# Bridgewater Bancshares Inc: Form 10-Q for the period ended Sep 30, 2024

- Company: [Bridgewater Bancshares Inc](/companies/bwb.md) (CIK 1341317)
- Form: 10-Q
- Filed: 2024-10-31
- Accepted by EDGAR: Oct 31, 2024, 07:15 ET
- Period: 2024-09-30
- Accession: 0001558370-24-014002
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1341317/000155837024014002/bwb-20240930x10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1341317/000155837024014002/

## 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 | $2.7m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2024-01-01 to 2024-09-30 | $7.6m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-07-01 to 2024-09-30 | $8.7m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2024-01-01 to 2024-09-30 | $24.6m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-07-01 to 2024-09-30 | $0.27 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2024-01-01 to 2024-09-30 | $0.77 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-07-01 to 2024-09-30 | $0.28 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2024-01-01 to 2024-09-30 | $0.79 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-07-01 to 2024-09-30 | 27,904,910 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2024-01-01 to 2024-09-30 | 27,919,784 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2024-01-01 to 2024-09-30 | $11.8m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2024-01-01 to 2024-09-30 | $658.0k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Share repurchases | 9 months, 2024-01-01 to 2024-09-30 | $5.2m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2024-09-30 | $191.9m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Total assets | at 2024-09-30 | $4.69bn | us-gaap:Assets |
| Total liabilities | at 2024-09-30 | $4.24bn | us-gaap:Liabilities |
| Shareholders' equity | at 2024-09-30 | $452.2m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 108,875 characters.

### General

*The following discussion explains the Company’s financial condition and results of operations as of and for the three and nine months ended September 30, 2024. Annualized results for these interim periods may not be indicative of results for the full year or future periods. The following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes presented elsewhere in this report and the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission, or the SEC, on March 7, 2024.*

### Forward-Looking Statements

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements include, without limitation, statements concerning plans, estimates, calculations, forecasts and projections with respect to the anticipated future performance of the Company. These statements are often, but not always, identified by words such as “may”, “might”, “should”, “could”, “predict”, “potential”, “believe”, “expect”, “continue”, “will”, “anticipate”, “seek”, “estimate”, “intend”, “plan”, “projection”, “would”, “annualized”, “target” and “outlook”, or the negative version of those words or other comparable words of a future or forward-looking nature. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the following:

- interest rate risk, including the effects of changes in the interest rate environment;
- fluctuations in the values of the securities held in our securities portfolio, including as the result of changes in interest rates;
- business and economic conditions generally and in the financial services industry, nationally and within our market area, including the level and impact of inflation and possible recession;
- the effects of developments and events in the financial services industry, including the large-scale deposit withdrawals over a short period of time that resulted in recent bank failures;
- loan concentrations in our loan portfolio;
- the overall health of the local and national real estate market;
- the ability to successfully manage credit risk;
- the ability to maintain an adequate level of allowance for credit losses on loans;
- new or revised accounting standards;
- the concentration of large loans to certain borrowers;
- the concentration of large deposits from certain clients, including those who have balances above current Federal Deposit Insurance Corporation (“FDIC”) insurance limits;
- the ability to successfully manage liquidity risk, which may increase the dependence on non-core funding sources such as brokered deposits, and negatively impact our cost of funds;
- the ability to raise additional capital to implement our business plan;
- the ability to implement our growth strategy and manage costs effectively;
- the composition of the Company’s senior leadership team and the ability to attract and retain key personnel;
- talent and labor shortages and employee turnover;
- the occurrence of fraudulent activity, breaches or failures of our third party vendors’ information security controls or cybersecurity-related incidents, including as a result of sophisticated attacks using artificial intelligence and similar tools;
- interruptions involving our information technology and telecommunications systems or third-party servicers;
- competition in the financial services industry, including from nonbank competitors such as credit unions and “fintech” companies;
- the effectiveness of the risk management fra­­mework;
- the commencement and outcome of litigation and other legal proceedings and regulatory actions against us;
- the impact of recent and future legislative and regulatory changes, including in response to recent bank failures;
- risks related to climate change and the negative impact it may have on our clients and their businesses;
- the imposition of other governmental policies impacting the value of products produced by our commercial borrowers;
- severe weather, natural disasters, wide spread disease or pandemics, acts of war or terrorism, or other adverse external events, including the ongoing conflict in the Middle East and the Russian invasion of Ukraine;
- potential impairment to the goodwill the Company recorded in connection with acquisitions;
- the risks associated with our ongoing acquisition of First Minnetonka City Bank, including the possibility that the merger may be more difficult or expensive to accomplish than anticipated, diversion of management's attention from daily operations and the effect of the proposed merger on the Company’s customer and employee relationships and operating results;
- changes to U.S. or state tax laws, regulations and guidance;
- potential changes in federal policy and at regulatory agencies as a result of the upcoming 2024 presidential election; and
- any other risks described in the “Risk Factors” section of this report and in other reports filed by Bridgewater Bancshares, Inc. with the Securities and Exchange Commission. ​

The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in this report. In addition, past results of operations are not necessarily indicative of future results. Any forward-looking statement made by us in this report is based only on information currently available to us and speaks only as of the date on which it is made. The Company undertakes no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.

### Overview

The Company is a financial holding company headquartered in St. Louis Park, Minnesota. The principal sources of funds for loans and investments are transaction, savings, time, and other deposits, and short-term and long-term borrowings. The Company’s principal sources of income are interest and fees collected on loans, interest and dividends earned on investment securities and service charges. The Company’s principal expenses are interest paid on deposit accounts and borrowings, employee compensation and other overhead expenses. The Company’s simple, efficient business model of providing responsive support and unconventional experiences to clients continues to be the underlying principle that drives the Company’s profitable growth.

### Critical Accounting Policies and Estimates

The consolidated financial statements of the Company are prepared based on the application of certain accounting policies, the most significant of which are described in “Note 1 – Description of the Business and Summary of Significant Accounting Policies” of the notes to the consolidated financial statements included as a part of the Company’s most recent Annual Report on Form 10-K, filed with the SEC on March 7, 2024. There have been no significant changes in the critical accounting policies or the assumptions and judgments utilized in applying these policies since December 31, 2023. Certain policies require numerous estimates and strategic or economic assumptions that may prove inaccurate or subject to variation and may significantly affect the reported results and financial position for the current period or in future periods. The use of estimates, assumptions, and judgments are necessary when financial assets and liabilities are required to be recorded or adjusted to reflect fair value. Assets carried at fair value inherently result in more financial statement volatility. Fair values and information used to record valuation adjustments for certain assets and liabilities are based on either quoted market prices or are provided by other independent third-party sources, when available. When such information is not available, management estimates valuation adjustments. Changes in underlying factors, assumptions or estimates in any of these areas could have a material impact on the future financial condition and results of operations. Management has discussed each critical accounting policy and the methodology for the identification and determination of critical accounting policies with the Company’s Audit Committee.

### Recent Developments

On August 28, 2024, the Company and FMB jointly announced the signing of a definitive merger agreement under which Bridgewater Bank will acquire First Minnetonka City Bank, the wholly-owned banking subsidiary of FMB, in an all-cash transaction.

On October 23, 2024, the Company announced the receipt of all necessary regulatory approvals for the transaction. The acquisition is expected to close in the fourth quarter of 2024, subject to the satisfaction of remaining closing conditions. At the closing of the transaction, First Minnetonka City Bank will merge with and into Bridgewater Bank, with Bridgewater Bank as the surviving entity. The combined organization is expected to have approximately $4.9 billion in total assets, $4.0 billion in deposits, $3.9 billion in loans and leases, and nine full-service branches across the Twin Cities.

### Operating Results Overview

The following table summarizes certain key financial results as of and for the periods indicated:

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

| ​ ​ ​ Income Statement | ​ ​ ​ ​ ​ | ​ ​ ​ As of and for the Three Months Ended September 30, ​ 2024 ​ ​ ​ ​ | ​ ​ ​ June 30 ​ 2024 ​ ​ ​ ​ | ​ ​ ​ March 31, ​ 2024 ​ ​ ​ ​ | ​ ​ ​ December 31, ​ 2023 ​ ​ ​ ​ | ​ ​ ​ ​ September 30, ​ 2023 ​ ​ ​ ​ |
| --- | --- | --- | --- | --- | --- | --- |
| Net Interest Income | **​** | $25,599 ​ | $24,996 ​ | $24,631 ​ | $25,314 ​ | $25,421 **​** |
| Provision for (Recovery of) Credit Losses | **​** | ​ — ​ | ​ 600 ​ | ​ 750 ​ | ​ (250) ​ | ​ (600) **​** |
| Noninterest Income | **​** | ​ 1,522 ​ | ​ 1,763 ​ | ​ 1,550 ​ | ​ 1,409 ​ | ​ 1,726 **​** |
| Noninterest Expense | **​** | ​ 15,760 ​ | ​ 15,539 ​ | ​ 15,189 ​ | ​ 15,740 ​ | ​ 15,237 **​** |
| Net Income | **​** | ​ 8,675 ​ | ​ 8,115 ​ | ​ 7,831 ​ | ​ 8,873 ​ | ​ 9,629 **​** |
| Net Income Available to Common Shareholders | **​** | ​ 7,662 ​ | ​ 7,101 ​ | ​ 6,818 ​ | ​ 7,859 ​ | ​ 8,616 **​** |
| ​ | ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ |
| **Per Common Share Data** | **​** | **​** **​** **​** | **​** **​** **​** | **​** **​** **​** | **​** **​** **​** | **​** **​** **​** |
| Basic Earnings Per Share | ​ | $0.28 **​** | $0.26 **​** | $0.25 **​** | $0.28 **​** | $0.31 ​ |
| Diluted Earnings Per Share | **​** | **​** 0.27 **​** | **​** 0.26 **​** | **​** 0.24 **​** | **​** 0.28 **​** | **​** 0.30 ​ |
| Book Value Per Share | **​** | **​** 14.06 **​** | **​** 13.63 **​** | **​** 13.30 **​** | **​** 12.94 **​** | **​** 12.47 ​ |
| Tangible Book Value Per Share (1) | **​** | **​** 13.96 **​** | **​** 13.53 **​** | **​** 13.20 **​** | **​** 12.84 **​** | **​** 12.37 ​ |
| Basic Weighted Average Shares Outstanding | **​** | **​** 27,382,798 **​** | **​** 27,386,713 **​** | **​** 27,691,401 **​** | **​** 27,870,430 **​** | **​** 27,943,409 ​ |
| Diluted Weighted Average Shares Outstanding | **​** | **​** 27,904,910 **​** | **​** 27,748,184 **​** | **​** 28,089,805 **​** | **​** 28,238,056 **​** | **​** 28,311,778 ​ |
| Shares Outstanding at Period End | **​** | **​** 27,425,690 **​** | **​** 27,348,049 **​** | **​** 27,589,827 **​** | **​** 27,748,965 **​** | **​** 28,015,505 ​ |
| ​ | ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ |
| **Selected Performance Ratios** | ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ |
| Return on Average Assets (2) | ​ | ​ 0.73% | ​ 0.70% | ​ 0.69% | ​ 0.77% | ​ 0.85% |
| Pre-Provision Net Revenue Return on Average Assets (1)(2) | ​ | ​ 0.96 ​ | ​ 0.94 ​ | ​ 0.95 ​ | ​ 0.96 ​ | ​ 1.01 ​ |
| Return on Average Shareholders' Equity (2) | ​ | ​ 7.79 ​ | ​ 7.49 ​ | ​ 7.35 ​ | ​ 8.43 ​ | ​ 9.23 ​ |
| Return on Average Tangible Common Equity (1)(2) | ​ | ​ 8.16 ​ | ​ 7.80 ​ | ​ 7.64 ​ | ​ 8.95 ​ | ​ 9.92 ​ |
| Average Shareholders' Equity to Average Assets | ​ | ​ 9.42 ​ | ​ 9.37 ​ | ​ 9.32 ​ | ​ 9.15 ​ | ​ 9.19 ​ |
| Net Interest Margin (3) | ​ | ​ 2.24 ​ | ​ 2.24 ​ | ​ 2.24 ​ | ​ 2.27 ​ | ​ 2.32 ​ |
| Core Net Interest Margin (1)(3) | ​ | ​ 2.16 ​ | ​ 2.17 ​ | ​ 2.18 ​ | ​ 2.21 ​ | ​ 2.24 ​ |
| Yield on Interest Earning Assets(3) | ​ | ​ 5.48 ​ | ​ 5.41 ​ | ​ 5.28 ​ | ​ 5.22 ​ | ​ 5.14 ​ |
| Yield on Total Loans, Gross(3) | ​ | ​ 5.57 ​ | ​ 5.50 ​ | ​ 5.38 ​ | ​ 5.33 ​ | ​ 5.26 ​ |
| Cost of Interest Bearing Liabilities | ​ | ​ 4.27 ​ | ​ 4.19 ​ | ​ 4.03 ​ | ​ 3.97 ​ | ​ 3.81 ​ |
| Cost of Total Deposits | ​ | ​ 3.58 ​ | ​ 3.46 ​ | ​ 3.32 ​ | ​ 3.19 ​ | ​ 2.99 ​ |
| Cost of Funds | ​ | ​ 3.54 ​ | ​ 3.49 ​ | ​ 3.34 ​ | ​ 3.23 ​ | ​ 3.10 ​ |
| Efficiency Ratio (1) | ​ | ​ 58.0 ​ | ​ 58.7 ​ | ​ 58.2 ​ | ​ 58.8 ​ | ​ 56.1 ​ |
| Noninterest Expense to Average Assets (2) | ​ | ​ 1.33 ​ | ​ 1.35 ​ | ​ 1.33 ​ | ​ 1.37 ​ | ​ 1.34 ​ |
| ​ | ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ |
| **Balance Sheet** | ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ |
| Total Assets | ​ | $4,691,517 ​ | $4,687,035 ​ | $4,723,109 ​ | $4,611,990 ​ | $4,557,070 **​** |
| Total Loans, Gross | ​ | ​ 3,685,590 ​ | ​ 3,800,385 ​ | ​ 3,784,205 ​ | ​ 3,724,282 ​ | ​ 3,722,271 **​** |
| Deposits | ​ | ​ 3,747,442 ​ | ​ 3,807,712 ​ | ​ 3,807,225 ​ | ​ 3,709,948 ​ | ​ 3,675,509 **​** |
| Total Shareholders' Equity | ​ | ​ 452,200 ​ | ​ 439,241 ​ | ​ 433,611 ​ | ​ 425,515 ​ | ​ 415,960 **​** |
| Loan to Deposit Ratio | ​ | ​ 98.3% | ​ 99.8% | ​ 99.4% | ​ 100.4% | ​ 101.3% |
| Core Deposits to Total Deposits (4) | ​ | ​ 71.5 ​ | ​ 67.9 ​ | ​ 69.3 ​ | ​ 68.7 ​ | ​ 70.3 **​** |
| Uninsured Deposits to Total Deposits | ​ | ​ 25.0 ​ | ​ 22.5 ​ | ​ 26.0 ​ | ​ 24.3 ​ | ​ 22.2 **​** |
| ​ | ​ | ​ **​** ​ | ​ **​** ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ |
| **Capital Ratios (Consolidated) (6)** | ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ |
| Tier 1 Leverage Ratio | ​ | ​ 9.75% | ​ 9.66% | ​ 9.66% | ​ 9.57% | ​ 9.62% |
| Common Equity Tier 1 Risk-based Capital Ratio | ​ | ​ 9.79 ​ | ​ 9.41 ​ | ​ 9.21 ​ | ​ 9.16 ​ | ​ 9.07 ​ |
| Tier 1 Risk-based Capital Ratio | ​ | ​ 11.44 ​ | ​ 11.03 ​ | ​ 10.83 ​ | ​ 10.79 ​ | ​ 10.69 ​ |
| Total Risk-based Capital Ratio | ​ | ​ 14.62 ​ | ​ 14.16 ​ | ​ 14.00 ​ | ​ 13.97 ​ | ​ 13.88 ​ |
| Tangible Common Equity to Tangible Assets (1) | ​ | ​ 8.17 ​ | ​ 7.90 ​ | ​ 7.72 ​ | ​ 7.73 ​ | ​ 7.61 ​ |

*(dollars in thousands)*

| ​ ​ ​ Selected Asset Quality Data | ​ ​ ​ ​ ​ | ​ ​ ​ As of and for the Three Months Ended September 30, ​ 2024 ​ ​ ​ ​ | ​ ​ ​ June 30 ​ 2024 ​ ​ ​ ​ | ​ ​ ​ March 31, ​ 2024 ​ ​ ​ ​ | ​ ​ ​ December 31, ​ 2023 ​ ​ ​ ​ | ​ ​ ​ ​ September 30, ​ 2023 ​ ​ ​ ​ |
| --- | --- | --- | --- | --- | --- | --- |
| Loans 30-89 Days Past Due | ​ | $65 ​ | $502 ​ | $— ​ | $15,110 ​ | $11 ​ |
| Loans 30-89 Days Past Due to Total Loans | ​ | ​ 0.00% | ​ 0.01% | ​ 0.00% | ​ 0.41% | ​ 0.00% |
| Nonperforming Loans | ​ | $8,378 ​ | $678 ​ | $249 ​ | $919 ​ | $749 ​ |
| Nonperforming Loans to Total Loans | ​ | ​ 0.23% | ​ 0.02% | ​ 0.01% | ​ 0.02% | ​ 0.02% |
| Nonaccrual Loans to Total Loans | ​ | ​ 0.23 ​ | ​ 0.02 ​ | ​ 0.01 ​ | ​ 0.02 ​ | ​ 0.02 ​ |
| Nonaccrual Loans and Loans Past Due 90 Days and Still Accruing to Total Loans | ​ | ​ 0.23 ​ | ​ 0.02 ​ | ​ 0.01 ​ | ​ 0.02 ​ | ​ 0.02 ​ |
| Foreclosed Assets | ​ | $434 ​ | $— ​ | $20 ​ | $— ​ | $— ​ |
| Nonperforming Assets (5) | ​ | ​ 8,812 ​ | ​ 678 ​ | ​ 269 ​ | ​ 919 ​ | ​ 749 ​ |
| Nonperforming Assets to Total Assets (5) | ​ | ​ 0.19% | ​ 0.01% | ​ 0.01% | ​ 0.02% | ​ 0.02% |
| Allowance for Credit Losses on Loans to Total Loans | ​ | ​ 1.38 ​ | ​ 1.37 ​ | ​ 1.36 ​ | ​ 1.36 ​ | ​ 1.36 ​ |
| Allowance for Credit Losses on Loans to Nonaccrual Loans | ​ | ​ 608.95 ​ | ​ 7,662.09 ​ | ​ 20,621.29 ​ | ​ 5,494.45 ​ | ​ 6,753.67 ​ |
| Net Loan Charge-Offs to Average Loans (2) | ​ | ​ 0.10 ​ | ​ 0.00 ​ | ​ 0.00 ​ | ​ 0.01 ​ | ​ 0.01 ​ |
| Watchlist Risk Rating Loans | ​ | $31,991 ​ | $30,436 ​ | $21,624 ​ | $26,485 ​ | $26,877 ​ |
| Substandard Risk Rating Loans | ​ | ​ 31,637 ​ | ​ 33,908 ​ | ​ 33,829 ​ | ​ 33,858 ​ | ​ 35,621 ​ |

(1) Represents a non-GAAP financial measure. See "Non-GAAP Financial Measures" for further details.

(2) Annualized.

(3) Amounts calculated on a tax-equivalent basis using the statutory federal tax rate of 21%.

(4) Core deposits are defined as total deposits less brokered deposits and certificates of deposit greater than $250,000.

(5) Nonperforming assets are defined as nonaccrual loans plus 90 days past due plus foreclosed assets.

### Discussion and Analysis of Results of Operations

### Net Income

Net income was $8.7 million for the third quarter of 2024, compared to net income of $9.6 million for the third quarter of 2023. Earnings per diluted common share for the third quarter of 2024 were $0.27, compared to $0.30 per diluted common share for the third quarter of 2023. Net income was $24.6 million for the nine months ended September 30, 2024, compared to net income of $31.1 million for the nine months ended September 30, 2023. Earnings per diluted common share for the nine months ended September 30, 2024 were $0.77, compared to $0.99 per diluted common share for the nine months ended September 30, 2023.

### Net Interest Income

The Company’s primary source of revenue is net interest income, which is impacted by the level of interest earning assets and related funding sources, as well as changes in interest rates. The difference between the average yield on earning assets and the average rate paid for interest bearing liabilities is the net interest spread. Noninterest bearing sources of funds, such as demand deposits and shareholders’ equity, also support earning assets. The impact of the noninterest bearing sources of funds is captured in the net interest margin, which is calculated as net interest income divided by average earning assets. Both the net interest margin and net interest spread are presented on a tax-equivalent basis, which means that tax-free interest income has been adjusted to pretax-equivalent income, assuming a 21% federal tax rate. Management’s ability to respond to changes in interest rates by using effective asset-liability management techniques is critical to managing net interest margin and the Company’s primary source of earnings.

### Average Balances and Yields

The following tables present, for the three and nine months ended September 30, 2024 and 2023, the average balances of each principal category of assets, liabilities and shareholders’ equity, and an analysis of net interest income. The average balances are principally daily averages and, for loans, include both performing and nonperforming balances. Interest income on loans includes the effects of net deferred loan origination fees and costs accounted for as yield adjustments. These tables are presented on a tax-equivalent basis, if applicable.

*(dollars in thousands)*

| ​ ​ ​ ​ ​ Interest Earning Assets: | ​ ​ ​ ​ ​ ​ | ​ ​ For the Three Months Ended September 30, 2024 Average Balance ​ ​ ​ ​ | ​ ​ ​ ​ | ​ ​ Interest & Fees ​ ​ ​ ​ | ​ ​ ​ ​ | ​ ​ ​ Yield/ ​ Rate ​ ​ ​ ​ | ​ ​ September 30, 2023 Average Balance ​ ​ ​ ​ | ​ ​ ​ ​ | ​ ​ Interest & Fees ​ ​ ​ ​ | ​ ​ ​ ​ | ​ ​ Yield/ Rate ​ ​ ​ ​ |
| --- | --- | ---: | --- | --- | --- | ---: | ---: | --- | --- | --- | ---: |
| Cash Investments | ​ | $157,114 | ​ | $1,971 | ​ | 4.99% | $81,038 | ​ | $903 | ​ | 4.42% |
| Investment Securities: | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Taxable Investment Securities | ​ | 668,429 | ​ | 8,406 | ​ | 5.00 ​ | 565,008 | ​ | 6,234 | ​ | 4.38 ​ |
| Tax-Exempt Investment Securities (1) | ​ | 31,496 | ​ | 402 | ​ | 5.08 ​ | 29,955 | ​ | 346 | ​ | 4.58 ​ |
| Total Investment Securities | ​ | 699,925 | ​ | 8,808 | ​ | 5.01 ​ | 594,963 | ​ | 6,580 | ​ | 4.39 ​ |
| Loans (1)(2) | ​ | 3,721,654 | ​ | ​ 52,118 | ​ | 5.57 ​ | 3,722,594 | ​ | ​ 49,326 | ​ | 5.26 ​ |
| Federal Home Loan Bank Stock | ​ | 16,828 | ​ | ​ 436 | ​ | 10.31 ​ | 17,829 | ​ | ​ 400 | ​ | 8.89 ​ |
| Total Interest Earning Assets | ​ | 4,595,521 | ​ | 63,333 | ​ | 5.48% | 4,416,424 | ​ | 57,209 | ​ | 5.14% |
| Noninterest Earning Assets | ​ | ​ 108,283 | ​ | ​ ​ | ​ | ​ ​ | ​ 88,513 | ​ | ​ ​ | ​ | ​ ​ |
| Total Assets | ​ | $4,703,804 | ​ | ​ ​ | ​ | ​ ​ | $4,504,937 | ​ | ​ ​ | ​ | ​ ​ |
| **Interest Bearing Liabilities:** | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Deposits: | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Interest Bearing Transaction Deposits | ​ | $804,161 | ​ | $9,369 | ​ | 4.63% | $730,244 | ​ | $7,136 | ​ | 3.88% |
| Savings and Money Market Deposits | ​ | 939,665 | ​ | ​ 10,262 | ​ | 4.34 ​ | 874,612 | ​ | ​ 8,089 | ​ | 3.67 ​ |
| Time Deposits | ​ | 355,050 | ​ | ​ 3,918 | ​ | 4.39 ​ | 266,635 | ​ | ​ 1,962 | ​ | 2.92 ​ |
| Brokered Deposits | ​ | 989,712 | ​ | ​ 10,638 | ​ | 4.28 ​ | 985,276 | ​ | ​ 10,038 | ​ | 4.04 ​ |
| Total Interest Bearing Deposits | ​ | ​ 3,088,588 | ​ | ​ 34,187 | ​ | 4.40 ​ | ​ 2,856,767 | ​ | ​ 27,225 | ​ | 3.78 ​ |
| Federal Funds Purchased | ​ | 141 | ​ | ​ 2 | ​ | 5.72 ​ | 39,641 | ​ | ​ 548 | ​ | 5.48 ​ |
| Notes Payable | ​ | 13,750 | ​ | ​ 296 | ​ | 8.58 ​ | 13,750 | ​ | ​ 296 | ​ | 8.58 ​ |
| FHLB Advances | ​ | 309,120 | ​ | ​ 1,942 | ​ | 2.50 ​ | 275,261 | ​ | ​ 2,316 | ​ | 3.34 ​ |
| Subordinated Debentures | ​ | 79,519 | ​ | ​ 1,001 | ​ | 5.01 ​ | 79,137 | ​ | ​ 1,003 | ​ | 5.03 ​ |
| Total Interest Bearing Liabilities | ​ | 3,491,118 | ​ | 37,428 | ​ | 4.27% | 3,264,556 | ​ | 31,388 | ​ | 3.81% |
| **Noninterest Bearing Liabilities:** | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Noninterest Bearing Transaction Deposits | ​ | 710,192 | ​ | ​ ​ | ​ | ​ ​ | 754,567 | ​ | ​ ​ | ​ | ​ ​ |
| Other Noninterest Bearing Liabilities | ​ | ​ 59,417 | ​ | ​ ​ | ​ | ​ ​ | ​ 71,767 | ​ | ​ ​ | ​ | ​ ​ |
| Total Noninterest Bearing Liabilities | ​ | 769,609 | ​ | ​ ​ | ​ | ​ ​ | 826,334 | ​ | ​ ​ | ​ | ​ ​ |
| Shareholders' Equity | ​ | ​ 443,077 | ​ | ​ ​ | ​ | ​ ​ | ​ 414,047 | ​ | ​ ​ | ​ | ​ ​ |
| Total Liabilities and Shareholders' Equity | ​ | $4,703,804 | ​ | ​ ​ | ​ | ​ ​ | $4,504,937 | ​ | ​ ​ | ​ | ​ ​ |
| Net Interest Income / Interest Rate Spread | ​ | ​ ​ | ​ | 25,905 | ​ | 1.21% | ​ ​ | ​ | 25,821 | ​ | 1.33% |
| Net Interest Margin (3) | ​ | ​ ​ | ​ | ​ ​ | ​ | 2.24% | ​ ​ | ​ | ​ ​ | ​ | 2.32% |
| Taxable Equivalent Adjustment: | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Tax-Exempt Investment Securities and Loans | ​ | ​ ​ | ​ | (306) | ​ | ​ ​ | ​ ​ | ​ | (400) | ​ | ​ ​ |
| Net Interest Income | ​ | ​ ​ | ​ | $25,599 | ​ | ​ ​ | ​ ​ | ​ | $25,421 | ​ | ​ ​ |

(1) Interest income and average rates for tax-exempt investment securities and loans are presented on a tax-equivalent basis, assuming a federal income tax rate of 21%.

(2) Average loan balances include nonaccrual loans. Interest income on loans includes amortization of deferred loan fees, net of deferred loan costs.

(3) Net interest margin includes the tax equivalent adjustment and represents the annualized results of: (i) the difference between interest income on interest earning assets and the interest expense on interest bearing liabilities, divided by (ii) average interest earning assets for the period.

*(dollars in thousands)*

| ​ ​ ​ ​ ​ Interest Earning Assets: | ​ ​ ​ ​ ​ ​ | ​ ​ For the Nine Months Ended September 30, 2024 Average Balance ​ ​ ​ ​ | ​ ​ ​ ​ | ​ ​ Interest & Fees ​ ​ ​ ​ | ​ ​ ​ ​ | ​ ​ ​ Yield/ ​ Rate ​ ​ ​ ​ | ​ ​ September 30, 2023 Average Balance ​ ​ ​ ​ | ​ ​ ​ ​ | ​ ​ Interest & Fees ​ ​ ​ ​ | ​ ​ ​ ​ | ​ ​ Yield/ ​ Rate ​ ​ ​ ​ |
| --- | --- | ---: | --- | --- | --- | ---: | ---: | --- | --- | --- | ---: |
| Cash Investments | ​ | $104,831 | ​ | $3,722 | ​ | 4.74% | $68,150 | ​ | $1,937 | ​ | 3.80% |
| Investment Securities: | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Taxable Investment Securities | ​ | 649,538 | ​ | 23,867 | ​ | 4.91 ​ | 569,097 | ​ | 18,192 | ​ | 4.27 ​ |
| Tax-Exempt Investment Securities (1) | ​ | 31,597 | ​ | 1,203 | ​ | 5.09 ​ | 28,947 | ​ | 975 | ​ | 4.50 ​ |
| Total Investment Securities | ​ | 681,135 | ​ | 25,070 | ​ | 4.92 ​ | 598,044 | ​ | 19,167 | ​ | 4.29 ​ |
| Loans (1)(2) | ​ | 3,740,855 | ​ | 153,568 | ​ | 5.48 ​ | 3,690,196 | ​ | ​ 142,659 | ​ | 5.17 ​ |
| Federal Home Loan Bank Stock | ​ | 18,111 | ​ | ​ 1,173 | ​ | 8.65 ​ | 22,343 | ​ | ​ 1,228 | ​ | 7.34 ​ |
| Total Interest Earning Assets | ​ | 4,544,932 | ​ | 183,533 | ​ | 5.39% | 4,378,733 | ​ | 164,991 | ​ | 5.04% |
| Noninterest Earning Assets | ​ | ​ 102,993 | ​ | ​ ​ | ​ | ​ ​ | ​ 86,243 | ​ | ​ ​ | ​ | ​ ​ |
| Total Assets | ​ | $4,647,925 | ​ | ​ ​ | ​ | ​ ​ | $4,464,976 | ​ | ​ ​ | ​ | ​ ​ |
| **Interest Bearing Liabilities:** | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Deposits: | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Interest Bearing Transaction Deposits | ​ | $757,409 | ​ | $25,332 | ​ | 4.47% | $625,531 | ​ | $15,833 | ​ | 3.38% |
| Savings and Money Market Deposits | ​ | 917,051 | ​ | ​ 28,502 | ​ | 4.15 ​ | 926,494 | ​ | ​ 21,636 | ​ | 3.12 ​ |
| Time Deposits | ​ | 344,484 | ​ | ​ 10,935 | ​ | 4.24 ​ | 261,474 | ​ | ​ 4,734 | ​ | 2.42 ​ |
| Brokered Deposits | ​ | 993,445 | ​ | ​ 31,226 | ​ | 4.20 ​ | 876,130 | ​ | ​ 24,394 | ​ | 3.72 ​ |
| Total Interest Bearing Deposits | ​ | ​ 3,012,389 | ​ | ​ 95,995 | ​ | 4.26 ​ | ​ 2,689,629 | ​ | ​ 66,597 | ​ | 3.31 ​ |
| Federal Funds Purchased | ​ | 27,605 | ​ | ​ 1,159 | ​ | 5.61 ​ | 220,434 | ​ | ​ 8,253 | ​ | 5.01 ​ |
| Notes Payable | ​ | 13,750 | ​ | ​ 887 | ​ | 8.62 ​ | 13,750 | ​ | ​ 844 | ​ | 8.21 ​ |
| FHLB Advances | ​ | 311,380 | ​ | ​ 6,325 | ​ | 2.71 ​ | 215,938 | ​ | ​ 5,269 | ​ | 3.26 ​ |
| Subordinated Debentures | ​ | 79,424 | ​ | ​ 2,982 | ​ | 5.02 ​ | 79,042 | ​ | ​ 2,979 | ​ | 5.04 ​ |
| Total Interest Bearing Liabilities | ​ | 3,444,548 | ​ | 107,348 | ​ | 4.16% | 3,218,793 | ​ | 83,942 | ​ | 3.49% |
| **Noninterest Bearing Liabilities:** | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Noninterest Bearing Transaction Deposits | ​ | 700,308 | ​ | ​ ​ | ​ | ​ ​ | 774,523 | ​ | ​ ​ | ​ | ​ ​ |
| Other Noninterest Bearing Liabilities | ​ | ​ 67,405 | ​ | ​ ​ | ​ | ​ ​ | ​ 63,646 | ​ | ​ ​ | ​ | ​ ​ |
| Total Noninterest Bearing Liabilities | ​ | 767,713 | ​ | ​ ​ | ​ | ​ ​ | 838,169 | ​ | ​ ​ | ​ | ​ ​ |
| Shareholders' Equity | ​ | ​ 435,664 | ​ | ​ ​ | ​ | ​ ​ | ​ 408,014 | ​ | ​ ​ | ​ | ​ ​ |
| Total Liabilities and Shareholders' Equity | ​ | $4,647,925 | ​ | ​ ​ | ​ | ​ ​ | $4,464,976 | ​ | ​ ​ | ​ | ​ ​ |
| Net Interest Income / Interest Rate Spread | ​ | ​ ​ | ​ | 76,185 | ​ | 1.23% | ​ ​ | ​ | 81,049 | ​ | 1.55% |
| Net Interest Margin (3) | ​ | ​ ​ | ​ | ​ ​ | ​ | 2.24% | ​ ​ | ​ | ​ ​ | ​ | 2.47% |
| Taxable Equivalent Adjustment: | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Tax-Exempt Investment Securities and Loans | ​ | ​ ​ | ​ | (959) | ​ | ​ ​ | ​ ​ | ​ | (1,189) | ​ | ​ ​ |
| Net Interest Income | ​ | ​ ​ | ​ | $75,226 | ​ | ​ ​ | ​ ​ | ​ | $79,860 | ​ | ​ ​ |

(1) Interest income and average rates for tax-exempt investment securities and loans are presented on a tax-equivalent basis, assuming a federal income tax rate of 21%.

(2) Average loan balances include nonaccrual loans. Interest income on loans includes amortization of deferred loan fees, net of deferred loan costs.

(3) Net interest margin includes the tax equivalent adjustment and represents the annualized results of: (i) the difference between interest income on interest earning assets and the interest expense on interest bearing liabilities, divided by (ii) average interest earning assets for the period.

### Interest Rates and Operating Interest Differential

Increases and decreases in interest income and interest expense result from changes in average balances (volume) of interest earning assets and interest bearing liabilities, as well as changes in average interest rates. The following table presents the effect that these factors had on the interest earned on interest earning assets and the interest incurred on interest bearing liabilities. The effect of changes in volume is determined by multiplying the change in volume by the previous period’s average rate. Similarly, the effect of rate changes is calculated by multiplying the change in average rate by the previous period’s volume. The changes not attributable specifically to either volume or rate have been allocated to the changes due to volume. The following tables present the changes in the volume and rate of interest bearing assets and liabilities for the three months ended September 30, 2024, compared to the three months ended September 30, 2023, and for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023:

*(dollars in thousands)*

| ​ ​ ​ ​ ​ Interest Earning Assets: | ​ ​ ​ ​ ​ ​ | ​ ​ Three Months Ended September 30, 2024 Compared with Three Months Ended September 30, 2023 Change Due To: Volume ​ ​ | ​ ​ | ​ ​ Rate ​ ​ | ​ ​ ​ | ​ ​ Interest Variance ​ ​ |
| --- | --- | --- | --- | --- | --- | --- |
| Cash Investments | ​ | $952 | ​ | $116 | ​ | $1,068 |
| Investment Securities: | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Taxable Investment Securities | ​ | ​ 1,283 | ​ | ​ 889 | ​ | ​ 2,172 |
| Tax-Exempt Investment Securities | ​ | ​ 18 | ​ | ​ 38 | ​ | ​ 56 |
| Total Securities | ​ | ​ 1,301 | ​ | ​ 927 | ​ | ​ 2,228 |
| Loans | ​ | ​ (143) | ​ | ​ 2,935 | ​ | ​ 2,792 |
| Federal Home Loan Bank Stock | ​ | ​ (27) | ​ | ​ 63 | ​ | ​ 36 |
| Total Interest Earning Assets | ​ | $2,083 | ​ | $4,041 | ​ | $6,124 |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| **Interest Bearing Liabilities:** | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Interest Bearing Transaction Deposits | ​ | $842 | ​ | $1,391 | ​ | $2,233 |
| Savings and Money Market Deposits | ​ | ​ 689 | ​ | ​ 1,484 | ​ | ​ 2,173 |
| Time Deposits | ​ | ​ 970 | ​ | ​ 986 | ​ | ​ 1,956 |
| Brokered Deposits | ​ | ​ 19 | ​ | ​ 581 | ​ | ​ 600 |
| Total Deposits | ​ | ​ 2,520 | ​ | ​ 4,442 | ​ | ​ 6,962 |
| Federal Funds Purchased | ​ | ​ (569) | ​ | ​ 23 | ​ | ​ (546) |
| Notes Payable | ​ | ​ — | ​ | ​ — | ​ | ​ — |
| FHLB Advances | ​ | ​ 204 | ​ | ​ (578) | ​ | ​ (374) |
| Subordinated Debentures | ​ | ​ 3 | ​ | ​ (5) | ​ | ​ (2) |
| Total Interest Bearing Liabilities | ​ | ​ 2,158 | ​ | ​ 3,882 | ​ | ​ 6,040 |
| Net Interest Income | ​ | $(75) | ​ | $159 | ​ | $84 |

*(dollars in thousands)*

| ​ ​ ​ ​ ​ Interest Earning Assets: | ​ ​ ​ ​ ​ ​ | ​ ​ ​ Nine Months Ended September 30, 2024 ​ Compared with ​ Nine Months Ended September 30, 2023 ​ Change Due To: ​ Volume ​ ​ | ​ ​ | ​ ​ ​ Rate ​ ​ | ​ ​ ​ | ​ ​ ​ Interest ​ Variance ​ ​ |
| --- | --- | --- | --- | --- | --- | --- |
| Cash Investments | ​ | $1,305 | ​ | $480 | ​ | $1,785 |
| Investment Securities: | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Taxable Investment Securities | ​ | ​ 2,972 | ​ | ​ 2,703 | ​ | ​ 5,675 |
| Tax-Exempt Investment Securities | ​ | ​ 102 | ​ | ​ 126 | ​ | ​ 228 |
| Total Securities | ​ | ​ 3,074 | ​ | ​ 2,829 | ​ | ​ 5,903 |
| Loans | ​ | ​ 2,223 | ​ | ​ 8,686 | ​ | ​ 10,909 |
| Federal Home Loan Bank Stock | ​ | ​ (274) | ​ | ​ 219 | ​ | ​ (55) |
| Total Interest Earning Assets | ​ | $6,328 | ​ | $12,214 | ​ | $18,542 |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| **Interest Bearing Liabilities:** | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Interest Bearing Transaction Deposits | ​ | $4,426 | ​ | $5,073 | ​ | $9,499 |
| Savings and Money Market Deposits | ​ | ​ (273) | ​ | ​ 7,139 | ​ | ​ 6,866 |
| Time Deposits | ​ | ​ 2,639 | ​ | ​ 3,562 | ​ | ​ 6,201 |
| Brokered Deposits | ​ | ​ 3,709 | ​ | ​ 3,123 | ​ | ​ 6,832 |
| Total Deposits | ​ | ​ 10,501 | ​ | ​ 18,897 | ​ | ​ 29,398 |
| Federal Funds Purchased | ​ | ​ (8,087) | ​ | ​ 993 | ​ | ​ (7,094) |
| Notes Payable | ​ | ​ — | ​ | ​ 43 | ​ | ​ 43 |
| FHLB Advances | ​ | ​ 1,943 | ​ | ​ (887) | ​ | ​ 1,056 |
| Subordinated Debentures | ​ | ​ 18 | ​ | ​ (15) | ​ | ​ 3 |
| Total Interest Bearing Liabilities | ​ | ​ 4,375 | ​ | ​ 19,031 | ​ | ​ 23,406 |
| Net Interest Income | ​ | $1,953 | ​ | $(6,817) | ​ | $(4,864) |

### Comparison of Net Interest Margin, Interest Income, and Interest Expense

#### Third Quarter of 2024 Compared to Third Quarter of 2023

Net interest income was $25.6 million for the third quarter of 2024, an increase of $178,000 compared to $25.4 million for the third quarter of 2023. The increase in net interest income was primarily due to increased cash balances, growth and higher yields in the securities portfolio, and higher yields on loans, offset partially by growth and higher rates on deposits.

Net interest margin (on a fully tax-equivalent basis) for the third quarter of 2024 was 2.24%, an eight basis point decline from 2.32% in the third quarter of 2023. Core net interest margin (on a fully tax-equivalent basis), a non-GAAP financial measure which excludes the impact of loan fees, was 2.16% for the third quarter of 2024, an eight basis point decline from 2.24% in the third quarter of 2023. The decline in the margin was primarily due to higher funding costs, offset partially by higher earning asset yields.

Average interest earning assets were $4.60 billion for the third quarter of 2024, an increase of $179.1 million, or 4.1%, compared to $4.42 billion for the third quarter of 2023. This increase in average interest earning assets was primarily due to increased cash balances and purchases of investment securities. Average interest bearing liabilities were $3.49 billion for the third quarter of 2024, an increase of $226.6 million, or 6.9%, compared to $3.26 billion for the third quarter of 2023. The increase in average interest bearing liabilities was primarily due to an increase in all deposit types and FHLB advances, offset partially by a decrease in federal funds purchased.

Average interest earning assets produced a tax-equivalent yield of 5.48% for the third quarter of 2024, compared to 5.14% for the third quarter of 2023. The increase in the yield on interest earning assets was primarily due to the purchase of higher yielding securities and the repricing of the loan and securities portfolios in the higher interest rate environment. The average rate paid on interest bearing liabilities was 4.27% for the third quarter of 2024, compared to

3.81% for the third quarter of 2023. The increase was primarily due to continued deposit repricing in the higher rate environment.

*Interest Income.* Total interest income, on a tax-equivalent basis, was $63.3 million for the third quarter of 2024, compared to $57.2 million for the third quarter of 2023. The $6.1 million, or 10.7%, increase in total interest income on a tax-equivalent basis was primarily due to purchases of investment securities and higher earning asset yields in the higher interest rate environment.

Interest income on the investment securities portfolio, on a tax-equivalent basis, increased $2.2 million for the third quarter of 2024, compared to the third quarter of 2023, primarily due to a $105.0 million, or 17.6%, increase in average balances between the two periods and higher rates earned on securities.

Interest income on loans, on a tax-equivalent basis, was $52.1 million for the third quarter of 2024, compared to $49.3 million for the third quarter of 2023. The $2.8 million increase was primarily due to the repricing of the loan portfolio in the higher interest rate environment.

Loan interest income and loan fees remained one of the primary contributing factors to the changes in the yield on interest earning assets. The aggregate loan yield increased to 5.57% in the third quarter of 2024, which was 31 basis points higher than 5.26% in the third quarter of 2023. The core loan yield continued to rise as new loans originated at higher yields and the existing portfolio reprice in the higher rate environment.

The following table presents a summary of interest and fees recognized on loans for the periods indicated:

| ​ ​ ​ | ​ ​ ​ | ​ ​ Three Months Ended September 30, 2024 ​ | ​ ​ | ​ ​ June 30, 2024 ​ | ​ ​ | ​ ​ March 31, 2024 ​ | ​ ​ | ​ ​ December 31, 2023 ​ | ​ ​ | ​ ​ September 30, 2023 ​ | ​ ​ |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- |
| Interest | ​ | 5.47% | ​ | 5.42% | ​ | 5.31% | ​ | 5.25% | ​ | 5.16% | ​ |
| Fees | ​ | 0.10 ​ | ​ | 0.08 ​ | ​ | 0.07 ​ | ​ | 0.08 ​ | ​ | 0.10 ​ | ​ |
| Yield on Loans | ​ | 5.57% | ​ | 5.50% | ​ | 5.38% | ​ | 5.33% | ​ | 5.26% | ​ |

*Interest Expense.* Interest expense on interest bearing liabilities was $37.4 million for the third quarter of 2024, an increase of $6.0 million, from $31.4 million for the third quarter of 2023. The increase was primarily due to growth and upward repricing of the deposit portfolio in the higher interest rate environment.

Interest expense on deposits was $34.2 million for the third quarter of 2024, an increase of $7.0 million, from $27.2 million for the third quarter of 2023. The increase in interest expense on deposits was primarily due to upward repricing of the deposit portfolio in the higher interest rate environment and the average balance of interest bearing deposits increasing by $231.8 million, or 8.1%. The cost of total deposits was 3.58% in the third quarter of 2024, a 59 basis point increase, compared to 2.99% in the third quarter of 2023. The increase was primarily due to the upward repricing of the deposit portfolio in the higher interest rate environment.

Interest expense on borrowings was $3.2 million for the third quarter of 2024, a decrease of $921,000, compared to $4.2 million for the third quarter of 2023. The decrease was primarily due to a decreased utilization of federal funds purchased and a decrease in the rate on FHLB advances.

#### Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023

Net interest income was $75.2 million for the nine months ended September 30, 2024, a decrease of $4.6 million, or 5.8%, compared to $79.9 million for the nine months ended September 30, 2023. The decrease in net interest income was primarily due to growth and higher rates paid on deposits, offset partially by growth and higher earning asset yields in the higher interest rate environment.

Net interest margin (on a fully tax-equivalent basis) for the nine months ended September 30, 2024 was 2.24%, a 23 basis point decline from 2.47% for the nine months ended September 30, 2023. Core net interest margin (on a fully tax-equivalent basis), a non-GAAP financial measure which excludes the impact of loan fees, was 2.17% for the nine months ended September 30, 2024, a 22 basis point decline from 2.39% for the nine months ended September 30, 2023.

Average interest earning assets were $4.54 billion for the nine months ended September 30, 2024, an increase of $166.2 million, or 3.8%, compared to $4.38 billion for the nine months ended September 30, 2023. This increase in average interest earning assets was primarily due to organic growth in the loan portfolio, continued purchases of investment securities, and an increase in cash balances. Average interest bearing liabilities were $3.44 billion for the nine months ended September 30, 2024, an increase of $225.8 million, or 7.0%, compared to $3.22 billion for the nine months ended September 30, 2023. The increase in average interest bearing liabilities was primarily due to an increase in interest bearing transaction deposits, time deposits, brokered deposits, and FHLB advances, offset partially by a decrease in federal funds purchased.

Average interest earning assets produced a tax-equivalent yield of 5.39% for the nine months ended September 30, 2024, compared to 5.04% for the nine months ended September 30, 2023. The average rate paid on interest bearing liabilities was 4.16% for the nine months ended September 30, 2024, compared to 3.49% for the nine months ended September 30, 2023.

*Interest Income.* Total interest income on a tax-equivalent basis was $183.5 million for the nine months ended September 30, 2024, compared to $165.0 million for the nine months ended September 30, 2023. The $18.5 million increase in total interest income on a tax-equivalent basis was primarily due to an increase in cash balances, organic growth in the loan portfolio, purchases of investment securities and higher earning asset yields in the higher interest rate environment.

Interest income on the investment securities portfolio, on a tax-equivalent basis, increased $5.9 million during the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023, primarily due to a $83.1 million, or 13.9%, increase in average balances and a 63 basis point increase in yield between the periods.

Interest income on loans, on a tax-equivalent basis, was $153.6 million for the nine months ended September 30, 2024, compared to $142.7 million for the nine months ended September 30, 2023. The $10.9 million increase was primarily due to a 1.4% increase in the average balances of loans outstanding and a 31 basis point increase in yield.

*Interest Expense.* Interest expense on interest bearing liabilities was $107.3 million for the nine months ended September 30, 2024, an increase of $23.4 million, compared to $83.9 million for the nine months ended September 30, 2023. The increase was primarily due to growth and continued deposit repricing in the higher interest rate environment, offset partially by decreased utilization of federal funds purchased.

Interest expense on deposits increased to $96.0 million for the nine months ended September 30, 2024, compared to $66.6 million for the nine months ended September 30, 2023. The $29.4 million increase in interest expense on deposits was primarily due to upward repricing of the deposit portfolio in the higher interest rate environment.

Interest expense on borrowings was $11.4 million for the nine months ended September 30, 2024, compared to $17.3 million for the nine months ended September 30, 2023. This decrease was primarily due to lower average balances of federal funds purchased.

### Provision for Credit Losses

The provision for credit losses on loans was $-0- for both the third quarter of 2024 and the third quarter of 2023. The provision for credit losses on loans was $1.5 million for the nine months ended September 30, 2024, compared to $2.1 million for the nine months ended September 30, 2023. Although loans decreased during the quarter, increased loss rates and other qualitative factor adjustments resulted in no provision for the quarter. The allowance for credit losses on loans to total loans was 1.38% at September 30, 2024, compared to 1.36% at December 31, 2023.

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

*(dollars in thousands)*

| ​ ​ ​ | ​ ​ ​ ​ | ​ ​ Three Months Ended September 30, 2024 | ​ | ​ ​ 2023 | ​ ​ ​ ​ | ​ ​ Nine Months Ended September 30, 2024 | ​ | ​ ​ 2023 |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Balance at Beginning of Period | ​ | $51,949 | ​ | $50,701 | ​ | $50,494 | ​ | $47,996 |
| Impact of Adopting CECL | ​ | ​ — | ​ | ​ — | ​ | ​ — | ​ | ​ 650 |
| Provision for Credit Losses | ​ | ​ — | ​ | ​ — | ​ | ​ 1,450 | ​ | ​ 2,050 |
| Charge-offs | ​ | ​ (937) | ​ | ​ (122) | ​ | ​ (949) | ​ | ​ (129) |
| Recoveries | ​ | ​ 6 | ​ | ​ 6 | ​ | ​ 23 | ​ | ​ 18 |
| Balance at End of Period | ​ | $51,018 | ​ | $50,585 | ​ | $51,018 | ​ | $50,585 |

The provision for credit losses for off-balance sheet credit exposures was $-0- for the third quarter of 2024, compared to a negative provision of $600,000 for the third quarter of 2023. No provision was recorded during the third quarter of 2024 due to unfunded commitments remaining stable as the migration to funded loans was offset by the volume of newly originated loans with unfunded commitments. The provision for credit losses for off-balance sheet exposures was a negative provision of $100,000 for the nine months ended September 30, 2024, compared to a negative provision of $2.0 million for the nine months ended September 30, 2023. The negative provision for both periods was due to a reduction in outstanding unfunded commitments. The allowance for credit losses on off-balance sheet credit exposures was $2.9 million as of September 30, 2024, compared to $3.0 million as of December 31, 2023.

The following table presents a summary of the activity in the provision for credit losses for the periods indicated:

*(dollars in thousands)*

| ​ ​ ​ | ​ ​ ​ ​ | ​ ​ Three Months Ended September 30, 2024 | ​ | ​ ​ 2023 | ​ ​ ​ | ​ ​ ​ ​ Increase/ (Decrease) | ​ ​ ​ ​ | ​ ​ Nine Months Ended September 30, 2024 | ​ | ​ ​ 2023 | ​ ​ ​ | ​ ​ ​ ​ Increase/ (Decrease) |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: |
| Provision for Credit Losses on Loans | ​ | $— | ​ | $— | ​ | $— | ​ | $1,450 | ​ | $2,050 | ​ | $(600) |
| Provision for (Recovery of) Credit Losses for Off-Balance Sheet Credit Exposures | ​ | ​ — | ​ | ​ (600) | ​ | ​ 600 | ​ | ​ (100) | ​ | ​ (1,975) | ​ | ​ 1,875 |
| Provision for (Recovery of) Credit Losses | ​ | $— | ​ | $(600) | ​ | $600 | ​ | $1,350 | ​ | $75 | ​ | $1,275 |

### Noninterest Income

Noninterest income was $1.5 million for the third quarter of 2024, a decrease of $204,000 from $1.7 million for the third quarter of 2023. The decrease was primarily due to $493,000 of FHLB prepayment income recognized in the previous year which did not reoccur, offset partially by higher letter of credit fees, an increase in the cash surrender value of bank-owned life insurance and an increase in other income. Noninterest income was $4.8 million for the nine months ended September 30, 2024, a decrease of $249,000 from $5.1 million for the nine months ended September 30, 2023. The decrease was primarily due to lower letter of credit fees and $792,000 of FHLB prepayment income recognized in the previous year which did not reoccur, offset partially by an increase in net gain on sale of securities and an increase in the cash surrender value of bank-owned life insurance.

The following table presents the major components of noninterest income for the periods indicated:

*(dollars in thousands)*

| ​ ​ ​ Noninterest Income: | ​ ​ ​ ​ ​ | ​ ​ Three Months Ended September 30, 2024 ​ ​ | ​ ​ | ​ ​ 2023 ​ ​ | ​ ​ ​ ​ | ​ ​ ​ ​ Increase/ (Decrease) ​ ​ | ​ ​ ​ ​ | ​ ​ Nine Months Ended September 30, 2024 ​ ​ | ​ ​ | ​ ​ 2023 ​ ​ | ​ ​ ​ ​ | ​ ​ ​ ​ Increase/ (Decrease) ​ ​ |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Customer Service Fees | ​ | $373 | ​ | $379 | ​ | $(6) | ​ | $1,081 | ​ | $1,096 | ​ | $(15) |
| Net Gain (Loss) on Sales of Securities | ​ | ​ (28) | ​ | ​ — | ​ | ​ (28) | ​ | ​ 385 | ​ | ​ (6) | ​ | ​ 391 |
| Letter of Credit Fees | ​ | ​ 424 | ​ | ​ 315 | ​ | ​ 109 | ​ | ​ 1,127 | ​ | ​ 1,328 | ​ | ​ (201) |
| Debit Card Interchange Fees | ​ | ​ 152 | ​ | ​ 150 | ​ | ​ 2 | ​ | ​ 448 | ​ | ​ 443 | ​ | ​ 5 |
| Bank-Owned Life Insurance | ​ | ​ 352 | ​ | ​ 252 | ​ | ​ 100 | ​ | ​ 965 | ​ | ​ 724 | ​ | ​ 241 |
| FHLB Prepayment Income | ​ | ​ — | ​ | ​ 493 | ​ | ​ (493) | ​ | ​ — | ​ | ​ 792 | ​ | ​ (792) |
| Other Income | ​ | ​ 249 | ​ | ​ 137 | ​ | ​ 112 | ​ | ​ 829 | ​ | ​ 707 | ​ | ​ 122 |
| Totals | ​ | $1,522 | ​ | $1,726 | ​ | $(204) | ​ | $4,835 | ​ | $5,084 | ​ | $(249) |

### Noninterest Expense

#### Third Quarter of 2024 Compared to Third Quarter of 2023

Noninterest expense was $15.8 million for the third quarter of 2024, an increase of $523,000 from $15.2 million for the third quarter of 2023. The increase was primarily attributable to increases in salaries and employee benefits, higher professional and consulting fees relating to the acquisition of First Minnetonka City Bank, increases in information technology and telecommunications, and marketing and advertising expense, offset partially by a decrease in the FDIC insurance assessment and lower derivative collateral fees.

#### Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023

Noninterest expense was $46.5 million for the nine months ended September 30, 2024, an increase of $2.9 million, from $43.6 million for the nine months ended September 30, 2023. The increase was primarily attributable to increases in salaries and employee benefits and higher professional and consulting fees driven by the acquisition of First Minnetonka City Bank.

The Company had 265 full-time equivalent employees at the end of the third quarter of 2024, compared to 255 at the end of the third quarter of 2023.

*Efficiency Ratio.* The efficiency ratio, a non-GAAP financial measure, reports total noninterest expense, less amortization of intangible assets, as a percentage of net interest income plus total noninterest income, less gains (losses) on sales of securities. Management believes this non-GAAP financial measure provides a meaningful comparison of operational performance and facilitates investors’ assessments of business performance and trends in comparison to peers in the banking industry.

The efficiency ratio was 58.0% for the third quarter of 2024, compared to 56.1% for the third quarter of 2023. The efficiency ratio for the nine months ended September 30, 2024 and 2023 was 58.3% and 51.2%, respectively. The efficiencies of the Company’s “branch-light” model have positioned the Company well to continue navigating a challenging environment for a more spread-based revenue model.

The following table presents the major components of noninterest expense for the periods indicated:

*(dollars in thousands)*

| ​ ​ ​ Noninterest Expense: | ​ ​ ​ ​ ​ | ​ ​ Three Months Ended September 30, 2024 ​ ​ | ​ ​ | ​ ​ 2023 ​ ​ | ​ ​ ​ ​ | ​ ​ ​ ​ Increase/ (Decrease) ​ ​ | ​ ​ ​ ​ | ​ ​ Nine Months Ended September 30, 2024 ​ ​ | ​ ​ | ​ ​ 2023 ​ ​ | ​ ​ ​ ​ | ​ ​ ​ ​ Increase/ (Decrease) ​ ​ |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Salaries and Employee Benefits | ​ | $9,851 | ​ | $9,519 | ​ | $332 | ​ | $28,959 | ​ | $26,923 | ​ | $2,036 |
| Occupancy and Equipment | ​ | ​ 1,069 | ​ | ​ 1,101 | ​ | ​ (32) | ​ | ​ 3,218 | ​ | ​ 3,385 | ​ | ​ (167) |
| FDIC Insurance Assessment | ​ | ​ 750 | ​ | ​ 1,075 | ​ | ​ (325) | ​ | ​ 2,350 | ​ | ​ 2,640 | ​ | ​ (290) |
| Data Processing | ​ | ​ 368 | ​ | ​ 392 | ​ | ​ (24) | ​ | ​ 1,252 | ​ | ​ 1,150 | ​ | ​ 102 |
| Professional and Consulting Fees | ​ | ​ 1,149 | ​ | ​ 715 | ​ | ​ 434 | ​ | ​ 2,890 | ​ | ​ 2,299 | ​ | ​ 591 |
| Derivative Collateral Fees | ​ | ​ 381 | ​ | ​ 543 | ​ | ​ (162) | ​ | ​ 1,395 | ​ | ​ 1,327 | ​ | ​ 68 |
| Information Technology and Telecommunications | ​ | ​ 840 | ​ | ​ 683 | ​ | ​ 157 | ​ | ​ 2,448 | ​ | ​ 2,077 | ​ | ​ 371 |
| Marketing and Advertising | ​ | ​ 367 | ​ | ​ 222 | ​ | ​ 145 | ​ | ​ 1,006 | ​ | ​ 805 | ​ | ​ 201 |
| Intangible Asset Amortization | ​ | ​ 9 | ​ | ​ 9 | ​ | ​ — | ​ | ​ 26 | ​ | ​ 91 | ​ | ​ (65) |
| Other Expense | ​ | ​ 976 | ​ | ​ 978 | ​ | ​ (2) | ​ | ​ 2,944 | ​ | ​ 2,883 | ​ | ​ 61 |
| Totals | ​ | $15,760 | ​ | $15,237 | ​ | $523 | ​ | $46,488 | ​ | $43,580 | ​ | $2,908 |

### Income Tax Expense

The provision for income taxes includes both federal and state taxes. Fluctuations in effective tax rates reflect the differences in the inclusion or deductibility of certain income and expenses for income tax purposes and the recognition of tax credits. The Company’s future effective income tax rate will fluctuate based on the mix of taxable and tax-free investments and loans, the recognition and availability of tax credit investments, and overall taxable income.

Income tax expense was $2.7 million for the third quarter of 2024, compared to $2.9 million for the third quarter of 2023. The effective combined federal and state income tax rate for the third quarter of 2024 was 23.6%, compared to 23.0% for the third quarter of 2023. Income tax expense was $7.6 million for the nine months ended September 30, 2024, compared to $10.2 million for the nine months ended September 30, 2023. The effective combined federal and state income tax rate for the nine months ended September 30, 2024 and 2023 was 23.6% and 24.7%, respectively. The fluctuations in the effective tax rate across both periods was primarily due to the timing and delivery of tax credits.

### Financial Condition

### Assets

Total assets at September 30, 2024 were $4.69 billion, an increase of $79.5 million, or 1.7%, over total assets of $4.61 billion at December 31, 2023, and an increase of $134.4 million, or 3.0%, over total assets of $4.56 billion at September 30, 2023. The year-to-date and year-over-year growth were primarily due to an increase in cash and cash equivalents and purchases of investment securities.

### Investment Securities Portfolio

The investment securities portfolio is used to make various term investments and is intended to provide the Company with adequate liquidity, a source of stable income, and at times, serve as collateral for certain types of deposits or borrowings. Investment balances in the investment securities portfolio are subject to change over time based on funding needs and interest rate risk management objectives. The liquidity levels take into account anticipated future cash flows and are maintained at levels management believes are appropriate to ensure future flexibility in meeting anticipated funding needs.

The investment securities portfolio consists primarily of U.S. government agency mortgage backed securities, municipal securities, and corporate securities comprised primarily of subordinated debentures of banks and financial holding companies. In addition, the Company also holds U.S. treasury securities, other mortgage backed and other debt securities. The investment securities portfolio has varying contractual maturities, some of these maturities do not necessarily represent the expected life of the securities as the securities may be called or paid down without penalty prior to their stated maturities. All investment securities are held as available for sale.

Securities available for sale were $664.7 million at September 30, 2024, compared to $604.1 million at December 31, 2023, an increase of $60.6 million, or 10.0%. At September 30, 2024, U.S. government agency mortgage-backed securities represented 15.5% of the portfolio, municipal securities represented 16.8% of the portfolio, corporate securities represented 20.8% of the portfolio, U.S. treasury securities represented 15.9% of the portfolio, SBA securities represented 2.2% of the portfolio, other mortgage-backed securities represented 16.1% of the portfolio, and asset-backed securities represented 12.7% of the portfolio.

The following table presents the amortized cost and fair value of securities available for sale, by type, at September 30, 2024 and December 31, 2023:

*(dollars in thousands)*

| ​ ​ ​ | ​ ​ | ​ ​ September 30, 2024 Amortized Cost | ​ ​ | ​ ​ Fair Value | ​ ​ | ​ ​ December 31, 2023 Amortized Cost | ​ ​ | ​ ​ Fair Value |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: |
| **U.S. Treasury Securities** | ​ | $105,998 | ​ | $105,875 | ​ | $— | ​ | $— |
| **SBA Securities** | ​ | ​ 14,105 | ​ | ​ 14,266 | ​ | ​ 18,497 | ​ | ​ 18,674 |
| **Mortgage-Backed Securities Issued or Guaranteed by U.S. Agencies (MBS):** | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ |
| Residential Pass-Through: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ |
| Guaranteed by GNMA | ​ | 6,947 | ​ | 6,484 | ​ | 45,256 | ​ | 44,188 |
| Issued by FNMA and FHLMC | ​ | 23,117 | ​ | 20,970 | ​ | 24,319 | ​ | 21,687 |
| Other Residential Mortgage-Backed Securities | ​ | 73,153 | ​ | 65,738 | ​ | 74,832 | ​ | 65,617 |
| Commercial Mortgage-Backed Securities | ​ | 10,316 | ​ | 9,975 | ​ | 10,811 | ​ | 10,292 |
| **All Other Commercial MBS** | ​ | 105,017 | ​ | 107,304 | ​ | 94,237 | ​ | 93,531 |
| **Total MBS** | ​ | 218,550 | ​ | 210,471 | ​ | 249,455 | ​ | 235,315 |
| **Municipal Securities** | ​ | 125,423 | ​ | ​ 111,887 | ​ | ​ 151,512 | ​ | ​ 132,524 |
| **Corporate Securities** | ​ | 144,539 | ​ | ​ 138,107 | ​ | ​ 142,098 | ​ | ​ 130,605 |
| **Asset-Backed Securities** | ​ | ​ 83,964 | ​ | ​ 84,109 | ​ | ​ 87,054 | ​ | ​ 86,986 |
| Total | ​ | $692,579 | ​ | $664,715 | ​ | $648,616 | ​ | $604,104 |

### Loan Portfolio

The Company focuses on lending to borrowers located or investing in the Minneapolis-St. Paul-Bloomington, MN-WI Metropolitan Statistical Area across a diverse range of industries and property types. The Company lends primarily to commercial customers, consisting of loans secured by nonfarm, nonresidential properties, multifamily residential properties, land, and non-real estate business assets. Responsive service, local decision making, and an efficient turnaround time from application to closing have been significant factors in growing the loan portfolio.

The Company manages concentrations of credit exposure through a risk management program which implements formalized processes and procedures specifically for managing and mitigating risk within the loan portfolio. The processes and procedures include board and management oversight, commercial real estate exposure limits, portfolio monitoring tools, management information systems, market reports, underwriting standards, internal and external loan review, and stress testing.

Total gross loans at September 30, 2024 were $3.69 billion, a decrease of $38.7 million, or 1.0%, over total gross loans of $3.72 billion at December 31, 2023, and a decrease of $36.7 million, or 1.0%, over total gross loans of $3.72 billion at September 30, 2023. The decrease in the loan portfolio during both periods was primarily due to elevated loan payoffs, offset partially by loan originations. The pace of loan growth has moderated in recent quarters, when compared to historical levels, due to active balance sheet management to continue to align loan growth with the funding outlook and ultimately the impact of the higher interest rate environment on the number of prospective deals that meet underwriting standards.

The following table presents the dollar and percentage composition of the loan portfolio by category, at the dates indicated:

*(dollars in thousands)*

| ​ ​ | ​ ​ | ​ ​ September 30, 2024 Amount | ​ | ​ ​ ​ Percent | ​ ​ June 30, 2024 Amount | ​ | ​ ​ ​ Percent | ​ ​ March 31, 2024 Amount | ​ | ​ ​ ​ Percent | ​ ​ December 31, 2023 Amount | ​ | ​ ​ ​ Percent | ​ ​ September 30, 2023 Amount | ​ | ​ ​ Percent |
| --- | --- | --- | --- | ---: | --- | --- | ---: | --- | --- | ---: | --- | --- | ---: | --- | --- | ---: |
| Commercial | **​** | $493,403 | ​ | 13.4% | $518,762 | ​ | 13.6% | $483,069 | ​ | 12.8% | $464,061 | ​ | 12.4% | $459,854 | ​ | 12.3% |
| Construction and Land Development | ​ | ​ 118,596 | ​ | 3.2 ​ | ​ 134,096 | ​ | 3.5 ​ | ​ 200,970 | ​ | 5.3 ​ | ​ 232,804 | ​ | 6.3 ​ | ​ 294,818 | ​ | 7.9 ​ |
| 1-4 Family Construction | ​ | ​ 45,822 | ​ | 1.3 ​ | ​ 60,551 | ​ | 1.6 ​ | ​ 65,606 | ​ | 1.7 ​ | ​ 65,087 | ​ | 1.8 ​ | ​ 64,463 | ​ | 1.7 ​ |
| Real Estate Mortgage: | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ |
| 1-4 Family Mortgage | ​ | ​ 421,179 | ​ | 11.4 ​ | ​ 416,944 | ​ | 11.0 ​ | ​ 417,773 | ​ | 11.0 ​ | ​ 402,396 | ​ | 10.8 ​ | ​ 404,716 | ​ | 10.9 ​ |
| Multifamily | ​ | ​ 1,379,814 | ​ | 37.4 ​ | ​ 1,404,835 | ​ | 37.0 ​ | ​ 1,389,345 | ​ | 36.7 ​ | ​ 1,388,541 | ​ | 37.3 ​ | ​ 1,378,669 | ​ | 37.0 ​ |
| CRE Owner Occupied | ​ | ​ 182,239 | ​ | 5.0 ​ | ​ 185,988 | ​ | 4.9 ​ | ​ 182,589 | ​ | 4.8 ​ | ​ 175,783 | ​ | 4.7 ​ | ​ 159,485 | ​ | 4.3 ​ |
| CRE Nonowner Occupied | ​ | ​ 1,032,142 | ​ | 28.0 ​ | ​ 1,070,050 | ​ | 28.2 ​ | ​ 1,035,702 | ​ | 27.4 ​ | ​ 987,306 | ​ | 26.5 ​ | ​ 951,263 | ​ | 25.6 ​ |
| Total Real Estate Mortgage Loans | ​ | 3,015,374 | ​ | 81.8 ​ | 3,077,817 | ​ | 81.1 ​ | 3,025,409 | ​ | 79.9 ​ | 2,954,026 | ​ | 79.3 ​ | 2,894,133 | ​ | 77.8 ​ |
| Consumer and Other | ​ | ​ 12,395 | ​ | 0.3 ​ | ​ 9,159 | ​ | 0.2 ​ | ​ 9,151 | ​ | 0.3 ​ | ​ 8,304 | ​ | 0.2 ​ | ​ 9,003 | ​ | 0.3 ​ |
| Total Loans, Gross | ​ | 3,685,590 | ​ | 100.0% | 3,800,385 | ​ | 100.0% | 3,784,205 | ​ | 100.0% | 3,724,282 | ​ | 100.0% | 3,722,271 | ​ | 100.0% |
| Allowance for Credit Losses | ​ | ​ (51,018) | ​ | ​ ​ | ​ (51,949) | ​ | ​ ​ | ​ (51,347) | ​ | ​ ​ | ​ (50,494) | ​ | ​ ​ | ​ (50,585) | ​ | ​ ​ |
| Net Deferred Loan Fees | ​ | ​ (5,705) | ​ | ​ ​ | ​ (6,214) | ​ | ​ ​ | ​ (6,356) | ​ | ​ ​ | ​ (6,573) | ​ | ​ ​ | ​ (7,222) | ​ | ​ ​ |
| Total Loans, Net | ​ | $3,628,867 | ​ | ​ ​ | $3,742,222 | ​ | ​ ​ | $3,726,502 | ​ | ​ ​ | $3,667,215 | ​ | ​ ​ | $3,664,464 | ​ | ​ ​ |

The Company primarily focuses on real estate mortgage lending, which constituted 81.8% of the portfolio at September 30, 2024. The composition of the portfolio has remained relatively consistent with prior periods and the Company does not expect any significant changes in the composition of the loan portfolio or the emphasis on real estate lending in the foreseeable future.

As of September 30, 2024, investor CRE loans totaled $2.58 billion, consisting of $1.03 billion of loans secured by nonowner occupied CRE, $1.38 billion of loans secured by multifamily residential properties, $45.8 million of 1-4 family construction loans and $118.6 million of construction and land development loans. Investor CRE loans represented 69.9% of the total gross loan portfolio and 449.1% of the Bank’s total risk-based capital at September 30, 2024, compared to 71.8% and 482.4%, respectively, at December 31, 2023.

The following table provides a breakdown of CRE nonowner occupied loans by collateral types as of September 30, 2024:

*(dollars in thousands)*

| ​ ​ ​ Collateral Type: | ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ Balance ​ ​ | ​ ​ ​ ​ ​ | ​ ​ Percent of ​ CRE Nonowner ​ Occupied Portfolio ​ ​ ​ | ​ ​ Percent of ​ Total Loan ​ Portfolio ​ ​ ​ |
| --- | --- | --- | --- | ---: | ---: |
| Industrial | **​** | $251,428 | ​ | 24.4% | 6.8% |
| Office | ​ | ​ 197,309 | ​ | 19.1 ​ | 5.4 ​ |
| Retail | ​ | ​ 168,750 | ​ | 16.3 ​ | 4.6 ​ |
| Nursing/Assisted Living | ​ | ​ 108,846 | ​ | 10.6 ​ | 2.9 ​ |
| Mini Storage Facility | ​ | ​ 107,473 | ​ | 10.4 ​ | 2.9 ​ |
| Medical Office | ​ | ​ 98,551 | ​ | 9.6 ​ | 2.7 ​ |
| Other | ​ | ​ 99,785 | ​ | 9.6 ​ | 2.7 ​ |
| Total CRE Nonowner Occupied | ​ | $1,032,142 | ​ | 100.0% | 28.0% |

The following tables present time to contractual maturity and sensitivity to interest rate changes for the loan portfolio as of September 30, 2024 and December 31, 2023:

*(dollars in thousands)*

| ​ ​ ​ | ​ ​ ​ | ​ ​ As of September 30, 2024 Due in One Year or Less | ​ ​ | ​ ​ More Than One Year to Five Years | ​ ​ | ​ ​ More Than Five Year to Fifteen Years | ​ ​ ​ | ​ ​ After Fifteen Years |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: |
| Commercial | ​ | $201,028 | ​ | $220,303 | ​ | $68,399 | ​ | $3,673 |
| Construction and Land Development | ​ | 50,820 | ​ | 65,868 | ​ | 1,908 | ​ | — |
| 1-4 Family Construction | ​ | ​ 37,959 | ​ | ​ 7,662 | ​ | ​ 201 | ​ | ​ — |
| Real Estate Mortgage: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ |
| 1-4 Family Mortgage | ​ | 67,910 | ​ | 279,126 | ​ | 73,509 | ​ | 634 |
| Multifamily | ​ | 223,731 | ​ | 563,634 | ​ | 505,554 | ​ | 86,895 |
| CRE Owner Occupied | ​ | 5,793 | ​ | 112,218 | ​ | 64,228 | ​ | — |
| CRE Nonowner Occupied | ​ | 267,106 | ​ | 505,874 | ​ | 259,162 | ​ | — |
| Total Real Estate Mortgage Loans | ​ | 564,540 | ​ | 1,460,852 | ​ | 902,453 | ​ | 87,529 |
| Consumer and Other | ​ | 8,760 | ​ | ​ 3,408 | ​ | ​ — | ​ | ​ 227 |
| Total Loans, Gross | ​ | $863,107 | ​ | $1,758,093 | ​ | $972,961 | ​ | $91,429 |
| Interest Rate Sensitivity: | ​ |  | ​ |  | ​ |  | ​ | ​ |
| Fixed Interest Rates | ​ | $557,598 | ​ | $1,463,797 | ​ | $481,866 | ​ | $26,531 |
| Floating or Adjustable Rates | ​ | 305,509 | ​ | 294,296 | ​ | 491,095 | ​ | 64,898 |
| Total Loans, Gross | ​ | $863,107 | ​ | $1,758,093 | ​ | $972,961 | ​ | $91,429 |

*(dollars in thousands)*

| ​ ​ ​ | ​ ​ ​ | ​ ​ As of December 31, 2023 Due in One Year or Less | ​ ​ | ​ ​ More Than One Year to Five Years | ​ ​ | ​ ​ More Than Five Year to Fifteen Years | ​ ​ ​ | ​ ​ After Fifteen Years |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: |
| Commercial | ​ | $157,047 | ​ | $206,460 | ​ | $96,826 | ​ | $3,728 |
| Construction and Land Development | ​ | 99,183 | ​ | 93,013 | ​ | 40,608 | ​ | — |
| 1-4 Family Construction | ​ | ​ 46,601 | ​ | ​ 9,476 | ​ | ​ 9,010 | ​ | ​ — |
| Real Estate Mortgage: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ |
| 1-4 Family Mortgage | ​ | 59,962 | ​ | 262,468 | ​ | 79,320 | ​ | 646 |
| Multifamily | ​ | 242,291 | ​ | 482,380 | ​ | 576,348 | ​ | 87,522 |
| CRE Owner Occupied | ​ | 8,271 | ​ | 83,280 | ​ | 84,232 | ​ | — |
| CRE Nonowner Occupied | ​ | 204,297 | ​ | 503,196 | ​ | 279,813 | ​ | — |
| Total Real Estate Mortgage Loans | ​ | 514,821 | ​ | 1,331,324 | ​ | 1,019,713 | ​ | 88,168 |
| Consumer and Other | ​ | 2,568 | ​ | ​ 5,533 | ​ | ​ — | ​ | ​ 203 |
| Total Loans, Gross | ​ | $820,220 | ​ | $1,645,806 | ​ | $1,166,157 | ​ | $92,099 |
| Interest Rate Sensitivity: | ​ |  | ​ |  | ​ |  | ​ | ​ |
| Fixed Interest Rates | ​ | $502,454 | ​ | $1,414,656 | ​ | $673,563 | ​ | $26,172 |
| Floating or Adjustable Rates | ​ | 317,766 | ​ | 231,150 | ​ | 492,594 | ​ | 65,927 |
| Total Loans, Gross | ​ | $820,220 | ​ | $1,645,806 | ​ | $1,166,157 | ​ | $92,099 |

### Asset Quality

The Company emphasizes credit quality in the originating and monitoring of the loan portfolio, and success in underwriting is measured by the levels of classified and nonperforming assets and net charge-offs. Federal regulations and internal policies require the use of an asset classification system as a means of managing and reporting problem and potential problem assets. The Company has incorporated an internal asset classification system, substantially consistent with federal banking regulations, as a part of the credit monitoring system. Federal banking regulations set forth a classification scheme for problem and potential problem assets as “substandard,” “doubtful” or “loss” assets. An asset is considered “substandard” if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. “Substandard” assets include those characterized by the “distinct possibility” that the financial institution will sustain “some loss” if the deficiencies are not corrected. Assets classified as “doubtful” have all of the weaknesses inherent in those classified “substandard” with the added characteristic that the weaknesses present make “collection or liquidation in full,” on the basis of currently existing facts, conditions, and values, “highly questionable and improbable.” Assets classified as “loss” are those considered “uncollectible” and of such little value that their continuance as assets without the establishment of a specific loss reserve is not warranted. Assets which do not currently expose the insured institution to sufficient risk to warrant classification in one of the aforementioned categories but possess weaknesses are required to be designated “watch.”

The following table presents information on loan classifications at September 30, 2024. The Company had no assets classified as doubtful or loss at September 30, 2024.

*(dollars in thousands)*

| ​ ​ | ​ ​ ​ | ​ ​ Risk Category Watch | ​ ​ | ​ ​ Substandard | ​ ​ | ​ ​ ​ Total |
| --- | --- | --- | --- | --- | --- | --- |
| Commercial | ​ | $495 | ​ | $14,199 | ​ | $14,694 |
| Construction and Land Development |  | ​ — |  | ​ 64 |  | ​ 64 |
| Real Estate Mortgage: |  | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| 1-4 Family Mortgage |  | ​ 826 |  | ​ 648 |  | ​ 1,474 |
| Multifamily |  | ​ 12,878 |  | ​ — |  | ​ 12,878 |
| CRE Owner Occupied |  | ​ 1,725 |  | ​ 977 |  | ​ 2,702 |
| CRE Nonowner Occupied |  | ​ 16,067 |  | ​ 15,749 |  | ​ 31,816 |
| Total Real Estate Mortgage Loans |  | ​ 31,496 |  | ​ 17,374 |  | ​ 48,870 |
| Totals | ​ | $31,991 | ​ | $31,637 | ​ | $63,628 |

Loans that have potential weaknesses that warranted a watchlist risk rating at September 30, 2024 totaled $32.0 million, compared to $26.5 million at December 31, 2023. Loans that warranted a substandard risk rating at September 30, 2024 totaled $31.6 million, compared to $35.9 million at December 31, 2023. Management continues to actively work with these borrowers and closely monitor substandard credits.

### Nonperforming Assets

Nonperforming loans include loans accounted for on a nonaccrual basis and loans 90 days past due and still accruing. Nonaccrual loans totaled $8.4 million as of September 30, 2024 and $919,000 as of December 31, 2023. There were no loans 90 days past due and still accruing as of September 30, 2024 or December 31, 2023. As of September 30, 2024, there were $434,000 of foreclosed assets. There were no foreclosed assets as of December 31, 2023. The overall increase in nonperforming assets was primarily due to one central business district office loan, which previously had a substandard risk rating.

The following table presents a summary of nonperforming assets, by category, at the dates indicated:

*(dollars in thousands)*

| ​ ​ | ​ ​ | ​ ​ ​ September 30, ​ 2024 | ​ ​ ​ December 31, ​ 2023 ​ |
| --- | --- | ---: | ---: |
| Total Nonaccrual Loans | ​ | $8,378 ​ | $919 ​ |
| Total Nonperforming Loans | ​ | $8,378 ​ | $919 ​ |
| Plus: Foreclosed Assets | ​ | 434 ​ | — ​ |
| Total Nonperforming Assets (1) | ​ | $8,812 ​ | $919 ​ |
| Nonaccrual Loans to Total Loans | ​ | 0.23% | 0.02% |
| Nonperforming Loans to Total Loans | ​ | 0.23 ​ | 0.02 ​ |
| Nonperforming Assets to Total Loans Plus Foreclosed Assets (1) | ​ | 0.24 ​ | 0.02 ​ |

(1) Nonperforming assets are defined as nonaccrual loans and loans greater than 90 days past due still accruing plus foreclosed assets. There were no loans greater than 90 days past due still accruing for any period shown.

The balance of nonperforming assets can fluctuate due to changes in economic conditions. The Company has established a policy to discontinue accruing interest on a loan (that is, to place the loan on nonaccrual status) after it has become 90 days delinquent as to payment of principal or interest, unless the loan is considered to be well-collateralized and is actively in the process of collection. In addition, a loan will be placed on nonaccrual status before it becomes 90 days delinquent unless management believes that the collection of interest is expected. Interest previously accrued but uncollected on such loans is reversed and charged against current income when the receivable is determined to be uncollectible. If management believes that a loan will not be collected in full, an increase to the allowance for credit losses on loans is recorded to reflect management’s estimate of any potential exposure or loss. Generally, payments received on nonaccrual loans are applied directly to principal. For the three and nine months ended September 30, 2024, the gross income that would have been recorded on nonaccrual loans was $116,000 and $152,000, respectively. For the three and nine months ended September 30, 2023, gross income that would have been recorded on nonacrrual loans was $20,000 and $51,000, respectively.

### Allowance for Credit Losses

The allowance for credit losses on loans is a reserve established through charges to earnings in the form of a provision for credit losses. The Company maintains an allowance for credit losses at a level management considers adequate to provide for expected lifetime losses in the portfolio. Although management strives to maintain an allowance it deems adequate, future economic changes, deterioration of borrowers’ creditworthiness, and the impact of examinations by regulatory agencies, among other factors, all could cause changes to the allowance for credit losses on loans.

At September 30, 2024, the allowance for credit losses on loans was $51.0 million, an increase of $524,000 from $50.5 million at December 31, 2023. Net charge-offs totaled $931,000 during the third quarter of 2024 and $116,000 during the third quarter of 2023. Net charge-offs totaled $926,000 for the nine months ended September 30, 2024 and $111,000 for the nine months ended September 30, 2023. The allowance for credit losses on loans as a percentage of total loans was 1.38% at September 30, 2024, compared to 1.36% at December 31, 2023.

The following table presents a summary of net charge-offs for the periods indicated:

*(dollars in thousands)*

| ​ ​ ​ Net Charge-offs (Recoveries) | ​ ​ ​ ​ | ​ ​ ​ Three Months Ended September 30, 2024 ​ ​ ​ | ​ ​ ​ ​ ​ 2023 ​ ​ ​ ​ | ​ ​ ​ Nine Months Ended September 30, 2024 ​ ​ ​ | ​ ​ ​ ​ ​ 2023 ​ ​ ​ |
| --- | --- | ---: | ---: | ---: | ---: |
| Commercial | ​ | $(5) ​ | $94 ​ | $(10) ​ | $89 ​ |
| Real Estate Mortgage: | ​ | ​ ​ | ​ ​ | ​ ​ | ​ ​ |
| 1-4 Family Mortgage | ​ | — ​ | (2) ​ | (3) ​ | (4) ​ |
| CRE Nonowner Occupied | ​ | 935 ​ | — ​ | 935 ​ | — ​ |
| Total Real Estate Mortgage Loans | ​ | 935 ​ | (2) ​ | 932 ​ | (4) ​ |
| Consumer and Other | ​ | 1 ​ | 24 ​ | 4 ​ | ​ 26 ​ |
| Total Net Charge-offs (Recoveries) | ​ | $931 ​ | $116 ​ | $926 ​ | $111 ​ |
| Net Charge-offs to Average Loans | ​ | ​ | ​ | ​ | ​ |
| Commercial | ​ | 0.00% | 0.08% | 0.00% | ​ 0.03% |
| Real Estate Mortgage: | ​ | ​ ​ | ​ ​ | ​ ​ | ​ ​ ​ |
| 1-4 Family Mortgage | ​ | 0.00 ​ | 0.00 ​ | 0.00 ​ | ​ 0.00 ​ |
| CRE Nonowner Occupied | ​ | 0.35 ​ | 0.00 ​ | 0.12 ​ | ​ 0.00 ​ |
| Total Real Estate Mortgage Loans | ​ | 0.12 ​ | 0.00 ​ | 0.04 ​ | ​ 0.00 ​ |
| Consumer and Other | ​ | 0.04 ​ | 1.02 ​ | 0.05 ​ | ​ 0.36 ​ |
| Total Net Charge-offs (Recoveries) (Annualized) to Average Loans | ​ | 0.10% | 0.01% | 0.03% | 0.00% |
| Gross Loans, End of Period | ​ | $3,685,590 ​ | $3,722,271 ​ | $3,685,590 ​ | $3,722,271 ​ |
| Average Loans | ​ | ​ 3,721,654 ​ | 3,722,594 ​ | ​ 3,740,855 ​ | 3,690,196 ​ |
| Allowance for Credit Losses to Total Gross Loans | ​ | 1.38% | 1.36% | 1.38% | 1.36% |

The following table presents a summary of the allocation of the allowance for credit losses on loans by loan portfolio segment as of the dates indicated:

*(dollars in thousands)*

| ​ ​ ​ | ​ ​ ​ | ​ ​ September 30, 2024 Amount | ​ | ​ ​ ​ ​ Percent | ​ ​ December 31, 2023 Amount | ​ | ​ ​ ​ ​ Percent ​ |
| --- | --- | ---: | --- | ---: | ---: | --- | ---: |
| Commercial | ​ | $5,673 | ​ | 11.1% | $5,398 | ​ | 10.7% |
| Construction and Land Development | ​ | 1,079 | ​ | 2.1 ​ | 2,156 | ​ | 4.3 ​ |
| 1-4 Family Construction | ​ | 394 | ​ | 0.8 ​ | 558 | ​ | 1.1 ​ |
| Real Estate Mortgage: | ​ | ​ | ​ | ​ ​ | ​ | ​ | ​ ​ |
| 1 - 4 Family Mortgage | ​ | 2,779 | ​ | 5.4 ​ | 2,651 | ​ | 5.3 ​ |
| Multifamily | ​ | 22,355 | ​ | 43.8 ​ | 22,217 | ​ | 44.0 ​ |
| CRE Owner Occupied | ​ | 1,233 | ​ | 2.4 ​ | 1,184 | ​ | 2.3 ​ |
| CRE Nonowner Occupied | ​ | 17,376 | ​ | 34.1 ​ | 16,225 | ​ | 32.1 ​ |
| Total Real Estate Mortgage Loans | ​ | 43,743 |  | 85.7 ​ | 42,277 |  | 83.7 ​ |
| Consumer and Other | ​ | 129 | ​ | 0.3 ​ | 105 | ​ | 0.2 ​ |
| Total Allowance for Credit Losses | ​ | $51,018 |  | 100.0% | $50,494 |  | 100.0% |

### Deposits

The principal sources of funds for the Company are deposits, consisting of demand deposits, money market accounts, savings accounts, and certificates of deposit. The following table presents the dollar and percentage composition of the deposit portfolio, by category, at the dates indicated:

*(dollars in thousands)*

| ​ ​ | ​ ​ | ​ ​ September 30, 2024 Amount | ​ | ​ ​ ​ Percent | ​ ​ ​ | ​ ​ June 30, 2024 Amount | ​ | ​ ​ ​ Percent | ​ ​ ​ | ​ ​ March 31, 2024 Amount | ​ | ​ ​ ​ Percent | ​ ​ ​ | ​ ​ December 31, 2023 Amount | ​ | ​ ​ ​ Percent | ​ ​ ​ | ​ ​ September 30, 2023 Amount | ​ | ​ ​ ​ Percent | ​ ​ ​ |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- |
| Noninterest Bearing Transaction Deposits | ​ | $713,309 | ​ | 19.0% | ​ | $705,175 | ​ | 18.5% | ​ | $698,432 | ​ | 18.3% | ​ | $756,964 | ​ | 20.4% | ​ | $754,297 | ​ | 20.5% | ​ |
| Interest Bearing Transaction Deposits | ​ | 805,756 | ​ | 21.5 ​ | ​ | 752,568 | ​ | 19.8 ​ | ​ | 783,736 | ​ | 20.6 ​ | ​ | 692,801 | ​ | 18.7 ​ | ​ | 780,863 | ​ | 21.3 ​ | ​ |
| Savings and Money Market Deposits | ​ | 980,345 | ​ | 26.2 ​ | ​ | 943,994 | ​ | 24.8 ​ | ​ | 979,773 | ​ | 25.7 ​ | ​ | 935,091 | ​ | 25.2 ​ | ​ | 872,534 | ​ | 23.7 ​ | ​ |
| Time Deposits | ​ | 347,080 | ​ | 9.3 ​ | ​ | 373,713 | ​ | 9.8 ​ | ​ | 352,510 | ​ | 9.3 ​ | ​ | 300,651 | ​ | 8.1 ​ | ​ | 265,737 | ​ | 7.2 ​ | ​ |
| Brokered Deposits | ​ | 900,952 | ​ | 24.0 ​ | ​ | 1,032,262 | ​ | 27.1 ​ | ​ | 992,774 | ​ | 26.1 ​ | ​ | 1,024,441 | ​ | 27.6 ​ | ​ | 1,002,078 | ​ | 27.3 ​ | ​ |
| Total Deposits | ​ | $3,747,442 | ​ | 100.0% | ​ | $3,807,712 | ​ | 100.0% | ​ | $3,807,225 | ​ | 100.0% | ​ | $3,709,948 | ​ | 100.0% | ​ | $3,675,509 | ​ | 100.0% | ​ |

Total deposits at September 30, 2024 were $3.75 billion, an increase of $37.5 million, or 1.0%, compared to total deposits of $3.71 billion at December 31, 2023, and an increase of $71.9 million, or 2.0%, over total deposits of $3.68 billion at September 30, 2023. Core deposits, defined as total deposits excluding brokered deposits and time deposits greater than $250,000, increased $131.2 million, or 6.9% annualized, from December 31, 2023. Growth in core deposits was primarily due to increased balances of existing clients and new client acquisitions. Based on the nature of the Company’s client base, management believes core deposits could fluctuate in future periods as deposit growth is not always linear.

The Company relies on increasing the deposit base to fund loans and other asset growth. The Company is in a highly competitive market and competes for local deposits by offering attractive products with competitive rates. The Company expects to have a higher average cost of funds for local deposits compared to competitor banks due to the lack of an extensive branch network. The Company’s strategy is to offset the higher cost of funding with a lower level of operating expense. When appropriate, the Company utilizes alternative funding sources such as brokered deposits. The brokered deposit market provides flexibility in structure, optionality and efficiency not afforded in traditional retail deposit channels. As of September 30, 2024, total brokered deposits were $901.0 million, a decrease of $123.5 million, compared to total brokered deposits of $1.02 billion at December 31, 2023. Brokered deposits continue to be used as a supplemental funding source, as needed, to support loan portfolio growth.

The following table presents the average balance and average rate paid on each of the following deposit categories as of and for the three months ended September 30, 2024 and 2023:

*(dollars in thousands)*

| ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ | ​ ​ As of and for the Three Months Ended September 30, 2024 Average Balance | ​ ​ | ​ ​ ​ ​ ​ Average ​ Rate | ​ ​ As of and for the Three Months Ended September 30, 2023 Average Balance | ​ ​ | ​ ​ ​ ​ ​ Average ​ Rate ​ |
| --- | --- | ---: | --- | ---: | ---: | --- | ---: |
| Noninterest Bearing Transaction Deposits | ​ | $710,192 | ​ | —% | $754,567 | ​ | —% |
| Interest Bearing Transaction Deposits | ​ | 804,161 | ​ | 4.63 ​ | 730,244 | ​ | 3.88 ​ |
| Savings and Money Market Deposits | ​ | 939,665 | ​ | 4.34 ​ | 874,612 | ​ | 3.67 ​ |
| Time Deposits \< $250,000 | ​ | 184,397 | ​ | 4.01 ​ | 181,689 | ​ | 2.56 ​ |
| Time Deposits \> $250,000 | ​ | 170,653 | ​ | 4.80 ​ | 84,946 | ​ | 3.70 ​ |
| Brokered Deposits | ​ | 989,712 | ​ | 4.28 ​ | 985,276 | ​ | 4.04 ​ |
| Total Deposits | ​ | $3,798,780 |  | 3.58% | $3,611,334 |  | 2.99% |

The Company’s total uninsured deposits, which are the amounts of deposit accounts that exceed the FDIC insurance limit, currently $250,000, were approximately $944.0 million, or 25.0% of total deposits, at September 30, 2024 and $900.0 million, or 24.3% of total deposits, at December 31, 2023. These amounts were estimated based on the same methodologies and assumptions used for regulatory reporting purposes.

### Borrowed Funds

#### Other Borrowings

At September 30, 2024, the Company had outstanding FHLB advances of $349.5 million, compared to $319.5 million at December 31, 2023. The Company’s borrowing capacity at the FHLB is determined based on collateral pledged, generally consisting of loans. The Company had additional borrowing capacity under this credit facility of $509.2 million and $498.7 million at September 30, 2024 and December 31, 2023, respectively.

The Company has an outstanding Loan and Security Agreement and revolving note with a third party correspondent lender, which is secured by 100% of the issued and outstanding stock of the Bank. On September 1, 2024, the Company entered into a third amendment to the agreement which extended the maturity date of the Company’s existing revolving line of credit with a maximum principal amount of $40.0 million from September 1, 2024 to September 1, 2026. The amendment also increased the floor rate from 3.85% to 4.50%. As of both September 30, 2024 and December 31, 2023, the Company had $13.8 million of outstanding balances under the revolving line of credit.

Additionally, the Company has borrowing capacity from other sources. As of September 30, 2024, the Bank was eligible to use the Federal Reserve discount window for borrowings. Based on assets pledged as collateral as of the applicable date, the Bank’s borrowing availability was approximately $868.0 million and $979.4 million at September 30, 2024 and December 31, 2023, respectively. As of September 30, 2024 and December 31, 2023, the Company had no outstanding advances from the discount window.

#### Subordinated Debentures

As of September 30, 2024 and December 31, 2023, the Company had subordinated debentures, net of issuance costs, of $79.6 million and $79.3 million, respectively.

For additional information, see “Note 8 – Subordinated Debentures” of the Company’s Consolidated Financial Statements included as part of this report.

### Contractual Obligations

The following table presents supplemental information regarding total contractual obligations at September 30, 2024:

*(dollars in thousands)*

| ​ ​ | ​ ​ | ​ ​ Within One Year | ​ ​ | ​ ​ One to Three Years | ​ ​ | ​ ​ Three to Five Years | ​ ​ | ​ ​ After Five Years | ​ ​ | ​ ​ ​ Total |
| --- | --- | ---: | --- | --- | --- | --- | --- | --- | --- | --- |
| Deposits Without a Stated Maturity | ​ | $2,638,892 | ​ | $— | ​ | $— | ​ | $— | ​ | $2,638,892 |
| Time Deposits | ​ | 335,002 | ​ | ​ 586,182 | ​ | ​ 174,611 | ​ | ​ 12,755 | ​ | ​ 1,108,550 |
| Notes Payable | ​ | ​ — | ​ | ​ 13,750 | ​ | ​ — | ​ | ​ — | ​ | ​ 13,750 |
| FHLB Advances | ​ | 278,000 | ​ | ​ 49,000 | ​ | ​ 22,500 | ​ | ​ — | ​ | ​ 349,500 |
| Subordinated Debentures | ​ | — | ​ | ​ — | ​ | ​ — | ​ | ​ 80,000 | ​ | ​ 80,000 |
| Commitment to Fund Tax Credit Investments | ​ | ​ 2,881 | ​ | ​ — | ​ | ​ — | ​ | ​ — | ​ | ​ 2,881 |
| Operating Lease Obligations | ​ | 596 | ​ | ​ 811 | ​ | ​ 370 | ​ | ​ — | ​ | ​ 1,777 |
| Totals | ​ | $3,255,371 | ​ | $649,743 | ​ | $197,481 | ​ | $92,755 | ​ | $4,195,350 |

The Company believes that it will be able to meet all contractual obligations as they come due through the maintenance of adequate cash levels. The Company expects to maintain adequate cash levels through earnings, loan and securities repayments and maturity activity and continued deposit gathering activities. As described above, the Company has in place various borrowing mechanisms for both short-term and long-term liquidity needs.

### Capital

Total shareholders’ equity at September 30, 2024 was $452.2 million, an increase of $26.7 million, or 6.3%, compared to total shareholders’ equity of $425.5 million at December 31, 2023. The increase was primarily due to net income retained and a decrease in unrealized losses in the securities portfolio, offset partially by a decrease in unrealized gains in the derivatives portfolio, preferred stock dividends, and stock repurchases.

Tangible book value per share, a non-GAAP financial measure, was $13.96 as of September 30, 2024, an increase of 8.8% from $12.84 as of December 31, 2023. Tangible common equity as a percentage of tangible assets, a non-GAAP financial measure, was 8.17% at September 30, 2024, compared to 7.73% at December 31, 2023.

*Stock Repurchase Program*. During the three months ended September 30, 2024, the Company repurchased no shares of its common stock. During the nine months ended September 30, 2024, the Company repurchased 446,509 shares of its common stock, representing 1.6% of the Company’s issued and outstanding shares at that time. Shares were repurchased during this period at a weighted average price of $11.60 per share, for a total of $5.2 million. All shares repurchased under the stock repurchase program were converted to authorized but unissued shares.

On July 23, 2024, the Company’s Board of Directors extended the expiration date of the Company’s previously announced stock repurchase program (the “2022 Stock Repurchase Program”) from August 16, 2024 to August 20, 2025. As of September 30, 2024, the remaining amount that could be used to repurchase shares under the stock repurchase program was $15.3 million. The Company remains committed to maintaining strong capital levels while enhancing shareholder value as it strategically executes its stock repurchase program based on various factors including valuation, capital levels and other uses of capital.

*Regulatory Capital.* The Company and the Bank are subject to various regulatory capital requirements administered by federal banking regulators. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by federal banking regulators that, if undertaken, could have a direct material effect on the Company’s and Bank’s business.

Management believes the Company and the Bank met all capital adequacy requirements to which they were subject as of September 30, 2024. The regulatory capital ratios for the Company and the Bank to meet the minimum capital adequacy standards and for the Bank to be considered well capitalized under the prompt corrective action framework are set forth in the following tables. The Company’s and the Bank’s actual capital amounts and ratios as of the dates indicated are presented in the following tables:

*(dollars in thousands)*

| ​ ​ ​ ​ September 30, 2024 Company (Consolidated): | ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ Actual Amount ​ ​ ​ ​ | ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ ​ Ratio ​ ​ ​ ​ | ​ ​ Minimum Required For Capital Adequacy Purposes Amount ​ ​ ​ ​ | ​ ​ ​ | ​ ​ ​ ​ ​ Ratio ​ ​ ​ ​ | ​ ​ For Capital Adequacy Purposes Plus Capital Conservation Buffer Amount ​ ​ ​ ​ | ​ ​ ​ | ​ ​ ​ ​ ​ Ratio ​ ​ ​ ​ ​ | ​ ​ To be Well Capitalized Under Prompt Corrective Action Regulations Amount ​ ​ ​ ​ | ​ ​ ​ | ​ ​ ​ ​ ​ Ratio ​ ​ ​ ​ ​ |
| --- | --- | --- | --- | ---: | --- | --- | ---: | --- | --- | ---: | --- | --- | --- |
| Total Risk-based Capital | ​ | $589,088 | ​ | 14.62% | $322,278 | ​ | 8.00% | $422,990 | ​ | 10.50% | ​ N/A | ​ | N/A ​ |
| Tier 1 Risk-based Capital | ​ | ​ 460,827 | ​ | 11.44 ​ | ​ 241,709 | ​ | 6.00 ​ | ​ 342,420 | ​ | 8.50 ​ | ​ N/A | ​ | N/A ​ |
| Common Equity Tier 1 Capital | ​ | ​ 394,313 | ​ | 9.79 ​ | ​ 181,281 | ​ | 4.50 ​ | ​ 281,993 | ​ | 7.00 ​ | ​ N/A | ​ | N/A ​ |
| Tier 1 Leverage Ratio | ​ | ​ 460,827 | ​ | 9.75 ​ | ​ 189,109 | ​ | 4.00 ​ | ​ 189,109 | ​ | 4.00 ​ | ​ N/A | ​ | N/A ​ |
| **Bank:** | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ |
| Total Risk-based Capital | ​ | $573,720 | ​ | 14.27% | $321,749 | ​ | 8.00% | $422,296 | ​ | 10.50% | $402,187 | ​ | 10.00% |
| Tier 1 Risk-based Capital | ​ | ​ 525,114 | ​ | 13.06 ​ | ​ 241,312 | ​ | 6.00 ​ | ​ 341,859 | ​ | 8.50 ​ | ​ 321,749 | ​ | 8.00 ​ |
| Common Equity Tier 1 Capital | ​ | ​ 525,114 | ​ | 13.06 ​ | ​ 180,984 | ​ | 4.50 ​ | ​ 281,531 | ​ | 7.00 ​ | ​ 261,421 | ​ | 6.50 ​ |
| Tier 1 Leverage Ratio | ​ | ​ 525,114 | ​ | 11.12 ​ | ​ 188,832 | ​ | 4.00 ​ | ​ 188,832 | ​ | 4.00 ​ | ​ 236,040 | ​ | 5.00 ​ |

*(dollars in thousands)*

| ​ ​ ​ ​ December 31, 2023 Company (Consolidated): | ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ Actual Amount ​ ​ ​ ​ | ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ ​ Ratio ​ ​ ​ ​ | ​ ​ Minimum Required For Capital Adequacy Purposes Amount ​ ​ ​ ​ | ​ ​ ​ | ​ ​ ​ ​ ​ Ratio ​ ​ ​ ​ | ​ ​ For Capital Adequacy Purposes Plus Capital Conservation Buffer Amount ​ ​ ​ ​ | ​ ​ ​ | ​ ​ ​ ​ ​ Ratio ​ ​ ​ ​ ​ | ​ ​ To be Well Capitalized Under Prompt Corrective Action Regulations Amount ​ ​ ​ ​ | ​ ​ ​ | ​ ​ ​ ​ ​ Ratio ​ ​ ​ ​ ​ |
| --- | --- | --- | --- | ---: | --- | --- | ---: | --- | --- | ---: | --- | --- | --- |
| Total Risk-based Capital | ​ | $570,770 | ​ | 13.97% | $326,872 | ​ | 8.00% | $429,019 | ​ | 10.50% | ​ N/A | ​ | N/A ​ |
| Tier 1 Risk-based Capital | ​ | ​ 440,947 | ​ | 10.79 ​ | ​ 245,154 | ​ | 6.00 ​ | ​ 347,301 | ​ | 8.50 ​ | ​ N/A | ​ | N/A ​ |
| Common Equity Tier 1 Capital | ​ | ​ 374,433 | ​ | 9.16 ​ | ​ 183,865 | ​ | 4.50 ​ | ​ 286,013 | ​ | 7.00 ​ | ​ N/A | ​ | N/A ​ |
| Tier 1 Leverage Ratio | ​ | ​ 440,947 | ​ | 9.57 ​ | ​ 184,383 | ​ | 4.00 ​ | ​ 184,383 | ​ | 4.00 ​ | ​ N/A | ​ | N/A ​ |
| **Bank:** | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ |
| Total Risk-based Capital | ​ | $554,269 | ​ | 13.58% | $326,528 | ​ | 8.00% | $428,568 | ​ | 10.50% | $408,160 | ​ | 10.00% |
| Tier 1 Risk-based Capital | ​ | ​ 503,787 | ​ | 12.34 ​ | ​ 244,896 | ​ | 6.00 ​ | ​ 346,936 | ​ | 8.50 ​ | ​ 326,528 | ​ | 8.00 ​ |
| Common Equity Tier 1 Capital | ​ | ​ 503,787 | ​ | 12.34 ​ | ​ 183,672 | ​ | 4.50 ​ | ​ 285,712 | ​ | 7.00 ​ | ​ 265,304 | ​ | 6.50 ​ |
| Tier 1 Leverage Ratio | ​ | ​ 503,787 | ​ | 10.95 ​ | ​ 184,037 | ​ | 4.00 ​ | ​ 184,037 | ​ | 4.00 ​ | ​ 230,047 | ​ | 5.00 ​ |

Regulations include a capital conservation buffer of 2.5% that was added to the minimum requirements for capital adequacy purposes. A banking organization with a conservation buffer of less than the required amount is subject to limitations on capital distributions, including dividend payments, stock repurchases and certain discretionary bonus payments to executive officers. At September 30, 2024, the ratios for the Company and the Bank were sufficient to meet the conservation buffer.

### Off-Balance Sheet Arrangements

In the normal course of business, the Company enters into various transactions to meet the financing needs of clients, which, in accordance with GAAP, are not included in the consolidated balance sheets. These transactions include commitments to extend credit, standby letters of credit, and commercial letters of credit, which involve, to varying degrees, elements of credit risk and interest rate risk in excess of the amounts recognized in the consolidated balance sheets. Most of these commitments mature within two years and the standby letters of credit are expected to expire without being drawn upon. All off-balance sheet commitments are included in the determination of the amount of risk-based capital that the Company and the Bank are required to hold.

The Company’s exposure to credit loss in the event of non-performance by the other party to the financial instrument for commitments to extend credit, standby letters of credit, and commercial letters of credit is represented by the contractual or notional amount of those instruments. The Company decreases its exposure to losses under these commitments by subjecting them to credit approval and monitoring procedures. The Company assesses the credit risk associated with certain commitments to extend credit and establishes a liability for probable credit losses.

The following table presents credit arrangements and financial instruments whose contract amounts represented credit risk as of September 30, 2024 and December 31, 2023:

*(dollars in thousands)*

| ​ ​ ​ | ​ ​ ​ | ​ ​ September 30, 2024 Fixed ​ ​ | ​ ​ | ​ ​ Variable ​ ​ | ​ ​ ​ | ​ ​ December 31, 2023 Fixed ​ ​ | ​ ​ | ​ ​ Variable ​ ​ |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: |
| Unfunded Commitments Under Lines of Credit | ​ | $162,664 | ​ | $361,034 | ​ | $164,880 | ​ | $381,752 |
| Letters of Credit | ​ | 5,745 | ​ | 106,324 | ​ | 6,780 | ​ | 96,509 |
| Totals | ​ | $168,409 | ​ | $467,358 | ​ | $171,660 | ​ | $478,261 |

The Company had outstanding letters of credit with the FHLB of $133.9 million and $114.4 million at September 30, 2024 and December 31, 2023, respectively, on behalf of customers and to secure public deposits.

### Liquidity

Liquidity is the Company’s capacity to meet cash and collateral obligations at a reasonable cost. Maintaining an adequate level of liquidity depends on the Company’s ability to efficiently meet both expected and unexpected cash flow and collateral needs without adversely affecting either daily operations or financial condition. The Bank’s Asset Liability Management, or ALM, Committee, which is comprised of members of senior management, is responsible for managing commitments to meet the needs of customers while achieving the Company’s financial objectives. The ALM Committee meets regularly to review balance sheet composition, funding capacities, and current and forecasted loan demand.

The Company manages liquidity by maintaining adequate levels of cash and other assets from on- and off-balance sheet arrangements. Specifically, on-balance sheet liquidity consists of cash and due from banks and unpledged investment securities available for sale, which are referred to as primary liquidity. In regards to off-balance sheet capacity, the Company maintains available borrowing capacity under secured borrowing lines with the FHLB, the Federal Reserve Bank of Minneapolis, and a correspondent lender, as well as unsecured lines of credit for the purpose of overnight funds with various correspondent banks, which the Company refers to as secondary liquidity. During the second quarter of 2024, the Company elected not to renew its membership and discontinued its use of the American Financial Exchange, or AFX. This had no impact on liquidity ratios as the availability of funds changed daily and therefore was not previously included in secondary liquidity. The Company had no borrowings outstanding through the AFX as of December 31, 2023.

Total on- and off-balance sheet liquidity was $2.29 billion as of September 30, 2024, compared to $2.23 billion at December 31, 2023. The Company did not utilize the Federal Reserve Discount Window during the nine months ended September 30, 2024.

The following tables present a summary of primary and secondary liquidity levels as of the dates indicated:

*(dollars in thousands)*

| ​ Primary Liquidity—On-Balance Sheet | ​ ​ | ​ ​ ​ September 30, 2024 ​ ​ ​ | ​ ​ ​ December 31, 2023 ​ ​ |
| --- | --- | ---: | ---: |
| Cash and Cash Equivalents | ​ | $167,869 ​ | $96,594 ​ |
| Securities Available for Sale | ​ | 664,715 ​ | 604,104 ​ |
| Less: Pledged Securities | ​ | ​ (146,144) ​ | ​ (170,727) ​ |
| Total Primary Liquidity | ​ | $686,440 ​ | $529,971 ​ |
| Ratio of Primary Liquidity to Total Deposits | ​ | 18.3% | 14.3% |
| ​ | ​ | ​ ​ ​ | ​ ​ ​ |
| **Secondary Liquidity—Off-Balance Sheet** | **​** | **​** **​** | **​** |
| Net Secured Borrowing Capacity with the FHLB | ​ | $509,223 ​ | $498,736 ​ |
| Net Secured Borrowing Capacity with the Federal Reserve Bank | ​ | 867,955 ​ | 979,448 ​ |
| Unsecured Borrowing Capacity with Correspondent Lenders | ​ | 200,000 ​ | 200,000 ​ |
| Secured Borrowing Capacity with Correspondent Lender | ​ | ​ 26,250 ​ | ​ 26,250 ​ |
| Total Secondary Liquidity | ​ | ​ 1,603,428 ​ | ​ 1,704,434 ​ |
| Total Primary and Secondary Liquidity | ​ | $2,289,868 ​ | $2,234,405 ​ |
| Ratio of Primary and Secondary Liquidity to Total Deposits | ​ | 61.1% | 60.2% |

During the nine months ended September 30, 2024, primary liquidity increased by $156.5 million due to a $71.3 million increase in cash and cash equivalents, a $60.6 million increase in securities available for sale and a $24.6 million decrease in pledged securities, when compared to December 31, 2023. Secondary liquidity decreased by $101.0 million as of September 30, 2024, when compared to December 31, 2023, due to a $111.5 million decrease in the borrowing capacity with the Federal Reserve Bank, offset partially by a $10.5 million increase in the borrowing capacity with the FHLB.

In addition to primary liquidity, the Company generates liquidity from cash flows from the loan and securities portfolios and from the large base of core deposits, defined as noninterest bearing transaction, interest bearing transaction, savings, non-brokered money market accounts and non-brokered time deposits less than $250,000. At September 30, 2024, core deposits totaled approximately $2.68 billion and represented 71.5% of total deposits. These core deposits are normally less volatile, often with customer relationships tied to other products offered by the Company, which promote long-standing relationships and stable funding sources.

The Company uses brokered deposits, the availability of which is uncertain and subject to competitive market forces and regulation, for liquidity and interest rate risk management purposes. At September 30, 2024, brokered deposits totaled $901.0 million, consisting of $761.5 million of brokered time deposits and $139.5 million of non-maturity brokered money market and transaction accounts. At December 31, 2023, brokered deposits totaled $1.02 billion, consisting of $850.5 million of brokered time deposits and $174.0 million of non-maturity brokered money market and transaction accounts.

The Company’s liquidity policy includes guidelines for On-Balance Sheet Liquidity (a measurement of primary liquidity to total deposits plus borrowings), Total On-Balance Sheet Liquidity with Borrowing Capacity (a measurement of primary and secondary liquidity to total deposits plus borrowings), Wholesale Funding Ratio (a measurement of total wholesale funding to total deposits plus borrowings), and other guidelines developed for measuring and maintaining liquidity.

### Non-GAAP Financial Measures

In addition to financial measures presented in accordance with GAAP, the Company routinely supplements its evaluation with an analysis of certain non-GAAP financial measures. The Company believes these non-GAAP financial measures, in addition to the related GAAP measures, provide meaningful information to investors to help them understand the Company’s operating performance and trends, and to facilitate comparisons with the performance of peers. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Reconciliations of non-GAAP disclosures used in this report to the comparable GAAP measures are provided in the following tables:

*(dollars in thousands)*

| ​ ​ ​ ​ Pre-Provision Net Revenue | ​ ​ ​ ​ ​ ​ | ​ ​ ​ For the Three Months Ended September 30, ​ 2024 ​ ​ ​ ​ ​ ​ | ​ ​ ​ June 30, ​ 2024 ​ ​ ​ ​ ​ ​ | ​ ​ ​ March 31, ​ 2024 ​ ​ ​ ​ ​ ​ | ​ ​ ​ December 31, ​ 2023 ​ ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ September 30, ​ 2023 ​ ​ ​ ​ ​ ​ ​ | ​ ​ ​ For the Nine Months Ended September 30, ​ 2024 ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ September 30, ​ 2023 ​ ​ ​ ​ ​ ​ ​ |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Noninterest Income | ​ | $1,522 ​ | $1,763 ​ | $1,550 ​ | $1,409 ​ | $1,726 ​ | $4,835 ​ | $5,084 ​ |
| Less: (Gain) Loss on Sales of Securities | ​ | ​ 28 ​ | ​ (320) ​ | ​ (93) ​ | ​ 27 ​ | ​ — ​ | ​ (385) ​ | ​ 6 ​ |
| Less: FHLB Advance Prepayment Income | ​ | ​ — ​ | ​ — ​ | ​ — ​ | ​ — ​ | ​ (493) ​ | ​ — ​ | ​ (792) ​ |
| Total Operating Noninterest Income | ​ | ​ 1,550 ​ | ​ 1,443 ​ | ​ 1,457 ​ | ​ 1,436 ​ | ​ 1,233 ​ | ​ 4,450 ​ | ​ 4,298 ​ |
| Plus: Net Interest Income | ​ | ​ 25,599 ​ | ​ 24,996 ​ | ​ 24,631 ​ | ​ 25,314 ​ | ​ 25,421 ​ | ​ 75,226 ​ | ​ 79,860 ​ |
| Net Operating Revenue | ​ | $27,149 ​ | $26,439 ​ | $26,088 ​ | $26,750 ​ | $26,654 ​ | $79,676 ​ | $84,158 ​ |
| ​ | ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ |
| Noninterest Expense | ​ | $15,760 ​ | $15,539 ​ | $15,189 ​ | $15,740 ​ | $15,237 ​ | $46,488 ​ | $43,580 ​ |
| Total Operating Noninterest Expense | ​ | $15,760 ​ | $15,539 ​ | $15,189 ​ | $15,740 ​ | $15,237 ​ | $46,488 ​ | $43,580 ​ |
| ​ | ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ |
| Pre-Provision Net Revenue | ​ | $11,389 ​ | $10,900 ​ | $10,899 ​ | $11,010 ​ | $11,417 ​ | $33,188 ​ | $40,578 ​ |
| **​** | ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ |
| Plus: | ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ |
| Non-Operating Revenue Adjustments | ​ | ​ (28) ​ | ​ 320 ​ | ​ 93 ​ | ​ (27) ​ | ​ 493 ​ | ​ 385 ​ | ​ 786 ​ |
| Less: | ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ |
| Provision for (Recovery of) Credit Losses | ​ | ​ — ​ | ​ 600 ​ | ​ 750 ​ | ​ (250) ​ | ​ (600) ​ | ​ 1,350 ​ | ​ 75 ​ |
| Provision for Income Taxes | ​ | ​ 2,686 ​ | ​ 2,505 ​ | ​ 2,411 ​ | ​ 2,360 ​ | ​ 2,881 ​ | ​ 7,602 ​ | ​ 10,202 ​ |
| Net Income | ​ | $8,675 ​ | $8,115 ​ | $7,831 ​ | $8,873 ​ | $9,629 ​ | $24,621 ​ | $31,087 ​ |
| ​ | ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ |
| Average Assets | ​ | $4,703,804 ​ | $4,646,517 ​ | $4,592,838 ​ | $4,567,446 ​ | $4,504,937 ​ | $4,647,925 ​ | $4,464,976 ​ |
| Pre-Provision Net Revenue Return on Average Assets | ​ | ​ 0.96% | ​ 0.94% | ​ 0.95% | ​ 0.96% | ​ 1.01% | ​ 0.95% | ​ 1.22% |

*(dollars in thousands)*

| ​ ​ ​ ​ Core Net Interest Margin | ​ ​ ​ ​ ​ ​ | ​ ​ ​ For the Three Months Ended September 30, ​ 2024 ​ ​ ​ ​ ​ ​ | ​ ​ ​ June 30, ​ 2024 ​ ​ ​ ​ ​ ​ | ​ ​ ​ March 31, ​ 2024 ​ ​ ​ ​ ​ ​ | ​ ​ ​ December 31, ​ 2023 ​ ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ September 30, ​ 2023 ​ ​ ​ ​ ​ ​ | ​ ​ ​ For the Nine Months Ended September 30, ​ 2024 ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ September 30, ​ 2023 ​ ​ ​ ​ ​ ​ ​ |
| --- | --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Net Interest Income (Tax-equivalent Basis) |  | $25,905 ​ | $25,288 ​ | $24,992 ​ | $25,683 ​ | $25,822 ​ | $76,185 ​ | $81,049 ​ |
| Less: Loan Fees | ​ | ​ (968) ​ | ​ (767) ​ | ​ (608) ​ | ​ (751) ​ | ​ (914) ​ | ​ (2,342) ​ | ​ (2,853) ​ |
| Core Net Interest Income | ​ | $24,937 ​ | $24,521 ​ | $24,384 ​ | $24,932 ​ | $24,908 ​ | $73,843 ​ | $78,196 ​ |
| ​ | ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ |
| Average Interest Earning Assets | ​ | $4,595,521 ​ | $4,545,920 ​ | $4,492,756 ​ | $4,480,428 ​ | $4,416,424 ​ | $4,544,932 ​ | $4,378,733 ​ |
| Core Net Interest Margin | ​ | ​ 2.16% | ​ 2.17% | ​ 2.18% | ​ 2.21% | ​ 2.24% | 2.17% | 2.39% |

*(dollars in thousands)*

| ​ ​ ​ ​ Efficiency Ratio | ​ ​ ​ ​ ​ ​ | ​ ​ ​ For the Three Months Ended September 30, ​ 2024 ​ ​ ​ ​ ​ ​ | ​ ​ ​ June 30, ​ 2024 ​ ​ ​ ​ ​ ​ | ​ ​ ​ March 31, ​ 2024 ​ ​ ​ ​ ​ ​ | ​ ​ ​ December 31, ​ 2023 ​ ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ September 30, ​ 2023 ​ ​ ​ ​ ​ ​ ​ | ​ ​ ​ For the Nine Months Ended September 30, ​ 2024 ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ September 30, ​ 2023 ​ ​ ​ ​ ​ ​ |
| --- | --- | ---: | ---: | ---: | ---: | ---: | --- | --- |
| Noninterest Expense |  | $15,760 ​ | $15,539 ​ | $15,189 ​ | $15,740 ​ | $15,237 ​ | $46,488 ​ | $43,580 ​ |
| Less: Amortization of Intangible Assets | ​ | ​ (9) ​ | ​ (8) ​ | ​ (9) ​ | ​ (9) ​ | ​ (9) ​ | ​ (26) ​ | ​ (91) ​ |
| Adjusted Noninterest Expense | ​ | $15,751 ​ | $15,531 ​ | $15,180 ​ | $15,731 ​ | $15,228 ​ | $46,462 ​ | $43,489 ​ |
| ​ | ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ |
| Net Interest Income | ​ | $25,599 ​ | $24,996 ​ | $24,631 ​ | $25,314 ​ | $25,421 ​ | ​ 75,226 ​ | ​ 79,860 ​ |
| Noninterest Income | ​ | ​ 1,522 ​ | ​ 1,763 ​ | ​ 1,550 ​ | ​ 1,409 ​ | ​ 1,726 ​ | ​ 4,835 ​ | ​ 5,084 ​ |
| Less: Gain (Loss) on Sales of Securities | ​ | ​ 28 ​ | ​ (320) ​ | ​ (93) ​ | ​ 27 ​ | ​ — ​ | ​ (385) ​ | ​ 6 ​ |
| Adjusted Operating Revenue | ​ | $27,149 ​ | $26,439 ​ | $26,088 ​ | $26,750 ​ | $27,147 ​ | $79,676 ​ | $84,950 ​ |
| Efficiency Ratio | ​ | 58.0% | 58.7% | 58.2% | 58.8% | 56.1% | 58.3% | 51.2% |

*(dollars in thousands)*

| ​ ​ ​ ​ Tangible Common Equity and Tangible Common Equity/Tangible Assets | ​ ​ ​ ​ ​ ​ | ​ ​ ​ For the Three Months Ended September 30, ​ 2024 ​ ​ ​ ​ ​ ​ | ​ ​ ​ June 30, ​ 2024 ​ ​ ​ ​ ​ ​ | ​ ​ ​ March 31, ​ 2024 ​ ​ ​ ​ ​ ​ | ​ ​ ​ December 31, ​ 2023 ​ ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ September 30, ​ 2023 ​ ​ ​ ​ ​ ​ | ​ ​ ​ For the Nine Months Ended September 30, ​ 2024 ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ September 30, ​ 2023 ​ ​ ​ ​ ​ ​ ​ |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Total Shareholders' Equity | **​** | $452,200 ​ | $439,241 ​ | $433,611 ​ | $425,515 ​ | $415,960 **​** | **​** **​** **​** | **​** **​** **​** |
| Less: Preferred Stock | **​** | **​** (66,514) **​** | **​** (66,514) **​** | **​** (66,514) **​** | **​** (66,514) **​** | **​** (66,514) **​** | **​** **​** **​** | **​** **​** **​** |
| Total Common Shareholders' Equity | ​ | ​ 385,686 ​ | ​ 372,727 ​ | ​ 367,097 ​ | ​ 359,001 ​ | ​ 349,446 ​ | ​ ​ ​ | ​ ​ ​ |
| Less: Intangible Assets | ​ | ​ (2,789) ​ | ​ (2,797) ​ | ​ (2,806) ​ | ​ (2,814) ​ | ​ (2,823) ​ | ​ ​ ​ | ​ ​ ​ |
| Tangible Common Equity | ​ | $382,897 ​ | $369,930 ​ | $364,291 ​ | $356,187 ​ | $346,623 ​ | ​ ​ ​ | ​ ​ ​ |
| ​ | ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ |
| Total Assets | ​ | $4,691,517 ​ | $4,687,035 ​ | $4,723,109 ​ | $4,611,990 ​ | $4,557,070 ​ | ​ ​ ​ | ​ ​ ​ |
| Less: Intangible Assets | ​ | ​ (2,789) ​ | ​ (2,797) ​ | ​ (2,806) ​ | ​ (2,814) ​ | ​ (2,823) ​ | ​ ​ ​ | ​ ​ ​ |
| Tangible Assets | ​ | $4,688,728 ​ | $4,684,238 ​ | $4,720,303 ​ | $4,609,176 ​ | $4,554,247 ​ | ​ ​ ​ | ​ ​ ​ |
| Tangible Common Equity/Tangible Assets | ​ | 8.17% | 7.90% | 7.72% | 7.73% | 7.61% | ​ ​ ​ | ​ ​ ​ |
| ​ | ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ |
| **Tangible Book Value Per Share** | ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ |
| Book Value Per Common Share | ​ | $14.06 ​ | $13.63 ​ | $13.30 ​ | $12.94 ​ | $12.47 ​ | ​ ​ ​ | ​ ​ ​ |
| Less: Effects of Intangible Assets | ​ | ​ (0.10) ​ | ​ (0.10) ​ | ​ (0.10) ​ | ​ (0.10) ​ | ​ (0.10) ​ | ​ ​ ​ | ​ ​ ​ |
| Tangible Book Value Per Common Share | ​ | $13.96 ​ | $13.53 ​ | $13.20 ​ | $12.84 ​ | $12.37 ​ | ​ ​ ​ | ​ ​ ​ |
| ​ | ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ |
| **Return on Average Tangible Common Equity** | ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ |
| Net Income Available to Common Shareholders | ​ | $7,662 ​ | $7,101 ​ | $6,818 ​ | $7,859 ​ | $8,616 ​ | $21,581 ​ | $28,047 ​ |
| **​** | ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ |
| Average Shareholders' Equity | ​ | $443,077 ​ | $435,585 ​ | $428,248 ​ | $417,789 ​ | $414,047 ​ | $435,664 ​ | $408,014 ​ |
| Less: Average Preferred Stock | ​ | ​ (66,514) ​ | ​ (66,514) ​ | ​ (66,514) ​ | ​ (66,514) ​ | ​ (66,514) ​ | ​ (66,514) ​ | ​ (66,514) ​ |
| Average Common Equity | ​ | ​ 376,563 ​ | ​ 369,071 ​ | ​ 361,734 ​ | ​ 351,275 ​ | ​ 347,533 ​ | ​ 369,150 ​ | ​ 341,500 ​ |
| Less: Effects of Average Intangible Assets | ​ | ​ (2,794) ​ | ​ (2,802) ​ | ​ (2,811) ​ | ​ (2,819) ​ | ​ (2,828) ​ | ​ (2,802) ​ | ​ (2,856) ​ |
| Average Tangible Common Equity | ​ | $373,769 ​ | $366,269 ​ | $358,923 ​ | $348,456 ​ | $344,705 ​ | $366,348 ​ | $338,644 ​ |
| Return on Average Tangible Common Equity | ​ | ​ 8.16% | ​ 7.80% | ​ 7.64% | ​ 8.95% | ​ 9.92% | ​ 7.87% | ​ 11.07% |

## Market risk

As filed, 8,157 characters.

### Interest Rate Risk

As a financial institution, the Company’s primary market risk is interest rate risk, which is defined as the risk of loss of net interest income or net interest margin because of changes in interest rates. The Company continually seeks to measure and manage the potential impact of interest rate risk. Interest rate risk occurs when interest earning assets and interest bearing liabilities mature or re-price at different times, on a different basis or in unequal amounts. Interest rate risk also arises when assets and liabilities each respond differently to changes in interest rates.

The Company’s management of interest rate risk is overseen by its ALM Committee, based on a risk management infrastructure approved by the board of directors that outlines reporting and measurement requirements. In particular, this infrastructure sets limits and management targets for various metrics, including net interest income simulation involving parallel shifts in interest rate curves, steepening and flattening yield curves, and various prepayment and deposit duration assumptions. The Company’s risk management infrastructure also requires a periodic review of all key assumptions used, such as identifying appropriate interest rate scenarios, setting loan prepayment rates based on historical analysis and noninterest bearing and interest bearing transaction deposit durations based on historical analysis. The Company does not engage in speculative trading activities relating to interest rates, foreign exchange rates, commodity prices, equities or credit.

The Company manages the interest rate risk associated with interest earning assets by managing the interest rates and terms associated with the investment securities portfolio by purchasing and selling investment securities from time to time. The Company manages the interest rate risk associated with interest bearing liabilities by managing the interest rates and terms associated with wholesale borrowings and deposits from customers which the Company relies on for funding. For example, the Company occasionally uses special offers on deposits to alter the interest rates and terms associated with interest bearing liabilities.

The Company has entered into certain hedging transactions including interest rate swaps and caps, which are designed to lessen elements of the Company’s interest rate exposure. Cash flow hedge relationships mitigate exposure to the variability of future cash flows or other forecasted transactions. The Company utilizes cash flow hedges to manage interest rate exposure for the brokered deposit and wholesale borrowing portfolios. At both September 30, 2024 and December 31, 2023, these cash flow hedges had a total notional amount of $308.0 million. Fair value hedge relationships mitigate exposure to changes in the fair value of a recognized asset or value. The Company utilizes fair value hedges to manage fair value exposure for the U.S. treasury security portfolio. At September 30, 2024, these fair value hedges had a total notional amount of $97.7 million. There were no fair value hedges at December 31, 2023. In the event that interest rates do not change in the manner anticipated, such transactions may adversely affect the Company’s results of operations.

### Net Interest Income Simulation

The Company uses a net interest income simulation model to measure and evaluate potential changes in net interest income that would result over the next 12 months from immediate and sustained changes in interest rates as of the measurement date. This model has inherent limitations and the results are based on a given set of rate changes and assumptions as of a certain point in time. For purposes of the simulation, the Company assumes no growth in either interest-sensitive assets or liabilities over the next 12 months; therefore, the model’s results reflect an interest rate shock to a static balance sheet. The simulation model also incorporates various other assumptions, which the Company believes are reasonable but which may have a significant impact on results, such as: (1) the timing of changes in interest rates, (2) shifts or rotations in the yield curve, (3) re-pricing characteristics for market-rate-sensitive instruments, (4) differing sensitivities of financial instruments due to differing underlying rate indices, (5) varying loan prepayment speeds for different interest rate scenarios, (6) the effect of interest rate limitations in assets, such as floors and caps, and (7) overall growth and repayment rates and product mix of assets and liabilities. Because of the limitations inherent in any approach used to measure interest rate risk, simulation results are not intended as a forecast of the actual effect of a change in market interest rates on the results, but rather as a means to better plan and execute appropriate asset-liability management strategies and to manage interest rate risk.

Potential changes to the Company’s net interest income in hypothetical rising and declining rate scenarios calculated as of September 30, 2024 and December 31, 2023 are presented in the table below. The projections assume an immediate, parallel shift downward of the yield curve of 100, 200, and 300 basis points and immediate, parallel shifts upward of the yield curve of 100, 200, 300 and 400 basis points. In the current interest rate environment, a downward shift of the yield curve of 400 basis points does not provide us with meaningful results and thus is not presented.

*(dollars in thousands)*

| ​ Change (basis points) in Interest Rates (12-Month Projection) | ​ ​ ​ ​ | ​ ​ September 30, 2024 Forecasted Net Interest Income | ​ ​ ​ ​ | ​ ​ Percentage Change from Base | ​ ​ ​ ​ | ​ ​ December 31, 2023 Forecasted Net Interest Income | ​ ​ ​ ​ | ​ ​ Percentage Change from Base |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: |
| +400 | ​ | $109,509 | ​ | (6.58)% | ​ | $118,597 | ​ | (2.39)% |
| +300 | ​ | 110,994 | ​ | (5.31) ​ | ​ | 118,983 | ​ | (2.08) ​ |
| +200 | ​ | 112,118 | ​ | (4.35) ​ | ​ | 119,395 | ​ | (1.74) ​ |
| +100 | ​ | 114,416 | ​ | (2.39) ​ | ​ | 119,916 | ​ | (1.31) ​ |
| 0 | ​ | 117,218 | ​ | — ​ | ​ | 121,504 | ​ | — ​ |
| −100 | ​ | ​ 120,865 | ​ | 3.11 ​ | ​ | ​ 125,138 | ​ | 2.99 ​ |
| −200 | ​ | ​ 124,853 | ​ | 6.51 ​ | ​ | ​ 128,643 | ​ | 5.87 ​ |
| −300 | ​ | ​ 130,226 | ​ | 11.10 ​ | ​ | ​ 132,269 | ​ | 8.86 ​ |

The table above indicates that as of September 30, 2024, in the event of an immediate and sustained 400 basis point increase in interest rates, the Company would experience a 6.58% decrease in net interest income. In the event of an immediate 300 basis point decrease in interest rates, the Company would experience an 11.10% increase in net interest income.

The results of this simulation analysis are hypothetical, and a variety of factors might cause actual results to differ substantially from what is depicted. For example, if the timing and magnitude of interest rate changes differ from those projected, net interest income might vary significantly. Non-parallel yield curve shifts such as a flattening or steepening of the yield curve or changes in interest rate spreads would also cause net interest income to be different from that depicted. An increasing interest rate environment could reduce projected net interest income if deposits and other short-term liabilities re-price faster than expected or re-price faster than the Company’s assets. Actual results could differ from those projected if the Company grows assets and liabilities faster or slower than estimated, if the Company experienced a net outflow of deposit liabilities, or if the mix of assets and liabilities otherwise changes. Actual results could also differ from those projected if the Company experienced substantially different repayment speeds in the loan portfolio than those assumed in the simulation model. Finally, these simulation results do not contemplate all the actions that the Company may undertake in response to potential or actual changes in interest rates, such as changes to the Company’s loan, investment, deposit, or funding strategies.

## Controls and procedures

As filed, 1,432 characters.

### Evaluation of Disclosure Controls and Procedures

The Company’s Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the design and operation of the Company’s “disclosure controls and procedures” (as that term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, or the Exchange Act) as of September 30, 2024, the end of the fiscal quarter covered by this Quarterly Report on Form 10-Q. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of September 30, 2024, the Company’s disclosure controls and procedures were effective to ensure that the information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to the Company’s management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

### Changes in Internal Control Over Financial Reporting

There has been no change in the Company’s internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Filed Oct 31, 2024.
Source: SEC EDGAR, the filing index for accession 0001558370-24-014002. Last ingested by Listed: Nov 2, 2026, 09:17 ET. No prices; not investment advice.