# Hanmi Financial Corp: Form 10-Q for the period ended Sep 30, 2024

- Company: [Hanmi Financial Corp](/companies/hafc.md) (CIK 1109242)
- Form: 10-Q
- Filed: 2024-11-04
- Accepted by EDGAR: Nov 4, 2024, 17:00 ET
- Period: 2024-09-30
- Accession: 0000950170-24-120861
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1109242/000095017024120861/hafc-20240930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1109242/000095017024120861/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Income tax | 3 months, 2024-07-01 to 2024-09-30 | $6.2m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2024-01-01 to 2024-09-30 | $18.8m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-07-01 to 2024-09-30 | $14.9m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2024-01-01 to 2024-09-30 | $44.5m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-07-01 to 2024-09-30 | $0.49 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2024-01-01 to 2024-09-30 | $1.47 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-07-01 to 2024-09-30 | $0.49 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2024-01-01 to 2024-09-30 | $1.47 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-07-01 to 2024-09-30 | 30,033,679 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2024-01-01 to 2024-09-30 | 30,117,269 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2024-01-01 to 2024-09-30 | $37.6m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2024-01-01 to 2024-09-30 | $1.8m | us-gaap:PaymentsToAcquireProductiveAssets |
| Dividends paid | 9 months, 2024-01-01 to 2024-09-30 | $22.8m | us-gaap:PaymentsOfDividends |
| Share repurchases | 9 months, 2024-01-01 to 2024-09-30 | $5.8m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Total assets | at 2024-09-30 | $7.71bn | us-gaap:Assets |
| Total liabilities | at 2024-09-30 | $6.98bn | us-gaap:Liabilities |
| Shareholders' equity | at 2024-09-30 | $736.7m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 76,621 characters.

The following is management’s discussion and analysis of our results of operations and financial condition as of and for the three and nine months ended September 30, 2024. This analysis should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Annual Report on Form 10-K”) and with the unaudited consolidated financial statements and notes thereto set forth in this Quarterly Report on Form 10-Q for the period ended September 30, 2024 (this “Report”).

### Forward-Looking Statements

Some of the statements contained in this Report are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements in this Report other than statements of historical fact are “forward–looking statements” for purposes of federal and state securities laws, including, but not limited to, statements about anticipated future operating and financial performance, financial condition and liquidity, business strategies, regulatory and competitive outlook, investment and expenditure plans, capital and financing needs and availability, plans and objectives of management for future operations, developments regarding our capital and strategic plans and other similar forecasts and statements of expectation and statements of assumptions underlying any of the foregoing. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “expects,” “plans,” “intends,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” or “continue,” or the negative of such terms and other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.

Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, financial condition, levels of activity, performance or achievements to differ from those expressed or implied by the forward-looking statements. These factors include the following:

- a failure to maintain adequate levels of capital and liquidity to support our operations;
- general economic and business conditions internationally, nationally and in those areas in which we operate;
- volatility and deterioration in the credit and equity markets;
- changes in consumer spending, borrowing and savings habits;
- availability of capital from private and government sources;
- demographic changes;
- competition for loans and deposits and failure to attract or retain loans and deposits;
- inflation and fluctuations in interest rates that reduce our margins and yields, the fair value of financial instruments, the level of loan originations or prepayments on loans we have made and make, the level of loan sales and the cost we pay to retain and attract deposits and secure other types of funding;
- our ability to enter new markets successfully and capitalize on growth opportunities;
- the current or anticipated impact of military conflict, terrorism or other geopolitical events;
- the effect of potential future supervisory action against us or Hanmi Bank and our ability to address any issues raised in our regulatory exams;
- risks of natural disasters;
- legal proceedings and litigation brought against us;
- a failure in or breach of our operational or security systems or infrastructure, including cyberattacks;
- the failure to maintain current technologies;
- risks associated with Small Business Administration loans;
- failure to attract or retain key employees;
- our ability to access cost-effective funding;
- changes in liquidity, including the size and composition of our deposit portfolio and the percentage of uninsured deposits in the portfolio;
- fluctuations in real estate values;
- changes in accounting policies and practices;
- changes in governmental regulation, including, but not limited to, any increase in FDIC insurance premiums and changes in the monetary policies of the U.S. Treasury and the Board of Governors of the Federal Reserve System;
- the ability of Hanmi Bank to make distributions to Hanmi Financial Corporation, which is restricted by certain factors, including Hanmi Bank’s retained earnings, net income, prior distributions made, and certain other financial considerations;
- strategic transactions we may enter into;
- the adequacy of and changes in the methodology for computing our allowance for credit losses;
- our credit quality and the effect of credit quality on our credit losses expense and allowance for credit losses;
- changes in the financial performance and/or condition of our borrowers and the ability of our borrowers to perform under the terms of their loans and other terms of credit agreements;
- our ability to control expenses; and
- cyber security and fraud risks against our information technology and those of our third-party providers and vendors.

For additional information concerning risks we face, see “Part II, Item 1A. Risk Factors” in this Report and “Item 1A. Risk Factors” in Part I of the 2023 Annual Report on Form 10-K. We undertake no obligation to update these forward-looking statements to reflect events or circumstances that occur after the date on which such statements were made, except as required by law.

### Critical Accounting Policies

We have established various accounting policies that govern the application of GAAP in the preparation of our financial statements. Our significant accounting policies are described in the Notes to the consolidated financial statements in our 2023 Annual Report on Form 10-K. We had no significant changes in our accounting policies since the filing of our 2023 Annual Report on Form 10-K.

Certain accounting policies require us to make significant estimates and assumptions that have a material impact on the carrying value of certain assets and liabilities, and we consider these critical accounting policies. For a description of these critical accounting policies, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies” in our 2023 Annual Report on Form 10-K. Actual results could differ significantly from these estimates and assumptions, which could have a material impact on the carrying value of assets and liabilities at the balance sheet dates and our results of operations for the reporting periods. Management has discussed the development and selection of these critical accounting policies with the Audit Committee of the Company’s Board of Directors.

### Executive Overview

Financial results include the following:

*(dollars in thousands, except per share data)*

|  | As of or for the Three Months Ended September 30, 2024 | 2023 | Nine Months Ended September 30, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| Net income | $14,892 | $18,796 | $44,506 | $61,408 |
| Earnings per diluted share | $0.49 | $0.62 | $1.47 | $2.01 |
| Dividends per share | $0.25 | $0.25 | $0.75 | $0.75 |
| Return on average assets | 0.79% | 1.00% | 0.79% | 1.11% |
| Return on average stockholders’ equity | 7.55% | 9.88% | 7.65% | 11.05% |

Net income was $14.9 million, or $0.49 per diluted share, for the three months ended September 30, 2024 compared to $18.8 million, or $0.62 per diluted share, for the same period a year ago. The decrease in net income was driven by a $4.8 million decrease in net interest income, a $2.8 million decrease in noninterest income, and a $0.9 million increase in noninterest expense, offset by decreases in credit loss expense of $2.9 million and income tax expense of $1.7 million. Credit loss expense for the third quarter of 2024 was $2.3 million compared to a $5.2 million expense for the third quarter of 2023, and consisted of provision for loan losses for both periods.

For the nine months ended September 30, 2024, net income was $44.5 million, or $1.47 per diluted share, compared to $61.4 million, or $2.01 per diluted share, for the same period a year ago. The decrease in net income was primarily driven by a decrease in net interest income of $18.8 million, a $3.3 million decrease in noninterest income, and a $5.5 million increase in noninterest expense, offset by decreases in credit loss expense of $3.7 million and income tax expense of $6.9 million. Credit loss expense for the nine months of 2024 was $3.5 million compared to a $7.2 million for the same period a year ago. Credit loss expense for the nine months of 2024 consisted of a $4.0 million provision for loan losses, offset by a $0.5 million recovery for off-balance sheet items. Credit loss expense for the first nine months of 2023 included a $7.9 million provision for loan losses, offset by a $0.7 million recovery for off-balance sheet items.

Other financial highlights include the following:

*(in thousands)*

|  | September 30, 2024 | December 31, 2023 |
| --- | ---: | ---: |
| Loans receivable | $6,257,744 | $6,182,434 |
| Securities available for sale, at fair value | 908,921 | 865,739 |
| Total assets | 7,712,299 | 7,570,341 |
| Deposits | 6,403,221 | 6,280,574 |
| Borrowings | 300,000 | 325,000 |
| Total stockholders’ equity | 736,709 | 701,891 |

### Results of Operations

### Net Interest Income

Our primary source of revenue is net interest income, which is the difference between interest derived from earning assets, and interest paid on liabilities obtained to fund those assets. Our net interest income is affected by changes in the level and mix of interest-earning assets and interest-bearing liabilities, referred to as volume changes. Net interest income is also affected by changes in the yields earned on assets and rates paid on liabilities, referred to as rate changes. Interest rates charged on loans receivable are affected principally by changes to market interest rates, the demand for loans receivable, the supply of money available for lending purposes, and other competitive factors. Those factors are, in turn, affected by general economic conditions and other factors beyond our control, such as federal economic policies, the general supply of money in the economy, legislative tax policies, governmental budgetary matters, and the actions of the Federal Reserve.

The following table shows the average balance of assets, liabilities and stockholders’ equity; the amount of interest income, and interest expense; the average yield or rate for each category of interest-earning assets and interest-bearing liabilities; and the net interest spread and the net interest margin on a taxable-equivalent basis for the periods indicated. All average balances are daily average balances.

*(dollars in thousands)*

| Assets Interest-earning assets: | Three Months Ended September 30, 2024 Average Balance | Interest Income / Expense | Average Yield / Rate | September 30, 2023 Average Balance | Interest Income / Expense | Average Yield / Rate |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Loans receivable (1) | $6,112,324 | $92,182 | 6.00% | $5,915,423 | $85,398 | 5.73% |
| Securities (2) | 986,041 | 5,523 | 2.27% | 955,473 | 4,204 | 1.79% |
| FHLB stock | 16,385 | 356 | 8.65% | 16,385 | 317 | 7.67% |
| Interest-bearing deposits in other banks | 183,027 | 2,356 | 5.12% | 317,498 | 4,153 | 5.19% |
| Total interest-earning assets | 7,297,777 | 100,417 | 5.48% | 7,204,779 | 94,072 | 5.19% |
| Noninterest-earning assets: |  |  |  |  |  |  |
| Cash and due from banks | 54,843 |  |  | 59,994 |  |  |
| Allowance for credit losses | (67,906) |  |  | (70,173) |  |  |
| Other assets | 251,421 |  |  | 240,145 |  |  |
| **Total assets** | **$7,536,135** |  |  | **$7,434,745** |  |  |
| **Liabilities and Stockholders’ Equity** |  |  |  |  |  |  |
| Interest-bearing liabilities: |  |  |  |  |  |  |
| Deposits: |  |  |  |  |  |  |
| Demand: interest-bearing | $83,647 | $31 | 0.15% | $94,703 | $32 | 0.13% |
| Money market and savings | 1,885,799 | 17,863 | 3.77% | 1,601,826 | 12,485 | 3.09% |
| Time deposits | 2,427,737 | 29,259 | 4.79% | 2,438,112 | 24,301 | 3.95% |
| Total interest-bearing deposits | 4,397,183 | 47,153 | 4.27% | 4,134,641 | 36,818 | 3.53% |
| Borrowings | 143,479 | 1,561 | 4.33% | 120,381 | 753 | 2.48% |
| Subordinated debentures | 130,403 | 1,652 | 5.07% | 129,780 | 1,646 | 5.07% |
| Total interest-bearing liabilities | 4,671,065 | 50,366 | 4.29% | 4,384,802 | 39,217 | 3.55% |
| Noninterest-bearing liabilities and equity: |  |  |  |  |  |  |
| Demand deposits: noninterest-bearing | 1,908,833 |  |  | 2,136,156 |  |  |
| Other liabilities | 171,987 |  |  | 159,127 |  |  |
| Stockholders’ equity | 784,250 |  |  | 754,660 |  |  |
| **Total liabilities and stockholders’ equity** | **$7,536,135** |  |  | **$7,434,745** |  |  |
| **Net interest income** |  | **$50,051** |  |  | **$54,855** |  |
| **Cost of deposits (3)** |  |  | **2.97%** |  |  | **2.33%** |
| Net interest spread (taxable equivalent basis) (4) |  |  | **1.19%** |  |  | **1.64%** |
| Net interest margin (taxable equivalent basis) (5) |  |  | **2.74%** |  |  | **3.03%** |

*(1) Loans receivable include loans held for sale and exclude the allowance for credit losses. Nonaccrual loans receivable are included in the average loans receivable balance.*

*(2) Securities average yield is calculated on a fully taxable equivalent basis using the current statutory federal tax rate of 21%.*

*(3) Represents interest expense on deposits as a percentage of all interest-bearing and noninterest-bearing deposits.*

*(4) Represents the average yield earned on interest-earning assets less the average rate paid on interest-bearing liabilities.*

*(5) Represents net interest income as a percentage of average interest-earning assets.*

The table below shows changes in interest income and interest expense and the amounts attributable to variations in interest rates and volumes for the periods indicated. The variances attributable to simultaneous volume and rate changes have been allocated to the change due to volume and the change due to rate categories in proportion to the relationship of the absolute dollar amount attributable solely to the change in volume and to the change in rate.

*(in thousands)*

| Interest and dividend income: | Three Months Ended September 30, 2024 vs September 30, 2023 Increases (Decreases) Due to Change In Volume | Rate | Total |
| --- | ---: | ---: | ---: |
| Loans receivable (1) | $2,601 | $4,183 | $6,784 |
| Securities (2) | 134 | 1,185 | 1,319 |
| FHLB stock | (2) | 41 | 39 |
| Interest-bearing deposits in other banks | (1,764) | (33) | (1,797) |
| **Total interest and dividend income** | **969** | **5,376** | **6,345** |
| Interest expense: |  |  |  |
| Demand: interest-bearing | $(4) | $3 | $(1) |
| Money market and savings | 2,302 | 3,076 | 5,378 |
| Time deposits | (170) | 5,128 | 4,958 |
| Borrowings | 142 | 666 | 808 |
| Subordinated debentures | 8 | (2) | 6 |
| **Total interest expense** | **2,278** | **8,871** | **11,149** |
| **Change in net interest income** | **$(1,309)** | **$(3,495)** | **$(4,804)** |

*(1) Loans receivable include loans held for sale and exclude the allowance for credit losses. Nonaccrual loans receivable are included in the average loans receivable balance.*

*(2) Securities average yield is calculated on a fully taxable equivalent basis using the current statutory federal tax rate of 21%.*

For the three months ended September 30, 2024 and 2023, net interest income was $50.1 million and $54.9 million, respectively. The net interest spread and net interest margin, on a taxable equivalent basis, for the quarter ended September 30, 2024, were 1.19% and 2.74%, respectively, compared to 1.64% and 3.03%, respectively, for the same period in 2023. Interest and dividend income increased $6.3 million, or 6.7%, to $100.4 million for the three months ended September 30, 2024 from $94.1 million for the same period in 2023, primarily due to higher average interest-earning asset yields, and an increase in the average balance of loans and securities. Interest expense increased $11.1 million, or 28.4%, to $50.4 million for the three months ended September 30, 2024 from $39.2 million for the same period in 2023 primarily due to increases in deposit rates and average deposit balances and, to a lesser extent, an increase in the cost of borrowings.

The average balance of interest earning assets increased $93.0 million, or 1.3%, to $7.30 billion for the three months ended September 30, 2024, from $7.20 billion for the three months ended September 30, 2023. The average balance of loans increased $196.9 million, or 3.3%, to $6.11 billion for the three months ended September 30, 2024, from $5.92 billion for the three months ended September 30, 2023. The average balance of securities increased $30.6 million, or 3.2%, to $986.0 million for the three months ended September 30, 2024, from $955.5 million for the three months ended September 30, 2023. The average balance of interest-bearing deposits at other banks decreased $134.5 million, or 42.4%, to $183.0 million for the three months ended September 30, 2024, from $317.5 million for the three months ended September 30, 2023.

The average yield on interest-earning assets, on a taxable equivalent basis, increased 29 basis points to 5.48% for the three months ended September 30, 2024, from 5.19% for the three months ended September 30, 2023. The average yield on loans increased to 6.00% for the three months ended September 30, 2024, from 5.73% for the three months ended September 30, 2023. The average yield on securities, on a taxable equivalent basis, increased to 2.27% for the three months ended September 30, 2024, from 1.79% for the three months ended September 30, 2023.

The average balance of interest-bearing liabilities increased $286.3 million, or 6.5%, to $4.67 billion for the three months ended September 30, 2024 compared with $4.38 billion for the three months ended September 30, 2023. The average balances of money market and savings accounts and borrowings increased by $284.0 million and $23.1 million, respectively, offset partially by decreases in interest-bearing demand deposits and time deposits of $11.1 million and $10.4 million, respectively.

The average cost of interest-bearing liabilities was 4.29% and 3.55% for the three months ended September 30, 2024 and 2023, respectively. The average cost of interest-bearing deposits increased 74 basis points to 4.27% for the three months ended September 30, 2024, compared with 3.53% for the three months ended September 30, 2023. The average cost of time deposits increased 84 basis points to 4.79% for the three months ended September 30, 2024 compared with 3.95% for the three months ended September 30, 2023. The average cost of money market and savings accounts increased 68 basis points to 3.77% for the three months ended September 30, 2023 compared with 3.09% for the three months ended September 30, 2023. The average cost of borrowings increased to 4.33% for the three months ended September 30, 2024 compared with 2.48% for the three months ended September 30, 2023.

The following table shows the average balance of assets, liabilities and stockholders’ equity; the amount of interest income, and interest expense; the average yield or rate for each category of interest-earning assets and interest-bearing liabilities; and the net interest spread and the net interest margin on a tax-equivalent basis for the periods indicated. All average balances are daily average balances.

*(dollars in thousands)*

| Assets Interest-earning assets: | Nine Months Ended September 30, 2024 Average Balance | Interest Income / Expense | Average Yield / Rate | September 30, 2023 Average Balance | Interest Income / Expense | Average Yield / Rate |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Loans receivable (1) | $6,113,214 | $274,608 | 6.00% | $5,933,525 | $249,888 | 5.63% |
| Securities (2) | 978,439 | 15,717 | 2.17% | 969,146 | 12,356 | 1.73% |
| FHLB stock | 16,385 | 1,077 | 8.77% | 16,385 | 888 | 7.25% |
| Interest-bearing deposits in other banks | 188,290 | 7,268 | 5.16% | 247,581 | 9,012 | 4.87% |
| Total interest-earning assets | 7,296,328 | 298,670 | 5.47% | 7,166,637 | 272,144 | 5.08% |
| Noninterest-earning assets: |  |  |  |  |  |  |
| Cash and due from banks | 56,217 |  |  | 62,354 |  |  |
| Allowance for credit losses | (68,305) |  |  | (71,236) |  |  |
| Other assets | 249,517 |  |  | 237,111 |  |  |
| **Total assets** | **$7,533,757** |  |  | **$7,394,866** |  |  |
| **Liabilities and Stockholders’ Equity** |  |  |  |  |  |  |
| Interest-bearing liabilities: |  |  |  |  |  |  |
| Deposits: |  |  |  |  |  |  |
| Demand: interest-bearing | $85,158 | $92 | 0.14% | $100,997 | $88 | 0.12% |
| Money market and savings | 1,849,053 | 51,740 | 3.74% | 1,506,776 | 29,687 | 2.63% |
| Time deposits | 2,462,779 | 87,454 | 4.74% | 2,355,923 | 64,656 | 3.67% |
| Total interest-bearing deposits | 4,396,990 | 139,286 | 4.23% | 3,963,696 | 94,431 | 3.19% |
| Borrowings | 158,419 | 5,112 | 4.31% | 194,530 | 4,755 | 3.27% |
| Subordinated debentures | 130,244 | 4,948 | 5.06% | 129,632 | 4,828 | 4.97% |
| Total interest-bearing liabilities | 4,685,653 | 149,346 | 4.26% | 4,287,858 | 104,014 | 3.24% |
| Noninterest-bearing liabilities and equity: |  |  |  |  |  |  |
| Demand deposits: noninterest-bearing | 1,904,611 |  |  | 2,223,891 |  |  |
| Other liabilities | 166,372 |  |  | 140,070 |  |  |
| Stockholders’ equity | 777,121 |  |  | 743,047 |  |  |
| **Total liabilities and stockholders’ equity** | **$7,533,757** |  |  | **$7,394,866** |  |  |
| **Net interest income** |  | **$149,324** |  |  | **$168,130** |  |
| **Cost of deposits (3)** |  |  | **2.95%** |  |  | 2.04% |
| Net interest spread (taxable equivalent basis) (4) |  |  | **1.21%** |  |  | 1.84% |
| Net interest margin (taxable equivalent basis) (5) |  |  | **2.74%** |  |  | 3.14% |

*(1) Loans receivable include loans held for sale and exclude the allowance for credit losses. Nonaccrual loans receivable are included in the average loans receivable balance.*

*(2) Securities average yield is calculated on a fully taxable equivalent basis using the current statutory federal tax rate of 21%.*

*(3) Represents interest expense on deposits as a percentage of all interest-bearing and noninterest-bearing deposits.*

*(4) Represents the average yield earned on interest-earning assets less the average rate paid on interest-bearing liabilities.*

*(5) Represents net interest income as a percentage of average interest-earning assets.*

The table below shows changes in interest income and interest expense and the amounts attributable to variations in interest rates and volumes for the periods indicated. The variances attributable to simultaneous volume and rate changes have been allocated to the change due to volume and the change due to rate categories in proportion to the relationship of the absolute dollar amount attributable solely to the change in volume and to the change in rate.

*(in thousands)*

| Interest and dividend income: | Nine Months Ended September 30, 2024 vs September 30, 2023 Increases (Decreases) Due to Change In Volume | Rate | Total |
| --- | ---: | ---: | ---: |
| Loans receivable (1) | $7,785 | $16,935 | $24,720 |
| Securities (2) | 118 | 3,243 | 3,361 |
| FHLB stock | 3 | 186 | 189 |
| Interest-bearing deposits in other banks | (2,154) | 410 | (1,744) |
| **Total interest and dividend income** | **5,752** | **20,774** | **26,526** |
| Interest expense: |  |  |  |
| Demand: interest-bearing | $(14) | $18 | $4 |
| Money market and savings | 7,511 | 14,542 | 22,053 |
| Time deposits | 2,996 | 19,802 | 22,798 |
| Borrowings | (881) | 1,238 | 357 |
| Subordinated debentures | 24 | 96 | 120 |
| **Total interest expense** | **9,636** | **35,696** | **45,332** |
| **Change in net interest income** | **$(3,884)** | **$(14,922)** | **$(18,806)** |

For the nine months ended September 30, 2024 and 2023, net interest income was $149.3 million and $168.1 million, respectively. The net interest spread and net interest margin, on a taxable equivalent basis, for the nine months ended September 30, 2024, were 1.21% and 2.74%, respectively, compared to 1.84% and 3.14%, respectively, for the same period in 2023. Interest and dividend income increased $26.5 million, or 9.7%, to $298.7 million for the nine months ended September 30, 2024 from $272.1 million for the same period in 2023, primarily due to higher average interest-earning asset yields and an increase in the average balance of loans. Interest expense increased $45.3 million, or 43.6%, to $149.3 million for the nine months ended September 30, 2024 from $104.0 million for the same period in 2023, primarily due to increases in deposit rates and average deposit balances and, to a lesser extent, an increase in the cost of borrowings.

The average balance of interest earning assets increased $129.7 million, or 1.8%, to $7.30 billion for the nine months ended September 30, 2024, from $7.17 billion for the nine months ended September 30, 2023. The average balance of loans increased $179.7 million, or 3.0%, to $6.11 billion for the nine months ended September 30, 2024, from $5.93 billion for the nine months ended September 30, 2023. The average balance of securities increased $9.3 million, or 1.0%, to $978.4 million for the nine months ended September 30, 2024, from $969.1 million for the nine months ended September 30, 2023. The average balance of interest-bearing deposits at other banks decreased $59.3 million, or 23.9%, to $188.3 million for the nine months ended September 30, 2024, from $247.6 million for the nine months ended September 30, 2023.

The average yield on interest-earning assets, on a taxable equivalent basis, increased 39 basis points to 5.47% for the nine months ended September 30, 2024, from 5.08% for the nine months ended September 30, 2023. The average yield on loans increased to 6.00% for the nine months ended September 30, 2024, from 5.63% for the nine months ended September 30, 2023. The average yield on securities, on a taxable equivalent basis, increased to 2.17% for the nine months ended September 30, 2024, from 1.73% for the nine months ended September 30, 2023. The average yield on interest-bearing deposits in other banks increased 29 basis points to 5.16% for the nine months ended September 30, 2024, from 4.87% for the nine months ended September 30, 2023.

The average balance of interest-bearing liabilities increased $397.8 million, or 9.3%, to $4.69 billion for the nine months ended September 30, 2024 compared with $4.29 billion for the nine months ended September 30, 2023. The average balances of time deposits and money market and savings accounts increased $106.9 million and $342.3 million, respectively, offset partially by decreases in interest-bearing demand deposits and borrowings of $15.8 million and $36.1 million, respectively.

The average cost of interest-bearing liabilities was 4.26% and 3.24% for the nine months ended September 30, 2024 and 2023, respectively. The average cost of interest-bearing deposits increased 104 basis points to 4.23% for the nine months ended September 30, 2024, compared with 3.19% for the nine months ended September 30, 2023. The average cost of time deposits increased 107 basis points to 4.74% for the nine months ended September 30, 2024 compared with 3.67% for the nine months ended September 30, 2023. The average cost of money market and savings accounts increased 111 basis points to 3.74% for the nine months ended September 30, 2023 compared with 2.63% for the nine months ended September 30, 2023. The average cost of subordinated debentures increased to 5.06% for the nine months ended September 30, 2024 compared with 4.97% for the nine months ended September 30, 2023. The average cost of borrowings increased 104 basis points to 4.31% for the nine months ended September 30, 2024 compared with 3.27% for the nine months ended September 30, 2023.

### Credit Loss Expense

For the third quarter of 2024, the Company recorded $2.3 million of credit loss expense, comprised of a $2.3 million provision for loan losses. There was no provision recorded for off-balance sheet items. For the same period in 2023, the Company recorded $5.2 million of credit loss expense, comprised of a $5.2 million provision for loan losses. There was no provision for off-balance sheet items. The decrease in credit loss expense was primarily due to a reduction in net charge-offs during the third quarter of 2024, compared to the third quarter of 2023.

For the nine months ended September 30, 2024, the Company recorded $3.5 million of credit loss expense, comprised of a $4.0 million provision for loan losses, partially offset by a $0.5 million recovery for off-balance sheet items. For the same period in 2023, the Company recorded $7.2 million of credit loss expense, comprised of a $7.9 million provision for loan losses, partially offset by a $0.7 million recovery for off-balance sheet items. The decrease in credit loss expense was primarily due to a reduction in net charge-offs during the first nine months of 2024, compared to the same period in 2023.

See also “Allowance for Credit Losses and Allowance for Credit Losses Related to Off-Balance Sheet Items” for further details.

### Noninterest Income

The following table sets forth the various components of noninterest income for the periods indicated:

*(in thousands)*

|  | Three Months Ended September 30, 2024 | 2023 | Increase (Decrease) Amount | Increase (Decrease) Percent |
| --- | ---: | ---: | ---: | ---: |
| Service charges on deposit accounts | $2,311 | $2,605 | $(294) | (11.29)% |
| Trade finance and other service charges and fees | 1,254 | 1,155 | 99 | 8.57 |
| Servicing income | 817 | 838 | (21) | (2.51) |
| Bank-owned life insurance income | 320 | 280 | 40 | 14.29 |
| All other operating income | 1,008 | 1,178 | (170) | (14.43) |
| **Service charges, fees & other** | **5,710** | **6,056** | **(346)** | **(5.71)** |
| Gain on sale of SBA loans | 1,544 | 1,172 | 372 | 31.74 |
| Gain on sale of mortgage loans | 324 | — | 324 | — |
| Gain on sale of bank premises | 860 | 4,000 | (3,140) | (78.50) |
| **Total noninterest income** | **$8,438** | **$11,228** | **$(2,790)** | **(24.85)%** |

For the three months ended September 30, 2024, noninterest income was $8.4 million, a decrease of $2.8 million, or 24.8%, compared to $11.2 million for the same period in 2023, due primarily to a $4.0 million gain on the sale-leaseback of a branch property in the third quarter of 2023, compared to a $0.9 million sale-leaseback gain in the same period in 2024, offset by a $0.4 million increase in gain on sale of SBA loans in 2024. During the third quarter of 2024, the Company sold $20.9 million of residential loans and recognized a net gain of $0.3 million. In the third quarter of 2024, the Company also sold $23.0 million of SBA loans and recognized a net gain of $1.5 million. During the third quarter of 2023, the Company sold $21.0 million of SBA loans and recognized a net gain of $1.2 million. For the three months ended September 30, 2024, trade premiums on SBA loan sales increased 170 basis points, to 8.54%, from 6.84% for the three months ended September 30, 2023.

The following table sets forth the various components of noninterest income for the periods indicated:

*(in thousands)*

|  | Nine Months Ended September 30, 2024 | 2023 | Increase (Decrease) Amount | Increase (Decrease) Percent |
| --- | ---: | ---: | ---: | ---: |
| Service charges on deposit accounts | $7,189 | $7,756 | $(567) | (7.31)% |
| Trade finance and other service charges and fees | 3,945 | 3,586 | 359 | 10.01 |
| Servicing income | 2,325 | 2,405 | (80) | (3.33) |
| Bank-owned life insurance income | 1,262 | 821 | 441 | 53.71 |
| All other operating income | 2,846 | 4,606 | (1,760) | (38.21) |
| **Service charges, fees & other** | **17,567** | **19,174** | **(1,607)** | **(8.38)** |
| Gain on sale of SBA loans | 4,669 | 4,253 | 416 | 9.78 |
| Gain on sale of mortgage loans | 1,132 | — | 1,132 | — |
| Net loss on sale of securities | — | (1,871) | 1,871 | (100.00) |
| Gain on sale of bank premises | 860 | 4,000 | (3,140) | (78.50) |
| Legal settlement | — | 1,943 | (1,943) | (100.00) |
| **Total noninterest income** | **$24,228** | **$27,499** | **$(3,271)** | **(11.89)%** |

For the nine months ended September 30, 2024, noninterest income was $24.2 million, a decrease of $3.3 million, or 11.9%, compared to $27.5 million for the same period in 2023, due primarily to a $4.0 million gain on the sale-leaseback of a branch property in the third quarter of 2023, compared to a $0.9 million sale-leaseback gain for the same period in 2024, and a $1.8 million decrease in all other operating income, offset partially by $1.1 million in gain on sale of mortgage loans in the first nine months of 2024. The decrease in all other operating income was mainly attributed to a $0.9 million increase in income related to equipment financing agreements and $0.6 million in swap fee income in the nine months ended September 30, 2023.

### Noninterest Expense

The following table sets forth the components of noninterest expense for the periods indicated:

*(in thousands)*

|  | Three Months Ended September 30, 2024 | 2023 | Increase (Decrease) Amount | Increase (Decrease) Percent |
| --- | ---: | ---: | ---: | ---: |
| Salaries and employee benefits | $20,851 | $20,361 | $490 | 2.41% |
| Occupancy and equipment | 4,499 | 4,825 | (326) | (6.76) |
| Data processing | 3,839 | 3,490 | 349 | 10.00 |
| Professional fees | 1,492 | 1,568 | (76) | (4.85) |
| Supplies and communications | 538 | 552 | (14) | (2.54) |
| Advertising and promotion | 631 | 534 | 97 | 18.16 |
| All other operating expenses | 2,875 | 2,852 | 23 | 0.81 |
| **Subtotal** | **34,725** | **34,182** | **543** | **1.59** |
| Other real estate owned expense | 77 | 16 | 61 | 381.25 |
| Repossessed personal property expense | 278 | 47 | 231 | 491.49 |
| **Total noninterest expense** | **$35,080** | **$34,245** | **$835** | **2.44%** |

For the three months ended September 30, 2024, noninterest expense was $35.1 million, an increase of $0.8 million, or 2.4%, compared with $34.2 million for the same period in 2023. The increase was mainly attributed to a $0.5 million increase in salaries and employee benefits, and a $0.3 million increase in data processing expense. The increase in salaries and employee benefits was mainly attributed to annual merit increases. Data processing expense increased due to an increase in software license and maintenance expense.

The following table sets forth the components of noninterest expense for the periods indicated:

*(in thousands)*

|  | Nine Months Ended September 30, 2024 | 2023 | Increase (Decrease) Amount | Increase (Decrease) Percent |
| --- | ---: | ---: | ---: | ---: |
| Salaries and employee benefits | $62,870 | $61,336 | $1,534 | 2.50% |
| Occupancy and equipment | 13,342 | 13,737 | (395) | (2.88) |
| Data processing | 11,076 | 10,208 | 868 | 8.50 |
| Professional fees | 5,134 | 4,278 | 856 | 20.01 |
| Supplies and communications | 1,710 | 1,866 | (156) | (8.36) |
| Advertising and promotion | 2,207 | 2,114 | 93 | 4.40 |
| All other operating expenses | 9,326 | 8,054 | 1,272 | 15.79 |
| **Subtotal** | **105,665** | **101,593** | **4,072** | **4.01** |
| Branch consolidation expense | 301 | — | 301 | — |
| Other real estate owned expense (income) | 105 | (181) | 286 | (158.01) |
| Repossessed personal property expense (income) | 729 | (96) | 825 | (859.38) |
| **Total noninterest expense** | **$106,800** | **$101,316** | **$5,484** | **5.41%** |

For the nine months ended September 30, 2024, noninterest expense was $106.8 million, an increase of $5.5 million, or 5.4%, compared with $101.3 million for the same period in 2023, primarily attributable to increases in salaries and employee benefits, data processing, professional fees, and other operating expenses. Salaries and employee benefits increased $1.5 million due to higher salaries, group insurance, and share-based compensation expense, offset primarily by capitalized labor costs associated with the Company's investment in a new loan origination system. Data processing expense increased $0.9 million due to an increase in software license and maintenance expense in 2024. Professional fees decreased $0.9 million primarily due to increases in consulting fees, and legal fees related to loan matters. All other operating expenses increased $1.3 million mainly due to a $0.6 million increase in loan and deposit-related expenses and a $0.4 million SBA servicing asset adjustment. Repossessed personal property expense increased mainly due to a $0.8 million loss on sale of lease assets.

### Income Tax Expense

Income tax expense was $6.2 million and $7.9 million, representing an effective income tax rate of 29.5% and 29.6% for the three months ended September 30, 2024 and 2023, respectively. Income tax expense was $18.8 million and $25.7 million, representing an effective income tax rate of 29.7% and 29.5% for the nine months ended September 30, 2024 and 2023, respectively.

### Financial Condition

### Securities

As of September 30, 2024, our securities portfolio consisted of U.S. government agency and sponsored agency mortgage-backed securities, collateralized mortgage obligations and debt securities, tax-exempt municipal bonds and U.S. Treasury securities. Most of these securities carry fixed interest rates. Other than holdings of U.S. government agency and sponsored agency obligations, there were no securities of any one issuer exceeding 10% of stockholders’ equity as of September 30, 2024 or December 31, 2023.

Securities increased $43.2 million to $908.9 million at September 30, 2024 from $865.7 million at December 31, 2023, mainly attributed to $128.3 million in securities purchases, partially offset by $105.9 million in payments and maturities, and a decrease in unrealized securities losses of $22.7 million during the nine months ended September 30, 2024.

The following table summarizes the contractual maturity schedule for securities, at amortized cost, and their cost weighted average yield, which is calculated using amortized cost as the weight, as of September 30, 2024:

*(dollars in thousands)*

| Securities available for sale: | Within One Year Amount | Yield | After One Year But Within Five Years Amount | Yield | After Five Years But Within Ten Years Amount | Yield | After Ten Years Amount | Yield | Total Amount | Yield |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| U.S. Treasury securities | $50,727 | 4.26% | $43,390 | 3.89% | $— | 0.00% | $— | 0.00% | $94,117 | 4.09% |
| U.S. government agency and sponsored agency obligations: |  |  |  |  |  |  |  |  |  |  |
| Mortgage-backed securities - residential | 10 | 2.97 | — | — | 19,732 | 3.45 | 444,668 | 1.73 | 464,410 | 1.80 |
| Mortgage-backed securities - commercial | 2,674 | 2.29 | 5,012 | 2.60 | — | — | 66,253 | 2.35 | 73,939 | 2.36 |
| Collateralized mortgage obligations | — | — | 128 | 1.29 | 221 | 2.74 | 149,985 | 3.89 | 150,334 | 3.89 |
| Debt securities | 52,984 | 1.07 | 75,368 | 1.76 | — | — | — | — | 128,352 | 1.47 |
| Total U.S. government agency and sponsored agency obligations | 55,668 | 1.13 | 80,508 | 1.81 | 19,953 | 3.44 | 660,906 | 2.28 | 817,035 | 2.18 |
| Municipal bonds-tax exempt | — | — | — | — | 42,907 | 1.33 | 33,439 | 1.34 | 76,346 | 1.34 |
| **Total securities available for sale** | **$106,395** | **2.62%** | **$123,898** | **2.54%** | **$62,860** | **2.00%** | **$694,345** | **2.23%** | **$987,498** | **2.30%** |

### Loans Receivable

As of September 30, 2024 and December 31, 2023, loans receivable (excluding loans held for sale), net of deferred loan fees and costs, discounts and allowance for credit losses, were $6.19 and $6.11 billion, respectively. For the nine months ended September 30, 2024, there was $855.6 million in new loan production, which included $38.4 million in SBA loan purchases, offset partially by $454.4 million in loan sales and payoffs, and amortization and other reductions of $325.9 million. Loan production consisted of commercial real estate loans of $258.0 million, residential mortgages of $124.1 million, commercial and industrial loans of $214.9 million, equipment financing agreements of $121.8 million and SBA loans of $136.9 million.

The table below shows the maturity distribution of outstanding loans, before the allowance for credit losses as of September 30, 2024. In addition, the table shows the distribution of such loans between those with floating or variable interest rates and those with fixed or predetermined interest rates.

*(in thousands)*

| Real estate loans: Commercial property | Within One Year | After One Year but Within Three Years | After Three Years but Within Five Years | After Five Years but Within Fifteen Years | After Fifteen Years | Total |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Retail | $144,993 | $366,032 | $361,686 | $149,144 | $65,578 | $1,087,433 |
| Hospitality | 208,243 | 259,865 | 278,417 | 54,531 | 17,961 | 819,017 |
| Office | 166,863 | 270,248 | 113,195 | 14,146 | 7,128 | 571,580 |
| Other | 229,156 | 512,317 | 448,099 | 137,936 | 41,786 | 1,369,294 |
| Total commercial property loans | 749,255 | 1,408,462 | 1,201,397 | 355,757 | 132,453 | 3,847,324 |
| Construction | 70,889 | 13,875 | — | — | — | 84,764 |
| Residential | 6,746 | 52 | 119 | 4,722 | 927,646 | 939,285 |
| Total real estate loans | 826,890 | 1,422,389 | 1,201,516 | 360,479 | 1,060,099 | 4,871,373 |
| Commercial and industrial loans | 424,394 | 176,678 | 87,289 | 190,731 | — | 879,092 |
| Equipment financing agreements | 29,729 | 223,656 | 239,715 | 14,179 | — | 507,279 |
| **Loans receivable** | **$1,281,013** | **$1,822,723** | **$1,528,520** | **$565,389** | **$1,060,099** | **$6,257,744** |
| Loans with predetermined interest rates | 610,474 | 1,273,104 | 762,695 | 29,362 | 255,734 | 2,931,369 |
| Loans with variable interest rates | 670,539 | 549,619 | 765,825 | 536,027 | 804,365 | 3,326,375 |

53

The table below shows the maturity distribution of outstanding loans, before the allowance for credit losses, with fixed or predetermined interest rates, as of September 30, 2024.

*(in thousands)*

| Real estate loans: Commercial property | Within One Year | After One Year but Within Three Years | After Three Years but Within Five Years | After Five Years but Within Fifteen Years | After Fifteen Years | Total |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Retail | $110,285 | $331,196 | $131,949 | $32 | $753 | $574,215 |
| Hospitality | 58,213 | 150,961 | 113,428 | 656 | — | 323,258 |
| Office | 107,476 | 211,986 | 50,420 | — | — | 369,882 |
| Other | 192,499 | 352,145 | 215,713 | 5,776 | 3,328 | 769,461 |
| Total commercial property loans | 468,473 | 1,046,288 | 511,510 | 6,464 | 4,081 | 2,036,816 |
| Construction | 1,194 | — | — | — | — | 1,194 |
| Residential | 3,209 | 52 | — | 2,422 | 251,653 | 257,336 |
| Total real estate loans | 472,876 | 1,046,340 | 511,510 | 8,886 | 255,734 | 2,295,346 |
| Commercial and industrial loans | 107,869 | 3,108 | 11,470 | 6,298 | — | 128,745 |
| Equipment financing agreements | 29,729 | 223,656 | 239,715 | 14,178 | — | 507,278 |
| **Loans receivable** | **$610,474** | **$1,273,104** | **$762,695** | **$29,362** | **$255,734** | **$2,931,369** |

The table below shows the maturity distribution of outstanding loans, before the allowance for credit losses, with floating or variable interest rates (including floating, adjustable and hybrids), as of September 30, 2024.

*(in thousands)*

| Real estate loans: Commercial property | Within One Year | After One Year but Within Three Years | After Three Years but Within Five Years | After Five Years but Within Fifteen Years | After Fifteen Years | Total |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Retail | $34,708 | $34,836 | $229,736 | $149,112 | $64,825 | $513,217 |
| Hospitality | 150,030 | 108,904 | 164,988 | 53,875 | 17,961 | 495,758 |
| Office | 59,386 | 58,262 | 62,775 | 14,146 | 7,129 | 201,698 |
| Other | 36,657 | 160,172 | 232,386 | 132,161 | 38,458 | 599,834 |
| Total commercial property loans | 280,781 | 362,174 | 689,885 | 349,294 | 128,373 | 1,810,507 |
| Construction | 69,695 | 13,875 | — | — | — | 83,570 |
| Residential | 3,537 | — | 119 | 2,300 | 675,992 | 681,948 |
| Total real estate loans | 354,013 | 376,049 | 690,004 | 351,594 | 804,365 | 2,576,025 |
| Commercial and industrial loans | 316,526 | 173,570 | 75,821 | 184,433 | — | 750,350 |
| **Loans receivable** | **$670,539** | **$549,619** | **$765,825** | **$536,027** | **$804,365** | **$3,326,375** |

### Industry

As of September 30, 2024, the loan portfolio included the following concentrations of loans to one type of industry that were greater than 10.0% of loans receivable outstanding:

*(in millions)*

|  | Balance as of September 30, 2024 | Percentage of Loans Receivable Outstanding |
| --- | ---: | ---: |
| Lessor of nonresidential buildings | $1,690 | 27.0% |
| Hospitality | 823 | 13.2% |

### Loan Quality Indicators

Loans 30 to 89 days past due and still accruing were $15.0 million at September 30, 2024, compared with $10.3 million at December 31, 2023, attributable to an increase of $5.6 million in past due residential loans, offset by payoffs and other reductions.

Activity in criticized loans was as follows for the periods indicated:

*(in thousands)*

| Three months ended September 30, 2024 | Special Mention | Classified |
| --- | ---: | ---: |
| Balance at beginning of period | $36,922 | $33,946 |
| Additions | 129,744 | 34,605 |
| Reductions | (35,090) | (40,174) |
| **Ending balance** | **$131,576** | **$28,377** |
| **Three months ended September 30, 2023** |  |  |
| Balance at beginning of period | $44,633 | $38,840 |
| Additions | 35,818 | 6,670 |
| Reductions | (3,978) | (12,376) |
| **Ending balance** | **$76,473** | **$33,134** |

*(in thousands)*

| Nine months ended September 30, 2024 | Special Mention | Classified |
| --- | ---: | ---: |
| Balance at beginning of period | $65,315 | $31,367 |
| Additions | 130,002 | 46,984 |
| Reductions | (63,741) | (49,974) |
| **Ending balance** | **$131,576** | **$28,377** |
| **Nine months ended September 30, 2023** |  |  |
| Balance at beginning of period | $79,013 | $46,192 |
| Additions | 60,814 | 14,226 |
| Reductions | (63,354) | (27,284) |
| **Ending balance** | **$76,473** | **$33,134** |

Special mention loans were $131.6 million and $65.3 million at September 30, 2024 and December 31, 2023, respectively. The $66.3 million increase included downgrades from pass loans of $130.0 million, offset by upgrades to pass loans of $10.3 million, downgrades to classified loans of $36.3 million, and paydowns and payoffs of $17.0 million. Additions during the third quarter of 2024 included the downgrade to the special mention category of two commercial real estate loans in the hospitality industry for $109.7 million and a commercial and industrial loan in the health care industry for $20.1 million, all of which were current and fully collateralized at September 30, 2024. Reductions during the third quarter of 2024 included the downgrade from the special mention category to the classified category of a $28.3 million completed construction loan for a memory care and assisted-living facility. Additionally, during the third quarter of 2024, the $28.3 million loan was transferred from classified to held-for-sale after the Bank recognized a $1.1 million charge-off on this loan. Subsequent to the end of the third quarter, the Bank completed the sale of the loan for $27.2 million (see **Note 16** ***- Subsequent Events***, for more information). Additional reductions in special mention loans during the third quarter resulted from upgrades of $6.1 million

Classified loans were $28.4 million and $31.4 million at September 30, 2024 and December 31, 2023, respectively. Classified loan activity for the nine months ended September 30, 2024 included increases primarily due to loan downgrades of $47.0 million that included the $28.3 special mention construction loan, offset by paydowns and payoffs of $18.2 million, $4.5 million in loan charge-offs, and the transfer, after the charge-off, of the $27.2 million construction loan to the held-for-sale nonaccrual category.

### Nonperforming Assets

Nonperforming loans consist of nonaccrual loans and loans 90 days or more past due and still accruing interest. Nonperforming assets consist of nonperforming loans and OREO. Loans are placed on nonaccrual status when, in the opinion of management, the full timely collection of principal or interest is in doubt. Generally, the accrual of interest is discontinued when principal or interest payments become more than 90 days past due, unless we believe the loan is adequately collateralized and in the process of collection. However, in certain instances, we may place a particular loan on nonaccrual status earlier, depending upon the individual circumstances surrounding the loan’s delinquency. When a loan is placed on nonaccrual status, previously accrued but unpaid interest is reversed against current income. Subsequent collections of cash are applied as principal reductions when received, except when the ultimate collectability of principal is probable, in which case interest payments are credited to income. Nonaccrual loans may be restored to accrual status when principal and interest become current and full repayment is expected, which generally occurs after sustained payment of six months. Interest income is recognized on the accrual basis for loans not meeting the criteria for nonaccrual. OREO consists of properties acquired by foreclosure or similar means.

Except for nonaccrual loans, management is not aware of any other loans as of September 30, 2024 for which known credit problems of the borrower would cause serious doubts as to the ability of such borrowers to comply with their present loan repayment terms, or any known events that would result in a loan being designated as nonperforming at some future date.

Nonaccrual loans were $15.2 million and $15.5 million as of September 30, 2024 and December 31, 2023, respectively, representing a decrease of $0.3 million, or 2.1%. As of September 30, 2024 and December 31, 2023, 1.90% and 1.25% of equipment financing agreements were on nonaccrual status, respectively. At September 30, 2024 there were $242,000 loans 90 days or more past due and still accruing interest. At December 31, 2023, all loans 90 days or more past due were classified as nonaccrual.

The $15.2 million of nonperforming loans as of September 30, 2024 had individually evaluated allowances of $5.2 million, compared to $15.5 million of nonperforming loans with individually evaluated allowances of $3.4 million as of December 31, 2023.

Nonperforming assets were $16.3 million at September 30, 2024, or 0.21% of total assets, compared to $15.6 million, or 0.21%, at December 31, 2023. Additionally, not included in nonperforming assets were repossessed personal property assets associated with equipment finance agreements of $1.2 million and $1.3 million at September 30, 2024 and December 31, 2023, respectively.

### Individually Evaluated Loans

The Company reviews loans on an individual basis when the loan does not share similar risk characteristics with loan pools. Individually evaluated loans are measured for expected credit losses based on the present value of expected cash flows discounted at the effective interest rate, the observable market price, or the fair value of collateral.

Individually evaluated loans were $15.2 million and $15.4 million as of September 30, 2024 and December 31, 2023, respectively, representing a decrease of $0.2 million, or 1.3%. Specific allowances associated with individually evaluated loans increased $1.8 million to $5.2 million as of September 30, 2024 compared with $3.4 million as of December 31, 2023, mainly attributed to specific reserve allocation on newly added nonperforming equipment finance agreements.

A borrower is experiencing financial difficulties when there is a probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. The Company may modify loans to borrowers experiencing financial difficulties by providing principal forgiveness, a term extension, an other-than-insignificant payment delay, or an interest rate reduction.

The following table presents loan modifications made to borrowers experiencing financial difficulty by type of modification, with related amortized cost balances, respective percentage shares of the total class of loans, and the related financial effect, for the periods indicated:

*(in thousands)*

| Three and nine months ended September 30, 2024 | Term Extension Amortized Cost Basis | % of Total Class of Loans | Financial Effect |
| --- | ---: | ---: | --- |
| Commercial and industrial loans | $20,060 | 2.0% | 1 loan with term extension of 6 years |

The modified loan above was current at September 30, 2024.

No loans were modified to borrowers experiencing financial difficulty during the three and nine months ended September 30, 2023.

### Allowance for Credit Losses and Allowance for Credit Losses Related to Off-Balance Sheet Items

The Company’s estimate of the allowance for credit losses at September 30, 2024 and December 31, 2023 reflected losses expected over the remaining contractual life of assets based on historical, current, and forward-looking information. The contractual term does not consider extensions, renewals or modifications.

Management selected three loss methodologies for the collective allowance estimation. At September 30, 2024, the Company used the discounted cash flow (“DCF”) method to estimate allowances for credit losses for the commercial and industrial loan portfolio, the Probability of Default/Loss Given Default (“PD/LGD”) method for the commercial real estate, construction and residential real estate portfolios, and the Weighted Average Remaining Maturity (“WARM”) method to estimate expected credit losses for equipment financing agreements. Loans that do not share similar risk characteristics are individually evaluated for allowances.

For all loans utilizing the DCF method, the Company determined that four quarters represented a reasonable and supportable forecast period and reverted to a historical loss rate over twelve quarters on a straight-line basis. For this loan segment, the Company applied an annualized historical PD/LGD using all available historical periods. Since reasonable and supportable forecasts of economic conditions are embedded directly into the DCF model, qualitative adjustments are considered but were minimal.

For each of the loan segments identified above, the Company applied an annualized historical PD/LGD using all available historical periods. The PD/LGD method incorporates a forecast of economic conditions into loss estimates using a qualitative adjustment.

For loan pools utilizing the PD/LGD method, the Company used historical periods that included an economic downturn to derive historical losses for better alignment in the estimation of expected losses under the PD/LGD method. The Company relied on Frye-Jacobs-modeled LGD rates for loan segments with insufficient historical loss data. The Frye-Jacobs model provides a means of applying an LGD rate in the event that limited to no loss data is available. The PD/LGD method incorporates a forecast into loss estimates using a qualitative adjustment.

The Company used the WARM method to estimate expected credit losses for the equipment financing agreements portfolio. The Company applied an expected loss ratio based on internal historical losses adjusted as appropriate for qualitative factors.

As of September 30, 2024 and December 31, 2023, the Company relied on the economic projections from Moody’s to inform its loss driver forecasts over the four-quarter forecast period. For all loan pools, the Company utilizes and forecasts the national unemployment rate as the primary loss driver.

To adjust the historical and forecast periods to current conditions, the Company applies various qualitative factors derived from market, industry or business specific data, changes in the underlying portfolio composition, trends relating to credit quality, delinquent and nonperforming loans and adversely-rated equipment financing agreements, and reasonable and supportable forecasts of economic conditions.

The following table reflects our allocation of the allowance for credit losses by loan category as well as the amount of loans in each loan category, including related percentages:

*(dollars in thousands)*

| Real estate loans: Commercial property | September 30, 2024 Allowance Amount | Percentage of Total Allowance | Total Loans | Percentage of Total Loans | December 31, 2023 Allowance Amount | Percentage of Total Allowance | Total Loans | Percentage of Total Loans |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Retail | $10,226 | 14.8% | $1,087,433 | 17.4% | $10,264 | 14.8% | $1,107,360 | 17.9% |
| Hospitality | 13,971 | 20.2 | 819,017 | 13.1 | 15,534 | 22.4 | 740,519 | 12.0 |
| Office | 3,879 | 5.6 | 571,580 | 9.1 | 3,024 | 4.4 | 574,981 | 9.3 |
| Other | 8,004 | 11.6 | 1,369,294 | 21.9 | 8,663 | 12.4 | 1,366,534 | 22.1 |
| Total commercial property loans | 36,080 | 52.2 | 3,847,324 | 61.5 | 37,485 | 54.0 | 3,789,394 | 61.3 |
| Construction | 1,698 | 2.5 | 84,764 | 1.4 | 2,756 | 4.0 | 100,345 | 1.6 |
| Residential | 5,916 | 8.6 | 939,285 | 15.0 | 5,258 | 7.5 | 962,661 | 15.6 |
| Total real estate loans | 43,694 | 63.3 | 4,871,373 | 77.9 | 45,499 | 65.5 | 4,852,400 | 78.5 |
| Commercial and industrial loans | 9,783 | 14.0 | 879,092 | 14.0 | 10,257 | 14.8 | 747,819 | 12.1 |
| Equipment financing agreements | 15,686 | 22.7 | 507,279 | 8.1 | 13,706 | 19.7 | 582,215 | 9.4 |
| **Total** | **$69,163** | **100.0%** | **$6,257,744** | **100.0%** | **$69,462** | **100.0%** | **$6,182,434** | **100.0%** |

57

The following table sets forth certain ratios related to our allowance for credit losses at the dates presented:

*(dollars in thousands)*

| Ratios: | As of September 30, 2024 | December 31, 2023 |
| --- | ---: | ---: |
| Allowance for credit losses to loans receivable | 1.11% | 1.12% |
| Nonaccrual loans to loans | 0.24% | 0.25% |
| Allowance for credit losses to nonaccrual loans | 453.56% | 448.89% |
| **Balance:** |  |  |
| Nonaccrual loans at end of period | $15,249 | $15,474 |
| Nonperforming loans at end of period | $15,490 | $15,474 |

The allowance for credit losses was $69.2 million and $69.5 million at September 30, 2024 and December 31, 2023, respectively. The allowance attributed to individually evaluated loans was $5.2 million and $3.4 million as of September 30, 2024 and December 31, 2023, respectively. The allowance attributed to collectively evaluated loans was $64.0 million and $66.1 million as of September 30, 2024 and December 31, 2023, respectively, and considered the impact of changes in macroeconomic assumptions, normalized interest rate forecasts for the subsequent four quarters, and a net reduction in specific qualitative factors allocated to criticized hospitality loans impacted by the pandemic.

As of September 30, 2024 and December 31, 2023, the allowance for credit losses related to off-balance sheet items, primarily unfunded loan commitments, was $2.0 million and $2.5 million, respectively. The Bank closely monitors the borrower’s repayment capabilities, while funding existing commitments to ensure losses are minimized. Based on management’s evaluation and analysis of portfolio credit quality and prevailing economic conditions, we believe these allowances were adequate for current expected lifetime losses in the loan portfolio and off-balance sheet exposure as of September 30, 2024.

The following table presents a summary of gross charge-offs and recoveries for the loan portfolio:

*(in thousands)*

|  | Three Months Ended September 30, 2024 | 2023 | Nine Months Ended September 30, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| Gross charge-offs | $(3,800) | $(9,370) | $(8,262) | $(14,314) |
| Gross recoveries | 2,924 | 492 | 3,999 | 2,242 |
| **Net (charge-offs) recoveries** | **$(876)** | **$(8,878)** | **$(4,263)** | **$(12,072)** |

For the three months ended September 30, 2024, gross charge-offs decreased $5.6 million from the same period in 2023. Gross recoveries for the three months ended September 30, 2024 increased $2.4 million from the same period in 2023. Gross charge-offs for the three months ended September 30, 2024 primarily consisted of a $1.1 million charge-off on a previously identified construction loan, equipment financing agreements charge-offs of $2.5 million, and commercial and industrial charge-offs of $0.2 million. Gross charge-offs for the three months ended September 30, 2023 primarily consisted of $6.1 million of commercial and industrial loans, $2.8 million of equipment financing agreements, $0.2 million of SBA loans secured by business assets and $0.2 million of SBA loans secured by real estate. Gross recoveries for the three months ended September 30, 2024 primarily consisted of a $1.7 million recovery on a commercial loan, $0.7 million in recoveries on real estate loans, and $0.5 million in recoveries on equipment financing agreements.

For the nine months ended September 30, 2024, gross charge-offs decreased $6.1 million from the same period in 2023. Gross charge-offs for the nine months ended September 30, 2024 primarily consisted of a $1.1 million charge-off on a construction loan, equipment financing agreements charge-offs of $6.6 million, and commercial and industrial charge-offs of $0.4 million. Gross charge-offs for the nine months ended September 30, 2023 primarily consisted of equipment financing agreements charge-offs of $7.1 million and commercial and industrial charge-offs of $6.6 million. Gross recoveries for the nine months ended September 30, 2024 increased $1.8 million from the same period in 2023. Gross recoveries for the nine months ended September 30, 2024 primarily consisted of a $1.7 million recovery on a commercial loan and $1.8 million in equipment financing agreements recoveries.

The following table presents a summary of net (charge-offs) recoveries for the loan portfolio:

*(dollars in thousands)*

| September 30, 2024 | Three Months Ended Average Loans | Net (Charge-Offs) Recoveries | Net (Charge-Offs) Recoveries to Average Loans (1) | Nine Months Ended Average Loans | Net (Charge-Offs) Recoveries | Net (Charge-Offs) Recoveries to Average Loans (1) |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Commercial real estate loans | $3,885,328 | $— | —% | $3,871,570 | $— | —% |
| Residential loans | 949,709 | (404) | (0.17) | 964,754 | (386) | (0.05) |
| Commercial and industrial loans | 753,578 | 1,489 | 0.79 | 729,491 | 1,465 | 0.27 |
| Equipment financing agreements | 523,721 | (1,961) | (1.50) | 547,403 | (5,342) | (1.30) |
| **Total** | **$6,112,336** | **$(876)** | **(0.06)%** | **$6,113,218** | **$(4,263)** | **(0.09)%** |
| **September 30, 2023** |  |  |  |  |  |  |
| Commercial real estate loans | $3,719,876 | $(166) | (0.02)% | $3,759,932 | $(453) | (0.02)% |
| Residential loans | 906,977 | — | — | 847,633 | 6 | 0.00 |
| Commercial and industrial loans | 697,454 | (6,182) | (3.55) | 729,893 | (5,704) | (1.04) |
| Equipment financing agreements | 591,116 | (2,530) | (1.71) | 596,067 | (5,921) | (1.32) |
| **Total** | **$5,915,423** | **$(8,878)** | **(0.60)%** | **$5,933,525** | **$(12,072)** | **(0.27)%** |

#### (1) Annualized

Net loan charge-offs were $0.9 million, or 0.06% of average loans and $8.9 million, or 0.60% of average loans for the three months ended September 30, 2024 and 2023, respectively. Net loan charge-offs were $4.3 million, or 0.09% of average loans, and $12.1 million, or 0.27% of average loans, for the nine months ended September 30, 2024 and 2023, respectively.

### Deposits

The following table shows the composition of deposits by type as of the dates indicated:

*(dollars in thousands)*

|  | September 30, 2024 Balance | Percent | December 31, 2023 Balance | Percent |
| --- | ---: | ---: | ---: | ---: |
| Demand – noninterest-bearing | $2,051,790 | 32.0% | $2,003,596 | 31.9% |
| Interest-bearing: |  |  |  |  |
| Demand | 79,287 | 1.2 | 87,452 | 1.4 |
| Money market and savings | 1,898,834 | 29.7 | 1,734,659 | 27.6 |
| Uninsured amount of time deposits more than $250,000: |  |  |  |  |
| Three months or less | 199,651 | 3.1 | 186,321 | 3.0 |
| Over three months through six months | 254,841 | 4.0 | 201,085 | 3.2 |
| Over six months through twelve months | 192,708 | 3.0 | 222,683 | 3.6 |
| Over twelve months | 4,215 | 0.1 | 70,932 | 1.1 |
| All other insured time deposits | 1,721,895 | 26.9 | 1,773,846 | 28.2 |
| **Total deposits** | **$6,403,221** | **100.0%** | **$6,280,574** | **100.0%** |

Total deposits were $6.40 billion and $6.28 billion as of September 30, 2024 and December 31, 2023, respectively, representing an increase of $122.6 million, or 2.0%. The increase in deposits was primarily driven by a $164.2 million increase in money market and savings deposits and a $48.2 million increase in noninterest-bearing demand deposits, partially offset by a $81.6 million decrease in time deposits. At September 30, 2024, the loan-to-deposit ratio was 97.7% compared to 98.4% at December 31, 2023.

As of September 30, 2024, the aggregate amount of uninsured deposits (deposits in amounts greater than $250,000, which is the maximum amount for federal deposit insurance) was $2.67 billion. The aggregate amount of uninsured time deposits was $651.4 million. Other uninsured deposits, such as demand and money market and savings deposits were $2.02 billion. At September 30, 2024, $1.17 billion of total uninsured deposits were in accounts with balances of $5.0 million or more. As of December 31, 2023, the aggregate amount of uninsured deposits was $2.52 billion. The aggregate amount of uninsured time deposits was $681.0 million.

Other uninsured deposits, such as demand, money market and savings deposits were $1.84 billion. At December 31, 2023, $1.09 billion of total uninsured deposits were in accounts with balances of $5.0 million or more.

The Bank’s wholesale funds historically consisted of FHLB advances, brokered deposits as well as State of California time deposits. As of September 30, 2024 and December 31, 2023, the Bank had $300.0 million and $325.0 million of FHLB advances, and $13.2 million and $58.3 million of brokered deposits, respectively, and $120.0 million of State of California time deposits, as of September 30, 2024 and December 31, 2023. The decrease in brokered deposits was due to the Bank utilizing more overnight FHLB borrowings as a funding source.

### Borrowings and Subordinated Debentures

Borrowings mostly take the form of FHLB advances. At September 30, 2024 and December 31, 2023, FHLB advances were $300.0 million and $325.0 million, respectively. FHLB open advances were $200.0 million and $212.5 million at September 30, 2024 and December 31, 2023, respectively. For the same periods, term advances were $100.0 million and $112.5 million, respectively. Funds from deposit growth not used to fund loan production were used to pay off borrowings.

The weighted-average interest rate of all FHLB advances at September 30, 2024 and December 31, 2023 was 4.81% and 4.69%, respectively.

The FHLB maximum amount outstanding at any month end during each of the year-to-date periods ended September 30, 2024 and December 31, 2023 was $350.0 million and $450.0 million, respectively.

The following is a summary of contractual maturities of FHLB advances greater than twelve months:

*(dollars in thousands)*

| FHLB of San Francisco | September 30, 2024 Outstanding Balance | Weighted Average Rate | December 31, 2023 Outstanding Balance | Weighted Average Rate |
| --- | ---: | ---: | ---: | ---: |
| Advances due over 12 months through 24 months | $87,500 | 4.32% | $12,500 | 1.90% |
| Advances due over 24 months through 36 months | — | — | 62,500 | 4.37 |
| **Outstanding advances over 12 months** | **$87,500** | **4.32%** | **$75,000** | **3.96%** |

Subordinated debentures were $130.5 million and $130.0 million as of September 30, 2024 and December 31, 2023, respectively. Subordinated debentures are comprised of fixed-to-floating subordinated notes of $108.5 million and $108.3 million as of September 30, 2024 and December 31, 2023, respectively, and junior subordinated deferrable interest debentures of $22.0 million and $21.7 million as of September 30, 2024 and December 31, 2023, respectively. See “Note 8 – Borrowings and Subordinated Debentures” to the consolidated financial statements for more details.

### Stockholders' Equity

Stockholders’ equity was $736.7 million and $701.9 million as of September 30, 2024 and December 31, 2023, respectively. Net income, net of $22.8 million of dividends paid, added $21.7 million to stockholders' equity for the period, as did $2.7 million of share-based compensation, and a $16.4 million decrease in unrealized after-tax losses on securities available for sale due to changes in interest rates, offset by a $0.4 million decrease in unrealized after-tax losses on cash flow hedges. In addition, the Company repurchased 345,000 shares of common stock during the period at an average share price of $16.68 for a total cost of $5.8 million. At September 30, 2024, 1,425,000 shares remain under the Company's share repurchase program.

### Interest Rate Risk Management

The spread between interest income on interest-earning assets and interest expense on interest-bearing liabilities is the principal component of net interest income, and interest rate changes substantially affect our financial performance. We emphasize capital protection through stable earnings. In order to achieve stable earnings, we prudently manage our assets and liabilities and closely monitor the percentage changes in net interest income and equity value in relation to limits established within our guidelines.

The Company performs simulation modeling to estimate the potential effects of interest rate changes. The following table summarizes one of the stress simulations performed to forecast the impact of changing interest rates on net interest income and the value of interest-earning assets and interest-bearing liabilities reflected on our balance sheet (i.e., an instantaneous parallel shift in the yield curve of the magnitude indicated below) as of September 30, 2024. The Company compares this stress simulation to policy limits, which specify the maximum tolerance level for net interest income exposure over a 1- to 12-month and a 13- to 24- month horizon, given the basis point adjustment in interest rates reflected below.

*(dollars in thousands)*

| Change in Interest Rates (Basis Points) | Net Interest Income Simulation 1- to 12-Month Horizon Dollar Change | Percentage Change | 13- to 24-Month Horizon Dollar Change | Percentage Change |
| ---: | ---: | ---: | ---: | ---: |
| 300 | $5,435 | 2.16% | $26,380 | 9.01% |
| 200 | $3,184 | 1.26% | $16,515 | 5.64% |
| 100 | $2,206 | 0.88% | $9,668 | 3.30% |
| -100 | $(3,654) | (1.45%) | $(13,155) | (4.50%) |
| -200 | $(7,957) | (3.16%) | $(29,165) | (9.97%) |
| -300 | $(12,591) | (5.00%) | $(46,913) | (16.03%) |

*(dollars in thousands)*

| Change in Interest Rates (Basis Points) | Economic Value of Equity (EVE) Dollar Change | Percentage Change |
| ---: | ---: | ---: |
| 300 | $33,722 | 4.82% |
| 200 | $28,313 | 4.05% |
| 100 | $21,874 | 3.13% |
| -100 | $(39,879) | (5.70%) |
| -200 | $(101,173) | (14.46%) |
| -300 | $(180,832) | (25.85%) |

The estimated sensitivity does not necessarily represent our forecast, and the results may not be indicative of actual changes to our net interest income. These estimates are based upon a number of assumptions, including the timing and magnitude of interest rate changes, prepayments on loans receivable and securities, pricing strategies on loans receivable and deposits, and replacement of asset and liability cash flows.

The key assumptions, based upon loans receivable, securities and deposits, are as follows:

| Conditional prepayment rates\*: |  |
| --- | ---: |
| Loans receivable | 14% |
| Securities | 6% |
| Deposit rate betas\*: |  |
| NOW, savings, money market demand | 48% |
| Time deposits, retail and wholesale | 75% |
| \* Balance-weighted average |  |

While the assumptions used are based on current economic and local market conditions, there is no assurance as to the predictive nature of these conditions, including how customer preferences or competitor influences might change.

### Capital Resources and Liquidity

### Capital Resources

Historically, our primary source of capital has been the retention of operating earnings. In order to ensure adequate capital levels, the Board regularly assesses projected sources and uses of capital, expected loan growth, anticipated strategic actions (such as stock repurchases and dividends), and projected capital thresholds under adverse and severely adverse economic conditions. In addition, the Board considers the Company’s access to capital from financial markets through the issuance of additional debt and securities, including common stock or notes, to meet its capital needs.

The Company’s ability to pay dividends to stockholders depends in part upon dividends it receives from the Bank. California law restricts the amount available for cash dividends to the lesser of a bank’s retained earnings or net income for its last three fiscal years (less any distributions to stockholders made during such period). Where the above test is not met, cash dividends may still be paid, with the prior approval of the Department of Financial Protection and Innovation (“DFPI”), in an amount not exceeding the greater of: (1) retained earnings of the Bank; (2) net income of the Bank for its last fiscal year; or (3) the net income of the Bank for its current fiscal year. The Company paid dividends of $22.8 million ($0.75 per share) for the nine months ended September 30, 2024 and $30.5 million ($1.00 per share) for the year 2023. As of October 1, 2024, the Bank has the ability to pay dividends of approximately $136.0 million, after giving effect to the $0.25 dividend declared on October 24, 2024, for the fourth quarter of 2024, without the prior approval of the Commissioner of the DFPI.

At September 30, 2024, the Bank’s total risk-based capital ratio of 14.27%, Tier 1 risk-based capital ratio of 13.23%, common equity Tier 1 capital ratio of 13.23% and Tier 1 leverage capital ratio of 11.43% placed the Bank in the “well capitalized” category pursuant to capital rules, which is defined as institutions with total risk-based capital ratio equal to or greater than 10.00%, Tier 1 risk-based capital ratio equal to or greater than 8.00%, common equity Tier 1 capital ratios equal to or greater than 6.50%, and Tier 1 leverage capital ratio equal to or greater than 5.00%.

At September 30, 2024, the Company's total risk-based capital ratio was 15.03%, Tier 1 risk-based capital ratio was 12.29%, common equity Tier 1 capital ratio was 11.95% and Tier 1 leverage capital ratio was 10.56%.

For a discussion of implemented changes to the capital adequacy framework prompted by Basel III and the Dodd- Frank Wall Street Reform and Consumer Protection Act, see our 2023 Annual Report on Form 10-K.

### Liquidity

For a discussion of liquidity for the Company, see Note 14 - Liquidity included in the notes to unaudited consolidated financial statements in this Report and Note 22 – Liquidity in our 2023 Annual Report on Form 10-K.

### Off-Balance Sheet Arrangements

For a discussion of off-balance sheet arrangements, see Note 12 - Off-Balance Sheet Commitments included in the notes to unaudited consolidated financial statements in this Report and “Item 1. Business - Off-Balance Sheet Commitments” in our 2023 Annual Report on Form 10-K.

### Contractual Obligations

There have been no material changes to the contractual obligations described in our 2023 Annual Report on Form 10-K.

## Market risk

As filed, 216 characters.

For quantitative and qualitative disclosures regarding market risks, see “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Interest Rate Risk Management” in this Report.

## Controls and procedures

As filed, 1,891 characters.

### Evaluation of Disclosure Controls and Procedures

### Evaluation of Disclosure Controls and Procedures

Management is responsible for the disclosure controls and procedures of the Corporation. Disclosure controls and procedures are controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods required by the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. As of the end of the period covered by this report, an evaluation was performed under the supervision and with the participation of the Corporation’s management, including the Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer), of the effectiveness of the design and operation of the Corporation’s disclosure controls and procedures. Based on that evaluation, the Corporation’s Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective as of September 30, 2024.

### Changes in Internal Control over Financial Reporting

There were no changes in the Corporation's internal control over financial reporting (as defined in Rule 13a-15(f)) during the quarter ended September 30, 2024 that materially affected, or are reasonably likely to materially affect, the Corporation’s internal control over financial reporting.

## Risk factors

As filed, 232 characters.

There have been no material changes in risk factors applicable to the Corporation from those described in “Risk Factors” in Part I, Item 1A of the Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

Filed Nov 4, 2024.
Source: SEC EDGAR, the filing index for accession 0000950170-24-120861. Last ingested by Listed: Nov 6, 2026, 14:12 ET. No prices; not investment advice.