to ~~2.02%~~1.67% for the same period in ~~2019~~2020, driven by a lower yield on our loan portfolio, partially offset by a lower cost of funds. Our compressed net interest margin for the six months ended June 30, 2021, resulted from the Federal Reserve interest rate cuts in 2020 and higher average balances of lower-earning assets.

The decrease in interest income on interest-earning assets was primarily the result of an increase in average total loans, which are our primary earning assets, of $1.66 billion, or 24.1%, more than offset by a decrease of ~~149~~73 basis points in yield on our loans, ~~partially offset by an increase in average total loans, which is our primary earning assets, of $1.58 billion, or 28.8%~~ for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021, compared to the same period in ~~2019~~2020. The most significant factor driving the yield on our loan portfolio was the impact of the ~~decrease~~decreases to the Federal ~~Reserve’s~~Reserve’s target federal funds rate in 2020 on our floating-rate ~~loans as well as increased on balance sheet liquidity.~~ loans. The change in

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yield is also attributable to an increased portion of our portfolio comprised of our lower-risk, lower-yielding ~~marketable-securities-backed~~marketable securities backed private banking ~~loans and commercial~~ loans. The overall yield on interest-earning assets declined ~~163~~70 basis points to ~~2.60%~~2.13% for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021, as compared to ~~4.23%~~2.83% for the same period in ~~2019~~2020, primarily due to the lower loan yields. Our loans are predominantly variable rate loans indexed to one-month LIBOR.

~~Table of Contents~~

The decrease in interest expense on interest-bearing liabilities was primarily the result of a decrease of ~~135~~72 basis points in the average rate paid on our interest-bearing liabilities, partially offset by an increase of ~~$2.08~~$1.73 billion, or ~~37.2%~~23.4%, in average interest-bearing liabilities for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021, compared to the same period in ~~2019~~2020. The decrease in average rate paid on our interest-bearing liabilities reflected decreases in rates paid in all deposit categories and ~~borrowing categories,~~our FHLB borrowings, which was largely driven by the impact of the ~~recent decrease~~decreases to the Federal ~~Reserve’s~~Reserve’s target ~~federal~~Federal funds rate in 2020 on our variable-rate liabilities. The change in ~~yield~~expense is also a result of our increased ~~on balance~~on-balance sheet liquidity. The increase in average interest-bearing liabilities was driven primarily by an increase of ~~$1.30~~$1.56 billion in average interest-bearing checking accounts and an increase of ~~$858.0~~$625.6 million in average money market deposit accounts, partially offset by a decrease of ~~$77.7~~$415.4 million in average certificates of deposit.

The following table analyzes the dollar amount of the changes in interest income and interest expense with respect to the primary components of interest-earning assets and interest-bearing liabilities. The table shows the amount of the change in interest income or interest expense caused by either changes in outstanding balances or changes in interest rates for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021, compared to the same period in ~~2019~~2020. The effect of a change in balances is measured by applying the average rate during the first period to the balance ~~(“volume”~~(“volume”) change between the two periods. The effect of changes in interest rate is measured by applying the change in rate between the two periods to the average volume during the first period.


		Nine Months Ended September 30,							Six Months Ended June 30,
		2020 over 2019							2021 over 2020
(Dollars in thousands)	(Dollars in thousands)	Yield/Rate		Volume		Change(1)		(Dollars in thousands)	Yield/Rate		Volume		Change(1)
Increase (decrease) in:	Increase (decrease) in:							Increase (decrease) in:
Interest income:	Interest income:							Interest income:
Interest-earning deposits	Interest-earning deposits	$	(6,774)	$	3,815	$	(2,959)	Interest-earning deposits	$	(943)	$	(490)	$	(1,433)
Federal funds sold	Federal funds sold	(101)		(18)		(119)		Federal funds sold	(24)		7		(17)
Debt securities available-for-sale	Debt securities available-for-sale	(2,950)		2,699		(251)		Debt securities available-for-sale	(2,639)		25		(2,614)
Debt securities held-to-maturity	Debt securities held-to-maturity	(1,951)		1,489		(462)		Debt securities held-to-maturity	(2,522)		4,023		1,501
Debt securities trading		—		1		1
Equity securities		—		(112)		(112)

FHLB stock	FHLB stock	(85)		(88)		(173)		FHLB stock	(186)		(181)		(367)
Total loans	Total loans	(70,917)		44,076		(26,841)		Total loans	(27,595)		22,188		(5,407)
Total increase (decrease) in interest income	Total increase (decrease) in interest income	(82,778)		51,862		(30,916)		Total increase (decrease) in interest income	(33,909)		25,572		(8,337)

Interest expense:	Interest expense:							Interest expense:
Interest-bearing deposits:	Interest-bearing deposits:							Interest-bearing deposits:
Interest-bearing checking accounts	Interest-bearing checking accounts	(15,633)		11,543		(4,090)		Interest-bearing checking accounts	(6,172)		4,247		(1,925)
Money market deposit accounts	Money market deposit accounts	(37,553)		12,920		(24,633)		Money market deposit accounts	(13,624)		3,193		(10,431)
Certificates of deposit	Certificates of deposit	(8,358)		(1,426)		(9,784)		Certificates of deposit	(6,823)		(3,158)		(9,981)
Borrowings:	Borrowings:							Borrowings:
FHLB borrowings	FHLB borrowings	(1,040)		(471)		(1,511)		FHLB borrowings	(206)		(959)		(1,165)
Line of credit borrowings	Line of credit borrowings	(18)		211		193		Line of credit borrowings	29		(235)		(206)
Subordinated notes payable, net	Subordinated notes payable, net	(37)		1,085		1,048		Subordinated notes payable, net	—		2,230		2,230
Total increase (decrease) in interest expense	Total increase (decrease) in interest expense	(62,639)		23,862		(38,777)		Total increase (decrease) in interest expense	(26,796)		5,318		(21,478)
Total increase (decrease) in net interest income	Total increase (decrease) in net interest income	$	(20,139)	$	28,000	$	7,861	Total increase (decrease) in net interest income	$	(7,113)	$	20,254	$	13,141

Provision for ~~Loan~~Credit Losses on Loans and ~~Lease Losses~~Leases

The provision for ~~loan~~credit losses on loans and ~~lease losses represents~~leases represent our determination of the amount necessary to be recorded against the current ~~period’s~~period’s earnings to maintain the allowance for ~~loan and lease losses~~credit loss at a level that is ~~considered adequate in relation to the estimated~~consistent with management’s assessment of credit losses ~~inherent~~ in the loan and lease ~~portfolio.~~ portfolio at a specific point in time under the methodology required by CECL. Results for the three and six months ended June 30, 2021, are presented under CECL methodology while prior period amounts continue to be reported in accordance with previously applicable GAAP. For additional information regarding our allowance for ~~loan~~credit losses on loans and ~~lease losses,~~leases, see ~~“Allowance~~“Allowance for ~~Loan~~Credit Losses on Loans and ~~Lease Losses.”~~Leases.”

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Provision for Loan and Lease Losses for the Three Months Ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020. We recorded provision expense for loan and lease losses of ~~$7.4~~$186,000 for the three months ended June 30, 2021, compared to provision expense of $6.0 million for the three months ended ~~September~~June 30, ~~2020, compared to a credit to provision of $607,000 for the three months ended September 30, 2019.~~2020. The provision expense for loan and lease losses for the three months ended ~~September~~June 30, 2021, was comprised of a net decrease in general reserves of $857,000 largely due to adjustments to the qualitative risk factors related to consensus forecasts of an economic recovery and reductions in modeled losses, and a decrease in specific reserves on non-performing loans of $1.3 million, more than offset by charge-offs in our commercial real estate portfolio of $2.4 million, all of which were previously reserved. The provision expense for loan and lease losses for the three months ended June 30, 2020, was comprised of a net increase in general reserves of ~~$6.9 million largely due to adjustments to the qualitative risk factors~~

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in response to economic uncertainty around the COVID-19 pandemic and a net increase of $504,000 in specific reserves that was primarily attributable to a non-performing loan in our commercial loan portfolio. The credit to provision for loan and lease losses for the three months ended September 30, 2019, was comprised of a net decrease of $455,000 in specific reserves on non-performing loans in our private banking portfolio, largely driven by a residential mortgage loan that moved to other real estate owned (“OREO”), a decrease of $187,000 in general reserves due to improved credit loss history, increased loan growth and recoveries of $77,000 in our commercial and industrial portfolio partially offset by charge-offs of $112,000 in our private banking portfolio.

~~Provision for Loan and Lease Losses for the~~ ~~Nine Months Ended September 30, 2020~~ ~~and~~ ~~2019~~. ~~We recorded provision expense for loan and lease losses of $16.4 million for the~~ ~~nine months ended September 30, 2020, compared to a provision credit of $1.7 million for the nine months ended September 30, 2019. The provision expense for loan and lease losses for the~~ ~~nine months ended September 30, 2020, was comprised of an increase in general reserves of $15.3~~$5.0 million largely due to adjustments to the qualitative risk factors in response to economic uncertainty around the COVID-19 pandemic and a net increase of ~~$1.5~~$1.0 million in specific reserves on non-performing loans, largely driven by a new non-accrual loan in our commercial loan portfolio.

Provision for Credit Losses on Loans and Leases for the Six Months Ended June 30, 2021 and 2020. We recorded provision expense for loan and lease losses of $399,000 for the six months ended June 30, 2021, compared to $9.0 million for the six months ended June 30, 2020. The provision expense for credit losses on loans and leases for the six months ended June 30, 2021, was comprised of a net decrease in general reserves of $5.8 million largely due to adjustments to the qualitative risk factors related to consensus forecasts of an economic recovery and reductions in modeled losses, partially offset by an increase of $3.6 million in specific reserves on non-performing loans, largely driven by two new non-accrual loans and charge-offs of $2.6 million, all in our commercial loan portfolio, most of which was previously reserved. The provision expense for loan and lease losses for the six months ended June 30, 2020, was comprised of an increase in general reserves of $8.3 million largely due to adjustments to the qualitative risk factors in response to economic uncertainty around the COVID-19 pandemic, in addition to a net increase of $1.0 million in specific reserves on non-performing loans, largely driven by a new non-accrual loan in our commercial loan portfolio, which were partially offset by recoveries of $342,000 in our commercial ~~loan~~and industrial portfolio. The credit to provision for loan and lease losses for the nine months ended September 30, 2019, was comprised of recoveries of $2.0 million in our commercial loan portfolio, a net decrease of $266,000 in specific reserves primarily due to paydowns on these non-performing loans and a residential mortgage loan that moved to OREO, partially offset by a net increase in general reserves of $432,000 and charge-offs of $112,000.

Non-Interest Income

Non-interest income is an important component of our total revenue and is comprised ~~primarily~~largely of investment management fees from Chartwell coupled with fees generated from loan and deposit relationships with our Bank customers, including swap transactions. The information provided in the table below under the caption ~~“Parent~~“Parent and ~~Other”~~Other” represents general operating activity of the Company not considered to be a reportable segment, which includes parent company activity as well as eliminations and adjustments that are necessary for purposes of reconciliation to the consolidated amounts.

The following table presents the components of our non-interest income by operating segment for the three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020:


		Three Months Ended September 30, 2020								Three Months Ended September 30, 2019									Three Months Ended June 30, 2021								Three Months Ended June 30, 2020
				Investment		Parent						Investment		Parent							Investment		Parent						Investment		Parent
(Dollars in thousands)	(Dollars in thousands)	Bank		Management		and Other		Consolidated		Bank		Management		and Other		Consolidated		(Dollars in thousands)	Bank		Management		and Other		Consolidated		Bank		Management		and Other		Consolidated
Investment management fees	Investment management fees	$	—	$	8,293	$	(198)	$	8,095	$	—	$	9,016	$	(114)	$	8,902	Investment management fees	$	—	$	9,774	$	(323)	$	9,451	$	—	$	7,897	$	(159)	$	7,738
Service charges on deposits	Service charges on deposits	235		—		—		235		129		—		—		129		Service charges on deposits	325		—		—		325		315		—		—		315
Net gain on the sale and call of debt securities	Net gain on the sale and call of debt securities	3,744		—		—		3,744		206		—		—		206		Net gain on the sale and call of debt securities	98		—		—		98		14		—		—		14
Swap fees	Swap fees	3,953		—		—		3,953		4,171		—		—		4,171		Swap fees	3,913		—		—		3,913		3,853		—		—		3,853
Commitment and other loan fees	Commitment and other loan fees	381		—		—		381		464		—		—		464		Commitment and other loan fees	564		—		—		564		462		—		—		462
Bank owned life insurance income																		Bank owned life insurance income	480		—		—		480		429		—		—		429
Other income (1)	Other income (1)	458		23		—		481		349		(9)		31		371		Other income (1)	1		12		—		13		156		30		—		186
Total non-interest income	Total non-interest income	$	8,771	$	8,316	$	(198)	$	16,889	$	5,319	$	9,007	$	(83)	$	14,243	Total non-interest income	$	5,381	$	9,786	$	(323)	$	14,844	$	5,229	$	7,927	$	(159)	$	12,997

(1)Other income is largely ~~includes~~comprised of items such as ~~income from bank owned life insurance (“BOLI”),~~ change in fair value on swaps and equity securities, gains on the sale of loans or OREO, and other general operating income.

Non-Interest Income for the Three Months Ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020. Our non-interest income was ~~$16.9~~$14.8 million for the three months ended ~~September~~June 30, ~~2020,~~2021, an increase of ~~$2.6~~$1.8 million, or ~~18.6%~~14.2%, from ~~$14.2~~$13.0 million for the same period in ~~2019~~2020. This increase was primarily related to an increase in ~~the net gain on the sale~~investment management fees and ~~call of debt securities,~~commitment and other loan fees, partially offset by lower ~~investment management fees,~~other income, as follows:

~~Bank Segment:~~

•~~Net gain on the sale and call of debt securities increased for the three months ended September 30, 2020 compared to the same period in~~ ~~2019~~, due to the repositioning of a portion of the corporate bond portfolio into government agency securities to take advantage of market appreciation and enhance the overall credit quality of the investment portfolio.

~~Investment Management Segment:~~

•Investment management fees decreased $723,000 for the three months ended September 30, 2020, compared to the same period in 2019, due to a lower weighted fee rate of 0.35% for the three months ended September 30, 2020, compared to

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Bank Segment:

~~0.38%~~

•Commitment and other loan fees for the three months ended ~~September~~June 30, ~~2019. The lower fee rate was a result of a shift~~2021 increased $102,000 compared to the same period in ~~the asset composition across investment products~~2020, primarily due to ~~asset class market returns and continued client investment~~an increase in ~~fixed~~letter of credit fee income.

•Other income ~~strategies~~for the three months ended June 30, 2021 decreased $155,000 compared to the same period in 2020, primarily due to ~~economic uncertainty. Assets~~a prior year net gain on the sale of OREO.

Investment Management Segment:

•Investment management fees increased $1.9 million for the three months ended June 30, 2021, compared to the same period in 2020, due to higher assets under management ~~were $9.65~~of $11.51 billion as of ~~September~~June 30, ~~2020,~~2021, an increase of ~~$38.0 million~~$2.26 billion from ~~September~~June 30, ~~2019,~~2020. The increase was driven by net inflows of ~~$71.0~~$553.0 million ~~partially offset by~~and market ~~depreciation~~appreciation of ~~$33.0 million.~~$1.70 billion. The weighted average fee rate was 0.35% for the three months ended June 30, 2021 and 2020.

The following table presents the components of our non-interest income by operating segment for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020:


		Nine Months Ended September 30, 2020								Nine Months Ended September 30, 2019									Six Months Ended June 30, 2021								Six Months Ended June 30, 2020
				Investment		Parent						Investment		Parent							Investment		Parent						Investment		Parent
(Dollars in thousands)	(Dollars in thousands)	Bank		Management		and Other		Consolidated		Bank		Management		and Other		Consolidated		(Dollars in thousands)	Bank		Management		and Other		Consolidated		Bank		Management		and Other		Consolidated
Investment management fees	Investment management fees	$	—	$	23,955	$	(484)	$	23,471	$	—	$	27,912	$	(332)	$	27,580	Investment management fees	$	—	$	19,009	$	(558)	$	18,451	$	—	$	15,662	$	(286)	$	15,376
Service charges on deposits	Service charges on deposits	763		—		—		763		343		—		—		343		Service charges on deposits	641		—		—		641		528		—		—		528
Net gain on the sale and call of debt securities	Net gain on the sale and call of debt securities	3,815		—		—		3,815		346		—		—		346		Net gain on the sale and call of debt securities	97		—		—		97		71		—		—		71
Swap fees	Swap fees	12,179		—		—		12,179		7,666		—		—		7,666		Swap fees	6,624		—		—		6,624		8,226		—		—		8,226
Commitment and other loan fees	Commitment and other loan fees	1,262		—		—		1,262		1,251		—		—		1,251		Commitment and other loan fees	890		—		—		890		881		—		—		881
Bank owned life insurance income																		Bank owned life insurance income	909		—		—		909		857		—		—		857
Other income (1)	Other income (1)	1,689		23		—		1,712		1,207		17		881		2,105		Other income (1)	851		32		—		883		374		—		—		374
Total non-interest income	Total non-interest income	$	19,708	$	23,978	$	(484)	$	43,202	$	10,813	$	27,929	$	549	$	39,291	Total non-interest income	$	10,012	$	19,041	$	(558)	$	28,495	$	10,937	$	15,662	$	(286)	$	26,313

(1)Other income is largely ~~includes~~comprised of items such as ~~income from BOLI,~~ change in fair value on swaps, ~~and equity securities,~~ gains on the sale of loans or OREO, and other general operating income.

Non-Interest Income for the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020. Our non-interest income was ~~$43.2~~$28.5 million for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021, an increase of ~~$3.9~~$2.2 million, or ~~10.0%~~8.3%, from ~~$39.3~~$26.3 million for the same period in ~~2019~~2020. This increase was primarily related to ~~increases in the net gain on the sale and call of debt securities and swap fees, partially offset by decreases~~an increase in investment management fees and other income, partially offset by a decrease in swap fees, as follows:

Bank Segment:

•~~Net gain on the sale and call of debt securities increased for the~~ ~~nine months ended September 30, 2020~~ ~~compared to the same period in~~ ~~2019~~, due to the repositioning of a portion of the corporate bond portfolio into government agency securities to take advantage of market appreciation and enhance the overall credit quality of the investment portfolio.

••Swap fees ~~increased $4.5~~decreased $1.6 million for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021, compared to the same period in ~~2019~~2020, due to ~~an increase~~a decrease in ~~customer swap transactions from both new and existing customers.~~demand by customers for interest rate protection through swaps given recent movement in the yield curve. While level and frequency of income associated with swap transactions can vary materially from period to period based on ~~customers’~~customers’ expectations of market conditions and term loan originations, there is customer demand for long-term interest rate protection in the current interest rate environment.

~~Investment Management Segment:~~•Other income increased $477,000 for the six months ended June 30, 2021, compared to the same period in 2020, primarily due to an early payoff of a customer’s equipment lease and resulting gain on the sale of leased equipment within our commercial banking portfolio, which was partially offset by lower gains in our debt trading portfolio.

Investment Management Segment:

•

•Investment management fees ~~decreased $4.0~~increased $3.3 million for the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, compared to the same period in ~~2019,~~2020, due to a lower weighted average fee rate of 0.35% for the nine months ended September 30, 2020, compared to 0.38% for the nine months ended September 30, 2019. The lower fee rate was a result of a shift in the asset composition across investment products primarily due to asset class market returns and continued client investment in fixed income strategies due to economic uncertainty.higher assets under management. Assets under management were ~~$9.65~~$11.51 billion as of ~~September~~June 30, ~~2020,~~2021, an increase of ~~$38.0 million~~$2.26 billion from ~~September~~June 30, ~~2019,~~2020. This was driven by net inflows of ~~$71.0~~$553.0 million ~~partially offset by~~and market ~~depreciation~~appreciation of ~~$33.0 million.~~

~~Parent and Other:~~

•~~Other income~~$1.70 billion. The weighted average fee rate was 0.35% for the ~~nine~~six months ended ~~September~~June 30, 2019 reflected $881,000 of unrealized gains on equity securities related to our mutual fund investment in mid-cap value equities. These securities were no longer held in our investment portfolio during the nine months ended September 30,2021 and 2020.

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Non-Interest Expense

Our non-interest expense represents the operating cost of maintaining and growing our business. The largest portion of non-interest expense for each segment is compensation and employee benefits, which include employee payroll expense as well as the cost of incentive compensation, benefit plans, health insurance and payroll taxes, all of which are impacted by the growth in our employee base, coupled with increases in the level of compensation and benefits of our existing employees. The information provided in the table below under the caption ~~“Parent~~“Parent and ~~Other”~~Other” represents general operating activity of the Company not considered to be a reportable segment, which includes parent company activity as well as eliminations and adjustments that are necessary for purposes of reconciliation to the consolidated amounts.

The following table presents the components of our non-interest expense by operating segment for the three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020:


		Three Months Ended September 30, 2020								Three Months Ended September 30, 2019									Three Months Ended June 30, 2021								Three Months Ended June 30, 2020
				Investment		Parent						Investment		Parent							Investment		Parent						Investment		Parent
(Dollars in thousands)	(Dollars in thousands)	Bank		Management		and Other		Consolidated		Bank		Management		and Other		Consolidated		(Dollars in thousands)	Bank		Management		and Other		Consolidated		Bank		Management		and Other		Consolidated
Compensation and employee benefits	Compensation and employee benefits	$	13,246	$	5,014	$	264	$	18,524	$	12,805	$	5,902	$	—	$	18,707	Compensation and employee benefits	$	14,713	$	5,908	$	316	$	20,937	$	11,370	$	4,877	$	322	$	16,569
Premises and equipment expense	Premises and equipment expense	1,095		393		—		1,488		981		439		—		1,420		Premises and equipment expense	1,003		170		—		1,173		1,131		384		—		1,515
Professional fees	Professional fees	1,367		160		69		1,596		1,237		141		(73)		1,305		Professional fees	1,990		216		(82)		2,124		755		333		21		1,109
FDIC insurance expense	FDIC insurance expense	3,030		—		—		3,030		994		—		—		994		FDIC insurance expense	1,125		—		—		1,125		2,560		—		—		2,560
General insurance expense	General insurance expense	225		69		—		294		190		68		—		258		General insurance expense	267		74		—		341		209		69		—		278
State capital shares tax	State capital shares tax	366		—		—		366		(720)		—		—		(720)		State capital shares tax	777		—		—		777		366		—		—		366
Travel and entertainment expense	Travel and entertainment expense	524		30		38		592		1,053		286		—		1,339		Travel and entertainment expense	575		64		—		639		250		29		—		279
Technology and data services	Technology and data services	1,847		729		—		2,576		1,323		759		—		2,082		Technology and data services	2,905		782		—		3,687		1,711		703		—		2,414
Intangible amortization expense	Intangible amortization expense	—		478		—		478		—		502		—		502		Intangible amortization expense	—		478		—		478		—		486		—		486

Marketing and advertising	Marketing and advertising	84		310		—		394		324		194		—		518		Marketing and advertising	526		372		—		898		311		375		—		686
Other operating expenses (1)	Other operating expenses (1)	1,678		163		248		2,089		762		397		209		1,368		Other operating expenses (1)	1,689		240		317		2,246		1,304		233		297		1,834
Total non-interest expense	Total non-interest expense	$	23,462	$	7,346	$	619	$	31,427	$	18,949	$	8,688	$	136	$	27,773	Total non-interest expense	$	25,570	$	8,304	$	551	$	34,425	$	19,967	$	7,489	$	640	$	28,096

Full-time equivalent employees (2)	Full-time equivalent employees (2)	243		55		—		298		219		57		—		276		Full-time equivalent employees (2)	283		58		—		341		229		58		—		287

(1)Other operating expenses include items such as organizational dues and subscriptions, charitable contributions, investor relations fees, sub-advisory fees, employee-related expenses, provision for unfunded commitments and other general operating expenses.

(2)Full-time equivalent employees shown are as of the end of the periods presented.

Non-Interest Expense for the Three Months Ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020. Our non-interest expense for the three months ended ~~September~~June 30, ~~2020,~~2021, increased ~~$3.7~~$6.3 million, or ~~13.2%~~22.5%, as compared to the same period in ~~2019~~2020, which included a ~~$4.5~~$5.6 million increase in expenses of the Bank segment and ~~a $1.3 million decrease~~an $815,000 increase in expenses of the Investment Management segment. Notable changes in each ~~segment’s~~segment’s expenses are as follows:

Bank Segment:

••~~Federal Deposit Insurance Corporation (“FDIC”) insurance expense increased $2.0 million for the three months ended September 30, 2020 compared to the same period in~~ ~~2019~~ ~~due to a credit that was received in the prior year~~.

•~~State capital shares tax increased $1.1 million for the three months ended September 30, 2020 compared to the same period in~~ ~~2019, primarily due to a favorable ruling that the Company received in prior year that resulted in a tax benefit.~~

•~~Travel and entertainment expense for the three months ended September 30, 2020 decreased by $529,000 compared to the same period in~~ ~~2019, primarily due to decreased travel and in person meetings as a result of the current COVID-19 pandemic.~~

•~~Other operating expenses increased $916,000 for the three months ended September 30, 2020 compared to the same period in~~ ~~2019~~ ~~primarily driven by an increase in provision for unfunded commitments.~~

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~~Investment Management Segment:~~

•~~Chartwell’s~~The Bank’s compensation and employee benefits costs for the three months ended ~~September~~June 30, ~~2020, decreased~~2021, increased by ~~$888,000~~$3.3 million compared to the same period in ~~2019~~2020, primarily due to ~~decreases~~an increase in the number of full-time equivalent employees, increases in the overall annual wage and benefits costs of our existing employees, and increases in incentive and stock-based compensation expenses. Due to the uncertainty of the pandemic in 2020, we minimized hiring efforts beginning in the second quarter of 2020, and have now front-loaded that hiring. These increases are a result of our investment in talent to support scalable growth and client experience.

••~~Travel and entertainment expense~~Professional fees increased $1.2 million for the three months ended ~~September~~June 30, ~~2020decreased by $256,000~~2021 compared to the same period in ~~2019,~~2020 primarily ~~primarily~~ due to ~~decreased travel~~higher audit and ~~in person meetings as a result of the current COVID-19 pandemic.~~accounting fees related to routine accounting and regulatory compliance.

••~~Marketing and advertising~~Federal Deposit Insurance Corporation (“FDIC”) insurance expense decreased $1.4 million for the three months ended ~~September~~June 30, ~~2020increased by $116,000~~2021 compared to the same period in ~~2019~~2020 ~~, primarily related~~due to a lower assessment rate as the ~~outsourcing of mutual fund and retail platform marketing efforts in 2020.~~Bank began to quality for the FDIC’s large bank assessment methodology.

~~Parent~~•Technology and ~~Other:~~

•~~Compensation and employee benefits, professional fees and other operating expenses increased~~data services for the three months ended ~~September~~June 30, ~~2020,~~2021 increased by $1.2 million compared to the same period in ~~2019. Intercompany allocations vary based~~2020, primarily due to increased software licensing fees and software depreciation expense as a result of our

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enhancements in technology and product innovation to support scalable growth. Similarly, due to the uncertainty of the pandemic in 2020, we delayed the spending on ~~individual segment business activities~~investments in innovation and development. As we gained more certainty around the pandemic and the economic environment in the second half of 2020 and continuing into 2021, we again have made meaningful investments in innovation and development.

Investment Management Segment:

•Chartwell’s compensation and employee benefits costs for the three months ended June 30, 2021, increased by $1.0 million compared to the same period in 2020, primarily due to an increase in variable incentive compensation expense as ~~well~~a function of increased revenue.

•Premises and equipment expense for three months ended June 30, 2021 decreased by $214,000 compared to the same period in 2020, primarily due to lower rent expense as ~~where management spends their time and efforts.~~a result of a new lease amendment effective April 1, 2021.

•Professional fees for the three months ended June 30, 2021 decreased by $117,000 compared to the same period in 2020, primarily due to lower legal fees related to the mutual fund complex in 2021.

The following table presents the components of our non-interest expense by operating segment for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020:

~~Nine Months Ended September 30, 2020~~

~~Nine Months Ended September 30, 2019~~

~~Investment~~

~~Parent~~

~~Investment~~

~~Parent~~

~~(Dollars in thousands)~~

~~Bank~~

~~Management~~

~~and Other~~

~~Consolidated~~

~~Bank~~

~~Management~~

~~and Other~~

~~Consolidated~~

~~Compensation and employee benefits~~

~~37,007~~

~~14,659~~

~~873~~

~~52,539~~

~~35,791~~

~~16,676~~

—

~~52,467~~

~~Premises and equipment expense~~

~~3,219~~

~~1,170~~

—

~~4,389~~

~~2,688~~

~~1,178~~

—

~~3,866~~

~~Professional fees~~

~~3,012~~

~~599~~

~~564~~

~~4,175~~

~~3,281~~

~~533~~

~~(108)~~

~~3,706~~

~~FDIC insurance expense~~

~~7,760~~

—

~~7,760~~

~~3,462~~

—

~~3,462~~

~~General insurance expense~~

~~627~~

~~207~~

—

~~834~~

~~608~~

~~203~~

—

~~811~~

~~State capital shares tax~~

~~1,115~~

—

~~1,115~~

—

~~Travel and entertainment expense~~

~~1,443~~

~~253~~

~~1,735~~

~~2,408~~

~~806~~

—

~~3,214~~

~~Technology and data services~~

~~5,166~~

~~2,128~~

—

~~7,294~~

~~4,057~~

~~2,189~~

—

~~6,246~~

~~Intangible amortization expense~~

—

~~1,466~~

—

~~1,466~~

—

~~1,506~~

—

~~1,506~~

~~Marketing and advertising~~

~~777~~

~~917~~

—

~~1,694~~

~~1,115~~

~~544~~

~~1,661~~

~~Other operating expenses~~ ~~(1)~~

~~4,336~~

~~565~~

~~766~~

~~5,667~~

~~3,422~~

~~1,045~~

~~584~~

~~5,051~~

~~Total non-interest expense~~

~~64,462~~

~~21,964~~

~~2,242~~

~~88,668~~

~~56,872~~

~~24,680~~

~~478~~

~~82,030~~


	Six Months Ended June 30, 2021								Six Months Ended June 30, 2020
			Investment		Parent						Investment		Parent
(Dollars in thousands)	Bank		Management		and Other		Consolidated		Bank		Management		and Other		Consolidated
Compensation and employee benefits	$	28,906	$	11,356	$	596	$	40,858	$	23,761	$	9,645	$	609	$	34,015
Premises and equipment expense	2,038		541		—		2,579		2,123		778		—		2,901
Professional fees	3,088		388		(28)		3,448		1,644		439		496		2,579
FDIC insurance expense	2,250		—		—		2,250		4,730		—		—		4,730
General insurance expense	496		143		—		639		403		137		—		540
State capital shares tax	1,427		—		—		1,427		749		—		—		749
Travel and entertainment expense	991		89		—		1,080		920		223		—		1,143
Technology and data services	5,206		1,581		—		6,787		3,319		1,398		—		4,717
Intangible amortization expense	—		956		—		956		—		988		—		988

Marketing and advertising	920		662		—		1,582		693		607		—		1,300
Other operating expenses (1)	2,903		508		686		4,097		2,658		403		517		3,578
Total non-interest expense	$	48,225	$	16,224	$	1,254	$	65,703	$	41,000	$	14,618	$	1,622	$	57,240

Non-Interest Expense for the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020. Our non-interest expense for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021, increased ~~$6.6~~$8.5 million, or ~~8.1%~~14.8%, as compared to the same period in ~~2019~~2020, which included a ~~$7.6~~$7.2 million increase in expenses of the Bank segment and a ~~$2.7~~$1.6 million ~~decrease~~increase in expenses of the Investment Management segment. Notable changes in each ~~segment’s~~segment’s expenses are as follows:

Bank Segment:

••The ~~Bank’s~~Bank’s compensation and employee benefits costs for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021, increased by ~~$1.2~~$5.1 million compared to the same period in ~~2019~~2020, primarily due to an increase in the number of full-time equivalent employees, increases in the overall annual wage and benefits costs of our existing employees, and increases in incentive and stock-based compensation expenses. Due to the uncertainty of the pandemic in 2020, we minimized hiring efforts beginning in the second quarter of 2020, and have now front-loaded that hiring. These increases are a result of our investment in talent to support scalable growth and client experience.

••~~FDIC insurance expense~~Professional fees for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 increased ~~$4.3~~$1.4 million compared to the same period in ~~2019,~~2020, primarily due to ~~a credit that was received in the prior year~~.higher audit and accounting fees related to routine accounting and regulatory compliance.

•~~State capital shares tax increased $1.1 million for the~~ ~~nine months ended September 30, 2020~~ ~~compared to the same period in~~ ~~2019, primarily due to a favorable ruling that the Company received in prior year that resulted in a tax benefit.~~

5861

Table of Contents

•FDIC insurance expense for the six months ended June 30, 2021 decreased $2.5 million compared to the same period in 2020, due to a lower assessment rate as the Bank began to quality for the FDIC’s large bank assessment methodology.

••Technology and data services for the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, increased ~~$1.1~~$1.9 million compared to the same period in ~~2019,~~2020, primarily due to increased software licensing fees and software depreciation expense as a result of our enhancements in ~~technology.~~ technology and product innovation to support scalable growth. Similarly, due to the uncertainty of the pandemic in 2020, we delayed the spending on investments in innovation and development. As we gained more certainty around the pandemic and the economic environment in the second half of 2020 and continuing into 2021, we again have made meaningful investments in innovation and development.

•~~Other operating expenses increased $914,000 for the~~ ~~nine months ended September 30, 2020~~ ~~compared to the same period in~~ ~~2019~~ ~~primarily driven by an increase in provision for unfunded commitments.~~Investment Management Segment:

~~Investment Management Segment:~~

••~~Chartwell’s~~Chartwell’s compensation and employee benefits costs for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021, ~~decreased~~increased by ~~$2.0~~$1.7 million compared to the same period in ~~2019~~2020, primarily due to ~~decreases~~an increase in ~~full-time equivalent employees and~~variable incentive ~~and stock-based~~ compensation ~~expenses.~~expense as a function of increased revenue.

••~~Marketing~~Premises and ~~advertising~~equipment expense for ~~the~~ ~~nine~~six months ended ~~September~~June 30, ~~2020 increased~~2021 decreased by ~~$373,000~~$237,000 compared to the same period in ~~2019~~2020, , primarily ~~related~~due to ~~the outsourcing~~lower rent expense primarily due to lower rent expense as a result of ~~mutual fund and retail platform marketing efforts in 2020.~~a new lease amendment effective April 1, 2021.

••Travel and entertainment expense for the six months ended June 30, 2021 decreased by $134,000 compared to the same period in 2020, primarily due to decreased travel and events as a result of the COVID-19 pandemic.

•Technology and data services for the six months ended June 30, 2021 increased by $183,000 compared to the same period in 2020, primarily due to higher information and data services fees as a result of efforts to align Chartwell with the Bank information technology new website in 2021, which were partially offset by lower investment research fees.

•Other operating expenses for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021, ~~decreased~~increased by ~~$480,000~~$105,000 compared to the same period in ~~2019~~2020, primarily due to ~~lower~~higher mutual fund platform distribution ~~expense and lower organizational dues and subscriptions.~~

~~Parent and Other:~~

•~~Compensation and employee benefits, professional fees, travel and entertainment expenses and other operating expenses increased for the~~ ~~nine months ended September 30, 2020, compared to the same period in~~ ~~2019. Intercompany allocations vary based on individual segment business activities as well as where management spends their time and efforts.~~ expenses.

Income Taxes

We utilize the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the tax effects of differences between the financial statement and tax basis of assets and liabilities. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities with regard to a change in tax rates is recognized in income in the period that includes the enactment date. We evaluate whether it is more likely than not that we will be able to realize the benefit of identified deferred tax assets.

Income Taxes for the Three Months Ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020. For the three months ended ~~September~~June 30, ~~2020,~~2021, we recognized income tax expense of ~~$2.2~~$4.5 million, or ~~18.9%~~19.2% of income before tax, as compared to income tax expense of ~~$3.1~~$2.0 million, or ~~15.8%~~16.0% of income before tax, for the same period in ~~2019~~2020. Our effective tax rate of ~~18.9%~~19.2% for the three months ended ~~September~~June 30, ~~2020,~~2021, increased compared to the same period in the prior year primarily due to the amount and timing of tax credits recognized in ~~2020~~2021 compared to ~~2019.~~2020.

Income Taxes for the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020. For the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021, we recognized income tax expense of ~~$7.4~~$9.1 million, or ~~18.4%~~20.6% of income before tax, as compared to income tax expense of ~~$7.4~~$5.2 million, or ~~13.9%~~18.2% of income before tax, for the same period in ~~2019~~2020. Our effective tax rate of ~~18.4%~~20.6% for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021, increased compared to the same period in the prior year primarily due to the amount and timing of tax credits recognized in ~~2020~~2021 compared to ~~2019.~~2020.

Financial Condition

Our total assets as of ~~September~~June 30, ~~2020~~2021, were $~~9.49~~11.54 billion, an increase of $~~1.73~~1.64 billion, or ~~29.7%~~33.5% on an annualized basis, from December 31, ~~2019~~2020, driven primarily by growth in our loan ~~portfolio,~~and investment ~~portfolio and cash and cash equivalents.~~portfolio. As of ~~September~~June 30, ~~2020~~2021, our loan portfolio totaled ~~$7.65~~$9.28 billion, an increase of $~~1.08~~1.05 billion, or ~~21.9%~~25.6% on an annualized basis, from December 31, ~~2019~~2020. Total investment securities increased ~~$351.1~~$495.1 million, or ~~100.0%~~118.5% on an annualized basis, to $~~820.2 million~~1.34 billion as of ~~September~~June 30, ~~2020~~2021, from December 31, ~~2019. Cash and cash equivalents~~ ~~increased$204.4 million~~ to ~~$608.3 million~~ ~~as of~~ ~~September 30,~~ 2020~~, from~~ ~~December 31, 2019~~. Our Asset and Liability Committee (“ALCO”) is responsible for managing the investment portfolio and liquidity of the Bank, among other responsibilities. Given the current overall interest rate environment, the strength of our loan growth, and in anticipation of clients’ credit needs during the COVID-19 crisis, our ALCO has kept excess liquidity in interest-bearing cash deposits and investments.

~~As of~~ ~~September 30, 2020, our total deposits were~~ ~~$8.18 billion, an increase of~~ ~~$1.55 billion, or~~ ~~31.2%~~ ~~annualized, from~~ ~~December 31, 2019~~. We focus ~~only~~ on high quality loan growth and ~~in the absence of this,~~ we aim to increase our assets through ~~cash and cash equivalents as well as~~ adding to our investment portfolio as part of our strategy to build greater ~~on balance~~on-balance sheet liquidity, funded through our deposits.

As of June 30, 2021, our total deposits were $10.19 billion, an increase of $1.70 billion, or 40.4% annualized, from December 31, 2020. Net borrowings ~~increased $40.4~~decreased $54.9 million to ~~$395.4~~$345.6 million as of ~~September~~June 30, ~~2020~~2021, from December 31, ~~2019~~2020. Our ~~shareholders’~~ shareholders’

equity increased $~~21.9~~37.4 million to $~~643.2~~794.6 million as of ~~September~~June 30, ~~2020~~2021, from December 31, ~~2019~~2020, primarily due to net income of $~~32.6~~35.0 million, ~~and~~ $~~7.2~~5.4 million in stock-based compensation ~~partially offset by a~~and an ~~decrease~~increase of $~~6.6~~2.1 million in accumulated other comprehensive income, ~~(loss),~~partially offset by preferred stock dividends paid of ~~$5.9~~$3.9 million, and the ~~purchase~~increase of ~~$3.3~~$1.6 million in treasury stock ~~and $2.5 million in cancellation~~related to the net settlement of ~~stock options.~~ equity awards exercised or vested.

Loans and Leases

Our loan and lease portfolio, which represents our largest earning asset, primarily consists of loans to our private banking clients, commercial and industrial loans and leases, and real estate loans secured by commercial properties. As of ~~September~~June 30, ~~2020, 93.4%~~2021, 94.3% of our loans had a floating interest rate.

The following table presents the composition of our loan portfolio as of the dates indicated:

~~September 30, 2020~~

~~December 31, 2019~~

~~(Dollars in thousands)~~

~~Outstanding~~

Percent of
Loans

~~Outstanding~~

Percent of
Loans

~~Private banking loans~~

~~4,458,767~~

~~58.3~~

~~3,695,402~~

~~56.2~~

~~Middle-market banking loans:~~

~~Commercial and industrial~~

~~1,138,288~~

~~14.9~~

~~1,085,709~~

~~16.5~~

~~Commercial real estate~~

~~2,057,391~~

~~26.8~~

~~1,796,448~~

~~27.3~~

~~Total middle-market banking loans~~

~~3,195,679~~

~~41.7~~

~~2,882,157~~

~~43.8~~

~~Loans and leases held-for-investment~~

~~7,654,446~~

~~100.0~~

~~6,577,559~~

~~100.0~~


	June 30, 2021				December 31, 2020
(Dollars in thousands)	Outstanding		Percent of Loans		Outstanding		Percent of Loans
Private banking loans	$	5,713,562	61.5	%	$	4,807,800	58.4	%
Middle-market banking loans:
Commercial and industrial	1,240,917		13.4	%	1,274,152		15.5	%
Commercial real estate	2,328,443		25.1	%	2,155,466		26.1	%
Total middle-market banking loans	3,569,360		38.5	%	3,429,618		41.6	%
Loans and leases held-for-investment	$	9,282,922	100.0	%	$	8,237,418	100.0	%

Loans and Leases Held-for-Investment. Loans and leases held-for-investment increased by $~~1.08~~1.05 billion, or ~~21.9%~~25.6% on an annualized basis, to $~~7.65~~9.28 billion as of ~~September~~June 30, ~~2020~~2021, from December 31, ~~2019~~2020. Our growth for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021, was comprised of an increase in private banking loans of $~~763.4~~905.8 million, ~~an increase~~ ~~in commercial and industrial loans and leases of~~ ~~$52.6 million~~and an increase in commercial real estate loans of $~~260.9~~173.0 million, partially offset by a decrease in commercial and industrial loans and leases of $33.2 million.

Primary Loan Categories

Private Banking Loans. Our private banking loans include personal and commercial loans that are sourced through our private banking channel (which operates on a national basis), including referral relationships with financial intermediaries. These loans primarily consist of loans made to high-net-worth individuals, trusts and businesses that are secured by cash and marketable securities. We also originate loans that are secured by cash value life insurance and to a ~~lessor~~lesser extent residential property or other financial assets. The primary source of repayment for these loans is the income and assets of the borrower. We also have a limited number of unsecured loans and lines of credit in our private banking loan portfolio.

As of ~~September~~June 30, ~~2020~~2021, ~~$4.38~~$5.64 billion, or ~~98.2%~~98.7%, of our private banking loans were secured by cash, marketable securities and/or cash value life insurance as compared to ~~$3.60~~$4.74 billion, or ~~97.4%~~98.6%, as of December 31, ~~2019~~2020. Our private banking lines of credit are typically due on demand. We expect the growth in these loans to continue as a result of our focus on this portion of our ~~private~~ banking business. We believe we have strong competitive advantages in this line of business given our robust distribution channel relationships and proprietary technology ~~and distribution channels~~. These loans usually have a lower risk profile and are an efficient use of capital because they typically are zero percent risk-weighted for regulatory capital purposes. On a daily basis, we monitor the collateral of the loans secured by cash, marketable securities and/or cash value life insurance, which further reduces the risk profile of the private banking portfolio. Since inception, we have had no charge-offs related to our loans secured by cash, marketable securities and/or cash value life insurance.

~~Table of Contents~~

Loans sourced through our private banking channel also include loans that are classified for regulatory purposes as commercial, most of which are also secured by cash, marketable securities and/or cash value life insurance. The table below includes all loans made through our private banking channel, by collateral type, as of the dates indicated.


~~(Dollars in thousands)~~	September 30, 2020		December 31, 2019
~~Private banking loans:~~
~~Secured by cash, marketable securities and/or cash value life insurance~~	$	~~4,379,691~~	$	~~3,599,198~~
~~Secured by real estate~~	~~49,964~~		~~62,782~~
~~Other~~	~~29,112~~		~~33,422~~
~~Total private banking loans~~	$	~~4,458,767~~	$	~~3,695,402~~


(Dollars in thousands)	June 30, 2021		December 31, 2020
Private banking loans:
Secured by cash, marketable securities and/or cash value life insurance	$	5,638,485	$	4,738,594
Secured by real estate	43,325		45,014
Other	31,752		24,192
Total private banking loans	$	5,713,562	$	4,807,800

Table of Conten t s

As of ~~September~~June 30, ~~2020~~2021, there were ~~$4.35~~$5.64 billion of total private banking loans with a floating interest rate and ~~$103.9~~$77.1 million with a fixed interest rate, compared to ~~$3.53~~$4.73 billion and ~~$169.4~~$77.1 million, respectively, as of December 31, ~~2019~~2020.

Commercial Banking - Commercial and Industrial Loans and Leases. Our commercial and industrial loan and lease portfolio primarily includes loans and equipment leases made to financial and other service companies or manufacturers generally for the purposes of financing production, operating capacity, accounts receivable, inventory, equipment, acquisitions and recapitalizations. Cash flow from the ~~borrower’s~~borrower’s operations is the primary source of repayment for these loans and leases, except for certain commercial loans that are secured by marketable securities.

As of ~~September~~June 30, ~~2020~~2021, there were ~~$864.5~~$914.3 million of total commercial and industrial loans with a floating interest rate and ~~$273.8~~$326.6 million with a fixed interest rate, compared to ~~$867.7~~$966.6 million and ~~$218.0~~$307.6 million, respectively, as of December 31, ~~2019~~2020.

Commercial Banking - Commercial Real Estate Loans. Our commercial real estate loan portfolio includes loans secured by commercial purpose real estate, including both owner-occupied properties and investment properties for various purposes including office, industrial, multifamily, retail, hospitality, healthcare and self-storage. Also included are commercial construction loans to finance the construction or renovation of structures as well as to finance the acquisition and development of raw land for various purposes. Individual project cash flows, global cash flows and liquidity from the developer, or the sale of the property are the primary sources of repayment for commercial real estate loans secured by investment properties. The primary source of repayment for commercial real estate loans secured by owner-occupied properties is cash flow from the ~~borrower’s~~borrower’s operations. There were ~~$219.8~~$220.0 million and ~~$210.7~~$220.8 million of owner-occupied commercial real estate loans as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively.

As of ~~September~~June 30, ~~2020~~2021, there were ~~$1.93~~$2.21 billion of total commercial real estate loans with a floating interest rate and ~~$126.2~~$120.8 million with a fixed interest rate, as compared to ~~$1.69~~$2.03 billion and ~~$111.2~~$123.3 million, respectively, as of December 31, ~~2019~~2020.

~~Table of Contents~~

Loan and Lease Maturities and Interest Rate Sensitivity

The following table presents the contractual maturity ranges and the amount of such loans and leases with fixed and adjustable rates in each maturity range as of the date indicated.

~~September 30, 2020~~

~~(Dollars in thousands)~~

~~Due on Demand~~

One Year
or Less

One to
Five Years

Greater Than
Five Years

~~Total~~

~~Maturity:~~

~~Private banking~~

~~4,215,454~~

~~56,530~~

~~83,177~~

~~103,606~~

~~4,458,767~~

~~Commercial and industrial~~

~~6,282~~

~~313,702~~

~~651,844~~

~~166,460~~

~~1,138,288~~

~~Commercial real estate~~

—

~~375,805~~

~~798,556~~

~~883,030~~

~~2,057,391~~

~~Loans and leases held-for-investment~~

~~4,221,736~~

~~746,037~~

~~1,533,577~~

~~1,153,096~~

~~7,654,446~~

~~Interest rate sensitivity:~~

~~Fixed interest rates~~

~~76,019~~

~~33,260~~

~~226,591~~

~~168,071~~

~~503,941~~

~~Floating or adjustable interest rates~~

~~4,145,717~~

~~712,777~~

~~1,306,986~~

~~985,025~~

~~7,150,505~~

~~Loans~~ ~~and leases~~ ~~held-for-investment~~

~~4,221,736~~

~~746,037~~

~~1,533,577~~

~~1,153,096~~

~~7,654,446~~


	June 30, 2021
(Dollars in thousands)	Due on Demand		One Year or Less		One to Five Years		Greater Than Five Years		Total
Maturity:
Private banking	$	5,461,025	$	43,512	$	112,255	$	96,770	$	5,713,562
Commercial and industrial	8,861		337,510		703,091		191,455		1,240,917
Commercial real estate	—		403,916		913,572		1,010,955		2,328,443
Loans and leases held-for-investment	$	5,469,886	$	784,938	$	1,728,918	$	1,299,180	$	9,282,922

Interest rate sensitivity:
Fixed interest rates	$	57,184	$	45,183	$	233,906	$	188,279	$	524,552
Floating or adjustable interest rates	5,412,702		739,755		1,495,012		1,110,901		8,758,370
Loans and leases held-for-investment	$	5,469,886	$	784,938	$	1,728,918	$	1,299,180	$	9,282,922

Interest Reserve Loans

As of ~~September~~June 30, ~~2020~~2021, loans with interest reserves totaled ~~$327.8~~$454.4 million, which represented ~~4.3%~~4.9% of loans and leases held-for-investment, compared to ~~$348.0~~$389.1 million, or ~~5.3%~~4.7%, as of December 31, ~~2019.~~2020. Certain loans reserve a portion of the proceeds to be used to pay interest due on the loan. These loans with interest reserves are common for construction and land development loans. The use of interest reserves is based on the project budget and schedule for completion, the feasibility of the project, the creditworthiness of the borrower and guarantors, and the loan to value coverage of the collateral. The interest reserve may be used by the borrower, when certain financial conditions are met, to draw loan funds to pay interest charges on the outstanding balance of the loan. When drawn, the interest is capitalized and added to the loan balance, subject to conditions specified during the initial underwriting and at the time the credit is approved. We have procedures and controls for monitoring compliance with loan covenants, advancing funds and determining default conditions.

Allowance for ~~Loan~~Credit Losses on Loans and ~~Lease Losses~~Leases

Our allowance for ~~loan~~credit losses on loans and ~~lease losses represents~~leases represent our current estimate of ~~probable~~expected credit losses ~~inherent~~ in the loan and lease portfolio at a specific point in time. This estimate includes credit losses associated with ~~specifically identified~~individually evaluated loans ~~as well as estimated probable credit losses inherent in the remainder~~and leases that do

Table of ~~the loan and lease portfolio.~~Conten t s

not share similar risk characteristics. Additions are made to the allowance through both periodic provisions recorded in the consolidated statements of income and recoveries of losses previously incurred. Reductions to the allowance occur as loans and lease are charged off or when the current estimate of expected credit ~~history~~losses in of any of the three loan portfolios ~~improves.~~decreases. Results for the three and six months ended June 30, 2021, are presented under CECL methodology while prior period amounts continue to be reported in accordance with previously applicable GAAP. Refer to Note 1, Summary of Significant Accounting Policies and Note 4, Allowance for ~~Loan~~Credit Losses on Loans and ~~Lease Losses,~~Leases, to our unaudited condensed consolidated financial statements for more details on the ~~Company’s~~Company’s allowance for ~~loan~~credit losses on loans and ~~lease~~ leases~~losses.~~.

The following table summarizes the allowance for loan and lease losses, as of the dates indicated:


~~(Dollars in thousands)~~	September 30, 2020			December 31, 2019
~~General reserves~~	$	~~29,186~~		$	~~13,937~~
~~Specific reserves~~	~~1,520~~			~~171~~
~~Total allowance for loan~~ ~~and lease~~ ~~losses~~	$	~~30,706~~		$	~~14,108~~
~~Allowance for loan~~ ~~and lease~~ ~~losses to loans~~ ~~and leases~~	~~0.40~~		%	~~0.21~~		%


(Dollars in thousands)	June 30, 2021			December 31, 2020
General reserves	$	26,991		$	32,642
Specific reserves	5,586			1,988
Total allowance for credit losses on loans and leases	$	32,577		$	34,630
Allowance for credit losses on loans and leases to loans and leases	0.35		%	0.42		%

As of ~~September~~June 30, ~~2020~~2021, we had specific reserves totaling $~~1.5~~5.6 million related to impaired loans with an aggregated total outstanding balance of $~~6.8~~11.2 million. As of December 31, ~~2019~~2020, we had specific reserves totaling ~~$171,000~~$2.0 million related to impaired loans with an aggregated total outstanding balance of ~~$171,000.~~$9.7 million. These loans were on non-accrual status as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019~~2020, respectively.

~~Table of Contents~~

The following table summarizes allowance for ~~loan~~credit losses on loans and ~~lease losses~~leases and the percentage of loans and leases by category, as of the dates indicated:

~~September 30, 2020~~

~~December 31, 2019~~

~~(Dollars in thousands)~~

~~Reserve~~

~~Percent of Loans~~

~~Reserve~~

~~Percent of Loans~~

~~Private banking~~

~~2,210~~

~~58.3~~

~~1,973~~

~~56.2~~

~~Commercial and industrial~~

~~7,772~~

~~14.9~~

~~5,262~~

~~16.5~~

~~Commercial real estate~~

~~20,724~~

~~26.8~~

~~6,873~~

~~27.3~~

~~Total allowance for loan~~ ~~and lease~~ ~~losses~~

~~30,706~~

~~100.0~~

~~14,108~~

~~100.0~~


	June 30, 2021				December 31, 2020
(Dollars in thousands)	Reserve		Percent of Loans and Leases			Reserve		Percent of Loans and Leases
Private banking	$	2,107	61.5	%		$	2,047	58.4	%
Commercial and industrial	8,969		13.4	%		5,254		15.5	%
Commercial real estate	21,501		25.1	%		27,329		26.1	%
Total allowance for credit losses on loans and leases	$	32,577	100.0	%		$	34,630	100.0	%

Allowance for ~~Loan~~Credit Losses on Loans and ~~Lease Losses~~Leases as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019~~2020. Our allowance for ~~loan~~credit losses on loans and ~~lease losses~~leases was ~~increased~~ to $~~30.7~~32.6 million, or ~~0.40%~~0.35% of loans as of ~~September~~June 30, ~~2020~~2021,, compared to $~~14.1~~34.6 million, or ~~0.21%~~0.42% of loans, as of December 31, ~~2019~~2020. Our allowance for ~~loan~~credit losses on loans and ~~lease losses increased~~leases decreased to ~~0.96%~~0.91% of commercial loans (excluding private banking loans primarily collateralized by liquid, marketable securities) as of ~~September~~June 30, ~~2020,~~2021, compared to ~~0.49%~~1.0% of commercial loans as of December 31, ~~2019~~2020. Our allowance for ~~loan and lease~~credit losses ~~increased due to adjustments to the qualitative risk factors~~decreased $2.1 million from December 31, 2020, driven by a decrease of $5.7 million in ~~response to economic uncertainty around the COVID-19 pandemic as well as the growth~~general reserves, partially offset by an increase of $3.6 million in ~~our loan portfolio.~~specific reserves. Our allowance for credit losses related to private banking loans increased ~~$237,000~~$60,000 from December 31, ~~2019~~2020 to ~~September~~June 30, ~~2020~~2021. ~~, primarily due to an increase in general reserves attributable to growth and qualitative adjustments in the portfolio, partially offset by decreased specific reserves related to a charge-off.~~ Our allowance for ~~loan and lease~~credit losses related to commercial and industrial loans increased ~~$2.5~~$3.7 million from December 31, ~~2019~~2020 to ~~September~~June 30, ~~2020~~2021, which was attributable to higher ~~general~~specific reserves due to ~~growth and qualitative adjustments~~the addition of non-accrual loans, partially offset by a decrease in ~~our portfolio.~~general reserves. Our allowance for ~~loan and lease~~credit losses related to commercial real estate loans ~~increased~~decreased by $~~13.9~~5.8 million from December 31, ~~2019~~2020 to ~~September~~June 30, ~~2020~~2021, due to ~~increased~~decreased general reserves. The decrease in general reserves ~~due to growth and~~in our commercial loan portfolio was primarily driven by qualitative adjustments in ~~addition to increased specific reserves~~the model related to assumptions around economic recovery and modeled loss forecasts. We applied a management overlay to our allowance for credit loss model to provide a reserve level that supports management’s best estimate of current expected credit losses within the ~~addition~~loan portfolio. The management overlay includes scenarios with near-term economic stress and other factors based upon management judgement. The consensus forecast within our model provided for a greater reserve release based on optimism around the economic environment and loss forecasts, which we believe may be an overreaction to the early onset of historically high level and rate of changes in the forecast and transactional values within commercial asset types. We would only release reserves to the extent suggested by our model if there is a ~~non-accrual loan. As previously mentioned, we have elected to delay implementation of CECL,~~sustained trend in ~~accordance with relief provided by~~ the ~~CARES Act. See “Recent Accounting Pronouncements~~economic recovery data and ~~Developments” for more information on our decision to delay implementation of CECL.~~continued progress overcoming the COVID-19 pandemic.

Charge-Offs and Recoveries

Our charge-off policy for commercial and private banking loans and leases requires that obligations that are not collectible be promptly charged off in the month the loss becomes probable, regardless of the delinquency status of the loan or lease. We recognize a partial charge-off when we have determined that the value of the collateral is less than the remaining ledger balance at the time of the evaluation. An obligation is not required to be charged off, regardless of delinquency status, if we have determined there exists

Table of Conten t s

sufficient collateral to protect the remaining loan or lease balance and there exists a strategy to liquidate the collateral. We may also consider a number of other factors to determine when a charge-off is appropriate, including: the status of a bankruptcy proceeding, the value of collateral and probability of successful liquidation, and the status of adverse proceedings or litigation that may result in collection.

~~Table of Contents~~

The following table provides an analysis of the allowance for ~~loan~~credit losses on loans and ~~lease losses,~~leases, charge-offs, recoveries and provision for ~~loan~~credit losses on loans and ~~lease losses~~leases for the periods indicated:


		Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended June 30,						Six Months Ended June 30,
(Dollars in thousands)	(Dollars in thousands)	2020			2019			2020			2019			(Dollars in thousands)	2021			2020			2021			2020
Beginning balance	Beginning balance	$	23,276		$	14,016		$	14,108		$	13,208		Beginning balance	$	34,644		$	17,304		$	34,630		$	14,108

Charge-offs:	Charge-offs:													Charge-offs:
Private banking	Private banking	—			(112)			(171)			(112)			Private banking	—			(171)			—			(171)
Commercial and industrial	Commercial and industrial	—			—			—			—			Commercial and industrial	—			—			(199)			—
Commercial real estate	Commercial real estate	—			—			—			—			Commercial real estate	(2,366)			—			(2,366)			—
Total charge-offs	Total charge-offs	—			(112)			(171)			(112)			Total charge-offs	(2,366)			(171)			(2,565)			(171)
Recoveries:	Recoveries:													Recoveries:
Private banking	Private banking	—			—			—			—			Private banking	—			—			—			—
Commercial and industrial	Commercial and industrial	—			77			341			1,974			Commercial and industrial	113			138			113			341
Commercial real estate	Commercial real estate	—			—			—			—			Commercial real estate	—			—			—			—
Total recoveries	Total recoveries	—			77			341			1,974			Total recoveries	113			138			113			341
Net recoveries (charge-offs)	Net recoveries (charge-offs)	—			(35)			170			1,862			Net recoveries (charge-offs)	(2,253)			(33)			(2,452)			170
Provision (credit) for loan and lease losses		7,430			(607)			16,428			(1,696)
Provision for credit losses on loans and leases														Provision for credit losses on loans and leases	186			6,005			399			8,998
Ending balance	Ending balance	$	30,706		$	13,374		$	30,706		$	13,374		Ending balance	$	32,577		$	23,276		$	32,577		$	23,276

Net loan charge-offs (recoveries) to average total loans, annualized		—		%	—		%	—		%	(0.05)		%
Provision (credit) for loan and lease losses to average total loans, annualized		0.40		%	(0.04)		%	0.31		%	(0.04)		%
Net loan charge-offs to average total loans and leases, annualized														Net loan charge-offs to average total loans and leases, annualized	0.10		%	—		%	0.06		%	—		%
Provision for credit losses on loans and leases to average total loans and leases, annualized														Provision for credit losses on loans and leases to average total loans and leases, annualized	0.01		%	0.34		%	0.01		%	0.26		%

Non-Performing Assets

Non-performing assets consist of non-performing loans and OREO. Non-performing loans are loans that are on non-accrual status. OREO is real property acquired through foreclosure on the collateral underlying defaulted loans and includes in-substance foreclosures. We record OREO at fair value, less estimated costs to sell the assets.

Our policy is to place loans in all categories on non-accrual status when collection of interest or principal is doubtful, or when interest or principal payments are 90 days or more past due. There ~~were~~was no ~~loans 90 days or more past due and still accruing interest as of~~ ~~September 30, 2020~~ ~~and~~ ~~December 31, 2019, and there was no~~ interest income recognized on loans while on non-accrual status for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019.~~2020. As of ~~September~~June 30, 2021, there was a loan for $43,000 that was 90 days or more past due and still accruing interest, which was fully secured. As of December 31, 2020, there were no loans 90 days or more past due and still accruing income. As of June 30, 2021, non-performing loans were ~~$6.8~~$11.2 million, or ~~0.09%~~0.12% of total loans, compared to ~~$184,000,~~$9.7 million, or ~~0.00%~~0.12% of total loans, as of December 31, ~~2019.~~2020. We had specific reserves of ~~$1.5~~$5.6 million and ~~$171,000~~$2.0 million as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively, on these non-performing loans. The net loan balance of our non-performing loans was ~~77.3%~~41.8% and ~~6.3%~~79.2% of the ~~customer’s~~customer’s outstanding balance after payments, charge-offs and specific reserves as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively.

For additional information on our non-performing loans as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, refer to Note 4, Allowance for ~~Loan~~Credit Losses on Loans and ~~Lease Losses,~~Leases, to our unaudited condensed consolidated financial statements.

Once the determination is made that a foreclosure is necessary, the loan is reclassified as ~~“in-substance foreclosure”~~“in-substance foreclosure” until a sale date and title to the property is finalized. Once we own the property, it is maintained, marketed, and rented or sold to repay the original loan. Historically, foreclosure trends in our loan portfolio have been low due to the credit quality of the real estate portfolio. Any loans that are modified or extended are reviewed for potential classification as a troubled debt restructuring ~~(“TDR”~~(“TDR”) loan. For borrowers that are experiencing financial difficulty, we complete a process that outlines the terms of the modification, the reasons for the proposed modification, and documents the current status of the borrower.

In response to the COVID-19 pandemic and its economic impact on our customers, we implemented a short-term loan modification program in compliance with the CARES Act and applicable regulatory guidance to provide temporary payment relief to those borrowers directly impacted by COVID-19. ~~Through September~~As of June 30, ~~2020, we granted temporary modifications on approximately 115~~2021, only four loans ~~totaling approximately $467.2~~representing $41.0 million, or 0.4% of ~~which just under half or $223.8 million has already resumed payment as~~loans, were

Table of ~~September 30, 2020.~~Conten t s

still in deferral status. Under the applicable guidance, these loan modifications were not considered TDRs. ~~The vast majority of our~~These loans that are still in deferral status are in our commercial real estate loan portfolio and are primarily secured by office, retail, or hotel ~~properties and multifamily properties, which comprised of over 80% of the deferral population.~~properties.

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We had non-performing assets of $~~9.5~~13.7 million, or ~~0.10%~~0.12% of total assets, as of ~~September~~June 30, ~~2020~~2021, as compared to $~~4.4~~12.4 million, or ~~0.06%~~0.13% of total assets, as of December 31, ~~2019~~2020. The increase in non-performing assets was ~~primarily due to~~ the ~~addition~~result of ~~new non-performing loans of $6.8~~$13.1 million in additions, partially offset by ~~the sale of a property~~$11.7 million in ~~OREO.~~reductions to non-performing assets. As of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019~~2020, we had OREO properties totaling ~~$2.7~~$2.6 million and ~~$4.3~~$2.7 million, respectively. The ~~decrease~~change in the OREO balance from December 31, 2020, was ~~due~~attributable to a $155,000 write-down on an OREO property. ~~property that was sold for $1.5 million during the nine months ended September 30, 2020.~~

The following table summarizes our non-performing assets as of the dates indicated:


~~(Dollars in thousands)~~	September 30, 2020			December 31, 2019
~~Non-performing loans:~~
~~Private banking~~	$	—		$	~~184~~
~~Commercial and industrial~~	~~458~~			—
~~Commercial real estate~~	~~6,296~~			—
~~Total non-performing loans~~	$	~~6,754~~		$	~~184~~
~~Other real estate owned~~	~~2,724~~			~~4,250~~
~~Total non-performing assets~~	$	~~9,478~~		$	~~4,434~~

~~Non-performing troubled debt restructured loans~~	$	—		$	~~171~~


~~Non-performing loans to total loans~~	~~0.09~~		%	—		%
~~Allowance for loan~~ ~~and lease~~ ~~losses to non-performing loans~~	~~454.63~~		%	~~7,667.39~~		%
~~Non-performing assets to total assets~~	~~0.10~~		%	~~0.06~~		%


(Dollars in thousands)	June 30, 2021			December 31, 2020
Non-performing loans:
Private banking	$	—		$	—
Commercial and industrial	8,749			458
Commercial real estate	2,426			9,222
Total non-performing loans	$	11,175		$	9,680
Other real estate owned	2,568			2,724
Total non-performing assets	$	13,743		$	12,404

Non-performing troubled debt restructured loans	$	2,399		$	2,926


Non-performing loans to total loans	0.12		%	0.12		%
Allowance for credit losses on loans and leases to non-performing loans	291.52		%	357.75		%
Non-performing assets to total assets	0.12		%	0.13		%

Potential Problem Loans

Potential problem loans are those loans that are not categorized as non-performing loans, but where current information indicates that the borrower may not be able to comply with repayment ~~terms.~~terms in the future. Among other factors, we monitor ~~the~~ past due status as an indicator of credit deterioration and potential problem loans. A loan is considered past due when the contractual principal and/or interest due in accordance with the terms of the loan agreement remains unpaid after the due date of the scheduled payment. To the extent that loans become past due, we assess the potential for loss on such loans individually as we would with other problem loans and consider the effect of any potential loss in determining any additional provision for ~~loan~~credit losses on loans and ~~lease losses.~~leases. We also assess alternatives to maximize collection of any past due loans, including and without limitation, restructuring loan terms, requiring additional loan guarantee(s) or collateral, or other planned action.

For additional information on the age analysis of past due loans segregated by class of loan for ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019~~2020, refer to Note 4, Allowance for ~~Loan~~Credit Losses on Loans and ~~Lease Losses,~~Leases, to our unaudited condensed consolidated financial statements.

On a monthly basis, we monitor various credit quality indicators for our loan portfolio, including delinquency, non-performing status, changes in risk ratings, changes in the underlying performance of the borrowers and other relevant factors. On a daily basis, we monitor the collateral of loans secured by cash, marketable securities and/or cash value life insurance within the private banking portfolio, which further reduces the risk profile of that portfolio.

Loan risk ratings are assigned based on the creditworthiness of the borrower and the quality of the collateral for loans secured by marketable securities. Loan risk ratings are reviewed on an ongoing basis according to internal policies. Loans within the pass rating are believed to have a lower risk of loss than loans that are risk rated as special mention, substandard or doubtful, which are believed to have an increasing risk of loss. Our internal risk ratings are consistent with regulatory guidance. We also monitor the loan portfolio through a formal periodic review process. All non-pass rated loans are reviewed monthly and higher risk-rated loans within the pass category are reviewed three times a year.

For additional information on the definitions of our internal risk rating and the ~~recorded investment in~~amortized cost basis of loans by credit quality indicator for ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019~~2020, refer to Note 4, Allowance for ~~Loan~~Credit Losses on Loans and ~~Lease Losses,~~Leases, to our unaudited condensed consolidated financial statements.

Table of Conten t s

Investment Securities

We utilize investment activities to enhance net interest income while supporting liquidity management and interest rate risk management. Our securities portfolio consists of available-for-sale debt securities, held-to-maturity debt securities and, from time to time, debt securities held for trading purposes. Also included in our investment securities is FHLB stock. For additional information on FHLB stock, refer to Note 2, Investment Securities, to our unaudited condensed consolidated financial statements. Debt securities

~~Table of Contents~~

purchased with the intent to sell under trading activity are recorded at fair value and changes to fair value are recognized in the consolidated statements of income. Debt securities categorized as available-for-sale are recorded at fair value and changes in the fair value of these securities are recognized as a component of total ~~shareholders’~~shareholders’ equity, within accumulated other comprehensive income (loss), net of deferred taxes. Debt securities categorized as held-to-maturity are securities that the Company intends to hold until maturity and are recorded at amortized cost.

The Bank has engaged Chartwell to provide securities portfolio advisory services, subject to the investment parameters set forth in our investment policy.

As of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, we reported debt securities in available-for-sale and held-to-maturity categories. In general, fair value is based on quoted market prices of identical assets, when available. Where sufficient data is not available to produce a fair valuation, fair value is based on broker quotes for similar assets. We validate the prices received from these third parties on a quarterly basis by comparing them to prices provided by a different independent pricing service. We have also reviewed the valuation methodologies provided to us by our pricing services. Broker quotes may be adjusted to ensure that financial instruments are recorded at fair value. Adjustments may include unobservable parameters, among other things. Securities, like loans, are subject to interest rate risk and credit risk. In addition, by their nature, debt securities classified as available-for-sale, and trading securities are also subject to fair value risks that could negatively affect the level of liquidity available to us, as well as ~~shareholders’~~shareholders’ equity.

We perform a quarterly review of our investment securities to identify those that may indicate other-than-temporary impairment (“OTTI”). Our policy for OTTI is based on a number of factors, including, but not limited to the length of time and extent to which the estimated fair value has been less than cost, the financial condition of the underlying issuer, the ability of the issuer to meet contractual obligations, the likelihood of the investment security’s ability to recover any decline in its estimated fair value and, for debt securities, whether we intend to sell the security or if it is more likely than not that we will be required to sell the security prior to its recovery. If the financial markets experience deterioration, charges to income could occur in future periods as a result of OTTI determinations.

Our available-for-sale debt securities portfolio consists of U.S. government agency obligations, mortgage-backed securities, collateralized mortgage obligations, corporate bonds, ~~and~~ single-issuer trust preferred securities, and certain municipal bonds, all with varying contractual maturities. Our held-to-maturity debt securities consists of certain municipal bonds, agency obligations, mortgage-backed securities, U.S. treasury notes and corporate bonds while our trading portfolio, when active, typically consists of U.S. treasury notes, also with varying contractual maturities. However, these maturities do not necessarily represent the expected life of certain securities as the securities may be called or paid down without penalty prior to their stated maturities. The effective duration of our debt securities portfolio as of ~~September~~June 30, ~~2020~~2021, was approximately ~~1.7,~~4.2, where duration is defined as the approximate percentage change in price for a ~~100 basis~~100-basis point change in rates. No investment in any of these securities exceeds any applicable limitation imposed by law or regulation. Our ~~ALCO~~Asset and Liability Committee (“ALCO”) reviews the investment portfolio on an ongoing basis to ensure that the investments conform to our investment policy.

Available-for-Sale Debt Securities. We held ~~$552.9~~$311.1 million and ~~$248.8~~$617.6 million in debt securities available-for-sale as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019~~2020, respectively. The ~~increase~~decrease of $~~304.1~~306.4 million was primarily attributable to the transfer of $480.8 million fair value of agency mortgage-backed securities to held-to-maturity designation, and purchases of ~~$467.2~~$294.3 million, net of prepayments, calls and maturities of ~~$44.3~~$44.1 million ~~and sales of $120.4 million for certain securities~~ during the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021.

On a fair value basis, ~~26.4%~~42.9% of our available-for-sale debt securities as of ~~September~~June 30, ~~2020~~2021, were floating-rate securities, for which yields increase or decrease based on changes in market interest rates. As of December 31, ~~2019~~2020, floating-rate securities comprised ~~45.8%~~23.8% of our available-for-sale debt securities.

On a fair value basis, ~~64.9%~~17.0% of our available-for-sale debt securities as of ~~September~~June 30, ~~2020~~2021, were U.S. government and agency securities, which tend to have a lower risk profile than certain corporate bonds and single-issuer trust preferred securities, which comprised the remainder of the portfolio. As of December 31, ~~2019~~2020, agency securities comprised ~~22.1%~~71.4% of our available-for-sale debt securities. The decrease was due to the transfer of the agency mortgage-backed securities to held-to-maturity designation.

Held-to-Maturity Debt Securities. We held ~~$254.0 million~~$1.01 billion and ~~$196.0~~$211.8 million in debt securities held-to-maturity as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019~~2020, respectively. The increase of ~~$58.0~~$802.9 million was primarily attributable to the transfer of $480.8 million of previously designated available-for-sale agency mortgage-backed securities to held-to-maturity designation, purchases of ~~$436.8~~$481.6 million for certain securities, net of calls and maturities of ~~$378.4~~$153.5 million, during the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021. As part of our asset and liability management strategy, we determined that we have the intent and ability to hold these bonds until maturity, and these securities were reported at amortized cost as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019~~2020.

Trading Debt Securities. We held no trading debt securities as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019~~2020.

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Table of ~~Contents~~Conten t s

The following tables summarize the amortized cost and fair value of debt securities available-for-sale and held-to-maturity, as of the dates indicated:

~~September 30, 2020~~

~~(Dollars in thousands)~~

Amortized
Cost

Gross Unrealized
Appreciation

Gross Unrealized
Depreciation

Estimated
Fair Value

~~Debt securities available-for-sale:~~

~~Corporate bonds~~

~~175,369~~

~~1,375~~

~~607~~

~~176,137~~

~~Trust preferred securities~~

~~18,192~~

—

~~466~~

~~17,726~~

~~Agency collateralized mortgage obligations~~

~~22,929~~

~~22,954~~

~~Agency mortgage-backed securities~~

~~325,374~~

~~2,117~~

~~667~~

~~326,824~~

~~Agency debentures~~

~~8,436~~

~~821~~

—

~~9,257~~

~~Total debt securities available-for-sale~~

~~550,300~~

~~4,347~~

~~1,749~~

~~552,898~~

~~Debt securities held-to-maturity:~~

~~Corporate bonds~~

~~23,674~~

~~455~~

~~24,097~~

~~Agency debentures~~

~~79,143~~

~~1,049~~

~~80,174~~

~~Municipal bonds~~

~~7,741~~

—

~~7,825~~

~~Residential mortgage-backed securities~~

~~139,161~~

~~160~~

~~293~~

~~139,028~~

~~Agency mortgage-backed securities~~

~~4,322~~

~~830~~

—

~~5,152~~

~~Total debt securities held-to-maturity~~

~~254,041~~

~~2,578~~

~~343~~

~~256,276~~

~~Total debt securities~~

~~804,341~~

~~6,925~~

~~2,092~~

~~809,174~~


	June 30, 2021
(Dollars in thousands)	Amortized Cost		Gross Unrealized Appreciation		Gross Unrealized Depreciation		Allowance for Credit Losses (1)		Estimated Fair Value
Debt securities available-for-sale:

Corporate bonds	135,853		1,606		289		—		137,170
Residential mortgage-backed securities	97,572		78		99		—		97,551


Trust preferred securities	18,300		312		186		—		18,426
Agency collateralized mortgage obligations	19,050		86		—		—		19,136
Agency mortgage-backed securities	25,263		30		1		—		25,292
Agency debentures	7,598		748		—		—		8,346
Municipal bonds	5,204		4		—		—		5,208
Total debt securities available-for-sale	$	308,840	$	2,864	$	575	$	—	$	311,129

~~December 31, 2019~~(1)Available-for-sale securities are recorded on the consolidated statements of financial condition at estimated fair value, net of allowance for credit losses, if applicable.

~~(Dollars in thousands)~~

Amortized
Cost

Gross Unrealized
Appreciation

Gross Unrealized
Depreciation

Estimated
Fair Value

~~Debt securities available-for-sale:~~

~~Corporate bonds~~

~~172,704~~

~~2,821~~

~~107~~

~~175,418~~

~~Trust preferred securities~~

~~18,092~~

~~216~~

~~18,260~~

~~Agency collateralized mortgage obligations~~

~~27,262~~

~~27,193~~

~~Agency mortgage-backed securities~~

~~18,058~~

~~451~~

—

~~18,509~~

~~Agency debentures~~

~~8,961~~

~~441~~

—

~~9,402~~

~~Total debt securities available-for-sale~~

~~245,077~~

~~3,940~~

~~235~~

~~248,782~~

~~Debt securities held-to-maturity:~~

~~Corporate bonds~~

~~24,678~~

~~619~~

—

~~25,297~~

~~Agency debentures~~

~~149,912~~

~~628~~

~~935~~

~~149,605~~

~~Municipal bonds~~

~~17,094~~

~~144~~

—

~~17,238~~

~~Agency mortgage-backed securities~~

~~4,360~~

~~255~~

—

~~4,615~~

~~Total debt securities held-to-maturity~~

~~196,044~~

~~1,646~~

~~935~~

~~196,755~~

~~Total debt securities~~

~~441,121~~

~~5,586~~

~~1,170~~

~~445,537~~


	June 30, 2021
(Dollars in thousands)	Amortized Cost		Gross Unrealized Appreciation		Gross Unrealized Depreciation		Estimated Fair Value		Allowance for Credit Losses (1)
Debt securities held-to-maturity:
Corporate bonds	$	30,670	$	1,051	$	27	$	31,694	$	47
Agency debentures	129,998		816		11		130,803		—
Municipal bonds	4,778		10		—		4,788		—
Residential mortgage-backed securities	230,913		285		1,710		229,488		23
Agency mortgage-backed securities	579,374		798		5,480		574,692		—
U.S. treasury notes	39,049		29		409		38,669		—
Total debt securities held-to-maturity	$	1,014,782	$	2,989	$	7,637	$	1,010,134	$	70

(1)Held-to-maturity securities are recorded on the consolidated statements of financial condition at amortized cost, net of allowance for credit losses.


	December 31, 2020
(Dollars in thousands)	Amortized Cost		Gross Unrealized Appreciation		Gross Unrealized Depreciation		Allowance for Credit Losses (1)		Estimated Fair Value
Debt securities available-for-sale:

Corporate bonds	$	157,452	$	1,538	$	526	$	—	$	158,464
Trust preferred securities	18,228		57		198		—		18,087


Agency collateralized mortgage obligations	22,058		36		5		—		22,089
Agency mortgage-backed securities	406,741		3,595		209		—		410,127
Agency debentures	8,013		790		—		—		8,803
Total debt securities available-for-sale	612,492		6,016		938		—		617,570

(1)Available-for-sale securities are recorded on the statement of financial condition at estimated fair value, net of allowance for credit losses, if applicable.

Table of Conten t s


	December 31, 2020
(Dollars in thousands)	Amortized Cost	Gross Unrealized Appreciation	Gross Unrealized Depreciation	Estimated Fair Value	Allowance for Credit Losses (1)
Debt securities held-to-maturity:
Corporate bonds	28,672	566	1	29,237	79
Agency debentures	48,130	1,051	—	49,181	—
Municipal bonds	6,577	45	—	6,622	—
Residential mortgage-backed securities	124,152	237	217	124,172	70
Agency mortgage-backed securities	4,309	778	—	5,087	—
Total debt securities held-to-maturity	211,840	2,677	218	214,299	149

(1)Held-to-maturity securities are recorded on the statement of financial condition at amortized cost, net of allowance for credit losses.

The changes in the fair values of our municipal bonds, agency debentures, agency collateralized mortgage obligations, ~~and~~ agency mortgage-backed securities, and U.S. treasury notes are primarily the result of interest rate fluctuations. To assess for credit impairment, management evaluates the underlying ~~issuer’s~~issuer’s financial performance and the related credit rating information through a review of publicly available financial statements and other publicly available information. The most recent assessment for credit impairment did not identify any issues related to the ultimate repayment of principal and interest on these debt securities. In addition, the Company has the ability and intent to hold debt securities in an unrealized loss position until recovery of their amortized cost. Based on this, ~~the Company considers all of the~~no allowance for credit losses has been recognized on debt securities available-for-sale in an unrealized ~~losses to be temporary.~~loss position.

Debt securities available-for-sale of ~~$2.4~~$2.2 million as of ~~September~~June 30, ~~2020,~~2021, were held in safekeeping at the FHLB and were included in the calculation of borrowing capacity. Additionally, there were ~~$28.8~~$38.7 million of debt securities held-to-maturity that were pledged as collateral for certain deposit relationships.

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Table of ~~Contents~~Conten t s

The following table sets forth the fair value, contractual maturities and approximated weighted average yield, calculated on a fully taxable equivalent basis, of our available-for-sale and held-to-maturity debt securities portfolios as of ~~September~~June 30, ~~2020~~2021, based on estimated annual income divided by the average amortized cost of these securities. Contractual maturities may differ from expected maturities because issuers and/or borrowers may have the right to call or prepay obligations with or without penalties, which would also impact the corresponding yield.

~~September 30, 2020~~

Less Than
One Year

One to
Five Years

Five to
10 Years

Greater Than
10 Years

~~Total~~

~~(Dollars in thousands)~~

~~Amount~~

~~Yield~~

~~Amount~~

~~Yield~~

~~Amount~~

~~Yield~~

~~Amount~~

~~Yield~~

~~Amount~~

~~Yield~~

~~Debt securities available-for-sale:~~

~~Corporate bonds~~

~~31,504~~

~~2.43~~

~~72,002~~

~~1.23~~

~~72,631~~

~~1.58~~

—

~~176,137~~

~~1.59~~

~~Trust preferred securities~~

—

~~9,132~~

~~2.08~~

~~8,594~~

~~1.99~~

~~17,726~~

~~2.04~~

~~Agency collateralized mortgage obligations~~

~~411~~

~~1.58~~

—

~~22,543~~

~~0.57~~

~~22,954~~

~~0.59~~

~~Agency mortgage-backed securities~~

—

~~18,306~~

~~1.02~~

~~308,518~~

~~1.69~~

~~326,824~~

~~1.65~~

~~Agency debentures~~

—

~~9,257~~

~~3.01~~

~~9,257~~

~~3.01~~

~~Total debt securities available-for-sale~~

~~31,915~~

~~72,002~~

~~100,069~~

~~348,912~~

~~552,898~~

~~Weighted average yield~~

~~2.42~~

~~1.23~~

~~1.53~~

~~1.66~~

~~1.62~~

~~Debt securities held-to-maturity:~~

~~Corporate bonds~~

—

~~9,702~~

~~5.09~~

~~14,395~~

~~5.33~~

—

~~24,097~~

~~5.23~~

~~Agency debentures~~

—

~~70,997~~

~~2.09~~

~~9,177~~

~~3.09~~

~~80,174~~

~~2.20~~

~~Municipal bonds~~

~~2,164~~

~~2.16~~

~~4,731~~

~~2.45~~

~~930~~

~~2.99~~

—

~~7,825~~

~~2.43~~

~~Residential mortgage-backed securities~~

—

~~139,028~~

~~2.23~~

~~139,028~~

~~2.23~~

~~Agency mortgage-backed securities~~

—

~~5,152~~

~~3.67~~

~~5,152~~

~~3.67~~

~~Total debt securities held-to-maturity~~

~~2,164~~

~~14,433~~

~~86,322~~

~~153,357~~

~~256,276~~

~~Weighted average yield~~

~~2.16~~

~~4.21~~

~~2.64~~

~~2.32~~

~~2.53~~

~~Total debt securities~~

~~34,079~~

~~86,435~~

~~186,391~~

~~502,269~~

~~809,174~~

~~Weighted average yield~~

~~2.40~~

~~1.72~~

~~2.04~~

~~1.86~~

~~1.91~~


	June 30, 2021
	Less Than One Year				One to Five Years					Five to 10 Years				Greater Than 10 Years				Total
(Dollars in thousands)	Amount		Yield		Amount		Yield			Amount		Yield		Amount		Yield		Amount		Yield
Debt securities available-for-sale:

Corporate bonds	$	27,622	0.72	%	$	46,953	1.17	%		$	62,595	1.48	%	$	—	—	%	$	137,170	1.22	%
Residential mortgage-backed securities	—		—	%	—		—	%	0	—		—	%	97,551		2.16	%	97,551		2.16	%


Trust preferred securities	—		—	%	—		—	%		9,697		2.01	%	8,729		1.90	%	18,426		1.96	%
Agency collateralized mortgage obligations	—		—	%	—		—	%		—		—	%	19,136		0.52	%	19,136		0.52	%
Agency mortgage-backed securities	—		—	%	—		—	%		—		—	%	25,292		1.89	%	25,292		1.89	%
Agency debentures	—		—	%	—		—	%		—		—	%	8,346		3.01	%	8,346		3.01	%
Municipal bonds	—		—	%	—		—	%	0	—		—	%	5,208		—	%	5,208		—	%
Total debt securities available-for-sale	27,622				46,953					72,292				164,262				311,129
Weighted average yield			0.72	%			1.17	%				1.55	%			1.88	%			1.59	%
Debt securities held-to-maturity:
Corporate bonds	—		—	%	11,941		5.19	%		19,753		5.15	%	—		—	%	31,694		5.17	%
Agency debentures	—		—	%	—		—	%		122,547		1.49	%	8,256		3.09	%	130,803		1.59	%
Municipal bonds	1,915		3.62	%	2,873		3.02	%		—		—	%	—		—	%	4,788		3.26	%
Residential mortgage-backed securities	—		—	%	—		—	%		—		—	%	229,488		1.98	%	229,488		1.98	%
Agency mortgage-backed securities	—		—	%	—		—	%		18,695		1.76	%	555,997		1.64	%	574,692		1.64	%
U.S. treasury notes	—		—	%	—		—	%		38,669		1.33	%	—		—	%	38,669		1.33	%
Total debt securities held-to-maturity	1,915				14,814					199,664				793,741				1,010,134
Weighted average yield			3.62	%			4.76	%				1.84	%			1.75	%			1.81	%
Total debt securities	$	29,537			$	61,767				$	271,956			$	958,003			$	1,321,263
Weighted average yield			0.91	%			2.01	%				1.76	%			1.77	%			1.76	%

For additional information regarding our investment securities portfolios, refer to Note 2, Investment Securities, to our unaudited condensed consolidated financial statements.

Assets Under Management

~~Chartwell’s~~Chartwell’s total assets under management of ~~$9.65~~$11.51 billion ~~decreased $48.0 million,~~increased $1.25 billion, or ~~0.5%~~12.2%, as of ~~September~~June 30, ~~2020,~~2021, from ~~$9.70~~$10.26 billion as of December 31, ~~2019.~~2020.

Table of Conten t s

The following table shows the changes of our assets under management by investment style for the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021.


		Nine Months Ended September 30, 2020											Six Months Ended June 30, 2021
(Dollars in thousands)	(Dollars in thousands)	Beginning Balance		Inflows (1)		Outflows (2)		Market Appreciation (Depreciation)		Ending Balance		(Dollars in thousands)	Beginning Balance		Inflows (1)		Outflows (2)		Market Appreciation (Depreciation)		Ending Balance
Equity investment styles	Equity investment styles	$	3,932,000	$	510,000	$	(414,000)	$	(460,000)	$	3,568,000	Equity investment styles	$	4,042,000	$	258,000	$	(534,000)	$	629,000	$	4,395,000
Fixed income investment styles	Fixed income investment styles	4,816,000		907,000		(402,000)		168,000		5,489,000		Fixed income investment styles	5,663,000		1,130,000		(269,000)		55,000		6,579,000
Balanced investment styles	Balanced investment styles	953,000		31,000		(343,000)		(45,000)		596,000		Balanced investment styles	558,000		27,000		(76,000)		28,000		537,000
Total assets under management	Total assets under management	$	9,701,000	$	1,448,000	$	(1,159,000)	$	(337,000)	$	9,653,000	Total assets under management	$	10,263,000	$	1,415,000	$	(879,000)	$	712,000	$	11,511,000

(1)Inflows consist of new business and contributions to existing accounts.

(2)Outflows consist of business lost as well as distributions from existing accounts.

~~Table of Contents~~

Deposits

~~Deposits~~

Deposits are our primary source of funds to support our earning assets. We have focused on creating and growing diversified, stable, and lower all-in cost deposit channels without operating through a traditional branch network. We market liquidity and treasury management products, payment processing products, and other deposit products to high-net-worth individuals, family offices, trust companies, wealth management firms, municipalities, endowments and foundations, broker/dealers, futures commission merchants, investment management firms, property management firms, payroll providers and other financial institutions. We believe that our deposit base is stable and diversified. We further believe we have the ability to attract new deposits, which is the primary source of funding our projected loan growth. With respect to our treasury management business, we utilize hybrid interest-bearing accounts that provide our clients with certainty around ~~the~~their fee structures and returns for their total cash position while enhancing our ability to obtain their full liquidity relationship and ~~balance their expectations with~~still meeting our cost of funds expectations, rather than the more traditional combination of separate non-interest bearing and interest-bearing ~~accounts.~~ accounts, which have reduced transparency and increased client burden.

We continue to enhance our liquidity and treasury management capabilities and team to support our efforts to grow this source of funding. Treasury management deposit accounts totaled ~~$1.35~~$2.27 billion as of ~~September~~June 30, ~~2020,~~2021, an increase of ~~$273.0~~$807.6 million, or ~~25.4%~~55.4%, from December 31, ~~2019.~~2020. Treasury management deposit accounts contributed to almost 50% of our total deposit growth for the six months ended June 30, 2021. As of June 30, 2021, we had approximately 480 treasury management clients, the majority of which were payment processors, lending client-operating accounts, bankruptcy, and real estate accounts. As of June 30, 2020, we had approximately 400 treasury management clients, mostly comprised of payment processors, lending client-operating accounts, and real estate accounts.

The table below depicts average balances of, and rates paid on our deposit portfolio by major deposit category for the three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020.


		Three Months Ended September 30,									Three Months Ended June 30,
		2020				2019					2021				2020
(Dollars in thousands)	(Dollars in thousands)	Average Amount		Average Rate Paid (1)		Average Amount		Average Rate Paid (1)		(Dollars in thousands)	Average Amount		Average Rate Paid (1)		Average Amount		Average Rate Paid (1)
Interest-bearing checking accounts	Interest-bearing checking accounts	$	2,866,303	0.46	%	$	1,116,624	2.06	%	Interest-bearing checking accounts	$	3,852,078	0.33	%	$	2,327,513	0.47	%
Money market deposit accounts	Money market deposit accounts	3,811,100		0.72	%	3,106,186		2.41	%	Money market deposit accounts	4,316,946		0.52	%	3,862,068		0.77	%
Certificates of deposit	Certificates of deposit	1,121,824		1.30	%	1,462,521		2.56	%	Certificates of deposit	929,906		0.54	%	1,389,984		1.69	%
Total average interest-bearing deposits	Total average interest-bearing deposits	7,799,227		0.71	%	5,685,331		2.38	%	Total average interest-bearing deposits	9,098,930		0.45	%	7,579,565		0.85	%
Noninterest-bearing deposits	Noninterest-bearing deposits	407,079		—		268,013		—		Noninterest-bearing deposits	460,601		—		417,732		—
Total average deposits	Total average deposits	$	8,206,306	0.67	%	$	5,953,344	2.27	%	Total average deposits	$	9,559,531	0.42	%	$	7,997,297	0.80	%

(1)Annualized

Average Deposits for the Three Months Ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020. For the three months ended ~~September~~June 30, ~~2020,~~2021, our average total deposits were ~~$8.21~~$9.56 billion, representing an increase of ~~$2.25~~$1.56 billion, or ~~37.8%~~19.5%, from the same period in ~~2019~~2020. The deposit growth was driven by increases in our interest-bearing checking account, money market deposit account and noninterest-bearing deposit account ~~categories.~~categories as we continue to attract clients to our treasury management business and grow our deposit product offerings. Our average cost of interest-bearing deposits decreased ~~167~~40 basis points to ~~0.71%~~0.45% for the three months ended ~~September~~June 30, ~~2020,~~2021, from ~~2.38%~~0.85% for the same period in ~~2019~~2020, as average rates paid were lower in all interest-bearing deposit categories, which was primarily driven by the ~~recent~~ ~~decrease~~decreases to the Federal ~~Reserve’s~~Reserve’s target federal funds rate in 2020, which impacted our variable-rate deposits. Another driver of the combination of higher average deposits and lower rates are our continued addition of meaningful and long-term client relationships that support our efforts to manage deposit costs through variable rate and discretionary pricing in the economic environment. Average

Table of Conten t s

interest-bearing checking accounts increased to ~~36.8%~~42.3% of total average interest-bearing deposits for the three months ended ~~September~~June 30, ~~2020,~~2021, compared to ~~19.6%~~30.7% for the same period in ~~2019~~2020. Average money market deposits decreased to ~~48.8%~~47.5% of total average interest-bearing deposits for the three months ended ~~September~~June 30, ~~2020,~~2021, from ~~54.7%~~51.0% for the same period in ~~2019~~2020. Average certificates of deposit decreased to ~~14.4%~~10.2% of total average interest-bearing deposits for the three months ended ~~September~~June 30, ~~2020,~~2021, compared to ~~25.7%~~18.3% for the same period in ~~2019~~2020. Average noninterest-bearing deposits increased ~~$139.1~~$42.9 million, or ~~51.9%~~10.3%, in the three months ended ~~September~~June 30, ~~2020~~2021, from the three months ended ~~September~~June 30, ~~2019,~~2020, and the average cost of total deposits decreased ~~160~~38 basis points to ~~0.67%~~0.42% for the three months ended ~~September~~June 30, ~~2020~~2021, from ~~2.27%~~0.80% for the same period in ~~2019.~~2020. We focus ~~only~~ on high quality loan growth and ~~in the absence of this,~~ we aim to increase our assets through ~~cash and cash equivalents as well as~~ adding to our investment portfolio as part of our strategy to build greater ~~on balance~~on-balance sheet liquidity, funded through our deposits.

~~Table of Contents~~

The table below depicts average balances of, and rates paid on, our deposit portfolio by deposit type for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020.


		Nine Months Ended September 30,									Six Months Ended June 30,
		2020				2019					2021				2020
(Dollars in thousands)	(Dollars in thousands)	Average Amount		Average Rate Paid (1)		Average Amount		Average Rate Paid (1)		(Dollars in thousands)	Average Amount		Average Rate Paid (1)		Average Amount		Average Rate Paid (1)
Interest-bearing checking accounts	Interest-bearing checking accounts	$	2,224,827	0.67	%	$	927,198	2.21	%	Interest-bearing checking accounts	$	3,461,202	0.35	%	$	1,900,563	0.84	%
Money market deposit accounts	Money market deposit accounts	3,740,968		1.03	%	2,883,009		2.49	%	Money market deposit accounts	4,331,121		0.54	%	3,705,517		1.20	%
Certificates of deposit	Certificates of deposit	1,297,637		1.74	%	1,375,324		2.59	%	Certificates of deposit	971,155		0.68	%	1,386,510		1.92	%
Total average interest-bearing deposits	Total average interest-bearing deposits	7,263,432		1.05	%	5,185,531		2.46	%	Total average interest-bearing deposits	8,763,478		0.48	%	6,992,590		1.24	%
Noninterest-bearing deposits	Noninterest-bearing deposits	391,689		—		262,056		—		Noninterest-bearing deposits	442,668		—		383,909		—
Total average deposits	Total average deposits	$	7,655,121	1.00	%	$	5,447,587	2.35	%	Total average deposits	$	9,206,146	0.46	%	$	7,376,499	1.18	%

(1) Annualized

Average Deposits for the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020. For the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021, our average total deposits were ~~$7.66~~$9.21 billion, representing an increase of ~~$2.21~~$1.83 billion, or ~~40.5%~~24.8%, from the same period in ~~2019~~2020. The average deposit growth was driven by increases in our interest-bearing checking account, money market deposit account and noninterest-bearing deposit account categories. The deposit growth was driven by increases in our interest-bearing checking account, money market deposit account and noninterest-bearing deposit account categories as we continue to attract clients to our treasury management business and grow our deposit product offerings. Our average cost of interest-bearing deposits decreased ~~141~~76 basis points to ~~1.05%~~0.48% for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021, from ~~2.46%~~1.24% for the same period in ~~2019~~2020, as average rates paid were lower in all interest-bearing deposit categories, driven by the ~~recent decrease to~~decreases in the Federal ~~Reserve’s~~Reserve’s target federal funds rate in 2020, which impacted our variable-rate deposits. Another driver of the combination of higher average deposits and lower rates are our continued addition of meaningful and long-term client relationships that support our efforts to manage deposit costs through variable rate and discretionary pricing in the economic environment. Average interest-bearing checking accounts increased to ~~30.6%~~39.5% of total average interest-bearing deposits for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021, compared to ~~17.9%~~27.2% for the same period in ~~2019~~2020. Average money market deposits decreased to ~~51.5%~~49.4% of total average interest-bearing deposits for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021, from ~~55.6%~~53.0% for the same period in ~~2019~~2020. Average certificates of deposit decreased to ~~17.9%~~11.1% of total average interest-bearing deposits for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021, compared to ~~26.5%~~19.8% for the same period in ~~2019~~2020. Average noninterest-bearing deposits increased ~~49.5%~~15.3%, in the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, from the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020, and the average cost of total deposits decreased ~~135~~72 basis points to ~~1.00%~~0.46% for the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, from ~~2.35%~~1.18% for the same period in ~~2019.~~2020. We focus ~~only~~ on high quality loan growth and ~~in the absence of this,~~ we aim to increase our assets through ~~cash and cash equivalents as well as~~ adding to our investment portfolio as part of our strategy to build greater ~~on balance~~on-balance sheet liquidity, funded through our deposits.

Certificates of Deposit

Maturities of certificates of deposit of $100,000 or more outstanding are summarized below, as of ~~September~~June 30, ~~2020.~~2021.


(Dollars in thousands)	~~September~~June 30, ~~2020~~2021
Months to maturity:
Three months or less	$	~~328,816~~388,510
Over three to six months	~~283,321~~131,414
Over six to 12 months	~~274,478~~197,679
Over 12 months	~~105,829~~148,068
Total	$	~~992,444~~865,671

Table of Conten t s

Reciprocal and Brokered Deposits

As of ~~September~~June 30, ~~2020~~2021, we consider approximately ~~94%~~89% of our total deposits to be relationship-based deposits, which include reciprocal certificates of deposit placed through CDARS®® and reciprocal demand deposits placed through ICS®®. As of ~~September~~June 30, ~~2020,~~2021, the Bank had CDARS®® and ICS®® reciprocal deposits totaling ~~$1.71~~$2.01 billion, which were not classified as ~~non-brokered~~brokered deposits. We continue to utilize brokered deposits as a tool for us to manage our cost of funds and to efficiently match changes in our liquidity needs based on our loan growth with our deposit balances. As of ~~September~~June 30, ~~2020,~~2021, brokered deposits were approximately 6%11% of total deposits. For additional information on our deposits, refer to Note 5, Deposits, to our unaudited condensed consolidated financial statements.

~~Table of Contents~~

Borrowings

Deposits are the primary source of funds for our lending and investment activities, as well as the ~~Bank’s~~Bank’s general business purposes. As an alternative source of liquidity, we may obtain advances from the FHLB of Pittsburgh, sell investment securities subject to our obligation to repurchase them, purchase ~~Federal~~federal funds or engage in overnight borrowings from the FHLB or our correspondent banks.

The following table presents certain information with respect to our outstanding borrowings, as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019~~2020.


		September 30, 2020								December 31, 2019									June 30, 2021								December 31, 2020
(Dollars in thousands)	(Dollars in thousands)	Amount		Interest Rate	Maximum Balance at Any Month End		Average Balance During the Period		Maximum Original Term	Amount		Interest Rate	Maximum Balance at Any Month End		Average Balance During the Period		Maximum Original Term	(Dollars in thousands)	Amount		Interest Rate	Maximum Balance at Any Month End		Average Balance During the Period		Maximum Original Term	Amount		Interest Rate	Maximum Balance at Any Month End		Average Balance During the Period		Maximum Original Term
FHLB borrowings	FHLB borrowings	$	300,000	0.41%	$	480,000	$	340,493	12 months	$	355,000	1.89%	$	605,000	$	394,480	12 months	FHLB borrowings	$	250,000	0.30%	$	250,000	$	251,933	12 months	$	300,000	0.35%	$	480,000	$	330,314	12 months
Line of credit borrowings	Line of credit borrowings	—		—%	30,000		8,047		12 months	—		—%	4,250		1,234		12 months	Line of credit borrowings	—		—%	5,200		2,282		12 months	5,000		4.25%	30,000		6,243		12 months
Subordinated notes payable	Subordinated notes payable	97,500		5.75%	97,500		47,737		10 years	—		—%	35,000		17,356		5 years	Subordinated notes payable	97,500		5.75%	97,500		97,500		10 years	97,500		5.75%	97,500		60,246		10 years
Total borrowings outstanding	Total borrowings outstanding	$	397,500	1.72%	$	607,500	$	396,277		$	355,000	1.89%	$	644,250	$	413,070		Total borrowings outstanding	$	347,500	1.83%	$	352,700	$	351,715		$	402,500	1.71%	$	607,500	$	396,803

The Company previously entered into cash flow hedge transactions to establish the interest rate paid on ~~$300.0~~$250.0 million of its FHLB borrowings at varying effective rates and maturities. For additional information on the detail of each cash flow hedge transaction, refer to Note 10, Derivatives and Hedging Activity, to our unaudited condensed consolidated financial statements.

Liquidity

We evaluate liquidity both at the holding company level and at the Bank level. As of ~~September~~June 30, ~~2020~~2021, the Bank and Chartwell represent our only material assets. Our primary sources of funds at the parent company level are cash on hand, dividends paid to us from ~~the Bank and~~ Chartwell, availability on our line of credit, and the net proceeds from the issuance of our debt and/or equity securities. As of ~~September~~June 30, ~~2020~~2021, our primary liquidity needs at the parent company level were the quarterly dividends on our preferred stock, ~~our semi-annual~~ interest payments on our ~~recently issued~~ subordinated ~~notes payable~~debt and ~~our~~other borrowings, and share ~~repurchase program.~~repurchases related to the net settlement of equity awards exercised or vested. All other liquidity needs were minimal and related to reimbursing the Bank for management, accounting and financial reporting services provided by Bank personnel. During the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021, the parent company paid ~~$5.8~~$3.9 million related to our preferred stock dividends, $2.8 million related to interest payments on our subordinated notes payable and other borrowings, and $1.6 million in purchases of treasury shares in connection with the net settlement of equity awards exercised or vested. During the six months ended June 30, 2020, the parent company paid $5.2 million related to our share repurchase and stock cancellation ~~program, $5.9~~programs and $3.9 million related to our preferred stock dividends and $261,000 related to interest payments on our other borrowings. During the nine months ended September 30, 2019, the parent company paid paid $35.0 million on the repayment of principal of subordinated debt, $3.8 million related to our preferred stock dividend, $2.0 million related to our share repurchase program and $1.1 million related to interest payments on our subordinated notes and other borrowings.dividends. We believe that our cash on hand at the parent company level, coupled with the dividend paying capacity of the Bank and Chartwell, were adequate to fund any foreseeable parent company obligations as of ~~September~~June 30, ~~2020.~~2021. In addition, ~~the holding company maintains~~we maintain an unsecured line of credit with ~~Texas Capital~~Huntington National Bank. As of ~~September~~June 30, ~~2020,~~2021, the unsecured line was $75.0 million, of which the full amount was available for borrowing. We also expect to receive gross proceeds of $105.0 million in the fourth quarter of 2020 in connection with our sale of securities to T-VIII PubOpps pursuant to the Investment Agreement and up to an additional $16.1 million if the warrants are exercised in full.

Our primary goal in liquidity management at the Bank level is to satisfy the cash flow requirements of depositors and borrowers, as well as our operating cash needs. These requirements include the payment of deposits on demand or at their contractual maturity, the repayment of borrowings as they mature, the payment of our ordinary business obligations, the ability to fund new and existing loans and other funding commitments or arrangements, and the ability to take advantage of new business opportunities. Our ALCO, which

Table of Conten t s

includes members of executive management, has established an asset/liability management policy designed to achieve and maintain earnings performance consistent with long-term goals while maintaining acceptable levels of interest rate risk, well capitalized regulatory status and adequate levels of liquidity. The ALCO has also established a contingency funding plan to address liquidity ~~crisis~~stress conditions. The ALCO is designated as the body responsible for the monitoring and implementation of these policies. The ALCO reviews liquidity on a frequent basis and approves significant changes in strategies that affect balance sheet or cash flow positions.

~~Table of Contents~~

Sources of asset liquidity are cash, interest-earning deposits with other banks, federal funds sold, certain unpledged debt and equity securities, loan repayments (scheduled and unscheduled) and future earnings. Sources of liability liquidity include a stable deposit base, the ability to renew maturing certificates of deposit, borrowing availability at the FHLB of Pittsburgh, unsecured lines with other financial institutions, access to reciprocal CDARS®® and ICS®® deposits and brokered deposits, and the ability to raise debt and equity. Customer deposits, which are an important source of liquidity, depend on the confidence of customers in us. Deposits are supported by our capital position and, up to applicable limits, the protection provided by FDIC insurance.

We measure and monitor liquidity on an ongoing basis, which allows us to more effectively understand and react to trends in our balance sheet. In addition, the ALCO uses a variety of methods to monitor our liquidity position and liquidity needs, including a liquidity gap, which measures potential sources and uses of funds over future periods. We have established policy guidelines for a variety of liquidity-related performance metrics, such as net loans to deposits, brokered funding composition, cash to total loans and duration of certificates of deposit, among others, all of which are utilized in measuring and managing our liquidity position. The ALCO performs contingency funding and capital stress analyses at least annually to determine our ability to meet potential liquidity and capital needs under various stress scenarios.

In response to the public health and economic crisis resulting from COVID-19 pandemic, we intentionally increased our liquid assets as a component of our assets and our deposits as a portion of our assets for the express purpose of carrying more on balance sheet liquidity to provide for potential or unforeseen clients’ needs during the pandemic, in particular during the early stages of the government shut-down programs. Our strong liquidity position is due to our ability to generate strong growth in deposits, which is evidenced by our ratio of total deposits to total assets of ~~86.2%~~88.3% and ~~85.4%~~85.8% as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019~~2020, respectively. Our ratio of average deposits to average assets increased to ~~85.9%~~87.2% for the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, from ~~83.8%~~85.7% for the same period in ~~2019.~~2020. As of ~~September~~June 30, ~~2020~~2021, we had available liquidity of $~~1.87~~2.49 billion, or ~~19.7%~~21.6% of total assets. These sources consisted of available cash totaling ~~$413.1~~$418.1 million, ~~or 4.4% of total assets,~~ unpledged investment securities totaling ~~$746.1 million,~~$1.24 billion, or ~~7.9%~~10.8% of total assets, and the ability to borrow from the FHLB and correspondent bank lines totaling $~~713.2~~826.3 million, or ~~7.5%~~7.2% of total assets. Available cash excludes cash posted as collateral for derivative and letter of credit transactions and the reserve balance requirement at the Federal Reserve.

The following table shows our available liquidity, by source, as of the dates indicated:


~~(Dollars in thousands)~~	September 30, 2020		December 31, 2019
~~Available cash~~	$	~~413,114~~	$	~~167,695~~
~~Certain unpledged debt securities~~	~~746,058~~		~~400,222~~
~~Net borrowing capacity~~	~~713,153~~		~~569,132~~
~~Total liquidity~~	$	~~1,872,325~~	$	~~1,137,049~~

~~For the~~ ~~nine months ended September 30, 2020, we generated~~ ~~$64.1 million~~ ~~of cash from operating activities, compared to~~ ~~$48.7 million~~ ~~for the same period in~~ ~~2019. This change in cash flow was the result of a decrease in net income of $13.0 million for the~~ ~~nine months ended September 30, 2020, more than offset by changes in working capital items largely related to timing.~~


(Dollars in thousands)	June 30, 2021		December 31, 2020
Available cash	$	418,090	$	271,090
Certain unpledged debt securities	1,243,938		793,658
Net borrowing capacity	826,292		704,082
Total liquidity	$	2,488,320	$	1,768,830

Investing activities resulted in a net cash outflow of $~~1.44~~1.59 billion for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021, as compared to a net cash outflow of $~~894.0~~944.6 million for the same period in ~~2019~~2020. The outflows for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021, were primarily due to net loan growth of $~~1.08~~1.05 billion and purchases of investment securities totaling ~~$904.0~~$775.9 million, partially offset by the proceeds from the sale, principal repayments and maturities from investment securities totaling ~~$543.1~~$272.3 million. The outflows for the ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, included net loan growth of ~~$881.9~~$593.0 million and purchases of investment securities totaling ~~$233.7~~$688.3 million, partially offset by the proceeds from the sale, principal repayments and maturities from investment securities totaling ~~$229.6~~$332.7 million.

Financing activities resulted in a net inflow of $~~1.58~~1.64 billion for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021, compared to a net inflow of $~~1.04~~1.23 billion for the same period in ~~2019~~2020. The inflows for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021, were primarily a result of a net increase in deposits of ~~$1.55~~$1.70 billion, partially offset by a net decrease in FHLB borrowings of $50.0 million. The inflows for the six months ended June 30, 2020, included a net increase in deposits of $1.20 billion and net proceeds of ~~$95.3~~$95.5 million from the issuance of subordinated notes payable, partially offset by a net decrease in FHLB borrowings of $55.0 million. The inflows for the nine months ended September 30, 2019, included a net increase in deposits of $1.04 billion and proceeds from the issuance of preferred stock of $77.6 million, partially offset by a net decrease in FHLB borrowings of $35.0 million and repayment of subordinated debt of $35.0 million.

We continue to evaluate the potential impact on liquidity management of various regulatory proposals, including those being established under the Dodd-Frank Wall Street Reform and Consumer Protection Act, as government regulators continue the final rule-making process.

Capital Resources

~~Table of Contents~~

~~Capital Resources~~

The access to and cost of funding for new business initiatives, the ability to engage in expanded business activities, the ability to pay dividends, the level of deposit insurance costs and the level and nature of regulatory oversight depend, in part, on our capital position. The Company filed a registration statement on Form S-3 with the SEC on December 26, 2019, which provides a means to allow us to issue registered securities to finance our growth objectives.

Table of Conten t s

The assessment of capital adequacy depends on a number of factors, including loan composition, asset quality, liquidity, earnings performance, changing competitive conditions and economic forces. We seek to maintain a strong capital base to support our growth and expansion activities, to provide stability to our current operations and to promote public confidence in our Company.

~~Shareholders’~~Shareholders’ Equity. ~~Shareholders’~~Shareholders’ equity was $~~643.2~~794.6 million as of ~~September~~June 30, ~~2020~~2021, compared to $~~621.3~~757.1 million as of December 31, ~~2019~~2020. The $~~21.9~~37.4 million increase during the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021, was primarily attributable to net income of $~~32.6~~35.0 million, ~~and~~ $~~7.2~~5.4 million in stock-based compensation ~~partially offset by a~~and ~~decrease~~ of $~~6.6~~2.1 million in accumulated other comprehensive income, ~~(loss),~~partially offset by preferred stock dividends ~~paid~~ of ~~$5.9~~$3.9 million ~~the purchase~~and an increase of ~~$3.3~~$1.6 million in treasury stock ~~and $2.5 million in cancellation~~related to the net settlement of ~~stock options.~~equity awards exercised or vested.

~~In May 2019,~~On December 30, 2020, the Company completed the ~~issuance~~private placement of securities pursuant to an Investment Agreement, dated October 10, 2020 and ~~sale~~amended December 9, 2020, with T-VIII PubOpps LP (“T-VIII PubOpps”), an affiliate of ~~a registered, underwritten public offering~~investment funds managed by Stone Point Capital LLC. Pursuant to the Investment Agreement, the Company sold to T-VIII PubOpps (i) 2,770,083 shares of ~~3,220,000 depositary~~voting common stock for $40.0 million, (ii) 650 shares ~~each representing a 1/40th interest in a share~~ of ~~its 6.375% Fixed-to-Floating Rate~~ Series ~~B Non-Cumulative Perpetual~~C Preferred Stock ~~no par value (the “~~for $65.0 million, and (iii) warrants to purchase up to 922,438 shares of voting common stock or non-voting common stock at an exercise price of $17.50 per share. After two years, the Series BC Preferred Stock~~”), with~~ is convertible into shares of non-voting common stock or, when transferred under certain limited circumstances to a holder other than an affiliate of Stone Point Capital LLC, voting common stock, at a price of $13.75 per share. The Series C Preferred Stock has a liquidation preference of ~~$1,000~~$100,000 per share, ~~(equivalent~~and is entitled to $25 per depository share). The Company received net proceeds of $77.6 million from the offering, after deducting underwriting discounts, commissions and direct offering expenses. Our Series B Preferred Stock provides Tier 1 capital for the holding company under federal regulatory capital rules.

When, as, and if declared by the board of directors of the Company (the “Board”), dividends will be payable on the Series B Preferred Stock from the date of issuance to, but excluding July 1, 2026, at a rate of 6.375% per annum, payable quarterly, in arrears, and from and including July 1, 2026, dividends will accrue and be payable at a floating rate equal to three-month LIBOR plus a spread of 408.8 basis points per annum, payable quarterly, in arrears. The Company may redeem the Series B Preferred Stock at its option, subject to regulatory approval, on or after July 1, 2024, as described in the prospectus supplement relating to the offering filed with the SEC on May 23, 2019.

In March 2018, the Company completed the issuance and sale of a registered, underwritten public offering of 1,610,000 depositary shares, each representing a 1/40th interest in a share of its 6.75% Fixed-to-Floating Rate Series A Non-Cumulative Perpetual Preferred Stock, no par value (the “Series A Preferred Stock”), with a liquidation preference of $1,000 per share (equivalent to $25 per depository share). The Company received net proceeds of $38.5 million from the offering, after deducting underwriting discounts, commissions and direct offering expenses. Our Series A Preferred Stock provides Tier 1 capital for the holding company under federal regulatory capital rules.

~~When,~~receive, when, as and if declared by the Board ~~dividends will be payable on~~of Directors of the ~~Series A Preferred Stock from the date of issuance to, but excluding April 1, 2023~~Company (“Board”), dividends at a rate of 6.75% per annum for each quarterly dividend period, payable ~~quarterly,~~ in arrears ~~and from and including April 1, 2023, dividends will accrue and be payable at a floating rate equal to three-month LIBOR plus a spread~~in cash or additional shares of ~~398.5 basis points per annum, payable quarterly, in arrears.~~Series C Preferred Stock. The Company ~~may redeem~~does not have redemption rights with respect to the Series AC Preferred ~~Stock~~Stock.

The Company received gross proceeds of $105.0 million at ~~its option, subject~~the closing of the private placement, and may receive up to ~~regulatory approval, on or after April 1, 2023, as described~~an additional $16.1 million if the warrants are exercised in ~~the prospectus supplement relating~~full. The net proceeds were recorded to shareholders’ equity at December 31, 2020, and allocated to the ~~offering filed with~~three equity instruments issued using the ~~SEC on March 19, 2018.~~relative fair value method applied to the common stock, and the preferred stock, and to the warrants issued which were recorded to additional paid-in capital. The net proceeds constitute Tier 1 capital for the Company under federal regulatory capital rules.

Regulatory Capital. As of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019~~2020, TriState Capital Holdings, Inc. and TriState Capital Bank were in compliance with all applicable regulatory capital requirements, and TriState Capital Bank was categorized as well capitalized for purposes of the ~~FDIC’s~~FDIC’s prompt corrective action regulations. As we employ our capital and continue to grow our operations, our regulatory capital levels may decrease. However, we will monitor our capital in order to remain categorized as well capitalized under the applicable regulatory guidelines and in compliance with all regulatory capital standards applicable to us. ~~As of September 30, 2020 and December 31, 2019, the~~The capital conservation buffer ~~was~~requirement is a CET 1 capital to risk-weighted assets ratio of 2.5%, or more, in addition to the minimum risk-based capital adequacy levels shown in the tables below. ~~Both~~As of June 30, 2021 and December 31, 2020, both the Company and the Bank were above the capital conservation buffer levels required to avoid limitations on capital distributions and discretionary bonus payments.

Table of ~~Contents~~Conten t s

The following tables present the actual capital amounts and regulatory capital ratios for the Company and the Bank as of the dates indicated:

~~September 30, 2020~~

~~Actual~~

~~For Capital Adequacy Purposes~~

~~To be Well Capitalized Under Prompt Corrective Action Provisions~~

~~(Dollars in thousands)~~

~~Amount~~

~~Ratio~~

~~Amount~~

~~Ratio~~

~~Amount~~

~~Ratio~~

~~Total risk-based capital ratio~~

~~Company~~

~~716,731~~

~~12.85~~

~~446,355~~

~~8.00~~

~~N/A~~

~~Bank~~

~~692,957~~

~~12.46~~

~~444,791~~

~~8.00~~

~~555,989~~

~~10.00~~

~~Tier 1 risk-based capital ratio~~

~~Company~~

~~589,176~~

~~10.56~~

~~334,766~~

~~6.00~~

~~N/A~~

~~Bank~~

~~660,841~~

~~11.89~~

~~333,593~~

~~6.00~~

~~444,791~~

~~8.00~~

~~Common equity tier 1 risk-based capital ratio~~

~~Company~~

~~473,097~~

~~8.48~~

~~251,075~~

~~4.50~~

~~N/A~~

~~Bank~~

~~660,841~~

~~11.89~~

~~250,195~~

~~4.50~~

~~361,393~~

~~6.50~~

~~Tier 1 leverage ratio~~

~~Company~~

~~589,176~~

~~6.23~~

~~378,310~~

~~4.00~~

~~N/A~~

~~Bank~~

~~660,841~~

~~7.00~~

~~377,750~~

~~4.00~~

~~472,187~~

~~5.00~~


	June 30, 2021
	Actual				For Capital Adequacy Purposes				To be Well Capitalized Under Prompt Corrective Action Provisions
(Dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio
Total risk-based capital ratio
Company	$	868,225	13.94	%	$	498,423	8.00	%	N/A		N/A
Bank	$	823,458	13.26	%	$	496,642	8.00	%	$	620,802	10.00	%
Tier 1 risk-based capital ratio
Company	$	743,882	11.94	%	$	373,817	6.00	%	N/A		N/A
Bank	$	794,715	12.80	%	$	372,481	6.00	%	$	496,642	8.00	%
Common equity tier 1 risk-based capital ratio
Company	$	564,539	9.06	%	$	280,363	4.50	%	N/A		N/A
Bank	$	794,715	12.80	%	$	279,361	4.50	%	$	403,521	6.50	%
Tier 1 leverage ratio
Company	$	743,882	6.86	%	$	433,567	4.00	%	N/A		N/A
Bank	$	794,715	7.34	%	$	432,885	4.00	%	$	541,106	5.00	%

~~December 31, 2019~~

~~Actual~~

~~For Capital Adequacy Purposes~~

~~To be Well Capitalized Under Prompt Corrective Action Provisions~~

~~(Dollars in thousands)~~

~~Amount~~

~~Ratio~~

~~Amount~~

~~Ratio~~

~~Amount~~

~~Ratio~~

~~Total risk-based capital ratio~~

~~Company~~

~~572,221~~

~~12.05~~

~~379,911~~

~~8.00~~

~~N/A~~

~~Bank~~

~~547,532~~

~~11.57~~

~~378,623~~

~~8.00~~

~~473,279~~

~~10.00~~

~~Tier 1 risk-based capital ratio~~

~~Company~~

~~558,068~~

~~11.75~~

~~284,933~~

~~6.00~~

~~N/A~~

~~Bank~~

~~532,779~~

~~11.26~~

~~283,967~~

~~6.00~~

~~378,623~~

~~8.00~~

~~Common equity tier 1 risk-based capital ratio~~

~~Company~~

~~442,385~~

~~9.32~~

~~213,700~~

~~4.50~~

~~N/A~~

~~Bank~~

~~532,779~~

~~11.26~~

~~212,975~~

~~4.50~~

~~307,631~~

~~6.50~~

~~Tier 1 leverage ratio~~

~~Company~~

~~558,068~~

~~7.54~~

~~296,038~~

~~4.00~~

~~N/A~~

~~Bank~~

~~532,779~~

~~7.22~~

~~295,277~~

~~4.00~~

~~369,097~~

~~5.00~~


	December 31, 2020
	Actual				For Capital Adequacy Purposes				To be Well Capitalized Under Prompt Corrective Action Provisions
(Dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio
Total risk-based capital ratio
Company	$	833,819	14.12	%	$	472,267	8.00	%	N/A		N/A
Bank	$	789,273	13.41	%	$	470,820	8.00	%	$	588,525	10.00	%
Tier 1 risk-based capital ratio
Company	$	707,711	11.99	%	$	354,200	6.00	%	N/A		N/A
Bank	$	758,658	12.89	%	$	353,115	6.00	%	$	470,820	8.00	%
Common equity tier 1 risk-based capital ratio
Company	$	530,568	8.99	%	$	265,650	4.50	%	N/A		N/A
Bank	$	758,658	12.89	%	$	264,836	4.50	%	$	382,542	6.50	%
Tier 1 leverage ratio
Company	$	707,711	7.29	%	$	388,408	4.00	%	N/A		N/A
Bank	$	758,658	7.83	%	$	387,626	4.00	%	$	484,533	5.00	%

Contractual Obligations and Commitments

There were no material changes to contractual obligations during the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, that were outside the ordinary course of business.

Off-Balance Sheet Arrangements

In the normal course of business, we enter into various transactions that are not included in our consolidated balance sheets in accordance with GAAP. These transactions include commitments to extend credit in the ordinary course of business to approved customers.

Unfunded loan commitments and demand line of credit availability, including standby letters of credit, are recorded on our statement of financial condition as they are funded. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Our measure of unfunded loan commitments and demand line of credit availability include unused availability under demand loans for our private banking lines secured by cash, marketable securities and/or cash value life insurance, as well as commitments to fund loans secured by residential properties, commercial real estate, construction loans, business lines of credit and other unused commitments of loans in various stages of funding. Not all commitments will fund or fully fund as customers

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often only draw on a portion of their available credit and we continuously monitor utilization of our unfunded lines of credit and on both commercial and private banking loans. We believe that we maintain sufficient liquidity or otherwise have the ability to generate the liquidity necessary to fund anticipated draws under unused loan commitments of demand lines of credit.

Standby letters of credit are written conditional commitments issued by us to guarantee the performance of our customer to a third party. In the event our customer does not perform in accordance with the terms of the agreement with the third party, we would be required to fund the commitment. The maximum potential amount of future payments we could be required to make is represented by the contractual amount of the commitment. If the commitment is funded, we would be entitled to seek recovery from the customer.

We minimize our exposure to loss under loan commitments and standby letters of credit and unfunded demand lines of credit by subjecting them to credit approval and monitoring procedures. The effect on our revenues, expenses, cash flows and liquidity of the unused portions of these commitments cannot be reasonably predicted because, while the borrower has the ability to draw upon these commitments at any time under certain contractual agreements, these commitments often expire without being drawn. There is no guarantee that the lines of credit will be used.

The following table is a summary of the total notional amount of unused loan commitments and standby letters of credit commitments and unfunded demand lines of credit availability, based on the values of eligible collateral or other terms under the loan agreement, by contractual maturities outstanding as of the date indicated.

~~September 30, 2020~~

~~(Dollars in thousands)~~

~~Due on Demand~~

One Year
or Less

One to
Three Years

Three to
Five Years

Greater Than
Five Years

~~Total~~

~~Unused loan commitments and demand lines of credit~~

~~5,092,789~~

~~561,418~~

~~360,676~~

~~143,276~~

~~14,596~~

~~6,172,755~~

~~Standby letters of credit~~

~~1,619~~

~~47,161~~

~~18,545~~

~~5,808~~

—

~~73,133~~

~~Total off-balance sheet arrangements~~

~~5,094,408~~

~~608,579~~

~~379,221~~

~~149,084~~

~~14,596~~

~~6,245,888~~


	June 30, 2021
(Dollars in thousands)	Due on Demand		One Year or Less		One to Three Years		Three to Five Years		Greater Than Five Years		Total
Unused loan commitments and demand lines of credit	$	7,189,147	$	586,328	$	508,717	$	143,266	$	12,718	$	8,440,176
Standby letters of credit	700		45,621		25,606		2,795		—		74,722
Total off-balance sheet arrangements	$	7,189,847	$	631,949	$	534,323	$	146,061	$	12,718	$	8,514,898

Market Risk

Market risk refers to potential losses arising from changes in interest rates, foreign exchange rates, equity prices and commodity prices. Our primary component of market risk is interest rate volatility. Fluctuations in interest rates will ultimately impact the level of both income and expense recorded on most of our assets and liabilities, and the market value of all interest-earning assets and interest-bearing liabilities, other than those that have a short term to maturity. Because of the nature of our operations, we are not subject to foreign exchange or commodity price risk. From time to time, we hold market risk sensitive instruments for trading purposes. The summary information provided in this section should be read in conjunction with our unaudited condensed consolidated financial statements and related notes.

Interest rate risk is comprised of re-pricing risk, basis risk, yield curve risk and option risk. Re-pricing risk arises from differences in the cash flow or re-pricing between asset and liability portfolios. Basis risk arises when asset and liability portfolios are related to different market rate indexes, which do not always change by the same amount or at the same time. Yield curve risk arises when asset and liability portfolios are related to different maturities on a given yield curve; when the yield curve changes shape, the risk position is altered. Option risk arises from embedded options within asset and liability products as certain borrowers may prepay their loans and certain depositors may redeem their certificates when rates change.

Our ALCO actively measures and manages interest rate risk. The ALCO is responsible for the formulation and implementation of strategies to improve balance sheet positioning and earnings, and for reviewing our interest rate sensitivity position. This involves devising policy guidelines, risk measures and limits, and managing the amount of interest rate risk and its effect on net interest income and capital.

We utilize an asset/liability model to measure and manage interest rate risk. The specific measurement tools used by management on at least a quarterly basis include net interest income (““NII””) simulation, economic value of equity (““EVE””) analysis and gap analysis. All are static measures that do not incorporate assumptions regarding future business. All are also measures of interest rate sensitivity used to help us develop strategies for managing exposure to interest rate risk rather than projecting future earnings.

In our view, all three measures have specific benefits and shortcomings. NII simulation explicitly measures exposure to earnings from changes in market rates of interest but does not provide a long-term view of value. EVE analysis helps identify changes in optionality and price over a longer-term horizon, but its liquidation perspective does not convey the earnings-based measures that are typically the focus of managing and valuing a going concern. Gap analysis compares the difference between the amount of interest-earning assets and interest-bearing liabilities subject to re-pricing over a period of time but only captures a single rate environment. Reviewing these various measures together helps management obtain a comprehensive view of our interest risk rate profile.

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The following NII simulation and EVE analysis metrics were calculated using rate shocks that represent immediate rate changes that move all market rates by the same amount instantaneously. The variance percentages represent the change between the NII simulation and EVE calculated under the particular rate scenario versus the NII simulation and EVE analysis calculated assuming market rates deemed appropriate as of the date of this filing. For the purpose of this exercise, it is assumed that rates do not fall below zero.


		September 30, 2020				December 31, 2019					June 30, 2021				December 31, 2020
(Dollars in thousands)	(Dollars in thousands)	Amount Change from Base Case		Percent Change from Base Case		Amount Change from Base Case		Percent Change from Base Case		(Dollars in thousands)	Amount Change from Base Case		Percent Change from Base Case		Amount Change from Base Case		Percent Change from Base Case
Net interest income (loss):	Net interest income (loss):									Net interest income (loss):
+300	+300	$	20,189	13.49	%	$	45,787	31.65	%	+300	$	3,768	1.97	%	$	22,885	13.56	%
+200	+200	$	5,678	3.79	%	$	30,367	20.99	%	+200	$	(5,392)	(2.83)	%	$	7,673	4.55	%
+100	+100	$	(8,379)	(5.60)	%	$	15,128	10.46	%	+100	$	(14,787)	(7.75)	%	$	(7,386)	(4.37)	%
–100		$	4,401	2.94	%	$	(16,822)	(11.63)	%
–100										–100	$	(4,410)	(2.31)	%	$	(2,919)	(1.73)	%

Economic value of equity:	Economic value of equity:									Economic value of equity:
+300	+300	$	(85,439)	(13.23)	%	$	6,511	1.10	%	+300	$	(182,380)	(23.99)	%	$	(88,848)	(12.07)	%
+200	+200	$	(71,220)	(11.03)	%	$	3,691	0.62	%	+200	$	(127,053)	(16.71)	%	$	(64,260)	(8.73)	%
+100	+100	$	(50,775)	(7.86)	%	$	1,513	0.26	%	+100	$	(76,898)	(10.12)	%	$	(42,314)	(5.75)	%
–100		$	(523)	(0.08)	%	$	(10,886)	(1.84)	%
–100										–100	$	38,100	5.01	%	$	16,700	2.27	%

We plan to continue to manage an asset sensitive interest rate risk position when it comes to net interest income due to the ongoing need for some duration in the liability ~~portfolio, although the duration of those time deposits is being managed shorter over time.~~portfolio. The current exception to this ~~approach~~asset sensitive NII position is in a plus 100 basis point shock scenario, where we accept the negative impact to NII for the first 25-50 basis points increase caused by floors implemented on our ~~recently implemented floors on~~ loans in 2020, because of the material benefit provided by those floors in the base case, -which is a case of low rates for a long period that we believe will persist. Our means of managing interest rate risk over the longer term include our focus on growing the deposit balances associated with our treasury management services, controlled adjustments within our discretionary priced accounts to respond to rising rates, and our ability to extend duration in liabilities, especially with rates at historically low levels across the yield curve. Additionally, while we will continue to implement floors on most new loan originations, our pricing strategy has transitioned to emphasizing loan spread as the primary tool to achieve yield and implementing lower levels of floors, which will reduce our liability sensitivity over time. Given the longer-term nature of the EVE analysis and the absolute low level of interest rates, we have migrated to a more liability sensitive interest rate risk position when it comes to economic value of equity due to the aforementioned expectation of low rates for an extended period of time.

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The following gap analysis presents the amounts of interest-earning assets and interest-bearing liabilities and related cash flow hedging instruments that are subject to re-pricing within the periods indicated.


		September 30, 2020																								June 30, 2021
(Dollars in thousands)	(Dollars in thousands)	Less Than 90 Days			91 to 180 Days			181 to 365 Days			One to Three Years			Three to Five Years			Greater Than Five Years			Non-Sensitive			Total Balance		(Dollars in thousands)	Less Than 90 Days			91 to 180 Days			181 to 365 Days			One to Three Years			Three to Five Years			Greater Than Five Years			Non-Sensitive			Total Balance
Assets:	Assets:																								Assets:
Interest-earning deposits	Interest-earning deposits	$	602,676		$	—		$	—		$	—		$	—		$	—		$	—		$	602,676	Interest-earning deposits	$	518,002		$	—		$	—		$	—		$	—		$	—		$	—		$	518,002
Federal funds sold	Federal funds sold	5,270			—			—			—			—			—			—			5,270		Federal funds sold	11,110			—			—			—			—			—			—			11,110
Total investment securities	Total investment securities	232,615			64,996			55,986			162,309			106,222			178,920			19,175			820,223		Total investment securities	212,045			46,996			80,251			299,973			259,822			434,387			4,184			1,337,658
Total loans and leases	Total loans and leases	7,223,624			44,958			64,038			195,433			84,973			27,927			13,493			7,654,446		Total loans and leases	8,800,354			66,607			89,328			218,588			64,836			26,284			16,925			9,282,922
Other assets	Other assets	—			—			—			—			—			—			411,175			411,175		Other assets	—			—			—			—			—			—			391,480			391,480
Total assets	Total assets	$	8,064,185		$	109,954		$	120,024		$	357,742		$	191,195		$	206,847		$	443,843		$	9,493,790	Total assets	$	9,541,511		$	113,603		$	169,579		$	518,561		$	324,658		$	460,671		$	412,589		$	11,541,172

Liabilities:	Liabilities:																								Liabilities:
Transaction deposits	Transaction deposits	$	6,049,255		$	—		$	168,656		$	393,956		$	75,000		$	—		$	439,878		$	7,126,745	Transaction deposits	$	8,198,737		$	35,247		$	196,272		$	300,000		$	25,000		$	—		$	513,529		$	9,268,785
Certificates of deposit	Certificates of deposit	328,448			347,784			269,885			110,851			—			—			—			1,056,968		Certificates of deposit	381,710			171,154			199,410			170,374			—			—			—			922,648
Borrowings, net	Borrowings, net	—			50,000			—			100,000			247,500			—			(2,061)			395,439		Borrowings, net	—			—			50,000			100,000			195,600			—			—			345,600
Other liabilities	Other liabilities	—			—			—			—			—			—			271,438			271,438		Other liabilities	—			—			—			—			—			—			209,571			209,571
Total liabilities	Total liabilities	6,377,703			397,784			438,541			604,807			322,500			—			709,255			8,850,590		Total liabilities	8,580,447			206,401			445,682			570,374			220,600			—			723,100			10,746,604

Equity	Equity	—			—			—			—			—			—			643,200			643,200		Equity	—			—			—			—			—			—			794,568			794,568
Total liabilities and equity	Total liabilities and equity	$	6,377,703		$	397,784		$	438,541		$	604,807		$	322,500		$	—		$	1,352,455		$	9,493,790	Total liabilities and equity	$	8,580,447		$	206,401		$	445,682		$	570,374		$	220,600		$	—		$	1,517,668		$	11,541,172

Interest rate sensitivity gap	Interest rate sensitivity gap	$	1,686,482		$	(287,830)		$	(318,517)		$	(247,065)		$	(131,305)		$	206,847		$	(908,612)				Interest rate sensitivity gap	$	961,064		$	(92,798)		$	(276,103)		$	(51,813)		$	104,058		$	460,671		$	(1,105,079)
Cumulative interest rate sensitivity gap	Cumulative interest rate sensitivity gap	$	1,686,482		$	1,398,652		$	1,080,135		$	833,070		$	701,765		$	908,612							Cumulative interest rate sensitivity gap	$	961,064		$	868,266		$	592,163		$	540,350		$	644,408		$	1,105,079
Cumulative interest rate sensitive assets to rate sensitive liabilities	Cumulative interest rate sensitive assets to rate sensitive liabilities	126.4		%	120.6		%	115.0		%	110.7		%	108.6		%	111.2		%	107.3		%			Cumulative interest rate sensitive assets to rate sensitive liabilities	111.2		%	109.9		%	106.4		%	105.5		%	106.4		%	111.0		%	107.4		%
Cumulative gap to total assets	Cumulative gap to total assets	17.8		%	14.7		%	11.4		%	8.8		%	7.4		%	9.6		%						Cumulative gap to total assets	8.3		%	7.5		%	5.1		%	4.7		%	5.6		%	9.6		%

The cumulative 12-month ratio of interest rate sensitive assets to interest rate sensitive liabilities decreased to ~~115.0%~~106.4% as of ~~September~~June 30, ~~2020~~2021, from ~~121.4%~~116.9% as of December 31, ~~2019~~2020.

The Company entered into cash flow hedge transactions to fix the interest rate on certain of the ~~Company’s~~Company’s borrowings for varying periods of time. During the life of these transactions, they have the effect on our gap analysis of moving ~~$300.0~~$250.0 million of borrowings from the less than 90 days re-pricing category to the ~~three months~~181 to 365 days and longer re-pricing categories. Of the ~~$300.0~~$250.0 million, $50.0 million was moved to the ~~three~~181 to ~~six months~~365 days re-pricing category, $100.0 million was moved to the ~~one to three~~one-to-three year ~~repricing~~re-pricing category and ~~$150.0~~$100.0 million to the ~~three to five years~~three-to-five year re-pricing category. For additional information on cash flow hedge transactions, refer to Note 10, Derivatives and Hedging Activity, to our unaudited condensed consolidated financial statements.

Additionally, in all of these analyses (NII, EVE and gap), we use what we believe is a conservative treatment of non-maturity, interest-bearing deposits. In our gap analysis, the allocation of non-maturity, interest-bearing deposits is fully reflected in the less than 90 days re-pricing category. The allocation of non-maturity, noninterest-bearing deposits is fully reflected in the non-sensitive category. In taking this approach, we provide ourselves with no benefit to either NII or EVE from a potential time lag in the rate increase of our non-maturity, interest-bearing deposits.

Impact of Inflation

Our financial statements and related data presented herein have been prepared in accordance with GAAP, which requires the measure of financial position and operating results in terms of historic dollars, without considering changes in the relative purchasing power of money over time due to inflation.

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Inflation generally increases the costs of funds, ~~and~~ operating overhead, and to the extent loans and other assets bear variable rates, the yields on such assets. Unlike most industrial companies, virtually all of the assets and liabilities of a financial institution are monetary

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in nature. As a result, interest rates generally have a more significant effect on the performance of a financial institution than the effects of general levels of inflation. In addition, inflation affects a financial ~~institution’s~~institution’s cost of goods and services purchased, the cost of salaries and benefits, occupancy expense and similar items. Inflation and related increases in interest rates generally decrease the market value of investments and loans held and may adversely affect liquidity, earnings and ~~shareholders’~~shareholders’ equity.

~~Other Matters~~LIBOR Transition

~~Recent Regulatory Developments~~

InOn March 2020, various regulatory agencies, including the Federal Reserve and the FDIC, issued an Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers affected by the Coronavirus. The interagency statement impacted accounting for loan modifications, which was revised on April 7, 2020, in response to the CARES Act. Under Accounting Standards Codification 310-40, “Receivables – Troubled Debt Restructurings by Creditors,” (“ASC 310-40”), a restructuring of debt constitutes a TDR if the creditor, for economic or legal reasons related to the debtor’s financial difficulties, grants a concession to the debtor that it would not otherwise consider. The agencies confirmed with the staff of the Financial Accounting Standards Board (“FASB”) that short-term modifications made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief, are not to be considered TDRs. This includes short-term modifications such as payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment that are insignificant.

As provided for under the CARES Act, a financial institution may account for an eligible loan modification either under section 4013 of the CARES Act or in accordance with ASC Subtopic 310-40. If a loan modification is not eligible under section 4013, or if the institution elects not to account for the loan modification under section 4013, the financial institution should evaluate whether the modified loan is a TDR. To be an eligible loan under section 4013, a loan modification must be (1) related to COVID-19; (2) executed on a loan that was not more than 30 days past due as of December 31, 2019; and (3) executed between March 1, 2020, and the earlier of (A) 60 days after the date of termination of the National Emergency or (B) December 31, 2020.

~~Recent Accounting Pronouncements and Developments~~

In August 2020, FASB issued ASU 2020-06, “Debt - Debt with Conversion and Other Options (Subtopic 470-20),” and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity which reduces the number of accounting models for convertible instruments and allows more contracts to qualify for equity classification. This standard is effective for public business entities for annual and interim periods in fiscal years beginning after December 15, 2021. Early adoption is permitted, but no earlier than annual and interim periods in fiscal years beginning after December 15, 2020. The Company is currently evaluating the impact this standard will have on our results of operations and financial position.

In March 2020, FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848),” which provides optional guidance for a limited time to ease the potential accounting burden associated with transitioning away from reference rates such as LIBOR. The expedients and exceptions provided by this standard will not be available until after December 31, 2022, other than for certain hedging relationships entered into before December 31, 2022. The standard may be applied as of the beginning of the interim period that includes March 12, 2020 through December 21, 2022. The Company is currently evaluating the impact this standard will have on our results of operations and financial position.

In January 2020, FASB issued ASU 2020-01, “Investments - ASU 2020-01, Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815): Clarifying the Interactions between Topic 321, Topic 323, and Topic 815. This new guidance addresses accounting for the transition into and out of the equity method and also provides guidance on whether equity method accounting would be applied to certain purchased options and forward contracts upon settlement. This standard is effective for public business entities for annual and interim periods in fiscal years beginning after December 15, 2020. Early adoption is permitted. The Company is currently evaluating the impact this standard will have on our results of operations and financial position.

In December 2019, FASB issued ASU 2019-12, “Simplifying the Accounting for Income Taxes,” which removes certain exceptions for: recognizing deferred taxes for investments, performing intraperiod allocation and calculating income taxes in interim periods. This standard also adds guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group. This standard is effective for public business entities for

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annual and interim periods in fiscal years beginning after December 15, 2020. Early adoption is permitted. The Company is currently evaluating the impact this standard will have on our results of operations and financial position.

In June 2016, the FASB issued ASU 2016-13, “Measurement of Credit Losses on Financial Instruments,” along with several other subsequent codification updates related to accounting for credit losses, which significantly change the way entities recognize impairment of many financial assets by requiring immediate recognition of estimated credit losses expected to occur over their remaining life. The new impairment methodology, under this accounting standard, known as the CECL model, replaces the current incurred loss model and requires financial assets measured at amortized cost basis, such as loans, debt securities, net investments in leases, and off-balance-sheet credit exposures, to be presented at the net amount expected to be collected. CECL requires use of expected credit losses based on a standard of relevant information about past events, including historical experience, current conditions, and reasonable and supportable economic forecasts that affect the collectability of the reported amount. Entities will apply the standard's provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. The changes were originally effective for public business entities that are SEC filers for annual and interim periods in fiscal years beginning after December 15, 2019. The CARES Act allows the option to delay the adoption of this standard until the date on which the national emergency related to the COVID-19 outbreak is terminated or December 31, 2020, whichever occurs first.

The Company has elected to delay its adoption of ASU 2016-13, commonly referred to as CECL, as provided by the CARES Act. Upon adoption of ASU 2016-13, the Company anticipates recognizing a one-time cumulative effect adjustment of approximately $1.5 million to $2.0 million, net of tax, through retained earnings as of January 1, 2020, for the changes in allowance for credit losses on loans and leases, unfunded commitments and certain debt securities. We estimate the allowance for credit losses on loans and leases under CECL to range from $30.0 million to $35.0 million on December 31, 2020. This estimate is based on a number of forward-looking variable assumptions subject to uncertainty including but not limited to economic forecasting, projected volume and composition of loans and leases, and credit quality.

~~LIBOR Transition~~

~~On July 27, 2017,~~5, 2021, the United ~~Kingdom’s~~Kingdom’s Financial Conduct Authority (the ~~“FCA”~~“FCA”) ~~announced that it will no longer persuade or require banks to submit rates for the calculation of~~, which regulates the London Interbank Offered Rate (“(“LIBOR”), confirmed that the publication of most LIBOR~~”) after 2021.~~ term rates will end on June 30, 2023 (excluding 1-week U.S. LIBOR and 2-month U.S. LIBOR, the publication of which will end on December 31, 2021). Given ~~LIBOR’s~~LIBOR’s extensive use across financial markets, the transition away from LIBOR presents various risks and challenges to financial markets and institutions, including to the Company. The ~~Company’s~~Company’s commercial and consumer businesses issue, trade and hold various products that are currently indexed to LIBOR. As of ~~September~~June 30, ~~2020,~~2021, the Company had a material amount of loans, investment securities, FHLB advances and notional value of derivatives indexed to LIBOR that will mature after 2021. If not sufficiently planned for, the discontinuation of LIBOR could result in financial, operational, legal, reputational orand compliance risks to financial markets and institutions, including to the Company.

The Alternative Reference Rates Committee ~~(“ARRC”~~(“ARRC”) has proposed the Secured Overnight Financing Rate ~~(“SOFR”~~(“SOFR”) as its preferred rate as an alternative to LIBOR, although the ~~AARC~~ARRC has not proposed that SOFR be required. The selection of SOFR as the alternative reference rate currently presents certain market concerns, because it is a risk-free rate, while LIBOR incorporates credit risk, and because the methodology for the proposed term structure for SOFR differs from the LIBOR framework. The federal banking agencies are not requiring SOFR as the replacement rate. On April 6, 2021, New York Governor Cuomo signed into law legislation that provides for the substitution of SOFR as an alternative reference rate in any LIBOR-based contract governed by New York state law that does not include clear fallback language, once LIBOR is discontinued.

The ARRC has released final recommended fallback contract language for new issuances of LIBOR-indexed bilateral business loans, syndicated loans, floating rate notes, securitizations and adjustable rate mortgage loans, and it continues to develop other LIBOR transition guidance. The International Swaps and Derivatives Association, Inc. ~~(“ISDA”~~(“ISDA”) ~~is also expected to establish a framework~~has announced protocol for the transition of derivative instruments away from LIBOR. The process for modification of legacy contracts that do not provide for a permanent transition from LIBOR remains a work in progress.

Due to the uncertainty surrounding the future of LIBOR, it is expected that the transition will span several reporting periods through the end of ~~2021.~~LIBOR publication in June 2023. The federal banking agencies have ~~said~~continued to encourage banks to transition away from LIBOR as soon as practicable and have stated that an ~~institution’s~~institution’s LIBOR transition plans are an examination priority. One of the major identified risks is inadequate fallback language in ~~the~~ various ~~instruments’ contracts~~instruments’ that may result in issues establishing the alternative index and adjusting the margin as applicable. The Company continues to monitor this activity and evaluate the related risks. The Company ~~has already:~~has: (1) established a cross-functional team to identify, assess and monitor risks associated with the transition of LIBOR and other benchmark rates; (2) developed an inventory of affected products; ~~and~~ (3) implemented more robust fallback contract ~~language.~~language; and (4) implemented a plan to adhere to the ISDA protocol for the transition of derivatives away from LIBOR. The ~~Company’s~~Company’s cross-functional team is also tasked with managing clear communication of the ~~Company’s~~Company’s transition plans with both internal and external stakeholders and ensuring that the Company appropriately updates its business processes, analytical tools, information systems and contract language to minimize disruption during and after the LIBOR transition. For additional information related to the potential impact surrounding the transition from LIBOR on the ~~Company’s~~Company’s business, see ~~“Item~~“Item 1A. Risk ~~Factors”~~Factors” in ~~this~~the Company’s Annual Report on Form ~~10-K.~~10-K filed with the SEC on February 25, 2021.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Quantitative and qualitative disclosures about market risk are presented under the caption ~~“Market Risk”~~“Market Risk” in Part I, Item 2 of this Quarterly Report on Form 10-Q.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The ~~Company’s~~Company’s management, including the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of the ~~Company’s~~Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of ~~September~~June 30, ~~2020.~~2021. The ~~Company’s~~Company’s disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the ~~SEC’s~~SEC’s rules and forms, and that such information is accumulated and communicated to the ~~Company’s~~Company’s management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the ~~Company’~~Company’s

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disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were effective as of ~~September~~June 30, ~~2020.~~2021.

Changes in Internal Control over Financial Reporting

There were no changes in the ~~Company’s~~Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended ~~September~~June 30, ~~2020,~~2021, that have materially affected, or are reasonably likely to materially affect, the ~~Company’s~~Company’s internal control over financial reporting.

PART II –– OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time the Company is a party to various litigation matters incidental to the conduct of its business. During the three months ended ~~September~~June 30, ~~2020,~~2021, the Company was not a party to any legal proceedings the resolution of which management believes will be material to the ~~Company’s~~Company’s business, future prospects, financial condition, liquidity, results of operation, cash flows or capital levels.

ITEM 1A. RISK FACTORS

There have not been any material changes to the risk factors previously disclosed under Item 1A of our Annual Report on Form 10-K for the year ended December 31, ~~2019,~~2020, previously filed with the SEC, except for the risk ~~factor~~factors included below:

~~The novel coronavirus (“~~COVID-19”) and the impact of actions to mitigate it ~~may materially and adversely affect~~could have an adverse effect on our business, financial condition and results of ~~operations.~~operations, and such effects will depend on future developments, which are highly uncertain and are difficult to predict.

Federal, state and local governments have enacted various restrictions in an attempt to limit the spread of COVID-19, including the declaration of a national emergency; multiple ~~cities’~~cities’ and ~~states’~~states’ declarations of states of emergency; school and business closings; limitations on social or public gatherings and other social distancing measures, such as working remotely, travel restrictions, quarantines and stay at home orders. Such measures have disrupted economic activity and contributed to job losses and reductions in consumer and business spending. In response to the economic and financial effects of COVID-19, the Federal Reserve has sharply reduced interest rates and instituted quantitative easing measures, as well as domestic and global capital market support programs. In addition, the ~~Trump~~President Administration, Congress, various federal agencies and state governments have taken measures to address the economic and social consequences of the pandemic, including the passage of the CARES Act. The CARES Act, among other things, provides certain measures to support individuals and businesses in maintaining solvency through monetary relief, including in the form of financing, loan forgiveness and automatic forbearance. ~~All of the~~The federal banking regulatory agencies have encouraged lenders to extend additional loans, and the federal government is considering additional stimulus and support legislation focused on providing aid to various sectors, including small businesses. The full impact on our business activities as a result of new government and regulatory policies, programs and guidelines, as well as ~~regulators’~~regulators’ reactions to such activities, remains uncertain.

The economic effects of the COVID-19 pandemic have had a destabilizing effect on financial markets, key market indices and overall economic activity. The uncertainty regarding the duration of the pandemic and the resulting economic disruption has caused increased market volatility and has led to an economic recession (including due to uncertainty regarding the impacts of a resurgence of COVID-19 infections, as well as a significant decrease in consumer confidence and business ~~generally.~~generally). The continuation of these

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conditions, the impacts of the CARES Act, and other federal and state measures, specifically with respect to loan forbearances, ~~has~~have adversely impacted our businesses and results of operations and the business and operations of at least some of our borrowers, customers and business partners and these impacts may be material. In particular, even as COVID-19 vaccines become widely available, these events have had, and/or can be expected to continue to have, the following effects, among other things:

••impair the ability of borrowers to repay outstanding loans or other obligations, resulting in increases in delinquencies;

••impair the value of collateral securing loans;

••impair the value of our securities portfolio;

••require an increase in our allowance for loan and lease losses;

••adversely affect the stability of our deposit base, or otherwise impair our liquidity;

••reduce our asset management revenues and the demand for our products and services;

••impair the ability of loan guarantors to honor commitments;

••negatively impact our regulatory capital ratios;

••result in increased compliance risk as we become subject to new regulatory and other requirements associated with any new programs in which we participate;

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•negatively impact the productivity and availability of key personnel and other employees necessary to conduct our business, and of third-party service providers who perform critical services for us, or otherwise cause operational failures due to changes in our normal business practices necessitated by the outbreak and related governmental actions;

••increase cyber and payment fraud risk, and other operational risks, given increased online and remote activity; and

••negatively impact revenue and income.

Prolonged measures by health or other governmental authorities encouraging or requiring significant restrictions on travel, assembly or other core business practices could further harm our business and those of our ~~customers, in particular our middle market business~~ customers. Although we have business continuity plans and other safeguards in place, there is no assurance that they will continue to be effective.

The ultimate impact of these factors is highly uncertain at this time and we do not yet know the full extent of the impacts on our business, our operations or the national or global economies, nor the pace of the economic recovery when the COVID-19 pandemic ~~subsides, the~~subsides. The decline in economic conditions generally and a prolonged negative impact on middle market businesses, in particular, due to COVID-19 is likely to result in a material adverse effect to our business, financial condition and results of operations in future period.

In addition, to the extent COVID-19 adversely affects our business, financial condition and results of operations, and global economic conditions more generally, it may also have the effect of heightening many of the other risks described in the ~~“Risk Factors”~~“Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020.

The intention of the United ~~Kingdom’s~~Kingdom’s FCA to cease support of LIBOR ~~after 2021~~by June 30, 2023 could negatively affect the fair value of our financial assets and liabilities, results of operations and net worth. A transition to an alternative reference interest rate could present operational problems and result in market disruption, including inconsistent approaches for different financial products, as well as disagreements with counterparties.

Although the publication of most LIBOR rates will cease on June 30, 2023 (excluding 1-week U.S. LIBOR and 2-month U.S. LIBOR, the publication of which will end on December 31, 2021), we ~~expect that~~cannot predict exactly when the capital and debt markets will cease to use LIBOR as a benchmark, ~~in the near future and no later than December 31, 2021, we cannot predict whether LIBOR will actually cease to be available after 2021,~~ whether SOFR will become the market benchmark in its place or what impact such a transition may have on our business, results of operations and financial condition.

The selection of SOFR as the alternative reference rate for these products currently presents certain market concerns because SOFR (unlike LIBOR) does not have an inherent term structure. A methodology has been developed to calculate SOFR-based term rates, and the Federal Reserve Bank of New York has published such rates daily since early 2020. However, the methodology has not been tested for an extended period of time, which may limit market acceptance of the use of SOFR. In addition, SOFR may not be a suitable alternative to LIBOR for all of our financial products, and it is uncertain what other rates might be appropriate for that purpose. It is uncertain whether these other indices will remain acceptable alternatives for such products. The replacement of LIBOR also may result in economic mismatches between different categories of instruments that now consistently rely on the LIBOR benchmark.

We have a significant ~~amount~~number of financial products, including mortgage loans, mortgage-related securities, other debt securities and derivatives, that are tied to LIBOR, and we continue to enter into transactions involving such products that will mature after 2021. Inconsistent approaches to a transition from LIBOR to an alternative rate among different market participants and for different financial products may cause market disruption and operational problems, which could adversely affect us, including by exposing us to increased basis risk and resulting costs in connection with this risk, and by creating the possibility of disagreements with counterparties.

~~Table of Contents~~

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Recent Sales of Unregistered Securities

None.

Table of Conten t s

Purchases of Equity Securities by the Company and Affiliated Purchasers

The table below sets forth information regarding the ~~Company’s~~Company’s purchases of its common stock during its fiscal quarter ended ~~September~~June 30, ~~2020:~~2021:

~~Total Number~~

~~of Shares~~

~~Purchased~~ ~~(1)~~

Weighted
Average
Price Paid
per Share

~~Total Number of~~

~~Shares Purchased~~

~~as Part of Publicly~~

~~Announced Plans~~

~~or Programs~~ ~~(2)~~

~~Approximate Dollar Value~~

~~of Shares that May~~

~~Yet Be Purchased~~

~~Under the Plans or~~

~~Programs~~ ~~(2)~~

~~July 1, 2020 - July 31, 2020~~

~~27,078~~

~~14.67~~

—

~~9,758,275~~

~~August 1, 2020 - August 31, 2020~~

~~15,082~~

~~14.04~~

—

~~9,758,275~~

~~September 1, 2020 - September 30, 2020~~

—

~~9,758,275~~

~~Total~~

~~42,160~~

~~14.44~~

—

~~9,758,275~~


	Total Number of Shares Purchased (1)	Weighted Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2)	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (2)
April 1, 2021 - April 30, 2021	2,732	$	23.81	—	$	9,758,275
May 1, 2021 - May 31, 2021	1,439	21.60		—	9,758,275
June 1, 2021 - June 30, 2021	—	—		—	9,758,275
Total	4,171	$	23.05	—	$	9,758,275

(1)There were ~~42,160~~4,171 shares of treasury stock acquired in connection with the net settlement of equity awards exercised or vested included in the total number of shares purchased reflected in the table above. These shares were not part of a publicly announced plan or program.

(2)On July 15, 2019, the Board approved a share repurchase program of up to $10 million. Under this authorization, purchases of shares may be made at the discretion of management from time to time in the open market or through negotiated transactions, as well as purchases of shares or the options to acquire shares subject to common stock incentive compensation award agreements from officers, directors or employees of the Company.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

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Table of Contents

ITEM 6. EXHIBITS

Exhibit No. Description

3.1 ~~Form~~Articles of ~~Certificate~~Amendment of ~~Designation of Series C Perpetual Non-Cumulative Convertible Non-Voting Preferred Stock (attached as Exhibit A in Exhibit 10.1 hereto)~~

~~10.1~~ ~~Investment Agreement,~~TriState Capital Holdings, Inc., dated as of ~~October 10, 2020, by and between TriState Capital Holdings, Inc. and T-VIII~~ ~~PubOpps LP~~May 17, 2021 (incorporated by reference to Exhibit ~~4.1~~3.1 to ~~the~~our Current Report on Form 8-K, ~~of TriState Capital Holdings, Inc.,~~ filed with the SEC on OMay 17, 2021).~~ctober 13, 2020)~~.

31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed ~~herewith.~~herewith .

31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed ~~herewith.~~herewith.

32 Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith.

101 The following materials from TriState Capital Holdings, Inc.’s’s Quarterly Report on Form 10-Q for the period ended ~~September~~June 30, ~~2020,~~2021, formatted in XBRL: (i) the Unaudited Condensed Consolidated Statements of Financial Condition, (ii) the Unaudited Condensed Consolidated Statements of Income, (iii) the Unaudited Condensed Consolidated Statements of Comprehensive Income, (iv) the Unaudited Condensed Consolidated Statements of Changes in ~~Shareholders’~~Shareholders’ Equity, (v) the Unaudited Condensed Consolidated Statements of Cash Flows, ~~and~~ (vi) the Notes to Unaudited Condensed Consolidated Financial ~~Statements.~~Statements, and (vii the Cover Page furnished herewith.*

104 Cover Page Interactive Data File, formatted in Inline XBRL (included in Exhibit 101).

* This information is deemed furnished, not filed.

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Table of ~~Contents~~Conten t s

SIGNATURES

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


TRISTATE CAPITAL HOLDINGS, INC.

By			/s/ James F. Getz
			James F. Getz
			Chairman, President and Chief Executive Officer

By			/s/ David J. Demas
			David J. Demas
			Chief Financial Officer

Date: ~~November 9, 2020~~August 5, 2021

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