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

☒

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

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

☐

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


New Jersey	22-3537895
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)


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	PGC	The NASDAQ Stock Market, LLC


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

(1)

Commencing on January 1, 2022, the allowance calculation is based on the current expected credit loss ("CECL") methodology. Prior to January 1, 2022, the calculation was based on the incurred loss methodology.

(unaudited)

(audited)

September 30,

December 31,

2021

2020

ASSETS

Cash and due from banks

$
9,299

$
10,629

Federal funds sold

—

102

Interest-earning deposits

606,913

642,591

Total cash and cash equivalents

616,212

653,322

Securities available for sale

843,779

622,689

Equity security, at fair value

14,824

15,117

FHLB and FRB stock, at cost

12,950

13,709

Loans held for sale, at fair value

3,013

13,588

Loans held for sale, at lower of cost or fair value

17,235

18,520

Loans

4,575,398

4,372,437

Less: Allowance for loan and lease losses

65,133

67,309

Net loans

4,510,265

4,305,128

Premises and equipment

23,123

21,609

Other real estate owned

—

50

Accrued interest receivable

22,790

22,495

Bank owned life insurance

46,510

46,809

Goodwill

36,212

33,103

Other intangible assets

13,121

10,788

Finance lease right-of-use assets

3,769

4,330

Operating lease right-of-use assets

10,307

9,421

Other assets

66,175

99,764

TOTAL ASSETS

$
6,240,285

$
5,890,442

LIABILITIES

Deposits:

Noninterest-bearing demand deposits

$
986,765

$
833,500

Interest-bearing deposits:

Checking

2,355,892

1,849,254

Savings

168,831

130,731

Money market accounts

1,287,686

1,298,885

Certificates of deposit - retail

426,981

530,222

Certificates of deposit - listing service

31,382

32,128

Subtotal deposits

5,257,537

4,674,720

Interest-bearing demand - brokered

85,000

110,000

Certificates of deposit - brokered

33,804

33,764

Total deposits

5,376,341

4,818,484

Short-term borrowings

—

15,000

Paycheck Protection Program Liquidity Facility

48,496

177,086

Finance lease liabilities

6,063

6,753

Operating lease liabilities

10,644

9,737

Subordinated debt, net

132,629

181,794

Deferred tax liabilities, net

27,575

32,978

Accrued expenses and other liabilities

95,523

121,488

TOTAL LIABILITIES

5,697,271

5,363,320

SHAREHOLDERS’ EQUITY

Preferred stock (no par value; authorized 500,000 shares; liquidation preference of $1,000 per share)

—

—

Common stock (no par value; stated value $0.83 per share; authorized 42,000,000 shares; issued
   shares, 20,615,903 at September 30, 2021 and 20,342,881 at December 31, 2020; outstanding
   shares, 18,627,910 at September 30, 2021 and 18,974,703 at December 31, 2020

17,185

16,958

Surplus

330,392

326,592

Treasury stock at cost, 1,987,993 shares at September 30, 2021 and 1,368,178 shares
   at December 31, 2020

(55,893
)

(36,477
)
Retained earnings

260,365

221,441

Accumulated other comprehensive loss, net of income tax

(9,035
)

(1,392
)
TOTAL SHAREHOLDERS’ EQUITY

543,014

527,122

TOTAL LIABILITIES & SHAREHOLDERS’ EQUITY

$
6,240,285

$
5,890,442

(1)

Commencing on January 1, 2022, the allowance calculation is based on the CECL methodology. Prior to January 1, 2022, the calculation was based on the incurred loss methodology.

Three Months Ended

Nine Months Ended

September 30,

September 30,

2021

2020

2021

2020

INTEREST INCOME

Interest and fees on loans

$
37,040

$
37,704

$
108,921

$
119,330

Interest on investments:

Taxable

2,824

2,182

8,473

6,749

Tax-exempt

28

51

107

166

Interest on loans held for sale

33

78

124

153

Interest on interest-earning deposits

142

159

367

820

Total interest income

40,067

40,174

117,992

127,218

INTEREST EXPENSE

Interest on savings and interest-bearing deposit accounts

1,880

2,066

5,358

11,640

Interest on certificates of deposit

836

2,529

3,333

9,370

Interest on borrowed funds

57

1,221

448

3,360

Interest on finance lease liability

74

84

229

261

Interest on subordinated debt

1,358

1,222

5,650

3,667

Subtotal - interest expense

4,205

7,122

15,018

28,298

Interest on interest-bearing demand - brokered

385

636

1,334

2,259

Interest on certificates of deposits - brokered

266

267

791

794

Total interest expense

4,856

8,025

17,143

31,351

NET INTEREST INCOME BEFORE PROVISION FOR LOAN AND
LEASE LOSSES

35,211

32,149

100,849

95,867

Provision for loan and lease losses

1,600

5,150

2,725

30,050

NET INTEREST INCOME AFTER PROVISION FOR LOAN AND
LEASE LOSSES

33,611

26,999

98,124

65,817

OTHER INCOME

Wealth management fee income

13,860

10,119

39,025

30,070

Service charges and fees

959

785

2,701

2,296

Bank owned life insurance

311

314

1,388

960

Gain on loans held for sale at fair value (mortgage banking)

408

954

1,842

1,796

Gain on loans held for sale at lower of cost or fair value

—

7,429

1,407

7,426

Fee income related to loan level, back-to-back swaps

—

—

—

1,620

Gain on sale of SBA loans

1,569

79

3,950

1,391

Corporate advisory fee income

84

75

1,303

215

Loss on swap termination

—

—

(842
)

—

Other income

660

456

2,798

1,257

Securities gains/(losses), net

(70
)

—

(293
)

323

Total other income

17,781

20,211

53,279

47,354

OPERATING EXPENSES

Compensation and employee benefits

19,859

19,202

61,759

57,614

Premises and equipment

4,459

4,109

12,646

12,188

FDIC insurance expense

555

605

1,669

1,310

Swap valuation allowance

1,350

—

1,350

—

Other operating expense

5,962

4,545

17,039

14,598

Total operating expenses

32,185

28,461

94,463

85,710

INCOME BEFORE INCOME TAX EXPENSE

19,207

18,749

56,940

27,461

Income tax expense

5,036

5,202

15,173

4,299

NET INCOME

$
14,171

$
13,547

$
41,767

$
23,162

EARNINGS PER SHARE

Basic

$
0.76

$
0.72

$
2.21

$
1.23

Diluted

$
0.74

$
0.71

$
2.15

$
1.22

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING

Basic

18,763,316

18,908,337

18,891,601

18,879,688

Diluted

19,273,831

19,132,650

19,390,522

19,052,605

Three Months Ended

Nine Months Ended

September 30,

September 30,

2021

2020

2021

2020

Net income

$
14,171

$
13,547

$
41,767

$
23,162

Comprehensive income/(loss):

Unrealized (losses)/gains on available for sale securities:

Unrealized holding (losses)/gains arising during the period

(5,635
)

(1,029
)

(14,148
)

6,801

(5,635
)

(1,029
)

(14,148
)

6,801

Tax effect

1,342

252

3,378

(1,649
)
Net of tax

(4,293
)

(777
)

(10,770
)

5,152

Unrealized gains/(losses) on cash flow hedges:

Unrealized holding gains/(losses) arising during the period

936

1,439

3,507

(7,249
)
Reclassification adjustment for amounts included in net
income

—

(5
)

842

(85
)

936

1,434

4,349

(7,334
)

Tax effect

(263
)

(408
)

(1,222
)

1,930

Net of tax

673

1,026

3,127

(5,404
)

Total other comprehensive income/(loss)

(3,620
)

249

(7,643
)

(252
)

Total comprehensive income

$
10,551

$
13,796

$
34,124

$
22,910

Accumulated

Other

Total

(In thousands, except share and

Preferred

Common

Treasury

Retained

Comprehensive

Shareholders'

per share data)

Stock

Stock

Surplus

Stock

Earnings

Loss

Equity

Balance at July 1, 2021 18,829,877
   common shares outstanding

$
—

$
17,164

$
328,035

$
(48,461
)

$
247,136

$
(5,415
)

$
538,459

Net income

—

—

—

—

14,171

—

14,171

Comprehensive loss

—

—

—

—

—

(3,620
)

(3,620
)
Amortization of restricted stock units

—

—

1,807

—

—

—

1,807

Cash dividends declared on common stock
   ($0.05 per share)

—

—

—

—

(942
)

—

(942
)
Share repurchase, 227,060 shares

—

—

—

(7,432
)

—

—

(7,432
)
Common stock options exercised, 400 shares

—

1

5

—

—

—

6

Exercise of warrants, 10,000 net of 6,416
   shares used to exercise, 3,584 shares

—

2

(2
)

—

—

—

—

Issuance of shares for Employee Stock
   Purchase Plan, 6,889 shares

—

6

226

—

—

—

232

Issuance of common stock for acquisition,
   14,220 shares

—

12

321

—

—

—

333

Balance at September 30, 2021 18,627,910
   common shares outstanding

$
—

$
17,185

$
330,392

$
(55,893
)

$
260,365

$
(9,035
)

$
543,014

Accumulated

Other

Total

(In thousands, except share and

Preferred

Common

Treasury

Retained

Comprehensive

Shareholders'

per share data)

Stock

Stock

Surplus

Stock

Earnings

Loss

Equity

Balance at July 1, 2020 18,905,135
   common shares outstanding

$
—

$
16,900

$
322,796

$
(36,477
)

$
206,757

$
(1,996
)

$
507,980

Net income

—

—

—

—

13,547

—

13,547

Comprehensive income

—

—

—

—

—

249

249

Amortization of restricted stock awards/units

—

—

1,798

—

—

—

1,798

Cash dividends declared on common stock
   ($0.05 per share)

—

—

—

—

(945
)

—

(945
)
Issuance of shares for Employee Stock
   Purchase Plan, 5,598 shares

—

4

95

—

—

—

99

Issuance of common stock for acquisition
   14,220 shares

—

12

(12
)

—

—

—

—

Balance at September 30, 2020 18,924,953
   common shares outstanding

$
—

$
16,916

$
324,677

$
(36,477
)

$
219,359

$
(1,747
)

$
522,728

Accumulated

Other

(In thousands, except share and

Preferred

Common

Treasury

Retained

Comprehensive

per share data)

Stock

Stock

Surplus

Stock

Earnings

Loss

Total

Balance at January 1, 2021 18,974,703
   common shares outstanding

$
—

$
16,958

$
326,592

$
(36,477
)

$
221,441

$
(1,392
)

$
527,122

Net income

—

—

—

—

41,767

—

41,767

Comprehensive loss

—

—

—

—

—

(7,643
)

(7,643
)
Restricted stock units issued, 288,348 shares

—

240

(240
)

—

—

—

—

Restricted stock units repurchased on
   vesting to pay taxes, (71,749) shares

—

(60
)

(2,171
)

—

—

—

(2,231
)
Amortization of restricted stock units

—

—

5,229

—

—

—

5,229

Cash dividends declared on common stock
   ($0.15 per share)

—

—

—

—

(2,843
)

—

(2,843
)
Share repurchase, 619,815 shares

—

—

—

(19,416
)

—

—

(19,416
)
Common stock options exercised, 3,220 net of
   62 shares used to exercise, 3,158 shares

—

3

37

—

—

—

40

Exercise of warrants, 50,000 net of 32,616
   shares used to exercise, 17,384 shares

—

14

(14
)

—

—

—

—

Issuance of shares for Employee Stock
   Purchase Plan, 21,661 shares

—

18

638

—

—

—

656

Issuance of common stock for acquisition,
   14,220 shares

—

12

321

—

—

—

333

Balance at September 30, 2021 18,627,910
   common shares outstanding

$
—

$
17,185

$
330,392

$
(55,893
)

$
260,365

$
(9,035
)

$
543,014

Accumulated

Other

(In thousands, except share and

Preferred

Common

Treasury

Retained

Comprehensive

per share data)

Stock

Stock

Surplus

Stock

Earnings

Loss

Total

Balance at January 1, 2020 18,926,810
   common shares outstanding

$
—

$
16,733

$
319,375

$
(29,990
)

$
199,029

$
(1,495
)

$
503,652

Net income

—

—

—

—

23,162

—

23,162

Comprehensive loss

—

—

—

—

—

(252
)

(252
)
Restricted stock units issued, 157,690 shares

—

131

(131
)

—

—

—

—

Restricted stock units/awards repurchased on
   vesting to pay taxes, (39,686) shares

—

(33
)

(610
)

—

—

—

(643
)
Amortization of restricted stock awards/units

—

—

5,062

—

—

—

5,062

Cash dividends declared on common stock
   ($0.15 per share)

—

—

—

—

(2,832
)

—

(2,832
)
Share repurchase, (220,222) shares

—

—

—

(6,487
)

—

—

(6,487
)
Common stock options exercised, 8,400 net of
   2,149 shares used to exercise, 6,251 shares

—

7

69

—

—

—

76

Exercise of warrants 20,000 net of 13,469
   shares used to exercise, 6,531 shares

—

6

(6
)

—

—

—

—

Issuance of shares for Employee Stock
   Purchase Plan, 52,533 shares

—

43

947

—

—

—

990

Issuance of common stock for acquisition,
   35,046 shares

—

29

(29
)

—

—

—

—

Balance at September 30, 2020 18,924,953
   common shares outstanding

$
—

$
16,916

$
324,677

$
(36,477
)

$
219,359

$
(1,747
)

$
522,728

Nine Months Ended September 30,

2021

2020

OPERATING ACTIVITIES:

Net income

$
41,767

$
23,162

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation

2,367

2,312

Amortization of premium and accretion of discount on securities, net

4,502

3,216

Amortization of restricted stock

5,229

5,062

Amortization of intangible assets

1,167

966

Amortization of subordinated debt costs

931

168

Provision for loan and lease losses

2,725

30,050

Deferred tax benefit

(3,247
)

(2,336
)
Stock-based compensation and employee stock purchase plan expense

93

199

Fair value adjustment for equity security

293

(323
)
Loans originated for sale (1)

(131,427
)

(125,466
)
Proceeds from sales of loans held for sale (1)

142,141

117,892

Gain on loans held for sale (1)

(5,792
)

(3,188
)
Gain on loans held for sale at lower of cost or fair value

(1,407
)

(7,426
)
Gain on OREO sold

(51
)

—

Gain on life insurance death benefit

(455
)

—

Increase in cash surrender value of life insurance, net

(465
)

(517
)
Increase in accrued interest receivable

(295
)

(11,674
)
Decrease/(increase) in other assets

2,998

(2,659
)
Increase/(decrease) in accrued expenses and other liabilities

7,390

(10,697
)
NET CASH PROVIDED BY OPERATING ACTIVITIES

68,464

18,741

INVESTING ACTIVITIES:

Principal repayments, maturities and calls of securities available for sale

338,596

152,273

Redemptions of FHLB and FRB stock

807

34,737

Purchase of securities available for sale

(578,336
)

(339,797
)
Purchase of equity securities

—

(4,000
)
Purchase of FHLB and FRB stock

(48
)

(29,102
)
Proceeds from sales of loans held for sale at lower of cost or fair value

54,123

372,406

Net increase in loans, net of participations sold

(253,638
)

(409,005
)
Proceeds from sales of other real estate

101

—

Purchase of premises and equipment

(3,371
)

(2,506
)
Purchase of wealth management company

(5,500
)

—

Proceeds from life insurance death benefit

1,219

—

NET CASH USED IN INVESTING ACTIVITIES

(446,047
)

(224,994
)
FINANCING ACTIVITIES:

Net increase in deposits

557,857

615,639

Net decrease in short-term borrowings

—

(113,100
)
Proceeds from Paycheck Protection Program Liquidity Facility

—

535,838

Repayments of Paycheck Protection Program Liquidity Facility

(128,590
)

(352,048
)
Repayments of FHLB advances

(15,000
)

—

Dividends paid on common stock

(2,843
)

(2,832
)
Exercise of Stock Options, net of stock swaps

40

76

Restricted stock repurchased on vesting to pay taxes

(2,231
)

(643
)
Repayments of subordinated debt

(50,000
)

—

Issuance of shares for employee stock purchase plan

656

990

Shares repurchased

(19,416
)

(6,487
)
NET CASH PROVIDED BY FINANCING ACTIVITIES

340,473

677,433

Net (decrease)/increase in cash and cash equivalents

(37,110
)

471,180

Cash and cash equivalents at beginning of period

653,322

208,185

Cash and cash equivalents at end of period

$
616,212

$
679,365

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

Cash paid during the period for:

Interest

$
16,128

$
30,260

Income tax, net

13,448

551

Transfer of loans to loans held for sale

45,776

364,910

Security purchases settled in subsequent period

—

15,088

(1)

Commencing on January 1, 2022, the allowance calculation is based on the CECL methodology. Prior to January 1, 2022, the calculation was based on the incurred loss methodology.

(2)

Includes mortgage loans originated with the intent to sell which are carried at fair value. In addition, this includes the guaranteed portion of Small Business Administration (“SBA”) loans which are carried at the lower of cost or fair value.

~~(1)~~

Includes mortgage loans originated with the intent to sell which are carried at fair value. In addition, this includes the guaranteed portion of U.S. Small Business Administration (“SBA”) loans which are carried at the lower of cost or fair value.

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

~~SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES~~

Principles of Consolidation and Organization: The consolidated financial statements of the Company are prepared on the accrual basis and include the accounts of the Company and its wholly-owned subsidiary, Peapack-Gladstone Bank (the “Bank”). The consolidated financial statements also include the Bank’s wholly-owned subsidiaries:

•

PGB Trust & Investments of Delaware

•

Peapack Capital Corporation (“PCC”)

•

Peapack-Gladstone Mortgage Group, Inc., which owns 99 percent of Peapack Ventures, LLC and 79 percent of Peapack-Gladstone Realty, Inc., a New Jersey real estate investment company

•

PGB Trust & Investments of Delaware, which owns one percent of Peapack Ventures, LLC

•

Peapack Ventures, LLC, which owns the remaining 21 percent of Peapack-Gladstone Realty, Inc.

•

PGB Securities, Inc.

•

~~PGB Trust & Investments of Delaware~~

•

~~Peapack Capital Corporation (“PCC”)~~

•

~~Murphy Capital Management (“Murphy Capital”)~~

•

~~Peapack-Gladstone Mortgage Group, Inc. owns 99 percent of Peapack Ventures, LLC and 79 percent of Peapack-Gladstone Realty, Inc., a New Jersey real estate investment company~~

•

~~PGB Trust & Investments of Delaware owns 1 percent of Peapack Ventures, LLC~~

•

~~Peapack Ventures, LLC owns the remaining 21 percent of Peapack-Gladstone Realty, Inc.~~

•

~~PGB Securities, Inc. (formed in the second quarter of 2020)~~

While the following footnotes include the consolidated results of the Company, the Bank and their subsidiaries, these footnotes primarily reflect the Bank’s and its subsidiaries’ activities. All significant intercompany balances and transactions have been eliminated from the accompanying consolidated financial statements.

Basis of Financial Statement ~~Presentation~~:Presentation: The consolidated financial statements have been prepared in accordance with ~~U.S. generally accepted accounting principles.~~GAAP. In preparing the financial statements, Management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the statement of condition and revenues and expenses for the periods presented. Actual results could differ from those estimates.

Adoption of New Accounting Standards: On January 1, 2022, the Company adopted Accounting Standards Update (“ASU”) 2016-13, Financial Instruments – Credit Losses (Topic 326) (“ASU 2016-13”), which replaced the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss (“CECL”) methodology. The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized cost, including loan and lease receivables and held-to-maturity debt securities. It also applies to off-balance sheet credit exposures not accounted for as insurance (loan commitments, standby letters of credit, financial guarantees, and other similar instruments). In addition, Accounting Standards Codification (“ASC”) 326 made changes to the accounting for available-for-sale debt securities. One such change is to require credit losses to be presented as an allowance rather than as a write-down on available-for-sale debt securities Management does not intend to sell or believes that it is more likely than not they will be required to sell.

The Company adopted ASC 326 using the modified retrospective method for all financial assets measured at amortized cost and off-balance sheet commitments. Results for reporting periods beginning after January 1, 2022, are presented under ASC 326 while prior period amounts continue to be reported in accordance with the incurred loss model previously applicable under GAAP. The Company recorded a net increase to retained earnings of $3.9 million as of January 1, 2022, for the cumulative effect of adopting ASC 326. The transition adjustment includes a $5.5 million reduction to our allowance for credit losses. The lower allowance was in part attributed to historically low charge-offs combined with the shorter duration of the loan portfolio employed in our CECL

analysis. Further, the incurred loss method required significant qualitative factors, including factors related to COVID-19, and the use of a multiplier for potential losses on criticized and classified loans, neither of which are included within the CECL methodology. The CECL methodology utilizes significantly less qualitative factors as it uses economic factors and historical losses over a full economic cycle and calculates losses based on discounted cash flow on an individual loan basis. Accordingly, the CECL model quantitatively accounts for some of the qualitative factors utilized in the incurred loss methodology.

The following table illustrates the impact to our financial statements as of January 1, 2022 upon adoption of ASC 326:


	January 1, 2022
(In thousands)	Impact to Consolidated Statement of Condition from ASC-326 Adoption			Tax Effect			Impact to Retained Earnings from ASC-326 Adoption
Allowance for credit losses on loans	$	(5,536	)	$	1,490		$	4,046
Allowance for credit losses on off-balance sheet commitments		188			(51	)		(137	)
Total impact from ASC 326 adoption	$	(5,348	)	$	1,439		$	3,909

Segment ~~Information~~:Information: The Company’s business is conducted through 2two business segments: (1) its banking segment (“Banking”), which involves the delivery of loan and deposit products to customers, and (2) the Peapack Private Wealth Management Division (“Peapack Private”), which includes asset management services to individuals and institutions. Management uses certain methodologies to allocate income and expense to the business segments.

The Banking segment includes: commercial (includes commercial and industrial (“C&I”) and equipment financing), commercial real estate, multifamily, residential and consumer lending activities; treasury management services; C&I advisory services; escrow management; deposit generation; operation of ATMs; telephone and internet banking services; merchant credit card services and customer support services.

Peapack Private includes: investment management services for individuals and institutions; personal trust services, including services as executor, trustee, administrator and custodian; and other financial planning and advisory services. This segment also includes the activity from the Delaware subsidiary, PGB Trust & Investments of ~~Delaware, and Murphy Capital.~~Delaware. Wealth management fees are primarily earned over time as the Company provides the contracted monthly or quarterly services and are generally assessed based on a tiered scale of the market value of assets under management and/or administration (“AUM”) at month-end. Fees that are transaction based, including trade execution services, are recognized at the point in time that the transaction is executed (i.e. trade date).

Cash and Cash Equivalents: For purposes of the statements of cash flows, cash and cash equivalents include cash and due from banks, interest-earning deposits and federal funds sold. Generally, federal funds are sold for one-day periods. Cash equivalents are of original maturities of 90 days or less. Net cash flows are reported for customer loan and deposit transactions and short-term borrowings with original maturities of 90 days or less.

Interest-Earning Deposits in Other Financial ~~Institutions~~:Institutions: Interest-earning deposits in other financial institutions mature within one year and are carried at cost.

Securities: Prior to January 1, 2022, Management evaluated securities for other-than-temporary impairment on at least a quarterly basis, and more frequently when economic or market conditions warranted. For securities in an unrealized loss position, Management considered the extent and duration of the unrealized loss and the financial condition and near-term prospects of the issuer. Management also assessed whether it intended to sell, or it is more likely than not that it was required to sell, a security in an unrealized loss position before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the entire difference between amortized cost and fair value is recognized as impairment through earnings. For debt securities that did not meet the aforementioned criteria, the amount of impairment was split into two components as follows: (1) other-than-temporary impairment related to credit loss, which would be recognized through the income statement and (2) other-than-temporary impairment related to other factors, which would be recognized in other comprehensive income.

Effective January 1, 2022, upon the adoption of ASU 2016-13, debt securities available-for-sale are measured at fair value and subject to impairment testing. When an available-for-sale debt security is considered impaired, the Company must determine if the decline in fair value has resulted from a credit-related loss or other factors and then, (1) recognize an allowance for credit losses ("ACL") by a charge to earnings for the credit-related component (if any) of the decline in fair value, and (2) recognize in other comprehensive income (loss) any non-credit related components of the fair value change. If the amount of the amortized cost basis expected to be recovered increases in a future period, the valuation reserve would be reduced, but not more than the amount of the current existing reserve for that security.

Debt securities are classified as held to maturity and carried at amortized cost when Management has the positive intent and ability to hold them to maturity. Under ASU 2016-13, held-to-maturity securities in a loss position are evaluated to determine if the decline in fair value has resulted from a credit-related loss or other factors and then, recognize an ACL through a charge to earnings for the decline in fair value. Other debt securities are classified as available for sale and are carried at fair value, with unrealized holding gains and losses reported in other comprehensive income (loss), net of tax. The Company also has an investment in a Community Reinvestment Act (“CRA”) investment fund, which is classified as an equity security.

Interest income includes amortization of purchase premiums and discounts. Premiums and discounts on securities are amortized on the level-yield method without anticipating prepayments, except for mortgage-backed securities where prepayments are anticipated, and premiums on callable debt securities, which are amortized to the earliest call date. Gains and losses on sales are recorded on the trade date and determined using the specific identification method.

Management evaluates securities for other-than-temporary impairment on at least a quarterly basis, and more frequently when economic or market conditions warrant. For securities in an unrealized loss position, Management considers the extent and duration of the unrealized loss and the financial condition and near-term prospects of the issuer. Management also assesses whether it intends to sell, or it is more likely than not that it will be required to sell, a security in an unrealized loss position before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the entire difference between amortized cost and fair value is recognized as impairment through earnings. For debt securities that do not meet the aforementioned criteria, the amount of impairment is split into two components as follows: (1) other-than-temporary impairment related to credit loss, which is recognized in the income statement and (2) other-than-temporary impairment related to other factors, which is recognized in other comprehensive income. The credit loss is defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis.

Federal Home Loan Bank (FHLB) and Federal Reserve Bank (FRB) Stock: The Bank is a member of the FHLB system. Members are required to own a certain amount of FHLB stock, based on the level of borrowings and other factors. FHLB stock is carried at cost, classified as a restricted security and periodically evaluated for impairment based on ultimate recovery of par value. Both cash and stock dividends are reported as income.

The Bank is also a member of the Federal Reserve Bank of New York and required to own a certain amount of FRB stock. FRB stock is carried at cost and classified as a restricted security. Dividends are reported as income.

Loans Held for Sale: Mortgage loans originated with the intent to sell in the secondary market are carried at fair value, as determined by outstanding commitments from investors.

Mortgage loans held for sale are generally sold with servicing rights released; therefore, 0no servicing rights are recorded. Gains and losses on sales of mortgage loans, shown as gain on sale of loans on the Statement of Income, are based on the difference between the selling price and the carrying value of the related loan sold.

SBA loans originated with the intent to sell in the secondary market are carried at the lower of cost or fair value. SBA loans are generally sold with the servicing rights retained. Gains and losses on the sale of SBA loans are based on the difference between the selling price and the carrying value of the related loan sold. Total SBA loans serviced totaled ~~$91.4~~$145.6 million and ~~$65.5~~$97.5 million as of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively. SBA loans held for sale totaled ~~$11.6~~$10.1 million and ~~$6.0~~$32.5 million at September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively.

Loans originated with the intent to hold and subsequently transferred to loans held for sale are carried at the lower of cost or fair value. These are loans that the Company no longer has the intent to hold for the foreseeable future.

Loans: Loans that Management has the intent and ability to hold for the foreseeable future or until maturity are stated at the principal amount outstanding. Interest on loans is recognized based upon the principal amount outstanding. Loans are stated at face value, less purchased premium and discounts and net deferred fees. Loan origination fees and certain direct loan origination costs are deferred and recognized on a level-yield method over the life of the loan as an adjustment to the loan’s yield. The definition of recorded investment in loans includes accrued interest receivable and deferred fees/~~cost,~~costs, however, for the Company’s loan disclosures, accrued interest and deferred fees/~~cost~~costs were excluded as the impact was not material.

Loans are considered past due when they are not paid within 30 days in accordance with contractual terms. The accrual of income on loans, including ~~impaired~~individually evaluated loans, is discontinued if, in the opinion of Management, principal or interest is not likely to be paid

in accordance with the terms of the loan agreement, or when principal or interest is past due 90 days unless the asset is both well secured and in the process of collection. All interest accrued but not received for loans placed on nonaccrual are reversed against interest income. Payments received on nonaccrual loans are recorded as principal payments. A nonaccrual loan is returned to accrual status only when interest and principal payments are brought current and future payments are reasonably assured, generally when the Bank receives contractual payments for a minimum of six consecutive months. Commercial loans are generally charged off, in whole or in part, after an analysis is completed which indicates that collectability of the full principal balance is in doubt. Consumer closed-end loans are generally charged off after they become 120 days past due and open-end loans after 180 days. Subsequent payments are credited to income only if collection of principal is not in doubt. If principal and interest payments are brought contractually current and future collectability is reasonably assured, loans may be returned to accrual status. Nonaccrual mortgage loans are generally charged off to the extent that the value of the underlying collateral does not cover the outstanding principal balance. The majority of the Company’s loans are secured by real estate in New Jersey, New York and Pennsylvania.

Allowance for Credit Losses: On January 1, 2022, the Company adopted ASU 2016-13, Topic 326 which replaced the incurred loss methodology with CECL for financial instruments measured at amortized cost and other commitments to extend credit. CECL requires the immediate recognition of estimated credit losses expected to occur over the estimated remaining life of the asset. The forward-looking concept of CECL requires loss estimates to consider historical experience, current conditions and reasonable and supportable economic forecasts of future events and circumstances.

The allowance for credit losses (“ACL”) on loans held for investment is the combination of the allowance for loan losses and the reserve for unfunded loan commitments. The allowance for loan losses is reported as a reduction of the amortized cost basis of loans, while the reserve for unfunded loan commitments is included within "other liabilities" on the Consolidated Statements of Condition. The estimate of credit loss incorporates assumptions for both the likelihood and amount of funding over the estimated life of the commitments, including adjustments for current conditions and reasonable and supportable forecasts. Management periodically reviews and updates its assumptions for estimated funding rates. The amortized cost basis of loans does not include accrued interest receivable, which is included in "accrued interest receivable" on the Consolidated Statements of Condition. The "Provision for credit losses" on the Consolidated Statements of Income is a combination of the provision for credit losses and the provision for unfunded loan commitments.

Allowance for Loan ~~and Lease Losses:~~ Losses under incurred methodology prior to CECL Adoption on January 1, 2022

The allowance for loan and lease losses iswas a valuation allowance for credit losses that iswas Management’s estimate of probable incurred losses in the loan portfolio. ~~The~~Under this accounting method, the process to determine reserves ~~utilizes analytic~~utilized analytical tools and Management judgment and iswas reviewed on a quarterly basis. When Management iswas reasonably certain that a loan balance iswas not fully collectable, an impairment analysis iswas completed whereby a specific reserve ~~may~~could be established or a full or partial charge off iswas recorded against the allowance. Subsequent recoveries, if any, ~~are~~were credited to the allowance. Management ~~estimates~~estimated the allowance balance required using past loan loss experience, the size and composition of the portfolio, information about specific borrower situations, estimated collateral values, ~~level of and trends in delinquent, classified and nonperforming loans,~~asset quality information, economic conditions and other factors. Allocations of the allowance ~~may~~could be made for specific loans via a specific reserve, but the entire allowance iswas available for any loan that, in Management’s judgment, should be charged off.

The allowance ~~consists~~consisted of specific and general components. The specific component of the allowance ~~relates~~related to loans that ~~are~~were individually classified as impaired.

A loan iswas impaired when, based on current information and events, it iswas probable that the Bank ~~will~~would be unable to collect all amounts due according to the contractual terms of the loan agreement. Factors considered by Management in determining impairment ~~include~~included payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that ~~experience~~experienced insignificant payment delays and payment shortfalls generally ~~are~~were not classified as impaired. Management ~~determines~~determined the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration ~~all of~~ the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed.

Loans ~~are~~were individually evaluated for impairment when they ~~are~~were classified as substandard ~~nonaccrual or TDR~~ by Management. If a loan iswas considered impaired, a portion of the allowance ~~may~~could be allocated so that the loan iswas reported, net, at the present value of estimated future cash flows using the loan’s existing rate or if repayment iswas expected solely from the underlying collateral, the loan principal balance iswas compared to the fair value of collateral less estimated disposition costs to determine the need, if any, for a charge off.

The general component of the allowance ~~covers~~covered non-impaired loans and iswas based primarily on the Company’s historical loss experience adjusted for current factors. The historical loss experience iswas determined by portfolio segment and iswas based on the

actual loss history ~~experience~~experienced by the Company on a weighted average basis over the previous three years. This actual loss experience iswas adjusted by other qualitative factors based on the risks present for each portfolio segment. ~~As a result of the effects of the COVID-19 pandemic, the Company increased certain~~These qualitative factors ~~in 2020 related to elevated levels~~included consideration of unemployment, economic forecasts and approved loan deferral payment requests as businesses both locally and nationally were shut down and have only gradually and partially reopened. The Company re-evaluated the qualitative factors related to the pandemic and reduced these factors during the first nine months of 2021. The Company also considered qualitative factors related to the following: levels of and trends in delinquencies, charge-offs and impaired loans; effects of any changes in risk selection and underwriting standards; other changes in lending policies, procedures and practices; experience, ability and depth of lending management and other relevant staffing and experience; national and local economic trends and conditions; industry conditions; and effects of changes in credit concentrations. For loans that ~~are~~were graded as non-impaired, the Company ~~allocates~~allocated a higher general reserve percentage than pass-rated loans using a multiple that iswas calculated annually through a migration analysis. At both ~~September 30,~~December 31, 2021 and ~~December 31,~~ 2020, respectively, the multiple was 2.25 times for non-impaired special mention loans and 3.25 times for non-impaired substandard loans.

~~value of the collateral, less estimated disposition costs. For TDRs that subsequently default, the Company determines the amount of reserve~~ACL in accordance with ~~the accounting policy for the allowance for loan and lease losses.~~CECL methodology

~~On March 27, 2020,~~With respect to pools of similar loans that are collectively evaluated, an appropriate level of general allowance is determined by portfolio segment using a non-linear discounted cash flow (“DCF”) model. The DCF model captures losses over the ~~President~~historical charge-off and prepayment cycle and applies those losses at a loan level over the remaining maturity of the United States signed the Coronavirus Aid, Relief, and Economic Security ("CARES”) Act, which provides entities with optional temporary relief from certain accounting and financial reporting requirements under U.S. GAAP.

The CARES Act allows financial institutions to suspend application of certain current TDR accounting guidance under Accounting Standards Codification ("ASC") 310-40 for loan modifications related to the COVID-19 pandemic made between March 1, 2020 and the earlier of December 31, 2020 or 60 days after the end of the COVID-19 national emergency, provided certain criteria are met. This relief can be applied to loan modifications for borrowers that were not more than 30 days past due as of December 31, 2019 and to loan modifications that defer or delay the payment of principal or interest or change the interest rate on the loan. The ~~revised CARES Act allows~~model then calculates a historical loss rate using the average losses over the reporting period, which is then applied to each segment utilizing a standard reversion rate. This loss rate is then supplemented with adjustments for reasonable and supportable forecasts of relevant economic indicators, including but not limited to unemployment rates, national consumer price and confidence indices. Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayments when appropriate. Also included in the ACL are qualitative factors based on the risks present for each portfolio segment. These qualitative factors include the following: levels of and trends in delinquencies and impaired loans; effects of any changes in risk selection and underwriting standards; other changes in lending policies, procedures and practices; experience, ability and depth of lending management and other relevant staffing and experience; industry conditions; and effects of changes in credit concentrations. It is also possible that these factors could include social, political, economic, and terrorist events or activities. All of these factors are susceptible to change, which may be significant. As a result of this detailed process, the ACL results in two forms of allocations, specific and general. These two components represent the total ACL deemed adequate to cover current expected credit losses in the loan ~~modifications through January 1, 2022. In April 2020, federal and state banking regulators issued~~portfolio.

When management identifies loans that do not share common risk characteristics (i.e., are not similar to other loans within a pool) they are evaluated on an individual basis. These loans are not included in the ~~Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by~~collective evaluation. For loans identified as having a likelihood of foreclosure or that the ~~Coronavirus to provide further interpretation of when a~~ borrower is experiencing financial difficulty, ~~specifically indicating that if~~a collateral dependent approach is used. These are loans for which the ~~modification~~repayment is ~~either short-term (e.g., six months)~~expected to be provided substantially through the operation or ~~mandated by~~sale of the collateral. Under CECL, for collateral dependent loans, the Company has adopted the practical expedient method to measure the allowance for credit losses based on the fair value of collateral. The allowance for credit losses is calculated on an individual loan basis based on the shortfall between the fair value of the loan's collateral, which is adjusted for liquidation costs/discounts, and amortized cost. If the fair value of the collateral exceeds the amortized cost, no allowance is required.

The CECL methodology requires a ~~federal or state government~~significant amount of management judgment in ~~response to~~determining the COVID-19 pandemic, the borrower is not experiencing financial difficulty under ASC 310-40. The Company continues to prudently work with borrowers negatively impacted by the COVID-19 pandemic while managing credit risks and recognizing an appropriate allowance for credit losses. Several of the steps in the methodology involve judgment and are subjective in nature including, among other things: segmenting the loan portfolio; determining the amount of loss history to consider; selecting predictive econometric regression models that use appropriate macroeconomic variables; determining the methodology to forecast prepayments; selecting the most appropriate economic forecast scenario; determining the length of the reasonable and ~~lease~~supportable forecast and reversion periods; estimating expected utilization rates on unfunded loan commitments; and assessing relevant and appropriate qualitative factors. In addition, the CECL methodology is dependent on economic forecasts, which are inherently imprecise and will change from period to period. Although the allowance for credit losses ~~on its loan portfolio. The Company approved total loan modifications under the CARES Act of $947.0 million, of which $33.1 million remain outstanding as of September 30, 2021.~~

~~Another key program under the CARES Act~~ is the Paycheck Protection Program (“PPP”) administered by the SBA which provided funding to qualifying businesses and organizations. Under this program, the Company has provided fundings of approximately $650 million. In the third quarter of 2020 and second quarter of 2021, the Company sold approximately $355.0 million and $56.5 million, respectively, of such loans, servicing rights released to a third party. The Company also referred approximately $124 million of PPP loans to a third party during the first six months of 2021. The Company has approximately $48.7 million of PPP loans remaining in its portfolio as of September 30, 2021 and believesconsidered appropriate, there can be no assurance that ~~the majority of these loans~~it will be ~~forgiven by the SBA.~~sufficient to absorb future losses.

In determining an appropriate amount for the allowance, the Bank segments and ~~evaluates~~aggregates the loan portfolio based on ~~Federal call report codes, which are based on collateral or purpose.~~common characteristics. The following ~~portfolio classes~~segments have been identified:

Primary Residential Mortgages. The Bank originates one to four family residential mortgage loans in the Tri-State area (New York, New Jersey and Connecticut), Pennsylvania and Florida. Loans are secured by first liens on the primary residence or investment property. Primary risk characteristics associated with residential mortgage loans typically involve: major living or lifestyle changes to the borrower, including unemployment or other loss of income; unexpected significant expenses, such as for major medical issues or catastrophic events; and divorce or death. In addition, residential mortgage loans that have adjustable rates could expose the borrower to higher debt service requirements in a rising interest rate environment. Further, real estate values could drop significantly and cause the value of the property to fall below the loan amount, creating additional potential loss exposure for the Bank.

~~Home Equity Lines of Credit~~. The Bank provides revolving lines of credit against one to four family residences in the Tri-State area. Primary risk characteristics associated with home equity lines of credit typically involve: major living or lifestyle changes to the borrower, including unemployment or other loss of income; unexpected significant expenses, such as for major medical issues or catastrophic events; and divorce or death. In addition, home equity lines of credit typically are made with variable or floating interest rates, which could expose the borrower to higher debt service requirements in a rising interest rate environment. Further, real estate values could drop significantly and cause the value of the property to fall below the loan amount, creating additional potential loss exposure for the Bank.

Junior Lien Loan on Residence (which include home equity lines of credit). The Bank provides junior lien loans (“JLL”) and revolving home equity lines of credit against one to four family properties in the Tri-State area. ~~JLLs can be either in the form of an amortizing home equity loan or a revolving home equity line of credit.~~ These

loans are subordinate to a first mortgage, which may be from another lending institution. Primary risk characteristics associated with JLLs and home equity lines of credit typically involve: major living or lifestyle changes to the borrower, including unemployment or other loss of income; unexpected significant expenses, such as for major medical issues or catastrophic events; and divorce or death. Further, real estate values could drop significantly and cause the value of the property to fall below the loan amount, creating additional potential loss exposure for the Bank. In addition, home equity lines of credit typically are made with variable or floating interest rates, which could expose the borrower to higher debt service requirements in a rising interest rate environment. Further, real estate values could drop significantly and cause the value of the property to fall below the loan amount, creating additional potential loss exposure for the Bank.

Multifamily ~~and Commercial Real Estate Loans~~. The Bank provides mortgage loans for multifamily properties (i.e., buildings which have five or more residential units) and other commercial real estate that is either owner occupied

or managed as an investment property ~~(non-owner occupied)~~(non-owner-occupied) in the Tri-State area and Pennsylvania. Commercial real estate properties primarily include retail buildings/shopping centers, hotels, office/medical buildings and industrial/warehouse space. Some properties are considered “mixed use” as they are a combination of building types, such as a building with retail space on the ground floor and either residential apartments or office suites on the upper floors. Multifamily loans are expected to be repaid from the cash flows of the underlying property so the collective amount of rents must be sufficient to cover all operating expenses, property management and maintenance, taxes and debt service. Increases in vacancy rates, interest rates or other changes in general economic conditions can have an impact on the borrower and its ability to repay the loan.

Owner-Occupied Commercial Real Estate Loans. The Bank provides mortgage loans for owner-occupied commercial real estate properties in the Tri-State area and Pennsylvania. Commercial real estate properties primarily include retail buildings/shopping centers, hotels, office/medical buildings and industrial/warehouse space. Some properties are mixed use. Commercial real estate loans are generally considered to have a higher degree of credit risk ~~than multifamily~~as they may be dependent on the ongoing success and operating viability of a fewer number of tenants who are occupying the property and who may have a greater degree of exposure to economic conditions.

Investment Commercial Real Estate Loans. The Bank provides mortgage loans for properties managed as an investment property (non-owner-occupied) in the Tri-State area and Pennsylvania. Non-owner-occupied properties primarily include retail buildings/shopping centers, hotels, office/medical buildings and industrial/warehouse space. Some properties are considered “mixed use” as they are a combination of building types, such as a building with retail space on the ground floor and either residential apartments or office suites on the upper floors. Commercial real estate loans are generally considered to have a higher degree of credit risk as they may be dependent on the ongoing success and operating viability of a fewer number of tenants who are occupying the property and who may have a greater degree of exposure to economic conditions.

Commercial and Industrial Loans. The Bank provides lines of credit and term loans to operating companies for business purposes. The loans are generally secured by business assets such as accounts receivable, inventory, business vehicles and equipment as well as the stock of a company, if privately held. Commercial and industrial loans are typically repaid first by the cash flows generated by the borrower’s business operations. The primary risk characteristics are specific to the underlying business and its ability to generate sustainable profitability and resulting positive cash flows. Factors that may influence a business’ profitability include, but are not limited to, demand for its products or services, quality and depth of management, degree of competition, regulatory changes, and general economic conditions. ~~Commercial and industrial loans are generally secured by business assets.~~ To mitigate the risk characteristics of commercial and industrial loans, these loans often include commercial real estate as collateral ~~to strengthen the Bank’s position~~ and the Bank will often require more frequent reporting requirements from the borrower in order to better monitor its business performance. However, the ability of the Bank to foreclose and realize sufficient value from the assets is often highly uncertain.

Leasing ~~and Equipment~~ Finance. PCC offers a range of finance solutions nationally. PCC provides term loans and leases secured by assets financed for U.S. based mid-size and large companies. Facilities tend to be fully drawn under fixed rate terms. PCC serves a broad range of industries including transportation, manufacturing, heavy construction and utilities.

Asset risk in PCC’s portfolio is generally recognized through changes to loan income, or through changes to lease related income streams due to fluctuations in lease rates. Changes to lease income can occur when the existing lease contract expires, the asset comes off lease or the business seeks to enter a new lease agreement. Asset risk may also change through depreciation, resulting from changes in the residual value of the operating lease asset or through impairment of the asset carrying value, which can occur at any time during the life of the asset.

Credit risk in PCC’s portfolio generally results from the potential default of borrowers or lessees, which may be driven by customer specific or broader industry related conditions. Credit losses can impact multiple parts of the income statement including loss of interest/lease/rental income and/or higher costs and expenses related to the repossession, refurbishment, re-marketing and or re-leasing of assets.

Construction. The Bank provides commercial construction loans for properties located in the Tri-state area. Risks common to commercial construction loans are cost overruns, changes in market demand for property, inadequate long-term financing arrangements and declines in real estate values. Changes in market demand for property could lead to longer marketing times resulting in higher carrying costs, declining values, and higher interest rates.

Consumer and Other. These are loans to individuals for household, family and other personal expenditures as well as obligations of states and political subdivisions in the U.S. This also represents all other loans that cannot be categorized in any of the previous mentioned loan segments. Consumer loans generally have higher interest rates and shorter terms than residential loans but tend to have higher credit risk due to the type of collateral securing the loan or in some cases the absence of collateral.

A troubled debt restructuring (“TDR”) is a modified loan with concessions made by the lender to a borrower who is experiencing financial difficulty. TDRs are impaired and are generally measured at the present value of estimated future cash flows using the loan’s effective rate at inception. If a TDR is considered to be a collateral dependent loan, the loan is reported, net, at the fair value of the collateral, less estimated disposition costs. For TDRs that subsequently default, the Company determines the amount of reserve in accordance with the accounting policy for the allowance for credit losses.

The Coronavirus Aid, Relief, and Economic Security ("CARES”) Act, which provided entities with optional temporary relief from certain accounting and financial reporting requirements under U.S. GAAP, allowed financial institutions to suspend application of certain current TDR accounting guidance under ASC 310-40 for loan modifications related to the COVID-19 pandemic made between March 1, 2020 and the earlier of December 31, 2020 or 60 days after the end of the COVID-19 national emergency, provided certain criteria were met. This relief could be applied to loan modifications for borrowers that were not more than 30 days past due as of December 31, 2019 and to loan modifications that deferred or delayed the payment of principal or interest or changed the interest rate on the loan. In April 2020, federal and state banking regulators issued the Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus to provide further interpretation of when a borrower is experiencing financial difficulty, specifically indicating that if the modification is either short-term (e.g., six months) or mandated by a federal or state government in response to the COVID-19 pandemic, the borrower is not experiencing financial difficulty under ASC 310-40. The Company approved total loan modifications under the CARES Act of $947.0 million of which none remain outstanding.

Another key program under the CARES Act is the Paycheck Protection Program (“PPP”) administered by the SBA which provided funding to qualifying businesses and organizations. Under this program, the Company provided funding of approximately $650 million. In the third quarter of 2020 and second quarter of 2021, the Company sold approximately $355.0 million and $56.5 million, respectively, of such loans, servicing rights released to a third party. The Company also referred approximately $124 million of PPP loans to a third party during the first six months of 2021. The Company has approximately $1.9 million of PPP loans remaining in its portfolio as of September 30, 2022 and believes that substantially all of these loans will be forgiven by the SBA. These loans are fully guaranteed by the SBA and provide for full forgiveness of the loans during a specified forgiveness period that meet specific guidelines provided by the SBA. Loans that do not meet the forgiveness criteria will enter a repayment period of 2 or 5 years.

Leases: At inception, contracts are evaluated to determine whether the contract constitutes a lease agreement. For contracts that are determined to be an operating lease, a corresponding right-of-use (“ROU”) asset and operating lease liability are recorded inas separate line items on the statement of condition. AAn ROU asset represents the Company’s right to use an underlying asset during the lease term and a lease liability represents the Company’s commitment to make contractually obligated lease payments. Operating lease ROU assets and liabilities are recognized at the commencement date of the lease and are based on the present value of lease payments over the lease term. The measurement of the operating lease ROU asset includes any lease payments made.

If the rate implicit in the lease is not readily determinable, the incremental collateralized borrowing rate is used to determine the present value of lease payments. This rate gives consideration to the applicable FHLB collateralized borrowing rates and is based on the information available at the commencement date. The Company has elected to apply the short-term lease measurement and recognition exemption to leases with an initial term of 12 months or less; therefore, these leases are not recorded on the Company’s statement of condition, but rather, lease expense is recognized over the lease term on a straight-line basis. The

Company’s lease agreements may include options to extend or terminate the lease. The Company’s decision to exercise renewal options is based on an assessment of its current business needs and market factors at the time of the renewal. The Company maintains certain property

and equipment under direct financing and operating leases. Substantially all of the leases in which the Company is the lessee are comprised of real estate property for branches and office space and are classified as operating leases.

The ROU asset is measured at the amount of the lease liability adjusted for lease incentives received, any cumulative prepaid or accrued rent if the lease payments are uneven throughout the lease term, any unamortized initial direct costs, and any impairment of the ROU asset. Operating lease expense consists ~~of:~~of a single lease cost allocated over the remaining lease term on a straight-line basis, variable lease payments not included in the lease liability, and any impairment of the ROU asset.

There are no terms or conditions related to residual value guarantees and no restrictions or covenants that would impact the Company’s ability to pay dividends or to incur additional financial obligations.

Derivatives: At the inception of a derivative contract, the Company designates the derivative as one of three types based on the Company’s intentions and belief as to likely effectiveness as a hedge. These three types are (1) a hedge of the fair value of a recognized asset or liability or of an unrecognized firm commitment (“fair value hedge”),; (2) a hedge of a forecasted transaction or the variability of cash flows to be received or paid related to a recognized asset or liability (“cash flow hedge”),; or (3) an instrument with no hedging designation. For a fair value hedge, the gain or loss on the derivative, as well as the offsetting loss or gain on the hedged item, are recognized in current earnings as fair values change. For a cash flow hedge, the gain or loss on the derivative is reported in other comprehensive income and is reclassified into earnings in the same periods during which the hedged transaction affects earnings. For cash flow hedges, changes in the fair value of derivatives that are not highly effective in hedging the changes in fair value or expected cash flows of the hedged item are recognized immediately in current earnings. Changes in the fair value of derivatives that do not qualify for hedge accounting are reported currently in earnings, as non-interest income. When hedge accounting is discontinued on a fair value hedge that no longer qualifies as an effective hedge, the derivative continues to be reported at fair value in the statement of condition, but the carrying amount of the hedged item is no longer adjusted for future changes in fair value. The adjustment to the carrying amount of the hedged item that existed at the date hedge accounting is discontinued is amortized over the remaining life of the hedged item into earnings.

Net cash settlements on derivatives that qualify for hedge accounting are recorded in interest income or interest expense, based on the item being hedged. Net cash settlements on derivatives that do not qualify for hedge accounting are reported in non-interest income. Cash flows on hedges are classified in the cash flow statement the same as the cash flows of the items being hedged.

The Company formally documents the relationship between derivatives and hedged items, as well as the risk-management objective and the strategy for undertaking hedge transactions at the inception of the hedging relationship. This documentation includes linking fair value or cash flow hedges to specific assets and liabilities on the ~~balance sheet~~statement of condition or to specific firm commitments or forecasted transactions. The Company discontinues hedge accounting when it determines that the derivative is no longer effective in offsetting changes in the fair value or cash flows of the hedged item, the derivative is settled or terminated, a hedged forecasted transaction is no longer probable, a hedged firm commitment is no longer firm, or treatment of the derivative as a hedge is no longer appropriate or intended.

When hedge accounting is discontinued, subsequent changes in fair value of the derivative are recorded as non-interest income. When a cash flow hedge is discontinued but the hedged cash flows or forecasted transactions are still expected to occur, gains or losses that were accumulated in other comprehensive income are amortized into earnings over the same periods which the hedged transactions will affect earnings.

The Company also offers facility specific / loan level swaps to its customers and offsets its exposure from such contracts by entering into mirror image swaps with a financial institution / swap counterparty (loan level / back-to-back swap program). The customer accommodations and any offsetting swaps are treated as non-hedging derivative instruments which do not qualify for hedge accounting (“standalone derivatives”). The notional amount of the swaps does not represent amounts exchanged by the parties. The amount exchanged is determined by reference to the notional amount and the other terms of the individual contracts. The fair value of the swaps is recorded as both an asset and a liability, in other assets and other liabilities, respectively, in equal amounts for these transactions. The Company is exposed to losses if a customer counterparty fails to make its payments under a contract in which the Company is in a net receiving position. At this time, the Company anticipates that its counterparties will be able to fully satisfy their obligations under the agreements. All of the contracts to which the Company is a party settle monthly. Further, the Company has netting agreements with the dealers with which it does business.

Stock-Based Compensation: The Company’s 2006 Long-Term Stock Incentive Plan, 2012 Long-Term Stock Incentive Plan and 2021 Long-Term Stock Incentive Plan allow the granting of shares of the Company’s common stock as incentive stock options, nonqualified stock options, restricted stock awards, restricted stock units and stock appreciation rights to directors, officers and employees of the Company and its subsidiaries. There are no shares remaining for issuance with respect to the stock option plan

approved in 2002, however options granted under this plan are still included in the amounts below. Options granted under these plans are, in general, exercisable not earlier than one year after the date of grant, at a price equal to the fair value of common stock

on the date of grant and expire not more than ten years after the date of grant. Stock options may vest during a period of up to five years after the date of grant. Some options granted to officers at or above the senior vice president level were immediately exercisable at the date of grant. The Company has a policy of using authorized but unissued shares to satisfy option exercises.

Upon adoption of ~~Accounting Standards Update (“ASU”)~~ASU 2016-09, “Compensation - Stock Compensation (Topic 718), Improvements to Employee Share-Based Payment Accounting,” the Company has elected to account for forfeitures as they occur, rather than estimate expected forfeitures.

For the Company’s stock option plans, changes in options outstanding during the nine months ended September 30, ~~2021~~2022 were as follows:

Weighted

Weighted

Average

Aggregate

Average

Remaining

Intrinsic

Number of

Exercise

Contractual

Value

Options

Price

Term

(In thousands)

Balance, January 1, 2021

50,660

$
13.59

Exercised during 2021

(3,220
)

12.80

Expired during 2021

—

—

Forfeited during 2021

(2,680
)

13.24

Balance, September 30, 2021

44,760

$
13.67

0.97 years

$
881

Vested and expected to vest

44,760

$
13.67

0.97 years

$
881

Exercisable at September 30, 2021

44,760

$
13.67

0.97 years

$
881


						Weighted
				Weighted		Average	Aggregate
				Average		Remaining	Intrinsic
	Number of			Exercise		Contractual	Value
	Options			Price		Term	(In thousands)
Balance, January 1, 2022		31,340		$	14.59
Exercised during 2022		(9,660	)		13.14
Expired during 2022		—			—
Forfeited during 2022		(900	)		13.11
Balance, September 30, 2022		20,780		$	15.33	0.44 years	$	381
Vested and expected to vest		20,780		$	15.33	0.44 years	$	381
Exercisable at September 30, 2022		20,780		$	15.33	0.44 years	$	381

The aggregate intrinsic value represents the difference between the Company’s closing stock price on the last trading day of the third quarter of ~~2021~~2022 and the exercise price, multiplied by the number of in-the-money options. The Company’s closing stock price on September 30, ~~2021~~2022 was ~~$33.36.~~$33.65.

There were 0no stock options granted during the three or nine months ended September 30, ~~2021.~~ 2022.

The Company issued performance-based and service-based restricted stock units in ~~2021~~2022 and ~~2020.~~2021. Service-based units vest ratably over a ~~three-~~three- or five-year period. There were 0no service-based restricted stock units granted during the third quarter of ~~2021.~~2022.

The performance-based awards are dependent upon the Company meeting certain performance criteria and, to the extent the performance criteria are met, will cliff vest at the end of the performance period, which is generally three years. There were 0no performance-based restricted stock units granted in the third quarter of ~~2021.~~ 2022.

Changes in non-vested shares dependent on performance criteria for the nine months ended September 30, ~~2021~~2022 were as follows:


				Weighted
				Average
	Number of			Grant Date
	Shares			Fair Value
Balance, January 1, 2022		225,435		$	20.29
Granted during 2022		71,482			35.93
Vested during 2022		(58,077	)		25.77
Forfeited during 2022		(5,284	)		17.92
Balance, September 30, 2022		233,556		$	23.77

Weighted

Average

Number of

Grant Date

Shares

Fair Value

Balance, January 1, 2021

221,600

$
20.47

Granted during 2021

51,710

31.36

Vested during 2021

(36,032
)

35.33

Forfeited during 2021

(11,843
)

26.32

Balance, September 30, 2021

225,435

$
20.29

Changes in service-based restricted stock awards/units for the nine months ended September 30, ~~2021~~2022 were as follows:

Weighted

Average

Number of

Grant Date

Shares

Fair Value

Balance, January 1, 2021

777,166

$
19.24

Granted during 2021

211,356

31.36

Vested during 2021

(252,316
)

22.01

Forfeited during 2021

(24,309
)

17.13

Balance, September 30, 2021

711,897

$
21.93


				Weighted
				Average
	Number of			Grant Date
	Shares			Fair Value
Balance, January 1, 2022		701,145		$	21.93
Granted during 2022		235,534			36.86
Vested during 2022		(267,530	)		21.48
Forfeited during 2022		(22,868	)		23.46
Balance, September 30, 2022		646,281		$	27.50

As of September 30, ~~2021,~~2022, there was ~~$14.3~~$17.0 million of total unrecognized compensation cost related to service-based and performance-based units. That cost is expected to be recognized over a weighted average period of ~~1.52~~1.39 years. Stock compensation expense ~~of $1.8 million was~~ recorded for ~~both~~ the third quarters of 2022 and 2021 totaled $2.1 million and ~~2020,~~$1.8 million, respectively. Stock compensation expense recorded for the nine months ended ~~Septembers~~September 30, 2022 and 2021 ~~and 2020~~ totaled ~~$5.3~~$5.7 million and ~~$5.1~~$5.3 million, respectively.

Employee Stock Purchase Plan (“ESPP”):~~In July 2019, the Board appointed ESPP committee revised the ESPP.~~ The ESPP provides for the granting of rights to purchase up to 150,000 shares of Peapack-Gladstone Financial Corporation common stock. In May 2020, shareholders approved an increase of 200,000 shares of Peapack-Gladstone Financial Corporation common stock to be issued under the ESPP.

~~Subject to certain eligibility requirements and restrictions, the ESPP provided for a single Offering Period of twelve months in duration, which commenced on May 16, 2019 and ended on May 15, 2020.~~

The ESPP ~~was revised to allow~~allows for the purchase of shares during four three-month Offering Periods of each calendar year. The Offering Periods ~~are~~end on February 16, May 16, August 16 and November 16 of each calendar year.

Each participant in the Offering Period is granted an option to purchase a number of shares and may contribute between 1one percent and 15 percent of their compensation. At the end of each Offering Period, ~~on the purchase date,~~ the number of shares to be purchased by the employee is determined by dividing the employee’s contributions accumulated during the Offering Period by the applicable purchase price. The purchase price is an amount equal to 85 percent of the closing market price of a share of common stock on the purchase date. Participation in the ESPP is entirely voluntary and employees can cancel their purchases at any time during the period without penalty. The fair value of each share purchase right is determined using the Black-Scholes option pricing model.

The Company recorded ~~$37,000 and $9,000~~$37,000 of expense in salaries and employee benefits expense for both the three months ended September 30, ~~2021~~2022 and ~~2020, respectively~~2021 related to the ESPP. Total shares issued under the ESPP during the third quarter of 2022 and 2021 were 6,441and ~~2020 were~~ 6,889 ~~and 5,598,~~, respectively.

The Company recorded ~~$93,000~~$114,000 and ~~$199,000~~$93,000 of expense in salaries and employee benefits expense for the nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively, related to the ESPP. Total shares issued under the ESPP ~~for~~during the nine months ended September 30, 2022 and 2021 were 20,369and ~~2020 were~~ 21,661 ~~and 52,533,~~, respectively.

Earnings per share – Basic and Diluted: The following is a reconciliation of the calculation of basic and diluted earnings per share. Basic net income per share is calculated by dividing net income available to shareholders by the weighted average shares outstanding during the reporting period. Diluted net income per share is computed similarly to that of basic net income per share, except that the denominator is increased to include the number of additional shares that would have been outstanding utilizing the Treasury Stock Method if all shares underlying potentially dilutive stock options were issued and all shares of restricted stock, stock warrants or restricted stock units were to vest during the reporting period.


	Three Months Ended				Nine Months Ended				Three Months Ended				Nine Months Ended
	September 30,				September 30,				September 30,				September 30,
(Dollars in thousands, except per share data)	2021		2020		2021		2020		2022		2021		2022		2021
Net income available to common shareholders	$	14,171	$	13,547	$	41,767	$	23,162	$	20,126	$	14,171	$	53,667	$	41,767

Basic weighted average shares outstanding		18,763,316		18,908,337		18,891,601		18,879,688		18,072,385		18,763,316		18,244,691		18,891,601
Plus: common stock equivalents		510,515		224,313		498,921		172,917		348,276		510,515		407,351		498,921
Diluted weighted average shares outstanding		19,273,831		19,132,650		19,390,522		19,052,605		18,420,661		19,273,831		18,652,042		19,390,522
Net income per share
Basic	$	0.76	$	0.72	$	2.21	$	1.23	$	1.11	$	0.76	$	2.94	$	2.21
Diluted		0.74		0.71		2.15		1.22		1.09		0.74		2.88		2.15

For the three months ended September 30, 2022, restricted stock units totaling 112,241 were not included in the computation of diluted earnings per share because they were anti-dilutive. For the three months ended September 30, 2021, all restricted stock units were included in the computation of diluted earnings per share because they were all dilutive. For the ~~three months ended September 30, 2020, restricted stock units totaling 374,366 were not included in the computation of diluted earnings per share because they were anti-dilutive. For the~~ nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, restricted stock units totaling ~~261,610~~296,687 and ~~207,466~~261,610 were not included in the computation of diluted earnings per share because they were anti-dilutive. Anti-dilutive shares are common stock equivalents with weighted average exercise prices in excess of the average market value for the periods presented.

Income Taxes: The Company files a consolidated Federal income tax return. Separate state income tax returns are filed for each subsidiary based on current laws and regulations.

The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in its financial statements or tax returns. The measurement of deferred tax assets and liabilities is based on the enacted tax rates. Such tax assets and liabilities are adjusted for the effect of a change in tax rates in the period of enactment.

The Company recognizes a tax position as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50 percent likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded.

The Company is no longer subject to examination by the U.S. Federal tax authorities for years prior to ~~2016~~2018 or by New Jersey tax authorities for years prior to ~~2015.~~ 2016.

The Company recognizes interest and/or penalties related to income tax matters in income tax expense.

Loss Contingencies: Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. Management does not believe there are any such matters that will have a material effect on the financial statements.

Restrictions on Cash: A large portion of cash on hand or on deposit with the Federal Reserve Bank (“FRB”) was required to meet regulatory reserve and clearing requirements. Prior to March 2020, reserves were in the form of cash and balances with the FRB and included in interest-earning deposits in our statement of condition. The FRB suspended cash reserve requirements effective March 26, 2020.

Comprehensive Income/(Loss): Comprehensive income/(loss) consists of net income and the change during the period in the Company’s net unrealized gains or losses on securities available for sale and unrealized gains and losses on cash flow hedge, net of tax, less adjustments for realized gains and losses.

Transfers of Financial Assets: Transfers of financial assets are accounted for as sales, when control over the assets has been relinquished. Control over transferred assets is deemed to be surrendered when the assets have been isolated from the Company, the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

Risks and Uncertainties:The COVID-19 pandemic has had a devastating effect on businesses both locally and nationally. As a result, Congress passed the CARES Act to provide economic assistance to American workers, families and businesses. The CARES Act contains substantial tax and spending provisions including direct financial aid to American families, extensive emergency funding for hospitals and medical providers, and economic stimulus to significant impacted industry sectors.

~~The Company expects COVID-19 to have an impact on our operations but cannot determine or estimate the full impact at this time.~~ It is possible that estimates made in the Company’s consolidated financial statements could be materially and adversely impacted as a result of the conditions created by COVID-19, including estimates regarding expected provision for ~~loan and lease~~credit losses and impairment of goodwill.

Goodwill and Other Intangible Assets: Goodwill is generally determined as the excess of the fair value of the consideration transferred, plus the fair value of any noncontrolling interests in the acquiree (if any), over the fair value of the net assets acquired and liabilities assumed as of the acquisition date. Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized but tested for impairment at least annually or more frequently if events and circumstances exist that indicate that a goodwill impairment test should be performed. Goodwill was primarily attributable to the Bank’s wealth acquisitions. Management monitors the impact of changes in the financial markets and includes these assessments in our impairment process. Management has concluded that there was no goodwill impairment as of September 30, 2022.

The Company has selected December 31 as the date to perform the annual impairment test. Intangible assets with definite useful lives are amortized over their estimated useful lives to their estimated residual values. Goodwill, which includes assembled workforce has an indefinite life on our statement of financial condition. Intangible assets with definite useful lives are amortized over their estimated useful lives to their estimated residual values. Goodwill and assembled workforce are the intangible assets with an indefinite life on our balance sheet.

Other intangible assets, which primarily consist of customer relationship intangible assets arising from acquisitions, are amortized on an accelerated basis over their estimated useful lives, which range from 5 to 15 ~~years.~~years.

2. INVESTMENT SECURITIES ~~AVAILABLE FOR SALE~~

A summary of amortized cost and approximate fair value of investment securities available for sale and held to maturity included in the Consolidated Statements of Condition as of September 30, ~~2021~~2022 and December 31, ~~2020~~2021 follows:


	September 30, 2021									September 30, 2022
			Gross		Gross							Gross		Gross			Allowance
	Amortized		Unrealized		Unrealized			Fair		Amortized		Unrealized		Unrealized			for		Fair
(In thousands)	Cost		Gains		Losses			Value		Cost		Gains		Losses			Credit Losses		Value
Securities Available for Sale:
U.S government-sponsored agencies	$	280,102	$	0	$	(5,669	)	$	274,433	$	244,770	$	—	$	(55,360	)	$	—	$	189,410
Mortgage-backed securities–residential		515,651		5,663		(6,183	)		515,131		315,541		40		(48,034	)		—		267,547
SBA pool securities		43,685		95		(850	)		42,930		33,538		2		(4,419	)		—		29,121
State and political subdivisions		5,696		54		0			5,750		2,613		—		(29	)		—		2,584
Corporate bond		5,500		35		0			5,535		10,000		—		(782	)		—		9,218
Total	$	850,634	$	5,847	$	(12,702	)	$	843,779
Total securities available for sale										$	606,462	$	42	$	(108,624	)	$	—	$	497,880
Securities Held to Maturity:
U.S. government-sponsored agencies										$	40,000	$	—	$	(4,869	)	$	—	$	35,131
Mortgage-backed securities–residential											63,551		—		(10,825	)		—		52,726
Total securities held to maturity										$	103,551	$	—	$	(15,694	)	$	—	$	87,857


	December 31, 2021
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
(In thousands)	Cost		Gains		Losses			Value
Securities Available for Sale:
U.S government-sponsored agencies	$	280,045	$	—	$	(7,824	)	$	272,221
Mortgage-backed securities–residential		481,062		3,849		(7,937	)		476,974
SBA pool securities		40,649		12		(1,100	)		39,561
State and political subdivisions		5,431		45		—			5,476
Corporate bond		2,500		21		—			2,521
Total securities available for sale	$	809,687	$	3,927	$	(16,861	)	$	796,753
Securities Held to Maturity:
U.S. government-sponsored agencies	$	40,000	$	7	$	(25	)	$	39,982
Mortgage-backed securities–residential		68,680		67		(269	)		68,478
Total securities held to maturity	$	108,680	$	74	$	(294	)	$	108,460

December 31, 2020

Gross

Gross

Amortized

Unrealized

Unrealized

Fair

(In thousands)

Cost

Gains

Losses

Value

U.S. treasuries

$
2,613

$
0

$
0

$
2,613

U.S. government-sponsored agencies

84,424

2

(655
)

83,771

Mortgage-backed securities–residential

467,915

8,604

(461
)

476,058

SBA pool securities

49,457

31

(359
)

49,129

State and political subdivisions

7,987

102

0

8,089

Corporate bond

3,000

29

0

3,029

Total

$
615,396

$
8,768

$
(1,475
)

$
622,689

The following table presents a summary of the gross gains, gross losses and net tax benefit related to proceeds on sales of securities available for sale for the nine months ended September 30, 2022:


(In thousands)	September 30, 2022
Proceeds from sales	$	118,972
Gross gains		3
Gross losses		(6,612	)
Net tax benefit		1,581

There were no sales of securities for the quarter ended September 30, 2022.

The following tables present the Company’s available for sale and held to maturity securities ~~in a~~with continuous unrealized ~~loss position~~losses and the approximate fair value of these investments as of September 30, ~~2021~~2022 and December 31, ~~2020.~~2021.


	September 30, 2022
	Duration of Unrealized Loss
	Less Than 12 Months					12 Months or Longer					Total
	Approximate					Approximate					Approximate
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
(In thousands)	Value		Losses			Value		Losses			Value		Losses
Securities Available for Sale:
U.S. government-sponsored agencies	$	—	$	—		$	189,410	$	(55,360	)	$	189,410	$	(55,360	)
Mortgage-backed securities residential		70,005		(5,425	)		166,924		(42,609	)		236,929		(48,034	)
SBA pool securities		3,788		(282	)		24,313		(4,137	)		28,101		(4,419	)
State and political subdivisions		2,584		(29	)		—		—			2,584		(29	)
Corporate bond		9,218		(782	)		—		—			9,218		(782	)
Total securities available for sale	$	85,595	$	(6,518	)	$	380,647	$	(102,106	)	$	466,242	$	(108,624	)
Securities Held to Maturity:
U.S. government-sponsored agencies	$	35,131	$	(4,869	)	$	—	$	—		$	35,131	$	(4,869	)
Mortgage-backed securities residential		52,726		(10,825	)		—		—			52,726		(10,825	)
Total securities held to maturity	$	87,857	$	(15,694	)	$	—	$	—		$	87,857	$	(15,694	)
Total securities	$	173,452	$	(22,212	)	$	380,647	$	(102,106	)	$	554,099	$	(124,318	)

September 30, 2021

Duration of Unrealized Loss

Less Than 12 Months

12 Months or Longer

Total

Approximate

Approximate

Approximate

Fair

Unrealized

Fair

Unrealized

Fair

Unrealized

(In thousands)

Value

Losses

Value

Losses

Value

Losses

U.S government-sponsored agencies

$
259,893

$
(5,209
)

$
14,540

$
(460
)

$
274,433

$
(5,669
)
Mortgage-backed securities-residential

288,682

(6,015
)

14,707

(168
)

303,389

(6,183
)
SBA pool securities

23,631

(330
)

10,577

(520
)

34,208

(850
)
Total

$
572,206

$
(11,554
)

$
39,824

$
(1,148
)

$
612,030

$
(12,702
)


	December 31, 2021
	Duration of Unrealized Loss
	Less Than 12 Months					12 Months or Longer					Total
	Approximate					Approximate					Approximate
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
(In thousands)	Value		Losses			Value		Losses			Value		Losses
Securities Available for Sale:
U.S. government-sponsored agencies	$	243,187	$	(6,858	)	$	29,034	$	(966	)	$	272,221	$	(7,824	)
Mortgage-backed securities residential		265,403		(7,053	)		33,455		(884	)		298,858		(7,937	)
SBA pool securities		22,057		(567	)		10,562		(533	)		32,619		(1,100	)
Total securities available for sale	$	530,647	$	(14,478	)	$	73,051	$	(2,383	)	$	603,698	$	(16,861	)
Securities Held to Maturity:
U.S. government-sponsored agencies	$	24,975	$	(25	)	$	—	$	—		$	24,975	$	(25	)
Mortgage-backed securities residential		48,307		(269	)		—		—			48,307		(269	)
Total securities held to maturity	$	73,282	$	(294	)	$	—	$	—		$	73,282	$	(294	)
Total securities	$	603,929	$	(14,772	)	$	73,051	$	(2,383	)	$	676,980	$	(17,155	)

December 31, 2020

Duration of Unrealized Loss

Less Than 12 Months

12 Months or Longer

Total

Approximate

Approximate

Approximate

Fair

Unrealized

Fair

Unrealized

Fair

Unrealized

(In thousands)

Value

Losses

Value

Losses

Value

Losses

U.S. government-sponsored agencies

$
73,769

$
(655
)

$
0

$
0

$
73,769

$
(655
)
Mortgage-backed securities-residential

103,340

(430
)

13,914

(31
)

117,254

(461
)
SBA pool securities

39,720

(343
)

2,095

(16
)

41,815

(359
)
Total

$
216,829

$
(1,428
)

$
16,009

$
(47
)

$
232,838

$
(1,475
)

Available for sale and held to maturity securities are evaluated to determine if a decline in fair value below the amortized cost basis has resulted from a credit loss or other factors. An impairment related to credit factors would be recorded through an allowance for credit losses. The allowance is limited to the amount by which the security’s amortized cost basis exceeds the fair value. An impairment that has not been recorded through an allowance for credit losses shall be recorded through other comprehensive income, net of applicable taxes. Investment securities will be written down to fair value through the Consolidated Statements of Income when management intends to sell, or may be required to sell, the securities before they recover in value. The issuers of securities currently in a continuous loss position continue to make timely principal and interest payments and none of these securities were past due or were placed in nonaccrual status at September 30, 2022. Primarily all of the investment securities are backed by loans guaranteed by either U.S. government agencies or U.S government-sponsored entities, and management believes that default is highly unlikely given the lack of historical credit losses and governmental backing. Management believes that the unrealized losses on ~~investment~~these securities ~~available~~are a function of changes in market interest rates and credit spreads, not changes in credit quality. Therefore, no allowance for ~~sale are temporary and are due to interest rate fluctuations and/or volatile market conditions rather than the credit-worthiness of the issuers. As of~~credit losses was recorded at September 30, 2021, the Company does not intend to sell these securities nor is it likely that it will be required to sell the securities before their anticipated recovery; therefore, none of the securities in an unrealized loss position were determined to be other-than-temporarily impaired.2022.

TheThe Company has an investment in a CRA investment fund with a fair value of ~~$14.8~~$13.0 million at September 30, ~~2021. The~~2022. This investment is classified as an equity security in our Consolidated Statements of Condition. This security had a loss of ~~$70,000~~$571,000 and $1.7 million for the three months ~~ended September 30, 2021~~ and ~~a loss of $293,000 for the~~ nine months ended September 30, ~~2021.~~2022, respectively. This amount is included in ~~securities gains/(losses), net~~the fair value adjustment for CRA equity security on the Consolidated Statements of ~~Income~~Income..

3. LOANS AND LEASES

Loans outstanding, excluding those held for sale, by general ledger classification, as of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, consisted of the following:


			% of					% of
	September 30,		Totals			December 31,		Total
(Dollars in thousands)	2022		Loans			2021		Loans
Residential mortgage	$	517,755		10.00	%	$	498,300		10.37	%
Multifamily mortgage		1,856,675		35.87			1,595,866		33.20
Commercial mortgage		638,903		12.34			662,626		13.78
Commercial loans (including equipment financing) (1)		2,084,998		40.27			1,955,157		40.67
Commercial construction		4,817		0.09			20,044		0.42
Home equity lines of credit		36,375		0.70			40,803		0.85
Consumer loans, including fixed rate home equity loans		37,412		0.72			33,687		0.70
Other loans		259		0.01			238		0.01
Total loans	$	5,177,194		100.00	%	$	4,806,721		100.00	%

% of

% of

September 30,

Totals

December 31,

Total

(Dollars in thousands)

2021

Loans

2020

Loans

Residential mortgage

$
507,865

11.10
%

$
502,829

11.50
%
Multifamily mortgage

1,497,683

32.73

1,126,946

25.77

Commercial mortgage

680,107

14.87

691,294

15.81

Commercial loans (including equipment financing) (A)

1,790,579

39.13

1,950,981

44.62

Commercial construction

25,718

0.56

12,600

0.29

Home equity lines of credit

42,512

0.93

50,545

1.15

Consumer loans, including fixed rate home equity loans

30,689

0.67

37,016

0.85

Other loans

245

0.01

226

0.01

Total loans

$
4,575,398

100.00
%

$
4,372,437

100.00
%
(1)

Includes PPP loans of $1.9 million at September 30, 2022 and $13.8 million at December 31, 2021.

~~(A)~~

~~Includes PPP loans of $49 million at September 30, 2021 and $196 million at December 31, 2020.~~

In determining an appropriate amount for the allowance, the Bank segments and ~~evaluates~~aggregated the loan portfolio based on ~~federal Call Report codes.~~common characteristics. The following ~~portfolio classes have been~~pool segments identified as of September 30, ~~2021 and December 31, 2020:~~

% of

% of

September 30,

Totals

December 31,

Total

(Dollars in thousands)

2021

Loans

2020

Loans

Primary residential mortgage

$
514,271

11.25
%

$
512,841

11.74
%
Home equity lines of credit

42,512

0.93

50,545

1.16

Junior lien loan on residence

3,218

0.07

4,527

0.10

Multifamily property

1,497,683

32.76

1,126,946

25.79

Owner-occupied commercial real estate

239,674

5.24

253,447

5.80

Investment commercial real estate

981,490

21.47

995,613

22.79

Commercial and industrial (A)

916,192

20.04

1,059,399

24.24

Lease financing

308,351

6.74

305,931

7.00

Farmland/agricultural production

4,461

0.10

3,068

0.07

Commercial construction loans

25,862

0.57

12,773

0.29

Consumer and other loans

38,032

0.83

44,483

1.02

Total loans

4,571,746

100.00
%

4,369,573

100.00
%
Net deferred costs

3,652

2,864

Total loans including net deferred costs

$
4,575,398

$
4,372,437

~~(A)~~

~~Includes PPP loans of $49 million at September 30, 2021 and $196 million at December 31, 2020.~~

~~The following tables present the loan balances by portfolio class,~~2022 are based on ~~impairment method, and~~ the ~~corresponding balances in the allowance for loan and lease losses (ALLL) as of September 30, 2021 and December 31, 2020:~~CECL methodology:


			% of
	September 30,		Totals
(Dollars in thousands)	2022		Loans
Primary residential mortgage	$	520,276		10.06	%
Junior lien loan on residence		40,216		0.78
Multifamily property		1,856,675		35.89
Owner-occupied commercial real estate		256,891		4.96
Investment commercial real estate		1,035,254		20.01
Commercial and industrial (1)		1,106,927		21.40
Lease financing		304,256		5.88
Construction		10,384		0.20
Consumer and other		42,506		0.82
Total loans		5,173,385		100.00	%
Net deferred costs		3,809
Total loans including net deferred costs	$	5,177,194

September 30, 2021

Total

Ending ALLL

Total

Ending ALLL

Loans

Attributable

Loans

Attributable

Individually

To Loans

Collectively

To Loans

Evaluated

Individually

Evaluated

Collectively

Total

For

Evaluated for

For

Evaluated for

Total

Ending

(In thousands)

Impairment

Impairment

Impairment

Impairment

Loans

ALLL

Primary residential mortgage

$
2,886

$
80

$
511,385

$
1,995

$
514,271

$
2,075

Home equity lines of credit

—

—

42,512

119

42,512

119

Junior lien loan on residence

—

—

3,218

7

3,218

7

Multifamily property

—

—

1,497,683

10,568

1,497,683

10,568

Owner-occupied commercial real estate

494

—

239,180

2,293

239,674

2,293

Investment commercial real estate

19,887

7,137

961,603

22,847

981,490

29,984

Commercial and industrial (A)

3,074

—

913,118

16,266

916,192

16,266

Lease financing

—

—

308,351

3,369

308,351

3,369

Farmland/agricultural production

—

—

4,461

58

4,461

58

Commercial construction loans

—

—

25,862

165

25,862

165

Consumer and other loans

—

—

38,032

229

38,032

229

Total ALLL

$
26,341

$
7,217

$
4,545,405

$
57,916

$
4,571,746

$
65,133

~~(A)~~

~~The balance includes PPP loans of $49 million, which had no related reserve as these loans are guaranteed by the SBA~~.

December 31, 2020

Total

Ending ALLL

Total

Ending ALLL

Loans

Attributable

Loans

Attributable

Individually

To Loans

Collectively

To Loans

Evaluated

Individually

Evaluated

Collectively

Total

For

Evaluated for

For

Evaluated for

Total

Ending

(In thousands)

Impairment

Impairment

Impairment

Impairment

Loans

ALLL

Primary residential mortgage

$
1,490

$
3

$
511,351

$
2,902

$
512,841

$
2,905

Home equity lines of credit

—

—

50,545

218

50,545

218

Junior lien loan on residence

—

—

4,527

15

4,527

15

Multifamily property

—

—

1,126,946

9,945

1,126,946

9,945

Owner-occupied commercial real estate

807

—

252,640

3,050

253,447

3,050

Investment commercial real estate

4,593

—

991,020

27,713

995,613

27,713

Commercial and industrial (A)

9,314

2,700

1,050,085

16,347

1,059,399

19,047

Lease financing

—

—

305,931

3,936

305,931

3,936

Farmland/agricultural production

—

—

3,068

43

3,068

43

Commercial construction loans

—

—

12,773

158

12,773

158

Consumer and other loans

—

—

44,483

279

44,483

279

Total ALLL

$
16,204

$
2,703

$
4,353,369

$
64,606

$
4,369,573

$
67,309

~~(A)The balance includes~~(1) Includes PPP loans of ~~$196 million, which had no related reserve as these loans are guaranteed by the SBA.~~

~~Impaired loans include nonaccrual loans of $25.9~~$1.9 million at September 30, 2022.

The portfolio classes identified as of December 31, 2021 are based on the incurred loss methodology and ~~$11.4~~are segmented by federal Call Report codes:


			% of
	December 31,		Total
(Dollars in thousands)	2021		Loans
Primary residential mortgage	$	500,243		10.42	%
Home equity lines of credit		40,803		0.85
Junior lien loan on residence		3,191		0.07
Multifamily property		1,595,866		33.23
Owner-occupied commercial real estate		252,603		5.26
Investment commercial real estate		1,003,979		20.90
Commercial and industrial (1)		992,332		20.66
Lease financing		345,868		7.20
Farmland/agricultural production		6,871		0.14
Commercial construction loans		20,174		0.42
Consumer and other loans		40,828		0.85
Total loans		4,802,758		100.00	%
Net deferred costs		3,963
Total loans including net deferred costs	$	4,806,721

(1)

Includes PPP loans of $13.8 million at December 31, ~~2020.~~ 2021.Included in impaired loans is a commercial real estate loan with a balance of $19.9 million and specific reserves of $7.1 million at September 30, 2021. Impaired loans also include performing TDR loans of $416,000 at September 30, 2021 and $201,000 at~~December 31, 2020. The allowance allocated to TDR loans totaled $57,000 and $3,000 at September 30, 2021 and December 31, 2020, respectively, of which 0ne was allocated to nonaccrual loans.~~ All accruing TDR loans were paying in accordance with restructured terms as of September 30, 2021. The Company has not committed to lend additional amounts as of September 30, 2021 to customers with outstanding loans that are classified as TDR loans.

The following tables present loans individually evaluated for impairment by class of loans as of September 30, 2021 and December 31, 2020 (The average impaired loans on the following tables represent year to date impaired loans):

September 30, 2021

Unpaid

Average

Principal

Recorded

Specific

Impaired

(In thousands)

Balance

Investment

Reserves

Loans

With no related allowance recorded:

Primary residential mortgage

$
1,947

$
1,750

$
—

$
1,789

Owner-occupied commercial real estate

521

494

—

564

Commercial and industrial

4,986

3,074

—

3,289

Total loans with no related allowance

$
7,454

$
5,318

$
—

$
5,642

With related allowance recorded:

Primary residential mortgage

$
1,136

$
1,136

$
80

$
489

Investment commercial real estate

19,887

19,887

7,137

2,210

Total loans with related allowance

$
21,023

$
21,023

$
7,217

$
2,699

Total loans individually evaluated for impairment

$
28,477

$
26,341

$
7,217

$
8,341

December 31, 2020

Unpaid

Average

Principal

Recorded

Specific

Impaired

(In thousands)

Balance

Investment

Reserves

Loans

With no related allowance recorded:

Primary residential mortgage

$
1,601

$
1,328

$
—

$
5,544

Owner-occupied commercial real estate

817

807

—

516

Investment commercial real estate

4,593

4,593

—

6,582

Commercial and industrial

7,137

4,314

—

1,677

Total loans with no related allowance

$
14,148

$
11,042

$
—

$
14,319

With related allowance recorded:

Primary residential mortgage

$
162

$
162

$
3

$
526

Commercial and industrial

5,000

5,000

2,700

4,140

Total loans with related allowance

$
5,162

$
5,162

$
2,703

$
4,666

Total loans individually evaluated for impairment

$
19,310

$
16,204

$
2,703

$
18,985

Interest income recognized on impaired loans for the quarters ended September 30, 2021 and 2020 was not material. The Company did not recognize any income on non-accruing impaired loans for the three months and nine months ended September 30, 2021 and 2020.

The following tables present the recorded investment in nonaccrual and loans past due ~~over~~ 90 days or over still on accrual by class of loans as of September 30, ~~2021~~2022 and December 31, ~~2020:~~

September 30, 2021

Loans Past Due

90 Days or Over

And Still

(In thousands)

Nonaccrual

Accruing Interest

Primary residential mortgage

$
2,495

$
0

Owner-occupied commercial real estate

494

0

Investment commercial real estate

19,887

Commercial and industrial

3,049

0

Total

$
25,925

$
0

December 31, 2020

Loans Past Due

90 Days or Over

And Still

(In thousands)

Nonaccrual

Accruing Interest

Primary residential mortgage

$
1,328

$
0

Owner-occupied commercial real estate

807

0

Commercial and industrial

9,275

0

Total

$
11,410

$
0

2021:


	September 30, 2022
			Loans Past Due
			90 Days or Over
			And Still
(In thousands)	Nonaccrual		Accruing Interest
Primary residential mortgage	$	2,527	$	—
Owner-occupied commercial real estate		263		—
Investment commercial real estate		12,429		—
Commercial and industrial		505		—
Total	$	15,724	$	—


	December 31, 2021
			Loans Past Due
			90 Days or Over
			And Still
(In thousands)	Nonaccrual		Accruing Interest
Primary residential mortgage	$	1,851	$	—
Junior lien loan on residence		18		—
Owner-occupied commercial real estate		458		—
Investment commercial real estate		12,750		—
Commercial and industrial		496		—
Total	$	15,573	$	—

The following tables present the aging of the recorded investment in past due loans as of September 30, ~~2021~~2022 and December 31, ~~2020~~2021 by class of loans, excluding nonaccrual loans:


	September 30, 2021								September 30, 2022
	30-59		60-89		90 Days or				30-59		60-89		90 Days or
	Days		Days		Greater		Total		Days		Days		Greater		Total
(In thousands)	Past Due		Past Due		Past Due		Past Due		Past Due		Past Due		Past Due		Past Due
Primary residential mortgage	$	997	$	—	$	0	$	997	$	323	$	—	$	—	$	323
Home equity lines of credit		114		—		—		114
Commercial and industrial		17		65		—		82		6,925		—		—		6,925
Total	$	1,128	$	65	$	0	$	1,193	$	7,248	$	—	$	—	$	7,248


	December 31, 2021
	30-59		60-89		90 Days or
	Days		Days		Greater		Total
(In thousands)	Past Due		Past Due		Past Due		Past Due
Primary residential mortgage	$	639	$	—	$	—	$	639
Commercial and industrial		7,825		142		—		7,967
Total	$	8,464	$	142	$	—	$	8,606

December 31, 2020

30-59

60-89

90 Days or

Days

Days

Greater

Total

(In thousands)

Past Due

Past Due

Past Due

Past Due

Primary residential mortgage

$
2,900

$
141

$
0

$
3,041

Home equity lines of credit

181

—

—

181

Junior lien loan on residence

—

25

—

25

Multifamily property

—

269

—

269

Owner-occupied commercial real estate

268

—

—

268

Commercial and industrial

497

772

—

1,269

Total

$
3,846

$
1,207

$
0

$
5,053

Credit Quality Indicators:

The Company places all commercial loans into various credit risk rating categories based on an assessment of the expected ability of the borrowers to properly service their debt. The assessment considers numerous factors including, but not limited to, current financial information on the borrower, historical payment experience, strength of any guarantor, nature of and value of any collateral, acceptability of the loan structure and documentation, relevant public information and current economic trends. This credit risk rating analysis is performed when the loan is initially underwritten and then annually based on set criteria in the loan policy.

In addition, the Bank has engaged an independent loan review firm to validate risk ratings and to ensure compliance with our policies and procedures. This review of the following types of loans is performed quarterly:

•

A large sample of relationships or new lending to existing relationships greater than $1,000,000 booked since the prior review;

•

All criticized and classified rated borrowers with relationship exposure of more than $500,000;

•

A large sample of Pass-rated (including Pass Watch) borrowers with total relationships in excess of $1,000,000 and a small sample of Pass related relationships less than $1,000,000;

•

All leveraged loans of $1,000,000 or greater;

•

At least two borrowing relationships managed by each commercial banker;

•

Any new Regulation “O” loan commitments over $1,000,000; and

•

Any other credits requested by Bank senior management or a member of the Board of Directors and any borrower for which the reviewer determines a review is warranted based upon knowledge of the portfolio, local events, industry stresses, etc.

•

~~A large sample of relationships or new lending to existing relationships greater than $1,000,000 booked since the prior review;~~

•

~~All criticized and classified rated borrowers with relationship exposure of more than $500,000;~~

•

~~A large sample of Pass-rated (including Pass Watch) borrowers with total relationships in excess of $1,000,000 and a small sample of Pass related relationships less than $1,000,000;~~

•

~~All leveraged loans of $1,000,000 or greater;~~

•

~~At least two borrowing relationships managed by each commercial banker;~~

•

~~Any new Regulation “O” loan commitments over $1,000,000; and~~

•

The review excludes borrowers with commitments of less than ~~$500,000.~~$500,000.

The Company uses the following regulatory definitions for criticized and classified risk ratings:

Special Mention: These loans have a potential weakness that deserves Management’s close attention. If left uncorrected, the potential weaknesses may result in deterioration of the repayment prospects for the loans or of the institution’s credit position at some future date.

Substandard: These loans are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful: These loans have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full highly questionable and improbable, based on currently existing facts, conditions and values.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass-rated loans.

~~Loans~~With the adoption of CECL, loans that are ~~considered~~in the process of or expected to be ~~impaired~~in foreclosure are ~~individually evaluated for~~deemed to be collateral dependent with respect to measuring potential loss and allowance ~~adequacy.~~adequacy and are individually evaluated by Management. Loans that do not ~~deemed impaired~~share common risk characteristics are ~~collectively~~also evaluated on an individual basis. All other loans are evaluated using a non-linear discounted cashflow methodology for measuring potential loss and allowance adequacy.

As25

The following is a summary of the credit risk profile of loans by internally assigned grade as of September 30, 2022 based on originations for the periods indicated; the years represent the year of origination for non-revolving loans:


	Grade as of September 30, 2022 for Loans Originated During
												2017				Revolving-
(In thousands)	2022		2021		2020			2019		2018		and Prior		Revolving		Term		Total
Primary residential mortgage:
Pass	$	91,142	$	94,871	$	63,091		$	38,422	$	28,052	$	201,286	$	—	$	694	$	517,558
Special mention		—		—		—			—		—		98		—		—		98
Substandard		—		—		554			1,062		282		722		—		—		2,620
Doubtful		—		—		—	��		—		—		—		—		—		—
Total primary residential mortgages		91,142		94,871		63,645			39,484		28,334		202,106		—		694		520,276

Junior lien loan on residence:
Pass		1,545		185		46			664		354		1,047		35,867		—		39,708
Special mention		—		—		—			—		—		—		—		—		—
Substandard		—		—		—			—		—		—		508		—		508
Doubtful		—		—		—			—		—		—		—		—		—
Total junior lien loan on residence		1,545		185		46			664		354		1,047		36,375		—		40,216

Multifamily property:
Pass		449,363		683,097		118,815			229,869		43,062		317,365		981		1,830		1,844,382
Special mention		—		—		—			2,860		—		3,518		—		—		6,378
Substandard		—		—		—			—		—		5,915		—		—		5,915
Doubtful		—		—		—			—		—		—		—		—		—
Total multifamily property		449,363		683,097		118,815			232,729		43,062		326,798		981		1,830		1,856,675

Owner-occupied commercial real estate:
Pass		12,216		44,107		20,990			12,335		22,587		134,701		764		8,739		256,439
Special mention		—		—		—			—		—		189		—		—		189
Substandard		—		—		—			—		—		263		—		—		263
Doubtful		—		—		—			—		—		—		—		—		—
Total owner-occupied commercial real estate		12,216		44,107		20,990			12,335		22,587		135,153		764		8,739		256,891

Investment commercial real estate:
Pass		149,630		155,537		64,245			168,225		93,927		317,770		7,128		21,831		978,293
Special mention		—		—		—			13,069		—		13,379		—		14,588		41,036
Substandard		12,429		—		—			3,496		—		—		—		—		15,925
Doubtful		—		—		—			—		—		—		—		—		—
Total investment commercial real estate		162,059		155,537		64,245			184,790		93,927		331,149		7,128		36,419		1,035,254

Commercial and industrial:
Pass		277,681		250,700		87,541			89,923		30,915		6,107		298,246		33,082		1,074,195
Special mention		16,333		1,788		2,322			4,265		194		—		7,325		—		32,227
Substandard		—		—		—			—		283		186		36		—		505
Doubtful		—		—		—			—		—		—		—		—		—
Total commercial and industrial		294,014		252,488		89,863			94,188		31,392		6,293		305,607		33,082		1,106,927

Lease financing:
Pass		51,120		76,975		61,758			56,022		34,009		20,422		—		—		300,306
Special mention		2,179		—		—			—		—		—		—		—		2,179
Substandard		—		—		—			1,771		—		—		—		—		1,771
Doubtful		—		—		—			—		—		—		—		—		—
Total lease financing		53,299		76,975		61,758			57,793		34,009		20,422		—		—		304,256

Construction loans:


Pass		—		—		—		1,444		—		—		4,848		4,092		10,384
Special mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—		—
Total commercial construction loans		—		—		—		1,444		—		—		4,848		4,092		10,384

Consumer and other loans:
Pass		—		396		200		13		—		5,980		32,661		3,256		42,506
Special mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—		—
Total consumer and other loans		—		396		200		13		—		5,980		32,661		3,256		42,506

Total:
Pass		1,032,697		1,305,868		416,686		596,917		252,906		1,004,678		380,495		73,524		5,063,771
Special mention		18,512		1,788		2,322		20,194		194		17,184		7,325		14,588		82,107
Substandard		12,429		—		554		6,329		565		7,086		544		—		27,507
Doubtful		—		—		—		—		—		—		—		—		—
Total Loans	$	1,063,638	$	1,307,656	$	419,562	$	623,440	$	253,665	$	1,028,948	$	388,364	$	88,112	$	5,173,385

As of December 31, 2021, and based on the most recent analysis performed, the risk category of loans by class of loans iswas as follows:

Special

(In thousands)

Pass

Mention

Substandard

Doubtful

Primary residential mortgage

$
507,378

$
325

$
6,568

$
—

Home equity lines of credit

42,047

—

465

—

Junior lien loan on residence

3,200

—

18

—

Multifamily property

1,484,408

12,933

342

—

Owner-occupied commercial real estate

229,482

9,441

751

—

Investment commercial real estate

882,526

79,077

19,887

—

Commercial and industrial

878,203

14,083

23,906

—

Lease financing

308,351

—

—

—

Farmland/agricultural production

4,461

—

—

—

Commercial construction loans

25,786

76

—

—

Consumer and other loans

38,032

—

—

—

Total

$
4,403,874

$
115,935

$
51,937

$
—


			Special
(In thousands)	Pass		Mention		Substandard		Doubtful
Primary residential mortgage	$	494,444	$	557	$	5,242	$	—
Home equity lines of credit		40,274		—		529		—
Junior lien loan on residence		3,173		—		18		—
Multifamily property		1,579,776		7,720		8,370		—
Owner-occupied commercial real estate		251,229		663		711		—
Investment commercial real estate		901,877		87,297		14,805		—
Commercial and industrial		951,127		20,178		21,027		—
Lease financing		345,868		—		—		—
Farmland/agricultural production		6,871		—		—		—
Commercial construction loans		20,099		75		—		—
Consumer and other loans		40,828		—		—		—
Total	$	4,635,566	$	116,490	$	50,702	$	—

~~As of December 31, 2020, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows:~~

Special

(In thousands)

Pass

Mention

Substandard

Doubtful

Primary residential mortgage

$
504,795

$
1,398

$
6,648

$
—

Home equity lines of credit

50,068

—

477

—

Junior lien loan on residence

4,483

—

44

—

Multifamily property

1,121,145

5,441

360

—

Owner-occupied commercial real estate

240,638

10,417

2,392

—

Investment commercial real estate

893,115

91,162

11,336

—

Commercial and industrial

989,281

53,604

16,514

—

Lease financing

305,931

—

—

—

Farmland/agricultural production

3,068

—

—

—

Commercial construction loans

12,692

81

—

—

Consumer and other loans

44,483

—

—

—

Total

$
4,169,699

$
162,103

$
37,771

$
—

At September 30, ~~2021, $26.3~~2022, $13.0 million of substandard loans were also considered ~~impaired,~~individually evaluated, compared to ~~$16.2~~$15.7 million at December 31, ~~2020. The increase in substandard loans was primarily due to the downgrade of one commercial real estate loan with a balance of $19.9 million at September 30,~~ 2021.

~~The activity in the allowance for loan and lease losses for the three months ended September 30, 2021 is summarized below:~~

July 1,

September 30,

2021

2021

Beginning

Provision

Ending

(In thousands)

ALLL

Charge-offs

Recoveries

(Credit)

ALLL

Primary residential mortgage

$
2,167

$
—

$
—

$
(92
)

$
2,075

Home equity lines of credit

123

—

—

(4
)

119

Junior lien loan on residence

8

—

—

(1
)

7

Multifamily property

10,615

—

—

(47
)

10,568

Owner-occupied commercial real estate

2,447

—

—

(154
)

2,293

Investment commercial real estate

27,886

—

—

2,098

29,984

Commercial and industrial

16,565

(19
)

50

(330
)

16,266

Lease financing

3,275

—

—

94

3,369

Farmland/agricultural production
��

43

—

—

15

58

Commercial construction loans

159

—

—

6

165

Consumer and other loans

217

(4
)

1

15

229

Total ALLL

$
63,505

$
(23
)

$
51

$
1,600

$
65,133

~~The activity in the allowance for loan and lease losses for the three months ended September 30, 2020 is summarized below:~~

July 1,

September 30,

2020

2020

Beginning

Provision

Ending

(In thousands)

ALLL

Charge-offs

Recoveries

(Credit)

ALLL

Primary residential mortgage

$
3,074

$
—

$
217

$
(324
)

$
2,967

Home equity lines of credit

244

—

3

(27
)

220

Junior lien loan on residence

20

—

—

(2
)

18

Multifamily property

9,662

—

—

1,002

10,664

Owner-occupied commercial real estate

3,177

—

—

(166
)

3,011

Investment commercial real estate

29,866

(5,132
)

—

4,432

29,166

Commercial and industrial

16,218

(164
)

6

112

16,172

Lease financing

3,349

—

—

124

3,473

Farmland/agricultural production

38

—

—

(23
)

15

Commercial construction loans

49

—

—

28

77

Consumer and other loans

368

(2
)

2

(6
)

362

Total ALLL

$
66,065

$
(5,298
)

$
228

$
5,150

$
66,145

~~The activity in the allowance for loan and lease losses for the nine months ended September 30, 2021 is summarized below:~~

January 1,

September 30,

2021

2021

Beginning

Provision

Ending

(In thousands)

ALLL

Charge-offs

Recoveries

(Credit)

ALLL

Primary residential mortgage

$
2,905

$
(12
)

$
—

$
(818
)

$
2,075

Home equity lines of credit

218

—

85

(184
)

119

Junior lien loan on residence

15

—

—

(8
)

7

Multifamily property

9,945

—

—

623

10,568

Owner-occupied commercial real estate

3,050

—

—

(757
)

2,293

Investment commercial real estate

27,713

—

—

2,271

29,984

Commercial and industrial

19,047

(5,019
)

60

2,178

16,266

Lease financing

3,936

—

—

(567
)

3,369

Farmland/agricultural production

43

—

—

15

58

Commercial construction loans

158

—

—

7

165

Consumer and other loans

279

(24
)

9

(35
)

229

Total ALLL

$
67,309

$
(5,055
)

$
154

$
2,725

$
65,133

~~The activity in the allowance for loan and lease losses for the nine months ended September 30, 2020 is summarized below:~~

January 1,

September 30,

2020

2020

Beginning

Provision

Ending

(In thousands)

ALLL

Charge-offs

Recoveries

(Credit)

ALLL

Primary residential mortgage

$
2,090

$
—

$
330

$
547

$
2,967

Home equity lines of credit

128

—

8

84

220

Junior lien loan on residence

13

—

—

5

18

Multifamily property

6,037

—

—

4,627

10,664

Owner-occupied commercial real estate

2,064

—

—

947

3,011

Investment commercial real estate

15,988

(5,532
)

31

18,679

29,166

Commercial and industrial

14,353

(2,418
)

11

4,226

16,172

Lease financing

2,642

—

—

831

3,473

Farmland/agricultural production

38

—

—

(23
)

15

Commercial construction loans

27

—

—

50

77

Consumer and other loans

296

(15
)

4

77

362

Total ALLL

$
43,676

$
(7,965
)

$
384

$
30,050

$
66,145

Loan Modifications:

The CARES Act ~~allows~~allowed financial institutions to suspend application of certain current TDR accounting guidance under ASC 310-40 for loan modifications related to the COVID-19 pandemic made between March 1, 2020 and the earlier of December 31, 2020 or 60 days after the end of the COVID-19 national emergency, provided certain criteria ~~are~~were met. ~~The revised CARES Act extended TDR relief to loan modifications through January 1, 2022.~~ This relief ~~can~~could be applied to loan modifications for borrowers that were not more than 30 days past due as of December 31, 2019 and to loan modifications that ~~defer~~deferred or ~~delay~~delayed the payment of principal or interest or ~~change~~changed the interest rate on the loan. In April 2020, federal and state banking regulators issued the Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus to provide further interpretation of when a borrower is experiencing financial difficulty, specifically indicating that if the modification is either short-term (e.g., six months) or mandated by a federal or state government in response to the COVID-19 pandemic, the borrower is not experiencing financial difficulty under ASC 310-40.

As of September 30, ~~2021,~~2022, the Bank had modified 542 loans under the CARES Act with a balance of ~~$947.0~~$947.0 million resulting in the deferral of principal and/or interest. ~~The table below summarizes the~~There are no outstanding deferrals as of September 30, 2021. All of these loans were performing in accordance with their terms prior to modification and are in conformance with the CARES Act. Included in the table below is 1 investment commercial real estate loan related to our back-to-back swap program totaling $19.9 million. Details with respect to loan modifications are as follows:2022.

Post-Modification

Outstanding

Number of

Recorded

(Dollars in thousands)

Loans

Investment

Primary residential mortgage

3

$
530

Investment commercial real estate

1

19,887

Commercial and industrial

4

12,657

Total

8

$
33,074

~~The~~ future performance of these loans, specifically beyond the term of the deferral, is uncertain, with the exception of one investment commercial real estate loan of $19.9 million for which the Company individually evaluated for impairment and recorded a specific reserve at September 30, 2021.

Troubled Debt Restructurings:

The Company has allocated ~~$57,000 and $3,000~~$2.4 million of specific reserves on TDRs as of September 30, ~~2021 and~~2022. The Company did not allocate specific reserves to customers whose loan terms had been modified TDRs as of December 31, ~~2020, respectively.~~2021. There were no unfunded commitments to lend additional amounts to customers with outstanding loans that are classified as TDRs.

26There were no loans modified as TDRs during the three-month period ended September 30, 2022.

The following table presents loans by class modified as TDRs during the three-month period ended September 30, 2021:

Pre-Modification

Post-Modification

Outstanding

Outstanding

Number of

Recorded

Recorded

(Dollars in thousands)

Loans

Investment

Investment

Primary residential mortgage

2

$
455

$
455

Total

2

$
455

$
455

~~There were 0~~


			Pre-Modification		Post-Modification
			Outstanding		Outstanding
	Number of		Recorded		Recorded
(Dollars in thousands)	Loans		Investment		Investment
Investment commercial real estate		2	$	455	$	455
Total		2	$	455	$	455

The following table presents loans by class modified as TDRs during the ~~three-month~~nine-month period ended September 30, ~~2020.~~2022:


			Pre-Modification		Post-Modification
			Outstanding		Outstanding
	Number of		Recorded		Recorded
(Dollars in thousands)	Loans		Investment		Investment
Investment commercial real estate		1	$	12,429	$	12,429
Total		1	$	12,429	$	12,429

The following table presents loans by class modified as TDRs during the nine-month period ended September 30, 2021:


			Pre-Modification		Post-Modification
			Outstanding		Outstanding
	Number of		Recorded		Recorded
(Dollars in thousands)	Loans		Investment		Investment
Primary residential mortgage		3	$	1,277	$	1,277
Commercial and industrial		1		2,194		2,194
Total		4	$	3,471	$	3,471

The identification of the TDRs did not have a material impact on the allowance for credit losses.

The following table presents loans by class modified as TDRs ~~during~~that failed to comply with the ~~nine-month period ended~~modified terms in the twelve months following modification and resulted in a payment default at September 30, ~~2020:~~

~~The identification of the TDRs did not have a significant impact on the allowance for loan and lease losses.~~ 2022:


	Number of		Recorded
(Dollars in thousands)	Loans		Investment
Primary residential mortgage		1	$	145
Total		1	$	145

The following table presents loans by class modified as TDRs that failed to comply with the modified terms in the twelve months following modification and resulted in a payment default at September 30, 2021:


			Pre-Modification		Post-Modification
			Outstanding		Outstanding
	Number of		Recorded		Recorded
(Dollars in thousands)	Loans		Investment		Investment
Primary residential mortgage		1	$	221	$	221
Total		1	$	221	$	221

Number of

Recorded

(Dollars in thousands)

Loans

Investment

Primary residential mortgage

1

$
193

Commercial and industrial

1

39

Total

2

$
232

In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed under the Company’s internal underwriting policy. The modification of the terms of such loans may include one or more of the following: (1) a reduction of the stated interest rate of the loan to a rate that is lower than the current market rate for new debt with similar risk; (2) an extension of an interest only period for a predetermined period of time; (3) an extension of the maturity date; or (4) an extension of the amortization period over which future payments will be computed. At the time a loan is restructured, the Bank performs a full ~~re-underwriting~~underwriting analysis, which includes, at a minimum, obtaining current financial statements and tax returns, copies of all leases, and an updated independent appraisal of the property. A loan will continue to

accrue interest if it can be reasonably determined that the borrower should be able to perform under the modified terms, that the loan has not been chronically delinquent (both to debt service and real estate taxes) or in nonaccrual status since its inception, and that there have been no charge-offs on the loan. Restructured loans with previous charge-offs would not accrue interest at the time of the TDR. At a minimum, six consecutive months of contractual payments would need to be made on a restructured loan before returning it to accrual status. Once a loan is classified as a TDR, the loan is reported as a TDR until the loan is paid in full, sold or charged-off. In rare circumstances, a loan may be removed from TDR status if it meets the requirements of ASC 310-40-50-2.

4. ALLOWANCE FOR CREDIT LOSSES

~~4. DEPOSITS~~

~~Certificates~~30

On January 1, 2022, the Company adopted ASU 2016-13, which replaced the incurred loss methodology with an expected loss methodology that is referred to as the CECL methodology. See Note 1, Summary of ~~deposit, over $250,000,~~Significant Accounting Policies for additional information on Topic 326.

The Company does not estimate expected credit losses on accrued interest receivable (“AIR”) on loans, as AIR is reversed or written off when the full collection of the AIR related to a loan becomes doubtful. AIR on loans totaled ~~$149.2 million and $186.3~~$16.1 million at September 30, 2022 and $19.1 million at December 31, 2021.

The following table presents the loan balances by segment, and the corresponding balances in the allowance as of September 30, 2022. For the period ended September 30, 2022, the allowance was based on the CECL methodology.


	September 30, 2022
			Ending ACL				Ending ACL
	Total		Attributable		Total		Attributable
	Individually		To Individually		Loans		To Loans				Total
	Evaluated		Evaluated		Collectively		Collectively		Total		Ending
(In thousands)	Loans		Loans		Evaluated		Evaluated		Loans		ACL
Primary residential mortgage	$	133	$	—	$	520,143	$	2,279	$	520,276	$	2,279
Junior lien loan on residence		—		—		40,216		154		40,216		154
Multifamily property		—		—		1,856,675		15,317		1,856,675		15,317
Owner-occupied commercial real estate		263		—		256,628		4,907		256,891		4,907
Investment commercial real estate		12,429		2,429		1,022,825		8,897		1,035,254		11,326
Commercial and industrial		222		—		1,106,705		21,838		1,106,927		21,838
Lease financing		—		—		304,256		3,238		304,256		3,238
Construction loans		—		—		10,384		128		10,384		128
Consumer and other loans		—		—		42,506		496		42,506		496
Total ACL	$	13,047	$	2,429	$	5,160,338	$	57,254	$	5,173,385	$	59,683

The following table presents the loan balances by portfolio class, based on impairment method, and the corresponding balances in the allowance as of December 31, 2021. For the year ended December 31, 2021, the allowance was calculated based on the incurred loss methodology:


	December 31, 2021
	Total		Ending ALLL		Total		Ending ALLL
	Loans		Attributable		Loans		Attributable
	Individually		To Loans		Collectively		To Loans
	Evaluated		Individually		Evaluated		Collectively				Total
	For		Evaluated for		For		Evaluated for		Total		Ending
(In thousands)	Impairment		Impairment		Impairment		Impairment		Loans		ALLL
Primary residential mortgage	$	2,242	$	—	$	498,001	$	1,432	$	500,243	$	1,432
Home equity lines of credit		—		—		40,803		83		40,803		83
Junior lien loan on residence		18		—		3,173		5		3,191		5
Multifamily property		—		—		1,595,866		9,806		1,595,866		9,806
Owner-occupied commercial real estate		458		—		252,145		1,998		252,603		1,998
Investment commercial real estate		12,750		4,234		991,229		22,849		1,003,979		27,083
Commercial and industrial		2,584		—		989,748		17,509		992,332		17,509
Lease financing		—		—		345,868		3,440		345,868		3,440
Farmland/agricultural production		—		—		6,871		84		6,871		84
Commercial construction loans		—		—		20,174		42		20,174		42
Consumer and other loans		—		—		40,828		215		40,828		215
Total ALLL	$	18,052	$	4,234	$	4,784,706	$	57,463	$	4,802,758	$	61,697

Individually evaluated loans include nonaccrual loans of $13.0 million at September 30, 2022 and $15.6 million at December 31, 2021. This includes a $12.4 million commercial real estate loan that was placed on nonaccrual status in the third quarter of 2021, which resulted in the Company recording a charge-off of $7.4 million during the fourth quarter of 2021. Individually evaluated loans did not include any performing TDR loans at September 30, 2022 but included $2.5 million of performing TDR loans at December 31, 2021. The allowance allocated to TDR loans totaled $2.4 million at September 30, 2022, of which all was allocated to one nonaccrual loan. At December 31, 2021, there was no allowance allocated to TDR loans. All accruing TDR loans were paying in accordance with restructured terms as of September 30, 2022. The Company has not committed to lend additional amounts as of September 30, 2022 to customers with outstanding loans that are classified as TDR loans.

The allowance for credit losses was $59.7 million as of September 30, 2022, compared to $61.7 million at December 31, 2021. The decline in the allowance for credit losses (“ACL”) was primarily due to the Day 1 reduction of $5.5 million incurred in connection with the implementation of CECL on January 1, 2022 partially offset by the 2022 provision for credit losses of $4.4 million. The allowance for credit losses as a percentage of loans was 1.15 percent and 1.28 percent at September 30, 2022 and December 31, ~~2020,~~2021, respectively. The allowance for credit loss ratio declined due to the Day 1 reduction and a 2022 provision for credit losses based on 2022 loan growth in lower risk segments that carry lower ACL coverage.

Under Topic 326, the Company's methodology for determining the ACL on loans is based upon key assumptions, including historic net charge-off factors, economic forecasts, reversion periods, prepayments and qualitative adjustments. The allowance is measured on a collective, or pool, basis when similar risk characteristics exist. Loans that do not share common risk characteristics are evaluated on an individual basis and are excluded from the collective evaluation.

The following tables present collateral dependent loans individually evaluated by segment as of September 30, 2022:


	September 30, 2022
	Unpaid						Average
	Principal		Recorded		Related		Individually Evaluated
(In thousands)	Balance		Investment		Allowance		Loans
With no related allowance recorded:
Primary residential mortgage	$	136	$	133	$	—	$	249
Owner-occupied commercial real estate		301		263		—		307
Commercial and industrial		241		222		—		254
Total loans with no related allowance	$	678	$	618	$	—	$	810
With related allowance recorded:
Investment commercial real estate	$	12,500	$	12,429	$	2,429	$	12,531
Total loans with related allowance	$	12,500	$	12,429	$	2,429	$	12,531
Total loans individually evaluated	$	13,178	$	13,047	$	2,429	$	13,341

The following table presents, under previously applicable GAAP, loans individually evaluated for impairment as of December 31, 2021 (the average impaired loans on the following tables represent year to date impaired loans):


	December 31, 2021
	Unpaid						Average
	Principal		Recorded		Specific		Impaired
(In thousands)	Balance		Investment		Reserves		Loans
With no related allowance recorded:
Primary residential mortgage	$	2,453	$	2,242	$	—	$	1,818
Owner-occupied commercial real estate		492		458		—		540
Junior lien loan on residence		18		18		—		3
Commercial and industrial		4,549		2,584		—		3,153
Total loans with no related allowance	$	7,512	$	5,302	$	—	$	5,514
With related allowance recorded:
Investment commercial real estate	$	19,887	$	12,750	$	4,234	$	6,034
Total loans with related allowance	$	19,887	$	12,750	$	4,234	$	6,034
Total loans individually evaluated for impairment	$	27,399	$	18,052	$	4,234	$	11,548

Interest income recognized on individually evaluated loans for the three and nine months ended September 30, 2022 and 2021 was not material. The Company did not recognize any income on non-accruing impaired loans for the three and nine months ended September 30, 2022 and 2021.

The activity in the allowance for credit losses for the three months ended September 30, 2022 is summarized below:


	July 1,										September 30,
	2022										2022
	Beginning							Provision			Ending
(In thousands)	ACL		Charge-offs			Recoveries		(Credit) (1)			ACL
Primary residential mortgage	$	2,154	$	—		$	15	$	110		$	2,279
Junior lien loan on residence		151		—			—		3			154
Multifamily property		15,790		—			—		(473	)		15,317
Owner-occupied commercial real estate		4,660		—			—		247			4,907
Investment commercial real estate		10,969		—			—		357			11,326
Commercial and industrial		20,998		—			—		840			21,838
Lease financing		3,352		—			—		(114	)		3,238
Construction loans		359		—			—		(231	)		128
Consumer and other loans		589		(19	)		—		(74	)		496
Total ACL	$	59,022	$	(19	)	$	15	$	665		$	59,683

(1) Provision to roll forward the ACL excludes a credit of $66,000 for off-balance sheet commitments.

The activity in the allowance for credit losses for the nine months ended September 30, 2022 is summarized below:


	December 31,													September 30,
	2021													2022
	Prior to adoption		Impact of								Provision			Ending
(In thousands)	of Topic 326		adopting Topic 326			Charge-offs			Recoveries		(Credit) (1)			ACL
Primary residential mortgage	$	1,510	$	717		$	—		$	15	$	37		$	2,279
Junior lien loan on residence		88		83			(3	)		—		(14	)		154
Multifamily property		9,806		4,072			—			—		1,439			15,317
Owner-occupied commercial real estate		1,998		2,902			—			—		7			4,907
Investment commercial real estate		27,083		(13,589	)		(250	)		—		(1,918	)		11,326
Commercial and industrial		17,509		(657	)		—			4		4,982			21,838
Lease financing		3,440		156			—			—		(358	)		3,238
Construction loans		48		361			—			—		(281	)		128
Consumer and other loans		215		419			(46	)		2		(94	)		496
Total ACL	$	61,697	$	(5,536	)	$	(299	)	$	21	$	3,800		$	59,683

(1) Provision to roll forward the ACL excludes a provision of $623,000 for off-balance sheet commitments.

For the accounting policy on the allowance for loan losses that was in effect prior to the adoption of Topic 326, refer to Note 1, Summary of Significant Accounting Policies in our Annual Report on Form 10-K for the year-ended December 31, 2021. The

activity in the allowance for loan and lease losses for the three months and nine months ended September 30, 2021 is summarized below:


	July 1,										September 30,
	2021										2021
	Beginning							Provision			Ending
(In thousands)	ALLL		Charge-offs			Recoveries		(Credit)			ALLL
Primary residential mortgage	$	2,167	$	—		$	—	$	(92	)	$	2,075
Home equity lines of credit		123		—			—		(4	)		119
Junior lien loan on residence		8		—			—		(1	)		7
Multifamily property		10,615		—			—		(47	)		10,568
Owner-occupied commercial real estate		2,447		—			—		(154	)		2,293
Investment commercial real estate		27,886		—			—		2,098			29,984
Commercial and industrial		16,565		(19	)		50		(330	)		16,266
Lease financing		3,275		—			—		94			3,369
Farmland/agricultural production		43		—			—		15			58
Commercial construction loans		159		—			—		6			165
Consumer and other loans		217		(4	)		1		15			229
Total ALLL	$	63,505	$	(23	)	$	51	$	1,600		$	65,133


	January 1,										September 30,
	2021										2021
	Beginning							Provision			Ending
(In thousands)	ALLL		Charge-offs			Recoveries		(Credit)			ALLL
Primary residential mortgage	$	2,905	$	(12	)	$	—	$	(818	)	$	2,075
Home equity lines of credit		218		—			85		(184	)		119
Junior lien loan on residence		15		—			—		(8	)		7
Multifamily property		9,945		—			—		623			10,568
Owner-occupied commercial real estate		3,050		—			—		(757	)		2,293
Investment commercial real estate		27,713		—			—		2,271			29,984
Commercial and industrial		19,047		(5,019	)		60		2,178			16,266
Lease financing		3,936		—			—		(567	)		3,369
Farmland/agricultural production		43		—			—		15			58
Commercial construction loans		158		—			—		7			165
Consumer and other loans		279		(24	)		9		(35	)		229
Total ALLL	$	67,309	$	(5,055	)	$	154	$	2,725		$	65,133

Allowance for Credit Losses on Off Balance Sheet Commitments

The following table presets the activity in the ACL for off balance sheet commitments for the nine months ended September 30, 2022:


	December 31,
	2021						September 30,
	Prior to adoption		Impact of		Provision		2022
(In thousands)	of Topic 326		adopting Topic 326		(Credit)		Ending ACL
Off balance sheet commitments	$	—	$	302	$	623	$	925
Total ACL	$	—	$	302	$	623	$	925

5. DEPOSITS

Certificates of deposit that met or exceeded $250,000 totaled $107.8 million and $140.4 million at September 30, 2022 and December 31, 2021, respectively. These totals excluded brokered certificates of deposit.

The following table sets forth the details of total deposits as of September 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


	September 30,				December 31,
	2022				2021
(Dollars in thousands)
Noninterest-bearing demand deposits	$	1,317,954	24.87	%	$	956,482	18.16	%
Interest-bearing checking (1)		2,149,629	40.57			2,287,894	43.45
Savings		166,821	3.15			154,914	2.94
Money market		1,178,112	22.23			1,307,051	24.82
Certificates of deposit - retail		345,047	6.51			409,608	7.78
Certificates of deposit - listing service		30,647	0.58			31,382	0.60
Subtotal deposits		5,188,210	97.91			5,147,331	97.75
Interest-bearing demand - Brokered		85,000	1.60			85,000	1.61
Certificates of deposit - Brokered		25,974	0.49			33,818	0.64
Total deposits	$	5,299,184	100.00	%	$	5,266,149	100.00	%

September 30,

December 31,

2021

2020

(Dollars in thousands)

Noninterest-bearing demand deposits

$
986,765

18.36
%

$
833,500

17.30
%
Interest-bearing checking⁽¹⁾

2,355,892

43.82

1,849,254

38.38

Savings

168,831

3.14

130,731

2.71

Money market

1,287,686

23.95

1,298,885

26.96

Certificates of deposit - retail

426,981

7.94

530,222

11.00

Certificates of deposit - listing service

31,382

0.58

32,128

0.67

Subtotal deposits

5,257,537

97.79

4,674,720

97.02

Interest-bearing demand - Brokered

85,000

1.58

110,000

2.28

Certificates of deposit - Brokered

33,804

0.63

33,764

0.70

Total deposits

$
5,376,341

100.00
%

$
4,818,484

100.00
%
(1)

Interest-bearing checking includes $567.3 million at September 30, 2022 and $647.8 million at December 31, 2021 of reciprocal balances in the Reich & Tang or Promontory Demand Deposit Marketplace program.

~~(1)~~

~~Interest-bearing checking includes~~ ~~$748.7 million at September 30, 2021 and $652.5 million at December 31, 2020 of reciprocal balances in the Reich & Tang or Promontory Demand Deposit Marketplace program.~~

The scheduled maturities of certificates of deposit, including brokered certificates of deposit, as of September 30, ~~2021~~2022, are as follows:


(In thousands)
2022	$	84,432
2023		183,096
2024		76,793
2025		46,231
2026		10,314
2027 and later		802
Total	$	401,668

(In thousands)

2021

$
135,488

2022

273,758

2023

16,775

2024

30,259

2025

28,686

Over 5 Years

7,201

Total

$
492,167

5.6. FEDERAL HOME LOAN BANK ADVANCES AND OTHER BORROWINGS

~~There were 0 overnight borrowings with the FHLB as of September 30, 2021 or December 31, 2020.~~ At September 30, ~~2021,~~2022, the Company had $32.4 million of overnight borrowings at the FHLB at a rate of 3.29 percent compared to no overnight borrowings as of December 31, 2021. At September 30, 2022, unused short-term overnight borrowing commitments totaled ~~$1.9~~$1.8 billion from the FHLB, ~~$22.0~~$22.0 million from correspondent banks and ~~$1.1~~$1.7 billion at the Federal Reserve Bank of New York.

The Company had $48.5 million in borrowings from the Federal Reserve’s Paycheck Protection Plan Lending Facility (the “PPPLF”), as of September 30, 2021 as compared to $177.1 million at December 31, 2020. The borrowings have a rate of 0.35 percent, primarily all of which have a ~~two-year~~ ~~maturity. The Company utilized the PPPLF to fund PPP loan production during the second quarter of 2020. The borrowings are fully pledged by PPP loans as of September 30, 2021.~~

~~During the quarter ended June 30, 2021, the Company terminated an interest rate swap with a notional amount of $15.0 million that was tied to a one-month FHLB advance totaling $15.0 million.~~

~~The Company prepaid $105.0 million of FHLB advances resulting in a prepayment penalty of $4.8 million during 2020.~~ ~~The repayment of the FHLB advances was expected to provide a benefit to interest expense greater than the prepayment penalty over the remaining life of the advances.~~7. BUSINESS SEGMENTS

~~6. BUSINESS SEGMENTS~~

The Company assesses its results among 2two operating segments, Banking and Peapack Private. Management uses certain methodologies to allocate income and expense to the business segments. A funds transfer pricing methodology is used to assign interest income and interest expense. Certain indirect expenses are allocated to segments. These include support unit expenses such as technology and operations and other support functions. Taxes are allocated to each segment based on the effective rate for the period shown. The Banking segment’s effective tax rate for the three and nine months ended September 30, 2020 was affected by a $3.3 million income tax benefit recorded during the first quarter of 2020. For additional information related to this income tax benefit refer to the ~~Income Taxes~~ ~~section of~~ ~~Management’s Discussion and Analysis.~~

Banking

The Banking segment includes: commercial (includes C&I and equipment finance), commercial real estate, multifamily, residential and consumer lending activities; treasury management services; C&I advisory services; escrow management; deposit generation; operation of ATMs; telephone and internet banking services; merchant credit card services and customer support and sales.

Peapack Private

Peapack Private which includes the operations of PGB Trust & Investments of Delaware, ~~and Murphy Capital,~~ consists of: investment management services provided for individuals and institutions; personal trust services, including services as executor, trustee, administrator, custodian and guardian; and other financial planning, tax preparation and advisory services.

The following tables present the statements of income and total assets for the Company’s reportable segments for the three and nine months ended September 30, ~~2021~~2022 and ~~2020.~~2021.


	Three Months Ended September 30, 2022
			Peapack
(In thousands)	Banking		Private		Total
Net interest income	$	43,327	$	2,198	$	45,525
Noninterest income		2,955		13,428		16,383
Total income		46,282		15,626		61,908

Provision for credit losses		599		—		599
Compensation and benefits		15,343		7,313		22,656
Premises and equipment expense		3,908		626		4,534
FDIC expense		510		—		510
Other operating expense		3,235		2,625		5,860
Total operating expense		23,595		10,564		34,159
Income before income tax expense		22,687		5,062		27,749
Income tax expense		6,193		1,430		7,623
Net income	$	16,494	$	3,632	$	20,126


	Three Months Ended September 30, 2021
			Peapack
(In thousands)	Banking		Private		Total
Net interest income	$	33,780	$	1,431	$	35,211
Noninterest income		3,476		14,305		17,781
Total income		37,256		15,736		52,992

Provision for loan and lease losses		1,600		—		1,600
Compensation and employee benefits		13,079		6,780		19,859
Premises and equipment expense		3,861		598		4,459
FDIC insurance expense		555		—		555
Other operating expense		4,657		2,655		7,312
Total operating expense		23,752		10,033		33,785
Income before income tax expense		13,504		5,703		19,207
Income tax expense		3,556		1,480		5,036
Net income	$	9,948	$	4,223	$	14,171


	Nine Months Ended September 30, 2022
			Peapack
(In thousands)	Banking		Private		Total
Net interest income	$	122,404	$	5,636	$	128,040
Noninterest income		6,645		42,960		49,605
Total income		129,049		48,596		177,645

Provision for credit losses		4,423		—		4,423
Compensation and employee benefits		47,222		19,765		66,987
Premises and equipment expense		11,674		2,147		13,821
FDIC insurance expense		1,484		—		1,484
Other operating expense		10,613		7,483		18,096
Total operating expense		75,416		29,395		104,811
Income before income tax expense		53,633		19,201		72,834
Income tax expense		14,117		5,050		19,167
Net income	$	39,516	$	14,151	$	53,667

Total assets at period end	$	5,999,393	$	87,868	$	6,087,261


	Nine Months Ended September 30, 2021
			Peapack
(In thousands)	Banking		Private		Total
Net interest income	$	96,405	$	4,444	$	100,849
Noninterest income		12,810		40,469		53,279
Total income		109,215		44,913		154,128

Provision for loan and lease losses		2,725		—		2,725
Compensation and employee benefits		43,876		17,883		61,759
Premises and equipment expense		10,950		1,696		12,646
FDIC insurance expense		1,669		—		1,669
Other operating expense		10,865		7,524		18,389
Total operating expense		70,085		27,103		97,188
Income before income tax expense		39,130		17,810		56,940
Income tax expense		10,436		4,737		15,173
Net income	$	28,694	$	13,073	$	41,767

Total assets at period end	$	6,144,190	$	96,095	$	6,240,285

Three Months Ended September 30, 2021

Peapack

(In thousands)

Banking

Private

Total

Net interest income

$
33,780

$
1,431

$
35,211

Noninterest income

3,476

14,305

17,781

Total income

37,256

15,736

52,992

Provision for loan and lease losses

1,600

0

1,600

Compensation and benefits

13,079

6,780

19,859

Premises and equipment expense

3,861

598

4,459

FDIC expense

555

0

555

Other operating expense

4,657

2,655

7,312

Total operating expense

23,752

10,033

33,785

Income before income tax expense

13,504

5,703

19,207

Income tax expense

3,556

1,480

5,036

Net income

$
9,948

$
4,223

$
14,171

Three Months Ended September 30, 2020

Peapack

(In thousands)

Banking

Private

Total

Net interest income

$
30,557

$
1,592

$
32,149

Noninterest income

9,451

10,760

20,211

Total income

40,008

12,352

52,360

Provision for loan and lease losses

5,150

0

5,150

Compensation and employee benefits

13,258

5,944

19,202

Premises and equipment expense

3,527

582

4,109

FDIC insurance expense

605

0

605

Other operating expense

2,231

2,314

4,545

Total operating expense

24,771

8,840

33,611

Income before income tax expense

15,237

3,512

18,749

Income tax expense

4,254

948

5,202

Net income

$
10,983

$
2,564

$
13,547

Nine Months Ended September 30, 2021

Peapack

(In thousands)

Banking

Private

Total

Net interest income

$
96,405

$
4,444

$
100,849

Noninterest income

12,810

40,469

53,279

Total income

109,215

44,913

154,128

Provision for loan and lease losses

2,725

0

2,725

Compensation and employee benefits

43,876

17,883

61,759

Premises and equipment expense

10,950

1,696

12,646

FDIC insurance expense

1,669

0

1,669

Other operating expense

10,865

7,524

18,389

Total operating expense

70,085

27,103

97,188

Income before income tax expense

39,130

17,810

56,940

Income tax expense

10,436

4,737

15,173

Net income

$
28,694

$
13,073

$
41,767

Total assets at period end

$
6,144,190

$
96,095

$
6,240,285

Nine Months Ended September 30, 2020

Peapack

(In thousands)

Banking

Private

Total

Net interest income

$
91,419

$
4,448

$
95,867

Noninterest income

16,036

31,318

47,354

Total income

107,455

35,766

143,221

Provision for loan and lease losses

30,050

0

30,050

Compensation and employee benefits

40,239

17,375

57,614

Premises and equipment expense

10,435

1,753

12,188

FDIC insurance expense

1,310

0

1,310

Other operating expense

7,889

6,709

14,598

Total operating expense

89,923

25,837

115,760

Income before income tax (benefit)/expense

17,532

9,929

27,461

Income tax (benefit)/expense

1,618

2,681

4,299

Net income

$
15,914

$
7,248

$
23,162

Total assets at period end

$
5,878,481

$
79,626

$
5,958,107

7.8. FAIR VALUE

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair values:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

~~Level 1:~~

~~Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.~~

~~Level 2:~~

Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

~~Level 3:~~

~~Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.~~

The Company used the following methods and significant assumptions to estimate the fair value:

Investment Securities: The fair values for investment securities are determined by quoted market prices (Level 1). For securities where quoted prices are not available, fair values are calculated based on market prices of similar securities (Level 2). For securities where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows or other market indicators (Level 3).

Loans Held for Sale, at Fair Value: The fair value of loans held for sale is determined using quoted prices for similar assets, adjusted for specific attributes of that loan or other observable market data, such as outstanding commitments from third party investors (Level 2).

Derivatives: The fair values of derivatives are based on valuation models using observable market data as of the measurement date (Level 2). Our derivatives are traded in an over-the-counter market where quoted market prices are not always available. Therefore, the fair values of derivatives are determined using quantitative models that utilize multiple market inputs. The inputs will vary based on the type of derivative, but could include interest rates, prices and indices to generate continuous yield or pricing curves, prepayment rates, and volatility factors to value the position. The majority of market inputs are actively quoted and can be validated through external sources, including brokers, market transactions and third-party pricing services.

~~Impaired~~Individually Evaluated Loans: The fair value of ~~impaired~~collateral dependent loans with specific allocations of the allowance for ~~loan and lease~~credit losses is generally based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. ~~Impaired~~Individually evaluated loans may, in some cases, also be measured by the discounted cash flow methodology where payments are anticipated. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value.

Other Real Estate Owned: Nonrecurring adjustments to certain commercial and residential real estate properties classified as other real estate owned (“OREO") are measured at fair value, less estimated costs to sell. Fair values are based on recent real estate appraisals. These appraisals may use a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value.

Appraisals for both collateral-dependent impaired loans and other real estate owned are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by Management. Once received, a third party conducts a review of the appraisal for compliance with the Uniform Standards of Professional Appraisal Practice and appropriate analysis methods for the type of property. Subsequently, a member of the Credit Department reviews the assumptions and approaches utilized in the appraisal, as well as the overall resulting fair value in comparison with independent data sources such as recent market data or industry-wide statistics. Appraisals on collateral dependent impaired loans and other real estate owned (consistent for all loan types) are obtained on an annual basis, unless a significant change in the market or other factors warrants a more frequent appraisal. On an annual basis, Management compares the actual selling price of any collateral that has been sold to the most recent appraised value to determine what additional adjustment should be made to the appraisal value to arrive at fair value for other properties. The most recent analysis performed indicated that a discount up to 15 percent should be applied to appraisals on properties. The discount is determined based on the nature of the underlying properties, aging of appraisals and other factors. For each collateral-dependent impaired loan, we consider other factors, such as certain indices or other market information, as well as property specific circumstances to determine if an adjustment to the appraised value is needed. In situations where there is evidence of change in

value, the Bank will determine if there is a need for an adjustment to the specific reserve on the collateral dependent impaired loans. When the Bank applies an interim adjustment, it generally shows the adjustment as an incremental specific reserve against the loan until it has received the full updated appraisal. All collateral-dependent impaired loans and other real estate owned valuations were supported by an appraisal less than 12 months old or in the process of obtaining an appraisal as of September 30, ~~2021.~~2022.

The following ~~table summarizes,~~tables summarize, at the dates indicated, assets measured at fair value on a recurring basis, including financial assets for which the Corporation has elected the fair value option:

Assets Measured on a Recurring Basis


			Fair Value Measurements Using								Fair Value Measurements Using
			Quoted								Quoted
			Prices in								Prices in
			Active		Significant						Active		Significant
			Markets For		Other		Significant				Markets For		Other		Significant
			Identical		Observable		Unobservable				Identical		Observable		Unobservable
	September 30,		Assets		Inputs		Inputs		September 30,		Assets		Inputs		Inputs
(In thousands)	2021		(Level 1)		(Level 2)		(Level 3)		2022		(Level 1)		(Level 2)		(Level 3)
Assets:
Available for sale:
U.S. government-sponsored agencies	$	274,433	$	—	$	274,433	$	—	$	189,410	$	—	$	189,410	$	—
Mortgage-backed securities-residential		515,131		—		515,131		—		267,547		—		267,547		—
SBA pool securities		42,930		—		42,930		—		29,121		—		29,121		—
State and political subdivisions		5,750		—		5,750		—		2,584		—		2,584		—
Corporate bond		5,535		—		5,535		—		9,218		—		9,218		—
CRA investment fund		14,824		14,824		—		—		12,957		12,957		—		—
Loans held for sale, at fair value		3,013		—		3,013		—		1,333		—		1,333		—
Derivatives:
Cash flow hedges										10,462		—		10,462		—
Loan level swaps		43,133		—		43,133		—		41,018		—		41,018		—
Total	$	904,749	$	14,824	$	889,925	$	—	$	563,650	$	12,957	$	550,693	$	—

Liabilities:
Derivatives:
Cash flow hedges	$	5,267	$	—	$	5,267	$	—
Loan level swaps		44,483		—		44,483		—	$	41,018	$	—	$	41,018	$	—
Total	$	49,750	$	—	$	49,750	$	—	$	41,018	$	—	$	41,018	$	—

Assets Measured on a Recurring Basis


			Fair Value Measurements Using									Fair Value Measurements Using
			Quoted									Quoted
			Prices in									Prices in
			Active		Significant							Active		Significant
			Markets For		Other		Significant					Markets For		Other		Significant
			Identical		Observable		Unobservable					Identical		Observable		Unobservable
	December 31,		Assets		Inputs		Inputs			December 31,		Assets		Inputs		Inputs
(In thousands)	2020		(Level 1)		(Level 2)		(Level 3)			2021		(Level 1)		(Level 2)		(Level 3)
Assets:
Securities available for sale:
U.S. treasuries	$	2,613	$	—	$	2,613	$	—
U.S. government-sponsored agencies		83,771		—		83,771		—		$	272,221	$	—	$	272,221	$	—
Mortgage-backed securities-residential		476,058		—		476,058		—			476,974		—		476,974		—
SBA pool securities		49,129		—		49,129		—			39,561		—		39,561		—
State and political subdivisions		8,089		—		8,089		—			5,476		—		5,476		—
Corporate bond		3,029		—		3,029		—			2,521		—		2,521		—
CRA investment fund		15,117		15,117		—		—			14,685		14,685		—		—
Loans held for sale, at fair value		13,588		—		13,588		—	��		3,040		—		3,040		—
Derivatives:
Loan level swaps		79,529		—		79,529		—			32,326		—		32,326		—
Total	$	730,923	$	15,117	$	715,806	$	—		$	846,804	$	14,685	$	832,119	$	—

Liabilities:
Derivatives:
Cash flow hedges	$	9,616	$	—	$	9,616	$	—		$	3,479	$	—	$	3,479	$	—
Loan level swaps		79,529		—		79,529		—			34,569		—		34,569		—
Total	$	89,145	$	—	$	89,145	$	—		$	38,048	$	—	$	38,048	$	—

The Company has elected the fair value option for certain loans held for sale. These loans are intended for sale and the Company believes that the fair value is the best indicator of the resolution of these loans. Interest income is recorded based on the contractual terms of the loan and in accordance with the Company’s policy on loans held for investment. None of these loans are 90 days or more past due nor on nonaccrual as of September 30, ~~2021~~2022 and December 31, ~~2020.~~2021.

The following tables present residential loans held for sale, at fair value at the dates indicated:


(In thousands)	September 30, 2021		December 31, 2020		September 30, 2022		December 31, 2021
Residential loans contractual balance	$	2,960	$	13,295	$	1,326	$	2,992
Fair value adjustment		53		293		7		48
Total fair value of residential loans held for sale	$	3,013	$	13,588	$	1,333	$	3,040

There were 0no transfers between Level 1 and Level 2 during the ~~three and~~ nine months ended September 30, ~~2021.~~2022.

The following tables summarize, at the dates indicated, assets measured at fair value on a non-recurring basis:

Fair Value Measurements Using

Quoted

Prices in

Active

Significant

Markets For

Other

Significant

Identical

Observable

Unobservable

September 30,

Assets

Inputs

Inputs

(In thousands)

2021

(Level 1)

(Level 2)

(Level 3)

Assets:

Impaired loans:

Primary residential mortgage

$
1,057

$
—

$
—

$
1,057

Investment commercial real estate

12,750

—

—

12,750

Fair Value Measurements Using

Quoted

Prices in

Active

Significant

Markets For

Other

Significant

Identical

Observable

Unobservable

September 30,

Assets

Inputs

(In thousands)

2022

(Level 1)

(Level 2)

(Level 3)

Assets:

Individually evaluated loans:

Investment commercial real estate

10,000

—

10,000

Fair Value Measurements Using

Quoted

Prices in

Active

Significant

Markets For

Other

Significant

Identical

Observable

Unobservable

December 31,

Assets

Inputs

(In thousands)

2021

(Level 1)

(Level 2)

(Level 3)

Assets:

Impaired loans:

Investment commercial real estate

8,516

—

8,516

Fair Value Measurements Using

Quoted

Prices in

Active

Significant

Markets For

Other

Significant

Identical

Observable

Unobservable

December 31,

Assets

Inputs

Inputs

(In thousands)

2020

(Level 1)

(Level 2)

(Level 3)

Assets:

Impaired loans:

Commercial and industrial

$
2,300

$
—

$
—

$
2,300

The carrying amounts and estimated fair values of financial instruments at September 30, ~~2021~~2022 are as follows:


			Fair Value Measurements at September 30, 2022 using
	Carrying
(In thousands)	Amount		Level 1		Level 2		Level 3		Total
Financial assets
Cash and cash equivalents	$	108,280	$	108,280	$	—	$	—	$	108,280
Securities available for sale		497,880		—		497,880		—		497,880
Securities held to maturity		103,551		—		87,857		—		87,857
CRA investment fund		12,957		12,957		—		—		12,957
FHLB and FRB stock		14,986		—		—		—	N/A
Loans held for sale, at fair value		1,333		—		1,333		—		1,333
Loans held for sale, at lower of cost or fair value		10,102		—		11,152		—		11,152
Loans, net of allowance for credit losses		5,117,511		—		—		4,842,877		4,842,877
Accrued interest receivable		17,816		—		1,756		16,060		17,816
Accrued interest receivable loan level swaps (1)		2,048		—		2,048		—		2,048
Cash flow hedges		10,462		—		10,462		—		10,462
Loan level swaps		41,018		—		41,018		—		41,018
Financial liabilities
Deposits	$	5,299,184	$	4,897,516	$	387,933	$	—	$	5,285,449
Short-term borrowings		32,369		—		32,369		—		32,369
Subordinated debt		132,916		—		—		127,062		127,062
Accrued interest payable		2,910		1,187		357		1,366		2,910
Accrued interest payable loan level swaps (2)		2,048		—		2,048		—		2,048
Loan level swap		41,018		—		41,018		—		41,018

Fair Value Measurements at September 30, 2021 using

Carrying

(In thousands)

Amount

Level 1

Level 2

Level 3

Total

Financial assets

Cash and cash equivalents

$
616,212

$
616,212

$
—

$
—

$
616,212

Securities available for sale

843,779

—

843,779

—

843,779

CRA investment fund

14,824

14,824

—

—

14,824

FHLB and FRB stock

12,950

—

—

��

—

N/A

Loans held for sale, at fair value

3,013

—

3,013

—

3,013

Loans held for sale, at lower of cost or fair value

17,235

—

18,627

—

18,627

Loans, net of allowance for loan and lease losses

4,510,265

—

—

4,619,193

4,619,193

Accrued interest receivable

22,790

—

2,028

20,762

22,790

Accrued interest receivable loan level swaps (A)

4,688

—

4,688

—

4,688

Loan level swaps

43,133

—

43,133

—

43,133

Financial liabilities

Deposits

$
5,376,341

$
4,884,174

$
495,816

$
—

$
5,379,990

Paycheck Protection Program Liquidity Facility

48,496

—

48,496

—

48,496

Subordinated debt

132,629

—

—

130,917

130,917

Accrued interest payable

2,157

132

659

1,366

2,157

Accrued interest payable loan level swaps (B)

4,688

—

4,688

—

4,688

Cash flow hedges

5,267

—

5,267

—

5,267

Loan level swap

44,483

—

44,483

—

44,483

(1)

Included in other assets in the Consolidated Statement of Condition.

(2)

Included in accrued expenses and other liabilities in the Consolidated Statement of Condition.

~~(A)~~

~~Included in other assets in the Consolidated Statement of Condition.~~

~~(B)~~

~~Included in accrued expenses and other liabilities in the Consolidated Statement of Condition.~~

The carrying amounts and estimated fair values of financial instruments at December 31, ~~2020~~2021 are as follows:


			Fair Value Measurements at December 31, 2021 using
	Carrying
(In thousands)	Amount		Level 1		Level 2		Level 3		Total
Financial assets
Cash and cash equivalents	$	146,804	$	146,804	$	—	$	—	$	146,804
Securities available for sale		796,753		—		796,753		—		796,753
Securities held to maturity		108,680		—		108,460		—		108,460
CRA investment fund		14,685		14,685		—		—		14,685
FHLB and FRB stock		12,950		—		—		—	N/A
Loans held for sale, at fair value		3,040		—		3,040		—		3,040
Loans held for sale, at lower of cost or fair value		34,051		—		37,538		—		37,538
Loans, net of allowance for loan and lease losses		4,745,024		—		—		4,767,293		4,767,293
Accrued interest receivable		21,589		—		2,443		19,146		21,589
Accrued interest receivable loan level swaps (1)		4,842		—		4,842		—		4,842
Loan level swaps		32,326		—		32,326		—		32,326
Financial liabilities
Deposits	$	5,266,149	$	4,791,341	$	476,659	$	—	$	5,268,000
Subordinated debt		132,701		—		—		140,556		140,556
Accrued interest payable		651		130		446		75		651
Accrued interest payable loan level swaps (2)		4,842		—		4,842		—		4,842
Cash flow hedges		3,479		—		3,479		—		3,479
Loan level swaps		34,569		—		34,569		—		34,569

(1)

Included in other assets in the Consolidated Statement of Condition.

(2)

Included in accrued expenses and other liabilities in the Consolidated Statement of Condition.

Fair Value Measurements at December 31, 2020 using

Carrying

(In thousands)

Amount

Level 1

Level 2

Level 3

Total

Financial assets

Cash and cash equivalents

$
653,322

$
653,322

$
—

$
—

$
653,322

Securities available for sale

622,689

—

622,689

—

622,689

CRA investment fund

15,117

15,117

—

—

15,117

FHLB and FRB stock

13,709

—

—

—

N/A

Loans held for sale, at fair value

13,588

—

13,588

—

13,588

Loans held for sale, at lower of cost or fair value

18,520

—

19,115

—

19,115

Loans, net of allowance for loan and lease losses

4,305,128

—

—

4,462,243

4,462,243

Accrued interest receivable

22,495

—

1,653

20,842

22,495

Loan level swaps

79,529

—

79,529

—

79,529

Financial liabilities

Deposits

$
4,818,484

$
4,222,370

$
604,036

$
—

$
4,826,406

Short-term borrowings

15,000

—

15,000

—

15,000

Paycheck Protection Program Liquidity Facility

177,086

—

177,086

—

177,086

Subordinated debt

181,794

—

—

183,348

183,348

Accrued interest payable

1,650

150

1,347

153

1,650

Cash flow hedges

9,616

—

9,616

—

9,616

Loan level swaps

79,529

—

79,529

—

79,529

8.9. REVENUE FROM CONTRACTS WITH CUSTOMERS

All of the Company’s revenue from contracts with customers within the scope of ASC 606 is recognized within noninterest income.

The following tables present the sources of noninterest income for the periods indicated:


	For the Three Months Ended September 30,
(In thousands)	2022		2021
Service charges on deposits
Overdraft fees	$	129	$	117
Interchange income		356		374
Other		575		468
Wealth management fees (1)		12,943		13,860
Corporate advisory fee income		102		84
Other (2)		2,278		2,878
Total noninterest other income	$	16,383	$	17,781


	For the Nine Months Ended September 30,
(In thousands)	2022		2021
Service charges on deposits
Overdraft fees	$	360	$	297
Interchange income		1,077		1,061
Other		1,638		1,343
Wealth management fees (1)		41,668		39,025
Corporate advisory fee income		1,696		1,303
Gains/(losses) on sales of OREO		—		51
Other (2)		3,166		10,199
Total noninterest other income	$	49,605	$	53,279

(1)

Includes investment brokerage fees.

For the Three Months Ended September 30,

(In thousands)

2021

2020

Service charges on deposits

Overdraft fees

$
117

$
88

Interchange income

374

319

Other

468

378

Wealth management fees (a)

13,860

10,119

Other (b)

2,962

9,307

Total noninterest other income
$
17,781

$
20,211

(2)

All of the other category is outside the scope of ASC 606.

For the Nine Months Ended September 30,

(In thousands)

2021

2020

Service charges on deposits

Overdraft fees

$
297

$
307

Interchange income

1,061

869

Other

1,343

1,120

Wealth management fees (a)

39,025

30,070

Gains on sales of OREO

51

—

Other (b)

11,502

14,988

Total noninterest other income
$
53,279

$
47,354

~~(a)~~

~~Includes investment brokerage fees.~~

~~(b)~~

~~All of the other category is outside the scope of ASC 606.~~

The following table presents the sources of noninterest income by operating segment for the periods indicated:


	For the Three Months Ended September 30,						For the Three Months Ended September 30,
	2022						2021
(In thousands)			Wealth						Wealth
Revenue by Operating Segment	Banking		Management		Total		Banking		Management		Total
Service charges on deposits
Overdraft fees	$	129	$	—	$	129	$	117	$	—	$	117
Interchange income		356		—		356		374		—		374
Other		575		—		575		468		—		468
Wealth management fees (1)		—		12,943		12,943		—		13,860		13,860
Corporate advisory fee income		102		—		102		84		—		84
Other (2)		1,793		485		2,278		2,433		445		2,878
Total noninterest income	$	2,955	$	13,428	$	16,383	$	3,476	$	14,305	$	17,781


	For the Nine Months Ended September 30,						For the Nine Months Ended September 30,
(In thousands)	2022						2021
Revenue by Operating			Wealth						Wealth
Segment	Banking		Management		Total		Banking		Management		Total
Service charges on deposits
Overdraft fees	$	360	$	—	$	360	$	297	$	—	$	297
Interchange income		1,077		—		1,077		1,061		—		1,061
Other		1,638		—		1,638		1,343		—		1,343
Wealth management fees (1)		—		41,668		41,668		—		39,025		39,025
Corporate advisory fee income		1,696		—		1,696		1,303		—		1,303
Gains/(losses) on sales of OREO		—		—		—		51		—		51
Other (2)		1,874		1,292		3,166		8,755		1,444		10,199
Total noninterest income	$	6,645	$	42,960	$	49,605	$	12,810	$	40,469	$	53,279

(1)

Includes investment brokerage fees.

(2)

All of the other category is outside the scope of ASC 606.

For the Three Months Ended
September 30,

For the Three Months Ended
September 30,

2021

2020

(In thousands)

Wealth

Wealth

Revenue by Operating Segment

Banking

Management

Total

Banking

Management

Total

Service charges on deposits

Overdraft fees

$
117

$
0

$
117

$
88

$
0

$
88

Interchange income

374

0

374

319

0

319

Other

468

0

468

378

0

378

Wealth management fees (a)

0

13,860

13,860

0

10,119

10,119

Other (b)

2,517

445

2,962

8,666

641

9,307

Total noninterest income

$
3,476

$
14,305

$
17,781

$
9,451

$
10,760

$
20,211

For the Nine Months Ended
September 30,

For the Nine Months Ended
September 30,

(In thousands)

2021

2020

Revenue by Operating

Wealth

Wealth

Segment

Banking

Management

Total

Banking

Management

Total

Service charges on deposits

Overdraft fees

$
297

$
0

$
297

$
307

$
0

$
307

Interchange income

1,061

0

1,061

869

0

869

Other

1,343

0

1,343

1,120

0

1,120

Wealth management fees (a)

0

39,025

39,025

0

30,070

30,070

Gains on sales of OREO

51

—

51

—

—

—

Other (b)

10,058

1,444

11,502

13,740

1,248

14,988

Total noninterest income

$
12,810

$
40,469

$
53,279

$
16,036

$
31,318

$
47,354

~~(a)~~

~~Includes investment brokerage fees.~~

~~(b)~~

~~All of the other category is outside the scope of ASC 606.~~

9.10. OTHER OPERATING EXPENSES

The following table presents the major components of other operating expenses for the periods indicated:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(In thousands)	2022		2021		2022		2021
Professional and legal fees	$	1,180	$	1,565	$	3,630	$	4,007
Telephone		403		342		1,085		988
Advertising		574		386		1,545		1,004
Amortization of intangible assets		384		431		1,204		1,167
Branch restructure		—		—		372		228
Write-off of subordinated debt costs		—		—		—		648
Other operating expenses		3,319		3,238		9,587		8,997
Total other operating expenses	$	5,860	$	5,962	$	17,423	$	17,039

Three Months Ended

Nine Months Ended

September 30,

September 30,

(In thousands)

2021

2020

2021

2020

Professional and legal fees

$
1,565

$
1,079

$
4,007

$
3,095

Telephone

342

370

988

1,089

Advertising

386

226

1,004

1,294

Amortization of intangible assets

431

321

1,167

966

Branch restructure

—

—

228

278

Write-off of subordinated debt costs

—

—

648

—

Other operating expenses

3,238

2,549

8,997

7,876

Total other operating expenses

$
5,962

$
4,545

$
17,039

$
14,598

The following is a summary of the accumulated other comprehensive income/(loss) balances, net of tax, for the three months ended September 30, ~~2021~~2022 and ~~2020:~~2021:


							Amount		Other												Amount			Other
							Reclassified		Comprehensive												Reclassified			Comprehensive
				Other			From		Income/(Loss)									Other			From			Income/(Loss)
				Comprehensive			Accumulated		Three Months									Comprehensive			Accumulated			Three Months
	Balance at			Income/(Loss)			Other		Ended			Balance at			Balance at			Income/(Loss)			Other			Ended			Balance at
	July 1,			Before			Comprehensive		September 30,			September 30,			July 1,			Before			Comprehensive			September 30,			September 30,
(In thousands)	2021			Reclassifications			Income/(Loss)		2021			2021			2022			Reclassifications			Income/(Loss)			2022			2022
Net unrealized holding gain/(loss) on securities available for sale, net of tax	$	(956	)	$	(4,293	)	$	—	$	(4,293	)	$	(5,249	)	$	(59,066	)	$	(23,563	)	$	—		$	(23,563	)	$	(82,629	)

Gain/(loss) on cash flow hedges		(4,459	)		673			—		673			(3,786	)		339			7,349			(42	)		7,307			7,646

Accumulated other comprehensive gain/(loss), net of tax	$	(5,415	)	$	(3,620	)	$	—	$	(3,620	)	$	(9,035	)	$	(58,727	)	$	(16,214	)	$	(42	)	$	(16,256	)	$	(74,983	)


							Amount		Other
							Reclassified		Comprehensive
				Other			From		Income/(Loss)
				Comprehensive			Accumulated		Three Months
	Balance at			Income/(Loss)			Other		Ended			Balance at
	July 1,			Before			Comprehensive		September 30,			September 30,
(In thousands)	2021			Reclassifications			Income/(Loss)		2021			2021
Net unrealized holding gain/(loss) on securities available for sale, net of tax	$	(956	)	$	(4,293	)	$	—	$	(4,293	)	$	(5,249	)

Gain/(loss) on cash flow hedges		(4,459	)		673			—		673			(3,786	)

Accumulated other comprehensive gain/(loss), net of tax	$	(5,415	)	$	(3,620	)	$	—	$	(3,620	)	$	(9,035	)

Amount

Other

Reclassified

Comprehensive

Other

From

Income/(Loss)

Comprehensive

Accumulated

Three Months

Balance at

Income/(Loss)

Other

Ended

Balance at

July 1,

Before

Comprehensive

September 30,

September 30,

(In thousands)

2020

Reclassifications

Income/(Loss)

2020

2020

Net unrealized holding gain/(loss) on
securities available for sale, net of tax

$
6,935

$
(777
)

$
—

$
(777
)

$
6,158

Gain/(loss) on cash flow hedges

(8,931
)

1,030

(4
)

1,026

(7,905
)

Accumulated other comprehensive gain/(loss),
net of tax

$
(1,996
)

$
253

$
(4
)

$
249

$
(1,747
)

The following represents the reclassifications out of accumulated other comprehensive income/(loss) for the three months ended September 30, ~~2021~~2022 and ~~2020:~~2021:


	Three Months Ended						Three Months Ended
	September 30,						September 30,
(In thousands)	2021		2020			Affected Line Item in Income Statement	2022			2021		Affected Line Item in Income Statement
Unrealized gains/(losses) on cash flow hedge derivatives:
Reclassification adjustment for amounts included in net income	$	—	$	(5	)	Interest expense
Reclassification adjustment for losses on termination of swaps included in net income		—		—		Other income
Unrealized gains/(losses) on securities available for sale:
Reclassification adjustment for gains on termination of swaps included in net income							$	(58	)	$	—	Other income
Tax effect		—		1		Income tax expense		16			—	Income tax expense
Total reclassifications, net of tax	$	—	$	(4	)		$	(42	)	$	—

The following is a summary of the accumulated other comprehensive income/(loss) balances, net of tax, for the nine months ended September 30, ~~2021~~2022 and ~~2020~~2021:


							Amount			Other
							Reclassified			Comprehensive
				Other			From			Income/(Loss)
				Comprehensive			Accumulated			Nine Months
	Balance at			Income/(Loss)			Other			Ended			Balance at
	January 1,			Before			Comprehensive			September 30,			September 30,
(In thousands)	2022			Reclassifications			Income/(Loss)			2022			2022
Net unrealized holding gain/(loss) on securities available for sale, net of tax	$	(9,873	)	$	(77,783	)	$	5,027		$	(72,756	)	$	(82,629	)

Gain/(loss) on cash flow hedges		(2,501	)		10,189			(42	)		10,147			7,646

Accumulated other comprehensive gain/(loss), net of tax	$	(12,374	)	$	(67,594	)	$	4,985		$	(62,609	)	$	(74,983	)


							Amount		Other
							Reclassified		Comprehensive
				Other			From		Income/(Loss)
				Comprehensive			Accumulated		Nine Months
	Balance at			Income/(Loss)			Other		Ended			Balance at
	January 1,			Before			Comprehensive		September 30,			September 30,
(In thousands)	2021			Reclassifications			Income/(Loss)		2021			2021
Net unrealized holding gain/(loss) on securities available for sale, net of tax	$	5,521		$	(10,770	)	$	—	$	(10,770	)	$	(5,249	)

Gain/(loss) on cash flow hedges		(6,913	)		2,521			606		3,127			(3,786	)

Accumulated other comprehensive gain/(loss), net of tax	$	(1,392	)	$	(8,249	)	$	606	$	(7,643	)	$	(9,035	)

Amount

Other

Reclassified

Comprehensive

Other

From

Income/(Loss)

Comprehensive

Accumulated

Nine Months

Balance at

Income/(Loss)

Other

Ended

Balance at

January 1,

Before

Comprehensive

September 30,

September 30,

(In thousands)

2021

Reclassifications

Income/(Loss)

2021

2021

Net unrealized holding gain/(loss) on
securities available for sale, net of tax

$
5,521

$
(10,770
)

$
—

$
(10,770
)

$
(5,249
)

Gain/(loss) on cash flow hedges

(6,913
)

2,521

606

3,127

(3,786
)

Accumulated other comprehensive
gain/(loss), net of tax

$
(1,392
)

$
(8,249
)

$
606

$
(7,643
)

$
(9,035
)

Amount

Other

Reclassified

Comprehensive

Other

From

Income/(Loss)

Comprehensive

Accumulated

Nine Months

Balance at

Income/(Loss)

Other

Ended

Balance at

January 1,

Before

Comprehensive

September 30,

September 30,

(In thousands)

2020

Reclassifications

Income/(Loss)

2020

2020

Net unrealized holding gain/(loss) on
securities available for sale, net of tax

$
1,006

$
5,152

$
—

$
5,152

$
6,158

Gain/(loss) on cash flow hedges

(2,501
)

(5,341
)

(63
)

(5,404
)

(7,905
)

Accumulated other comprehensive
gain/(loss), net of tax

$
(1,495
)

$
(189
)

$
(63
)

$
(252
)

$
(1,747
)

~~11.~~12. DERIVATIVES

The Company utilizes interest rate swap agreements as part of its asset liability management strategy to help manage its interest rate risk position. The notional amount of the interest rate swaps does not represent amounts exchanged by the parties. The amount exchanged is determined by reference to the notional amount and the other terms of the individual interest rate swap agreements.

Interest Rate Swaps Designated as Cash Flow Hedges: Interest rate swaps with a notional amount of ~~$230.0~~$290.0 millionas of September 30, ~~2021~~2022 and ~~$270.0~~$230.0 million as of December 31, ~~2020~~2021 were designated as cash flow hedges of certain interest-bearing deposits. On a quarterly basis, the Company performs a qualitative hedge effectiveness assessment. This assessment takes into consideration any adverse developments related to the counterparty’s risk of default and any negative events or circumstances that affect the factors that originally enabled the Company to assess that it could reasonably support, qualitatively, an expectation that the hedging relationship was and will continue to be highly effective. As of September 30, ~~2021,~~2022, there were no events or market conditions that would result in hedge ineffectiveness. The aggregate fair value of the swaps is recorded in other assets/liabilities with changes in fair value recorded in other comprehensive income. The amount included in accumulated other comprehensive income would be reclassified to current earnings should the hedges no longer be considered effective. The Company expects the hedges to remain fully effective during the remaining terms of the swaps.

39In March 2022, the Company entered into four forward starting interest rate swaps with a total notional amount of $100.0 million. These swaps will effectively extend the interest rate protection of existing swaps that are maturing in 2023 for an additional five years. As such, they are designated as cash flow hedges of certain interest-bearing deposits. The Company will receive variable amounts and pay fixed amounts. The weighted-average fixed pay rate on these forward swaps was 2.25% as of September 30, 2022. As of September 30, 2022, an unrealized gain of $6.4 million was recorded in accumulated other comprehensive income related to these forward starting swaps. The tables below do not include the impact of these forward swaps.

The following table presents information about the interest rate swaps designated as cash flow hedges as of September 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


(Dollars in thousands)	September 30, 2022			December 31, 2021
Notional amount	$	290,000		$	230,000
Weighted average pay rate		1.78	%		1.99	%
Weighted average receive rate		1.53	%		0.20	%
Weighted average maturity	2.26 years			1.04 years
Unrealized gain/(loss), net	$	4,083		$	(3,479	)

Number of contracts		12			13


	September 30, 2022
	Notional		Fair
(In thousands)	Amount		Value
Interest rate swaps related to interest-bearing deposits	$	290,000	$	4,083
Total included in other assets		290,000		4,083
Total included in other liabilities		—		—

(Dollars in thousands)

September 30,
2021

December 31,
2020

Notional amount

$
230,000

$
270,000

Weighted average pay rate

1.99
%

1.93
%
Weighted average receive rate

0.21
%

0.22
%
Weighted average maturity

1.29 years

2.02 years

Unrealized loss, net

$
(5,267
)

$
(9,616
)

Number of contracts

11

13


	December 31, 2021
	Notional		Fair
(In thousands)	Amount		Value
Interest rate swaps related to interest-bearing deposits	$	230,000	$	(3,479	)
Total included in other assets		—		—
Total included in other liabilities		230,000		(3,479	)

Net interest expense recorded on these swap transactions totaled $1.0 million and $3.3 million for the three and nine months ended September 30, 2021, respectively. Net interest expense recorded on these swap transactions totaled $1.1 million and $2.4 million for the three months and nine months ended September 30, 2020, respectively.

Cash Flow Hedges

The following table presents the net gain/(loss) recorded in accumulated other comprehensive income/(loss) and the consolidated financial statements relating to the cash flow derivative instruments for the three ~~months~~ and nine months ended September 30, ~~2021~~2022 and ~~2020:~~2021:


	For the Three Months Ended September 30,					For the Nine Months Ended September 30,						For the Three Months Ended September 30,				For the Nine Months Ended September 30,
(In thousands)	2021		2020			2021			2020			2022		2021		2022		2021
Interest rate contracts
Gain/(loss) recognized in other comprehensive income (effective portion)	$	673	$	1,026		$	3,127		$	(5,404	)	$	10,048	$	936	$	13,999	$	3,507
Gain/(loss) reclassified from other comprehensive income to interest expense		—		(4	)		—			(63	)		—		—		—		—
Gain/(loss) recognized in other noninterest income		—		—			(842	)		—			58		—		58		(842	)

During the ~~first~~third quarter of ~~2020,~~2022, the Company recognized an unrealized after-tax gain of ~~$26,000~~$167,000 in accumulated other comprehensive income/(loss) related to the termination of 3two interest rate swaps designated as cash flow ~~hedges. During the second quarter of 2019, the Company recognized an unrealized after-tax~~hedges that were deemed ineffective. The gain ~~of $189,000 in accumulated other comprehensive income/(loss) related to the termination of 4 interest rate swaps designated as cash flow hedges. These gains were~~is being amortized into earnings over the remaining life of the terminated ~~swaps~~swaps.

Net interest income/(expense) recorded on these swap transactions totaled $(11,000) and ~~completed amortization as of December 31, 2020. The Company did not recognize pre-tax~~$(1.7) million for the three and nine months ended September 30, 2022, respectively. Net interest ~~income~~expense recorded on these swap transactions totaled $1.0 million and $3.3 million for the three and nine months ended September 30, 2021, ~~related to the amortization of the gain on the terminated interest rate swaps designated as cash flow hedges. The Company recognized pre-tax interest income~~respectively.~~of $5,000 and $85,000 for the three and nine months ended September 30, 2020related to the amortization of the gain on the terminated interest rate swaps designated as cash flow hedges.~~

~~During the second quarter of 2021, the Bank terminated interest rate swaps with a notional amount of $40.0 million.~~The interest rate swaps were designated as cash flow hedges in which the Bank received a variable payment from our counterparty in exchange for making fixed-rate payments over the life of the swap agreements. Due to increased liquidity levels, management made the decision to pay off certain interest-bearing deposit liabilities that were being hedged. These liabilities will not be replaced; therefore, it will no longer be probable that the original forecasted transactions subject to the cash flow hedges will occur. As a result, the pre-tax loss on the termination of the interest rate swaps of $842,000 was recorded in the income statement for the nine months ended September 30, 2021.

September 30, 2021

Notional

Fair

(In thousands)

Amount

Value

Interest rate swaps related to interest-bearing deposits

$
230,000

$
(5,267
)
Total included in other assets

—

—

Total included in other liabilities

230,000

(5,267
)

December 31, 2020

Notional

Fair

(In thousands)

Amount

Value

Interest rate swaps related to interest-bearing deposits

$
270,000

$
(9,616
)
Total included in other assets

—

—

Total included in other liabilities

270,000

(9,616
)

Derivatives Not Designated as Accounting ~~Hedges:~~Hedges

The Company offers facility specific/loan level swaps to its customers and offsets its exposure from such contracts by entering ~~into~~ mirror image swaps with a financial institution/swap counterparty (loan level / back-to-back swap program). The customer accommodations and any offsetting swaps are treated as non-hedging derivative instruments which do not qualify for hedge accounting (“standalone derivatives”). The notional amount of the swaps does not represent amounts exchanged by the parties. The amount exchanged is determined by reference to the notional amount and the other terms of the individual contracts. The fair value of the swaps is recorded as both an asset and a liability, in other assets and other liabilities, respectively, in equal amounts for these transactions.

The accrued interest receivable and payable related to these swaps of $2.0 million and $4.8 million at September 30, 2022 and December 31, 2021, respectively, is recorded in other assets and other liabilities. At December 31, 2021, the Company recorded a total swap valuation provision of ~~$1.4~~$2.1 million related to a commercial real estate loan placed on ~~non-accrual~~nonaccrual status during the third quarter of 2021. ~~The accrued interest receivable and payable~~This swap was terminated during the first quarter of ~~$4.7 million related to our swaps is recorded in other assets and other liabilities as of September 30, 2021.~~2022.

Information about these swaps is as follows:


(Dollars in thousands)	September 30, 2022			December 31, 2021
Notional amount	$	627,502		$	702,210
Fair value	$	(38,969	)	$	32,326
Weighted average pay rates		3.96	%		4.00	%
Weighted average receive rates		4.88	%		1.83	%
Weighted average maturity	4.83 years			5.5 years

Number of contracts		80			86

(Dollars in thousands)

September 30,
2021

December 31,
2020

Notional amount

$
730,966

$
823,134

Fair value (A)

$
47,821

$
79,529

Weighted average pay rates

3.98
%

4.02
%
Weighted average receive rates

1.81
%

1.91
%
Weighted average maturity

5.8 years

6.5 years

Number of contracts

87

95

~~(A)~~

~~The September 30, 2021 amount includes the fair value of the loan level swap asset of $43.1 million~~ ~~plus accrued interest receivable of $4.7 million on back-to-back swap loans.~~

~~12.~~13. SUBORDINATED DEBT

In June 2016, the Company issued $50.0 million in aggregate principal amount of fixed-to-floating subordinated notes (the “2016 Notes”) to certain institutional investors. The 2016 Notes were non-callable for five years, had a stated maturity of June 30, 2026, and bore interest at a fixed rate of 6.0 percent per year until June 30, 2021. From June 30, 2021 to the maturity date or early redemption date, the interest rate reset quarterly to a level equal to the then current three-month London Interbank Offered Rate (“LIBOR”) rate plus 485 basis points, payable quarterly in arrears. During the second quarter of 2021, the Company used a portion of the proceeds from the December 2020 subordinated debt issuance to redeem the $50.0 million June 2016 issuance. The remaining net issuance costs of $648,000 were written-off during the quarter ended June 30, 2021.

In December 2017, the Company issued ~~$35.0~~$35.0 million in aggregate principal amount of fixed-to-floating subordinated notes (the “2017 Notes”) to certain institutional investors. The 2017 Notes are non-callable for five years, have a stated maturity of December 15, 2027, and bear interest at a fixed rate of 4.75 percent ~~per year~~ until December 15, 2022. From December 16, 2022 to the maturity date or early redemption date, the interest rate will reset quarterly to a level equal to the then current three-month ~~LIBOR~~London Interbank Offered Rate (“LIBOR”) rate plus 254 basis points, payable quarterly in arrears. Debt issuance costs incurred totaled ~~$875,000~~$875,000 and are being amortized to maturity.

Approximately $29.1 million of the net proceeds from the sale of the 2017 Notes were contributed by the Company to the Bank in the fourth quarter of 2017. The remaining funds (approximately $5 million), representing three years of interest payments, were retained by the Company.

In December 2020, the Company issued ~~$100.0~~$100.0 million in aggregate principal amount of fixed to floating ~~subordinates~~subordinated notes (the “2020 Notes”) to certain institutional investors. The 2020 Notes are non-callable for five years, have a stated maturity of December 22, 2030, and bear interest at a fixed rate of 3.50 percent ~~per year~~ until December 22, 2025. From December 23, 2025 to the maturity date or early redemption date, the interest rate will reset quarterly to a level equal to the then current three-month ~~SOFR~~Secured Overnight Financing Rate (“SOFR”) plus 326 basis points, payable quarterly in arrears. Debt issuance costs incurred totaled ~~$1.9~~$1.9 million and are being amortized to maturity.

The Company may use the proceeds from the issuance of the 2020 Notes to refinance then-outstanding debt, for stock repurchases, acquisitions of wealth management firms, as well as other general corporate purposes.

Subordinated debt is presented net of issuance costs on the Consolidated Statements of Condition. The subordinated debt issuances are included in the Company’s regulatory total capital amount and ratio.

In connection with the issuance of the 2020 Notes, the Company obtained ratings from Kroll Bond Rating Agency (“KBRA”) and Moody’s Investors Services (“Moody’s). KBRA assigned an investment grade rating of BBB- and Moody’s assigned an investment grade rating of Baa3 for the 2020 Notes at the time of issuance.

14. LEASES

~~13. LEASES~~

The Company maintains certain property and equipment under direct financing and operating leases. As of September 30, 2022, the Company's operating lease ROU asset and operating lease liability totaled $13.4 million and $14.1 million, respectively. As of December 31, 2021, the Company's operating lease ROU asset and operating lease liability totaled ~~$10.3~~$9.8 million and ~~$10.6 million, respectively. As of December 31, 2020, the Company's operating lease ROU asset and operating lease liability totaled $9.4 million and $9.7~~$10.1 million, respectively. A weighted average discount rate of ~~2.82~~2.65 percent and ~~3.11~~2.78 percent was used in the measurement of the ROU asset and lease liability as of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively.

The Company's leases have remaining lease terms between two months to 1514 years, with a weighted average lease term of ~~6.31~~7.53 years at September 30, ~~2021.~~2022. The Company's leases had remaining lease terms between ~~one month~~four months to 1615 years, with a weighted average lease term of ~~6.01~~6.09 years at December 31, ~~2020.~~2021. The Company’s lease agreements may include options to extend or terminate the lease. The Company’s decision to exercise renewal options is based on an assessment of its current business needs and market factors at the time of the renewal.

Total operating lease costs were ~~$697,000~~$868,000 and ~~$789,000~~$697,000 for the three months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively. The variable lease costs were ~~$75,000~~$76,000 and ~~$82,000~~$75,000 for the three months ended September 30, 2022 and 2021, ~~and 2020,~~ respectively.

Total operating lease costs were ~~$2.1~~$2.6 million and ~~$2.4~~$2.1 million for the nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively. The variable lease costs were ~~$242,000~~$229,000 and ~~$259,000~~$242,000 for the nine months ended September 30, 2022 and 2021, ~~and 2020,~~ respectively.

The following is a schedule of the Company's operating lease liabilities by contractual maturity as of September 30, ~~2021:~~2022:


(In thousands)
2022	$	711
2023		2,976
2024		2,299
2025		2,048
2026		1,487
Thereafter		6,194
Total lease payments		15,715
Less: imputed interest		1,614
Total present value of lease payments	$	14,101

(In thousands)

2021

$
691

2022

2,560

2023

2,163

2024

1,719

2025

1,463

Thereafter

3,151

Total lease payments

11,747

Less: imputed interest

1,103

Total present value of lease payments

$
10,644

The following table shows the supplemental cash flow information related to the Company’s direct finance and operating leases for the ~~nine months ended September 30, 2021 and 2020:~~periods indicated:


	For the Nine Months Ended				For the Nine Months Ended September 30,
(In thousands)	2021		2020		2022		2021
Right-of-use asset obtained in exchange for lease obligation	$	2,772	$	455	$	5,696	$	2,772
Operating cash flows from operating leases		1,844		2,139		2,008		1,844
Operating cash flows from direct finance leases		229		261		193		229
Financing cash flows from direct finance leases		561		561		561		561

~~14.~~15. ACCOUNTING PRONOUNCEMENTS

On June 16, 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” This ASU replaces the incurred loss model with an expected loss model, referred to as “current expected credit loss” (“CECL”) model. It will significantly change estimates for credit losses related to financial assets measured at amortized cost, including loans receivable, and certain other contracts. The largest impact will be on lenders and the “allowance for loan and lease losses” (“ALLL”). This ASU will be effective for “public business entities” (“PBEs”) in fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company has elected to delay the adoption of ASU 2016-13, as approved by the CARES Act, until January 1, 2022. The Company has reviewed the potential impact to our securities portfolio, which primarily consists of U.S. government sponsored entities, mortgage-backed securities and municipal securities which have no history of credit loss and have strong credit ratings. The Company does not expect the standard to have a material impact on its financial statements as it relates to the Company’s securities portfolio. The Company is also currently evaluating the impact the CECL model will have on our accounting and allowance for loans losses. The Company has selected a third-party firm to assist in the development of a CECL model to assist in the calculation of the allowance for loan and lease losses in preparation for the change to the expected loss model. The Company has also engaged a third-party firm to perform a model validation of our CECL model. The Company is also in the process of updating its policies and internal controls accordingly. The Company expects to recognize a one-time cumulative-effect adjustment to our ALLL as of January 1, 2022, consistent with regulatory expectations set forth in interagency guidance. The Company cannot yet determine the magnitude of any such one-time cumulative adjustment or of the overall impact of the new standard on our consolidated financial condition or results of operations.

~~In December 2019, the FASB issued ASU 2019-12,~~“Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” The amendments in this Update simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. This ASU removes the following exceptions: exception to the incremental approach for intra-period tax allocation when there is a loss from continuing operations and income or a gain from other items; exception to the requirement to recognize a deferred tax liability for equity method investments when a foreign subsidiary becomes an equity method investment; exception to the ability not to recognize a deferred tax liability for a foreign subsidiary when a foreign equity method investment becomes a subsidiary; and the exception to the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year. The guidance is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption is permitted. This ASU did not have a material impact on the Company’s consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, ~~“Reference~~Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial ~~Reporting”~~Reporting (“ASU 2020-04”). The amendments in ~~this Update~~ASU 2020-04 provide optional expedients and exceptions for applying ~~generally accepted accounting principles (GAAP)~~GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in ~~this Update~~ASU 2020-04 apply only to contracts and hedging relationships that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022. The amendments in this ASU can be adopted immediately and are effective through December 31, ~~2020.~~2022. The Company is evaluating alternative reference rates including ~~the Secured Overnight Financing Rate (“SOFR”)~~SOFR in preparation for a rate index replacement and the adoption of ~~this ASU.~~ASU 2020-04.

In March 2022, FASB issued ASU 2022-01, Derivatives and Hedging (Topic 815) (“ASU 2022-01”) which clarifies the guidance in ASC 815 on fair value hedge accounting of interest rate risk for portfolios and financial assets. Among other things, the amended guidance established the “last-of-layer” method for making the fair value hedge accounting for these portfolios more accessible and renamed that method the “portfolio layer” method. ASU 2022-01 is effective January 1, 2023 and is not expected to have a material impact on our consolidated financial statements.

In March 2022, FASB issued ASU 2022-02, Financial Instruments–Credit Losses (Topic 326); Troubled Debt Restructurings and Vintage Disclosures (“ASU 2022-02”). ASU 2022-02 eliminates the accounting guidance on troubled debt restructurings for creditors in ASC 310-40 and amends the guidance on “vintage disclosures” to require disclosure of current-period gross write-offs by year of origination. ASU 2022-02 also updates the requirements related to accounting for credit losses under ASC 326 and adds enhanced disclosures for creditors with respect to loan refinancings and restructurings for borrowers experiencing financial difficulty. The amendments in this update will be effective for fiscal years beginning after December 15, 2022 for entities that have adopted the amendments in ASU 2016-13, Financial Instruments–Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments. The Company is evaluating the additional disclosure requirements and does not expect them to have a material effect on the consolidated financial statements.

Item 2

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

FORWARD LOOKING STATEMENTS: This Quarterly Report on Form 10-Q may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are not historical facts and include expressions about Management’s confidence and strategies and Management’s expectations about operations, growth, financial results, new and existing programs and products, investments, relationships, opportunities and market conditions. These statements may be identified by such forward-looking terminology as “expect”, “look”, “believe”, “anticipate”, “may”, or similar statements or variations of such terms. Actual results may differ materially from such forward-looking statements. Factors that may cause results to differ materially from those contemplated by such forward-looking statements include, among others, those risk factors identified in the Company’s Form 10-K for the year ended December 31, ~~2020,~~2021, in addition to/which include the following:

•

~~our inability~~•

inflation and changes in interest rates and potential effects from a recession, which may adversely impact our margins and yields, reduce the fair value of our financial instruments, reduce our loan originations and lead to higher operating costs;

•

our ability to successfully grow our business and implement our strategic plan, including our ability to generate revenues to offset the increased personnel and other costs related to the strategic plan;

•

the disruption to local, regional, national and global economic activity caused by infectious disease outbreaks, including ~~an inability to generate revenues to offset the increased personnel and other costs related to the strategic plan;~~

•

~~the impact of anticipated higher operating expenses in 2021 and beyond;~~

•

~~our inability to successfully integrate wealth management firm acquisitions;~~

•

~~our inability to manage our growth;~~

•

~~our inability to successfully integrate our expanded employee base;~~

•

~~an unexpected decline in the economy, in particular in our New Jersey and New York market areas;~~

•

~~declines in our net interest margin caused by the interest rate environment and/or our highly competitive market;~~

•

~~declines in the value in our investment portfolio;~~

•

~~the impact of a pandemic event on our business, operations, customers, allowance for loan losses and capital levels;~~

•

~~higher than expected increases in our allowance for loan and lease losses;~~

•

~~higher than expected increases in loan and lease losses or in the level of delinquent, nonperforming, classified and criticized loans;~~

•

~~changes in interest rates;~~

•

~~decline in real estate values within our market areas;~~

•

legislative and regulatory actions (including the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act, Basel III and related regulations) that may result in increased compliance costs;

•

~~successful cyberattacks against our information technology (“IT”) infrastructure and that of our IT and third-party providers;~~

•

~~higher than expected FDIC insurance premiums;~~

•

~~adverse weather conditions;~~

•

~~our inability to successfully generate business in new geographic markets;~~

•

~~a reduction in our lower-cost funding sources;~~

•

~~our inability to adapt to technological changes;~~

•

~~claims and litigation pertaining to fiduciary responsibility, environmental laws and other matters;~~

•

~~our inability to retain key employees;~~

•

~~demands for loans and deposits in our market areas;~~

•

~~adverse changes in securities markets;~~

•

~~changes in accounting policies and practices; and~~

•

~~other unexpected material adverse changes in our operations or earnings.~~

Further, given its ongoing and dynamic nature, it is difficult to predict the full impact of the COVID-19 pandemic on our business. The extent of such impact will depend on future developments, which are highly uncertain, including when the coronavirus can be controlled and abated and when and whether the gradual reopening of businesses will result in a meaningful increase in economic activity. As the result of the COVID-19 pandemic and variants thereof, and the ~~related adverse local~~significant and ~~national economic consequences, we could be subject~~continuing impact that such pandemics may have on our growth, operations, earnings and asset quality;

•

the impact of potentially higher operating expenses;

•

our ability to ~~any of~~successfully integrate wealth management firm acquisitions;

•

our ability to manage our growth;

•

our ability to successfully integrate our expanded employee base;

•

an unexpected decline in the ~~following risks, any of which could have~~economy, in particular in our New Jersey and New York market areas;

•

declines in our net interest margin and/or our ability to originate loans caused by the interest rate environment and/or our highly competitive market;

•

declines in the value in our investment portfolio;

•

impact from a ~~material, adverse effect~~pandemic event on our business, ~~financial condition, liquidity,~~operations, customers, allowance for credit losses and ~~results~~capital levels;

•

higher than expected increases in our allowance for credit losses;

•

higher than expected increases in credit losses or in the level of ~~operations:~~delinquent, nonperforming, classified and criticized loans;

•

decline in real estate values within our market areas;

•

successful cyberattacks against our IT infrastructure and that of our IT and third-party providers;

•

higher than expected FDIC insurance premiums;

•

adverse weather conditions;

•

the current or anticipated impact of military conflict, terrorism or other geopolitical events;

•

our inability to successfully generate new business in new geographic markets;

•

a reduction in our lower-cost funding sources;

•

our inability to adapt to technological changes;

•

claims and litigation pertaining to fiduciary responsibility, environmental laws and other matters;

•

our inability to retain key employees;

•

demands for loans and deposits in our market areas;

•

adverse changes in securities markets;

•

changes in accounting policies and practices; and

•

other unexpected material adverse changes in our operations or earnings.

•

~~demand for our products and services may decline, making it difficult to grow assets and income;~~

•

if the economy is unable to substantially reopen, and higher levels of unemployment continue for an extended period of time, loan delinquencies, problem assets, and foreclosures may increase, resulting in increased charges and reduced income;

•

~~collateral for loans, especially real estate, may decline in value, which could cause loan losses to increase;~~

•

~~our allowance for loan losses may increase if borrowers experience financial difficulties, which will adversely affect our net income;~~

•

~~the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us;~~

•

~~a material decrease in net income or a net loss over several quarters could result in an elimination or a decrease in the rate of our quarterly cash dividend;~~

•

~~our wealth management revenues may decline with continuing market turmoil;~~

•

~~a worsening of business and economic conditions or in the financial markets could result in an impairment of certain intangible assets, such as goodwill;~~

•

the unanticipated loss or unavailability of key employees due to the outbreak, which could harm our ability to operate our business or execute our business strategy, especially as we may not be successful in finding and integrating suitable successors;

•

~~we may face litigation, regulatory enforcement and reputation risk as a result of our participation in the PPP and the risk that the SBA may not fund some or all PPP loan guaranties;~~

•

~~our cyber security risks are increased as the result of an increase in the number of employees working remotely; and~~

•

~~FDIC premiums may increase if the agency experience additional resolution costs.~~

For the Three Months Ended September 30,

Change

(Dollars in thousands, except per share data)

2021

2020

2021 vs 2020

Results of Operations:

Net interest income

$
35,211

$
32,149

$
3,062

Provision for loan and lease losses

1,600

5,150

(3,550
)
Net interest income after provision for loan and lease losses

33,611

26,999

6,612

Wealth management fee income (1)

13,860

10,119

3,741

Other income (2)

3,921

10,092

(6,171
)
Operating expense (3)

32,185

28,461

3,724

Income before income tax expense

19,207

18,749

458

Income tax expense

5,036

5,202

(166
)
Net income

$
14,171

$
13,547

$
624

Total revenue (4)

$
52,992

$
52,360

$
632

Diluted average shares outstanding

19,273,831

19,132,650

141,181

Diluted earnings per share

$
0.74

$
0.71

$
0.03

Return on average assets annualized (ROAA)

0.95
%

0.89
%

0.06
%
Return on average equity annualized (ROAE)

10.40

10.53

(0.13
)
(1)

Commencing on January 1, 2022, the allowance calculation is based on the CECL methodology. Prior to January 1, 2022, the calculation was based on the incurred loss methodology.

(2)

The quarter ended September 30, 2022 and 2021 included a fair value adjustment on a CRA equity security of $571,000 and $70,000, respectively.

(3)

The quarter ended September 2021 included $1.4 million of expense related to a swap valuation allowance.

(4)

Total revenue equals net interest income plus wealth management fee income and other income.

~~(1)~~

The September 2021 quarter included a full quarter of wealth management fee income and expense related to the December hires of the teams from Lucas and Noyes and the July acquisition of Princeton Portfolio Strategies Group (“PPSG”).

~~(2)~~

~~The quarter ended September 30, 2020 included a gain on sale of $7.4 million on the sale of $355 million of PPP loans.~~

~~(3)~~

~~The September 2021 quarter included $1.4 million related to a swap valuation allowance.~~

~~(4)~~

~~Total revenue equals net interest income plus wealth management fee income and other income.~~

(1)

Commencing on January 1, 2022, the allowance calculation is based on the CECL methodology. Prior to January 1, 2022, the calculation was based on the incurred loss methodology.

For the Nine Months Ended
September 30,

Change

(Dollars in thousands, except per share data)

2021

2020

2021 vs 2020

Results of Operations:

Net interest income

$
100,849

$
95,867

$
4,982

Provision for loan and lease losses (1)

2,725

30,050

(27,325
)
Net interest income after provision for loan and lease losses

98,124

65,817

32,307

Wealth management fee income (2)

39,025

30,070

8,955

Other income (3)

14,254

17,284

(3,030
)
Operating expense (4)

94,463

85,710

8,753

Income before income tax expense

56,940

27,461

29,479

Income tax expense (5)

15,173

4,299

10,874

Net income

$
41,767

$
23,162

$
18,605

Total revenue (6)

$
154,128

$
143,221

$
10,907

Diluted average shares outstanding

19,390,522

19,052,605

337,917

Diluted earnings per share

$
2.15

$
1.22

$
0.93

Return on average assets annualized (ROAA)

0.94
%

0.54
%

0.40
%
Return on average equity annualized (ROAE)

10.43

6.07

4.36

~~(1)~~

~~The 2020~~(2)

The nine months ended September 30, 2022 included nine months of wealth management fee income and expense related to the July 2021 acquisition of Princeton Portfolio Strategies Group (“PPSG”) while the nine months ~~included a provision for loan and lease losses of $30.1 million, primarily due to the environment at that time created by the COVID-19 pandemic.~~

~~(2)~~

The 2021 nine months included nine months of wealth management fee income and expense related to the December hires of the teams from Lucas and Noyes and three months of wealth management fee income and expense related to the July acquisition of PPSG.

~~(3)~~

The 2021 nine months included: a cost of $842,000 related to the termination of interest rate swaps; a $1.4 million gain on loans held at lower of cost or fair value; $722,000 of fee income related to the referral of PPP loans to a third party; and $455,000 of additional BOLI income related to receipt of life insurance proceeds. The 2020 nine months included a $7.4 million gain on the sale of $355 million of PPP loans.

~~(4)~~

The 2021 nine months included: $1.5 million of severance expense related to certain corporate restructuring within several areas of the Bank; $648,000 of expense related to the redemption of subordinated debt; and $1.4 million related to a swap valuation allowance.

~~(5)~~

~~The 2020 nine months included a $3.2 million tax benefit related to the carryback of tax NOLs to prior years when the federal tax rate was 14 percent higher.~~

~~(6)~~

~~Total revenue equals net interest income plus wealth management fee income and other income~~

September 30,

December 31,

Change

2021

2020

2021 vs 2020

Selected Balance Sheet Ratios:

Total capital (Tier I + II) to risk-weighted assets

15.12
%

17.67
%

(2.55
)%
Tier I leverage ratio

8.56

8.53

0.03

Loans to deposits

85.10

90.74

(5.64
)
Allowance for loan and lease losses to total loans

1.42

1.54

(0.12
)
Allowance for loan and lease losses to nonperforming loans

251.24

589.91

(338.67
)
Nonperforming loans to total loans

0.57

0.26

0.31

~~For the quarter~~ ended September 30, 2021 included three months.

(3)

The nine months ended September 30, 2022 included a $6.6 million loss on sale of securities associated with a balance sheet reposition executed in the first quarter of 2022, and a $1.7 million fair value adjustment on a CRA equity security. The nine months ended September 30, 2021 included a cost of $842,000 related to the termination of certain interest rate swaps; a $1.4 million gain on sale of loans held at lower of cost or fair value; $722,000 of income related to referral of PPP loans to a third party; $455,000 of additional bank-owned life insurance ("BOLI") income related to the receipt of life insurance proceeds; and a $293,000 fair value adjustment on a CRA equity security.

(4)

Each of the nine months ended September 30, 2022 and 2021 included $1.5 million of severance expense related to certain staff reorganizations with several areas of the bank. The nine months ended September 30, 2021 included $648,000 of expense related to the redemption of subordinated debt and $1.4 million related to a swap valuation allowance.

(5)

Total revenue equals net interest income plus wealth management fee income and other income.

•

~~The Company’s branch offices are open with fully operational lobbies and drive-thru facilities (effective May 2021), ATM access, and on-line banking;~~

•

~~Management has leveraged technology to support employees that are working remotely; and~~

•

~~Retail client initiatives have been introduced including:~~

~~The Company has approved deferral requests under the CARES Act of approximately $947.0 million of which there are only $13 million deferrals as of September 30, 2021;~~

~~Waiver of all late fees for April/May/June 2020; and~~

The Company continued to utilize the PPP to assist both clients and community organizations with funding needs related to the pandemic during 2021. The Company funded $57 million of PPP loans and referred another $124 million directly to a third party for processing and servicing.

Nine Months Ended

Nine Months Ended

September 30, 2021

September 30, 2020

NII

NIM

NII

NIM

NII/NIM excluding the below
$
97,655

2.53
%

$
91,901

2.51
%
Prepayment premiums received on loan paydowns

1,530

0.03
%

1,005

0.02
%
Effect of maintaining excess interest earning cash

(365
)

-0.17
%

(1,000
)

-0.19
%
Effect of PPP loans

2,029

-0.04
%

3,961

-0.01
%
NII/NIM as reported
$
100,849

2.35
%

$
95,867

2.33
%

For the Three Months Ended

September 30,

September 30,

(In thousands)

2021

2020

Residential mortgage loans originated for portfolio

$
36,845

$
32,599

Residential mortgage loans originated for sale

24,041

54,521

Total residential mortgage loans

60,886

87,120

Commercial real estate loans

14,944

1,613

Multifamily properties

120,716

1,500

C&I loans (A) (B)

143,121

118,048

Small business administration

11,570

4,962

Wealth Lines of Credit (A)

10,020

2,000

Total commercial loans

300,371

128,123

Installment loans

178

253

Home equity lines of credit (A)

2,535

4,759

Total loans closed

$
363,970

$
220,255

(a)

Includes loans and lines of credit that closed in the period but were not necessarily funded.

For the Nine Months Ended

September 30,

September 30,

(In thousands)

2021

2020

Residential mortgage loans originated for portfolio

$
89,742

$
66,057

Residential mortgage loans originated for sale

95,346

110,973

Total residential mortgage loans

185,088

177,030

Commercial real estate loans

65,550

11,219

Multifamily properties

461,545

75,458

C&I loans (A) (B)

413,547

260,250

Small business administration (C)

86,276

614,443

Wealth Lines of Credit (A)

15,695

5,750

Total commercial loans

1,042,613

967,120

Installment loans

266

1,459

Home equity lines of credit (A)

8,574

12,671

Total loans closed

$
1,236,541

$
1,158,280

~~(A)~~

~~Includes loans and lines of credit that closed in the period but were not necessarily funded.~~

(b)

Includes equipment finance leases and loans.

~~(B)~~

~~Includes equipment finance leases and loans.~~

~~(C)~~ (c)

Includes PPP loans of $57 ~~million and $596~~ million for the nine months ended September 30, ~~2021 and 2020, respectively.~~

2021.

September 30,

December 31,

September 30,

2021

2020

2020

Multifamily mortgage loans as a percent of
   total regulatory capital of the Bank

230
%

188
%

195
%

Non-owner occupied commercial real estate
   loans as a percent of total regulatory capital
   of the Bank

154

168

176

Total CRE concentration

384
%

356
%

371
%

(1)

Average balances for available for sale securities are based on amortized cost.

(2)

Interest income is presented on a tax-equivalent basis using a 21 percent federal tax rate.

(3)

Loans are stated net of unearned income and include nonaccrual loans.

(4)

Net interest income on a tax-equivalent basis as a percentage of total average interest-earning assets.

September 30, 2021

September 30, 2020

Average

Income/

Annualized

Average

Income/

Annualized

(Dollars in thousands)

Balance

Expense

Yield

Balance

Expense

Yield

ASSETS:

Interest-earning assets:

Investments:

Taxable (1)

$
820,574

$
2,824

1.38
%

$
553,607

$
2,182

1.58
%
Tax-exempt (1) (2)

6,035

64

4.24

9,127

116

5.08

Loans (2) (3):

Residential mortgages

503,621

3,779

3.00

529,500

4,437

3.35

Commercial mortgages

2,133,259

16,114

3.02

1,929,319

15,115

3.13

Commercial

1,826,368

16,553

3.63

2,134,399

17,653

3.31

Commercial construction

24,596

198

3.22

4,395

55

5.01

Installment

32,219

245

3.04

52,659

377

2.86

Home equity

43,182

357

3.31

53,373

444

3.33

Other

252

5

7.94

283

7

9.89

Total loans

4,563,497

37,251

3.27

4,703,928

38,088

3.24

Federal funds sold

—

—

—

102

—

0.25

Interest-earning deposits

413,623

142

0.14

652,832

159

0.10

Total interest-earning assets

5,803,729

40,281

2.78
%

5,919,596

40,545

2.74
%
Noninterest-earning assets:

Cash and due from banks

8,592

7,479

Allowance for loan and lease losses

(64,100
)

(68,110
)

Premises and equipment

23,311

21,511

Other assets

201,287

242,017

Total noninterest-earning assets

169,090

202,897

Total assets

$
5,972,819

$
6,122,493

LIABILITIES:

Interest-bearing deposits:

Checking

$
2,098,827

$
1,177

0.22
%

$
1,828,780

$
1,130

0.25
%
Money markets

1,257,760

683

0.22

1,235,040

920

0.30

Savings

152,759

20

0.05

125,016

16

0.05

Certificates of deposit - retail

461,917

836

0.72

642,732

2,529

1.57

Subtotal interest-bearing deposits

3,971,263

2,716

0.27

3,831,568

4,595

0.48

Interest-bearing demand - brokered

85,000

385

1.81

130,000

636

1.96

Certificates of deposit - brokered

33,796

266

3.15

33,742

267

3.17

Total interest-bearing deposits

4,090,059

3,367

0.33

3,995,310

5,498

0.55

FHLB advances and borrowings

64,332

57

0.35

475,465

1,221

1.03

Finance lease liabilities

6,147

74

4.82

7,054

84

4.76

Subordinated debt

132,588

1,358

4.10

83,552

1,222

5.85

Total interest-bearing liabilities

4,293,126

4,856

0.45
%

4,561,381

8,025

0.70
%
Noninterest-bearing liabilities:

Demand deposits

997,450

872,560

Accrued expenses and other liabilities

137,387

173,816

Total noninterest-bearing liabilities

1,134,837

1,046,376

Shareholders’ equity

544,856

514,736

Total liabilities and shareholders’ equity

$
5,972,819

$
6,122,493

Net interest income (tax-equivalent basis)

$
35,425

$
32,520

Net interest spread

2.33
%

2.04
%
Net interest margin (4)

2.42
%

2.20
%
Tax equivalent adjustment

$
(214
)

$
(371
)

Net interest income

$
35,211

$
32,149

~~(1)~~

~~Average balances for available for sale securities are based on amortized cost.~~

~~(2)~~

~~Interest income is presented on a tax-equivalent basis using a 21 percent federal tax rate.~~

~~(3)~~

~~Loans are stated net of unearned income and include nonaccrual loans.~~

~~(4)~~

~~Net interest income on a tax-equivalent basis as a percentage of total average interest-earning assets.~~

(1)

Average balances for available for sale securities are based on amortized cost.

(2)

Interest income is presented on a tax-equivalent basis using a 21 percent federal tax rate.

(3)

Loans are stated net of unearned income and include nonaccrual loans.

(4)

Net interest income on a tax-equivalent basis as a percentage of total average interest-earning assets.

September 30, 2021

September 30, 2020

Average

Income/

Annualized

Average

Income/

Annualized

(Dollars in thousands)

Balance

Expense

Yield

Balance

Expense

Yield

ASSETS:

Interest-earning assets:

Investments:

Taxable (1)

$
822,262

$
8,473

1.37
%

$
467,881

$
6,749

1.92
%
Tax-exempt (1) (2)

6,961

243

4.65

9,930

376

5.05

Loans (2) (3):

Residential mortgages

501,276

11,559

3.07

531,563

13,510

3.39

Commercial mortgages

1,972,723

45,590

3.08

1,989,256

49,745

3.33

Commercial

1,900,231

49,992

3.51

1,977,597

54,450

3.67

Commercial construction

20,418

516

3.37

4,440

187

5.62

Installment

34,724

777

2.98

53,165

1,212

3.04

Home equity

45,672

1,133

3.31

54,627

1,512

3.69

Other

239

15

8.37

321

23

9.55

Total loans

4,475,283

109,582

3.26

4,610,969

120,639

3.49

Federal funds sold

64

—

0.13

102

—

0.25

Interest-earning deposits

465,287

367

0.11

468,064

820

0.23

Total interest-earning assets

5,769,857

118,665

2.74
%

5,556,946

128,584

3.09
%
Noninterest-earning assets:

Cash and due from banks

10,018

6,149

Allowance for loan and lease losses

(67,592
)

(58,896
)

Premises and equipment

23,087

21,373

Other assets

203,344

212,716

Total noninterest-earning assets

168,857

181,342

Total assets

$
5,938,714

$
5,738,288

LIABILITIES:

Interest-bearing deposits:

Checking

$
1,996,663

$
3,099

0.21
%

$
1,706,558

$
6,219

0.49
%
Money markets

1,250,933

2,204

0.23

1,211,720

5,374

0.59

Savings

140,066

55

0.05

118,291

47

0.05

Certificates of deposit - retail

494,255

3,333

0.90

672,308

9,370

1.86

Subtotal interest-bearing deposits

3,881,917

8,691

0.30

3,708,877

21,010

0.76

Interest-bearing demand - brokered

100,110

1,334

1.78

153,358

2,259

1.96

Certificates of deposit - brokered

33,783

791

3.12

33,729

794

3.14

Total interest-bearing deposits

4,015,810

10,816

0.36

3,895,964

24,063

0.82

FHLB advances and borrowings

138,448

448

0.43

330,324

3,360

1.36

Finance lease liabilities

6,376

229

4.79

7,266

261

4.79

Subordinated debt

165,053

5,650

4.56

83,496

3,667

5.86

Total interest-bearing liabilities

4,325,687

17,143

0.53
%

4,317,050

31,351

0.97
%
Noninterest-bearing liabilities:

Demand deposits

932,088

763,414

Accrued expenses and other liabilities

143,045

149,187

Total noninterest-bearing liabilities

1,075,133

912,601

Shareholders’ equity

533,894

508,637

Total liabilities and shareholders’ equity

$
5,934,714

$
5,738,288

Net interest income (tax-equivalent basis)

$
101,522

$
97,233

Net interest spread

2.21
%

2.12
%
Net interest margin (4)

2.35
%

2.33
%
Tax equivalent adjustment

$
(673
)

$
(1,366
)

Net interest income

$
100,849

$
95,867

~~(1)~~

~~Average balances for available for sale securities are based on amortized cost.~~

~~(2)~~

~~Interest income is presented on a tax-equivalent basis using a 21 percent federal tax rate.~~

~~(3)~~

~~Loans are stated net of unearned income and include nonaccrual loans.~~

~~(4)~~

~~Net interest income on a tax-equivalent basis as a percentage of total average interest-earning assets.~~

For the Three Months Ended September 30, 2021

Difference due to

Change In

Change In:

Income/

(In Thousands):

Volume

Rate

Expense

ASSETS:

Investments

$
822

$
(232
)

$
590

Loans

(1,237
)

400

(837
)
Interest-earning deposits

(71
)

54

(17
)
Total interest income

$
(486
)

$
222

$
(264
)
LIABILITIES:

Interest-bearing checking

$
106

$
(59
)

$
47

Money market

(21
)

(216
)

(237
)
Savings

4

—

4

Certificates of deposit - retail

(575
)

(1,118
)

(1,693
)
Certificates of deposit - brokered

—

(1
)

(1
)
Interest bearing demand brokered

(202
)

(49
)

(251
)
Borrowed funds

(319
)

(845
)

(1,164
)
Capital lease obligation

(10
)

—

(10
)
Subordinated debt

502

(366
)

136

Total interest expense

$
(515
)

$
(2,654
)

$
(3,169
)
Net interest income

$
29

$
2,876

$
2,905

For the Nine Months Ended September 30, 2021

Difference due to

Change In

Change In:

Income/

(In Thousands):

Volume

Rate

Expense

ASSETS:

Investments

$
3,524

$
(1,933
)

$
1,591

Loans

(3,280
)

(7,777
)

(11,057
)
Interest-earning deposits

(5
)

(448
)

(453
)
Total interest income

$
239

$
(10,158
)

$
(9,919
)
LIABILITIES:

Interest-bearing checking

$
427

$
(3,547
)

$
(3,120
)
Money market

188

(3,358
)

(3,170
)
Savings

8

—

8

Certificates of deposit - retail

(2,047
)

(3,990
)

(6,037
)
Certificates of deposit - brokered

1

(4
)

(3
)
Interest bearing demand brokered

(732
)

(193
)

(925
)
Borrowed funds

(2,107
)

(805
)

(2,912
)
Capital lease obligation

(31
)

(1
)

(32
)
Subordinated debt

2,797

(814
)

1,983

Total interest expense

$
(1,496
)

$
(12,712
)

$
(14,208
)
Net interest income

$
1,735

$
2,554

$
4,289

After 1

After 5

But

But

After

Within

Within

Within

10

(Dollars in thousands)

1 Year

5 Years

10 Years

Years

Total

U.S. government-sponsored agencies

$
—

$
5,625

$
122,915

$
145,893

$
274,433

—

1.00
%

1.32
%

1.69
%

1.51
%
Mortgage-backed securities-residential (1)

$
25,155

$
20,524

$
37,484

$
431,968

$
515,131

1.25
%

2.37
%

1.72
%

1.38
%

1.44
%
SBA pool securities

$
—

$
—

$
7,212

$
35,718

$
42,930

—

—

1.92
%

1.22
%

1.33
%
State and political subdivisions (2)

$
3,067

$
2,683

$
—

$
—

$
5,750

2.54
%

2.10
%

—

—

2.34
%
Corporate bond

$
—

$
—

$
5,535

$
—

$
5,535

—

—

4.23
%

—

4.23
%
Total

$
28,222

$
28,832

$
173,146

$
613,579

$
843,779

1.39
%

2.07
%

1.52
%

1.45
%

1.48
%
(1)

Shown using stated final maturity.

(2)

Yields presented on a fully tax-equivalent basis.

~~(1)~~

~~Shown using stated final maturity.~~

~~(2)~~

~~Yields presented on a fully tax-equivalent basis.~~

For the Nine Months Ended September 30,

Change

(In thousands)

2021

2020

2021 vs 2020

Service charges and fees

$
2,701

$
2,296

$
405

Bank owned life insurance

1,388

960

428

Gain on sale of loans (mortgage banking)

1,842

1,796

46

Gain/(loss) on loans held for sale at lower of cost or fair value

1,407

7,426

(6,019
)
Fee income related to loan level, back-to-back swaps

—

1,620

(1,620
)
Gain on sale of SBA loans

3,950

1,391

2,559

Corporate advisory fee income

1,303

215

1,088

Loss on swap termination

(842
)

—

(842
)
Other income

2,798

1,257

1,541

Securities gains, net

(293
)

323

(616
)
Total other income (excluding wealth management income)

$
14,254

$
17,284

$
(3,030
)

For the Nine Months Ended September 30,

Change

(In thousands)

2021

2020

2021 vs 2020

Compensation and employee benefits

$
61,759

$
57,614

$
4,145

Premises and equipment

12,646

12,188

458

FDIC assessment

1,669

1,310

359

Other Operating Expenses:

   Professional and legal fees

4,007

3,095

912

   Telephone

988

1,089

(101
)
   Advertising

1,004

1,294

(290
)
   Amortization of intangible assets

1,167

966

201

   Branch restructure

228

278

(50
)
   Write-off of subordinated debt costs

648

—

648

   Swap valuation allowance

1,350

—

1,350

   Other

8,997

7,876

1,121

Total operating expenses

$
94,463

$
85,710

$
8,753

As of

September 30,

June 30,

March 31,

December 31,

September 30,

(Dollars in thousands)

2021

2021

2021

2020

2020

Loans past due 90 days or more and still accruing

$
—

$
—

$
—

$
—

$
—

Nonaccrual loans (1)

25,925

5,962

11,767

11,410

8,611

Other real estate owned

—

—

50

50

50

Total nonperforming assets

$
25,925

$
5,962

$
11,817

$
11,460

$
8,661

Performing TDRs

$
416

$
190

$
197

$
201

$
2,278

Loans past due 30 through 89 days and still accruing (2)(3)

$
1,193

$
1,678

$
1,622

$
5,053

$
6,609

Loans subject to special mention

$
115,935

$
148,601

$
166,013

$
162,103

$
129,700

Classified loans (1)

$
51,937

$
11,178

$
25,714

$
37,771

$
41,263

Impaired loans (1)

$
26,341

$
6,498

$
11,964

$
16,204

$
15,514

Nonperforming loans as a % of total loans (4)

0.57
%

0.13
%

0.27
%

0.26
%

0.19
%
Nonperforming assets as a % of total assets (4)

0.42
%

0.10
%

0.20
%

0.19
%

0.15
%
Nonperforming assets as a % of total loans
plus other real estate owned (4)

0.57
%

0.13
%

0.27
%

0.26
%

0.19
%
(1)

Amounts reflect TDRs that are paying according to restructured terms.

(2)

Amount excludes $12.9 million at September 30, 2022, $13.5 million at June 30, 2022, $13.6 million at March 31, 2022, $1.1 million at December 31, 2021 and $4.0 million at September 30, 2021 of TDRs included in nonaccrual loans.

(3)

Includes $5.1 million outstanding to a U.S. governmental unit at September 30, 2022; $6.9 million for one equipment lease principally due to administrative issues with the servicer and the lessee/borrower at December 31, 2021.

(4)

Nonperforming loans/assets do not include performing TDRs.

~~(1)~~

Excludes one commercial loan held for sale of $5.6 million at September 30, 2021, June 30, 2021 and March 31, 2021. Excludes residential and commercial loans held for sale of $8.5 million at December 31, 2020. Excludes one commercial loan held for sale of $10.0 million at September 30, 2020. Includes one impaired commercial real estate loan with a balance of $19.9 million at September 30, 2021.

~~(2)~~

~~Excludes a residential loan held for sale of $93,000 at December 31, 2020.~~

~~(3)~~

~~December 31, 2020 includes $1.3 million of residential loans that are classified as delinquent due to an escrow payment shortage due to a recent change in escrow payment requirement.~~

~~(4)~~

~~Nonperforming loans/assets do not include performing TDRs.~~

Commencing on January 1, 2022, the allowance calculation is based on the CECL methodology. Prior to January 1, 2022, the allowance calculation was based on the incurred loss methodology. Provision to rollforward the ACL excludes a credit of $66,000 for the three months ended September 30, 2022, a provision of $803,000 for the three months ended June 30, 2022 and a credit of $114,000 for the three months ended March 31, 2022 related to the off-balance sheet commitments.

The September 30, 2021, December 31, 2021, March 31, 2022, June 30, 2022 and September 30, 2022 allowance coverage ratios include PPP loans of $48.7 million, $13.8 million, $9.6 million, $9.4 million and $1.9 million, respectively, in total loans. PPP loans are fully guaranteed by the SBA and as such do not have an associated reserve for those same periods.

~~(A)~~

The September 30, 2020, December 31, 2020, March 31, 2021, June 30, 2021 and September 30, 2021 ALLL coverage ratios include PPP loans of $202.0 million, $195.6 million, $186.9 million, $83.8 million and $48.7 million, respectively, in total loans.

To Be Well

For Capital

Capitalized Under

For Capital

Adequacy Purposes

Prompt Corrective

Adequacy

Including Capital

Actual

Action Provisions

Purposes

Conservation Buffer (A)

(Dollars in thousands)

Amount

Ratio

Amount

Ratio

Amount

Ratio

Amount

Ratio

As of September 30, 2021:

Total capital
(to risk-weighted assets)

$
651,841

14.26
%

$
457,054

10.00
%

$
365,643

8.00
%

$
479,907

10.50
%

Tier I capital
(to risk-weighted assets)

594,610

13.01

365,643

8.00

274,232

6.00

388,496

8.50

Common equity tier I
(to risk-weighted assets)

594,581

13.01

297,085

6.50

205,674

4.50

319,938

7.00

Tier I capital
(to average assets)

594,610

10.15

292,879

5.00

234,303

4.00

234,303

4.00

As of December 31, 2020:

Total capital
(to risk-weighted assets)

$
600,478

14.81
%

$
405,587

10.00
%

$
324,469

8.00
%

$
425,866

10.50
%

Tier I capital
(to risk-weighted assets)

549,575

13.55

324,469

8.00

243,352

6.00

344,749

8.50

Common equity tier I
(to risk-weighted assets)

549,540

13.55

263,631

6.50

182,514

4.50

283,911

7.00

Tier I capital
(to average assets)

549,575

9.71

283,083

5.00

226,466

4.00

226,466

4.00

(A)

See footnote on following table

~~(A)~~

~~See footnote on following table~~

The Company’s regulatory capital amounts and ratios are presented in the following table:


						To Be Well							For Capital
						Capitalized Under		For Capital					Adequacy Purposes
						Prompt Corrective		Adequacy					Including Capital
	Actual					Action Provisions		Purposes					Conservation Buffer (A)
(Dollars in thousands)	Amount		Ratio			Amount	Ratio	Amount		Ratio			Amount		Ratio
As of September 30, 2022:
Total capital (to risk-weighted assets)	$	733,988		14.74	%	N/A	N/A	$	398,309		8.00	%	$	522,780		10.50	%

Tier I capital (to risk-weighted assets)		540,464		10.86		N/A	N/A		298,731		6.00			423,203		8.50

Common equity tier I (to risk-weighted assets)		540,440		10.86		N/A	N/A		224,049		4.50			348,520		7.00

Tier I capital (to average assets)		540,464		8.70		N/A	N/A		248,580		4.00			248,580		4.00

As of December 31, 2021:
Total capital (to risk-weighted assets)	$	700,790		14.64	%	N/A	N/A	$	382,944		8.00	%	$	502,614		10.50	%

Tier I capital (to risk-weighted assets)		508,231		10.62		N/A	N/A		287,208		6.00			406,878		8.50

Common equity tier I (to risk-weighted assets)		508,207		10.62		N/A	N/A		215,406		4.50			335,076		7.00

Tier I capital (to average assets)		508,231		8.29		N/A	N/A		245,242		4.00			245,242		4.00

To Be Well

For Capital

Capitalized Under

For Capital

Adequacy Purposes

Prompt Corrective

Adequacy

Including Capital

Actual

Action Provisions

Purposes

Conservation Buffer (A)

(Dollars in thousands)

Amount

Ratio

Amount

Ratio

Amount

Ratio

Amount

Ratio

As of September 30, 2021:

Total capital
(to risk-weighted assets)

$
691,044

15.12
%

N/A

N/A

$
365,617

8.00
%

$
479,872

10.50
%

Tier I capital
(to risk-weighted assets)

501,188

10.97

N/A

N/A

274,213

6.00

388,468

8.50

Common equity tier I
(to risk-weighted assets)

501,159

10.97

N/A

N/A

205,660

4.50

319,915

7.00

Tier I capital
(to average assets)

501,188

8.56

N/A

N/A

234,284

4.00

234,284

4.00

As of December 31, 2020:

Total capital
(to risk-weighted assets)

$
716,210

17.67
%

N/A

N/A

$
324,322

8.00
%

$
425,673

10.50
%

Tier I capital
(to risk-weighted assets)

483,535

11.93

N/A

N/A

243,242

6.00

344,592

8.50

Common equity tier I
(to risk-weighted assets)

483,500

11.93

N/A

N/A

182,431

4.50

283,782

7.00

Tier I capital
(to average assets)

483,535

8.53

N/A

N/A

226,624

4.00

226,624

4.00

(A)

~~(A)~~

The Basel Rules require the Company and the Bank to maintain a 2.5% “capital conservation buffer” on top of the minimum risk-weighted asset ratios. The capital conservation buffer is designed to absorb losses during periods of economic stress. Banking institutions with a ratio of (i) CET1 to risk-weighted assets, (ii) Tier 1 capital to risk-weighted assets or (iii) total capital to risk-weighted assets above the respective minimum but below the capital conservation buffer face constraints on dividends, equity repurchases and discretionary bonus payments to executive officers based on the amount of the shortfall.

~~The Company’s regulatory total risk-based capital ratio was benefitted by the $48.7 million (net) subordinated debt issuance that closed in June 2016. At that time,~~ the Company ~~down-streamed approximately $40.0 million of proceeds to~~and the Bank asto maintain a 2.5% “capital conservation buffer” on top of the minimum risk-weighted asset ratios. The capital ~~benefitting~~conservation buffer is designed to absorb losses during periods of economic stress. Banking institutions with a ratio of (i) Common Equity Tier 1 to risk-weighted assets, (ii) Tier 1 capital to risk-weighted assets or (iii) total capital to risk-weighted assets above the ~~Bank’s regulatory~~respective minimum but below the capital ~~ratios.~~

~~On December 12, 2017,~~conservation buffer face constraints on dividends, equity repurchases and discretionary bonus payments to executive officers based on the ~~Company issued $35.0 million in aggregate principal~~ amount of ~~fixed-to-floating subordinated notes due December 15, 2027. The Company down-streamed approximately $29.1 million of those proceeds to~~ the ~~Bank as capital.~~

shortfall.

Actively market C&I loans, which tend to have adjustable-rate features, and which generate customer relationships that can result in higher core deposit accounts;

Actively market equipment finance leases and loans, which tend to have shorter terms and higher interest rates than real estate loans;

Limit residential mortgage portfolio originations to adjustable-rate and/or shorter-term and/or “relationship” loans that result in core deposit and/or wealth management relationships;

Actively market core deposit relationships, which are generally longer duration liabilities;

Utilize medium to longer term certificates of deposit and/or wholesale borrowings to extend liability duration;

Utilize interest rate swaps to extend liability duration;

Utilize a loan level / back-to-back interest rate swap program, which converts a borrower’s fixed rate loan to adjustable rate for the Company;

Closely monitor and actively manage the investment portfolio, including management of duration, prepayment and interest rate risk;

Maintain adequate levels of capital; and

•

~~Actively market equipment finance leases and loans, which tend to have shorter terms and higher interest rates than real estate loans;~~

•

~~Limit residential mortgage portfolio originations to adjustable-rate and/or shorter-term and/or “relationship” loans that result in core deposit and/or wealth management relationships;~~

•

~~Actively market core deposit relationships, which are generally longer duration liabilities;~~

•

~~Utilize medium to longer term certificates of deposit and/or wholesale borrowings to extend liability duration;~~

•

~~Utilize interest rate swaps to extend liability duration;~~

•

~~Utilize a loan level / back-to-back interest rate swap program, which converts a borrower’s fixed rate loan to adjustable rate for the Company;~~

•

~~Closely monitor and actively manage the investment portfolio, including management of duration, prepayment and interest rate risk;~~

•

~~Maintain adequate levels of capital; and~~

•

~~Utilize loan sales.~~

Estimated Increase/

EVPE as a Percentage of

(Dollars in thousands)

Decrease in EVPE

Present Value of Assets (2)

Change In

Interest

Rates

Estimated

EVPE

Increase/(Decrease)

(Basis Points)

EVPE (1)

Amount

Percent

Ratio (3)

(basis points)

+200

$
697,330

$
16,756

2.46
%

11.68
%

75

+100

689,879

9,305

1.37

11.32

39

Flat interest rates

680,574

—

—

10.93

—

-100

635,345

(45,229
)

(6.65
)

10.11

(82
)
(1)

EVPE is the discounted present value of expected cash flows from assets and liabilities.

(2)

Present value of assets represents the discounted present value of incoming cash flows on interest-earning assets.

(3)

EVPE ratio represents EVPE divided by the present value of assets.

~~(1)~~

~~EVPE is the discounted present value of expected cash flows from assets and liabilities.~~

~~(2)~~

~~Present value of assets represents the discounted present value of incoming cash flows on interest-earning assets.~~

~~(3)~~

~~EVPE ratio represents EVPE divided by the present value of assets.~~

Represents shares withheld to satisfy tax withholding obligations upon the exercise of stock options and/or the vesting of restricted stock awards/units.

On January 27, 2022, the Company’s Board of Directors approved a plan to repurchase up to 920,000 shares, which was approximately 5 percent of the outstanding shares as of that date, through March 31, 2023. The timing and amount of shares repurchased will depend on certain factors, including but not limited to, market conditions and prices, the Company’s liquidity and capital requirements and alternative uses of capital.

~~(2)~~

On January 28, 2021, the Company’s Board of Directors approved a plan to repurchases up to 948,735 shares, which was approximately 5 percent of the outstanding shares as of that date, through March 31, 2022.


3	Articles of Incorporation and By-Laws:

	A. Certificate of Incorporation of the Registrant, as amended, incorporated herein by reference to Exhibit 3 of the Registrant’s Quarterly Report on Form 10-Q filed on November 9, 2009 (File No. 001-16197).

	B. By-Laws of the Registrant, incorporated herein by reference to Exhibit 3.2 of the Registrant’s Current Report on Form 8-K filed on December 20, 2017 (File No. 001-16197).

31.1	Certification of Douglas L. Kennedy, Chief Executive Officer of the Corporation, pursuant to Securities Exchange Act Rule 13a-14(a).

31.2	Certification of Jeffrey J. Carfora, Chief Financial Officer of the Corporation, pursuant to Securities Exchange Act Rule 13a-14(a).

32	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed by Douglas L. Kennedy, Chief Executive Officer of the Corporation and Jeffrey J. Carfora, Chief Financial Officer of the Corporation.

101.INS	Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because iXBRL tags are embedded within the Inline XBRL document.

101.SCH	Inline XBRL Taxonomy Extension Schema Document.

101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).


	PEAPACK-GLADSTONE FINANCIAL CORPORATION
	(Registrant)

DATE: November ~~8, 2021~~9, 2022	By:	/s/ Douglas L. Kennedy
		Douglas L. Kennedy
		President and Chief Executive Officer
		(Principal Executive Officer)

DATE: November ~~8, 2021~~9, 2022	By:	/s/ Jeffrey J. Carfora
		Jeffrey J. Carfora
		Senior Executive Vice President and Chief Financial Officer
		(Principal Financial Officer)

DATE: November ~~8, 2021~~9, 2022	By:	/s/ Francesco S. Rossi
		Francesco S. Rossi
		Chief Accounting Officer
		(Principal Accounting Officer)


Item 1	Financial Statements (Unaudited)	3
	Consolidated Statements of Condition at September 30, ~~2021~~2022 and December 31, ~~2020~~2021	3
	Consolidated Statements of Income for the three and nine months ended September 30, ~~2021~~2022 and ~~2020~~2021	4
	Consolidated Statements of Comprehensive Income/(Loss) for the three and nine months ended September 30, ~~2021~~2022 and ~~2020~~2021	5
	Consolidated Statement of Changes in Shareholders’ Equity for the three and nine months ended September 30, ~~2021~~2022 and ~~2020~~2021	65
	Consolidated Statements of Cash Flows for the nine months ended September 30, ~~2021~~2022 and ~~2020~~2021	89
	Notes to Consolidated Financial Statements	910
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4449
Item 3	Quantitative and Qualitative Disclosures About Market Risk	6570
Item 4	Controls and Procedures	6773


Item 1	Legal Proceedings	6873
Item 1A	Risk Factors	6873
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	6874
Item 3	Defaults Upon Senior Securities	6874
Item 4	Mine Safety Disclosures	6874
Item 5	Other Information	6874
Item 6	Exhibits	6975


	(unaudited)			(audited)
	September 30,			December 31,
	2022			2021
ASSETS
Cash and due from banks	$	5,066		$	5,929
Federal funds sold		—			—
Interest-earning deposits		103,214			140,875
Total cash and cash equivalents		108,280			146,804
Securities available for sale		497,880			796,753
Securities held to maturity (fair value $87,857 at September 30, 2022 and $108,460 at December 31, 2021)		103,551			108,680
Equity security, at fair value		12,957			14,685
FHLB and FRB stock, at cost		14,986			12,950
Loans held for sale, at fair value		1,333			3,040
Loans held for sale, at lower of cost or fair value		10,102			34,051
Loans		5,177,194			4,806,721
Less: Allowance for credit losses (1)		59,683			61,697
Net loans		5,117,511			4,745,024
Premises and equipment		23,781			23,044
Other real estate owned		116			—
Accrued interest receivable		17,816			21,589
Bank owned life insurance		47,072			46,663
Goodwill		36,212			36,212
Other intangible assets		11,486			12,690
Finance lease right-of-use assets		3,021			3,582
Operating lease right-of-use assets		13,404			9,775
Other assets		67,753			62,451
TOTAL ASSETS	$	6,087,261		$	6,077,993
LIABILITIES
Deposits:
Noninterest-bearing demand deposits	$	1,317,954		$	956,482
Interest-bearing deposits:
Checking		2,149,629			2,287,894
Savings		166,821			154,914
Money market accounts		1,178,112			1,307,051
Certificates of deposit - retail		345,047			409,608
Certificates of deposit - listing service		30,647			31,382
Subtotal deposits		5,188,210			5,147,331
Interest-bearing demand - brokered		85,000			85,000
Certificates of deposit - brokered		25,974			33,818
Total deposits		5,299,184			5,266,149
Short-term borrowings		32,369			—
Finance lease liabilities		5,003			5,820
Operating lease liabilities		14,101			10,111
Subordinated debt, net		132,916			132,701
Deferred tax liabilities, net		14,490			39,322
Accrued expenses and other liabilities		73,684			77,502
TOTAL LIABILITIES		5,571,747			5,531,605
SHAREHOLDERS’ EQUITY
Preferred stock (no par value; authorized 500,000 shares; liquidation preference of $1,000 per share)		—			—
Common stock (no par value; stated value $0.83 per share; authorized 42,000,000 shares; issued shares, 20,973,770 at September 30, 2022 and 20,656,810 at December 31, 2021; outstanding shares, 17,920,571 at September 30, 2022 and 18,393,888 at December 31, 2021)		17,484			17,220
Surplus		336,534			332,358
Treasury stock at cost, 3,053,199 shares at September 30, 2022 and 2,262,922 shares at December 31, 2021		(92,637	)		(65,104	)
Retained earnings		329,116			274,288
Accumulated other comprehensive loss, net of income tax		(74,983	)		(12,374	)
TOTAL SHAREHOLDERS’ EQUITY		515,514			546,388
TOTAL LIABILITIES & SHAREHOLDERS’ EQUITY	$	6,087,261		$	6,077,993


Balance at September 30, 2022 17,920,571 common shares outstanding	$	—	$	17,484	$	336,534		$	(92,637	)	$	329,116		$	(74,983	)	$	515,514

														Accumulated
														Other			Total
(In thousands, except share and	Preferred		Common					Treasury			Retained			Comprehensive			Shareholders'
per share data)	Stock		Stock		Surplus			Stock			Earnings			Loss			Equity
Balance at July 1, 2021 18,829,877 common shares outstanding	$	—	$	17,164	$	328,035		$	(48,461	)	$	247,136		$	(5,415	)	$	538,459
Net income		—		—		—			—			14,171			—			14,171
Comprehensive loss		—		—		—			—			—			(3,620	)		(3,620	)
Amortization of restricted stock units		—		—		1,807			—			—			—			1,807
Cash dividends declared on common stock ($0.05 per share)		—		—		—			—			(942	)		—			(942	)
Share repurchase, (227,060) shares		—		—		—			(7,432	)		—			—			(7,432	)
Common stock options exercised, 400 shares		—		1		5			—			—			—			6
Exercise of warrants, 10,000 net of 6,416 shares used to exercise, 3,584 shares		—		2		(2	)		—			—			—			—
Issuance of shares for Employee Stock Purchase Plan, 6,889 shares		—		6		226			—			—			—			232
Issuance of common stock for acquisition 14,220 shares		—		12		321			—			—			—			333
Balance at September 30, 2021 18,627,910 common shares outstanding	$	—	$	17,185	$	330,392		$	(55,893	)	$	260,365		$	(9,035	)	$	543,014


	Nine Months Ended September 30,
	2022			2021
OPERATING ACTIVITIES:
Net income	$	53,667		$	41,767
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		2,554			2,367
Amortization of premium and accretion of discount on securities, net		2,331			4,502
Amortization of restricted stock		6,300			5,229
Amortization of intangible assets		1,204			1,167
Amortization of subordinated debt costs		215			931
Provision for credit losses (1)		4,423			2,725
Swap valuation allowance		673			—
Deferred tax benefit		(5,907	)		(3,247	)
Stock-based compensation and employee stock purchase plan expense		114			93
Fair value adjustment for equity security		1,728			293
Loss on securities available for sale		6,609			—
Loans originated for sale (2)		(58,409	)		(131,427	)
Proceeds from sales of loans held for sale (2)		85,663			142,141
Gain on loans held for sale (2)		(6,599	)		(5,792	)
Gain on loans held for sale at lower of cost or fair value		—			(1,407	)
Gain on OREO sold		—			(51	)
Gain on life insurance death benefit		—			(455	)
Increase in cash surrender value of life insurance, net		(409	)		(465	)
Decrease/(increase) in accrued interest receivable		3,773			(295	)
Decrease in other assets		3,952			2,998
Increase in accrued expenses and other liabilities		3,709			7,390
NET CASH PROVIDED BY OPERATING ACTIVITIES		105,591			68,464
INVESTING ACTIVITIES:
Principal repayments, maturities and calls of securities available for sale		305,337			338,596
Principal repayments, maturities and calls of securities held to maturity		5,046			807
Redemptions of FHLB and FRB stock		26,567			—
Proceeds from sales of securities available for sale		118,972			—
Purchase of securities available for sale		(229,941	)		(578,336	)
Purchase of FHLB and FRB stock		(28,603	)		(48	)
Proceeds from sales of loans held for sale at lower of cost or fair value		—			54,123
Net increase in loans, net of participations sold		(372,026	)		(253,638	)
Proceeds from sales of other real estate		—			101
Purchase of premises and equipment		(2,730	)		(3,371	)
Purchase of wealth management company		—			(5,500	)
Proceeds from life insurance death benefit		—			1,219
NET CASH USED IN INVESTING ACTIVITIES		(177,378	)		(446,047	)
FINANCING ACTIVITIES:
Net increase in deposits		33,035			557,857
Net increase in short-term borrowings		32,369			—
Repayments of Paycheck Protection Program Liquidity Facility		—			(128,590	)
Repayments of FHLB advances		—			(15,000	)
Dividends paid on common stock		(2,748	)		(2,843	)
Exercise of stock options, net of stock swaps		126			40
Restricted stock repurchased on vesting to pay taxes		(2,701	)		(2,231	)
Repayments of subordinated debt		—			(50,000	)
Issuance of shares for employee stock purchase plan		715			656
Shares repurchased		(27,533	)		(19,416	)
NET CASH PROVIDED BY FINANCING ACTIVITIES		33,263			340,473
Net decrease in cash and cash equivalents		(38,524	)		(37,110	)
Cash and cash equivalents at beginning of period		146,804			653,322
Cash and cash equivalents at end of period	$	108,280		$	616,212
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest	$	17,155		$	16,128
Income tax, net		16,311			13,448
Transfer of loans to loans held for sale		—			45,776
Transfer of loans to other real estate owned		116			—

(In thousands)
2021	$	135,488
2022		273,758
2023		16,775
2024		30,259
2025		28,686
Over 5 Years		7,201
Total	$	492,167

	Three Months Ended September 30, 2020
			Peapack
(In thousands)	Banking		Private		Total
Net interest income	$	30,557	$	1,592	$	32,149
Noninterest income		9,451		10,760		20,211
Total income		40,008		12,352		52,360

Provision for loan and lease losses		5,150		0		5,150
Compensation and employee benefits		13,258		5,944		19,202
Premises and equipment expense		3,527		582		4,109
FDIC insurance expense		605		0		605
Other operating expense		2,231		2,314		4,545
Total operating expense		24,771		8,840		33,611
Income before income tax expense		15,237		3,512		18,749
Income tax expense		4,254		948		5,202
Net income	$	10,983	$	2,564	$	13,547

	Nine Months Ended September 30, 2020
			Peapack
(In thousands)	Banking		Private		Total
Net interest income	$	91,419	$	4,448	$	95,867
Noninterest income		16,036		31,318		47,354
Total income		107,455		35,766		143,221

Provision for loan and lease losses		30,050		0		30,050
Compensation and employee benefits		40,239		17,375		57,614
Premises and equipment expense		10,435		1,753		12,188
FDIC insurance expense		1,310		0		1,310
Other operating expense		7,889		6,709		14,598
Total operating expense		89,923		25,837		115,760
Income before income tax (benefit)/expense		17,532		9,929		27,461
Income tax (benefit)/expense		1,618		2,681		4,299
Net income	$	15,914	$	7,248	$	23,162

Total assets at period end	$	5,878,481	$	79,626	$	5,958,107

(Dollars in thousands)	September 30, 2021			December 31, 2020
Notional amount	$	230,000		$	270,000
Weighted average pay rate		1.99	%		1.93	%
Weighted average receive rate		0.21	%		0.22	%
Weighted average maturity	1.29 years			2.02 years
Unrealized loss, net	$	(5,267	)	$	(9,616	)

Number of contracts		11			13


	For the Three Months Ended September 30,						Change
(Dollars in thousands, except per share data)	2022			2021			2022 vs 2021
Results of Operations:
Net interest income	$	45,525		$	35,211		$	10,314
Provision for credit losses (1)		599			1,600			(1,001	)
Net interest income after provision for credit losses		44,926			33,611			11,315
Wealth management fee income		12,943			13,860			(917	)
Other income (2)		3,440			3,921			(481	)
Operating expense (3)		33,560			32,185			1,375
Income before income tax expense		27,749			19,207			8,542
Income tax expense		7,623			5,036			2,587
Net income	$	20,126		$	14,171		$	5,955

Total revenue (4)	$	61,908		$	52,992		$	8,916

Diluted average shares outstanding		18,420,661			19,273,831			(853,170	)

Diluted earnings per share	$	1.09		$	0.74		$	0.35

Return on average assets annualized ("ROAA")		1.30	%		0.95	%		0.35	%
Return on average equity annualized ("ROAE")		15.21			10.40			4.81


	For the Three Months Ended
	September 30,		September 30,
(In thousands)	2022		2021
Residential mortgage loans originated for portfolio	$	17,885	$	36,845
Residential mortgage loans originated for sale		4,898		24,041
Total residential mortgage loans		22,783		60,886

Commercial real estate loans		7,320		14,944
Multifamily		4,000		120,716
C&I loans (A) (B)		251,249		143,121
Small business administration		5,682		11,570
Wealth lines of credit (A)		4,450		10,020
Total commercial loans		272,701		300,371

Installment loans		1,253		178
Home equity lines of credit (A)		5,614		2,535
Total loans closed	$	302,351	$	363,970

	September 30, 2021									September 30, 2020
	Average			Income/			Annualized			Average			Income/			Annualized
(Dollars in thousands)	Balance			Expense			Yield			Balance			Expense			Yield
ASSETS:
Interest-earning assets:
Investments:
Taxable (1)	$	820,574		$	2,824			1.38	%	$	553,607		$	2,182			1.58	%
Tax-exempt (1) (2)		6,035			64			4.24			9,127			116			5.08
Loans (2) (3):
Residential mortgages		503,621			3,779			3.00			529,500			4,437			3.35
Commercial mortgages		2,133,259			16,114			3.02			1,929,319			15,115			3.13
Commercial		1,826,368			16,553			3.63			2,134,399			17,653			3.31
Commercial construction		24,596			198			3.22			4,395			55			5.01
Installment		32,219			245			3.04			52,659			377			2.86
Home equity		43,182			357			3.31			53,373			444			3.33
Other		252			5			7.94			283			7			9.89
Total loans		4,563,497			37,251			3.27			4,703,928			38,088			3.24
Federal funds sold		—			—			—			102			—			0.25
Interest-earning deposits		413,623			142			0.14			652,832			159			0.10
Total interest-earning assets		5,803,729			40,281			2.78	%		5,919,596			40,545			2.74	%
Noninterest-earning assets:
Cash and due from banks		8,592									7,479
Allowance for loan and lease losses		(64,100	)								(68,110	)
Premises and equipment		23,311									21,511
Other assets		201,287									242,017
Total noninterest-earning assets		169,090									202,897
Total assets	$	5,972,819								$	6,122,493
LIABILITIES:
Interest-bearing deposits:
Checking	$	2,098,827		$	1,177			0.22	%	$	1,828,780		$	1,130			0.25	%
Money markets		1,257,760			683			0.22			1,235,040			920			0.30
Savings		152,759			20			0.05			125,016			16			0.05
Certificates of deposit - retail		461,917			836			0.72			642,732			2,529			1.57
Subtotal interest-bearing deposits		3,971,263			2,716			0.27			3,831,568			4,595			0.48
Interest-bearing demand - brokered		85,000			385			1.81			130,000			636			1.96
Certificates of deposit - brokered		33,796			266			3.15			33,742			267			3.17
Total interest-bearing deposits		4,090,059			3,367			0.33			3,995,310			5,498			0.55
FHLB advances and borrowings		64,332			57			0.35			475,465			1,221			1.03
Finance lease liabilities		6,147			74			4.82			7,054			84			4.76
Subordinated debt		132,588			1,358			4.10			83,552			1,222			5.85
Total interest-bearing liabilities		4,293,126			4,856			0.45	%		4,561,381			8,025			0.70	%
Noninterest-bearing liabilities:
Demand deposits		997,450									872,560
Accrued expenses and other liabilities		137,387									173,816
Total noninterest-bearing liabilities		1,134,837									1,046,376
Shareholders’ equity		544,856									514,736
Total liabilities and shareholders’ equity	$	5,972,819								$	6,122,493
Net interest income (tax-equivalent basis)				$	35,425								$	32,520
Net interest spread								2.33	%								2.04	%
Net interest margin (4)								2.42	%								2.20	%
Tax equivalent adjustment				$	(214	)							$	(371	)
Net interest income				$	35,211								$	32,149


	For the Three Months Ended September 30, 2022
	Difference due to						Change In
	Change In:						Income/
(In Thousands):	Volume			Rate			Expense
ASSETS:
Investments	$	(176	)	$	171		$	(5	)
Loans		4,854			9,239			14,093
Interest-earning deposits		(91	)		1,111			1,020
Total interest income	$	4,587		$	10,521		$	15,108
LIABILITIES:
Interest-bearing checking	$	271		$	3,679		$	3,950
Money market		86			788			874
Savings		—			(15	)		(15	)
Certificates of deposit - retail		(130	)		85			(45	)
Certificates of deposit - brokered		(63	)		7			(56	)
Interest bearing demand brokered		(2	)		(38	)		(40	)
Borrowed funds		(465	)		437			(28	)
Capital lease obligation		(13	)		—			(13	)
Subordinated debt		5			—			5
Total interest expense	$	(311	)	$	4,943		$	4,632
Net interest income	$	4,898		$	5,578		$	10,476


					September 30, 2022				December 31, 2021
							Estimated				Estimated
	September 30,		December 31,		Amortized		Fair		Amortized		Fair
(In thousands)	2021		2020		Cost		Value		Cost		Value
U.S. treasuries	$	—	$	2,613
Investment securities - available for sale:
U.S. government-sponsored agencies		274,433		83,771	$	244,770	$	189,410	$	280,045	$	272,221
Mortgage-backed securities-residential (principally U.S. government-sponsored entities)		515,131		476,058		315,541		267,547		481,062		476,974
SBA pool securities		42,930		49,129		33,538		29,121		40,649		39,561
State and political subdivisions		5,750		8,089		2,613		2,584		5,431		5,476
Corporate bond		5,535		3,029		10,000		9,218		2,500		2,521
Total investment securities - available for sale					$	606,462	$	497,880	$	809,687	$	796,753
Investment securities - held to maturity:
U.S. government-sponsored agencies						40,000		35,131		40,000		39,982
Mortgage-backed securities-residential (principally U.S. government-sponsored entities)						63,551		52,726		68,680		68,478
Total investment securities - held to maturity					$	103,551	$	87,857	$	108,680	$	108,460
Total	$	843,779	$	622,689	$	710,013	$	585,737	$	918,367	$	905,213


				After 1			After 5
				But			But			After
	Within			Within			Within			10
(Dollars in thousands)	1 Year			5 Years			10 Years			Years			Total
Investment securities - available for sale:
U.S. government-sponsored agencies	$	—		$	—		$	111,935		$	77,475		$	189,410
		—			—			1.39	%		1.79	%		1.56	%
Mortgage-backed securities-residential (1)		24,986			8,937			15,126			218,498			267,547
		3.37	%		2.85	%		1.90	%		1.99	%		2.12	%
SBA pool securities		—			—			11,686			17,435			29,121
		—			—			1.75	%		1.32	%		1.49	%
State and political subdivisions (2)		1,945			639			—			—			2,584
		2.17	%		1.90	%		—			—			2.10	%
Corporate bond		—			—			9,218			—			9,218
		—			—			4.81	%		—			4.81	%
Total investments - available for sale	$	26,931		$	9,576		$	147,965		$	313,408		$	497,880
		3.28	%		2.79	%		1.65	%		1.90	%		1.90	%
Investment securities - held to maturity:
U.S. government-sponsored agencies		—			15,000			25,000			—			40,000
		—			1.35	%		1.64	%		—			1.53	%
Mortgage-backed securities-residential (1)		—			—			—			63,551			63,551
		—			—			—			1.77	%		1.77	%
Total investments - held to maturity	$	—		$	15,000		$	25,000		$	63,551			103,551
		—			1.35	%		1.64	%		1.77	%		1.68	%
Total	$	26,931		$	24,576		$	172,965		$	376,959		$	601,431
		3.28	%		1.91	%		1.65	%		1.88	%		1.86	%


	As of
	September 30,			June 30,			March 31,			December 31,			September 30,
(Dollars in thousands)	2022			2022			2022			2021			2021
Loans past due 90 days or more and still accruing	$	—		$	—		$	—		$	—		$	—
Nonaccrual loans		15,724			15,078			15,884			15,573			25,925
Other real estate owned		116			116			—			—			—
Total nonperforming assets	$	15,840		$	15,194		$	15,884		$	15,573		$	25,925

Performing TDRs (1)(2)	$	2,761		$	2,272		$	2,375		$	2,479		$	416

Loans past due 30 through 89 days and still accruing (3)	$	7,248		$	3,126		$	606		$	8,606		$	1,193

Loans subject to special mention	$	82,107		$	98,787		$	110,252		$	116,490		$	115,935

Classified loans	$	27,507		$	27,167		$	47,386		$	50,702		$	51,937

Individually evaluated loans	$	13,047		$	13,227		$	16,147		$	18,052		$	26,341

Nonperforming loans as a % of total loans (4)		0.30	%		0.29	%		0.31	%		0.32	%		0.56	%
Nonperforming assets as a % of total assets (4)		0.26	%		0.25	%		0.25	%		0.26	%		0.42	%
Nonperforming assets as a % of total loans plus other real estate owned (4)		0.31	%		0.29	%		0.31	%		0.32	%		0.57	%


	Estimated Increase/								EVPE as a Percentage of
(Dollars in thousands)	Decrease in EVPE								Present Value of Assets (2)
Change In
Interest
Rates	Estimated								EVPE			Increase/(Decrease)
(Basis Points)	EVPE (1)		Amount			Percent			Ratio (3)			(basis points)
+200	$	779,622	$	(37,658	)		(4.61	)%		13.98	%		1
+100		797,519		(19,761	)		(2.42	)		13.97			—
Flat interest rates		817,280		—			—			13.97			—
-100		872,091		54,811			6.71			14.46			49


	Total Number of Shares Purchased As Part of Publicly Announced Plans or Programs		Total Number of Shares Withheld (1)		Average Price Paid Per Share		Maximum Number of Shares That May Yet Be Purchased Under the Plans Or Programs (2)
July 1, 2022 -
July 31, 2022		—		—	$	—		749,042
August 1, 2022 -
August 31, 2022		222,673		—		34.18		526,369
September 1, 2022 -
September 30, 2022		67,726		—		33.96		458,643
Total		290,399		—	$	34.13