10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)

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

For the Quarterly Period Ended September 30, 2021

OR

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

For the transition period from _________ to _________

Commission File Number 0-25923

Eagle Bancorp, Inc.

(Exact name of registrant as specified in its charter)

Maryland	52-2061461
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
7830 Old Georgetown Road, Third Floor, Bethesda, Maryland	20814
(Address of principal executive offices)	(Zip Code)

(301) 986-1800

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Securities Registered Pursuant to Section 12(b) of the Act:

Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock, $0.01 par value	EGBN	The Nasdaq Stock Market, LLC

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

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

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

    Large accelerated filer ☒    Accelerated filer ☐

    Non-accelerated filer ☐    Smaller Reporting Company ☐

        Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act Yes ☐ No ☒

As of October 31, 2021, the registrant had 31,950,245 shares of Common Stock outstanding.

EAGLE BANCORP, INC.

TABLE OF CONTENTS

PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	3
	Consolidated Balance Sheets	3
	Consolidated Statements of Income	4
	Consolidated Statements of Comprehensive Income	5
	Consolidated Statements of Changes in Shareholders’ Equity	5
	Consolidated Statements of Cash Flows	7
	Notes to Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	46
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	76
Item 4.	Controls and Procedures	76
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	77
Item 1A.	Risk Factors	77
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	80
Item 3.	Defaults Upon Senior Securities	80
Item 4.	Mine Safety Disclosures	80
Item 5.	Other Information	80
Item 6.	Exhibits	81
Signatures		82

2

PART I - FINANCIAL INFORMATION

Item 1 – Financial Statements (Unaudited)

EAGLE BANCORP, INC.

Consolidated Balance Sheets (Unaudited)

(dollars in thousands, except per share data)

	September 30, 2021		December 31, 2020
Assets
Cash and due from banks	$	8,806	$	8,435
Federal funds sold	38,934		28,200
Interest bearing deposits with banks and other short-term investments	2,452,744		1,752,420
Investment securities (amortized cost of $1,789,416 and $1,129,255 and allowance for credit losses of $256 and $167 as of September 30, 2021 and December 31, 2020, respectively).	1,786,659		1,151,083
Federal Reserve and Federal Home Loan Bank stock	34,093		40,104
Loans held for sale	53,413		88,205
Loans	6,850,863		7,760,212
Less allowance for credit losses	(82,906)		(109,579)
Loans, net	6,767,957		7,650,633
Premises and equipment, net	15,293		13,553
Operating lease right-of-use assets	30,080		25,237
Deferred income taxes	44,733		38,571
Bank owned life insurance	108,158		76,729
Goodwill and Intangible assets, net	105,103		105,114
Other real estate owned	5,135		4,987
Other assets	134,209		134,531
Total Assets	$	11,585,317	$	11,117,802
Liabilities and Shareholders’ Equity
Liabilities
Deposits:
Noninterest bearing demand	$	2,836,418	$	2,809,334
Interest bearing transaction	812,410		756,923
Savings and money market	5,268,157		4,645,186
Time, $100 thousand or more	347,937		546,173
Other time	403,566		431,587
Total deposits	9,668,488		9,189,203
Customer repurchase agreements	29,401		26,726
Other short-term borrowings	300,000		300,000
Long-term borrowings	69,639		268,077
Operating lease liabilities	34,345		28,022
Reserve for unfunded commitments	5,011		5,498
Other liabilities	146,736		59,384
Total Liabilities	10,253,620		9,876,910
Shareholders’ Equity
Common stock, par value $0.01 per share; shares authorized 100,000,000, shares issued and outstanding 31,947,458 and 31,779,663, respectively	316		315
Additional paid in capital	432,479		427,016
Retained earnings	901,218		798,061
Accumulated other comprehensive (loss) income	(2,316)		15,500
Total Shareholders’ Equity	1,331,697		1,240,892
Total Liabilities and Shareholders’ Equity	$	11,585,317	$	11,117,802

See Notes to Consolidated Financial Statements.

3

EAGLE BANCORP, INC.

Consolidated Statements of Income (Unaudited)

(dollars in thousands, except per share data)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Interest Income
Interest and fees on loans	$	82,182	$	89,296	$	260,124	$	278,979
Interest and dividends on investment securities	5,877		4,141		15,878		14,139
Interest on balances with other banks and short-term investments	1,083		384		2,239		2,104
Interest on federal funds sold	10		12		25		84
Total interest income	89,152		93,833		278,266		295,306
Interest Expense
Interest on deposits	6,590		10,995		21,288		44,055
Interest on customer repurchase agreements	14		84		34		257
Interest on short-term borrowings	506		505		1,502		1,363
Interest on long-term borrowings	2,997		3,211		9,114		9,486
Total interest expense	10,107		14,795		31,938		55,161
Net Interest Income	79,045		79,038		246,328		240,145
(Credit) Provision for Credit Losses	(8,203)		6,607		(14,409)		40,654
Provision for Unfunded Commitments	716		(2,078)		(487)		974
Net Interest Income After (Credit) Provision For Credit Losses	86,532		74,509		261,224		198,517
Noninterest Income
Service charges on deposits	1,204		1,061		3,303		3,428
Gain on sale of loans	3,332		12,226		11,988		16,249
Gain on sale of investment securities	1,519		115		2,058		1,650
Increase in the cash surrender value of bank owned life insurance	642		413		1,429		1,655
Other income	1,602		4,029		11,033		12,827
Total noninterest income	8,299		17,844		29,811		35,809
Noninterest Expense
Salaries and employee benefits	22,145		19,388		63,790		54,289
Premises and equipment expenses	3,859		5,125		11,121		12,414
Marketing and advertising	1,013		928		2,879		3,117
Data processing	2,886		2,700		8,451		7,955
Legal, accounting and professional fees	2,021		3,097		8,523		14,064
FDIC insurance	1,549		2,152		5,586		5,556
Other expenses	2,902		3,525		9,506		11,759
Total noninterest expense	36,375		36,915		109,856		109,154
Income Before Income Tax Expense	58,456		55,438		181,179		125,172
Income Tax Expense	14,847		14,092		46,108		31,847
Net Income	$	43,609	$	41,346	$	135,071	$	93,325
Earnings Per Common Share
Basic	$	1.36	$	1.28	$	4.23	$	2.88
Diluted	$	1.36	$	1.28	$	4.22	$	2.88

See Notes to Consolidated Financial Statements.

4

EAGLE BANCORP, INC.

Consolidated Statements of Comprehensive Income (Unaudited)

(dollars in thousands)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Net Income	$	43,609	$	41,346	$	135,071	$	93,325
Other comprehensive income, net of tax:
Unrealized gain (loss) on securities available for sale	(5,703)		(624)		(16,666)		13,354
Reclassification adjustment for net gain included in net income	(1,133)		(86)		(1,534)		(1,231)
Total unrealized gain (loss) on investment securities	(6,836)		(710)		(18,200)		12,123
Unrealized gain (loss) on derivatives	—		24		769		(1,324)
Reclassification adjustment for amounts included in net income	—		289		(385)		513
Total unrealized gain (loss) on derivatives	—		313		384		(811)
Other comprehensive income (loss)	(6,836)		(397)		(17,816)		11,312
Comprehensive Income	$	36,773	$	40,949	$	117,255	$	104,637

See Notes to Consolidated Financial Statements.

EAGLE BANCORP, INC.

Consolidated Statements of Changes in Shareholders’ Equity (Unaudited)

(dollars in thousands except share data)

															Accumulated
															Other
	Common						Additional Paid				Retained				Comprehensive				Shareholders'
	Shares		Amount				in Capital				Earnings				Income (Loss)				Equity
Balance July 1, 2021	31,961,573		$	316			$	431,103			$	870,397			$	4,520			$	1,306,336
Net Income	—		—				—				43,609				—				43,609
Other Comprehensive loss, net of tax	—		—				—				—				(6,836)				(6,836)
Stock-based compensation expense	—		—				1,990				—				—				1,990
Time based stock awards granted	250		—				—				—				—				—
Vesting of time based stock awards issued at date of grant, net of shares withheld for payroll taxes	(2,756)		—				—				—				—				—
Issuance of common stock related to employee stock purchase plan	—		—				—				—				—				—
Cash dividends declared ($0.40 per share)	—		—				—				(12,788)				—				(12,788)
Common stock repurchased	(11,609)						(615)												(615)
Balance September 30, 2021	31,947,458	—	$	316	$	—	$	432,479	$	—	$	901,218	$	—	$	(2,316)	$	—	$	1,331,697
Balance July 1, 2020	32,224,756		$	320			$	440,934			$	731,973			$	14,668			$	1,187,895
Net Income	—		—				—				41,346				—				41,346
Other Comprehensive loss, net of tax	—		—				—				—				(397)				(397)
Stock-based compensation expense	—		—				1,452				—				—				1,452
Vesting of time based stock awards issued at date of grant, net of shares withheld for payroll taxes	(3,297)		—				—				—				—				—
Time based stock awards granted	—		—				—				—				—				—
Issuance of common stock related to employee stock purchase plan	7,177		—				206				—				—				206
Cash dividends declared ($0.22 per share)	—		—				—				(7,100)				—				(7,100)
Balance September 30, 2020	32,228,636	—	$	320	$	—	$	442,592	$	—	$	766,219	$	—	$	14,271			$	1,223,402

5

									Accumulated
									Other
	Common			Additional Paid			Retained		Comprehensive		Shareholders'
	Shares	Amount		in Capital			Earnings		Income (Loss)		Equity
Balance January 1, 2021	31,779,663	$	315	$	427,016		$	798,061	$	15,500	$	1,240,892
Net Income	—	—		—			135,071		—		135,071
Other comprehensive loss, net of tax	—	—		—			—		(17,816)		(17,816)
Stock-based compensation expense	—	—		5,814			—		—		5,814
Vesting of time based stock awards issued at date of grant, net of shares withheld for payroll taxes	(23,755)	1		(1)			—		—		—
Vesting of performance based stock awards, net of shares withheld for payroll taxes	15,686	—		—			—		—		—
Time based stock awards granted	179,172	—		—			—		—		—
Issuance of common stock related to employee stock purchase plan	9,767	—		327			—		—		327
Cash dividends declared ($1.00 per share)	—	—		—			(31,914)		—		(31,914)
Common stock repurchased	(13,075)	—		(677)			—		—		(677)
Balance September 30, 2021	31,947,458	$	316	$	432,479		$	901,218	$	(2,316)	$	1,331,697
Balance January 1, 2020	33,241,496	$	331	$	482,286		$	705,105	$	2,959	$	1,190,681
Net Income	—	—		—			93,325		—		93,325
Cumulative effect adjustment due to the adoption of ASC 326, net of tax	—	—		—			(10,931)		—		(10,931)
Other comprehensive income, net of tax	—	—		—			—		11,312		11,312
Stock-based compensation expense	—	—		3,874			—		—		3,874
Vesting of time based stock awards issued at date of grant, net of shares withheld for payroll taxes	(28,218)	—		—			—		—		—
Vesting of performance based stock awards, net of shares withheld for payroll taxes	4,126	—		—		—	—		—		—
Time based stock awards granted	176,252	—		—			—		—		—
Issuance of common stock related to employee stock purchase plan	17,821	—		589			—		—		589
Cash dividends declared ($0.66 per share)	—	—		—			(21,280)		—		(21,280)
Common stock repurchased	(1,182,841)	(11)		(44,157)					—		(44,168)
Balance September 30, 2020	32,228,636	$	320	$	442,592		$	766,219	$	14,271	$	1,223,402

See Notes to Consolidated Financial Statements.

6

EAGLE BANCORP, INC.

Consolidated Statements of Cash Flows (Unaudited)

(dollars in thousands)

	Nine Months Ended September 30,
	2021		2020
Cash Flows From Operating Activities:
Net Income	$	135,071	$	93,325
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses	(14,409)		40,654
Provision for unfunded commitments	(487)		974
Depreciation and amortization	4,795		3,515
Gains on sale of loans	(11,988)		(16,249)
Gains on sale of GNMA loans	—		(2,443)
Securities premium amortization (discount accretion), net	3,152		5,345
Origination of loans held for sale	(929,090)		(862,171)
Proceeds from sale of loans held for sale	975,870		856,043
Net increase in cash surrender value of BOLI	(1,429)		(1,655)
Deferred income tax (benefit) expense	—		(6,559)
Net gain on sale of other real estate owned	(148)		(1,180)
Net gain on sale of investment securities	(2,058)		(1,650)
Stock-based compensation expense	5,814		3,874
Net tax benefits from stock compensation	—		99
(Increase) decrease in other assets	(29,667)		(45,493)
Increase (decrease) in other liabilities	89,348		41,156
Net cash provided by operating activities	224,774		107,585
Cash Flows From Investing Activities:
Purchases of available-for-sale investment securities	(1,059,189)		(465,119)
Proceeds from maturities of available-for-sale securities	233,366		208,264
Proceeds from sale/call of available-for-sale securities	164,569		130,265
Purchases of Federal Reserve and Federal Home Loan Bank stock	(158)		(9,116)
Sale of Federal Reserve and Federal Home Loan Bank stock	6,169		4,250
Proceeds from sale of SBA PPP loans	170,154		—
Net change in loans	727,021		(343,665)
Net change in premises and equipment	(4,973)		(445)
Net cash used in investing activities	236,959		(475,566)
Cash Flows From Financing Activities:
Increase in deposits	479,285		954,394
Net change in customer repurchase agreements	2,675		(6,687)
Increase in short-term borrowings	—		50,000
Proceeds from long-term borrowings	—		50,293
Repayment of long-term borrowings	(200,000)		—
Proceeds from issuance of common stock	—		—
Proceeds from employee stock purchase plan	327		564
Common stock repurchased	(677)		(44,168)
Cash dividends paid	(31,914)		(21,280)
Net cash provided by financing activities	249,696		983,116
Net Decrease In Cash and Cash Equivalents	711,429		615,135
Cash and Cash Equivalents at Beginning of Period	1,789,055		241,973
Cash and Cash Equivalents at End of Period	$	2,500,484	$	857,108
Supplemental Cash Flows Information:
Interest paid	$	36,831	$	59,011
Income taxes paid	$	42,986	$	29,850
Non-Cash Investing Activities
Initial recognition of operating lease right-of-use assets	$	(10,168)	$	998
Transfers from loans to other real estate owned	$	148	$	3,500
Change in fair value of cash flow hedges	$	(516)	$	—
Change in fair value of investments	$	24,495	$	—

See Notes to Consolidated Financial Statements.

7

EAGLE BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. Summary of Significant Accounting Policies

Basis of Presentation

The Consolidated Financial Statements include the accounts of Eagle Bancorp, Inc. and its subsidiaries (the “Company”). Active subsidiaries include: EagleBank (the “Bank”), Eagle Insurance Services, LLC, Bethesda Leasing, LLC, and Landroval Municipal Finance, Inc., with all significant intercompany transactions eliminated.

The Consolidated Financial Statements of the Company included herein are unaudited. The Consolidated Financial Statements reflect all adjustments, consisting of normal recurring accruals that in the opinion of management, are necessary to present fairly the results for the periods presented. The amounts as of and for the year ended December 31, 2020 were derived from audited Consolidated Financial Statements. Certain information and note disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). In addition to the “Critical Accounting Policies” described below, the Company applies the accounting policies contained in Note 1 to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. The Company believes that the disclosures are adequate to make the information presented not misleading. Certain reclassifications have been made to amounts previously reported to conform to the current period presentation. Reclassifications had no effect on prior year net income or shareholders' equity.

Nature of Operations

The Company, through the Bank, conducts a full service community banking business, primarily in Northern Virginia, Suburban Maryland, and Washington, D.C. The primary financial services offered by the Bank include real estate, commercial and consumer lending, as well as traditional deposit and repurchase agreement products. The Bank is also active in the origination and sale of residential mortgage loans, the origination of small business loans, and the origination, securitization and sale of multifamily Federal Housing Administration (“FHA”) loans. The guaranteed portion of small business loans, guaranteed by the Small Business Administration (“SBA”), is typically sold to third party investors in a transaction apart from the loan’s origination. The Bank offers its products and services through eighteen banking offices, five lending centers and various electronic capabilities, including remote deposit services and mobile banking services. Eagle Insurance Services, LLC, a subsidiary of the Bank, offers access to insurance products and services through a referral program with a third party insurance broker. Landroval Municipal Finance, Inc., a subsidiary of the Bank, focuses on lending to municipalities by buying debt on the public market as well as direct purchase issuance. Bethesda Leasing, a subsidiary of the Bank, holds title to repossessed real estate.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates. The allowance for credit losses, the fair value of financial instruments and the status of contingencies are particularly susceptible to significant change.

Risks and Uncertainties

The outbreak of COVID-19 in early 2020 adversely impacted a broad range of industries in which the Company’s customers operate. Vaccinations are readily available to those in the United States and in many other countries. Although management feels we're generally trending in a positive direction and strides have been made in the fight against COVID-19, we remain cautious given the potential for lingering effects of the pandemic, including vaccination efficacy against variants and the speed of vaccination adoption around the country, which could continue to impair some customers' ability to fulfill their financial obligations to the Company. The ongoing pandemic caused significant disruptions in the U.S. economy and disrupted banking and other financial activity in the areas in which the Company operates. While there has been no material adverse impact on the Company’s employees and operations to date, COVID-19 could still potentially create business continuity or credit issues for the Company depending on how much longer the pandemic lasts. Some lingering uncertainty regarding the continued spread of COVID-19 (including new variants) remains. Congress, the President, and the Federal Reserve took several actions designed to cushion the economic fallout. Most notably, the Coronavirus Aid, Relief and Economic Security (“CARES”) Act was signed into law at the end of March 2020 as a $2 trillion legislative package. The goal of the CARES Act

8

is to prevent a severe economic downturn through various measures, including direct financial aid to American families and economic stimulus to significantly impacted industry sectors. In addition to the general impact of COVID-19, certain provisions of the CARES Act as well as other follow-up stimulus legislative (including the $1.9 trillion "American Rescue Package") and regulatory relief efforts have had a material impact on the Company’s operations.

The Company’s business is dependent upon the willingness and ability of its employees and customers to conduct banking and other financial transactions. The response to control and manage COVID-19 has shown significant progress in many respects. If the response becomes unsuccessful as a result of vaccine efficacy against variants or delays in critical mass adoption of available vaccines, the Company could experience a material adverse effect on its business, financial condition, results of operations and cash flows. While it is not possible to know the full universe or extent that the impact of COVID-19, and resulting measures to curtail its spread, will have on the Company’s operations, the Company is disclosing potentially material items of which it is aware.

Financial position and results of operations

The Company’s interest income could be reduced due to COVID-19. In keeping with guidance from regulators, the Company has worked with COVID-19 affected borrowers throughout the pandemic to defer their payments, interest, and fees. While interest and fees will still accrue to income, through normal GAAP accounting, should eventual credit losses on these deferred payments emerge, interest income and fees accrued would need to be reversed. In such a scenario, interest income in future periods could be negatively impacted. Although accommodations of this type have slowed significantly, at this time the Company is unable to project the full extent of the materiality of such an impact, but recognizes the breadth of the economic impact may affect its borrowers’ ability to repay in future periods.

Capital and liquidity

While the Company believes that it has sufficient capital to withstand an extended economic recession brought about by COVID-19, its reported and regulatory capital ratios can be adversely impacted by credit losses. While we have adjusted our credit loss reserves in 2021 to reflect improving economic conditions, our reported and regulatory capital ratios could be further impacted by additional credit losses, if the economy experiences further volatility (either due to COVID-19 or otherwise). Additionally, on August 2, 2021, the Company redeemed $150 million in Fixed-to-Floating Subordinated Notes issued on July 26, 2016; discussed further below in Note 8—Long-Term Borrowings. The repayment of the Subordinated Debt reduced regulatory capital ratios at the Bank, but did not reduce regulatory capital ratios at the Company, with the exception of Total Capital to Risk Weighted Assets.

The Company maintains access to multiple sources of liquidity. Wholesale funding markets have remained open to us, and rates for short term funding have recently been low. If funding costs were to become elevated for an extended period of time, it could have an adverse effect on the Company’s net interest margin. If an extended recession caused large numbers of the Company’s customers to withdraw their funds faster than expected, the Company might become more reliant on volatile or more expensive sources of funding.

Asset valuation

The ongoing COVID-19 pandemic has caused and could continue to cause volatility and potential declines in the Company’s stock price.

Goodwill is subject to impairment testing at the reporting unit level and must be conducted at least annually. The Company performs impairment testing during the fourth quarter of each year or when events or changes in circumstances indicate the assets might be impaired.

Determining the fair value of a reporting unit under the goodwill impairment test is subjective and often involves the use of significant estimates and assumptions. Estimates of fair value are primarily determined using discounted cash flows, market comparisons and recent transactions. These approaches use significant estimates and assumptions including projected future cash flows, discount rates reflecting the market rate of return, projected growth rates and determination and evaluation of appropriate market comparables. Future events could cause the Company to conclude that goodwill or other intangibles have become impaired, which would result in recording an impairment loss. Any resulting impairment loss could have a material adverse impact on the Company's financial condition and results of operations. The Company determined that there were no triggering events and an impairment analysis was not performed as of September 30, 2021. Annual impairment testing of intangibles and goodwill as required by GAAP will be performed in the fourth quarter of 2021.

9

Business Continuity Plan

The Company implemented a remote working strategy for many of its employees last year in response to the COVID-19 pandemic. The Company did not incur additional material costs related to its continued deployment of the remote working strategy. As of September 30, 2021, the Company did not identify any material operational or internal control risks, or challenges to its ability to maintain its systems and controls, in light of the measures the Company took to prevent the spread of COVID-19. As concerns over the most severe impacts of the pandemic have abated, the Company's non-branch personnel returned to work on a "hybrid" basis starting November 1, 2021. The hybrid workplace allows certain employees to work remotely a portion of the week, but provides that each department has at least 50% of its staff in the office each day. We have established general guidelines for returning to the workplace that include having employees maintain safe distances, staggered work schedules to limit the number of employees in a single location, more frequent cleaning of our facilities and other practices encouraging a safe working environment during this challenging time, including required COVID-19 training programs. The Company does not currently face any material resource constraint through the implementation of its business continuity plans. We are monitoring jurisdictional guidelines and will continue to respond as appropriate.

Lending operations and accommodations to borrowers

In response to the COVID-19 pandemic and consistent with regulatory guidance, we also implemented a short-term loan modification program to provide temporary payment relief to certain borrowers who meet the program's qualifications. As of September 30, 2021, we had ongoing temporary modifications on approximately 6 loans representing approximately $70 million (approximately 1.0% of total loans) in outstanding balances, as compared to 36 loans representing approximately $72 million (approximately 0.9% of total loans) at December 31, 2020. Additionally, none of the deferrals are reflected in the Company's asset quality measures (i.e. non-performing loans) due to the provision of the CARES Act that permits U.S. financial institutions to temporarily suspend the U.S. GAAP requirements to treat such short-term loan modifications as troubled debt restructurings ("TDRs"). Similar provisions have also been confirmed by interagency guidance issued by the federal banking agencies and confirmed with staff members of the Financial Accounting Standards Board.

The Company actively participated in the Paycheck Protection Program (“PPP”), administered by the Small Business Administration (“SBA”). The PPP loans originated by the Bank generally have two-year or five-year terms and earn interest at 1% plus fees. The majority of these loans have been forgiven by the SBA in accordance with the terms of the program. As of September 30, 2021, PPP loans totaled $67.3 million through 109 business loans. The Company understands that loans funded through the PPP program are fully guaranteed by the U.S. government. Should those circumstances change, the Company could be required to provision additional allowance for credit loss through additional credit loss expense charges to earnings. We sold a total of approximately $170 million of PPP loans in the second quarter of 2021. Approximately $171 million in SBA principal was forgiven in the third quarter of 2021. Origination of new loans through the PPP has ceased, and the focus going forward will be on forgiveness.

Credit

The Company is working with customers directly affected by COVID-19. As a result of the current economic environment caused by the COVID-19 pandemic, the Company continues to engage in frequent communication with borrowers to better understand their situation and the challenges faced, allowing it to respond proactively as needs and issues arise. Should economic conditions worsen, the Company could experience increases in its required allowance for credit losses (“ACL”) and record provisions for credit losses. It is possible that the Company’s asset quality measures could worsen at future measurement periods if the effects of COVID-19, or related variants, are prolonged.

Loans

Loans held for investment are stated at the amount of unpaid principal reduced by deferred income (net of costs). Interest on loans is recognized using the simple-interest method on the daily balances of the principal amounts outstanding. Loan origination fees, net of direct loan origination costs, and commitment fees are deferred and amortized as an adjustment to yield over the life of the loan, or over the commitment period, as applicable.

A loan that has been modified or renewed is considered a TDR when two conditions are met: 1) the borrower is experiencing financial difficulty and 2) concessions are made for the borrower's benefit that would not otherwise be considered for a borrower or transaction with similar credit risk characteristics. The Company offers various types of concessions when modifying a loan. Commercial and industrial loans modified in a TDR often involve temporary interest-only payments, term extensions, and converting revolving credit lines to term loans. Additional collateral, a co-borrower, or a guarantor is often

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requested. The most common change in terms provided by the Company is an extension of an interest-only term. As of September 30, 2021, all performing TDRs were categorized as interest-only modifications. Refer to the subsection above "Lending operations and accommodations to borrowers" for a discussion on the impact of the CARES Act on TDRs.

A loan is considered past due when a contractually due payment has not been received by the contractual due date. We place a loan on nonaccrual status when there is a clear indication that the borrower’s cash flow may not be sufficient to meet payments as they become due, which is generally when a loan is 90 days past due. When a loan is placed on nonaccrual status, all previously accrued and unpaid interest is reversed as a reduction of current period interest income. Interest income is subsequently recognized on a cash basis as long as the remaining book balance of the asset is deemed to be collectible. If collectability is questionable, then cash payments are applied to principal. A loan is placed back on accrual status when both principal and interest are current and it is probable that we will be able to collect all amounts due (both principal and interest) according to the terms of the loan agreement.

Allowance for Credit Losses- Loans

The ACL is an estimate of the expected credit losses in the loans held for investment portfolio.

Accounting Standards Codification ("ASC") 326, "Financial Instruments--Credit Losses" requires lifetime expected credit losses to be immediately recognized when a financial asset is originated or purchased. The ACL is a valuation account that is deducted from the amortized cost basis of loans to present the net amount expected to be collected on the loans. Loans, or portions thereof, are charged off against the allowance when they are deemed uncollectible.

Reserves on loans that do not share risk characteristics are evaluated on an individual basis (nonaccrual, TDR). Nonaccrual loans are specifically reviewed for loss potential and when deemed appropriate are assigned a reserve based on an individual evaluation. The remainder of the portfolio, representing all loans not assigned an individual reserve, is segregated by call report codes (the quarterly required regulatory report otherwise known as form FFIEC 041) and a loan-level probability of default (“PD”) / Loss Given Default (“LGD”) cash flow method with and using an exposure at default (“EAD”) model is applied. These historical loss rates are then modified to incorporate our reasonable and supportable forecast of future losses at the portfolio segment level.

The ACL also includes an amount for inherent risks not reflected in the historical analyses. Relevant factors include, but are not limited to, concentrations of credit risk, changes in underwriting standards, experience and depth of lending staff, and trends in delinquencies.

The Company uses regression analysis of historical internal and peer data (as Company loss data is insufficient) to determine suitable credit loss drivers to utilize when modeling lifetime PD and LGD. This analysis also determines how expected PD will be impacted by different forecasted levels of the loss drivers.

A similar process is employed to calculate a reserve assigned to off-balance sheet commitments, specifically unfunded loan commitments and letters of credit. Any needed reserve is recorded in reserve for unfunded commitments (“RUC”) on the Consolidated Balance Sheets. For periods beyond which we are able to develop reasonable and supportable forecasts, we revert to the historical loss rate on a straight-line basis over a twelve-month period.

The Company uses a loan level PD/LGD cash flow method with an EAD model to estimate expected credit losses. In accordance with ASC 326, expected credit losses are measured on a collective (pooled) basis for financial assets with similar risk characteristics. The bank groups collectively assessed loans using a call report code. Some unique loan types, such as PPP loans, are grouped separately due to their specific risk characteristics.

For each of these loan segments, the Company generates cash flow projections at the instrument level wherein payment expectations are adjusted for estimated prepayment speeds, PD rates, and LGD rates. The modeling of expected prepayment speeds is based on historical internal data. EAD is based on each instrument's underlying amortization schedule in order to estimate the bank's expected credit loss exposure at the time of the borrower's potential default.

For our cash flow model, management utilizes and forecasts regional unemployment by using a national forecast and estimating a regional adjustment based on historical differences between the two as the loss driver over our reasonable and supportable period of 18 months and reverts back to a historical loss rate over twelve months on a straight-line basis over the loan's remaining maturity. In 2021, unemployment projections have started to recover from elevated levels experienced in 2020 as a result of the COVID-19 pandemic. Unemployment projections materially inform our CECL ("current expected credit loss") economic forecast and resulted in a reduction to our ACL during the nine months ended September 30, 2021. Management

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leverages economic projections from reputable and independent third parties to inform its loss driver forecasts over the forecast period.

While our methodology in establishing the ACL attributes portions of the ACL and RUC to the separate loan pools or segments, the entire ACL and RUC is available to absorb credit losses expected in the total loan portfolio and total amount of unfunded credit commitments, respectively. Portfolio segments are used to pool loans with similar risk characteristics and align with our methodology for measuring expected credit losses.

In addition to quantitative amounts as determined by our valuation models, we apply a qualitative factors overlay that incorporates trends and conditions and factors that the models may not fully capture in our judgement. These qualitative adjustments are evaluated quarterly to ensure these economic factor adjustments remain supportable and current.

The following table presents a breakdown of the provision for credit losses included in our Consolidated Statements of Income for the applicable periods (in thousands):

	Three Months Ended				Nine months ended
(dollars in thousands)	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
Provision (credit) for credit losses- loans	$	(8,326)	$	6,589	$	(14,498)	$	40,498
Provision (credit) for credit losses- AFS debt securities	123		18		89		156
Total provision (credit) for credit losses	$	(8,203)	$	6,607	$	(14,409)	$	40,654

A summary of our primary portfolio segments is as follows:

Commercial. The commercial loan portfolio comprises lines of credit and term loans for working capital, equipment, and other business assets across a variety of industries. These loans are used for general corporate purposes including financing working capital, internal growth, and acquisitions; and are generally secured by accounts receivable, inventory, equipment and other assets of our clients’ businesses.

Paycheck Protection Program. The PPP portfolio comprises loans issued under the SBA’s Paycheck Protection Program to support small businesses impacted by the pandemic. PPP loans are approved subject to limited underwriting criteria following SBA guidelines, are unsecured, and are fully guaranteed as to principal and interest by the SBA.

    Income producing commercial real estate. Income producing commercial real estate loans comprise permanent and bridge financing provided to professional real estate owners/managers of commercial and residential real estate projects and properties who have a demonstrated record of past success with similar properties. Collateral properties include apartment buildings, office buildings, hotels, mixed-use buildings, retail, data centers, warehouse, and shopping centers. The primary source of repayment on these loans is generally expected to come from lease or operation of the real property collateral. Income producing commercial real estate loans are impacted by fluctuation in collateral values, as well as rental demand and rates.

Owner occupied – commercial real estate. The owner occupied commercial real estate portfolio comprises permanent financing provided to operating companies and their related entities for the purchase or refinance of real property wherein their business operates. Collateral properties include industrial property, office buildings, religious facilities, mixed-use property, health care and educational facilities.

Real Estate Mortgage – Residential. Real estate mortgage residential loans comprise consumer mortgages for the purpose of purchasing or refinancing first lien real estate loans secured by primary-residence, second-home, and rental residential real property.

Construction – commercial and residential. The construction commercial and residential loan portfolio comprises of loans made to builders and developers of commercial and residential property, for both renovation, new construction, and development projects. Collateral properties include apartment buildings, mixed use property, residential condominiums, single and 1-4 residential property, and office buildings. The primary source of repayment on these loans is expected to come from the sale, permanent financing, or lease of the real property collateral. Construction loans are impacted by fluctuations in collateral values and the ability of the borrower or ultimate purchaser to obtain permanent financing.

Construction – commercial and industrial ("C&I") (owner occupied). The construction C&I (owner occupied) portfolio comprises loans to operating companies and their related entities for new construction or renovation of the real or

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leased property in which they operate. Generally these loans contain provisions for conversion to an owner occupied commercial real estate or to a commercial loan after completion of construction. Collateral properties include industrial, healthcare, religious facilities, restaurants, and office buildings.

Home Equity. The home equity portfolio comprises consumer lines of credit and loans secured by subordinate liens on residential real property.

Other Consumer. The other consumer portfolio comprises consumer purpose loans not secured by real property, including personal lines of credit and loans, overdraft lines, and vehicle loans. This category also includes other loan items such as overdrawn deposit accounts as well as loans and loan payments in process.

The Company uses several credit quality indicators to manage credit risk in an ongoing manner. The Company’s primary credit quality indicators use an internal credit risk rating system that categorizes loans into pass, watch, special mention, or classified categories. We have several pass credit grades that are assigned to loans based on varying levels of risk, ranging from credits that are secured by cash or marketable securities, to watch credits which have all the characteristics of an acceptable credit risk but warrant more than the normal level of monitoring. Special mention loans are those that are currently protected by the sound worth and paying capacity of the borrower, but that are potentially weak and constitute an additional credit risk. These loans have the potential to deteriorate to a substandard grade due to the existence of financial or administrative deficiencies. Substandard loans have a well-defined weakness or weaknesses that jeopardizes the liquidation of the debt. They are characterized by the distinct possibility that we will sustain some loss if the deficiencies are not corrected. Some substandard loans are inadequately protected by the sound worth and paying capacity of the borrower and of the collateral pledged and may be considered impaired. Substandard loans can be accruing or can be on nonaccrual depending on the circumstances of the individual loans.

Loans classified as doubtful have all the weaknesses inherent in substandard loans with the added characteristics that the weaknesses make collection in full highly questionable and improbable. The possibility of loss is extremely high. All doubtful loans are on nonaccrual.

Classified loans represent the sum of loans graded substandard and doubtful. The methodology used in the estimation of the allowance, which is performed at least quarterly, is designed to be dynamic and responsive to changes in portfolio credit quality and forecasted economic conditions. Changes are reflected in the allowance on collectively assessed and individually assessed loans as the collectability of classified loans is evaluated with new information. As our portfolio has matured, historical loss ratios have been closely monitored. The review of the appropriateness of the allowance is performed by executive management and presented to management committees, Credit Oversight Committee (which replaced Directors Loan Committee), the Audit Committee, and the Board of Directors. The committees' reports to the Board are part of the Board review on a quarterly basis of our consolidated financial statements. When management determines that foreclosure is probable, and for certain collateral-dependent loans where foreclosure is not considered probable, expected credit losses are based on the estimated fair value of the collateral adjusted for selling costs, when appropriate. A loan is considered collateral-dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral.

Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayments when appropriate. The contractual term excludes expected extensions, renewals and modifications unless management has a reasonable expectation that a loan will be in a trouble debt restructuring.

We do not measure an ACL on accrued interest receivable balances because these balances are written off in a timely manner as a reduction to interest income when loans are placed on nonaccrual status.

Collateral Dependent Financial Assets

Loans that do not share risk characteristics are evaluated on an individual basis. For collateral dependent financial assets where the Company has determined that foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and the Company expects repayment of the financial asset to be provided substantially through the sale of the collateral, the ACL is measured based on the difference between the fair value of the collateral and the amortized cost basis of the asset as of the measurement date. When repayment is expected to be from the operation of the collateral, expected credit losses are calculated as the amount by which the amortized cost basis of the financial asset exceeds the net present value ("NPV") from the operation of the collateral. When repayment is expected to be from the sale of the collateral, expected credit losses are calculated as the amount by which the amortized cost basis of the financial asset exceeds the fair value of the

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underlying collateral less estimated cost to sell. The ACL may be zero if the fair value of the collateral at the measurement date exceeds the amortized cost basis of the financial asset.

A loan that has been modified or renewed is considered a TDR when two conditions are met: 1) the borrower is experiencing financial difficulty and 2) concessions are made for the borrower's benefit that would not otherwise be considered for a borrower or transaction with similar credit risk characteristics. The Company’s ACL reflects all effects of a TDR when an individual asset is specifically identified as a reasonably expected TDR. The Company has determined that a TDR is reasonably expected no later than the point when the lender concludes that modification is the best course of action and it is at least reasonably possible that the troubled borrower will accept some form of concession from the lender to avoid a default. Reasonably expected TDRs and executed non-performing TDRs are evaluated individually to determine the required ACL. Refer to the subsection above "Lending operations and accommodations to borrowers" for a discussion on the impact of the CARES Act on TDRs.

Allowance for Credit Losses - Available-for-Sale Debt Securities

For Available for Sale ("AFS") debt securities in an unrealized loss position, the Company first assesses whether it intends to sell, or it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either criterion is met, the security’s amortized cost basis is written down to fair value through income. For AFS debt securities that do not meet the aforementioned criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. When evaluating whether credit loss exists, accounting guidance requires that the Company not consider the length of time that fair value has been less than amortized cost. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security is compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income. The entire amount of an impairment loss is recognized in earnings only when: (1) the Company intends to sell the security; or (2) it is more likely than not that the Company will have to sell the security before recovery of its amortized cost basis; or (3) the Company does not expect to recover the entire amortized cost basis of the security. In all other situations, only the portion of the impairment loss representing the credit loss must be recognized in earnings, with the remaining portion being recognized in shareholders’ equity as comprehensive income, net of deferred taxes. Changes in the allowance for credit losses are recorded as a provision for (or reversal of) credit losses. Losses are charged against the allowance when management believes the uncollectibility of an AFS security is confirmed or when either of the criteria regarding intent or requirement to sell is met. Any impairment not recorded through an allowance for credit loss is recognized in other comprehensive income as a non-credit-related impairment. The majority of available-for-sale debt securities as of September 30, 2021 and December 31, 2020 were issued by U.S. agencies. However, as of September 30, 2021 and December 31, 2020, the allowance for credit losses on AFS securities was $256 thousand and $167 thousand, respectively, based on the Company's determination that part of the unrealized loss positions in AFS corporate and municipal securities could be the result of credit losses. See Note 3 Investment Securities for more information.

We have made a policy election to exclude accrued interest from the amortized cost basis of available-for-sale debt securities and report accrued interest separately in other assets in the Consolidated Balance Sheets. Available-for-sale debt securities are placed on nonaccrual status when we no longer expect to receive all contractual amounts due, which is generally at 90 days past due. Accrued interest receivable is reversed against interest income when a security is placed on nonaccrual status. Accordingly, we do not recognize an allowance for credit loss against accrued interest receivable.

Loan Commitments and Allowance for Credit Losses on Off-Balance Sheet Credit Exposures

Financial instruments include off-balance sheet credit instruments such as commitments to make loans and commercial letters of credit issued to meet customer financing needs. The Company's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for off-balance sheet loan commitments is represented by the contractual amount of those instruments. Such financial instruments are recorded when they are funded.

The Company records a reserve for unfunded commitments (“RUC”) on off-balance sheet credit exposures through a charge to provision for credit loss expense in the Company’s Consolidated Statement of Income. The RUC on off-balance sheet credit exposures is estimated by loan segment at each balance sheet date under the current expected credit loss model using the same methodologies as portfolio loans, taking into consideration the likelihood that funding will occur, and is included in the RUC on the Company’s Consolidated Balance Sheet.

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These statements should be read in conjunction with the audited Consolidated Financial Statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

Other New Authoritative Accounting Guidance

Accounting Standards Adopted in 2021:

ASU 2019-12 "Income Taxes (Topic 740)" ("ASU 2019-12") simplifies the accounting for income taxes by removing certain exceptions and improves the consistent application of GAAP by clarifying and amending other existing guidance. ASU 2019-12 became effective for us on January 1, 2021 and did not have a material impact on our consolidated financial statements.

Accounting Standards Pending Adoption:

ASU 2020-4, "Reference Rate Reform (Topic 848)" ("ASU 2020-4") provides optional expedients and exceptions for applying GAAP to loan and lease agreements, derivative contracts, and other transactions affected by the anticipated transition away from LIBOR toward new interest rate benchmarks. For transactions that are modified because of reference rate reform and that meet certain scope guidance (i) modifications of loan agreements should be accounted for by prospectively adjusting the effective interest rate and the modification will be considered "minor" so that any existing unamortized origination fees/ costs would carry forward and continue to be amortized and (ii) modifications of lease agreements should be accounted for as a continuation of the existing agreement with no reassessments of the lease classification and the discount rate or remeasurements of lease payments that otherwise would be required for modifications not accounted for as separate contracts. ASU 2020-4 also provides numerous optional expedients for derivative accounting. ASU 2020-4 is effective March 12, 2020 through December 31, 2022. An entity may elect to apply ASU 2020-4 for contract modifications as of January 1, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements are available to be issued. Once elected for a Topic or an Industry Subtopic within the Codification, the amendments in this ASU must be applied prospectively for all eligible contract modifications for that Topic or Industry Subtopic. We anticipate this ASU will simplify any modifications we execute between the selected start date (yet to be determined) and December 31, 2022 that are directly related to LIBOR transition by allowing prospective recognition of the continuation of the contract, rather than extinguishment of the old contract resulting in writing off unamortized fees/costs. We do not anticipate that the LIBOR transition or the application of this ASU will have material effects on the Company's business operations and consolidated financial statements.

Note 2. Cash and Due from Banks

The Company has deposits with other banks for derivative positions it holds, totaling $7.6 million at September 30, 2021 and $5.1 million at December 31, 2020, of which $3.2 million and $4.2 million, respectively, serve as collateral for those derivative positions.

Additionally, the Bank maintains interest bearing balances with the Federal Home Loan Bank ("FHLB") of Atlanta and noninterest bearing balances with domestic correspondent banks to cover associated costs for services they provide to the Bank.

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Note 3. Investment Securities Available-for-Sale

Amortized cost and estimated fair value of securities available-for-sale are summarized as follows:

			Gross		Gross		Allowance		Estimated
September 30, 2021	Amortized		Unrealized		Unrealized		for Credit		Fair
(dollars in thousands)	Cost		Gains		Losses		Losses		Value
U.S. treasuries	$	24,838	$	16	$	—	$	—	$	24,854
U.S. agency securities	356,626		806		(3,726)		—		353,706
Residential mortgage backed securities	1,206,867		8,151		(11,882)		—		1,203,136
Municipal bonds	119,511		4,284		(629)		(2)		123,164
Corporate bonds	81,376		783		(304)		(254)		81,601
Other	$	198	—		—		—		198
	$	1,789,416	$	14,040	$	(16,541)	$	(256)	$	1,786,659

			Gross		Gross				Estimated
December 31, 2020	Amortized		Unrealized		Unrealized		Allowance for		Fair
(dollars in thousands)	Cost		Gains		Losses		Credit Losses		Value
U.S. agency securities	$	181,087	$	1,461	$	(627)	$	—	$	181,921
Residential mortgage backed securities	811,328		14,506		(833)		—		825,001
Municipal bonds	102,259		5,872		—		(18)		108,113
Corporate bonds	34,383		1,624		(8)		(149)		35,850
Other	$	198	—		—		—		198
	$	1,129,255	$	23,463	$	(1,468)	$	(167)	$	1,151,083

In addition, at September 30, 2021 and December 31, 2020 the Company held $34.1 million and $40.1 million, respectively, in equity securities in a combination of FRB and FHLB stocks, which are required to be held for regulatory purposes and which are not marketable, and therefore are carried at cost.

Accrued interest on available-for-sale securities totaled $4.5 million and $3.5 million at September 30, 2021 and December 31, 2020, respectively, and was included in other assets in the Consolidated Balance Sheets.

Gross unrealized losses and fair value of available-for-sale securities for which an allowance for credit losses has not been recorded, by length of time that individual securities have been in a continuous unrealized loss position are as follows:

		Less than				12 Months
		12 Months				or Greater				Total
		Estimated				Estimated				Estimated
September 30, 2021	Number of	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(dollars in thousands)	Securities	Value		Losses		Value		Losses		Value		Losses
U. S. agency securities	45	$	200,153	$	3,135	$	47,078	$	591	$	247,231	$	3,726
Residential mortgage backed securities	109	769,073		10,332		48,869		1,550		817,942		11,882
Corporate bonds	6	26,699		304		—		—		26,699		304
Municipal bonds	11	38,213		629		—		—		38,213		629
	171	$	1,034,138	$	14,400	$	95,947	$	2,141	$	1,130,085	$	16,541

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		Less than				12 Months
		12 Months				or Greater				Total
		Estimated				Estimated				Estimated
December 31, 2020	Number of	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(dollars in thousands)	Securities	Value		Losses		Value		Losses		Value		Losses
U. S. agency securities	28	$	46,412	$	67	$	41,320	$	560	$	87,732	$	627
Residential mortgage backed securities	35	170,178		782		6,419		51		176,597		833
Corporate bonds	3	5,764		8		—		—		5,764		8
	66	$	222,354	$	857	$	47,739	$	611	$	270,093	$	1,468

The majority of the AFS debt securities in an unrealized loss position as of September 30, 2021, consisted of debt securities issued by U.S. government agencies or U.S. government-sponsored enterprises. These securities carry the explicit and/or implicit guarantee of the U.S. government, are widely recognized as “risk free,” and have a long history of zero credit loss.

As of September 30, 2021, total gross unrealized losses were primarily attributable to changes in interest rates, relative to when the investment securities were purchased, and not due to the credit quality of the investment securities. However, as of September 30, 2021, the Company determined that part of the unrealized loss positions in AFS corporate and municipal securities could be the result of credit losses, and therefore, an allowance for credit losses of $256 thousand was recorded. The weighted average duration of debt securities, which comprise 99.9% of total investment securities, is 4.8 years. If quoted prices are not available, fair value is measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security's credit rating, prepayment assumptions and other factors such as credit loss assumptions. The Company does not intend to sell the investments and it is more likely than not that the Company will not have to sell the securities before recovery of its amortized cost basis, which may be at maturity.

The amortized cost and estimated fair value of investments available-for-sale at September 30, 2021 and December 31, 2020 by contractual maturity are shown in the table below. Contractual maturities for residential mortgage backed securities (“MBS”) are not shown as they may differ significantly from expected maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

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	September 30, 2021				December 31, 2020
	Amortized		Estimated		Amortized		Estimated
(dollars in thousands)	Cost		Fair Value		Cost		Fair Value
U.S. treasuries
After one year through five years	$	24,838	$	24,854	$	—	$	—
U. S. agency securities maturing:
One year or less	182,385		180,838		53,916		53,906
After one year through five years	97,969		98,179		110,083		110,777
Five years through ten years	76,272		74,689		17,087		17,240
Residential mortgage backed securities	1,206,867		1,203,136		811,328		825,001
Municipal bonds maturing:
One year or less	3,909		3,962		4,329		4,348
After one year through five years	24,618		26,133		26,622		28,272
Five years through ten years	70,937		73,293		69,309		73,389
After ten years	20,047		19,778		2,000		2,121
Corporate bonds maturing:
One year or less	13,928		14,148		5,218		5,220
After one year through five years	38,111		38,384		22,189		23,267
Five years through ten years	29,337		29,323		6,976		7,511
After ten years	—		—		—		—
Other	198		198		198		198
Allowance for Credit Losses	—		(256)		—		(167)
	$	1,789,416	$	1,786,659	$	1,129,255	$	1,151,083

For the nine months ended September 30, 2021, gross realized gains on sales of investments securities were $2.1 million and there were $47 thousand gross realized losses on sales of investment securities. For the nine months ended September 30, 2020, gross realized gains on sales of investments securities were $1.7 million, and there were no gross realized losses on sales of investment securities.

Proceeds from sales and calls of investment securities for the nine months ended September 30, 2021 were $164.6 million compared to $130.3 million for the same period in 2020.

The carrying value of securities pledged as collateral for certain government deposits, securities sold under agreements to repurchase, and certain lines of credit with correspondent banks at September 30, 2021 and December 31, 2020 was $240.2 million and $268.4 million, respectively, which is well in excess of required amounts in order to operationally provide significant reserve amounts for new business. As of September 30, 2021 and December 31, 2020, there were no holdings of securities of any one issuer, other than the U.S. Government and U.S. agency securities, which exceeded ten percent of shareholders’ equity.

Note 4. Mortgage Banking Derivatives

As part of its mortgage banking activities, the Bank enters into interest rate lock commitments, which are commitments to originate loans where the interest rate on the loan is determined prior to funding and the customers have locked into that interest rate. The Bank then locks in the loan and interest rate with an investor and commits to deliver the loan if settlement occurs (“best efforts”) or commits to deliver the locked loan in a binding (“mandatory”) delivery program with an investor. Certain loans under interest rate lock commitments are covered under forward sales contracts of mortgage backed securities. Forward sales contracts of MBS are recorded at fair value with changes in fair value recorded in noninterest income. Interest rate lock commitments and commitments to deliver loans to investors are considered derivatives. The market value of interest rate lock commitments and best efforts contracts are not readily ascertainable with precision because they are not actively traded in stand-alone markets. The Bank determines the fair value of interest rate lock commitments and delivery contracts by measuring the fair value of the underlying asset, which is impacted by current interest rates, taking into consideration the probability that the interest rate lock commitments will close or will be funded.

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Certain additional risks arise from these forward delivery contracts in that the counterparties to the contracts may not be able to meet the terms of the contracts. The Bank does not expect any counterparty to any MBS to fail to meet its obligation. Additional risks inherent in mandatory delivery programs include the risk that, if the Bank does not close the loans subject to interest rate risk lock commitments, it will still be obligated to deliver MBS to the counterparty under the forward sales agreement. Should this be required, the Bank could incur significant costs in acquiring replacement loans or MBS and such costs could have an adverse effect on mortgage banking operations.

The fair value of the mortgage banking derivatives is recorded as a freestanding asset or liability with the change in value being recognized in current earnings during the period of change.

The Bank has mortgage banking derivative financial instruments that are included in other assets, and are related to its interest rate lock commitments. The notional value of the mortgage banking derivative financial instruments was $137.0 million at September 30, 2021 and $367.7 million at December 31, 2020. The fair value of these mortgage banking derivative instruments was $1.6 million at September 30, 2021 and at $5.2 million at December 31, 2020.

Included in gain on sale of loans for the three and nine months ended September 30, 2021 there was a $21 thousand net loss relating to mortgage banking derivative instruments as compared to a net loss of $145 thousand and $309 thousand for the three and nine months ended September 30, 2020, respectively.

Note 5. Loans and Allowance for Credit Losses

The Bank makes loans to customers primarily in the Washington, D.C. metropolitan area and surrounding communities. A substantial portion of the Bank’s loan portfolio consists of loans to businesses secured by real estate and other business assets.

Loans, net of unamortized net deferred fees, at September 30, 2021 and December 31, 2020 are summarized by type as follows:

	September 30, 2021				December 31, 2020
(dollars in thousands)	Amount		%		Amount		%
Commercial	$	1,289,215	19 %		$	1,437,433	19	%
PPP loans	67,311		1 %		454,771		6	%
Income producing - commercial real estate	3,337,303		49	%	3,687,000		47	%
Owner occupied - commercial real estate	977,617		14 %		997,694		13	%
Real estate mortgage - residential	76,259		1 %		76,592		1	%
Construction - commercial and residential	824,133		12 %		873,261		11	%
Construction - C&I (owner occupied)	222,366		3 %		158,905		2	%
Home equity	55,527		1 %		73,167		1	%
Other consumer	1,132		—		1,389		—
Total loans	6,850,863		100	%	7,760,212		100	%
Less: allowance for credit losses	(82,906)				(109,579)
Net loans (1)	$	6,767,957			$	7,650,633

________________________________________

(1)Excludes accrued interest receivable of $40.0 million and $46.0 million at September 30, 2021 and December 31, 2020, respectively, which is recorded in other assets.

Unamortized net deferred fees amounted to $22.7 million and $30.8 million at September 30, 2021 and December 31, 2020, respectively.

As of September 30, 2021 and December 31, 2020, the Bank serviced $115 million and $124 million, respectively, of multifamily FHA loans, SBA loans and other loan participations that are not reflected as loan balances on the Consolidated Balance Sheets.

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Loan Origination / Risk Management

Specific loan reserves are established based upon credit and/or collateral risks on an individual loan basis. The remainder of the portfolio, representing all loans not assigned an individual reserve, is segregated by call report codes and a loan-level PD/LGD cash flow method using an EAD model is applied. The loss rates are then modified to incorporate our reasonable and supportable forecast of future losses at the portfolio segment level, as well as any necessary qualitative adjustments.

The composition of the Company’s loan portfolio is heavily weighted toward commercial real estate, both owner occupied and income producing real estate. At September 30, 2021, owner occupied - commercial real estate and construction – C&I (owner occupied) represent approximately 17% of the loan portfolio. At September 30, 2021, non-owner occupied commercial real estate and real estate construction represented approximately 61% of the loan portfolio. The combined owner occupied and commercial real estate and construction loans represent approximately 78% of the loan portfolio. Real estate also serves as collateral for loans made for other purposes, resulting in 80% of all loans being secured by real estate. These loans are underwritten to mitigate lending risks typical of this type of loan such as declines in real estate values, changes in borrower cash flow and general economic conditions. The Bank typically requires a maximum loan to value of 80% and minimum cash flow debt service coverage of 1.15 to 1.0. Personal guarantees may be required, but may be limited. In making real estate commercial mortgage loans, the Bank generally requires that interest rates adjust not less frequently than five years.

The Company is also an active traditional commercial lender providing loans for a variety of purposes, including working capital, equipment and account receivable financing. This loan category represents approximately 19 % of the loan portfolio at September 30, 2021 and was generally variable or adjustable rate. Personal guarantees are generally required, but may be limited. Non-PPP SBA loans represent approximately 1% of the commercial loan category. In originating SBA loans, the Company assumes the risk of non-payment on the unguaranteed portion of the credit as well as potential recourse to the SBA guarantees. The Company generally sells the guaranteed portion of the loan generating noninterest income from the gains on sale, as well as servicing income on the portion participated. SBA loans are subject to the same cash flow analyses as other commercial loans. SBA loans are subject to a maximum loan size established by the SBA as well as internal loan size guidelines.

Approximately 1 % of the loan portfolio at September 30, 2021 consists of PPP loans to eligible customers. PPP loans are expected to primarily be repaid via forgiveness provisions (under the CARES Act and subsequent legislation) from the SBA. These loans are fully guaranteed as to principal and interest by the SBA and ultimately by the full faith and credit of the U.S. Government; as a result, they were approved utilizing different underwriting standards than the Bank's other commercial loans. PPP loans are included in the CECL model but do not carry an allowance for credit loss due to the aforementioned government guarantees.

Approximately 1% of the loan portfolio at September 30, 2021 consists of home equity loans and lines of credit and other consumer loans. These credits, while making up a small portion of the loan portfolio, demand the same emphasis on underwriting and credit evaluation as other types of loans advanced by the Bank.

Approximately 1 % of the loan portfolio consists of residential mortgage loans. The repricing duration of these loans was 21 months at September 30, 2021. These credits represent first liens on residential property loans originated by the Bank. While the Bank’s general practice is to originate and sell (servicing released) loans made by its Residential Lending department, from time to time certain loan characteristics do not meet the requirements of third party investors and these loans are instead maintained in the Bank’s portfolio until they are resold to another investor at a later date or mature.

Loans are secured primarily by duly recorded first deeds of trust or mortgages. In some cases, the Bank may accept a recorded junior trust position. In general, borrowers will have a proven ability to build, lease, manage and/or sell a commercial or residential project and demonstrate satisfactory financial condition. Additionally, an equity contribution toward the project is customarily required.

Construction loans require that the financial condition and experience of the general contractor and major subcontractors be satisfactory to the Bank. Guaranteed, fixed price contracts are required whenever appropriate, along with payment and performance bonds or completion bonds for larger scale projects.

Loans intended for residential land acquisition, lot development and construction are made on the premise that the land: 1) is or will be developed for building sites for residential structures, and 2) will ultimately be utilized for construction or

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improvement of residential zoned real properties, including the creation of housing. Residential development and construction loans will finance projects such as single family subdivisions, planned unit developments, townhouses, and condominiums. Residential land acquisition, development and construction loans generally are underwritten with a maximum term of 36 months, including extensions approved at origination.

Commercial land acquisition and construction loans are secured by real property where loan funds will be used to acquire land and to construct or improve appropriately zoned real property for the creation of income producing or owner user commercial properties. Borrowers are generally required to put equity into each project at levels determined by the appropriate approval authority. Commercial land acquisition and construction loans generally are underwritten with a maximum term of 24 months.

Substantially all construction draw requests must be presented in writing on American Institute of Architects documents and certified either by the contractor, the borrower and/or the borrower’s architect. Each draw request shall also include the borrower’s soft cost breakdown certified by the borrower or their Chief Financial Officer. Prior to an advance, the Bank or its contractor inspects the project to determine that the work has been completed, to justify the draw requisition.

Commercial permanent loans are generally secured by improved real property which is generating income in the normal course of operation. Debt service coverage, assuming stabilized occupancy, must be satisfactory to support a permanent loan. The debt service coverage ratio is ordinarily at least 1.15 to 1.0. As part of the underwriting process, debt service coverage ratios are stress tested assuming a 200 basis point increase in interest rates from their current levels.

Commercial permanent loans generally are underwritten with a term not greater than 10 years or the remaining useful life of the property, whichever is lower. The preferred term is between 5 to 7 years, with amortization to a maximum of 25 years.

The Company’s loan portfolio includes acquisition, development and construction (“ADC”) real estate loans including both investment and owner occupied projects. ADC loans amounted to $1.4 billion at September 30, 2021. A portion of the ADC portfolio, both speculative and non-speculative, includes loan-funded interest reserves at origination. ADC loans that provide for the use of interest reserves represent approximately 57.5% of the outstanding ADC loan portfolio at September 30, 2021. The decision to establish a loan-funded interest reserve is made upon origination of the ADC loan and is based upon a number of factors considered during underwriting of the credit including: (1) the feasibility of the project; (2) the experience of the sponsor; (3) the creditworthiness of the borrower and guarantors; (4) the borrower equity contribution; and (5) the level of collateral protection. When appropriate, an interest reserve provides an effective means of addressing the cash flow characteristics of a properly underwritten ADC loan. The Company recognizes that one of the risks inherent in the use of interest reserves is the potential masking of underlying problems with the project and/or the borrower’s ability to repay the loan. In order to mitigate these inherent risks, the Company employs a series of reporting and monitoring mechanisms on all ADC loans, whether or not an interest reserve is provided, including: (1) construction and development timelines which are monitored on an ongoing basis which track the progress of a given project to the timeline projected at origination; (2) a construction loan administration department independent of the lending function; (3) third party independent construction loan inspection reports; (4) monthly interest reserve monitoring reports detailing the balance of the interest reserves approved at origination and the days of interest carry represented by the reserve balances as compared to the then current anticipated time to completion and/or sale of speculative projects; and (5) quarterly commercial real estate construction meetings among senior Company management, which includes monitoring of current and projected real estate market conditions. If a project has not performed as expected, it is not the customary practice of the Company to increase loan-funded interest reserves.

The following tables detail activity in the allowance for credit losses by portfolio segment for the three and nine months ended September 30, 2021 and 2020. PPP loans are excluded from these tables since they do not carry an allowance for credit loss, as these loans are fully guaranteed as to principal and interest by the SBA, whose guarantee is backed by the full faith and credit of the U.S. Government. Allocation of a portion of the allowance to one category of loans does not restrict the use of the allowance to absorb losses in other categories.

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					Income Producing -				Owner Occupied -				Real Estate				Construction -
					Commercial				Commercial				Mortgage -				Commercial and				Home				Other
(dollars in thousands)	Commercial				Real Estate				Real Estate				Residential				Residential				Equity				Consumer		Total
Three Months Ended September 30, 2021
Allowance for credit losses:
Balance at beginning of period	$	21,348			$	45,970			$	12,995			$	882			$	10,427			$	897			$	41	$	92,560
Loans charged-off	(1,999)				—				—				—				—				—				(1)		(2,000)
Recoveries of loans previously charged-off	81				97				—				—				493				—				1		672
Net loans charged-off	(1,918)		—		97		—		—		—		—		—		493		—		—		—		—		(1,328)
Provision for credit losses	(2,503)				(4,636)				(1,050)				172				(179)				(129)				(1)		(8,326)
Ending balance	$	16,927	$	—	$	41,431	$	—	$	11,945	$	—	$	1,054	$	—	$	10,741	$	—	$	768	$	—	$	40	$	82,906
Nine Months Ended September 30, 2021
Allowance for credit losses:
Balance at beginning of period	$	26,569			$	55,385			$	14,000			$	1,020			$	11,529			$	1,039			$	37	$	109,579
Loans charged-off	(7,691)				(5,216)				—				—				(206)				—				(1)		(13,114)
Recoveries of loans previously charged-off	326				97				—				—				499								17		939
Net loans (charged-off) recoveries	(7,365)				(5,119)				—				—				293				—				16		(12,175)
Provision for credit losses- loans	(2,277)				(8,835)				(2,055)				34				(1,081)				(271)				(13)		(14,498)
Ending balance	$	16,927			$	41,431			$	11,945			$	1,054			$	10,741			$	768			$	40	$	82,906
As of September 30, 2021
Allowance for credit losses:
Individually evaluated for impairment	$	3,198			$	5,439			$	—			$	501			$	—			$	165			$	—	$	9,303
Collectively evaluated for impairment	13,729				35,992				11,945				553				10,741				603				40		73,603
Ending balance	$	16,927			$	41,431			$	11,945			$	1,054			$	10,741			$	768			$	40	$	82,906
Three Months Ended September 30, 2020
Allowance for credit losses:
Balance at beginning of period	28,078				51,863				12,341				1,550				13,808				1,112				44		108,796
Loans charged-off	(187)				(3,750)				(20)				—				(1,179)				(92)				—		(5,228)
Recoveries of loans previously charged-off	45				—				—				—				—				—				13		58
Net loans (charged-off) recoveries	(142)				(3,750)		—		(20)		—		—		—		(1,179)		—		(92)		—		13		(5,170)
Provision for credit losses- loans	(712)				7,327				769				321				(1,088)				(13)				(15)		6,589
Ending balance	27,224				55,440				13,090		—		1,871		—		11,541		—		1,007		—		42		110,215
Nine Months Ended September 30, 2020
Allowance for credit losses:
Balance at beginning of period, prior to adoption of ASC 326	$	18,832			$	29,265			$	5,838			$	1,557			$	17,485			$	656			$	25	$	73,658
Impact of adopting ASC 326	892				11,230				4,674				(301)				(6,143)				245				17		$	10,614
Loans charged-off	(7,332)				(4,300)				(20)				—				(2,947)				(92)				—		(14,691)
Recoveries of loans previously charged-off	116				—				—				—				—				—				20		136
Net loans (charged-off) recoveries	(7,216)				(4,300)				(20)				—				(2,947)				(92)				20		(14,555)
Provision for credit losses- loans	14,716				19,245				2,598				615				3,146				198				(20)		40,498
Ending balance	$	27,224			$	55,440			$	13,090			$	1,871			$	11,541			$	1,007			$	42	$	110,215
As of September 30, 2020
Allowance for credit losses:
Individually evaluated for impairment	$	9,593			$	5,999			$	670			$	1,148			$	204			$	—			$	3	$	17,617
Collectively evaluated for impairment	17,631				49,441				12,420				723				11,337				1,007				39		92,598
Ending balance	$	27,224			$	55,440			$	13,090			$	1,871			$	11,541			$	1,007			$	42	$	110,215

We recorded a reversal of $8.2 million and a positive $6.6 million provision for credit losses (inclusive of the PCL on loans and AFS debt securities) for the three months ended September 30, 2021 and 2020, respectively, under CECL. We recorded a reversal of $14.4 million and a positive $40.7 million provision for credit losses for the nine months ended September 30, 2021 and 2020, respectively, under CECL. We recorded $1.3 million and $5.2 million in net charge-offs during

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the three months ended September 30, 2021 and 2020, respectively. We also recorded $12.2 million and $14.6 million in net charge-offs during the nine months ended September 30, 2021 and 2020, respectively.

A loan is considered collateral-dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral.

The following table presents the amortized cost basis of collateral-dependent loans by class of loans as of September 30, 2021 and December 31, 2020:

(dollars in thousands)	Business/Other Assets		Real Estate
September 30, 2021
Commercial	$	3,281	$	9,936
Income producing - commercial real estate	3,193		20,867
Owner occupied - commercial real estate	—		1,593
Real estate mortgage - residential	—		1,781
Construction - commercial and residential	—		—
Home equity	190		366
Other consumer	—		—
Total	$	6,664	$	34,543

(dollars in thousands)	Business/Other Assets		Real Estate
December 31, 2020
Commercial	$	11,326	$	4,026
Income producing - commercial real estate	3,193		15,686
Owner occupied - commercial real estate	—		23,159
Real estate mortgage - residential	—		2,932
Construction - commercial and residential	—		206
Home equity	—		415
Other consumer	—		—
Total	$	14,519	$	46,424

Credit Quality Indicators

The Company uses several credit quality indicators to manage credit risk in an ongoing manner. The Company’s primary credit quality indicators inform an internal credit risk rating system that categorizes loans into pass, watch, special mention, or classified categories. Credit risk ratings are applied individually to those classes of loans that have significant or unique credit characteristics that benefit from a case-by-case evaluation. These are typically loans to businesses or individuals in the classes which comprise the commercial portfolio segment. Groups of loans that are underwritten and structured using standardized criteria and characteristics, such as statistical models (e.g., credit scoring or payment performance), are typically risk rated and monitored collectively. These are typically loans to individuals in the classes which comprise the consumer portfolio segment.

The following are the definitions of the Company’s credit quality indicators:

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Pass:	Loans in all classes that comprise the commercial and consumer portfolio segments that are not adversely rated, are contractually current as to principal and interest, and are otherwise in compliance with the contractual terms of the loan agreement. Management believes that there is a low likelihood of loss related to those loans that are considered pass.
Watch:	Loan paying as agreed with generally acceptable asset quality; however the obligor’s performance has not met expectations. Balance sheet and/or income statement has shown deterioration to the point that the obligor could not sustain any further setbacks. Credit is expected to be strengthened through improved obligor performance and/or additional collateral within a reasonable period of time.
Special Mention:	Loans in the classes that comprise the commercial portfolio segment that have potential weaknesses that deserve management’s close attention. If not addressed, these potential weaknesses may result in deterioration of the repayment prospects for the loan. The special mention credit quality indicator is not used for classes of loans that comprise the consumer portfolio segment. Management believes that there is a moderate likelihood of some loss related to those loans that are considered special mention.
Classified:	Classified (a) Substandard – Loans inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the company will sustain some loss if the deficiencies are not corrected. Loss potential, while existing in the aggregate amount of substandard loans, does not have to exist in individual loans classified substandard.
	Classified (b) Doubtful – Loans that have all the weaknesses inherent in a loan classified substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. The possibility of loss is extremely high, but because of certain important and reasonably specific pending factors, which may work to the advantage and strengthening of the assets, its classification as an estimated loss is deferred until its more exact status may be determined.

Based on the most recent analysis performed, amortized cost basis of loans by risk category, class and year of origination is as follows:

September 30, 2021 (dollars in thousands)	Prior		2017		2018	2019	2020	2021	Total
Commercial
Pass	407,791		190,479		211,058	129,448	103,135	164,058	1,205,969
Watch	14,162		8,798		17,857	6,721	7,927	2,959	58,424
Special Mention	980		9,952		381	98	—	—	11,411
Substandard	10,267		695		2,217	232	—	—	13,411
Total	433,200	—	209,924	—	231,513	136,499	111,062	167,017	1,289,215
PPP loans
Pass	—	—	—	—	—	—	32,381	34,930	67,311
Total	—	—	—	—	—	—	32,381	34,930	67,311
Income producing - commercial real estate
Pass	708,822		287,984		610,727	514,416	418,980	306,458	2,847,387
Watch	66,069		73,753		—	43,739	34,859	—	218,420
Special Mention	101,687		—		42,244	51,969	—	—	195,900
Substandard	61,542		—		8,512	5,542	—	—	75,596
Total	938,120	—	361,737	—	661,483	615,666	453,839	306,458	3,337,303
Owner occupied - commercial real estate
Pass	383,943		132,292		131,088	71,524	44,465	40,718	804,030
Watch	23,960		3,234		93,035	23,968	—	—	144,197
Special Mention	—		—		—	2,133	—	—	2,133
Substandard	23,512		—		—	3,745	—	—	27,257
Total	431,415	—	135,526	—	224,123	101,370	44,465	40,718	977,617

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Real estate mortgage - residential
Pass	15,047				7,284				13,409		16,703		3,999		14,770		71,212
Watch	3,265				—				—		—		—		—		3,265
Substandard	1,698				—				—		84		—		—		1,782
Total	20,010		—		7,284		—		13,409		16,787		3,999		14,770		76,259
Construction - commercial and residential
Pass	60,130				160,792				185,229		128,722		181,470		60,289		776,632
Watch	506				43,913				—		3,082		—		—		47,501
Substandard	—		—						—		—				—		—
Total	60,636		—		204,705		—		185,229		131,804		181,470		60,289		824,133
Construction - C&I (owner occupied)																	—
Pass	21,522				52,731				23,581		30,809		57,911		647		187,201
Watch	685				396				3,254		15,112		15,718		—		35,165
Substandard	—				—				—		—		—		—		—
Total	22,207		—		53,127		—		26,835		45,921		73,629		647		222,366
Home Equity																	—
Pass	25,402				5,832				1,782		2,644		9,443		8,943		54,046
Watch	879				—				—		—		—		—		879
Substandard	556				—				—		46		—		—		602
Total	26,837		—		5,832		—		1,782		2,690		9,443		8,943		55,527
Other Consumer																	—
Pass	936				24				46		33		24		63		1,126
Substandard	6				—				—		—		—		—		6
Total	942		—		24		—		46		33		24		63		1,132
Total Recorded Investment	$	1,933,367	$	—	$	978,159	$	—	$	1,344,420	$	1,050,770	$	910,312	$	633,835	6,850,863
December 31, 2020 (dollars in thousands)	Prior				2016				2017		2018		2019		2020		Total
Commercial
Pass	323,660				111,886				249,541		211,551		164,166		227,095		1,287,899
Watch	31,903				5,315				19,145		21,013		7,740		7,979		93,095
Special Mention	4,969				1,692				8,969		3,385		5,599		2,169		26,783
Substandard	17,679				5,803				1,820		3,525		829		—		29,656
Total	378,211				124,696				279,475		239,474		178,334		237,243		1,437,433
PPP loans
Pass	—				—				—		—		—		454,771		454,771
Total	—				—				—		—		—		454,771		454,771
Income producing - commercial real estate																	—
Pass	560,915				347,946				397,953		622,276		643,388		512,387		3,084,865
Watch	152,367				62,912				91,636		89,852		44,555		34,195		475,517
Special Mention	213				—				—		—		51,969		—		52,182
Substandard	58,555				800				4,656		4,883		5,542		—		74,436
Total	772,050				411,658				494,245		717,011		745,454		546,582		3,687,000
Owner occupied - commercial real estate
Pass	343,371				100,272				111,996		136,644		59,681		49,584		801,548
Watch	16,014				5,011				2,640		10,338		15,501		—		49,504
Special Mention	418				—				—		83,110		19,091		—		102,619
Substandard	28,228				784				1,908		2,048		10,151		904		44,023
Total	388,031				106,067				116,544		232,140		104,424		50,488		997,694
Real estate mortgage - residential
Pass	16,310				2,693				10,199		12,746		18,209		10,116		70,273
Watch	1,996				699				—		728		—		—		3,423
Substandard	1,198				1,698				—		—		—		—		2,896

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Total	19,504		5,090		10,199		13,474		18,209		10,116		76,592
Construction - commercial and residential
Pass	21,290		60,486		266,788		297,480		105,679		71,297		823,020
Watch	929		—		42,751		3,448		—		—		47,128
Special Mention	12		—		—		2,895		—		—		2,907
Substandard	—		—		206		—		—		—		206
Total	22,231		60,486		309,745		303,823		105,679		71,297		873,261
Construction - C&I (owner occupied)
Pass	8,278		10,476		6,637		30,340		22,209		40,101		118,041
Watch	3,573		—		2,118		4,935		—		—		10,626
Special Mention	124		—		—		—		14,436		15,678		30,238
Total	11,975		10,476		8,755		35,275		36,645		55,779		158,905
Home Equity
Pass	33,226		4,493		8,227		7,827		4,224		12,924		70,921
Watch	1,596		—		—		—		—		—		1,596
Substandard	603		—		—		—		47		—		650
Total	35,425		4,493		8,227		7,827		4,271		12,924		73,167
Other Consumer
Pass	929		190		64		74		94		31		1,382
Substandard	7		—		—		—		—		—		7
Total	936		190		64		74		94		31		1,389
Total Recorded Investment	$	1,628,363	$	723,156	$	1,227,254	$	1,549,098	$	1,193,110	$	1,439,231	$	7,760,212

The Company’s credit quality indicators are generally updated annually; however, credits rated watch or below are reviewed more frequently.

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Nonaccrual and Past Due Loans

As part of the Company's comprehensive loan review process, management committees carefully evaluate loans that are past-due 30 days or more. The committees make a thorough assessment of the conditions and circumstances surrounding each delinquent loan. The Bank’s loan policy requires that loans be placed on nonaccrual if they are 90 days past-due, unless they are well secured and in the process of collection. Additionally, Credit Administration specifically analyzes the status of development and construction projects, sales activities and utilization of interest reserves in order to carefully and prudently assess potential increased levels of risk requiring additional reserves.

The table presents, by class of loan, an aging analysis and the recorded investments in loans past due as of September 30, 2021 and December 31, 2020:

			Loans		Loans		Loans						Total Recorded
	Current		30-59 Days		60-89 Days		90 Days or		Total Past				Investment in
(dollars in thousands)	Loans		Past Due		Past Due		More Past Due		Due Loans		Nonaccrual		Loans
September 30, 2021
Commercial	$	1,276,100	$	96	$	872	$	—	$	968	$	12,147	$	1,289,215
PPP loans	64,004		3,307		—		—		3,307		—		67,311
Income producing - commercial real estate	3,322,370		—		—		—		—		14,933		3,337,303
Owner occupied - commercial real estate	972,632		579		2,813		—		3,392		1,593		977,617
Real estate mortgage - residential	74,241		—		—		—		—		2,018		76,259
Construction - commercial and residential	821,051		—		3,082		—		3,082		—		824,133
Construction - C&I (owner occupied)	221,463		903		—		—		903		—		222,366
Home equity	54,575		127		269		—		396		556		55,527
Other consumer	1,080		52		—		—		52		—		1,132
Total	$	6,807,516	$	5,064	$	7,036	$	—	$	12,100	$	31,247	$	6,850,863
December 31, 2020
Commercial	$	1,394,244	$	6,411	$	21,426	$	—	$	27,837	$	15,352	$	1,437,433
PPP loans	454,771		—		—		—		—		—		454,771
Income producing - commercial real estate	3,616,207		—		51,913		—		51,913		18,880		3,687,000
Owner occupied - commercial real estate	960,364		10,630		3,542		—		14,172		23,158		997,694
Real estate mortgage – residential	72,231		1,430		—		—		1,430		2,931		76,592
Construction - commercial and residential	869,723		2,992		340		—		3,332		206		873,261
Construction- C&I (owner occupied)	158,905		—		—		—		—		—		158,905
Home equity	67,732		467		4,552		—		5,019		416		73,167
Other consumer	1,367		21		1		—		22		—		1,389
Total	$	7,595,544	$	21,951	$	81,774	$	—	$	103,725	$	60,943	$	7,760,212

The following presents the nonaccrual loans as of September 30, 2021 and December 31, 2020:

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	September 30, 2021
	Nonaccrual with		Nonaccrual with		Total
	No Allowance		an Allowance		Nonaccrual
(dollars in thousands)	for Credit Loss		for Credit Loss		Loans
Commercial	$	7,113	$	5,034	$	12,147
Income producing - commercial real estate	4,620		10,313		14,933
Owner occupied - commercial real estate	1,593		—		1,593
Real estate mortgage - residential	84		1,934		2,018
Construction - commercial and residential	—		—		—
Home equity	366		190		556
Total (1)(2)	$	13,776	$	17,471	$	31,247

	December 31, 2020
	Nonaccrual with		Nonaccrual with		Total
	No Allowance		an Allowance		Nonaccrual
(dollars in thousands)	for Credit Loss		for Credit Loss		Loans
Commercial	$	3,263	$	12,089	$	15,352
Income producing - commercial real estate	6,500		12,380		18,880
Owner occupied - commercial real estate	18,941		4,217		23,158
Real estate mortgage - residential	1,234		1,697		2,931
Construction - commercial and residential	—		206		206
Home equity	416		—		416
Total (1)(2)	$	30,354	$	30,589	$	60,943

Note

(1)Excludes TDRs that were performing under their restructured terms totaling $10.2 million at September 30, 2021 and $10.5 million at December 31, 2020.

(2)Gross interest income of $1.4 million and $2.6 million would have been recorded for the nine months ended September 30, 2021 and September 30, 2020, respectively, if nonaccrual loans shown above had been current and in accordance with their original terms, while $23 thousand and $282 thousand interest income was actually recorded on such loans for the nine months ended September 30, 2021 and 2020 respectively. See Note 1 to the Consolidated Financial Statements for a description of the Company’s policy for placing loans on nonaccrual status.

Modifications

A modification of a loan constitutes a TDR when the borrower is experiencing financial difficulty and the modification constitutes a concession. The Company offers various types of concessions when modifying a loan. Commercial and industrial loans modified in a TDR often involve temporary interest-only payments, term extensions, and converting revolving credit lines to term loans. Additional collateral, a co-borrower, or a guarantor is often requested. The most common change in terms provided by the Company is an extension of an interest-only term. As of September 30, 2021, all performing TDRs were categorized as interest-only modifications.

Loans modified in a TDR for the Company may have the financial effect of increasing the specific allowance associated with the loan. An allowance for impaired consumer and commercial loans that have been modified in a TDR is measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s observable market price, or the estimated fair value of the collateral, less any selling costs, if the loan is collateral dependent. Management exercises significant judgment in developing these estimates.

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In response to the COVID-19 pandemic and its economic impact to our customers, we implemented a short-term modification program that complies with the CARES Act and ASC 310-40 to provide temporary payment relief to those borrowers directly impacted by COVID-19 who were not more than 30 days past due as of December 31, 2019. This program allows for a deferral of payments for 90 days, which we extended for an additional 90 days, for a maximum of 180 days on a cumulative and successive basis. The deferred payments along with interest accrued during the deferral period are due and payable on the maturity date. As of September 30, 2021, we had ongoing temporary modifications on approximately 6 loans representing approximately $70 million (approximately 1.0% of total loans) in outstanding balances, as compared to 36 loans representing approximately $72 million (approximately 0.9% of total loans) at December 31, 2020. Additionally, none of the deferrals are reflected in the Company's asset quality measures (i.e. non-performing loans) due to the provision of the CARES Act that permits U.S. financial institutions to temporarily suspend the GAAP requirements to treat such short-term loan modifications as TDR. Similar provisions have also been confirmed by interagency guidance issued by the federal banking agencies and confirmed with staff members of the Financial Accounting Standards Board.

The following table presents by class, the recorded investment of loans modified in TDRs held by the Company for the periods ended September 30, 2021 and 2020.

	September 30, 2021
				Income		Owner
	Number			Producing -		Occupied -		Construction -
	of			Commercial		Commercial		Commercial
(dollars in thousands)	Contracts	Commercial		Real Estate		Real Estate		Real Estate		Total
Troubled debt restructurings
Restructured accruing	5	$	1,069	$	9,126	$	—	$	—	$	10,195
Restructured nonaccruing	2	—		6,342		—		—		6,342
Total	7	$	1,069	$	15,468	$	—	$	—	$	16,537
Specific allowance		$	146	$	3,225	$	—	$	—	$	3,371
Restructured and subsequently defaulted		$	—	$	6,342	$	—	$	—	$	6,342

	September 30, 2020
				Income		Owner
	Number			Producing -		Occupied -		Construction -
	of			Commercial		Commercial		Commercial
(dollars in thousands)	Contracts	Commercial		Real Estate		Real Estate		Real Estate		Total
Troubled debt restructurings
Restructured accruing	7	$	1,297	$	9,188	$	37	$	—	$	10,522
Restructured nonaccruing	4	138		6,342		2,370		—		8,850
Total	11	$	1,435	$	15,530	$	2,407	$	—	$	19,372
Specific allowance		$	227	$	629	$	—	$	—	$	856
Restructured and subsequently defaulted		$	138	$	11,161	$	2,370	$	—	$	13,669

The Company had seven TDRs at September 30, 2021 totaling approximately $16.5 million. Five of these loans totaling approximately $10.2 million are performing under their modified terms as of September 30, 2021.

For the first nine months of 2021 there were no performing TDR loans that defaulted on their modified terms; in the first nine months of 2020, two performing TDR loans, with a balance of $6.3 million, defaulted on their modified terms and were placed on nonaccrual status.

A default is considered to have occurred once the TDR is past due 90 days or more or it has been placed on nonaccrual status. For the nine months ended September 30, 2021, one previously nonperforming restructured loan had its collateral sold and all principal collected along with partial collection of delinquent interest; in addition, one restructured loan purchased as part of the 2014 acquisition of Virginia Heritage Bank has now had its full carrying value collected, while additional payments will recover previously written off principal and interest, and one nonperforming restructured loan was charged off. No similar

29

transactions occurred during the three months ended September 30, 2021. During the nine months ended September 30, 2021 and 2020, no loans were re-underwritten and removed from TDR status. Loans modified in a TDR are closely monitored for delinquency as an early indicator of possible future default. If loans modified in a TDR subsequently default, the Company evaluates the loan for possible further impairment. The allowance may be increased, adjustments may be made in the allocation of the allowance or partial charge-offs may be taken to further write-down the carrying value of the loan. For the nine months ended September 30, 2021 there were no loans modified in a TDR. For the nine months ended September 30, 2020 there were two loans modified in a TDR with a balance of $572 thousand.

Note 6. Leases

A lease is defined as a contract that conveys the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration. On January 1, 2019, the Company adopted ASU No. 2016-2 “Leases” (Topic 842) and has adopted all subsequent ASUs that modified Topic 842. For the Company, Topic 842 primarily affected the accounting treatment for operating lease agreements in which the Company is the lessee.

Substantially all of the leases in which the Company is the lessee are comprised of real estate property for branch offices, ATM locations, and corporate office space. Substantially all of our leases are classified as operating leases, and as such, were previously not recognized on the Company’s Consolidated Balance Sheets. With the adoption of Topic 842, operating lease agreements were required to be recognized on the Consolidated Balance Sheets as a right-of-use (“ROU”) asset and a corresponding lease liability.

As of September 30, 2021, the Company had $30.1 million of operating lease ROU assets and $34.3 million of operating lease liabilities on the Company’s Consolidated Balance Sheets. As of December 31, 2020, the Company had $25.2 million of operating lease ROU assets and $28.0 million of operating lease liabilities on the Company’s Consolidated Balance Sheets. The Company elects not to recognize ROU assets and lease liabilities arising from short-term leases, leases with initial terms of twelve months or less, or equipment leases (deemed immaterial) on the Consolidated Balance Sheets.

The leases contain terms and conditions of options to extend or terminate the lease which are recognized as part of the ROU assets and lease liabilities when an economic benefit to exercise the option exists and there is a 90% probability that the Company will exercise the option. If these criteria are not met, the options are not included in ROU assets and lease liabilities.

As of September 30, 2021, our leases do not contain material residual value guarantees or impose restrictions or covenants related to dividends or the Company’s ability to incur additional financial obligations. As of September 30, 2021, there was one lease that has been signed but did not yet commence as of the reporting date that created significant rights and obligations for the Company.

The following table presents lease costs and other lease information.

	Three Months Ended								Nine Months Ended
(dollars in thousands)	September 30, 2021				September 30, 2020				September 30, 2021		September 30, 2020
Lease Cost
Operating Lease Cost (Cost resulting from lease payments)	$	1,960			$	2,248			$	6,132	$	6,253
Variable Lease Cost (Cost excluded from lease payments)	205				202				678		720
Sublease Income	(117)				(87)				(291)		(261)
Net Lease Cost	$	2,048			$	2,363			$	6,519	$	6,712
Operating Lease - Operating Cash Flows (Fixed Payments)	$	1,992			$	2,229			$	6,344	$	6,648
	September 30, 2021				December 31, 2020
Right-of-Use Assets - Operating Leases	$	30,080			$	25,237
Weighted Average Lease Term - Operating Leases	6.22			yrs	6.20			yrs
Weighted Average Discount Rate - Operating Leases	3.14		%		4.00		%

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Future minimum payments for operating leases with initial or remaining terms of more than one year as of September 30, 2021 were as follows:

(dollars in thousands)
Twelve Months Ended:
September 30, 2022	$	1,910
September 30, 2023	4,517
September 30, 2024	6,550
September 30, 2025	5,792
September 30, 2026	4,815
Thereafter	12,097
Total Future Minimum Lease Payments	35,681
Amounts Representing Interest	(1,336)
Present Value of Net Future Minimum Lease Payments	$	34,345

Note 7. Other Derivatives

The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of its assets and liabilities and the use of derivative financial instruments.

Cash Flow Hedges of Interest Rate Risk

The Company uses interest rate swap agreements to assist in its interest rate risk management. The Company’s objective in using interest rate derivatives designated as cash flow hedges is to add stability to interest expense and to better manage its exposure to interest rate movements. To accomplish this objective, the Company utilizes interest rate swaps as part of its interest rate risk management strategy intended to mitigate the potential risk of rising interest rates on the Bank’s cost of funds. The notional amounts of the interest rate swaps designated as cash flow hedges do not represent amounts exchanged by the counterparties, but rather, the notional amount is used to determine, along with other terms of the derivative, the amounts to be exchanged between the counterparties. The interest rate swaps are designated as cash flow hedges and involve the receipt of variable rate amounts from one counterparty in exchange for the Company making fixed payments. The Company’s intent is to hedge its exposure to the variability in potential future interest rate conditions on existing financial instruments.

For derivatives designated as cash flow hedges, changes in the fair value of the derivative are initially reported in other comprehensive income (outside of earnings), net of tax, and subsequently reclassified to earnings when the hedged transaction affects earnings. The Company assesses the effectiveness of each hedging relationship by comparing the changes in cash flows of the derivative hedging instrument with the changes in cash flows of the designated hedged transactions.

The Company's sole designated cash flow hedge matured during April 2021. Thus, as of September 30, 2021 and December 31, 2020, the Company had zero and one, respectively, designated cash flow hedge interest rate swap transaction outstanding associated with the Company's variable rate deposits. Amounts reported in accumulated other comprehensive income related to designated cash flow hedge derivatives were reclassified to interest income/expense as interest payments were made/received on the Company’s variable-rate assets/liabilities.

Non-designated Hedges

Derivatives not designated as hedges are not speculative and result from a service the Company provides to certain customers. The Company executes interest rate caps and swaps with commercial banking customers to facilitate their respective risk management strategies. Those interest rate swaps are simultaneously hedged by offsetting derivatives that the Company executes with a third party, such that the Company minimizes its net risk exposure resulting from such transactions. As the interest rate derivatives associated with this program do not meet the strict hedge accounting requirements, changes in the fair value of both the customer derivatives and the offsetting derivatives are recognized directly in earnings.

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The Company entered into credit risk participation agreements ("RPAs") with institutional counterparties, under which the Company assumes its pro-rata share of the credit exposure associated with a borrower's performance related to interest rate derivative contracts. The fair value of RPAs is calculated by determining the total expected asset or liability exposure of the derivatives to the borrowers and applying the borrowers' credit spread to that exposure. Total expected exposure incorporates both the current and potential future exposure of the derivatives, derived from using observable inputs, such as yield curves and volatilities.

Credit-risk-related Contingent Features

The Company has agreements with each of its derivative counterparties that contain a provision where if the Company defaults on any of its indebtedness, then the Company could also be declared in default on its derivative obligations.

The Company is exposed to credit risk in the event of nonperformance by the interest rate derivative counterparty. The Company minimizes this risk by entering into derivative contracts with only large, stable financial institutions, and the Company has not experienced, and does not expect, any losses from counterparty nonperformance on the interest rate derivatives. The Company monitors counterparty risk in accordance with the provisions of ASC Topic 815, "Derivatives and Hedging." In addition, the interest rate derivative agreements contain language outlining collateral-pledging requirements for each counterparty.

The interest rate derivative agreements detail: 1) that collateral be posted when the market value exceeds certain threshold limits associated with the secured party’s exposure; 2) if the Company defaults on any of its indebtedness (including default where repayment of the indebtedness has not been accelerated by the lender), then the Company could also be declared in default on its derivative obligations; 3) if the Company fails to maintain its status as a well-capitalized institution then the counterparty could terminate the derivative positions and the Company would be required to settle its obligations under the agreements.

The table below identifies the balance sheet category and fair value of the Company’s designated cash flow hedge derivative instruments and non-designated hedges as of September 30, 2021 and December 31, 2020. The Company has a minimum collateral posting threshold with its derivative counterparty. If the Company had breached any provisions under the agreement at September 30, 2021, it could have been required to settle its obligations under the agreement at the termination value.

	September 30, 2021					December 31, 2020
(dollars in thousands)	Notional Amount		Fair Value		Balance Sheet Category	Fair Value		Balance Sheet Category
Derivatives not designated as hedging instruments
Interest rate product	$	239,248	$	4,955	Other Assets	$	3,491	Other Assets
Mortgage banking derivatives	137,223		1,575		Other Assets	5,213		Other Assets
	$	376,471	$	6,530	Other Assets	$	8,704	Other Assets
Derivatives designated as hedging instruments
Interest rate product	$	—	$	—	Other Liabilities	$	516	Other Liabilities
Derivatives not designated as hedging instruments
Interest rate product	$	239,248	$	5,110	Other Liabilities	$	3,653	Other Liabilities
Other Contracts	26,542		63		Other Liabilities	118		Other Liabilities
	$	265,790	$	5,173	Other Liabilities	$	3,771	Other Liabilities
Liability position on balance sheet			$	5,173		$	4,287
Cash and other collateral			$	3,244		4,168
Net Derivative Amounts			$	1,929		$	119

The table below presents the pre-tax net gains (losses) of the Company’s designated cash flow hedges for the three and nine months ended September 30, 2021 and 2020:

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The Effect of Fair Value and Cash Flow Hedge Accounting on Accumulated Other Comprehensive Income
	Amount of Gain (Loss) Recognized				Location of Gain or (Loss)	Amount of Gain or (Loss)
					Recognized from	Reclassified from Accumulated
Derivatives in Subtopic	in OCI on Derivative				Accumulated Other	OCI into Income
815-20 Hedging	Three Months Ended September 30,				Comprehensive Income into	Three Months Ended September 30,
Relationships (dollars in thousands)	2021		2020		Income	2021		2020
Derivatives in Cash Flow Hedging Relationships
Interest Rate Products	$	—	$	31	Interest Expense	$	—	$	(389)
Total	$	—	$	31		$	—	$	(389)
					Location of Gain or (Loss)	Amount of Gain or (Loss)
	Amount of Gain (Loss) Recognized				Recognized from	Reclassified from Accumulated
Derivatives in Subtopic	in OCI on Derivative				Accumulated Other	OCI into Income
815-20 Hedging	Nine Months Ended September 30,				Comprehensive Income into	Nine Months Ended September 30,
Relationships (dollars in thousands)	2021		2020		Income	2021		2020
Derivatives in Cash Flow Hedging Relationships
Interest Rate Products	$	1	$	(1,517)	Interest Expense	$	(445)	$	(755)
Total	$	1	$	(1,517)		$	(445)	$	(755)

    The table below presents the effect of the Company’s derivative financial instruments on the Consolidated Statements of Income for the three and nine months ended September 30, 2021 and 2020:

The Effect of Fair Value and Cash Flow Hedge Accounting on the Statements of Income
	Location and Amount of Gain or (Loss) Recognized in Income on
	Fair Value and Cash Flow Hedging Relationships (in 000's)
	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
	Interest Expense				Interest Expense
Total amounts of income and expense line items presented in the consolidated statement of income in which the effects of fair value or cash flow hedges are recorded	$	—	$	(389)	$	(445)	$	(755)
Gain or (loss) on cash flow hedging relationships in Subtopic 815-20
Interest contracts
Amount of gain or (loss) reclassified from accumulated other comprehensive income into income	$	—	$	(389)	$	(445)	$	(755)
Amount of gain or (loss) reclassified from accumulated other comprehensive income into income as a result that a forecasted transaction is no longer probable of occurring	$	—	$	—	$	—	$	—
Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income - Included Component	$	—	$	(389)	$	(445)	$	(755)
Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income - Excluded Component	$	—	$	—	$	—	$	—

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Effect of Derivatives Not Designated as Hedging Instruments on the Statements of Income
		Amount of Income (Loss)
		Recognized in Income on
	Location of	Derivative
Derivatives Not Designated as Hedging	(Loss) Recognized in	Three Months Ended September 30,				Nine Months Ended September 30,
Instruments under Subtopic 815-20	Income on Derivative	2021		2020		2021		2020
Interest Rate Products	Other income / (expense)	$	277	$	(40)	$	261	$	(326)
Mortgage banking derivatives	Other income / (expense)	1,575		6,015		5,268		6,015
Other Contracts	Other income / (expense)	—		(13)		44		(77)
Total		$	1,852	$	5,962	$	5,573	$	5,612

Note 8. Long-Term Borrowings

The following table presents information related to the Company’s long-term borrowings as of September 30, 2021 and December 31, 2020.

(dollars in thousands)	September 30, 2021		December 31, 2020
Subordinated Notes, 5.75%	$	70,000	$	70,000
Subordinated Notes, 5.0%	—		150,000
FHLB Advance, 1.81%	—		50,000
Less: unamortized debt issuance costs	(361)		(1,923)
Long-term borrowings	$	69,639	$	268,077

On August 5, 2014, the Company completed the sale of $70.0 million of its 5.75% subordinated notes, due September 1, 2024 (the “2024 Notes”). The 2024 Notes were offered to the public at par and qualify as Tier 2 capital for regulatory purposes to the fullest extent permitted under the Basel III Rule capital requirements. The net proceeds were approximately $68.8 million, which includes $1.2 million in deferred financing costs which are being amortized over the life of the 2024 Notes.

On July 26, 2016, the Company completed the sale of $150.0 million of its 5.00% Fixed-to-Floating Rate Subordinated Notes, due August 1, 2026 (the “2026 Notes”). The 2026 Notes were offered to the public at par and qualify as Tier 2 capital for regulatory purposes to the fullest extent permitted under the Basel III Rule capital requirements. The net proceeds were approximately $147.4 million, which includes $2.6 million in deferred financing costs which are being amortized over the life of the 2026 Notes. The Company paid the 2026 Notes in full on August 2, 2021 and accelerated deferred financing costs of $1.3 million on that date.

On February 26, 2020, the Bank borrowed $50 million dollars under its borrowing arrangement with the FHLB at a fixed rate of 1.81% with a maturity date of February 26, 2030 as part of the overall asset liability strategy and to support loan growth. In the first quarter of 2021, we realized a net gain of $911 thousand on the cancellation of this debt.

Note 9. Net Income per Common Share

The calculation of net income per common share for the three and nine months ended September 30, 2021 and 2020 was as follows:

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	Three Months Ended September 30,				Nine Months Ended September 30,
(dollars and shares in thousands, except per share data)	2021		2020		2021		2020
Basic:
Net income	$	43,609	$	41,346	$	135,071	$	93,325
Average common shares outstanding	31,959		32,229		31,931		32,434
Basic net income per common share	$	1.36	$	1.28	$	4.23	$	2.88
Diluted:
Net income	$	43,609	$	41,346	$	135,071	$	93,325
Average common shares outstanding	31,959		32,229		31,931		32,434
Adjustment for common share equivalents	72		22		62		24
Average common shares outstanding-diluted	32,031		32,251		31,993		32,458
Diluted net income per common share	$	1.36	$	1.28	$	4.22	$	2.88
Anti-dilutive shares	3		26		3		26

Note 10. Other Comprehensive Income

The following table presents the components of other comprehensive income (loss) for the three and nine months ended September 30, 2021 and 2020.

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(dollars in thousands)	Before Tax		Tax Effect		Net of Tax
Three Months Ended September 30, 2021
Net unrealized gain (loss) on securities available-for-sale	$	(7,682)	$	1,979	$	(5,703)
Less: Reclassification adjustment for net gains (losses) included in net income	(1,519)		386		(1,133)
Total unrealized gain (loss)	(9,201)		2,365		(6,836)
Net unrealized gain (loss) on derivatives	—		—		—
Less: Reclassification adjustment for gain (loss) included in net income	—		—		—
Total unrealized gain (loss)	—		—		—
Other Comprehensive Income (Loss)	$	(9,201)	$	2,365	$	(6,836)
Three Months Ended September 30, 2020
Net unrealized gain (loss) on securities available-for-sale	$	(840)	$	216	$	(624)
Less: Reclassification adjustment for net gains (losses) included in net income	(115)		29		(86)
Total unrealized gain (loss)	(955)		245		(710)
Net unrealized gain (loss) on derivatives	31		(7)		24
Less: Reclassification adjustment for gain (loss) included in net income	389		(100)		289
Total unrealized gain (loss)	420		(107)		313
Other Comprehensive Income (Loss)	$	(535)	$	138	$	(397)
Nine Months Ended September 30, 2021
Net unrealized gain (loss) on securities available-for-sale	$	(22,437)	$	5,771	$	(16,666)
Less: Reclassification adjustment for net gains (losses) included in net income	(2,058)		524		(1,534)
Total unrealized gain (loss)	(24,495)		6,295		(18,200)
Net unrealized loss on derivatives	1,033		(264)		769
Less: Reclassification adjustment for gain (loss) included in net income	(517)		132		(385)
Total unrealized gain (loss)	516		(132)		384
Other Comprehensive Income (Loss)	$	(23,979)	$	6,163	$	(17,816)
Nine Months Ended September 30, 2020
Net unrealized gain (loss) on securities available-for-sale	$	18,402	$	(5,048)	$	13,354
Less: Reclassification adjustment for net gains included in net income	(1,650)		419		(1,231)
Total unrealized gain (loss)	16,752		(4,629)		12,123
Net unrealized gain (loss) on derivatives	(1,986)		662		(1,324)
Less: Reclassification adjustment for gain included in net income	688		(175)		513
Total unrealized gain (loss)	(1,298)		487		(811)
Other Comprehensive Income (Loss)	$	15,454	$	(4,142)	$	11,312

The following table presents the changes in each component of accumulated other comprehensive income (loss), net of tax, for the three and nine months ended September 30, 2021 and 2020.

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	Securities				Accumulated Other
	Available				Comprehensive Income
(dollars in thousands)	For Sale		Derivatives		(Loss)
Three Months Ended September 30, 2021
Balance at Beginning of Period	$	4,804	$	(284)	$	4,520
Other comprehensive income before reclassifications	(5,703)		—		(5,703)
Amounts reclassified from accumulated other comprehensive income (loss)	(1,133)		—		(1,133)
Net other comprehensive income during period	(6,836)		—		(6,836)
Balance at End of Period	$	(2,032)	$	(284)	$	(2,316)
	Securities				Accumulated Other
	Available				Comprehensive Income
(dollars in thousands)	For Sale		Derivatives		(Loss)
Three Months Ended September 30, 2020
Balance at Beginning of Period	$	15,942	$	(1,274)	$	14,668
Other comprehensive income before reclassifications	(624)		24		(600)
Amounts reclassified from accumulated other comprehensive loss	(86)		289		203
Net other comprehensive income during period	(710)		313		(397)
Balance at End of Period	$	15,232	$	(961)	$	14,271
	Securities				Accumulated Other
	Available				Comprehensive Income
(dollars in thousands)	For Sale		Derivatives		(Loss)
Nine Months Ended September 30, 2021
Balance at Beginning of Period	$	16,168	$	(668)	$	15,500
Other comprehensive income (loss) before reclassifications	(16,666)		769		(15,897)
Amounts reclassified from accumulated other comprehensive income (loss)	(1,534)		(385)		(1,919)
Net other comprehensive income (loss) during period	(18,200)		384		(17,816)
Balance at End of Period	$	(2,032)	$	(284)	$	(2,316)
	Securities				Accumulated Other
	Available				Comprehensive Income
(dollars in thousands)	For Sale		Derivatives		(Loss)
Nine Months Ended September 30, 2020
Balance at Beginning of Period	$	3,109	$	(150)	$	2,959
Other comprehensive income (loss) before reclassifications	13,354		(1,324)		12,030
Amounts reclassified from accumulated other comprehensive loss	(1,231)		513		(718)
Net other comprehensive income (loss) during period	12,123		(811)		11,312
Balance at End of Period	$	15,232	$	(961)	$	14,271

The following tables present the amounts reclassified out of each component of accumulated other comprehensive income (loss) for the three and nine months ended September 30, 2021 and 2020.

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	Amount Reclassified from
	Accumulated Other				Affected Line Item in
Details about Accumulated Other	Comprehensive (Loss) Income				the Statement Where
Comprehensive Income Components	Three Months Ended September 30,				Net Income is Presented
(dollars in thousands)	2021		2020
Realized gain on sale of investment securities	$	1,519	$	115	Gain on sale of investment securities
Interest income derivative deposits	—		(389)		Interest income on deposits
Income tax expense	(386)		71		Income tax expense
Total Reclassifications for the Period	$	1,133	$	(203)	Net Income
	Amount Reclassified from
	Accumulated Other				Affected Line Item in
Details about Accumulated Other	Comprehensive (Loss) Income				the Statement Where
Comprehensive Income Components	Nine Months Ended September 30,				Net Income is Presented
(dollars in thousands)	2021		2020
Realized gain on sale of investment securities	$	2,058	$	1,650	Gain on sale of investment securities
Interest income derivative deposits	517		(688)		Interest income on deposits
Income tax expense	(656)		(244)		Income tax expense
Total Reclassifications for the Period	$	1,919	$	718	Net Income

Note 11. Fair Value Measurements

The fair value of an asset or liability is the price that would be received to sell that asset or paid to transfer that liability in an orderly transaction occurring in the principal market (or most advantageous market in the absence of a principal market) for such asset or liability. In estimating fair value, the Company utilizes valuation techniques that are consistent with the market approach, the income approach and/or the cost approach. Such valuation techniques are consistently applied. Inputs to valuation techniques include the assumptions that market participants would use in pricing an asset or liability. ASC Topic 820, “Fair Value Measurements and Disclosures,” establishes a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:

Level 1         Quoted prices in active exchange markets for identical assets or liabilities; also includes certain U.S. Treasury and other U.S. Government and agency securities actively traded in over-the-counter markets.

Level 2         Observable inputs other than Level 1 including quoted prices for similar assets or liabilities, quoted prices in less active markets, or other observable inputs that can be corroborated by observable market data; also includes derivative contracts whose value is determined using a pricing model with observable market inputs or can be derived principally from or corroborated by observable market data. This category generally includes certain U.S. Government and agency securities, corporate debt securities, derivative instruments, and residential mortgage loans held for sale.

Level 3     Unobservable inputs supported by little or no market activity for financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation; also includes observable inputs for single dealer nonbinding quotes not corroborated by observable market data. This category generally includes certain private equity investments, retained interests from securitizations, and certain collateralized debt obligations.

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Assets and Liabilities Recorded at Fair Value on a Recurring Basis

The tables below present the recorded amount of assets and liabilities measured at fair value on a recurring basis as of September 30, 2021 and December 31, 2020.

			Significant		Significant
			Other		Other
			Observable		Unobservable
	Quoted Prices		Inputs		Inputs		Total
(dollars in thousands)	(Level 1)		(Level 2)		(Level 3)		(Fair Value)
September 30, 2021
Assets:
Investment securities available-for-sale:
U.S. treasuries	$	—	$	24,854	$	—	$	24,854
U. S. agency securities	—		353,706		—		353,706
Residential mortgage backed securities	—		1,203,136		—		1,203,136
Municipal bonds	—		123,164		—		123,164
Corporate bonds	—		80,101		1,500		81,601
Loans held for sale	—		53,413		—		53,413
Interest rate caps	—		4,882		—		4,882
Mortgage banking derivatives	—		—		1,565		1,565
Total assets measured at fair value on a recurring basis as of September 30, 2021	$	—	$	1,843,256	$	3,065	$	1,846,321
Liabilities:
Interest rate swap derivatives	$	—	$	—	$	—	$	—
Derivative liability	—		73		—		73
Interest rate caps	—		5,037		—		5,037
Total liabilities measured at fair value on a recurring basis as of September 30, 2021	$	—	$	5,110	$	—	$	5,110
December 31, 2020
Assets:
Investment securities available-for-sale:
U. S. agency securities	$	—	$	181,921	$	—	$	181,921
Residential mortgage backed securities	—		825,001		—		825,001
Municipal bonds	—		108,113		—		108,113
Corporate bonds	—		34,350		1,500		35,850
Loans held for sale	—		88,205		—		88,205
Interest rate caps	—		3,413		—		3,413
Mortgage banking derivatives	—		—		5,213		5,213
Total assets measured at fair value on a recurring basis as of December 31, 2020	$	—	$	1,241,003	$	6,713	$	1,247,716
Liabilities:
Interest rate swap derivatives	$	—	$	516	$	—	$	516
Derivative liability	—		118		—		118
Interest rate caps	—		3,574		—		3,574
Total liabilities measured at fair value on a recurring basis as of December 31, 2020	$	—	$	4,208	$	—	$	4,208

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Investment securities available-for-sale: Investment securities available-for-sale are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted prices, if available. If quoted prices are not available, fair value is measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions and other factors such as credit loss assumptions. Level 1 securities include those traded on an active exchange such as the New York Stock Exchange. Level 2 securities include U.S. agency debt securities, mortgage backed securities issued by Government Sponsored Entities and municipal bonds. Securities classified as Level 3 include securities in less liquid markets, the carrying amounts approximate the fair value.

Loans held for sale: The Company has elected to carry loans held for sale at fair value. This election reduces certain timing differences in the Consolidated Statement of Income and better aligns with the management of the portfolio from a business perspective. Fair value is derived from secondary market quotations for similar instruments. Gains and losses on sales of residential mortgage loans are recorded as a component of noninterest income in the Consolidated Statements of Income. Gains and losses on sales of multifamily FHA securities are recorded as a component of noninterest income in the Consolidated Statements of Income. As such, the Company classifies loans subjected to fair value adjustments as Level 2 valuation.

The following tables summarize the difference between the aggregate fair value and the aggregate unpaid principal balance for loans held for sale measured at fair value as of September 30, 2021 and December 31, 2020.

	September 30, 2021
			Aggregate Unpaid
(dollars in thousands)	Fair Value		Principal Balance		Difference
Loans held for sale	$	53,413	$	52,554	$	859

	December 31, 2020
			Aggregate Unpaid
(dollars in thousands)	Fair Value		Principal Balance		Difference
Loans held for sale	$	88,205	$	86,551	$	1,654

There were no residential mortgage loans held for sale that were 90 or more days past due or on nonaccrual status as of September 30, 2021 or December 31, 2020.

Interest rate swap derivatives: These derivative instruments consist of interest rate swap agreements, which are accounted for as cash flow hedges under ASC 815. The Company’s derivative position is classified within Level 2 of the fair value hierarchy and is valued using models generally accepted in the financial services industry and that use actively quoted or observable market input values from external market data providers and/or non-binding broker-dealer quotations. The fair value of the derivatives is determined using discounted cash flow models. These models’ key assumptions include the contractual terms of the respective contract along with significant observable inputs, including interest rates, yield curves, nonperformance risk and volatility. Derivative contracts are executed with a Credit Support Annex, which is a bilateral agreement that requires collateral postings when the market value exceeds certain threshold limits. These agreements protect the interests of the Company and its counterparties should either party suffer a credit rating deterioration.

Credit risk participation agreements: The Company enters into credit risk participation agreements (“RPAs”) with institutional counterparties, under which the Company assumes its pro-rata share of the credit exposure associated with a borrower’s performance related to interest rate derivative contracts. The fair value of RPAs is calculated by determining the total expected asset or liability exposure of the derivatives to the borrowers and applying the borrowers’ credit spread to that exposure. Total expected exposure incorporates both the current and potential future exposure of the derivatives, derived from using observable inputs, such as yield curves and volatilities. Accordingly, RPAs fall within Level 2.

Interest rate caps: The Company entered into an interest rate cap agreement ("cap") with an institutional counterparty, under which the Company will receive cash if and when market rates exceed the cap's strike rate. The fair value of the cap is calculated by determining the total expected asset or liability exposure of the derivatives. Total expected exposure incorporates both the current and potential future exposure of the derivative, derived from using observable inputs, such as yield curves and volatilities. Accordingly, the cap falls within Level 2.

Mortgage banking derivatives for loans settled on a mandatory basis: The Company relied on a third-party pricing service to value its mortgage banking derivative financial assets and liabilities, which the Company classifies as a Level 3

40

valuation. The external valuation model to estimate the fair value of its interest rate lock commitments to originate residential mortgage loans held for sale includes grouping the interest rate lock commitments by interest rate and terms, applying an estimated pull-through rate based on historical experience, and then multiplying by quoted investor prices determined to be reasonably applicable to the loan commitment groups based on interest rate, terms, and rate lock expiration dates of the loan commitment groups. The Company also relies on an external valuation model to estimate the fair value of its forward commitments to sell residential mortgage loans (i.e. an estimate of what the Company would receive or pay to terminate the forward delivery contract based on market prices for similar financial instruments), which includes matching specific terms and maturities of the forward commitments against applicable investor pricing.

Mortgage banking derivative for loans settled best efforts basis: The significant unobservable input (Level 3) used in the fair value measurement of the Company's interest rate lock commitments is the pull through ratio, which represents the percentage of loans currently in a lock position which management estimates will ultimately close. An increase in the pull through ratio (i.e. higher percentage of loans are estimated to close) will increase the gain or loss. The pull through ratio is largely dependent on the loan processing stage that a loan is currently in. The pull through rate is computed by the Company's secondary marketing consultant using historical data and the ratio is periodically reviewed by the Company for reasonableness.

The following is a reconciliation of activity for assets and liabilities measured at fair value based on Significant Other Unobservable Inputs (Level 3):

	Investment		Mortgage Banking
(dollars in thousands)	Securities		Derivatives		Total
Assets:
Beginning balance at January 1, 2021	$	1,500	$	5,213	$	6,713
Realized gain (loss) included in earnings	—		(3,648)		(3,648)
Migrated to level 2 valuation	—		—		—
Ending balance at September 30, 2021	$	1,500	$	1,565	$	3,065
Liabilities:
Beginning balance at January 1, 2021	$	—	$	—	$	—
Ending balance at September 30, 2021	$	—	$	—	$	—

	Investment		Mortgage Banking
(dollars in thousands)	Securities		Derivatives		Total
Assets:
Beginning balance at January 1, 2020	$	10,931	$	280	$	11,211
Realized (loss) gain included in earnings	—		5,735		5,735
Migrated to level 2 valuation	(9,233)		—		(9,233)
Ending balance at September 30, 2020	$	1,698	$	6,015	$	7,713
Liabilities:
Beginning balance at January 1, 2020	$	—	$	66	$	66
Realized gain included in earnings	—		(66)		(66)
Ending balance at September 30, 2020	$	—	$	—	$	—

The investment securities classified as Level 3 consist of one corporate bond of a local banking company which is not publicly traded, and for which the carrying amount approximates fair value.

For Level 3 assets measured at fair value on a recurring or nonrecurring basis as of September 30, 2021and December 31, 2020, the significant unobservable inputs used in the fair value measurements were as follows:

41

		September 30, 2021						December 31, 2020
(dollars in thousands)	Valuation Technique	Description	Range	Weighted Average (1)		Fair Value		Weighted Average (1)		Fair Value
Mortgage banking derivatives	Pricing Model	Pull Through Rate	84.2% - 87.0%	85.50	%	$	1,565	79.14	%	$	5,213

(1) Unobservable inputs for mortgage banking derivatives were weighted by loan amount.

Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis

The Company measures certain assets at fair value on a nonrecurring basis and the following is a general description of the methods used to value such assets.

At September 30, 2021, substantially all of the Company’s individually evaluated loans were evaluated based upon the fair value of the collateral. In accordance with ASC Topic 820, individually evaluated loans where an allowance is established based on the fair value of collateral require classification in the fair value hierarchy. When the fair value of the collateral is based on an observable market price or a current appraised value, the Company records the loan as nonrecurring Level 2. When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, the Company records the loan as nonrecurring Level 3.

Other real estate owned: Other real estate owned is initially recorded at fair value less estimated selling costs. Fair value is based upon independent market prices, appraised values of the collateral or management’s estimation of the value of the collateral, which the Company classifies as a Level 3 valuation. Assets measured at fair value on a nonrecurring basis are included in the table below:

			Significant		Significant
			Other		Other
			Observable		Unobservable
	Quoted Prices		Inputs		Inputs		Total
(dollars in thousands)	(Level 1)		(Level 2)		(Level 3)		(Fair Value)
September 30, 2021
Commercial	$	—	$	—	$	10,019	$	10,019
Income producing - commercial real estate	—		—		18,621		18,621
Owner occupied - commercial real estate	—		—		1,593		1,593
Real estate mortgage - residential	—		—		1,281		1,281
Construction - commercial and residential	—		—		—		—
Home equity	—		—		391		391
Other consumer	—		—		—		—
Other real estate owned	—		—		5,135		5,135
Total assets measured at fair value on a nonrecurring basis as of September 30, 2021	$	—	$	—	$	37,040	$	37,040

42

			Significant		Significant
			Other		Other
			Observable		Unobservable
	Quoted Prices		Inputs		Inputs		Total
(dollars in thousands)	(Level 1)		(Level 2)		(Level 3)		(Fair Value)
December 31, 2020
Commercial	$	—	$	—	$	9,285	$	9,285
Income producing - commercial real estate	—		—		21,638		21,638
Owner occupied - commercial real estate	—		—		21,930		21,930
Real estate mortgage - residential	—		—		2,602		2,602
Construction - commercial and residential	—		—		103		103
Home equity	—		—		416		416
Other real estate owned	—		—		4,987		4,987
Total assets measured at fair value on a nonrecurring basis as of December 31, 2020	$	—	$	—	$	60,961	$	60,961

Fair Value of Financial Instruments

The Company discloses fair value information about financial instruments for which it is practicable to estimate the value, whether or not such financial instruments are recognized on the balance sheet. Fair value is the amount at which a financial instrument could be exchanged in a current transaction between willing parties, other than in a forced sale or liquidation, and is best evidenced by quoted market price, if one exists.

Quoted market prices, if available, are shown as estimates of fair value. Because no quoted market prices exist for a portion of the Company’s financial instruments, the fair value of such instruments has been derived based on management’s assumptions with respect to future economic conditions, the amount and timing of future cash flows and estimated discount rates. Different assumptions could significantly affect these estimates. Accordingly, the net realizable value could be materially different from the estimates presented below. In addition, the estimates are only indicative of individual financial instrument values and should not be considered an indication of the fair value of the Company taken as a whole. The estimated fair value of the Company’s financial instruments at September 30, 2021 and December 31, 2020 are as follows:

43

					Fair Value Measurements
					Quoted Prices (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	Carrying
(dollars in thousands)	Value		Fair Value
September 30, 2021
Assets
Cash and due from banks	$	8,806	$	8,806	$	8,806	$	—	$	—
Federal funds sold	38,934		38,934		—		38,934		—
Interest bearing deposits with other banks	2,452,744		2,452,744		—		2,452,744		—
Investment securities	1,786,659		1,786,659		—		1,785,159		1,500
Accrued interest receivable	40,028		40,028		—		40,028		—
Loans held for sale	53,413		53,413		—		53,413		—
Loans	6,767,957		6,624,261		—		—		6,624,261
Annuity investment	14,206		14,206		—		14,206		—
Mortgage banking derivatives	1,565		1,565		—		—		1,565
Interest rate caps	4,882		4,882		—		4,882		—
Liabilities
Noninterest bearing deposits	2,836,418		2,836,418		—		2,836,418		—
Interest bearing deposits	6,080,567		6,080,567		—		6,080,567		—
Time deposits	751,503		761,212		—		761,212		—
Customer repurchase agreements	29,401		29,401		—		29,401		—
Borrowings	369,639		376,058		—		376,058		—
Interest rate swap derivatives	—		—		—		—		—
Credit risk participation agreement	73		73		—		73		—
Interest rate caps	5,037		5,037		—		5,037		—
December 31, 2020
Assets
Cash and due from banks	$	8,435	$	8,435	$	8,435	$	—	$	—
Federal funds sold	28,200		28,200		—		28,200
Interest bearing deposits with other banks	1,752,420		1,752,420		—		1,752,420
Investment securities	1,150,885		1,150,885		—		1,149,385		1,500
Accrued interest receivable	40,104		40,104		—		40,104		—
Loans held for sale	88,205		88,205		—		88,205		—
Loans	7,650,633		7,608,687		—		—		7,608,687
Annuity investment	14,468		14,468		—		14,468		—
Mortgage banking derivative	5,213		5,213		—		—		5,213
Interest rate caps	3,413		3,413		—		3,413		—
Liabilities
Noninterest bearing deposits	2,809,334		2,809,334		—		2,809,334		—
Interest bearing deposits	756,923		756,923		—		756,923		—
Time deposits	977,760		993,500		—		993,500		—
Customer repurchase agreements	26,726		26,726		—		26,726		—
Borrowings	568,077		575,435		—		575,435		—
Interest rate swap derivatives	516		516		—		516		—
Credit risk participation agreements	118		118		—		118		—
Interest rate caps	3,574		3,574		—		3,574		—

-

44

Note 12 - Legal Contingencies

There have been no material changes in the status of the legal proceedings previously disclosed in Part I, Item 3 of the Company's Annual Report on Form 10-K for the year ended December 31, 2020, except as follows. From time to time, the Company and its subsidiaries are involved in various legal proceedings incidental to their business in the ordinary course, including matters in which damages in various amounts are claimed. Based on information currently available, the Company does not believe that the liabilities (if any) resulting from such legal proceedings will have a material effect on the financial position of the Company. However, in light of the inherent uncertainties involved in such matters, ongoing legal expenses or an adverse outcome in one or more of these matters could materially and adversely affect the Company’s financial condition, results of operations or cash flows in any particular reporting period, as well as its reputation.

As previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, on January 25, 2021, the Company entered into a settlement agreement with respect to a previously disclosed shareholder demand letter, covering substantially the same subject matters as the disclosed civil securities class action litigation pending in the SDNY. The letter demanded that the Board undertake an investigation into the Board’s and management’s alleged violations of law and alleged breaches of fiduciary duties, and take appropriate actions following such investigation. On October 4, 2021, the DC Superior Court approved the settlement and dismissed the derivative action complaint. The Company has already begun executing on the terms of the settlement, including the payment of agreed-upon fees and expenses (which were fully covered by the Company’s D&O insurance policy).

In connection with the previously disclosed investigation by the SEC, the Company’s discussions with the Staff have progressed, and the Company continues to engage with the Staff, including senior Staff members, about a potential resolution or settlement of the Staff’s investigation with respect to the Company. The Company is hopeful that these discussions will lead to a timely resolution of the investigation as it relates to the Company and any current employees and directors on a mutually agreeable basis, but there can be no assurance that will be the case. There also can be no assurance that this would result in resolution of any charges against former employees or directors, given the Staff’s ongoing review of the factual record. Any agreements reached by the Company with the Staff would be subject to approval by the Commission, and there can be no assurance that it would be approved. We are unable to predict the outcome of the investigation or these discussions or whether any potential resolution would have a material impact on the Company.

The Company is also continuing discussions with the Staff of the Federal Reserve Board about a potential resolution or settlement of its investigation with respect to the Company. With respect to the other investigations described above, we are unable to predict their duration, scope or outcome.

As previously disclosed, the Company maintains director and officer insurance policies (“D&O Insurance Policies”) that provide coverage for the legal defense costs related to certain of the above-described investigations and litigations. When claims are covered by D&O Insurance Policies, the Company records a corresponding receivable against the incurred legal defense cost expense subject to coverage under the D&O Insurance Policies and then eliminates the receivable and expense when the claim is paid. Subject to any new developments to the above-described investigations and litigations that may occur over the next few months, the Company currently believes there is a possibility that the applicable D&O Insurance Policies may be exhausted as early as the fourth quarter of this year. Once the D&O Insurance Policies are exhausted, the Company will be responsible for paying the defense costs associated with the above-described investigations and litigations for itself and on behalf of any current and former Officers and Directors entitled to indemnification from the Company. Since the commencement of the above-described matters in 2018 through September 30, 2021, the Company’s D&O Insurance carriers have advanced defense cost claims to the Company and its current and former directors and officers in an aggregate of approximately $10 million, excluding the cost of settlements. Because this aggregate amount does not reflect total expenses incurred and includes costs related to certain proceedings that have since settled, this number is not intended to be and should not be used as an estimate of defense costs going forward. The Company cannot predict with any certainty the amount of defense costs that the Company may incur in the future in connection with currently ongoing and any potential future investigations and legal proceedings, as they are dependent on various factors, many of which are outside of the Company’s control.

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

The following discussion provides information about the results of operations, financial condition, liquidity, and capital resources of Eagle Bancorp, Inc. (the “Company”) and its subsidiaries as of the dates and periods indicated. This discussion and analysis should be read in conjunction with the unaudited Consolidated Financial Statements and Notes thereto, appearing elsewhere in this report and the Management Discussion and Analysis in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

This report contains forward-looking statements within the meaning of the Securities Exchange Act of 1934 (the “Exchange Act”), as amended, including statements of goals, intentions, and expectations as to future trends, plans, events or results of Company operations and policies and regarding general economic conditions. In some cases, forward-looking statements can be identified by use of words such as “may,” “will,” “can,” “anticipates,” “believes,” “expects,” “plans,” “estimates,” “potential,” “assume," "probable," "possible," "continue,” “should,” “could,” “would,” “strive," "seeks," "deem," "projections," "forecast," "consider," "indicative," "uncertainty," "likely," "unlikely," "likelihood," "unknown," "attributable," "depends," "intends," "generally," "feel," "typically," "judgment," "subjective" and similar words or phrases. These statements are based upon current and anticipated economic conditions, nationally and in the Company’s market (including the macroeconomic and other challenges and uncertainties resulting from the coronavirus (“COVID-19”) pandemic, including on our credit quality and business operations), interest rates and interest rate policy, competitive factors and other conditions, which by their nature are not susceptible to accurate forecast, and are subject to significant uncertainty. For details on factors that could affect these expectations, see the risk factors contained in this report and the risk factors and other cautionary language included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, and in other periodic and current reports filed by the Company with the Securities and Exchange Commission. Because of these uncertainties and the assumptions on which this discussion and the forward-looking statements are based, actual future operations and results in the future may differ materially from those indicated herein. Readers are cautioned against placing undue reliance on any such forward-looking statements. The Company’s past results are not necessarily indicative of future performance, and nothing contained herein is meant to or should be considered and treated as earnings guidance of future quarters’ performance projections. All information is as of the date of this report. Any forward-looking statements made by or on behalf of the Company speak only as to the date they are made. Except to the extent required by applicable law or regulation, the Company undertakes no obligation to revise or update publicly any forward looking statement for any reason.

GENERAL

The Company is a growth-oriented, one-bank holding company headquartered in Bethesda, Maryland. The Company provides general commercial and consumer banking services through EagleBank (the “Bank”), its wholly owned banking subsidiary, a Maryland chartered bank which is a member of the Federal Reserve System. The Company was organized in October 1997, to be the holding company for the Bank. The Bank was organized in 1998 as an independent, community oriented, full service banking alternative to the super regional financial institutions, which dominate the Company’s primary market area. The Company’s philosophy is to provide superior, personalized service to its customers. The Company focuses on relationship banking, providing each customer with a number of services and becoming familiar with and addressing customer needs in a proactive, personalized fashion. The Bank currently has a total of eighteen branch offices, including seven in Northern Virginia, six in Suburban Maryland, and five in Washington, D.C. The Bank also operates five lending offices, with one in Northern Virginia, three in Suburban Maryland and one in Washington, D.C.

The Bank offers a broad range of commercial banking services to its business and professional clients, as well as full service consumer banking services to individuals living and/or working primarily in the Bank’s market area. The Bank emphasizes providing commercial banking services to sole proprietors, small and medium-sized businesses, non-profit organizations and associations, and investors living and working in and near the primary service area. These services include the usual deposit functions of commercial banks, including business and personal checking accounts, “NOW” accounts and money market and savings accounts, business, construction, and commercial loans, residential mortgages and consumer loans, and cash management services. The Bank is also active in the origination and sale of residential mortgage loans and the origination of Small Business Administration ("SBA”) loans.

The residential mortgage loans are originated for sale to third-party investors, generally large mortgage and banking companies, under best efforts and/or mandatory delivery commitments with the investors to purchase the loans subject to compliance with pre-established criteria. The decision whether to sell residential mortgage loans on a mandatory or best efforts lock basis is a function of multiple factors, including but not limited to overall market volumes of mortgage loan originations, forecasted “pull-through” rates of origination, loan closing operational considerations, pricing differentials between the two methods, and availability and pricing of various interest rate hedging strategies associated with the mortgage origination

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pipeline. The Company continually monitors these factors to maximize profitability and minimize operational and interest rate risks.

The Bank generally sells the guaranteed portion of the SBA loans in a transaction apart from the loan origination generating noninterest income from the gains on sale, as well as servicing income on the portion participated. The Company originates multifamily Federal Housing Administration ("FHA”) loans through the Department of Housing and Urban Development’s Multifamily Accelerated Program (“MAP”). The Company securitizes these loans through the Government National Mortgage Association (“Ginnie Mae”) MBS I program and shortly thereafter sells the resulting securities in the open market to authorized dealers in the normal course of business, and periodically bundles and sells the servicing rights. Bethesda Leasing, LLC, a subsidiary of the Bank, holds title to and manages other real estate owned (“OREO”) assets. Eagle Insurance Services, LLC, a subsidiary of the Bank, offers access to insurance products and services through a referral program with a third party insurance broker. Additionally, the Bank offers investment advisory services through referral programs with third parties. Landroval Municipal Finance, Inc., a subsidiary of the Bank, focuses on lending to municipalities by buying debt on the public market as well as direct purchase issuance.

Impact of COVID-19

Since the inception of the COVID-19 pandemic in March of 2020, much progress has been made in reopening economies back up domestically and abroad. In the United States and in other nations around the world, the availability of vaccines ramped up significantly in the first three quarters of 2021. Although management feels we're generally trending in a positive direction and strides have been made in the fight against COVID-19, we remain cautious given the potential for lingering effects of the pandemic, including vaccination efficacy against variants and the speed of vaccination adoption around the country, which could continue to impair some customers' ability to fulfill their financial obligations to the Company.

In order to protect the health of our customers and employees, and to comply with applicable government directives, we have modified our business practices, including directing employees to work from home insofar as is possible and implementing our business continuity plans and protocols to the extent necessary. As concerns over the most severe impacts of the pandemic have abated, the Company's non-branch personnel returned to work on a "hybrid" basis on November 1, 2021. The hybrid workplace allows certain employees to work remotely a portion of the week, but provides that each department has at least 50% of its staff in the office each day. We have established general guidelines for returning to the workplace that include having employees maintain safe distances, staggered work schedules to limit the number of employees in a single location, more frequent cleaning of our facilities and other practices encouraging a safe working environment, including required COVID-19 training programs. We are monitoring jurisdictional guidelines and will continue to respond as appropriate.

On March 27, 2020, the CARES Act was signed into law. It contains substantial tax and spending provisions intended to address the impact of the COVID-19 pandemic. The CARES Act created the Paycheck Protection Program (the "PPP"), a program designed to aid small- and medium-sized businesses through federally guaranteed loans distributed through banks. These loans are intended to guarantee payroll and other costs to help those businesses remain viable and allow their workers to pay their bills.

As an SBA preferred lender, the Bank has been participating in the PPP program, which is winding down as loans complete the forgiveness process. As of September 30, 2021, the Bank had an outstanding balance of PPP loans remaining of $67.3 million.

Following the CARES Act, the Consolidated Appropriations Act was signed in to law on December 27, 2020 which expanded and modified the PPP as well as provided additional COVID-19 support. Subsequently, the American Rescue Plan Act of 2021 was signed in to law on March 11, 2021 providing additional relief in the form of testing and vaccination sites along with direct stimulus checks. Governmental actions taken in response to the COVID-19 pandemic have not always been coordinated or consistent across jurisdictions but, in general, have been expanding in scope and intensity. The efficacy and ultimate effect of these actions is not known.

In response to the COVID-19 pandemic, we had previously implemented a short-term loan modification program to provide temporary payment relief to certain borrowers who meet the program's qualifications. Initial modifications under the program have predominantly been for 90 days, with a second 90 day modification if warranted. These types of loan modifications are no longer being granted at this time. The deferred payments along with interest accrued during the deferral period are due and payable on the existing maturity date of the existing loan. As of September 30, 2021, we had ongoing temporary modifications on approximately 6 loans representing approximately $70 million (approximately 1.0% of total loans) in outstanding balances, as compared to 36 loans representing approximately $72 million (approximately 0.9% of total loans) at December 31, 2020. Additionally, none of the deferrals are reflected in the Company's asset quality measures (i.e. non-

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performing loans) due to the provision of the CARES Act that permits U.S. financial institutions to temporarily suspend the U.S. GAAP requirements to treat such short-term loan modifications as troubled debt restructurings ("TDRs"). Some of these deferrals may have met the criteria for treatment under U.S. generally accepted accounting principles ("GAAP") as troubled debt restructurings ("TDRs"). Similar provisions have also been confirmed by interagency guidance issued by the federal banking agencies and confirmed with staff members of the Financial Accounting Standards Board.

We continue to monitor the impact of COVID-19 closely even as economic forecasts improve. In addition, we continue to monitor the effects that have resulted from the CARES Act and other legislative and regulatory developments related to COVID-19; however, the extent to which the COVID-19 pandemic could impact our operations and financial results during the remainder of 2021 and in 2022 is uncertain.

CRITICAL ACCOUNTING POLICIES

The Company’s Consolidated Financial Statements are prepared in accordance with GAAP and follow general practices within the banking industry. Application of these principles requires management to make estimates, assumptions, and judgments that affect the amounts reported in the financial statements and accompanying notes. These estimates, assumptions and judgments are based on information available as of the date of the Consolidated Financial Statements; accordingly, as this information changes, the Consolidated Financial Statements could reflect different estimates, assumptions, and judgments. Certain policies inherently have a greater reliance on the use of estimates, assumptions and judgments and, as such, have a greater possibility of producing results that could be materially different than originally reported. Estimates, assumptions, and judgments are necessary when assets and liabilities are required to be recorded at fair value, when a decline in the value of an asset not carried on the financial statements at fair value warrants an impairment write-down or a valuation reserve to be established, or when an asset or liability needs to be recorded contingent upon a future event. Carrying assets and liabilities at fair value inherently results in more financial statement volatility. The Company applies the accounting policies contained in Note 1 to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 and Note 1 to the Consolidated Financial Statements included in this report. There have been no significant changes to the Company’s accounting policies as disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 except as indicated below and in “Accounting Standards Adopted in 2021” in Note 1 to the Consolidated Financial Statements in this report.

Provision for Credit Losses and Provision for Unfunded Commitments

A consequence of lending activities is that we may incur credit losses, so we record an allowance for credit losses ("ACL") with respect to loan receivables and a reserve for unfunded commitments (“RUC”) as estimates of those losses. The amount of such losses will vary depending upon the risk characteristics of the loan portfolio as affected by economic conditions such as changes in interest rates, the financial performance of borrowers and regional unemployment rates, which management estimates by using a national forecast and estimating a regional adjustment based on historical differences between the two.

CECL requires an estimate of the credit losses expected over the life of an exposure (or pool of exposures). The Provision for Unfunded Commitments represents the expected credit losses on off-balance sheet commitments such as unfunded commitments to extend credit and standby letters of credit. The RUC is determined by estimating future draws and applying the expected loss rates on those draws.

Management has significant discretion in making the judgments inherent in the determination of the provisions for credit loss, ACL, and the RUC. Our determination of these amounts requires significant reliance on estimates and significant judgment as to the amount and timing of expected future cash flows on loans, significant reliance on historical loss rates on homogenous portfolios, consideration of our quantitative and qualitative evaluation of economic factors, and the reliance on our reasonable and supportable forecasts.

The Provision for Credit Losses ("PCL") represents the periodic expense for expected credit losses arising from the Company's loan and AFS securities portfolios.

The Company uses a loan-level probability of default ("PD")/ loss given default ("LGD") cash flow method with an exposure at default ("EAD") model to estimate expected credit losses for the commercial, income producing – commercial real estate, owner occupied – commercial real estate, real estate mortgage - residential, construction – commercial and residential, construction – C&I (owner occupied), home equity, and other consumer loan pools. For each of these loan segments, the Company generates cash flow projections at the instrument level wherein payment expectations are adjusted for estimated prepayment speed, probability of default, and loss given default. The modeling of expected prepayment speeds is based on historical internal data. PPP loans are included in the model but do not carry a reserve, as these loans are fully guaranteed by the

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SBA, whose guarantee is backed by the full faith and credit of the U.S. Government.

The Company uses regression analysis of historical internal and peer data (as Company loss data is insufficient) to determine suitable loss drivers to utilize when modeling lifetime probability of default and loss given default. This analysis also determines how expected probability of default will react to forecasted levels of the loss drivers. For our cash flow model, management utilizes and forecasts regional unemployment by using a national forecast and estimating a regional adjustment based on historical differences between the two as a loss driver over our reasonable and supportable period of 18 months, and reverts back to a historical loss rate over the following twelve months on a straight-line basis. Management leverages economic projections from reputable and independent third parties to inform its loss driver forecasts over the forecast period.

The ACL also includes an amount for inherent risks not reflected in the historical analyses. Relevant factors include, but are not limited to, concentrations of credit risk, changes in underwriting standards, experience and depth of lending staff, and trends in delinquencies. While our methodology in establishing the reserve for credit losses attributes portions of the ACL and RUC to the commercial and consumer portfolio segments, the entire ACL and RUC is available to absorb credit losses expected in the total loan portfolio and total amount of unfunded credit commitments, respectively.

Under CECL, reserve for credit losses are significantly influenced by the composition, characteristics and quality of our loan portfolio, as well as the prevailing economic conditions and forecasts utilized. Material changes to these and other relevant factors may result in greater volatility to the reserve for credit losses, and therefore, greater volatility to our reported earnings. See Notes 1 and 5 to the Consolidated Financial Statements for more information on the provision for credit losses.

Goodwill and Other Intangibles

Goodwill is subject to impairment testing at the reporting unit level and must be conducted at least annually. The Company performs impairment testing during the fourth quarter of each year or when events or changes in circumstances indicate the assets might be impaired.

Determining the fair value of a reporting unit under the goodwill impairment test involves judgment and often involves the use of significant estimates and assumptions. Estimates of fair value are primarily determined using discounted cash flows, market comparisons and recent transactions. These approaches use significant estimates and assumptions including projected future cash flows, discount rates reflecting the market rate of return, projected growth rates and determination and evaluation of appropriate market comparables. Future events could cause the Company to conclude that goodwill or other intangibles have become impaired, which would result in recording an impairment loss. Any resulting impairment loss could have a material adverse impact on the Company's financial condition and results of operations. Annual impairment testing of intangibles and goodwill as required by GAAP will be performed in the fourth quarter of 2021.

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RESULTS OF OPERATIONS

Earnings Summary

Three Months Ended September 30, 2021 vs. Three Months Ended September 30, 2020

Net income for the three months ended September 30, 2021 was $43.6 million compared to $41.3 million for the same period in 2020, a 5% increase. Net income per basic and diluted common share for the three months ended September 30, 2021 was $1.36 compared to $1.28 per basic and diluted common share for the same period in 2020, a 6% increase.

Net income increased for the three months ended September 30, 2021 relative to the same period in 2020 due primarily to a $7.5 million net reversal of the provision for credit losses and reserve for unfunded commitments, partially offset by lower noninterest income (before investment gain) of $6.8 million due primarily to lower gain on sale of loans. By comparison, the third quarter of 2020 included net provisions for credit losses and unfunded commitments of $4.5 million and noninterest income (before investment gain) of $17.7 million.

Total revenue (i.e. net interest income plus noninterest income) was $87.3 million for the three months ended September 30, 2021 as compared to $96.9 million for the same period in 2020. The most significant portion of revenue is net interest income, which was $79.0 million for the three months ended September 30, 2021, compared to $79.0 million for the same period in 2020. Net interest income was flat due to a 13% increase in average earning assets, offset by a corresponding decline in net interest margin (see next paragraph), when comparing the three months ended September 30, 2021 with the same period in 2020.

The net interest margin, which measures the difference between interest income and interest expense (i.e. net interest income) as a percentage of earning assets, was 2.73% for the three months ended September 30, 2021 and 3.08% for the same period in 2020. The drivers of the change are detailed in the "Net Interest Income and Net Interest Margin" section below.

The benefit of noninterest sources funding earning assets was 22 basis points for the three months ended September 30, 2021 as compared to 33 basis points for the same period in 2020. The decrease in benefit from noninterest sources was due to a 58 basis points reduction in the average yield on interest earning assets, as loans (held for investment) declined and investments and interest bearing deposits with other banks increased, compared to a smaller decline of 34 basis points in total interest bearing liabilities. This led to a 35 basis point decrease in the net interest margin for the three months ended September 30, 2021 as compared to the same period in 2020.

Total noninterest income for the three months ended September 30, 2021 decreased to $8.3 million from $17.8 million for the same period in 2020, a 53% decrease. The decrease was primarily due to lower gain on sale of loans, which were entirely of residential mortgage loans. Other income also fell on lower FHA trade premiums. For further information on the components and drivers of these changes see "Noninterest Income" section below.

Gain on sale of loans for the three months ended September 30, 2021 was $3.3 million compared to $12.2 million for the same period in 2020, an decrease of 73%. Residential mortgage origination and sale volume peaked in the third quarter of 2020 based on a combination of low rates, concerns about rising rates and rising home values. This increase in mortgage volume abated as mortgage rates started to increase at the beginning of 2021.

Other income for the three months ended September 30, 2021 decreased to $1.6 million from $4.0 million for the same period in 2020, a 60% decrease. This decrease was attributed to gain on sale of Other Real Estate Owned ("OREO") and FHA trade premiums being negligible for the three months ended September 30, 2021, compared to a combined $2 million for the same period in 2020.

Noninterest expenses totaled $36.4 million for the three months ended September 30, 2021, as compared to $36.9 million for same period in 2020, a 1% decrease. See the "Noninterest Expense" section for further detail on the components and drivers of the change.

Income tax expenses were $14.8 million for the three months ended September 30, 2021 an increase of 5.4%, compared to the same period in 2020. The components and drivers of the change are discussed in the "Income Tax Expense" section below.

The efficiency ratio, which measures the ratio of noninterest expense to total revenue, was 41.7% for the three months ended September 30, 2021, as compared to 38.1% the same period in 2020.

Management believes it has effectively managed the Company over the past twelve months as deposits flowed into the Bank, increasing the balance sheet by maintaining a focus on disciplined pricing of both loans and sources of funding.

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At September 30, 2021, total loans (including PPP loans) were 13.1% lower than they were a year earlier, and average loans were 10.8% lower in the three months ended September 30, 2021 as compared to the same period in 2020. PPP loans represented $67.3 million of total loans at September 30, 2021, compared to $456.1 million a year earlier. Notwithstanding the impact of the reduction of PPP loans (through forgiveness and sales) to total loans, the decrease in loan balance is mostly attributable to elevated payoffs and prepays due in part to successful completion of construction projects, competition to refinance at lower rates with longer amortization periods, and excess liquidity at competing banks as well as many companies and construction project sponsors. From a liquidity and funding perspective, the Company continues to benefit from a higher level of both interest bearing and noninterest bearing accounts relative to the third quarter of 2020. At September 30, 2021, total deposits were 18.2% higher than deposits a year earlier, while average deposits were 15.8% higher for the three months ended September 30, 2021 compared with the three months ended September 30, 2020.

In terms of the average asset composition, loans, which generally have higher yields than securities and other earning assets, represented 61% of average earning assets for the three months ended September 30, of 2021, down from 78% for the same period in 2020. The decline was primarily a result of strong deposit inflows in the third quarter of 2020, which resulted in a significant increase in cash and securities combined with the aforementioned decline in loans.

The ratio of common equity to total assets was 11.49% at September 30, 2021. This is down from 12.11% a year earlier, as assets increased by 14.6% (supported by strong deposit inflows which significantly increased assets held in cash and securities) and common equity (reduced by dividends and stock repurchases) increased by a smaller 8.9%. As discussed later in “Capital Resources and Adequacy,” the regulatory capital ratios of the Bank and Company remain above well capitalized levels.

For the three months ended September 30, 2021, the Company reported an annualized return on average assets (“ROAA”) of 1.46%, as compared to 1.57% for the same period in 2020. Total shareholders’ equity was $1.33 billion at September 30, 2021, compared to $1.22 billion a year earlier. The annualized return on average common equity (“ROACE”) for the three months ended September 30, 2021 was 13.00% as compared to 13.58% for the same period in 2020. The annualized return on average tangible common equity (“ROATCE”) for the three months ended September 30, 2021 was 14.11% as compared to 14.87% for the same period in 2020. The decrease in these earnings-based ratios, in spite of higher net income for the period ($43.6 million versus $41.3 million), was due to the increase in average assets for the three months ended September 30, 2021, compared to the same period in 2020. Refer to the "Use of Non-GAAP Financial Measures" section for additional detail and a reconciliation of GAAP to non-GAAP financial measures.

Nine Months Ended September 30, 2021 vs. Nine Months Ended September 30, 2020

Net interest income increased by 3% for the nine months ended September 30, 2021 over the same period in 2020 ($246.3 million as compared to $240.1 million). This was largely attributable the decline in the interest paid on deposits outpacing the decline in interest and fees on loans, and a 15.1% increase in average earnings assets compared to an increase of 11.3% for interest bearing liabilities.

For the nine months ended September 30, 2021, the Company reported an annualized ROAA of 1.56% as compared to 1.24% for the same period in 2020. The annualized ROACE for the nine months ended September 30, 2021 was 13.98% as compared to 10.44% for the same period in 2020. The annualized ROATCE for the nine months ended September 30, 2021 was 15.21% as compared to 11.45% for the same period in 2020. The increase in these ratios was primarily due to reversals from the allowance for credit losses on loans and the reserve for unfunded commitments in the first nine months of 2021, versus increases to both of these accounts for the same period in 2020. Refer to the "Use of Non-GAAP Financial Measures" section for additional detail and a reconciliation of GAAP to non-GAAP financial measures.

The net interest margin was 2.91% for the nine months ended September 30, 2021 and 3.27% for the same period in 2020. Average earning asset yields decreased 73 basis points to 3.29% for the nine months ended September 30, 2021, as compared to 4.02% for the same period in 2020. The average cost of interest bearing liabilities decreased by 56 basis points to 0.61% for the nine months ended September 30, 2021, as compared to 1.17% for the same period in 2020. Combining the change in the yield on earning assets and the costs of interest bearing liabilities, the net interest spread decreased by 17 basis points for the nine months ended September 30, 2021 as compared to the same period in 2020 (2.68% as compared to 2.85%). The benefit of noninterest sources funding earning assets decreased by 19 basis points, based on a benefit of 23 basis points for the nine months ended September 30, 2021 as compared to a benefit of 42 basis points for the same period in 2020.

The Company believes it has effectively managed its pricing and interest rate risk over the past twelve months as market interest rates moved lower and have stayed low. This factor has been significant to overall earnings performance over the past twelve months as net interest income represents 89% of the Company's total revenue for the nine months ended September 30, 2021.

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For the nine months ended September 30, 2021, total loans decreased 11.7% from December 31, 2020 (from $7.8 billion to $6.9 billion), and average loans were 6.0% lower in the first nine months of 2021 as compared to the same period in 2020. At September 30, 2021, total deposits were 5.2% lower than deposits at December 31, 2020, while average deposits were 17.4% higher for the first nine months of 2021 compared with the same period in 2020.

There was decline in average loans from $7.9 billion to $7.4 billion over the nine months ended September 30, 2021 as compared to the same period in 2020, but the Bank has significant liquidity as average deposits increased from $8.3 billion to $9.7 billion. The increase in deposits has come from certain financial intermediary relationships that are also experiencing increased liquidity. In terms of the average asset composition, loans, which generally have higher yields than securities and other earning assets, represented 65% and 80% of average earning assets for the first nine months of 2021 and 2020, respectively. For the first nine months of 2021, as compared to the same period in 2020, average loans, excluding loans held for sale, decreased $473 million, or 6%, due to the sale of PPP loans, and payoffs/paydowns outpaced loan originations/fundings. Average investment securities for the nine months ended September 30, 2021 and 2020 amounted to 13% and 9% of average earning assets, respectively. The combination of federal funds sold, interest bearing deposits with other banks and loans held for sale represented 21% and 11% of average earning assets for the first nine months of 2021 and 2020, respectively.

The provision for credit losses decreased with a reversal of $14.4 million for the nine months ended September 30, 2021 as compared to a provision of $40.7 million for same period in 2020. The primary difference is the during the nine months ended September 30, 2021, the economy was recovering from the COVID-19 pandemic leading to improvement in credit quality and improvement and adjustments in qualitative and environmental factors and corresponding reversals from the Allowance for Credit Losses, versus the same period in 2020 when the onset of the COVID-19 pandemic necessitated increased provisions to the Allowance for Credit Losses. Net charge-offs of $12.2 million for the nine months ended September 30, 2021 represented an annualized 0.22% of average loans, excluding loans held for sale, as compared to $14.6 million, or an annualized 0.25% of average loans, excluding loans held for sale, in the first nine months of 2020. Net charge-offs in the first nine months of 2021 were attributable to commercial loans ($7.4 million) and commercial real estate loans ($4.8 million).

Total noninterest income for the nine months ended September 30, 2021 decreased to $29.8 million from $35.8 million for the same period in 2020, a 17% decrease. Gain on sale of loans for the nine months ended September 30, 2021 decreased to $12.0 million from $16.2 million for the same period in 2020, a 26% decrease. Residential mortgage origination and sale volume rose after a slow first quarter of 2020 and accelerated and peaked in the third quarter of 2020 based on a combination of low rates, concerns about rising rates and rising home values. This increase in mortgage volume abated at the beginning of 2021 as mortgage rates started to increase and has remained at a relatively consistent level for the first three quarters of 2021. Residential mortgage loans locked were $831.4 million for the first nine months of 2021 as compared to $1,433.3 million for the same period in 2020.

Residential lending gains for the first nine months of 2020 include $3.9 million in hedge and mark to market losses incurred during the first three quarters of 2020 that were not repeated in 2021. The 2020 losses were attributable to the Federal Reserve’s market actions negatively impacting mortgage backed securities pricing combined with sharp declines in servicing right valuations associated with investor uncertainty surrounding COVID-19 at the end of March 2020.

Other income for the nine months ended September 30, 2021 decreased to $11.0 million from $12.8 million for the nine months ended September 30, 2020, a 14% decrease. The primary decreases were in loan service fees and gain on sale of OREO. Gains on sale of investments were $2.1 million and $1.7 million for the nine months ended September 30, 2021 and 2020, respectively.

For the first nine months of 2021, the efficiency ratio was 39.8% as compared to 39.6% for the same period in 2020. Noninterest expenses totaled $109.9 million for the nine months ended September 30, 2021, as compared to $109.2 million for the same period in 2020, a 1% increase. The increase in noninterest expense is primarily from increased salaries and employee benefits, partially offset by a reduction in legal costs.

Salaries and employee benefits were $63.8 million for the nine months ended September 30, 2021, as compared to $54.3 million for the same period in 2020, an increase of $9.5 million or 18% due to payroll taxes associated with annual vesting, additional restricted stock awards granted and amortization, and higher annual incentive accruals based on performance expectations.

Legal, accounting and professional fees decreased $5.5 million for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020.

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Data processing expenses were $8.5 million for the nine months ended September 30, 2021 compared to $8.0 million for the same period in 2020, a 6% increase.

FDIC expenses were $5.59 million for the nine months ended September 30, 2021 compared to $5.56 million for the same period in 2020, a 0.5% increase.

Other expenses were $9.5 million for the nine months ended September 30, 2021 compared to $11.8 million over the same period ended September 30, 2020, a 19% decrease.

The reasons for the noninterest expense results described above are further discussed in the “Noninterest Expense” section.

Income tax expenses were $46 million for the nine months ended September 30, 2021 an increase of 45%, compared to the same period in 2020. The components and drivers of the change are discussed in the "Income Tax Expense" section below.

The ratio of common equity to total assets increased to 11.49% at September 30, 2021 from 11.16% at December 31, 2020 as the increase in common equity (from earnings of $135.1 million, reduced by dividends of $31.9 million and stock purchases of $677 thousand), for the nine months ended September 30, 2021, outweighed the increase in assets increased over that same period. The earnings are is discussed in the “Earnings Summary” above. As discussed later in “Capital Resources and Adequacy,” the regulatory capital ratios of the Bank and Company remain above well capitalized levels.

Net Interest Income and Net Interest Margin

Net interest income is the difference between interest income on earning assets and the cost of funds supporting those assets. Earning assets are composed primarily of loans, investment securities, and interest bearing deposits with other banks and other short term investments. The cost of funds represents interest expense on deposits, customer repurchase agreements and other borrowings. Noninterest bearing deposits and capital are other components representing funding sources (refer to discussion above under Results of Operations). Changes in the volume and mix of assets and funding sources, along with the changes in yields earned and rates paid, determine changes in net interest income.

Net interest income was $79.0 million for the three months ended September 30, 2021, unchanged from the $79.0 million for the same period in 2020. Net interest income was flat due to a 13% increase in average earnings assets, offset by a corresponding decline in net interest margin, when comparing the three months ended September 30, 2020 with the same period in 2021. Additionally, the PPP loans had an average yield of 6.69% (includes fee acceleration from the forgiveness process) for the three months ended September 30, 2021, which positively impacted the overall yield of the total loan portfolio by approximately 5 basis points.

For the nine months ended September 30, 2021, net interest income increased by $6.2 million, which reflects earnings on a higher level of average earnings assets and $4.7 million of accelerated interest income from the PPP sale in the second quarter of 2021. Additionally, the PPP loans had an average yield of 6.22% (includes fee acceleration from the forgiveness process) for the nine months ended September 30, 2021, which positively impacted the overall yield of the total loan portfolio by approximately 7 basis points.

The net interest margin was 2.91% for the nine months ended September 30, 2021 and 3.27% for the same period in 2020. The decline reflects the impact of lower rates on increased cash and securities balances and loans balances representing a lower percentage of earning assets, partially offset by the accelerated interest income from the PPP sale.

In the first nine months of 2021 as compared to the same period in 2020, average U.S. Treasury rates in the two to five year range decreased by approximately 10 basis points and the average yield curve steepened as the average two to ten year spread went from an average of 43 basis points to an average of 124 basis points. The Company experienced 36 basis points of net interest margin compression between the first nine months of 2020 as compared to the first nine months of 2021 (from 3.27% to 2.91%). In addition, our cost of funds declined 37 basis points (from 0.75% to 0.38%), while the yield on earning assets declined by 73 basis points (from 4.02% to 3.29%). Average liquidity was $2.7 billion for the third quarter of 2021 and $1.3 billion for the third quarter of 2020. The yield on our loan assets was negatively impacted by the low interest rate environment in the first three quarters of 2021 as legacy fixed rate loans originated in higher rate eras matured and paid off or were prepaid off. A substantial portion of the variable rate loan portfolio has interest rate floors that cushioned the decline in loan yields.

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Average earning asset yields decreased 73 basis points to 3.29% for the nine months ended September 30, 2021, as compared to 4.02% for the same period in 2020. The average cost of interest bearing liabilities decreased by 56 basis points (to 0.61% from 1.17%) for the nine months ended September 30, 2021 as compared to the same period in 2020. Combining the change in the yield on earning assets and the costs of interest bearing liabilities, the net interest spread decreased by 17 basis points for the nine months ended September 30, 2021 as compared to 2020 (2.85% as compared to 2.68%).

The tables below presents the average balances and rates of the major categories of the Company’s assets and liabilities for the three months ended September 30, 2021 and 2020 and also the nine months ended September 30, 2021 and 2020. Included in the tables are measurements of interest rate spread and margin. Interest rate spread is the difference (expressed as a percentage) between the interest rate earned on earning assets less the interest rate paid on interest bearing liabilities. While the interest rate spread provides a quick comparison of earnings rates versus cost of funds, management believes that margin, together with net interest income, provides a better measurement of performance. The net interest margin (as compared to net interest spread) includes the effect of noninterest bearing sources in its calculation. Net interest margin is net interest income expressed as a percentage of average earning assets.

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Eagle Bancorp, Inc.

Consolidated Average Balances, Interest Yields And Rates (Unaudited)

(dollars in thousands)

	Three Months Ended September 30,
	2021						2020
	Average Balance		Interest		Average Yield/Rate		Average Balance		Interest		Average Yield/Rate
ASSETS
Interest earning assets:
Interest bearing deposits with other banks and other short-term investments	$	2,668,265	$	1,083	0.16	%	$	1,275,932	$	384	0.12	%
Loans held for sale (1)	56,866		642		4.52	%	79,354		567		2.86	%
Loans (1) (2)	7,055,621		81,540		4.59	%	7,910,260		88,730		4.46	%
Investment securities available for sale (2)	1,670,723		5,877		1.40	%	906,990		4,141		1.82	%
Federal funds sold	34,805		10		0.11	%	33,403		11		0.13	%
Total interest earning assets	11,486,280		89,152		3.08	%	10,205,939		93,833		3.66	%
Total noninterest earning assets	432,215						376,681
Less: allowance for credit losses	92,169						109,025
Total noninterest earning assets	340,046						267,656
TOTAL ASSETS	$	11,826,326					$	10,473,595
LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest bearing liabilities:
Interest bearing transaction	$	842,086	$	402	0.19	%	$	756,005	$	483	0.25	%
Savings and money market	4,971,866		3,645		0.29	%	3,998,603		4,929		0.49	%
Time deposits	763,513		2,543		1.32	%	1,112,664		5,583		2.00	%
Total interest bearing deposits	6,577,465		6,590		0.40	%	5,867,272		10,995		0.75	%
Customer repurchase agreements	27,348		14		0.20	%	28,523		84		1.17	%
Other short-term borrowings	300,003		506		0.67	%	300,003		505		0.66	%
Long-term borrowings	121,346		2,997		9.88	%	267,946		3,211		4.69	%
Total interest bearing liabilities	7,026,162		10,107		0.57	%	6,463,744		14,795		0.91	%
Noninterest bearing liabilities:
Noninterest bearing demand	3,370,649						2,724,640
Other liabilities	98,493						74,066
Total noninterest bearing liabilities	3,469,142						2,798,706
Shareholders’ Equity	1,331,022						1,211,145
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	11,826,326					$	10,473,595
Net interest income			$	79,045					$	79,038
Net interest spread					2.51	%					2.75	%
Net interest margin					2.73	%					3.08	%
Cost of funds					0.35	%					0.58	%

(1)Loans placed on nonaccrual status are included in average balances. Net loan fees and late charges included in interest income on loans totaled $6.3 million and $5.4 million for the three months ended September 30, 2021 and 2020, respectively.

(2)Interest and fees on loans and investments exclude tax equivalent adjustments.

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	Nine Months Ended September 30,
	2021						2020
	Average Balance		Interest		Average Yield/Rate		Average Balance		Interest		Average Yield/Rate
ASSETS
Interest earning assets:
Interest bearing deposits with other banks and other short-term investments	$	2,288,660	$	2,239	0.13	%	$	990,051	$	2,104	0.28	%
Loans held for sale (1)	79,264		1,936		3.26	%	66,158		1,605		3.23	%
Loans (1) (2)	7,385,733		258,188		4.67	%	7,859,188		277,374		4.71	%
Investment securities available for sale (2)	1,506,996		15,878		1.41	%	865,484		14,139		2.18	%
Federal funds sold	32,146		25		0.10	%	33,424		84		0.34	%
Total interest earning assets	11,292,799		278,266		3.29	%	9,814,305		295,306		4.02	%
Total noninterest earning assets	408,167						368,974
Less: allowance for credit losses	100,756						99,198
Total noninterest earning assets	307,411						269,776
TOTAL ASSETS	$	11,600,210					$	10,084,081
LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest bearing liabilities:
Interest bearing transaction	$	819,033	$	1,217	0.20	%	$	787,434	$	2,679	0.45	%
Savings and money market	4,842,621		11,312		0.31	%	3,751,397		21,619		0.77	%
Time deposits	826,790		8,759		1.42	%	1,199,654		19,757		2.20	%
Total interest bearing deposits	6,488,444		21,288		0.44	%	5,738,485		44,055		1.03	%
Customer repurchase agreements	22,240		34		0.20	%	29,710		257		1.16	%
Other short-term borrowings	300,003		1,502		0.67	%	273,452		1,363		0.66	%
Long-term borrowings	197,090		9,114		6.17	%	257,265		9,486		4.84	%
Total interest bearing liabilities	7,007,777		31,938		0.61	%	6,298,912		55,161		1.17	%
Noninterest bearing liabilities:
Noninterest bearing demand	3,206,250						2,519,867
Other liabilities	93,960						71,314
Total noninterest bearing liabilities	3,300,210						2,591,181
Shareholders’ Equity	1,292,223						1,193,988
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	11,600,210					$	10,084,081
Net interest income			$	246,328					$	240,145
Net interest spread					2.68	%					2.85	%
Net interest margin					2.91	%					3.27	%
Cost of funds					0.38	%					0.75	%

(1)Loans placed on nonaccrual status are included in average balances. Net loan fees and late charges included in interest income on loans totaled $26.3 million and $16.1 million for the nine months ended September 30, 2021 and 2020, respectively.

(2)Interest and fees on loans and investments exclude tax equivalent adjustments.

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Provision for Credit Losses

The provision for credit losses represents the amount of expense charged to current earnings to fund the ACL on loans and the ACL on available for sale investment securities. The amount of the allowance for credit losses on loans is based on many factors that reflect management’s assessment of the risk in the loan portfolio. Those factors include historical losses based on internal and peer data, economic conditions and trends, the value and adequacy of collateral, volume and mix of the portfolio, performance of the portfolio, and internal loan processes of the Company and Bank.

The provision for unfunded commitments is presented separately on the Statement of Income. This provision considers the probability that unfunded commitments will fund among other factors.

Management has developed a comprehensive analytical process to monitor the adequacy of the allowance for credit losses. The process and guidelines were developed utilizing, among other factors, the guidance from federal banking regulatory agencies, relevant available information, from internal and external sources, relating to past events, current conditions and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, loan concentrations, credit quality, or term as well as for changes in environmental conditions, such as changes in unemployment rates, property values or other relevant factors. Refer to additional detail regarding these forecasts in the “Allowance for Credit Losses - Loans" section of Note 1 to the Consolidated Financial Statements.

The results of this process, in combination with conclusions of the Bank’s outside consultants’ review of the risk inherent in the loan portfolio, support management’s assessment as to the adequacy of the allowance at the balance sheet date. Please refer to the discussion under “Critical Accounting Policies” above and in Note 1 to the Consolidated Financial Statements for an overview of the methodology management employs on a quarterly basis to assess the adequacy of the allowance and the provisions charged to expense. Also, refer to the table on the next page which reflects activity in the allowance for credit losses.

During the three months ended September 30, 2021, the ACL on loans reflected a reversal of $8.3 million in the provision and $1.3 million in net charge-offs, which were attributable primarily to one commercial loan with a balance of $1 million. The provision for credit losses on loans for the same period in 2020 was $6.6 million. The high level of provisioning in the third quarter of 2020 was primarily due to the impact of COVID-19 on our actual and expected future credit losses. The reversal in the third quarter of 2021 was primarily driven by the decline in loans, improvement in credit quality, and improvement and adjustments in qualitative and environmental factors. Net charge-offs for the three months ended September 30, 2021, represented an annualized 0.08% of average loans, excluding loans held for sale, as compared to $5.2 million, or an annualized 0.26% of average loans, excluding loans held for sale, for the same period in 2020.

During the nine months ended September 30, 2021, the ACL on loans reflected a reversal of $14.5 million in the provision, and $12.2 million in net charge-offs during the period. The provision for credit losses on loans was $40.7 million for the nine months ended September 30, 2020. Net charge-offs in the first nine months of 2021 represented an annualized 0.22% of average loans, excluding loans held for sale, as compared to $14.6 million, or an annualized 0.25% of average loans, excluding loans held for sale, in the first nine months of 2020.

As part of its comprehensive loan review process, internal loan and credit committees carefully evaluate loans that are past-due 30 days or more. The Committees make a thorough assessment of the conditions and circumstances surrounding each delinquent loan. The Bank’s loan policy requires that loans be placed on nonaccrual if they are 90 days past-due, unless they are well secured and in the process of collection. Additionally, Credit Administration specifically analyzes the status of development and construction projects, sales activities and utilization of interest reserves in order to carefully and prudently assess potential increased levels of risk requiring additional reserves.

The maintenance of a high quality loan portfolio, with an adequate allowance for credit losses, will continue to be a primary management objective for the Company. The Company’s goal is to mitigate risks in the event of unforeseen threats to the loan portfolio as a result of economic downturn or other negative influences. Plans for mitigating inherent risks in managing loan assets include carefully enforcing loan policies and procedures, evaluating each borrower’s business plan during the underwriting process and throughout the loan term, identifying and monitoring primary and alternative sources for loan repayment, and obtaining collateral to mitigate economic loss in the event of liquidation.

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The following table sets forth activity in the allowance for credit losses for the periods indicated.

	Nine Months Ended September 30,
(dollars in thousands)	2021			2020
Balance at beginning of period	$	109,579		$	73,658
Impact of adopting CECL	—			10,614
Charge-offs:
Commercial	7,691			7,332
Income producing - commercial real estate	5,216			4,300
Owner occupied - commercial real estate	—			20
Real estate mortgage - residential	—			—
Construction - commercial and residential	206			2,947
Construction - C&I (owner occupied)	—			—
Home equity	—			92
Other consumer	1			—
Total charge-offs	13,114			14,691
Recoveries:
Commercial	326			116
Income producing - commercial real estate	97			—
Owner occupied - commercial real estate	—			—
Real estate mortgage - residential	—			—
Construction - commercial and residential	499			—
Construction - C&I (owner occupied)	—			—
Home equity	—			—
Other consumer	17			20
Total recoveries	939			136
Net charge-offs	12,175			14,555
Provision for Credit Losses- Loans	(14,498)			40,498
Balance at end of period	$	82,906		$	110,215
Annualized ratio of net charge-offs during the period to average loans outstanding during the period	0.22		%	0.25		%

The following table reflects the allocation of the allowance for credit losses at the dates indicated. The allocation of the allowance to each category is not necessarily indicative of future losses or charge-offs and does not restrict the use of the allowance to absorb losses in any category.

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	September 30, 2021						December 31, 2020
(dollars in thousands)	ACL - Loans		% of Total ACL		% of Total Loans		ACL - Loans		% of Total ACL		% of Total Loans
Commercial	$	16,927	20	%	19	%	$	26,569	24	%	19	%
PPP loans	—		—	%	1	%	—		—	%	6	%
Income producing - commercial real estate	41,431		51	%	49	%	55,385		51	%	47	%
Owner occupied - commercial real estate	11,945		14	%	14	%	14,000		13	%	13	%
Real estate mortgage - residential	1,054		1	%	1	%	1,020		1	%	1	%
Construction - commercial and residential	7,613		9	%	12	%	9,092		8	%	11	%
Construction - C&I (owner occupied)	3,128		4	%	3	%	2,437		2	%	2	%
Home equity	768		1	%	1	%	1,039		1	%	1	%
Other consumer	40		—	%	—	%	37		—	%	—	%
Total allowance	$	82,906	100	%	100	%	$	109,579	100	%	100	%

Nonperforming Assets

As shown in the table below, the Company’s level of nonperforming assets, which is comprised of loans delinquent 90 days or more, and nonaccrual loans, which includes the nonperforming portion of TDRs and OREO, totaled $36.4 million at September 30, 2021 representing 0.31% of total assets, as compared to $65.9 million of nonperforming assets, or 0.59% of total assets, at December 31, 2020.

At September 30, 2021, the Company had no accruing loans 90 days or more past due. Management remains attentive to early signs of deterioration in borrowers’ financial conditions and to taking the appropriate action to mitigate risk. Furthermore, the Company is diligent in placing loans on nonaccrual status and believes, based on its loan portfolio risk analysis, that its allowance for credit losses, at 1.21% of total loans at September 30, 2021, is adequate to absorb expected credit losses within the loan portfolio at that date.

CECL allows for institutions to evaluate individual loans in the event that the asset does not share similar risk characteristics with its original segmentation. This can occur due to credit deterioration, increased collateral dependency or other factors leading to impairment. In particular, the Company individually evaluates loans on nonaccrual status and those identified as TDRs, though it may individually evaluate other loans or groups of loans as well if it determines they no longer share similar risk with their assigned segment. Reserves on individually assessed loans are determined by one of two methods: the fair value of collateral or the discounted cash flow. Fair value of collateral is used for loans determined to be collateral dependent, and the fair value represents the net realizable value of the collateral, adjusted for sales costs, commissions, senior liens, etc. The continuing payments are discounted over the expected life at the loan’s original contract rate and include adjustments for risk of default.

Loans are considered to have been modified in a TDR when, due to a borrower's financial difficulties, the Company makes unilateral concessions to the borrower that it would not otherwise consider. Concessions could include interest rate reductions, principal or interest forgiveness, forbearance, and other actions intended to minimize economic loss and to avoid foreclosure or repossession of collateral. Alternatively, management, from time-to-time and in the ordinary course of business, implements renewals, modifications, extensions, and/or changes in terms of loans to borrowers who have the ability to repay on reasonable market-based terms, as circumstances may warrant. Such modifications are not considered to be TDRs, as the accommodation of a borrower's request does not rise to the level of a concession if the modified transaction is at market rates and terms and/or the borrower is not experiencing financial difficulty. For example: (1) adverse weather conditions may create a short term cash flow issue for an otherwise profitable retail business that suggests a temporary interest-only period on an amortizing loan; (2) there may be delays in absorption on a real estate project that reasonably suggests extension of the loan maturity at market terms; or (3) there may be maturing loans to borrowers with demonstrated repayment ability who are not in a position at the time of maturity to obtain alternate long-term financing. The determination of whether a restructured loan is a TDR requires consideration of all of the facts and circumstances surrounding the change in terms, and the exercise of prudent business judgment.

The Company had seven TDRs at September 30, 2021 totaling approximately $16.5 million. Five of these loans totaling approximately $10.2 million are performing under their modified terms. In the first nine months of 2020, two

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performing TDR loans, with a balance of $6.3 million, defaulted on its modified terms and was placed on nonaccrual status. A default is considered to have occurred once the TDR is past due 90 days or more or it has been placed on nonaccrual. Commercial and consumer loans modified in a TDR are closely monitored for delinquency as an early indicator of possible future default. If loans modified in a TDR subsequently default, the Company evaluates the loan for possible further impairment. The allowance may be increased, adjustments may be made in the allocation of the allowance, or partial charge-offs may be taken to further write-down the carrying value of the loan. For both the nine months ended September 30, 2021 and 2020, there were no loans modified in a TDR.

There is uncertainty regarding the region’s overall economic outlook given lack of clarity over how long COVID-19 will continue to impact our region. Management has been working with customers on payment deferrals to assist companies in managing through this crisis. Some of these deferrals may have met the criteria for treatment under GAAP as TDRs. As of September 30, 2021, we had ongoing temporary modifications on approximately 6 loans representing approximately $70 million (approximately 1.0% of total loans) in outstanding balances, as compared to 36 loans representing approximately $72 million (approximately 0.9% of total loans) at December 31, 2020. Additionally, none of the deferrals are reflected in the Company’s asset quality measures (i.e. non-performing loans) due to the provision of the CARES Act that permits U.S. financial institutions to temporarily suspend the GAAP requirements to treat such short-term loan modifications as TDRs. Similar provisions have also been confirmed by interagency guidance issued by the federal banking agencies and confirmed with staff members of the Financial Accounting Standards Board.

Total nonperforming loans amounted to $31.2 million at September 30, 2021 (0.46% of total loans) compared to $60.9 million at December 31, 2020 (0.79% of total loans).

Included in nonperforming assets are OREO properties, which at September 30, 2021 was $5.1 million for five foreclosed properties. As of December 31, 2020, OREO was $5.0 million.

OREO properties are carried at fair value less estimated costs to sell. It is the Company's policy to obtain third party appraisals prior to foreclosure, and to obtain updated third party appraisals on OREO properties generally not less frequently than annually. Generally, the Company would obtain updated appraisals or evaluations where it has reason to believe, based upon market indications (such as comparable sales, legitimate offers below carrying value, broker indications and similar factors), that the current appraisal does not accurately reflect current value. There were no sales of an OREO property during the first nine months of 2021 or 2020.

The following table shows the amounts of nonperforming assets at the dates indicated for September 30, 2021.

(dollars in thousands)	September 30, 2021			December 31, 2020
Nonaccrual Loans:
Commercial	$	12,147		$	15,352
Income producing - commercial real estate	14,933			18,879
Owner occupied - commercial real estate	1,593			23,158
Real estate mortgage - residential	2,018			2,932
Construction - commercial and residential	—			206
Construction - C&I (owner occupied)	—			—
Home equity	556			416
Other consumer	—			—
Accruing loans-past due 90 days	—			—
Total nonperforming loans (1)	31,247			60,943
Other real estate owned	5,135			4,987
Total nonperforming assets	$	36,382		$	65,930
Coverage ratio, allowance for credit losses to total nonperforming loans	265.32		%	179.80		%
Ratio of nonperforming loans to total loans	0.46		%	0.79		%
Ratio of nonperforming assets to total assets	0.31		%	0.59		%

________________________________________________________

(1)Nonaccrual loans reported in the table above do not include loans that migrated from a performing TDR status during the period. During the nine months ended September 30, 2021, there were no loans that migrated from a performing TDR

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status. During the nine months ended September 30, 2020 there were two loans totaling $6.3 million that migrated from a performing TDR.

Significant variation in the amount of nonperforming loans may occur from period to period because the amount of nonperforming loans depends largely on the condition of a relatively small number of individual credits and borrowers relative to the total loan portfolio.

At September 30, 2021, there were $87.9 million of performing loans considered to be potential problem loans, defined as loans that are not included in the 90 days past due, nonaccrual or restructured categories, but for which known information about possible credit problems causes management to be uncertain as to the ability of the borrowers to comply with the present loan repayment terms, which may in the future result in disclosure in the past due, nonaccrual or restructured loan categories. Potential problem loans were $91.2 million at December 31, 2020. The Company has taken a conservative yet proactive approach with respect to risk rating its loan portfolio. Based upon their status as potential problem loans, these loans receive heightened scrutiny and ongoing intensive risk management.

Noninterest Income

Total noninterest income includes service charges on deposits, gain on sale of loans, gain on sale of investment securities, income from bank owned life insurance (“BOLI”) and other income.

Total noninterest income for the three months ended September 30, 2021 decreased to $8.3 million from $17.8 million for the three months ended September 30, 2020, a 53% decrease. Gain on sale of loans for the three months ended September 30, 2021 decreased to $3.3 million from $12.2 million for the three months ended September 30, 2020, a 73% decrease; a decrease in gains on the sale of residential mortgage comprised the entire $8.9 million difference between the two periods. Residential mortgage loan locked commitments were $280 million for the three months ended September 30, 2021 as compared to $593 million for the same period in 2020.

The decision whether to sell residential mortgage loans on a mandatory or best efforts lock basis is a function of multiple factors, including but not limited to overall market volumes of mortgage loan originations, forecasted “pull-through” rates of origination, loan underwriting and closing operational considerations, pricing differentials between the two methods, and availability and pricing of various interest rate hedging strategies associated with the mortgage origination pipeline. The Company continually monitors these factors to maximize profitability and minimize operational and interest rate risks.

Other income for the three months ended September 30, 2021 decreased to $1.6 million from $4.0 million for the three months ended September 30, 2020, a 60% decrease.

Service charges on deposits for the three months ended September 30, 2021 increased to $1.2 million from $1.1 million for the three months ended September 30, 2020, a 13% increase, due to an increase in deposit activity.

Gain on sale of investment securities were $1.5 million for the three months ended September 30, 2021 compared to $115 thousand for the same period in 2020.

Total noninterest income for the nine months ended September 30, 2021 decreased to $29.8 million from $35.8 million for the nine months ended September 30, 2020, a 17% decrease. Gain on sale of loans for the nine months ended September 30, 2021 decreased to $12.0 million from $16.2 million for the nine months ended September 30, 2020, a 26% decrease; the decrease was driven by lower gains on the sale of residential mortgage loans. Residential mortgage loans locked commitments were $831 million for the first nine months of 2021 as compared to $1.43 billion for the first nine months of 2020. Service charges on deposits for the nine months ended September 30, 2021 decreased to $3.3 million from $3.4 million for the nine months ended September 30, 2020, a 4% decrease.

Residential lending gains for the first nine months of 2020 include $3.9 million in hedge and mark to market losses incurred during the first three quarters of 2020 that were not repeated in 2021. The 2020 losses were attributable to the Federal Reserve’s market actions negatively impacting mortgage backed securities pricing combined with sharp declines in servicing right valuations associated with investor uncertainty surrounding COVID-19 at the end of March 2020.

Other income for the nine months ended September 30, 2021 decreased to $11.0 million from $12.8 million for the nine months ended September 30, 2020, a 14% decrease. The primary decreases were in loan service fees and gain on sale of OREO.

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Gains on sale of investments were $2.1 million and $1.7 million for the nine months ended September 30, 2021 and 2020, respectively.

Servicing agreements relating to the Ginnie Mae mortgage-backed securities program require the Company to advance funds to make scheduled payments of principal, interest, taxes and insurance, if such payments have not been received from the borrowers. The Company will generally recover funds advanced pursuant to these arrangements under the FHA insurance and guarantee program. However, in the interim, the Company must absorb the cost of the funds it advances during the time the advance is outstanding. The Company must also bear the costs of attempting to collect on delinquent and defaulted mortgage loans. In addition, if a defaulted loan is not cured, the mortgage loan would be canceled as part of the foreclosure proceedings and the Company would not receive any future servicing income with respect to that loan. At September 30, 2021, the Company had eight loans outstanding under FHA mortgage loan servicing agreements for a total of $218.5 million. To the extent the mortgage loans underlying the Company’s servicing portfolio experience delinquencies, the Company would be required to dedicate cash resources to comply with its obligation to advance funds as well as incur additional administrative costs related to increases in collection efforts.

The Company originates residential mortgage loans and, pending market conditions and other factors outlined above, may utilize either or both "mandatory delivery" and “best efforts” forward loan sale commitments to sell those loans, servicing released. Loans sold are subject to repurchase in circumstances where documentation is deficient, the underlying loan becomes delinquent, or there is fraud by the borrower. Loans sold are subject to penalty if the loan pays off within a specified period following loan funding and sale. The Bank considers these potential recourse provisions to be a minimal risk, but has established a reserve under GAAP for possible repurchases. There were no repurchases due to fraud by the borrower during the nine months ended September 30, 2021. The reserve amounted to $89 thousand at September 30, 2021 and is included in other liabilities on the Consolidated Balance Sheets.

Beyond the participation in the PPP program, the Company is an originator of SBA loans and its practice is to sell the guaranteed portion of those loans at a premium. There was $232 thousand of income from this source for the nine months ended September 30, 2021 compared to $288 thousand for the same period in 2020. Activity in SBA loan sales to secondary markets can vary widely from quarter to quarter. See "Note 1: Summary of Significant Accounting Policies" for details regarding the Company’s participation in the PPP program.

Noninterest Expense

Total noninterest expense includes salaries and employee benefits, premises and equipment expenses, marketing and advertising, data processing, legal, accounting and professional, FDIC insurance, and other expenses.

Total noninterest expenses totaled $36.4 million for the three months ended September 30, 2021, as compared to $36.9 million for the three months ended September 30, 2020, a 1.5% decrease. Total noninterest expenses totaled $109.9 million for the nine months ended September 30, 2021, as compared to $109.2 million for the nine months ended September 30, 2020, a 0.6% increase due substantially to the following:

Salaries and employee benefits were $22.1 million for the three months ended September 30, 2021, as compared to $19.4 million for the same period in 2020, an increase of $2.8 million or 14%. Salaries and employee benefits were $63.8 million for the nine months ended September 30, 2021, as compared to $54.3 million for the same period in 2020, an increase of $9.5 million or 18%. For both the three month and nine month periods, the increase was due to increased incentive bonus accruals based on economic outlook in 2021 (continued reopening of economy) compared to accruals in the third quarter of 2020 (continuation of the COVID-19 pandemic), and an increase in share based compensation. At September 30, 2021, the Company’s full time equivalent staff numbered 509 as compared to 515 at September 30, 2020.

Premises and equipment for the three months ended September 30, 2021 and 2020, respectively, were $3.9 million, of which $3.2 million were premise expenses, and $5.1 million, of which $4.4 million were premises expenses. Premises and equipment expenses were $11.1 million for the nine months ended September 30, 2021, of which $9.3 million were premises expenses. For the nine months ended September 30, 2020 premises and equipment expenses were $12.4 million, of which $10.3 million were premises expenses. For the nine months ended September 30, 2021, the Company recognized $291 thousand of sublease revenue as compared to $261 thousand for the same period in 2020. Sublease revenue is accounted for as a reduction to premises and equipment expenses.

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Marketing and advertising expenses totaled $1.0 million for the three months ended September 30, 2021 and $928 thousand for the same period in 2020. Marketing and advertising expenses totaled $2.9 million for the nine months ended September 30, 2021 and $3.1 million for the same period in 2020. The decrease was due to lower advertising, promotions and sponsorships.

Data processing expenses were $2.9 million for the three months ended September 30, 2021 compared to $2.7 million for the same period in 2020. Data processing expense increased to $8.5 million for the nine months ended September 30, 2021 from $8.0 million for the same period in 2020, a 6% increase. The increase, which took place in the first quarter of 2021 was related to an increase in licensing fees.

Legal, accounting and professional fees were $2.0 million for the three months ended September 30, 2021, compared to $3.1 million for the three months ended September 30, 2020, a decrease of $1.1 million. Legal fees and expenditures were $357 thousand and $1.8 million for the three months ended September 30, 2021 and 2020, respectively, and were primarily associated with previously disclosed ongoing governmental investigations and related subpoenas and document requests, as well as our defense of the previously disclosed class action lawsuit. Legal, accounting and professional fees for the nine months ended September 30, 2021 were $8.5 million compared to $14.1 million for the nine months ended September 30, 2020, a decrease of $5.5 million, primarily due to higher legal fees in 2020 versus the same period in 2021. The amount of legal fees and expenditures reported for the three months ended September 30, 2021 are net of expected insurance coverage where we believe we have a high likelihood of recovery pursuant to our D&O insurance policies but does not include any offset for potential claims we may have in the future as to which recovery is impossible to predict at this time. See Part II, Item 1 - "Legal Proceedings" for more information.

FDIC expenses were $1.5 million for the three months ended September 30, 2021 compared to $2.2 million for the same period in 2020, a 28% decrease. FDIC expenses were $5.59 million for the nine months ended September 30, 2021 compared to $5.56 million for the same period in 2020, a 0.5% increase. The increase for the first nine months of 2021 compared to the same period in 2020 were due to a higher deposit base, offset by improved metrics used in the calculation of fees.

The major components of other expenses include broker fees, franchise taxes, director compensation and insurance expense. Other expenses decreased to $2.9 million for the three months ended September 30, 2021 from $3.5 million for the same period in 2020, an 18% decrease. Other expenses decreased to $9.5 million for the nine months ended September 30, 2021 from $11.8 million for the same period September 30, 2020, a 19% decrease, due primarily to lower broker fees and lower OREO expense, partially offset by higher real estate taxes-utilities.

The efficiency ratio, which measures the ratio of noninterest expense to total revenue, was 41.6% for the third quarter of 2021, as compared to 38.1% for the third quarter of 2020. For the first nine months of 2021, the efficiency ratio was 39.8% as compared to 39.6% for the same period in 2020. The increase in the third quarter of 2021 over the third quarter of 2020 was primarily due to an decrease in noninterest income.

As a percentage of average assets, total noninterest expense (annualized) was 1.23% for the three months ended September 30, 2021 as compared to 1.41% for the same period in 2020. As a percentage of average assets, total noninterest expense (annualized) was 1.26% for the nine months ended September 30, 2021 as compared to 1.44% for the same period in 2020.

Income Tax Expense

The Company’s ratio of income tax expense to pre-tax income (“effective tax rate”) for the three months ended September 30, 2021 and 2020 was 25.4%. The total tax provision for the three months ended September 30, 2021 was $14.8 million, compared to $14.1 million for the three months ended September 30, 2020. The effective income tax rate for the nine months ended September 30, 2021 and 2020 was 25.4%. The total tax provision for the nine months ended September 30, 2021 was $46.1 million, compared to $31.8 million for the nine months ended September 30, 2020. The Company's earnings increased for the three and nine months ended September 30, 2021 with a corresponding increase to disallowed expenses giving rise to no incremental change to the effective tax rate.The Company has not recorded any liabilities for uncertain tax positions as of September 30, 2021. The Company remains subject to periodic audits and reviews by the taxing authorities, and the Company’s returns for the years 2018-2020 remain open for examination.

FINANCIAL CONDITION

Summary

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Total assets at September 30, 2021 was $11.6 billion and at December 31, 2020 was $11.1 billion . The largest component of assets, total loans (excluding loans held for sale), were $6.9 billion at September 30, 2021, as compared to $7.8 billion at December 31, 2020, an 11.7% decrease. The decrease in loans over the nine months ended September 30, 2021, was driven by the successful completion of projects, and at the outset of the COVID-19 pandemic, our focus on serving existing loan clients and maintaining credit quality. More recently, in the second and third quarters of 2021, the decline in loans also has been influenced by the competition to refinance at lower rates for longer amortization periods, and excess liquidity at competing banks as well as many companies and construction project sponsors. Additionally, the Bank reduced its PPP loans from $565 million at March 31, 2021 to $67 million at September 30, 2021 though the forgiveness process and loan sales.

Loans held for sale amounted to $53.4 million at September 30, 2021 compared to $88.2 million at December 31, 2020, a 39.4% decrease. The investment portfolio totaled $1.8 billion at September 30, 2021 as compared to $1.2 billion at December 31, 2020, an increase of 55.2%, primarily due to the deployment of cash from deposit inflows into investments.

Total deposits at September 30, 2021 were $9.7 billion and at December 31, 2020 were $9.2 billion. We continue to work on expanding the breadth and depth of our existing relationships while we pursue building new relationships. Total borrowed funds (excluding customer repurchase agreements) were $369.6 million at September 30, 2021, as compared to $568.1 million at December 31, 2020.

Total shareholders’ equity was $1.33 billion as of September 30, 2021 compared to $1.24 billion as of December 31, 2020, an increase of $90.8 million. This increase was primarily from earnings of $135.1 million and $5.8 million in additional paid-in capital associated with share-based compensation, offset by $17.8 million in unrealized losses on AFS securities (net of taxes), $31.9 million in dividends declared and $677 thousand of stock repurchases, .

The Company’s capital ratios remain substantially in excess of regulatory minimum and buffer requirements, with a total risk based capital ratio of 16.59% at September 30, 2021, as compared to 17.04% at December 31, 2020, common equity tier 1 (“CET1”) risk based capital was 15.33% at September 30, 2021 compared to 13.49% at December 31, 2020, tier 1 risk based capital ratios of 15.33% at September 30, 2021, as compared to 13.49% at December 31, 2020, and a tier 1 leverage ratio of 10.58% at September 30, 2021, as compared to 10.31% at December 31, 2020.

The ratio of common equity to total assets was 11.49% at September 30, 2021, as compared to 11.16% at December 31, 2020. Book value per share was $41.68 at September 30, 2021, a 6.7% increase over $39.05 at December 31, 2020. In addition, the tangible common equity ratio was 10.68% at September 30, 2021, as compared to 10.31% at December 31, 2020. Tangible book value per share was $38.39 at September 30, 2021, a 7.4% increase over $35.74 at December 31, 2020. Refer to the “Use of Non-GAAP Financial Measures” section for additional detail and a reconciliation of GAAP to non-GAAP financial measures.

In order to be considered well-capitalized, the Bank must have a CET1 risk based capital ratio of 6.5%, a Tier 1 risk-based ratio of 8.0%, a total risk-based capital ratio of 10.0% and a leverage ratio of 5.0%. The Company and the Bank exceed all these requirements and satisfy the capital conservation buffer of 2.5% of CET1 capital required to engage in capital distribution. Failure to maintain the required capital conservation buffer would limit the ability of the Company and the Bank to pay dividends, repurchase shares or pay discretionary bonuses.

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Loans, net of amortized deferred fees and costs, at September 30, 2021 and December 31, 2020 by major category are summarized below.

	September 30, 2021				December 31, 2020
(dollars in thousands)	Amount		%		Amount		%
Commercial	$	1,289,215	19	%	$	1,437,433	19	%
PPP loans	67,311		1	%	454,771		6	%
Income producing - commercial real estate	3,337,303		49	%	3,687,000		47	%
Owner occupied - commercial real estate	977,617		14	%	997,694		13	%
Real estate mortgage - residential	76,259		1	%	76,592		1	%
Construction - commercial and residential	824,133		12	%	873,261		11	%
Construction - C&I (owner occupied)	222,366		3	%	158,905		2	%
Home equity	55,527		1	%	73,167		1	%
Other consumer	1,132		—	%	1,389		—	%
Total loans	6,850,863		100	%	7,760,212		100	%
Less: allowance for credit losses	(82,906)				(109,579)
Net loans (1)	$	6,767,957			$	7,650,633

(1)Excludes accrued interest receivable of $40.0 million and $30.8 million at September 30, 2021 and December 31, 2020, respectively, which is recorded in other assets.

In its lending activities, the Company seeks to develop and expand relationships with clients whose businesses and individual banking needs will grow with the Bank. Superior customer service, local decision making, and accelerated turnaround time from application to closing have been significant factors in growing the loan portfolio and meeting the lending needs in the markets served, while maintaining sound asset quality.

Loans outstanding were $6.9 billion at September 30, 2021, a decrease of $909.3 million, or 11.7%, from the $7.8 billion at December 31, 2020. PPP loans outstanding were $67.3 million at September 30, 2021, a decrease of $387.5 million, from the $454.8 million at December 31, 2021. If PPP loans are excluded, loans outstanding were $6.8 billion at September 30, 2021, a decrease of $521.9 million from December 31, 2020. PPP loans accounted for approximately 42.6% total decrease in loans outstanding over the nine months ended September 30, 2021. Refer to the "Use of Non-GAAP Financial Measures" section for additional detail and a reconciliation of GAAP to non-GAAP financial measures.

Loan balances have incrementally fallen since the second quarter of 2021. The low interest rate environment and extremely competitive landscape remain factors impacting growth in our lending efforts, and the rate and amount of payoffs have increased in the third quarter. Notwithstanding an increased supply of residential (rental) units, for sale single family residential properties and multi-family commercial real estate leasing in the Bank’s market area have held up well, particularly for well-located projects close to the District of Columbia. As a general matter, there has been some softening and slow decision making relative to renewals in the office leasing market as tenants evaluate the “new normal” with respect to office occupancy. Overall, commercial real estate values have generally held up well, but we continue to be cautious of the capitalization rates at which some assets are trading and as a result we are being cautious with our valuations. Commercial loans meet reasonable underwriting standards, including appropriate collateral and cash flow necessary to support debt service. Valuations associated with the moderately priced housing market have generally been increasing, with well-located, Metro-accessible properties garnering a premium. We believe there will be more opportunities to originate loans for large commercial projects and grow the loan portfolio as economic conditions improve. The potential impact from the COVID-19 pandemic may not yet have been fully reflected in the market across all asset types. Please refer to the COVID-19 risk factor in Item 1A below.

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Loan Portfolio Exposures - COVID-19:

Industry segments within the Loan Portfolio as of September 30, 2021 that we believe may have heightened risk from the COVID-19 pandemic include:

Industry	Principal Balance (in 000’s)			% of Loan Portfolio
Accommodation & Food Services	$	623,813	(1)	9.1	%
Retail Trade	79,078		(2)	1.2	%
Commercial Real Estate exposure (not included above)
Restaurant	35,043			0.5	%
Hotel	61,150			0.9	%
Retail	376,342			5.5	%
Total	$	1,175,426		17.2	%

1 Includes $31.3 million of PPP loans.

2 Includes $64 thousand of PPP loans.

Concerns over exposures to the Accommodation and Food Service industry and Retail Trade are the most immediate at this time. Accommodation and Food Service exposure represents 9.1% of the Bank’s loan portfolio as of September 30, 2021. Retail Trade exposure represents 1.2% of the Bank’s loan portfolio. The Bank has ongoing extensive outreach to these customers and has assisted where necessary with PPP loans and payment deferrals or interest-only periods in the short term while customers work to adapt to the evolving landscape of the COVID-19 pandemic. The uncertain duration and severity of the pandemic and the timing of recovery may impact future credit challenges in these areas.

Although not evidenced at September 30, 2021, it is anticipated that some portion of the CRE loans secured by the above property types could be impacted by the tenancies associated with impacted industries. The Bank is working with CRE investor borrowers and monitoring rent collections as part of our portfolio management oversight.

Deposits and Other Borrowings

The principal sources of funds for the Bank are core deposits, consisting of demand deposits, money market accounts, NOW accounts, savings accounts and certificates of deposit. The deposit base includes transaction accounts, time and savings accounts, which customers use for cash management and which provide the Bank with a source of fee income and cross-marketing opportunities, as well as an attractive source of lower cost funds. To meet funding needs during periods of high loan demand and seasonal variations in core deposits, the Bank utilizes alternative funding sources such as secured borrowings from the Federal Home Loan Banks (the “FHLB”), federal funds purchased lines of credit from correspondent banks and brokered deposits from regional and national brokerage firms and IntraFi Network, LLC (“IntraFi”).

For the nine months ended September 30, 2021, noninterest bearing deposits increased by $27.1 million as compared to December 31, 2020, while interest bearing deposits increased by $452.2 million during the same period.

From time to time, the Bank accepts brokered time deposits, generally in denominations of less than $250 thousand, from national brokerage networks, including IntraFi. Additionally, the Bank participates in the Certificates of Deposit Account Registry Service (the “CDARS”) and the Insured Cash Sweep product (“ICS”), which provide for reciprocal (“two-way”) transactions among banks facilitated by IntraFi for the purpose of maximizing FDIC insurance. The Bank also is able to obtain one-way CDARS deposits and participates in IntraFi’s Insured Network Deposit (“IND”). At September 30, 2021, total deposits included $2.7 billion of brokered deposits (excluding the CDARS and ICS two-way) which represented 28.3% of total deposits. At December 31, 2020, total brokered deposits (excluding the CDARS and ICS two-way) were $2.4 billion, or 26.2% of total deposits. The CDARS and ICS two-way component represented $808.1 million, or 8.4%, of total deposits and $790.0 million, or 8.6%, of total deposits at September 30, 2021 and December 31, 2020, respectively. These sources are believed by the Company to represent a reliable and cost efficient alternative funding source for the Bank. However, to the extent that the condition, regulatory position or reputation of the Company or Bank deteriorates, or to the extent that there are significant

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changes in market interest rates which the Company and Bank do not elect to match, we may experience an outflow of brokered deposits. In that event, we would be required to obtain alternate sources for funding.

At September 30, 2021, the Company had $2.84 billion in noninterest bearing demand deposits, representing 29% of total deposits, compared to $2.81 billion of noninterest bearing demand deposits at December 31, 2020, or 31% of total deposits. Average noninterest bearing deposits of total deposits for the nine months ended September 30, 2021 and 2020 were 33% and 31%. The Bank also offers business NOW accounts and business savings accounts to accommodate those customers who may have excess short term cash to deploy in interest earning assets.

As an enhancement to the basic noninterest bearing demand deposit account, the Company offers a sweep account, or “customer repurchase agreement,” allowing qualifying businesses to earn interest on short-term excess funds that are not suited for either a certificate of deposit or a money market account. The balances in these accounts were $29.4 million at September 30, 2021 compared to $26.7 million at December 31, 2020. Customer repurchase agreements are not deposits and are not insured by the FDIC, but are collateralized by U.S. agency securities and/or U.S. agency backed mortgage backed securities. These accounts are particularly suitable to businesses with significant fluctuation in the levels of cash flows. Attorney and title company escrow accounts are examples of accounts which can benefit from this product, as are customers who may require collateral for deposits in excess of FDIC insurance limits but do not qualify for other pledging arrangements. This program requires the Company to maintain a sufficient investment securities level to accommodate the fluctuations in balances which may occur in these accounts.

At September 30, 2021 the Company had $751.5 million in time deposits. Time deposits decreased by $226.3 million from year end December 31, 2020. The Bank raises and renews time deposits through its branch network, for its public funds customers, and through brokered certificates of deposits ("CDs") to meet the needs of its community of savers and as part of its interest rate risk management and liquidity planning.

The Company had no outstanding balances under its federal funds lines of credit provided by correspondent banks (which are unsecured) at September 30, 2021 and December 31, 2020. At September 30, 2021 and December 31, 2020, the Company had $300 million of FHLB short-term advances borrowed as part of the overall asset liability strategy and to support loan growth. Outstanding FHLB advances are secured by collateral consisting of a blanket lien on qualifying loans in the Bank’s commercial mortgage, residential mortgage and home equity loan portfolios.

Long-term borrowings outstanding at September 30, 2021 included the Company’s August 5, 2014 issuance of $70.0 million of subordinated notes, due September 1, 2024. On August 2, 2021, the Company redeemed $150 million of subordinated debt issued on July 26, 2016. The redemption accelerated deferred financing costs of $1.3 million, which is included in interest income for the third quarter of 2021. For additional information on the subordinated notes, please refer to Notes 8 and 13 to the Consolidated Financial Statements included in this report.

Liquidity Management

Liquidity is a measure of the Company’s and Bank’s ability to meet loan demand and to satisfy depositor withdrawal requirements in an orderly manner. The Bank’s primary sources of liquidity consist of cash and cash balances due from correspondent banks, excess reserves at the Federal Reserve, loan repayments, federal funds sold and other short-term investments, maturities and sales of investment securities, income from operations and new core deposits into the Bank. The Bank’s investment portfolio of debt securities is held in an available-for-sale status which allows for flexibility, subject to holdings held as collateral for customer repurchase agreements and public funds, to generate cash from sales as needed to meet ongoing loan demand. These sources of liquidity are considered primary and are supplemented by the ability of the Company and Bank to borrow funds or issue brokered deposits, which are termed secondary sources of liquidity and which are substantial.

Additionally, the Bank can purchase up to $155 million in federal funds on an unsecured basis from its correspondents, against which there was no amount outstanding at September 30, 2021, and can obtain unsecured funds under one-way CDARS and ICS brokered deposits in the amount of $1.7 billion, against which there was $77 thousand outstanding at September 30, 2021. The Bank also has a commitment from IntraFi to place up to $1.8 billion of brokered deposits from its IND program in amounts requested by the Bank, as compared to an actual balance of $1.65 billion at September 30, 2021. At September 30, 2021, the Bank was also eligible to make advances from the FHLB up to $1.0 billion based on loans pledged as collateral to the FHLB, of which there was $300 million outstanding at September 30, 2021. The Bank may enter into repurchase agreements as well as obtain additional borrowing capabilities from the FHLB, provided adequate collateral exists to secure these lending relationships. The Bank also has a back-up borrowing facility through the Discount Window at the Federal Reserve Bank of Richmond (“Federal Reserve Bank”). This facility, which amounts to approximately $588 million, is collateralized with

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specific loan assets identified to the Federal Reserve Bank. It is anticipated that, except for periodic testing, this facility would be utilized for contingency funding only.

The loss of deposits through disintermediation is one of the greater risks to liquidity. Disintermediation occurs most commonly when rates rise and depositors withdraw deposits seeking higher rates in alternative savings and investment sources than the Bank may offer. The Bank was founded under a philosophy of relationship banking and, therefore, believes that it has less of an exposure to disintermediation and resultant liquidity concerns than do many banks. The Bank makes competitive deposit interest rate comparisons weekly and feels its interest rate offerings are competitive.

There is, however, a risk that some deposits would be lost if rates were to increase and the Bank elected not to remain competitive with its deposit rates. Under those conditions, the Bank believes that it is well positioned to use other sources of funds such as FHLB borrowings, brokered deposits, repurchase agreements and correspondent banks’ lines of credit to offset a decline in deposits in the short run. Over the long-term, an adjustment in assets and change in business emphasis could compensate for a potential loss of deposits. The Bank also maintains a marketable investment portfolio to provide flexibility in the event of significant liquidity needs. The Asset Liability Committee of the Bank (the “ALCO”) and the full Board of Directors of the Bank have adopted policy guidelines which emphasize the importance of core deposits, adequate asset liquidity and a contingency funding plan. Additionally, as noted above, if the condition, regulatory treatment or reputation of the Company or Bank deteriorates, we may experience an outflow of brokered deposits as a result of our inability to attract them or to accept or renew them. In that event, we would be required to obtain alternate sources for funding.

Our primary and secondary sources of liquidity remain strong. Average deposits increased 17.4% for the first nine months of 2021 as compared to the same period in 2020. However, we still maintain a very liquid investment portfolio, including significant overnight liquidity. In the third quarter of 2021, average short term liquidity was $2.7 billion, which is above EagleBank’s average needs, and secondary sources of liquidity at September 30, 2021 were $2.9 billion.

At September 30, 2021, under the Bank’s liquidity formula, it had $6.6 billion of primary and secondary liquidity sources. The amount is deemed adequate to meet current and projected funding needs.

Commitments and Contractual Obligations

Loan commitments outstanding and lines and letters of credit at September 30, 2021 are as follows:

(dollars in thousands)
Unfunded loan commitments	$	2,180,111
Unfunded lines of credit	96,874
Letters of credit	88,495
Total	$	2,365,480

Unfunded loan commitments are agreements whereby the Bank has made a commitment and the borrower has accepted the commitment to lend to a customer as long as there is satisfaction of the terms or conditions established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee before the commitment period is extended. In many instances, borrowers are required to meet performance milestones in order to draw on a commitment as is the case in construction loans, or to have a required level of collateral in order to draw on a commitment as is the case in asset based lending credit facilities. Since commitments may expire without being drawn, the total commitment amount does not necessarily represent future cash requirements. As of September 30, 2021, unfunded loan commitments included $137.0 million related to interest rate lock commitments on residential mortgage loans and were of a short-term nature. The pipeline of loan commitments remains strong.

Unfunded lines of credit are agreements to lend to a customer as long as there is no violation of the terms or conditions established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since commitments may expire without being drawn, the total commitment amount does not necessarily represent future cash requirements.

Letters of credit include standby and commercial letters of credit. Standby letters of credit are conditional commitments issued by the Bank to guarantee the performance by the Bank’s customer to a third party. Standby letters of credit generally become payable upon the failure of the customer to perform according to the terms of the underlying contract with the third party. Standby letters of credit are generally not drawn. Commercial letters of credit are issued specifically to facilitate commerce and typically result in the commitment being drawn when the underlying transaction is consummated between the

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customer and a third party. The contractual amount of these letters of credit represents the maximum potential future payments guaranteed by the Bank. The Bank has recourse against the customer for any amount it is required to pay to a third party under a letter of credit, and holds cash and or other collateral on those standby letters of credit for which collateral is deemed necessary.

Asset/Liability Management and Quantitative and Qualitative Disclosures about Market Risk

A fundamental risk in banking is exposure to market risk, or interest rate risk, since a bank’s net income is largely dependent on net interest income. The Bank’s ALCO formulates and monitors the management of interest rate risk through policies and guidelines established by it and the full Board of Directors and through review of detailed reports discussed quarterly. In its consideration of risk limits, the ALCO considers the impact on earnings and capital, the level and direction of interest rates, liquidity, local economic conditions, outside threats and other factors. Banking is generally a business of managing the maturity and repricing mismatch inherent in its asset and liability cash flows and to provide net interest income growth consistent with the Company’s profit objectives.

During the nine months ended September 30, 2021, the Company was able to produce a net interest margin of 2.91% as compared to 3.27% during the same period in 2020, and continue to manage its overall interest rate risk position. The Company, along with many other banks, continues to be challenged in 2021 during a period of ongoing low interest rates, lower loan balances and an inflow of deposits. This has changed the earning assets mix and increased funds held in investments and interest bearing deposits at other banks, both of which have rates well below those on loans.

The Company, through its ALCO and ongoing financial management practices, monitors the interest rate environment in which it operates and adjusts the rates and maturities of its assets and liabilities to remain competitive and to achieve its overall financial objectives subject to established risk limits. In the current and expected future interest rate environment, the Company has been maintaining its investment portfolio to manage the balance between yield and risk in its portfolio of mortgage backed securities. Further, the Company has been managing the investment portfolio to provide liquidity and some additional yield over cash. Additionally, the Company has limited call risk in its U.S. agency investment portfolio. During the three months ended September 30, 2021, the average investment portfolio balance increased by $763.7 million, or 84%, as compared to average balance for the three months ended September 30, 2020. The cash received from deposit growth along with cash flows from the investment and loan portfolio were deployed primarily into cash and new investments, as loan balances have declined.

The percentage mix of municipal securities was 7% of total investments at September 30, 2021 and 9% at December 31, 2020. The portion of the portfolio invested in mortgage backed securities was 67% and 72% at September 30, 2021 and December 31, 2020, respectively. The portion of the portfolio invested in U.S. agency investments was 20% at September 30, 2021 and 16% at December 31, 2020. Shorter duration floating rate corporate bonds were 5% and 3% of total investments at September 30, 2021 and December 31, 2020, respectively, and SBA bonds, which are included in mortgage backed securities, were 3% and 6% of total investments at September 30, 2021 and December 31, 2020, respectively. The duration of the investment portfolio increased to 4.2 years at September 30, 2021 from 3.2 years at December 31, 2020.

The re-pricing duration of the loan portfolio was 18 months at September 30, 2021 as compared to 21 months at December 31, 2020 with fixed rate loans amounting to 42% and 45% of total loans at September 30, 2021 and December 31, 2020, respectively. Variable and adjustable rate loans comprised 58% (offset by 1% from the dilution impact of PPP loans) and 55% of total loans at September 30, 2021 and December 31, 2020, respectively. Variable rate loans are generally indexed to either the one month LIBOR interest rate, or the Wall Street Journal prime interest rate, while adjustable rate loans are indexed primarily to the five year U.S. Treasury interest rate.

The duration of the deposit portfolio held steady in this low rate environment, measuring 45 months at September 30, 2021 from 42 months at December 31, 2020.

The net unrealized loss before income tax on the investment portfolio was $2.5 million at September 30, 2021 as compared to a net unrealized gain before tax of $22.0 million at December 31, 2020. This change is primarily due to higher interest rates. At September 30, 2021, the net unrealized loss position represented 0.1% of the investment portfolio’s book value.

There can be no assurance that the Company will be able to successfully achieve its optimal asset liability mix, as a result of competitive pressures, customer preferences and the inability to perfectly forecast future interest rates and movements.

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One of the tools used by the Company to manage its interest rate risk is the static gap analysis presented below. The Company also employs an earnings simulation model on a quarterly basis to monitor its interest rate sensitivity and risk and to model its balance sheet cash flows and the related income statement effects in different interest rate scenarios. The model utilizes current balance sheet data and attributes and is adjusted for assumptions as to investment maturities (including prepayments), loan prepayments, interest rates, and the level of noninterest income and noninterest expense. The data is then subjected to a “shock test” which assumes a simultaneous change in interest rates up 100, 200, 300, and 400 basis points or down 100 and 200, along the entire yield curve, but not below zero. The results are analyzed as to the impact on net interest income, net income and the market equity over the next twelve and twenty-four month periods from September 30, 2021. In addition to analysis of simultaneous changes in interest rates along the yield curve, changes based on interest rate “ramps” is also performed. This analysis represents the impact of a more gradual change in interest rates, as well as yield curve shape changes.

For the analysis presented below, at September 30, 2021, the simulation assumes a 45 basis point change in interest rates on money market and interest bearing transaction deposits for each 100 basis point change in market interest rates in a decreasing interest rate shock scenario with a floor of 0 basis points (compared to a floor 10 basis points in the same analysis as of September 30, 2020), and assumes a 45 basis point change in interest rates on money market and interest bearing transaction deposits for each 100 basis point change in market interest rates in an increasing interest rate shock scenario. The floor rate in the analysis was lowered due to the fact that in the current interest rate environment, there are interest bearing accounts with current rates less than 10 basis points. The beta factors were lowered from prior period analysis to reflect the Bank's historical experience and the determination that the build-up of excess liquidity would allow the Bank not to raise deposit rates as aggressively as it might under different circumstances.

The Company’s analysis at September 30, 2021 shows a moderate effect on net interest income (over the next 12 months) as well as a moderate effect on the economic value of equity when interest rates are shocked both down 100 and 200 basis points and up 100, 200, 300, and 400 basis points. This moderate impact is due substantially to the significant level of variable rate and repriceable assets and liabilities and related shorter relative durations. The repricing duration of the investment portfolio at September 30, 2021 is 4.9 years, the loan portfolio 1.5 years, the interest bearing deposit portfolio 3.75 years, and the borrowed funds portfolio 6.76 years.

The following table reflects the result of simulation analysis on the September 30, 2021 asset and liabilities balances:

Change in interest rates (basis points)		Percentage change in net interest income	Percentage change in net income	Percentage change in market value of portfolio equity
+	400	33.8%	59.8%	12.2%
+	300	24.0%	42.5%	9.4%
+	200	14.5%	25.7%	6.5%
+	100	6.2%	11.1%	3.4%
	—	—	—	—
-	100	(2.1)%	(3.6)%	(9.4)%
-	200	(3.4)%	(5.9)%	(24.6)%

The results of the simulation are within the relevant policy limits adopted by the Company for percentage change in net interest income. For net interest income, the Company has adopted a policy limit of -10% for a 100 basis point change, -12% for a 200 basis point change, -18% for a 300 basis point change and -24% for a 400 basis point change. For the market value of equity, the Company has adopted a policy limit of -12% for a 100 basis point change, -15% for a 200 basis point change, -25% for a 300 basis point change and -30% for a 400 basis point change. The amounts in the first three quarters of 2021 exceeded these limits due to the already low level of rates on non-maturing deposit instruments. Management has determined that due to the level of market rates at September 30, 2021, interest rate shocks of -100, -200, -300 and -400 basis points leave the Bank with near zero down to negative rate instruments and are not considered practical or informative. The changes in net interest income, net income and the economic value of equity in higher interest rate shock scenarios at September 30, 2021 are not considered to be excessive. The impact of 2.1% in net interest income and 3.6% in net income given a 100 basis point decrease in market interest rates reflects in large measure the impact of variable rate loans and fed funds sold repricing downward while deposits remain at expected floor rates and are not expected to have lower interest rates.

In the first three quarters of 2021, the Company continued to manage its interest rate sensitivity position to moderate levels of risk, as indicated in the simulation results above. The interest rate risk position at September 30, 2021, was relatively

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similar to the December 31, 2020 position for both the up and down rate scenarios, though we are showing greater asset sensitivity owing from the change in beta factors described above.

Although certain assets and liabilities may have similar maturities or repricing periods, they may react in different degrees to changes in market interest rates. Also, the interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market rates. Additionally, certain assets, such as adjustable-rate mortgage loans, have features that limit changes in interest rates on a short-term basis and over the life of the loan. Further, in the event of a change in interest rates, prepayment and early withdrawal levels could deviate significantly from those assumed in modeling. Finally, the ability of many borrowers to service their debt may decrease in the event of a significant interest rate increase.

During the first three quarters of 2021, average market interest rates increased across the yield curve as compared to the 2020 year end. In the most recent quarter, however, there was on average a flattening of the yield curve as compared to the market rates during second quarter of 2021, with rate decreases being more significant at the longer end of the yield curve.

As compared to the second quarter of 2021 the third quarter average two-year U.S. Treasury rate increased by 5 basis points from 0.17% to 0.22%, the average five year U.S. Treasury rate decreased by 5 basis points from 0.84% to 0.79% and the average ten year U.S. Treasury rate decreased by 27 basis points from 1.59% to 1.32%. The Company’s net interest margin was 2.73% for the third quarter of 2021 and 3.08% in the third quarter of 2020. The Company believes that the net interest margin in the most recent quarter as compared to 2020’s third quarter has been consistent with its interest rate risk analysis.

Gap Position

Banks and other financial institutions earnings are significantly dependent upon net interest income, which is the difference between interest earned on rate sensitive assets and interest expense on rate sensitive liabilities. Net interest income represented 89% and 87% of the Company’s revenue for the first three quarters of 2021 and 2020, respectively.

In falling interest rate environments, net interest income is maximized with longer term, higher yielding assets being funded by lower yielding short-term funds, or what is referred to as a negative mismatch or gap. Conversely, in a rising interest rate environment, net interest income is maximized with shorter term, higher yielding assets being funded by longer-term liabilities or what is referred to as a positive mismatch or gap.

The gap position, which is a measure of the difference in maturity and repricing volume between assets and liabilities, is a means of monitoring the sensitivity of a financial institution to changes in interest rates. The table below provides an indication of the sensitivity of the Company to changes in interest rates. A negative gap indicates the degree to which the volume of repriceable liabilities exceeds repriceable assets in given time periods. While a positive gap indicates the degree to which the volume of repriceable assets exceeds repriceable liabilities in given time periods.

At September 30, 2021, the Company had a positive gap position of approximately $426 million or 3.68% of total assets, out to three months, and a positive cumulative gap position of $686 million, or 5.92% of total assets out to twelve months. At December 31, 2020, the Company had a positive gap position of approximately $464 million or 4.2% of total assets out to three months and a positive cumulative gap position of $352 million or 3% of total assets out to 12 months. The change in the gap position at September 30, 2021 as compared to December 31, 2020 was due to reduction in time deposits relative to money market demand amount, and the maturity of a $100 million pay fixed balance sheet swap in April 2021. Such a change in the gap position is not deemed material to the Company's overall interest rate risk position, which relies more heavily on simulation analysis that captures the full opportunity within the balance sheet. The current position is within guideline limits established by the ALCO. While management believes that this overall position creates a reasonable balance in managing its interest rate risk and maximizing its net interest margin within plan objectives, there can be no assurance as to the actual results.

Management has carefully considered its strategy to maximize interest income by reviewing interest rate levels, economic indicators and call features within its investment portfolio, as well as interest rate floors within its loan portfolio. These factors have been discussed with the ALCO and management believes that current strategies remain appropriate to current economic and interest rate trends.

If interest rates increase by 100 basis points, the Company’s net interest income and net interest margin are expected to increase modestly due to the impact of significant volumes of variable rate assets more than offsetting the assumption of an increase in money market interest rates by 70% of the change in market interest rates.

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If interest rates decline by 100 basis points, the Company’s net interest income and margin are expected to decline modestly as the impact of lower market rates on a large amount of liquid assets more than offsets the ability to lower interest rates on interest bearing liabilities.

Because competitive market behavior does not necessarily track the trend of interest rates but at times moves ahead of financial market influences, the change in the cost of liabilities may be different than anticipated by the gap model. If this were to occur, the effects of a declining interest rate environment may not be in accordance with management’s expectations.

Gap Analysis

September 30, 2021

(dollars in thousands) 

Repriceable in:	0-3 months			4-12 months			13-36 months			37-60 months			Over 60 months			Total Rate Sensitive		Non Sensitive		Total
RATE SENSITIVE ASSETS:
Investment securities	$	216,780		$	168,743		$	363,334		$	329,616		$	708,186		$	1,786,659
Loans (1)(2)	3,612,317			665,963			1,390,616			643,721			538,247			6,850,864
Fed funds and other short-term investments	2,491,678			—			—			—			—			2,491,678
Other earning assets	108,158			—			—			—			—			108,158
Total	$	6,428,933		$	834,706		$	1,753,950		$	973,337		$	1,246,433		$	11,237,359	$	347,958	$	11,585,317
RATE SENSITIVE LIABILITIES:
Noninterest bearing demand	$	95,389		$	266,272		$	583,465		$	436,589		$	1,454,703		$	2,836,418
Interest bearing transaction	812,410			—			—			—			—			812,410
Savings and money market	4,943,157			—			—			—			325,000			5,268,157
Time deposits	122,449			308,402			295,711			21,811			3,130			751,503
Customer repurchase agreements and fed funds purchased	29,401			—			—			—			—			29,401
Other borrowings	—			—			69,639			—			300,000			369,639
Total	$	6,002,806		$	574,674		$	948,815		$	458,400		$	2,082,833		$	10,067,528	$	186,092	$	10,253,620
GAP	$	426,127		$	260,032		$	805,135		$	514,937		$	(836,400)		$	1,169,831
Cumulative GAP	$	426,127		$	686,159		$	1,491,294		$	2,006,231		$	1,169,831
Cumulative gap as percent of total assets	3.68		%	5.92		%	12.87		%	17.32		%	10.10		%
OFF BALANCE-SHEET:
Interest Rate Swaps - LIBOR based	$	—		$	—		$	—		$	—		$	—		$	—
Interest Rate Swaps - Fed Funds based	—			—			—			—			—			—
Total	$	—		$	—		$	—		$	—		$	—		$	—			$	—
GAP	$	426,127		$	260,032		$	805,135		$	514,937		$	(836,400)		$	1,169,831
Cumulative GAP	$	426,127		$	686,159		$	1,491,294		$	2,006,231		$	1,169,831
Cumulative gap as percent of total assets	3.68		%	5.92		%	12.87		%	17.32		%	10.10		%

(1)Excludes loans held for sale

(2)Nonaccrual loans are included in the over 60 months category

Capital Resources and Adequacy

The assessment of capital adequacy depends on a number of factors such as asset quality and mix, liquidity, earnings performance, changing competitive conditions and economic forces, stress testing, regulatory measures and policy, as well as the overall level of growth and complexity of the balance sheet. The adequacy of the Company’s current and future capital needs is monitored by management on an ongoing basis. Management seeks to maintain a capital structure that will assure an adequate level of capital to support anticipated asset growth and to absorb potential losses.

The federal banking regulators have issued guidance for those institutions which are deemed to have concentrations in commercial real estate lending. Pursuant to the supervisory criteria contained in the guidance for identifying institutions with a potential commercial real estate concentration risk, institutions which have (1) total reported loans for construction, land development, and other land acquisitions which represent 100% or more of an institution’s total risk-based capital; or (2) total commercial real estate loans representing 300% or more of the institution’s total risk-based capital and the institution’s commercial real estate loan portfolio has increased 50% or more during the prior 36 months are identified as having potential commercial real estate concentration risk. Institutions which are deemed to have concentrations in commercial real estate

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lending are expected to employ heightened levels of risk management with respect to their commercial real estate portfolios, and may be required to hold higher levels of capital. The Company, like many community banks, has focused on commercial real estate loans, and the Company has experienced growth in its commercial real estate portfolio in recent years. At September 30, 2021, we did exceed the construction, land development, and other land acquisitions regulatory concentration threshold, we continue to monitor our concentration in commercial real estate lending and remain in compliance with the guidance issued by the federal banking regulators. Construction, land and land development loans represent 105% of total risk based capital. Management has extensive experience in commercial real estate lending, and has implemented and continues to maintain heightened risk management procedures, and strong underwriting criteria with respect to its commercial real estate portfolio. Loan monitoring practices include but are not limited to periodic stress testing analysis to evaluate changes to cash flows, owing to interest rate increases and declines in net operating income. Nevertheless, as our commercial real estate concentration fluctuates each quarter, we may be required to maintain higher levels of capital, which could require us to obtain additional capital, and may adversely affect shareholder returns. The Company has an extensive Capital Plan and Capital Policy, which includes pro-forma projections including stress testing within which the Board of Directors has established internal minimum targets for regulatory capital ratios that are in excess of well capitalized ratios.

The Company and the Bank are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and prompt corrective action regulations involve quantitative measures of assets, liabilities, and certain off-balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators about components, risk weightings, and other factors and the regulators can lower classifications in certain cases. Failure to meet various capital requirements can initiate regulatory action that could have a direct material effect on the financial statements.

The prompt corrective action regulations provide five categories, including well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition. If a bank is only adequately capitalized, regulatory approval is required to, among other things, accept, renew or roll-over brokered deposits. If a bank is undercapitalized, capital distributions and growth and expansion are limited, and plans for capital restoration are required.

The Board of Governors of the Federal Reserve Board and the FDIC have adopted rules (the “Basel III Rules”) implementing the Basel Committee on Banking Supervision's capital guidelines for U.S. banks (commonly known as Basel III). Under the Basel III Rules, the Company and Bank are required to maintain, inclusive of the capital conservation buffer of 2.5%, a minimum CET1 ratio of 7.0%, a minimum ratio of Tier 1 capital to risk-weighted assets of 8.5%, a minimum total capital to risk-weighted assets ratio of 10.5%, and a minimum leverage ratio of 4.0%. At September 30, 2021, the Company and the Bank meet all these requirements, and satisfy the requirement to maintain a capital conservation buffer of 2.5% of CET1 capital for capital adequacy purposes.

During the fourth quarter of 2020, the Company started a new stock repurchase plan. Under the Board approval in December, the Company may repurchase up to an aggregate of 1,588,848 shares of its common stock (inclusive of shares remaining under the initial authorization), commencing January 1, 2021 through December 31, 2021, subject to earlier termination by the Board of Directors (the “2021 Stock Repurchase Plan”). In the third quarter of 2021, the Company completed repurchases of 11,609 shares for $614,609 at an average cost of $52.94 per share under the 2021 Stock Repurchase Plan. No stock repurchases took place during the second quarter of 2021. In the first quarter of 2021, the Company completed repurchases of 1,466 shares for a total of $62,000 at an average cost of $42.46 per share under the 2021 Stock Repurchase Plan. For the nine months ended September 30, 2021, and since the start of the 2021 Stock Repurchase Plan, the Company has repurchased a total of 13,075 shares for $676,901 at an average cost of $51.77 per share.

The Company announced a regular quarterly cash dividend on September 29, 2021 of $0.40 per share to shareholders of record on October 21, 2021 and payable on November 1, 2021.

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The actual capital amounts and ratios for the Company and Bank as of September 30, 2021 and December 31, 2020 are presented in the table below.

	Company				Bank				Minimum Required For Capital		To Be Well Capitalized Under Prompt Corrective
	Actual				Actual				Adequacy		Action
(dollars in thousands)	Amount		Ratio		Amount		Ratio		Purposes		Regulations*
As of September 30, 2021
CET1 capital (to risk weighted assets)	$	1,240,026	15.33	%	$	1,230,642	15.28	%	7.00	%	6.50	%
Total capital (to risk weighted assets)	1,341,934		16.59	%	1,304,550		16.20	%	10.50	%	10.00	%
Tier 1 capital (to risk weighted assets)	1,240,026		15.33	%	1,230,642		15.28	%	8.50	%	8.00	%
Tier 1 capital (to average assets)	1,240,026		10.58	%	1,230,642		10.53	%	4.00	%	5.00	%
As of December 31, 2020
CET1 capital (to risk weighted assets)	$	1,137,896	13.49	%	$	1,244,028	14.90	%	7.00	%	6.50	%
Total capital (to risk weighted assets)	1,438,224		17.04	%	1,338,356		16.03	%	10.50	%	10.00	%
Tier 1 capital (to risk weighted assets)	1,137,896		13.49	%	1,224,028		14.90	%	8.50	%	8.00	%
Tier 1 capital (to average assets)	1,137,896		10.31	%	1,224,028		11.29	%	4.00	%	5.00	%

* Applies to Bank only

Bank and holding company regulations, as well as Maryland law, impose certain restrictions on dividend payments by the Bank, as well as restricting extensions of credit and transfers of assets between the Bank and the Company. At September 30, 2021 the Bank could pay dividends to the Company to the extent of its earnings so long as it maintained the minimum required capital ratios listed in the table above.

In December 2018, federal banking regulators issued a final rule that provides an optional three-year phase-in period for the adverse regulatory capital effects of adopting the CECL methodology pursuant to new accounting guidance for the recognition of credit losses on certain financial instruments, effective January 1, 2020. In March 2020, the federal banking regulators issued an interim final rule that provides banking organizations with an alternative option to temporarily delay for two years the estimated impact of the adoption of the CECL methodology on regulatory capital, followed by the three-year phase-in period. The cumulative amount that is not recognized in regulatory capital will be phased in at 25 percent per year beginning January 1, 2022. We have elected to adopt the March 2020 interim final rule.

On August 2, 2021, the Company paid in full $150.0 million of subordinated debt due 2026 and accelerated deferred financing costs of $1.3 million on that date. Refer to Note 8 for additional detail.

Use of Non-GAAP Financial Measures

The Company considers the following non-GAAP measurements useful for investors, regulators, management and others to evaluate capital adequacy and to compare against other financial institutions. The tables below provide a reconciliation of these non-GAAP financial measures with financial measures defined by GAAP.

Tangible common equity to tangible assets (the "tangible common equity ratio"), tangible book value per common share, the annualized return on average tangible common equity, and efficiency ratio are non-GAAP financial measures derived from GAAP-based amounts. The Company calculates the tangible common equity ratio by excluding the balance of intangible assets from common shareholders' equity and dividing by tangible assets. The Company calculates tangible book value per common share by dividing tangible common equity by common shares outstanding, as compared to book value per common share, which the Company calculates by dividing common shareholders' equity by common shares outstanding. The Company calculates the ROATCE by dividing net income available to common shareholders by average tangible common equity which is calculated by excluding the average balance of intangible assets from the average common shareholders’ equity. The Company calculates the efficiency ratio by dividing noninterest expense by the sum of net interest income and noninterest income. The efficiency ratio measures a bank’s overhead as a percentage of its revenue. The Company considers this information important to shareholders as tangible equity is a measure that is consistent with the calculation of capital for bank regulatory purposes,

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which excludes intangible assets from the calculation of risk based ratios and as such is useful for investors, regulators, management and others to evaluate capital adequacy and to compare against other financial institutions.

GAAP Reconciliation

(dollars in thousands except per share data)

	September 30, 2021			December 31, 2020			September 30, 2020
Common shareholders’ equity	$	1,331,697		$	1,240,892		$	1,223,402
Less: Intangible assets	(105,103)			(105,114)			(105,165)
Tangible common equity	$	1,226,594		$	1,135,778		$	1,118,237
Book value per common share	$	41.68		$	39.05		$	37.96
Less: Intangible book value per common share	(3.29)			(3.31)			(3.26)
Tangible book value per common share	$	38.39		$	35.74		$	34.70
Total assets	$	11,585,317		$	11,117,802		$	10,106,294
Less: Intangible assets	(105,103)			(105,114)			(105,165)
Tangible assets	$	11,480,214		$	11,012,688		$	10,001,129
Tangible common equity ratio	10.68		%	10.31		%	11.18		%
	September 30, 2021						December 31, 2020			September 30, 2020
	Three Months Ended			Nine Months Ended			Year Ended			Three Months Ended(1)			Nine Months Ended
Average common shareholders’ equity	$	1,331,022		$	1,292,223		$	1,204,341		$	1,211,145		$	1,193,988
Less: Average intangible assets	(105,126)			(105,151)			(104,903)			(105,106)			(104,826)
Average tangible common equity	$	1,225,896		$	1,187,072		$	1,099,438		$	1,106,039		$	1,089,162
Net Income Available to Common Shareholders	$	43,609		$	135,071		$	132,217		$	41,346		$	93,325
Average tangible common equity	$	1,225,896		$	1,187,072		$	1,099,438		$	1,032,720		$	1,089,162
Annualized Return on Average Tangible Common Equity	14.11		%	15.21		%	12.03		%	14.87		%	11.45		%

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Net interest income	$79,045		$79,038		$246,328		$240,145
Noninterest income	8,299		17,844		29,811		35,809
Revenue	$87,344		$96,882		$276,139		$275,954
Noninterest expense	$36,375		$36,915		$109,856		$109,154
Efficiency ratio	41.65	%	38.10	%	39.78	%	39.56	%

(1)These numbers have been corrected from the original disclosure in the Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, which stated that average common shareholders’ equity was $1,137,826,000, average tangible common equity was $1,032,720,000 and annualized return on average tangible common equity was 15.93%, all for the three months ended September 30, 2020.

Total loans, excluding loans held for sale and PPP loans is a non-GAAP financial measures derived from GAAP-based amounts. The Company calculates total loans, excluding loans held for sale and PPP loans by excluding the balance of the PPP loans from the total loans. The Company considers this information important to shareholders as total loans, excluding loans

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held for sale and PPP loans is a measure that removes fluctuations associated with the activity related to the non-core business and management of the PPP portfolio.

	September 30, 2021		December 31, 2020		September 30, 2020
Total loans, excluding loans held for sale (GAAP)	$	6,850,863	$	7,760,212	$	7,880,255
Less: PPP loans	(67,311)		(454,771)		(456,115)
Total loans, excluding loans held for sale and PPP loans (Non-GAAP)	$	6,783,552	$	7,305,441	$	7,424,140

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Please refer to Item 2 of this report, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” under the caption “Asset/Liability Management and Quantitative and Qualitative Disclosure about Market Risk.”

Item 4. Controls and Procedures

Evaluation of disclosure controls and procedures. The Company’s management, under the supervision and with the participation of the Chief Executive Officer, Executive Chairman and Chief Financial Officer, evaluated, as of the last day of the period covered by this report, the effectiveness of the design and operation of the Company’s disclosure controls and procedures, as defined in Rule 13a-15(e) under the Exchange Act. Based on that evaluation, the Chief Executive Officer, Executive Chairman and the Chief Financial Officer concluded that the Company’s disclosure controls and procedures as of September 30, 2021 were effective to provide reasonable assurance that information required to be disclosed in the reports we file and submit under the Exchange Act is recorded, processed, summarized and reported as and when required and that it is accumulated and communicated to our management, including the Chief Executive Officer, Executive Chairman and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in internal control over financial reporting. There were no changes in our internal control over financial reporting as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) that occurred during the third quarter of 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION

Item 1 - Legal Proceedings

For a description of our material pending legal proceedings, see “Note 12. Legal Contingencies” of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, which is incorporated herein by reference.

Item 1A - Risk Factors

The COVID-19 pandemic has adversely affected, and is likely to continue to adversely affect, our customers and other businesses in our market area, as well as counterparties and third party vendors. The resulting adverse impacts on our business, financial condition, liquidity and results of operations have been, and may continue to be significant.

The COVID-19 pandemic and the resulting containment measures have resulted in widespread economic and financial disruptions that have adversely affected, and are likely to continue to adversely effect, our customers and other businesses in our market area, as well as counterparties and third-party vendors. We continue to see the impact of the pandemic on our business, which may potentially worsen, particularly since there remains ongoing uncertainty as to how long the COVID-19 pandemic and related containment measures will continue, both in our market area and the rest of the country. This impact has been, in certain areas, and could continue to be significant, adverse and potentially material. The full extent of this impact, and the resulting impact on our business, financial condition, liquidity and results of operations, remains inestimable at this time, and will depend on a number of evolving factors and future developments beyond our control and that we are unable to predict, including the duration, spread and severity of the pandemic; the nature, extent and effectiveness of containment measures; the timing of development and widespread availability of medical treatments or vaccines; the extent and duration of the effect on the economy, unemployment, consumer confidence and consumer and business spending; the impact and continued availability of monetary, fiscal and other economic policies and programs designed to provide economic assistance to individuals and small businesses; and how quickly and to what extent normal economic and operating conditions can resume. It is also possible that any adverse impacts of the pandemic and containment measures may continue once the pandemic is controlled and the containment measures are lifted.

Many of the risks described in the risk factors and other cautionary language included in the Company's Annual Report on Form 10-K for the year ended December 31, 2020, and current reports filed by the Company with the Securities and Exchange Commission will likely be exacerbated, and the impact of such risks will likely be magnified, as a result of the COVID-19 pandemic. We expect the negative impacts of the COVID-19 pandemic on our business, financial condition, liquidity and results of operations to be the most severe in the following areas:

•Loan Credit Quality.  The significant disruption resulting from the COVID-19 pandemic has been materially affecting the businesses of our customers and of their customers, which impacts their creditworthiness, their ability to pay amounts owed to us and our ability to collect those amounts. Further, volatile and unpredictable ongoing market conditions, both as a result of impacts from the COVID-19 pandemic and otherwise, may negatively impact our ability to achieve our long-term loan growth objectives. While there is no shortage of loan demand in current market conditions, the quality of many of the loans available is such that we may have to make trade-off decisions between reaching target loan origination quantities to keep up with our loan growth objectives and maintaining certain target levels of loan quality to protect our credit quality and portfolio. There can be no guarantee that any decisions made in this regard will be successful or lead to our achieving our long-term loan growth and credit quality objectives. If we are too conservative with loan quality, we may not be able to keep up with our peer competitors in terms of loan growth, and if we are too focused on loan growth, our credit quality risk profile may result in material negative impacts on our overall financial performance and results. As loan volume represents our largest contributor to our net interest income, such market conditions, including a continuation of the historically low interest rate environment, may have a material negative impact on our loan credit quality, our short-term and long-term strategy and our results of operations. Among the industry’s most clearly impacted by the pandemic are the Accommodation and Food Service industry, exposure to which represents 9% of our loan portfolio as of September 30, 2021, and the Retail Trade industry, which represents 1% of our loan portfolio as of September 30, 2021.  In addition, approximately 7% of our loan portfolio as of September 30, 2021 is secured by commercial real estate loans secured by restaurants, hotels or retail properties. These areas may have a longer recovery period than other industries. Despite high home sales volumes and our strong performance in gains from residential mortgage loans for the first three quarters of 2021, such volumes and performance are not stable and economic conditions are may likely result in future material declines in real estate values and home sales volumes, and an increase in tenants failing to make or deferring

77

rent payments.  A large portion of our loan portfolio is related to real estate, with 33% consisting of commercial real estate and real estate construction loans, and 83% of our loans being secured by real estate. As a result of actual or expected credit losses, we may downgrade loans, increase our allowance for loan losses, and write-down or charge-off credit relationships, any of which would negatively impact our results of operations. In addition, market upheavals are likely to affect the value of real estate and commercial assets. In the event of foreclosure, it is unlikely that we will be able to sell the foreclosed property at a price that will allow us to recoup a significant portion of the delinquent loan.

•PPP Administration and Compliance. Due to the short timeframe between the passing of the CARES Act and the beginning of the PPP, there continues to be some ambiguity in the laws, rules and guidance regarding the day-to-day mechanics and operations of the program, and particularly how banks should administer the program as we continue in the loan forgiveness stage. There is no guarantee that the Bank will, in all instances, be able to avoid potential processing issues, administrative pitfalls or other obstacles that may present from time to time, and any such issues, pitfalls or other obstacles that arise may result in adverse impacts on our operational and strategic objectives. Further, due to the “first come first served” nature of the PPP, the loans originated under this program may present potential fraud risk and operational risk, increasing the risk that loan forgiveness may not be obtained by the borrowers and that the government guaranty may not be honored. In particular, there is risk that some borrowers may not qualify for the loan forgiveness feature due to the conduct of the borrower after the loans were originated. These factors may result in us having to hold a significant amount of these low-yield loans in our portfolio for an extended period of time, which may negatively impact our broader business performance and results of operations.

•Deposit Business. As a result of the COVID-19 pandemic, deposit customers are expected to retain higher levels of cash. While increased low-interest deposits could have a positive impact in the short-term, we would not expect these funds to be replenished as customers use deposit funds for liquidity for their business and individual needs. If deposit levels decline, our available liquidity would decline, and we could be forced to obtain liquidity on terms less favorable than current deposit terms, which would in turn compress margins and negatively impact our results of operations.

•Interest Rate Risk. Our net interest income, lending activities, deposits and profitability have been and could continue to be negatively affected by volatility in interest rates caused by uncertainties stemming from the COVID-19 pandemic. In March 2020, the Federal Reserve lowered the target range for the federal funds rate to a range from 0 to 0.25 percent. A prolonged period of extremely volatile and unstable market conditions would likely increase our funding costs and negatively affect market risk mitigation strategies. Higher income volatility from changes in interest rates and spreads to benchmark indices could cause a loss of future net interest income and a decrease in current fair market values of our assets. Fluctuations in interest rates will impact both the level of income and expense recorded on most of our assets and liabilities and the market value of all interest-earning assets and interest-bearing liabilities, which in turn could have a material adverse effect on our net income, operating results or financial condition.

•Operational Risk. Current and future restrictions on our workforce's access to our facilities could limit our ability to meet customer servicing expectations and have a material adverse effect on our operations. We rely on business processes and branch activity that largely depend on people and technology, including access to information technology systems as well as information, applications, payment systems and other services provided by third parties. In response to COVID-19, the Company implemented a remote working strategy for many of its employees This action may result in increased spending on our business continuity efforts, such as technology and readiness procedures for returning to our offices. We could also experience an increased strain on our risk management policies, as remote working may impact some employees abilities to comply with certain policies. Further, technology in employees' homes may not be as robust as in our offices and could cause the networks, information systems, applications, and other tools available to employees to be more limited or less reliable than in our offices. The continuation of these work-from-home measures also introduces additional operational risk, including related to the effectiveness of our anti-money laundering and other compliance programs, as well as increased cybersecurity risk. These cyber risks include greater phishing, malware, and other cybersecurity attacks, vulnerability to disruptions of our information technology infrastructure and telecommunications systems for remote operations, increased risk of unauthorized dissemination of confidential information, limited ability to restore the systems in the event of a systems failure or interruption, greater risk of a security breach resulting in destruction or misuse of valuable information, and potential impairment of our ability to perform critical functions, including wiring funds, all of which could expose us to risks of data or financial loss, litigation and liability and could seriously disrupt our operations and the operations of any impacted customers. Furthermore, while the Company's non-branch personnel returned to work on a "hybrid" basis on November 1, 2021, state and local guidelines continue to evolve, and the operation of a hybrid workplace may negatively impact our ability to attract and retain qualified personnel. Even after the market fully recovers from the impacts of the COVID-19 pandemic, differences in the demands, expectations and priorities of the workforce may require us to rethink and amend our recruiting and retention strategies in order to attract and keep new employees. There is no guarantee that we will be successful in gaining or maintaining

78

a competitive edge against our peer banks in terms of hiring new talent in the near or long term, and any failure to do so may materially impact our business operations and long-term growth.

•External Vendors and Service Providers. We rely on many outside service providers that support our day-to-day operations including data processing and electronic communications, real estate appraisal, loan servicers and local and federal government agencies, offices and courthouses. In light of the containment measures responding to COVID-19, many of these entities may limit the availability and access of their services, which may impact our business. For example, loan origination could be delayed due to the limited availability of real estate appraisers for the collateral. Loan closings could be delayed related to reductions in available staff in recording offices or the closing of courthouses, which slows the process for title work, mortgage and UCC filings. If the third-party service providers continue to have limited capacities for a prolonged period or if additional limitations or potential disruptions in these services materialize, it may negatively affect our operations.

•Strategic and Reputational Risk. The pandemic and containment measures have caused us to modify our strategic plans and business practices, and we may take further actions that we determine are in the best interests of our colleagues, customers and business partners. If we do not respond appropriately to the pandemic, or if customers or other stakeholders do not perceive our response to be adequate, we could suffer damage to our reputation and our brand, which could materially adversely affect our business. We also face an increased risk of litigation and governmental and regulatory scrutiny as a result of the effects of the pandemic on market and economic conditions and actions governmental authorities take in response to those conditions, as detailed in the Note 1 to the Consolidated Financial Statements.

Litigation and regulatory actions, possibly including enforcement actions, could subject us to significant fines, penalties, judgments or other requirements resulting in increased expenses or restrictions on our business activities.

In the normal course of our business, we are named as a defendant in various legal actions, arising in connection with our current and/or prior business activities or public disclosures. Legal actions could include claims for substantial compensatory or punitive damages or claims for indeterminate amounts of damages. Further, we may be subject to regulatory enforcement actions. We are also, from time to time, the subject of subpoenas, requests for information, reviews, investigations and proceedings (both formal and informal) by various agencies and other bodies regarding our current and/or prior business activities. Additionally, we also from time to time receive demand letters from shareholders, and such letters may lead to these shareholders filing claims or derivative suits against us if our engagement with such shareholders ends in a failure to successfully negotiate a settlement. The Company has received various document requests and subpoenas from securities and banking regulators and U.S. Attorney’s offices in connection with investigations, which the Company believes relate to the Company's identification, classification and disclosure of related party transactions; the retirement of certain former officers and directors; and the relationship of the Company and certain of its former officers and directors with a local public official, among other things. The Company is currently defending against shareholder litigation. Any such legal or regulatory actions may subject us to substantial compensatory or punitive damages, significant fines, penalties, obligations to change our business practices, required changes in our senior officers, or other requirements resulting in increased expenses, diminished income and damage to our business. Our involvement in any such matters, whether tangential or otherwise, and even if the matters are ultimately determined in our favor, could also cause significant harm to our reputation and divert management attention from the operation of our business. Further, any settlement, regulatory order or agreement, informal enforcement action, or adverse judgment in connection with any formal or informal proceeding or investigation by government agencies may result in adverse audit findings, or additional litigation, investigations or proceedings as other parties, including other litigants and/or government agencies begin independent reviews of the same activities. As a result, the outcome of legal and regulatory actions could have a material adverse effect on our business, results of operations, financial condition and stock price, including in any particular reporting period.

Further, in such matters, it is inherently difficult to determine whether any loss is probable or whether it is possible to estimate the amount of any reasonably possible loss. We cannot predict with certainty if, how or when such proceedings will be resolved or what the eventual fine, penalty or other relief, conditions or restrictions, if any, may be, particularly for actions that are in their early stages of investigation. We may be required to pay fines or civil money penalties, or make other payments in connection with certain of these issues. This uncertainty makes it difficult to estimate probable losses, which, in turn, can lead to substantial disparities between the reserves we may establish for such proceedings and the eventual settlements, fines, or penalties. While the Company and Bank carry insurance to protect us from material outlays (excluding regulatory fees and penalties), such insurance may not always fully or even substantially cover such outlays, and any adverse determinations in such actions could have a material adverse effect on our business, financial condition, results of operations and stock price. In the event such insurance is exhausted, any additional fees, costs, expenses and penalties incurred would be borne by the Company and could have a material adverse effect on our business, financial condition, results of operations and stock price.

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

(a) Sales of Unregistered Securities.	None
(b) Use of Proceeds.	Not Applicable
(c) Issuer Purchases of Securities.

Period	Total Number of Shares Purchased (2)	Average Price Paid Per Share		Total Number of Shares Purchased as Part  of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (1)
July 1 - 31, 2021	—	—		—	1,587,382
August 1 - 31. 2021	—	$	—	—	1,587,382
September 1 - 30, 2021	11,609	$	52.94	11,609	1,575,773
Total	11,609	$	52.94	11,609

_______________________________

(1)On December 16, 2020, the Company's Board of Directors adopted a new share repurchase program to take effect starting January 1, 2021, after the expiration of the previous repurchase program on December 31, 2020. The Board of Directors authorized the repurchase of 1,588,848 shares of common stock, or approximately 5% of the Company's outstanding shares of common stock, under the new repurchase program, which will expire on December 31, 2021, subject to earlier termination of the program by the Board of Directors. The program was announced by a press release dated December 17, 2020 and a Form 8-K filed on December 17, 2020.

(2)Includes shares of the Company’s common stock acquired by the Company in connection with satisfaction of tax withholding obligations on vested restricted shares.

Item 3 - Defaults Upon Senior Securities

None

Item 4 - Mine Safety Disclosures

Not Applicable

Item 5 - Other Information

None

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Item 6 - Exhibits

31.1	Certification of Susan G. Riel
31.2	Certification of Norman R. Pozez
31.3	Certification of Charles D. Levingston
32.1	Certification of Susan G. Riel
32.2	Certification of Norman R. Pozez
32.3	Certification of Charles D. Levingston
101	Interactive data files pursuant to Rule 405 of Regulation S-T:
	(i)    Consolidated Balance Sheets at September 30, 2021 and December 31, 2020
	(ii)   Consolidated Statement of Income for the three and nine months ended September 30, 2021 and 2020
	(iii)  Consolidated Statement of Comprehensive Income for the three and nine months ended September 30, 2021 and 2020
	(iv)  Consolidated Statement of Changes in Shareholders’ Equity for the three and nine months ended September 30, 2021 and 2020
	(v)   Consolidated Statement of Cash Flows for the nine months ended September 30, 2021 and 2020
	(vi)  Notes to the Consolidated Financial Statements
104	The cover page of this Quarterly Report on Form 10-Q, formatted in Inline XBRL

81

SIGNATURES

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

	EAGLE BANCORP, INC.
Date: November 9, 2021	By:	/s/ Susan G. Riel
		Susan G. Riel, President and Chief Executive Officer of the Company
Date: November 9, 2021	By:	/s/ Charles D. Levingston
		Charles D. Levingston, Executive Vice President and Chief Financial Officer of the Company

82

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Susan G. Riel, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Eagle Bancorp, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: November 9, 2021	/s/ Susan G. Riel
	President and Chief Executive Officer of the Company

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Norman R. Pozez, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Eagle Bancorp, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: November 9, 2021	/s/ Norman R. Pozez
	Executive Chairman of the Company

EX-31.3

Exhibit 31.3

CERTIFICATION

I, Charles D. Levingston, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Eagle Bancorp, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: November 9, 2021	/s/ Charles D. Levingston
	Executive Vice President and Chief Financial Officer of the Company

EX-32.1

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350

In connection with the Form 10-Q of Eagle Bancorp, Inc. for the quarter ended September 30, 2021, I, Susan G. Riel, President and Chief Executive Officer of Eagle Bancorp, Inc., hereby certify pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge and belief, that:

(1) such Form 10-Q/A fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in such Form 10-Q/A fairly presents, in all material respects, the financial condition and results of operations of Eagle Bancorp, Inc.

/s/ Susan G. Riel	Date: November 9, 2021
Susan G. Riel
President and Chief Executive Officer of the Company

EX-32.2

Exhibit 32.2

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350

In connection with the Form 10-Q of Eagle Bancorp, Inc. for the quarter ended September 30, 2021, I, Norman R. Pozez, Executive Chairman of Eagle Bancorp, Inc., hereby certify pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge and belief, that:

(1) such Form 10-Q/A fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in such Form 10-Q/A fairly presents, in all material respects, the financial condition and results of operations of Eagle Bancorp, Inc.

/s/ Norman R. Pozez	Date: November 9, 2021
Norman R. Pozez
Executive Chairman of the Company

EX-32.3

Exhibit 32.3

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350

In connection with the Form 10-Q of Eagle Bancorp, Inc. for the quarter ended September 30, 2021, I, Charles D. Levingston, Executive Vice President and Chief Financial Officer of Eagle Bancorp, Inc., hereby certify pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge and belief, that:

(1) such Form 10-Q/A fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in such Form 10-Q/A fairly presents, in all material respects, the financial condition and results of operations of Eagle Bancorp, Inc.

/s/ Charles D. Levingston	Date: November 9, 2021
Charles D. Levingston
Executive Vice President and Chief Financial Officer of the Company

XML

Cover Page - shares	9 Months Ended
	Sep. 30, 2021	Oct. 31, 2021
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Sep. 30, 2021
Document Transition Report	false
Entity File Number	0-25923
Entity Registrant Name	Eagle Bancorp, Inc.
Entity Incorporation, State or Country Code	MD
Entity Tax Identification Number	52-2061461
Entity Address, Address Line One	7830 Old Georgetown Road
Entity Address, Address Line Two	Third Floor
Entity Address, City or Town	Bethesda
Entity Address, State or Province	MD
Entity Address, Postal Zip Code	20814
City Area Code	301
Local Phone Number	986-1800
Title of 12(b) Security	Common Stock, $0.01 par value
Trading Symbol	EGBN
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		31,950,245
Entity Central Index Key	0001050441
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2021
Document Fiscal Period Focus	Q3
Amendment Flag	false

XML

Consolidated Balance Sheets - (Unaudited) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Assets
Cash and due from banks	$ 8,806	$ 8,435
Federal funds sold	38,934	28,200
Interest bearing deposits with banks and other short-term investments	2,452,744	1,752,420
Investment securities (amortized cost of $1,789,416 and $1,129,255 and allowance for credit losses of $256 and $167 as of September 30, 2021 and December 31, 2020, respectively).	1,786,659	1,151,083
Federal Reserve and Federal Home Loan Bank stock	34,093	40,104
Loans held for sale	53,413	88,205
Loans	6,850,863	7,760,212
Less allowance for credit losses	(82,906)	(109,579)
Loans, net	6,767,957	7,650,633
Premises and equipment, net	15,293	13,553
Operating lease right-of-use assets	30,080	25,237
Deferred income taxes	44,733	38,571
Bank owned life insurance	108,158	76,729
Goodwill and Intangible assets, net	105,103	105,114
Other real estate owned	5,135	4,987
Other assets	134,209	134,531
Total Assets	11,585,317	11,117,802
Deposits:
Noninterest bearing demand	2,836,418	2,809,334
Interest bearing transaction	812,410	756,923
Savings and money market	5,268,157	4,645,186
Time, $100 thousand or more	347,937	546,173
Other time	403,566	431,587
Total deposits	9,668,488	9,189,203
Customer repurchase agreements	29,401	26,726
Other short-term borrowings	300,000	300,000
Long-term borrowings	69,639	268,077
Operating lease liabilities	34,345	28,022
Reserve for unfunded commitments	5,011	5,498
Other liabilities	146,736	59,384
Total Liabilities	10,253,620	9,876,910
Shareholders’ Equity
Common stock, par value $0.01 per share; shares authorized 100,000,000, shares issued and outstanding 31,947,458 and 31,779,663, respectively	316	315
Additional paid in capital	432,479	427,016
Retained earnings	901,218	798,061
Accumulated other comprehensive (loss) income	(2,316)	15,500
Total Shareholders’ Equity	1,331,697	1,240,892
Total Liabilities and Shareholders’ Equity	$ 11,585,317	$ 11,117,802

XML

Consolidated Balance Sheets - (Unaudited) (Parenthetical) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Statement of Financial Position [Abstract]
Investment securities available for sale, amortized cost	$ 1,789,416	$ 1,129,255
Allowance for credit losses	256	167
Time deposits	$ 100	$ 100
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, authorized (in shares)	100,000,000	100,000,000
Common stock, issued (in shares)	31,947,458	31,779,663
Common stock, outstanding (in shares)	31,947,458	31,779,663

XML

Consolidated Statements of Income - (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Interest Income
Interest and fees on loans	$ 82,182	$ 89,296	$ 260,124	$ 278,979
Interest and dividends on investment securities	5,877	4,141	15,878	14,139
Interest on balances with other banks and short-term investments	1,083	384	2,239	2,104
Interest on federal funds sold	10	12	25	84
Total interest income	89,152	93,833	278,266	295,306
Interest Expense
Interest on deposits	6,590	10,995	21,288	44,055
Interest on customer repurchase agreements	14	84	34	257
Interest on short-term borrowings	506	505	1,502	1,363
Interest on long-term borrowings	2,997	3,211	9,114	9,486
Total interest expense	10,107	14,795	31,938	55,161
Net Interest Income	79,045	79,038	246,328	240,145
(Credit) Provision for Credit Losses	(8,203)	6,607	(14,409)	40,654
Provision for Unfunded Commitments	716	(2,078)	(487)	974
Net Interest Income After (Credit) Provision For Credit Losses	86,532	74,509	261,224	198,517
Noninterest Income
Service charges on deposits	1,204	1,061	3,303	3,428
Gain on sale of loans	3,332	12,226	11,988	16,249
Gain on sale of investment securities	1,519	115	2,058	1,650
Increase in the cash surrender value of bank owned life insurance	642	413	1,429	1,655
Other income	1,602	4,029	11,033	12,827
Total noninterest income	8,299	17,844	29,811	35,809
Noninterest Expense
Salaries and employee benefits	22,145	19,388	63,790	54,289
Premises and equipment expenses	3,859	5,125	11,121	12,414
Marketing and advertising	1,013	928	2,879	3,117
Data processing	2,886	2,700	8,451	7,955
Legal, accounting and professional fees	2,021	3,097	8,523	14,064
FDIC insurance	1,549	2,152	5,586	5,556
Other expenses	2,902	3,525	9,506	11,759
Total noninterest expense	36,375	36,915	109,856	109,154
Income Before Income Tax Expense	58,456	55,438	181,179	125,172
Income Tax Expense	14,847	14,092	46,108	31,847
Net Income	$ 43,609	$ 41,346	$ 135,071	$ 93,325
Earnings Per Common Share
Basic net income per common share (in dollars per share)	$ 1.36	$ 1.28	$ 4.23	$ 2.88
Diluted net income per common share (in dollars per share)	$ 1.36	$ 1.28	$ 4.22	$ 2.88

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Consolidated Statements of Comprehensive Income - (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Statement of Comprehensive Income [Abstract]
Net Income	$ 43,609	$ 41,346	$ 135,071	$ 93,325
Other comprehensive income, net of tax:
Unrealized gain (loss) on securities available for sale	(5,703)	(624)	(16,666)	13,354
Reclassification adjustment for net gain included in net income	(1,133)	(86)	(1,534)	(1,231)
Total unrealized gain (loss) on investment securities	(6,836)	(710)	(18,200)	12,123
Unrealized gain (loss) on derivatives	0	24	769	(1,324)
Reclassification adjustment for amounts included in net income	0	289	(385)	513
Total unrealized gain (loss) on derivatives	0	313	384	(811)
Other comprehensive income (loss)	(6,836)	(397)	(17,816)	11,312
Comprehensive Income	$ 36,773	$ 40,949	$ 117,255	$ 104,637

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Consolidated Statements of Changes in Shareholders' Equity - (Unaudited) - USD ($) $ in Thousands	Total	Cumulative Effect, Period of Adoption, Adjustment	Common Stock	Additional Paid In Capital	Retained Earnings	Retained Earnings Cumulative Effect, Period of Adoption, Adjustment	Accumulated Other Comprehensive Income (Loss)
Beginning balance (in shares) at Dec. 31, 2019			33,241,496,000
Beginning balance at Dec. 31, 2019	$ 1,190,681	$ (10,931)	$ 331	$ 482,286	$ 705,105	$ (10,931)	$ 2,959
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net Income	93,325				93,325
Other comprehensive loss, net of tax	11,312						11,312
Stock-based compensation expense	3,874			3,874
Vesting of time based stock awards issued at date of grant, net of shares withheld for payroll taxes (in shares)			(28,218,000)
Vesting of performance based stock awards, net of shares withheld for payroll taxes (in shares)			4,126,000
Time based stock awards granted (in shares)			176,252,000
Issuance of common stock related to employee stock purchase plan (in shares)			17,821,000
Issuance of common stock related to employee stock purchase plan	589			589
Cash dividends declared	(21,280)				(21,280)
Common stock repurchased (in shares)			(1,182,841,000)
Common stock repurchased	(44,168)		$ (11)	(44,157)
Ending balance (in shares) at Sep. 30, 2020			32,228,636,000
Ending balance at Sep. 30, 2020	1,223,402		$ 320	442,592	766,219		14,271
Beginning balance (in shares) at Jun. 30, 2020			32,224,756,000
Beginning balance at Jun. 30, 2020	1,187,895		$ 320	440,934	731,973		14,668
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net Income	41,346				41,346
Other comprehensive loss, net of tax	(397)						(397)
Stock-based compensation expense	1,452			1,452
Vesting of time based stock awards issued at date of grant, net of shares withheld for payroll taxes (in shares)			(3,297,000)
Time based stock awards granted (in shares)			0
Issuance of common stock related to employee stock purchase plan (in shares)			7,177,000
Issuance of common stock related to employee stock purchase plan	206			206
Cash dividends declared	(7,100)				(7,100)
Ending balance (in shares) at Sep. 30, 2020			32,228,636,000
Ending balance at Sep. 30, 2020	$ 1,223,402		$ 320	442,592	766,219		14,271
Beginning balance (in shares) at Dec. 31, 2020	31,779,663		31,779,663,000
Beginning balance at Dec. 31, 2020	$ 1,240,892		$ 315	427,016	798,061		15,500
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net Income	135,071				135,071
Other comprehensive loss, net of tax	(17,816)						(17,816)
Stock-based compensation expense	5,814			5,814
Vesting of time based stock awards issued at date of grant, net of shares withheld for payroll taxes (in shares)			(23,755,000)
Vesting of time based stock awards issued at date of grant, net of shares withheld for payroll taxes	0		$ 1	(1)
Vesting of performance based stock awards, net of shares withheld for payroll taxes (in shares)			15,686,000
Time based stock awards granted (in shares)			179,172,000
Issuance of common stock related to employee stock purchase plan (in shares)			9,767,000
Issuance of common stock related to employee stock purchase plan	327			327
Cash dividends declared	(31,914)				(31,914)
Common stock repurchased (in shares)			(13,075,000)
Common stock repurchased	$ (677)		$ 0	(677)
Ending balance (in shares) at Sep. 30, 2021	31,947,458		31,947,458,000
Ending balance at Sep. 30, 2021	$ 1,331,697		$ 316	432,479	901,218		(2,316)
Beginning balance (in shares) at Jun. 30, 2021			31,961,573,000
Beginning balance at Jun. 30, 2021	1,306,336		$ 316	431,103	870,397		4,520
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net Income	43,609				43,609
Other comprehensive loss, net of tax	(6,836)						(6,836)
Stock-based compensation expense	1,990			1,990
Vesting of time based stock awards issued at date of grant, net of shares withheld for payroll taxes (in shares)			(2,756,000)
Time based stock awards granted (in shares)			250,000
Cash dividends declared	(12,788)				(12,788)
Common stock repurchased (in shares)			(11,609,000)
Common stock repurchased	$ (615)			(615)
Ending balance (in shares) at Sep. 30, 2021	31,947,458		31,947,458,000
Ending balance at Sep. 30, 2021	$ 1,331,697		$ 316	$ 432,479	$ 901,218		$ (2,316)

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Consolidated Statements of Changes in Shareholders' Equity - (Unaudited) (Parenthetical) - $ / shares	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2019
Statement of Stockholders' Equity [Abstract]
Cash dividends declared (in dollars per share)	$ 0.40	$ 0.22	$ 1.00	$ 0.66
Accounting Standards Update [Extensible List]					Accounting Standards Update 2019-11 [Member]

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Consolidated Statements of Cash Flows - (Unaudited) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
Cash Flows From Operating Activities:
Net Income	$ 135,071	$ 93,325
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses	(14,409)	40,654
Provision for unfunded commitments	(487)	974
Depreciation and amortization	4,795	3,515
Gains on sale of loans	(11,988)	(16,249)
Gains on sale of GNMA loans	0	(2,443)
Securities premium amortization (discount accretion), net	3,152	5,345
Origination of loans held for sale	(929,090)	(862,171)
Proceeds from sale of loans held for sale	975,870	856,043
Net increase in cash surrender value of BOLI	(1,429)	(1,655)
Deferred income tax (benefit) expense	0	(6,559)
Net gain on sale of other real estate owned	(148)	(1,180)
Net gain on sale of investment securities	(2,058)	(1,650)
Stock-based compensation expense	5,814	3,874
Net tax benefits from stock compensation	0	99
(Increase) decrease in other assets	(29,667)	(45,493)
Increase (decrease) in other liabilities	89,348	41,156
Net cash provided by operating activities	224,774	107,585
Cash Flows From Investing Activities:
Purchases of available-for-sale investment securities	(1,059,189)	(465,119)
Proceeds from maturities of available-for-sale securities	233,366	208,264
Proceeds from sale/call of available-for-sale securities	164,569	130,265
Purchases of Federal Reserve and Federal Home Loan Bank stock	(158)	(9,116)
Sale of Federal Reserve and Federal Home Loan Bank stock	6,169	4,250
Proceeds from sale of SBA PPP loans	170,154	0
Net change in loans	727,021	(343,665)
Net change in premises and equipment	(4,973)	(445)
Net cash used in investing activities	236,959	(475,566)
Cash Flows From Financing Activities:
Increase in deposits	479,285	954,394
Net change in customer repurchase agreements	2,675	(6,687)
Increase in short-term borrowings	0	50,000
Proceeds from long-term borrowings	0	50,293
Repayment of long-term borrowings	(200,000)	0
Proceeds from issuance of common stock	0	0
Proceeds from employee stock purchase plan	327	564
Common stock repurchased	(677)	(44,168)
Cash dividends paid	(31,914)	(21,280)
Net cash provided by financing activities	249,696	983,116
Net Decrease In Cash and Cash Equivalents	711,429	615,135
Cash and Cash Equivalents at Beginning of Period	1,789,055	241,973
Cash and Cash Equivalents at End of Period	2,500,484	857,108
Supplemental Cash Flows Information:
Interest paid	36,831	59,011
Income taxes paid	42,986	29,850
Non-Cash Investing Activities
Initial recognition of operating lease right-of-use assets	(10,168)	998
Transfers from loans to other real estate owned	148	3,500
Change in fair value of cash flow hedges	(516)	0
Change in fair value of investments	$ 24,495	$ 0

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Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2021

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

Basis of Presentation

The Consolidated Financial Statements include the accounts of Eagle Bancorp, Inc. and its subsidiaries (the “Company”). Active subsidiaries include: EagleBank (the “Bank”), Eagle Insurance Services, LLC, Bethesda Leasing, LLC, and Landroval Municipal Finance, Inc., with all significant intercompany transactions eliminated.

The Consolidated Financial Statements of the Company included herein are unaudited. The Consolidated Financial Statements reflect all adjustments, consisting of normal recurring accruals that in the opinion of management, are necessary to present fairly the results for the periods presented. The amounts as of and for the year ended December 31, 2020 were derived from audited Consolidated Financial Statements. Certain information and note disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). In addition to the “Critical Accounting Policies” described below, the Company applies the accounting policies contained in Note 1 to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. The Company believes that the disclosures are adequate to make the information presented not misleading. Certain reclassifications have been made to amounts previously reported to conform to the current period presentation. Reclassifications had no effect on prior year net income or shareholders' equity.

Nature of Operations

The Company, through the Bank, conducts a full service community banking business, primarily in Northern Virginia, Suburban Maryland, and Washington, D.C. The primary financial services offered by the Bank include real estate, commercial and consumer lending, as well as traditional deposit and repurchase agreement products. The Bank is also active in the origination and sale of residential mortgage loans, the origination of small business loans, and the origination, securitization and sale of multifamily Federal Housing Administration (“FHA”) loans. The guaranteed portion of small business loans, guaranteed by the Small Business Administration (“SBA”), is typically sold to third party investors in a transaction apart from the loan’s origination. The Bank offers its products and services through eighteen banking offices, five lending centers and various electronic capabilities, including remote deposit services and mobile banking services. Eagle Insurance Services, LLC, a subsidiary of the Bank, offers access to insurance products and services through a referral program with a third party insurance broker. Landroval Municipal Finance, Inc., a subsidiary of the Bank, focuses on lending to municipalities by buying debt on the public market as well as direct purchase issuance. Bethesda Leasing, a subsidiary of the Bank, holds title to repossessed real estate.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates. The allowance for credit losses, the fair value of financial instruments and the status of contingencies are particularly susceptible to significant change.

Risks and Uncertainties

The outbreak of COVID-19 in early 2020 adversely impacted a broad range of industries in which the Company’s customers operate. Vaccinations are readily available to those in the United States and in many other countries. Although management feels we're generally trending in a positive direction and strides have been made in the fight against COVID-19, we remain cautious given the potential for lingering effects of the pandemic, including vaccination efficacy against variants and the speed of vaccination adoption around the country, which could continue to impair some customers' ability to fulfill their financial obligations to the Company. The ongoing pandemic caused significant disruptions in the U.S. economy and disrupted banking and other financial activity in the areas in which the Company operates. While there has been no material adverse impact on the Company’s employees and operations to date, COVID-19 could still potentially create business continuity or credit issues for the Company depending on how much longer the pandemic lasts. Some lingering uncertainty regarding the continued spread of COVID-19 (including new variants) remains. Congress, the President, and the Federal Reserve took several actions designed to cushion the economic fallout. Most notably, the Coronavirus Aid, Relief and Economic Security (“CARES”) Act was signed into law at the end of March 2020 as a $2 trillion legislative package. The goal of the CARES Act

is to prevent a severe economic downturn through various measures, including direct financial aid to American families and economic stimulus to significantly impacted industry sectors. In addition to the general impact of COVID-19, certain provisions of the CARES Act as well as other follow-up stimulus legislative (including the $1.9 trillion "American Rescue Package") and regulatory relief efforts have had a material impact on the Company’s operations.

The Company’s business is dependent upon the willingness and ability of its employees and customers to conduct banking and other financial transactions. The response to control and manage COVID-19 has shown significant progress in many respects. If the response becomes unsuccessful as a result of vaccine efficacy against variants or delays in critical mass adoption of available vaccines, the Company could experience a material adverse effect on its business, financial condition, results of operations and cash flows. While it is not possible to know the full universe or extent that the impact of COVID-19, and resulting measures to curtail its spread, will have on the Company’s operations, the Company is disclosing potentially material items of which it is aware.

Financial position and results of operations

The Company’s interest income could be reduced due to COVID-19. In keeping with guidance from regulators, the Company has worked with COVID-19 affected borrowers throughout the pandemic to defer their payments, interest, and fees. While interest and fees will still accrue to income, through normal GAAP accounting, should eventual credit losses on these deferred payments emerge, interest income and fees accrued would need to be reversed. In such a scenario, interest income in future periods could be negatively impacted. Although accommodations of this type have slowed significantly, at this time the Company is unable to project the full extent of the materiality of such an impact, but recognizes the breadth of the economic impact may affect its borrowers’ ability to repay in future periods.

Capital and liquidity

While the Company believes that it has sufficient capital to withstand an extended economic recession brought about by COVID-19, its reported and regulatory capital ratios can be adversely impacted by credit losses. While we have adjusted our credit loss reserves in 2021 to reflect improving economic conditions, our reported and regulatory capital ratios could be further impacted by additional credit losses, if the economy experiences further volatility (either due to COVID-19 or otherwise). Additionally, on August 2, 2021, the Company redeemed $150 million in Fixed-to-Floating Subordinated Notes issued on July 26, 2016; discussed further below in Note 8—Long-Term Borrowings. The repayment of the Subordinated Debt reduced regulatory capital ratios at the Bank, but did not reduce regulatory capital ratios at the Company, with the exception of Total Capital to Risk Weighted Assets.

The Company maintains access to multiple sources of liquidity. Wholesale funding markets have remained open to us, and rates for short term funding have recently been low. If funding costs were to become elevated for an extended period of time, it could have an adverse effect on the Company’s net interest margin. If an extended recession caused large numbers of the Company’s customers to withdraw their funds faster than expected, the Company might become more reliant on volatile or more expensive sources of funding.

Asset valuation

The ongoing COVID-19 pandemic has caused and could continue to cause volatility and potential declines in the Company’s stock price.

Goodwill is subject to impairment testing at the reporting unit level and must be conducted at least annually. The Company performs impairment testing during the fourth quarter of each year or when events or changes in circumstances indicate the assets might be impaired.

Determining the fair value of a reporting unit under the goodwill impairment test is subjective and often involves the use of significant estimates and assumptions. Estimates of fair value are primarily determined using discounted cash flows, market comparisons and recent transactions. These approaches use significant estimates and assumptions including projected future cash flows, discount rates reflecting the market rate of return, projected growth rates and determination and evaluation of appropriate market comparables. Future events could cause the Company to conclude that goodwill or other intangibles have become impaired, which would result in recording an impairment loss. Any resulting impairment loss could have a material adverse impact on the Company's financial condition and results of operations. The Company determined that there were no triggering events and an impairment analysis was not performed as of September 30, 2021. Annual impairment testing of intangibles and goodwill as required by GAAP will be performed in the fourth quarter of 2021.

Business Continuity Plan

The Company implemented a remote working strategy for many of its employees last year in response to the COVID-19 pandemic. The Company did not incur additional material costs related to its continued deployment of the remote working strategy. As of September 30, 2021, the Company did not identify any material operational or internal control risks, or challenges to its ability to maintain its systems and controls, in light of the measures the Company took to prevent the spread of COVID-19. As concerns over the most severe impacts of the pandemic have abated, the Company's non-branch personnel returned to work on a "hybrid" basis starting November 1, 2021. The hybrid workplace allows certain employees to work remotely a portion of the week, but provides that each department has at least 50% of its staff in the office each day. We have established general guidelines for returning to the workplace that include having employees maintain safe distances, staggered work schedules to limit the number of employees in a single location, more frequent cleaning of our facilities and other practices encouraging a safe working environment during this challenging time, including required COVID-19 training programs. The Company does not currently face any material resource constraint through the implementation of its business continuity plans. We are monitoring jurisdictional guidelines and will continue to respond as appropriate.

Lending operations and accommodations to borrowers

In response to the COVID-19 pandemic and consistent with regulatory guidance, we also implemented a short-term loan modification program to provide temporary payment relief to certain borrowers who meet the program's qualifications. As of September 30, 2021, we had ongoing temporary modifications on approximately 6 loans representing approximately $70 million (approximately 1.0% of total loans) in outstanding balances, as compared to 36 loans representing approximately $72 million (approximately 0.9% of total loans) at December 31, 2020. Additionally, none of the deferrals are reflected in the Company's asset quality measures (i.e. non-performing loans) due to the provision of the CARES Act that permits U.S. financial institutions to temporarily suspend the U.S. GAAP requirements to treat such short-term loan modifications as troubled debt restructurings ("TDRs"). Similar provisions have also been confirmed by interagency guidance issued by the federal banking agencies and confirmed with staff members of the Financial Accounting Standards Board.

The Company actively participated in the Paycheck Protection Program (“PPP”), administered by the Small Business Administration (“SBA”). The PPP loans originated by the Bank generally have two-year or five-year terms and earn interest at 1% plus fees. The majority of these loans have been forgiven by the SBA in accordance with the terms of the program. As of September 30, 2021, PPP loans totaled $67.3 million through 109 business loans. The Company understands that loans funded through the PPP program are fully guaranteed by the U.S. government. Should those circumstances change, the Company could be required to provision additional allowance for credit loss through additional credit loss expense charges to earnings. We sold a total of approximately $170 million of PPP loans in the second quarter of 2021. Approximately $171 million in SBA principal was forgiven in the third quarter of 2021. Origination of new loans through the PPP has ceased, and the focus going forward will be on forgiveness.

Credit

The Company is working with customers directly affected by COVID-19. As a result of the current economic environment caused by the COVID-19 pandemic, the Company continues to engage in frequent communication with borrowers to better understand their situation and the challenges faced, allowing it to respond proactively as needs and issues arise. Should economic conditions worsen, the Company could experience increases in its required allowance for credit losses (“ACL”) and record provisions for credit losses. It is possible that the Company’s asset quality measures could worsen at future measurement periods if the effects of COVID-19, or related variants, are prolonged.

Loans

Loans held for investment are stated at the amount of unpaid principal reduced by deferred income (net of costs). Interest on loans is recognized using the simple-interest method on the daily balances of the principal amounts outstanding. Loan origination fees, net of direct loan origination costs, and commitment fees are deferred and amortized as an adjustment to yield over the life of the loan, or over the commitment period, as applicable.

A loan that has been modified or renewed is considered a TDR when two conditions are met: 1) the borrower is experiencing financial difficulty and 2) concessions are made for the borrower's benefit that would not otherwise be considered for a borrower or transaction with similar credit risk characteristics. The Company offers various types of concessions when modifying a loan. Commercial and industrial loans modified in a TDR often involve temporary interest-only payments, term extensions, and converting revolving credit lines to term loans. Additional collateral, a co-borrower, or a guarantor is often

requested. The most common change in terms provided by the Company is an extension of an interest-only term. As of September 30, 2021, all performing TDRs were categorized as interest-only modifications. Refer to the subsection above "Lending operations and accommodations to borrowers" for a discussion on the impact of the CARES Act on TDRs.

A loan is considered past due when a contractually due payment has not been received by the contractual due date. We place a loan on nonaccrual status when there is a clear indication that the borrower’s cash flow may not be sufficient to meet payments as they become due, which is generally when a loan is 90 days past due. When a loan is placed on nonaccrual status, all previously accrued and unpaid interest is reversed as a reduction of current period interest income. Interest income is subsequently recognized on a cash basis as long as the remaining book balance of the asset is deemed to be collectible. If collectability is questionable, then cash payments are applied to principal. A loan is placed back on accrual status when both principal and interest are current and it is probable that we will be able to collect all amounts due (both principal and interest) according to the terms of the loan agreement.

Allowance for Credit Losses- Loans

The ACL is an estimate of the expected credit losses in the loans held for investment portfolio.

Accounting Standards Codification ("ASC") 326, "Financial Instruments--Credit Losses" requires lifetime expected credit losses to be immediately recognized when a financial asset is originated or purchased. The ACL is a valuation account that is deducted from the amortized cost basis of loans to present the net amount expected to be collected on the loans. Loans, or portions thereof, are charged off against the allowance when they are deemed uncollectible.

Reserves on loans that do not share risk characteristics are evaluated on an individual basis (nonaccrual, TDR). Nonaccrual loans are specifically reviewed for loss potential and when deemed appropriate are assigned a reserve based on an individual evaluation. The remainder of the portfolio, representing all loans not assigned an individual reserve, is segregated by call report codes (the quarterly required regulatory report otherwise known as form FFIEC 041) and a loan-level probability of default (“PD”) / Loss Given Default (“LGD”) cash flow method with and using an exposure at default (“EAD”) model is applied. These historical loss rates are then modified to incorporate our reasonable and supportable forecast of future losses at the portfolio segment level.

The ACL also includes an amount for inherent risks not reflected in the historical analyses. Relevant factors include, but are not limited to, concentrations of credit risk, changes in underwriting standards, experience and depth of lending staff, and trends in delinquencies.

The Company uses regression analysis of historical internal and peer data (as Company loss data is insufficient) to determine suitable credit loss drivers to utilize when modeling lifetime PD and LGD. This analysis also determines how expected PD will be impacted by different forecasted levels of the loss drivers.

A similar process is employed to calculate a reserve assigned to off-balance sheet commitments, specifically unfunded loan commitments and letters of credit. Any needed reserve is recorded in reserve for unfunded commitments (“RUC”) on the Consolidated Balance Sheets. For periods beyond which we are able to develop reasonable and supportable forecasts, we revert to the historical loss rate on a straight-line basis over a twelve-month period.

The Company uses a loan level PD/LGD cash flow method with an EAD model to estimate expected credit losses. In accordance with ASC 326, expected credit losses are measured on a collective (pooled) basis for financial assets with similar risk characteristics. The bank groups collectively assessed loans using a call report code. Some unique loan types, such as PPP loans, are grouped separately due to their specific risk characteristics.

For each of these loan segments, the Company generates cash flow projections at the instrument level wherein payment expectations are adjusted for estimated prepayment speeds, PD rates, and LGD rates. The modeling of expected prepayment speeds is based on historical internal data. EAD is based on each instrument's underlying amortization schedule in order to estimate the bank's expected credit loss exposure at the time of the borrower's potential default.

For our cash flow model, management utilizes and forecasts regional unemployment by using a national forecast and estimating a regional adjustment based on historical differences between the two as the loss driver over our reasonable and supportable period of 18 months and reverts back to a historical loss rate over twelve months on a straight-line basis over the loan's remaining maturity. In 2021, unemployment projections have started to recover from elevated levels experienced in 2020 as a result of the COVID-19 pandemic. Unemployment projections materially inform our CECL ("current expected credit loss") economic forecast and resulted in a reduction to our ACL during the nine months ended September 30, 2021. Management

leverages economic projections from reputable and independent third parties to inform its loss driver forecasts over the forecast period.

While our methodology in establishing the ACL attributes portions of the ACL and RUC to the separate loan pools or segments, the entire ACL and RUC is available to absorb credit losses expected in the total loan portfolio and total amount of unfunded credit commitments, respectively. Portfolio segments are used to pool loans with similar risk characteristics and align with our methodology for measuring expected credit losses.

In addition to quantitative amounts as determined by our valuation models, we apply a qualitative factors overlay that incorporates trends and conditions and factors that the models may not fully capture in our judgement. These qualitative adjustments are evaluated quarterly to ensure these economic factor adjustments remain supportable and current.

The following table presents a breakdown of the provision for credit losses included in our Consolidated Statements of Income for the applicable periods (in thousands):

	Three Months Ended				Nine months ended
(dollars in thousands)	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
Provision (credit) for credit losses- loans	$	(8,326)	$	6,589	$	(14,498)	$	40,498
Provision (credit) for credit losses- AFS debt securities	123		18		89		156
Total provision (credit) for credit losses	$	(8,203)	$	6,607	$	(14,409)	$	40,654

A summary of our primary portfolio segments is as follows:

Commercial. The commercial loan portfolio comprises lines of credit and term loans for working capital, equipment, and other business assets across a variety of industries. These loans are used for general corporate purposes including financing working capital, internal growth, and acquisitions; and are generally secured by accounts receivable, inventory, equipment and other assets of our clients’ businesses.

Paycheck Protection Program. The PPP portfolio comprises loans issued under the SBA’s Paycheck Protection Program to support small businesses impacted by the pandemic. PPP loans are approved subject to limited underwriting criteria following SBA guidelines, are unsecured, and are fully guaranteed as to principal and interest by the SBA.

    Income producing commercial real estate. Income producing commercial real estate loans comprise permanent and bridge financing provided to professional real estate owners/managers of commercial and residential real estate projects and properties who have a demonstrated record of past success with similar properties. Collateral properties include apartment buildings, office buildings, hotels, mixed-use buildings, retail, data centers, warehouse, and shopping centers. The primary source of repayment on these loans is generally expected to come from lease or operation of the real property collateral. Income producing commercial real estate loans are impacted by fluctuation in collateral values, as well as rental demand and rates.

Owner occupied – commercial real estate. The owner occupied commercial real estate portfolio comprises permanent financing provided to operating companies and their related entities for the purchase or refinance of real property wherein their business operates. Collateral properties include industrial property, office buildings, religious facilities, mixed-use property, health care and educational facilities.

Real Estate Mortgage – Residential. Real estate mortgage residential loans comprise consumer mortgages for the purpose of purchasing or refinancing first lien real estate loans secured by primary-residence, second-home, and rental residential real property.

Construction – commercial and residential. The construction commercial and residential loan portfolio comprises of loans made to builders and developers of commercial and residential property, for both renovation, new construction, and development projects. Collateral properties include apartment buildings, mixed use property, residential condominiums, single and 1-4 residential property, and office buildings. The primary source of repayment on these loans is expected to come from the sale, permanent financing, or lease of the real property collateral. Construction loans are impacted by fluctuations in collateral values and the ability of the borrower or ultimate purchaser to obtain permanent financing.

Construction – commercial and industrial ("C&I") (owner occupied). The construction C&I (owner occupied) portfolio comprises loans to operating companies and their related entities for new construction or renovation of the real or

leased property in which they operate. Generally these loans contain provisions for conversion to an owner occupied commercial real estate or to a commercial loan after completion of construction. Collateral properties include industrial, healthcare, religious facilities, restaurants, and office buildings.

Home Equity. The home equity portfolio comprises consumer lines of credit and loans secured by subordinate liens on residential real property.

Other Consumer. The other consumer portfolio comprises consumer purpose loans not secured by real property, including personal lines of credit and loans, overdraft lines, and vehicle loans. This category also includes other loan items such as overdrawn deposit accounts as well as loans and loan payments in process.

The Company uses several credit quality indicators to manage credit risk in an ongoing manner. The Company’s primary credit quality indicators use an internal credit risk rating system that categorizes loans into pass, watch, special mention, or classified categories. We have several pass credit grades that are assigned to loans based on varying levels of risk, ranging from credits that are secured by cash or marketable securities, to watch credits which have all the characteristics of an acceptable credit risk but warrant more than the normal level of monitoring. Special mention loans are those that are currently protected by the sound worth and paying capacity of the borrower, but that are potentially weak and constitute an additional credit risk. These loans have the potential to deteriorate to a substandard grade due to the existence of financial or administrative deficiencies. Substandard loans have a well-defined weakness or weaknesses that jeopardizes the liquidation of the debt. They are characterized by the distinct possibility that we will sustain some loss if the deficiencies are not corrected. Some substandard loans are inadequately protected by the sound worth and paying capacity of the borrower and of the collateral pledged and may be considered impaired. Substandard loans can be accruing or can be on nonaccrual depending on the circumstances of the individual loans.

Loans classified as doubtful have all the weaknesses inherent in substandard loans with the added characteristics that the weaknesses make collection in full highly questionable and improbable. The possibility of loss is extremely high. All doubtful loans are on nonaccrual.

Classified loans represent the sum of loans graded substandard and doubtful. The methodology used in the estimation of the allowance, which is performed at least quarterly, is designed to be dynamic and responsive to changes in portfolio credit quality and forecasted economic conditions. Changes are reflected in the allowance on collectively assessed and individually assessed loans as the collectability of classified loans is evaluated with new information. As our portfolio has matured, historical loss ratios have been closely monitored. The review of the appropriateness of the allowance is performed by executive management and presented to management committees, Credit Oversight Committee (which replaced Directors Loan Committee), the Audit Committee, and the Board of Directors. The committees' reports to the Board are part of the Board review on a quarterly basis of our consolidated financial statements. When management determines that foreclosure is probable, and for certain collateral-dependent loans where foreclosure is not considered probable, expected credit losses are based on the estimated fair value of the collateral adjusted for selling costs, when appropriate. A loan is considered collateral-dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral.

Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayments when appropriate. The contractual term excludes expected extensions, renewals and modifications unless management has a reasonable expectation that a loan will be in a trouble debt restructuring.

We do not measure an ACL on accrued interest receivable balances because these balances are written off in a timely manner as a reduction to interest income when loans are placed on nonaccrual status.

Collateral Dependent Financial Assets

Loans that do not share risk characteristics are evaluated on an individual basis. For collateral dependent financial assets where the Company has determined that foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and the Company expects repayment of the financial asset to be provided substantially through the sale of the collateral, the ACL is measured based on the difference between the fair value of the collateral and the amortized cost basis of the asset as of the measurement date. When repayment is expected to be from the operation of the collateral, expected credit losses are calculated as the amount by which the amortized cost basis of the financial asset exceeds the net present value ("NPV") from the operation of the collateral. When repayment is expected to be from the sale of the collateral, expected credit losses are calculated as the amount by which the amortized cost basis of the financial asset exceeds the fair value of the

underlying collateral less estimated cost to sell. The ACL may be zero if the fair value of the collateral at the measurement date exceeds the amortized cost basis of the financial asset.

A loan that has been modified or renewed is considered a TDR when two conditions are met: 1) the borrower is experiencing financial difficulty and 2) concessions are made for the borrower's benefit that would not otherwise be considered for a borrower or transaction with similar credit risk characteristics. The Company’s ACL reflects all effects of a TDR when an individual asset is specifically identified as a reasonably expected TDR. The Company has determined that a TDR is reasonably expected no later than the point when the lender concludes that modification is the best course of action and it is at least reasonably possible that the troubled borrower will accept some form of concession from the lender to avoid a default. Reasonably expected TDRs and executed non-performing TDRs are evaluated individually to determine the required ACL. Refer to the subsection above "Lending operations and accommodations to borrowers" for a discussion on the impact of the CARES Act on TDRs.

Allowance for Credit Losses - Available-for-Sale Debt Securities

For Available for Sale ("AFS") debt securities in an unrealized loss position, the Company first assesses whether it intends to sell, or it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either criterion is met, the security’s amortized cost basis is written down to fair value through income. For AFS debt securities that do not meet the aforementioned criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. When evaluating whether credit loss exists, accounting guidance requires that the Company not consider the length of time that fair value has been less than amortized cost. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security is compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income. The entire amount of an impairment loss is recognized in earnings only when: (1) the Company intends to sell the security; or (2) it is more likely than not that the Company will have to sell the security before recovery of its amortized cost basis; or (3) the Company does not expect to recover the entire amortized cost basis of the security. In all other situations, only the portion of the impairment loss representing the credit loss must be recognized in earnings, with the remaining portion being recognized in shareholders’ equity as comprehensive income, net of deferred taxes. Changes in the allowance for credit losses are recorded as a provision for (or reversal of) credit losses. Losses are charged against the allowance when management believes the uncollectibility of an AFS security is confirmed or when either of the criteria regarding intent or requirement to sell is met. Any impairment not recorded through an allowance for credit loss is recognized in other comprehensive income as a non-credit-related impairment. The majority of available-for-sale debt securities as of September 30, 2021 and December 31, 2020 were issued by U.S. agencies. However, as of September 30, 2021 and December 31, 2020, the allowance for credit losses on AFS securities was $256 thousand and $167 thousand, respectively, based on the Company's determination that part of the unrealized loss positions in AFS corporate and municipal securities could be the result of credit losses. See Note 3 Investment Securities for more information.

We have made a policy election to exclude accrued interest from the amortized cost basis of available-for-sale debt securities and report accrued interest separately in other assets in the Consolidated Balance Sheets. Available-for-sale debt securities are placed on nonaccrual status when we no longer expect to receive all contractual amounts due, which is generally at 90 days past due. Accrued interest receivable is reversed against interest income when a security is placed on nonaccrual status. Accordingly, we do not recognize an allowance for credit loss against accrued interest receivable.

Loan Commitments and Allowance for Credit Losses on Off-Balance Sheet Credit Exposures

Financial instruments include off-balance sheet credit instruments such as commitments to make loans and commercial letters of credit issued to meet customer financing needs. The Company's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for off-balance sheet loan commitments is represented by the contractual amount of those instruments. Such financial instruments are recorded when they are funded.

The Company records a reserve for unfunded commitments (“RUC”) on off-balance sheet credit exposures through a charge to provision for credit loss expense in the Company’s Consolidated Statement of Income. The RUC on off-balance sheet credit exposures is estimated by loan segment at each balance sheet date under the current expected credit loss model using the same methodologies as portfolio loans, taking into consideration the likelihood that funding will occur, and is included in the RUC on the Company’s Consolidated Balance Sheet.

These statements should be read in conjunction with the audited Consolidated Financial Statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

Other New Authoritative Accounting Guidance

Accounting Standards Adopted in 2021:

ASU 2019-12 "Income Taxes (Topic 740)" ("ASU 2019-12") simplifies the accounting for income taxes by removing certain exceptions and improves the consistent application of GAAP by clarifying and amending other existing guidance. ASU 2019-12 became effective for us on January 1, 2021 and did not have a material impact on our consolidated financial statements.

Accounting Standards Pending Adoption:

ASU 2020-4, "Reference Rate Reform (Topic 848)" ("ASU 2020-4") provides optional expedients and exceptions for applying GAAP to loan and lease agreements, derivative contracts, and other transactions affected by the anticipated transition away from LIBOR toward new interest rate benchmarks. For transactions that are modified because of reference rate reform and that meet certain scope guidance (i) modifications of loan agreements should be accounted for by prospectively adjusting the effective interest rate and the modification will be considered "minor" so that any existing unamortized origination fees/ costs would carry forward and continue to be amortized and (ii) modifications of lease agreements should be accounted for as a continuation of the existing agreement with no reassessments of the lease classification and the discount rate or remeasurements of lease payments that otherwise would be required for modifications not accounted for as separate contracts. ASU 2020-4 also provides numerous optional expedients for derivative accounting. ASU 2020-4 is effective March 12, 2020 through December 31, 2022. An entity may elect to apply ASU 2020-4 for contract modifications as of January 1, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements are available to be issued. Once elected for a Topic or an Industry Subtopic within the Codification, the amendments in this ASU must be applied prospectively for all eligible contract modifications for that Topic or Industry Subtopic. We anticipate this ASU will simplify any modifications we execute between the selected start date (yet to be determined) and December 31, 2022 that are directly related to LIBOR transition by allowing prospective recognition of the continuation of the contract, rather than extinguishment of the old contract resulting in writing off unamortized fees/costs. We do not anticipate that the LIBOR transition or the application of this ASU will have material effects on the Company's business operations and consolidated financial statements.

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Cash and Due from Banks

9 Months Ended

Sep. 30, 2021

Cash and Cash Equivalents [Abstract]

Cash and Due from Banks

Cash and Due from Banks

The Company has deposits with other banks for derivative positions it holds, totaling $7.6 million at September 30, 2021 and $5.1 million at December 31, 2020, of which $3.2 million and $4.2 million, respectively, serve as collateral for those derivative positions.

Additionally, the Bank maintains interest bearing balances with the Federal Home Loan Bank ("FHLB") of Atlanta and noninterest bearing balances with domestic correspondent banks to cover associated costs for services they provide to the Bank.

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Investment Securities Available-for-Sale

9 Months Ended

Sep. 30, 2021

Investments, Debt and Equity Securities [Abstract]

Investment Securities Available-for-Sale

Investment Securities Available-for-Sale

Amortized cost and estimated fair value of securities available-for-sale are summarized as follows:

			Gross		Gross		Allowance		Estimated
September 30, 2021	Amortized		Unrealized		Unrealized		for Credit		Fair
(dollars in thousands)	Cost		Gains		Losses		Losses		Value
U.S. treasuries	$	24,838	$	16	$	—	$	—	$	24,854
U.S. agency securities	356,626		806		(3,726)		—		353,706
Residential mortgage backed securities	1,206,867		8,151		(11,882)		—		1,203,136
Municipal bonds	119,511		4,284		(629)		(2)		123,164
Corporate bonds	81,376		783		(304)		(254)		81,601
Other	$	198	—		—		—		198
	$	1,789,416	$	14,040	$	(16,541)	$	(256)	$	1,786,659

			Gross		Gross				Estimated
December 31, 2020	Amortized		Unrealized		Unrealized		Allowance for		Fair
(dollars in thousands)	Cost		Gains		Losses		Credit Losses		Value
U.S. agency securities	$	181,087	$	1,461	$	(627)	$	—	$	181,921
Residential mortgage backed securities	811,328		14,506		(833)		—		825,001
Municipal bonds	102,259		5,872		—		(18)		108,113
Corporate bonds	34,383		1,624		(8)		(149)		35,850
Other	$	198	—		—		—		198
	$	1,129,255	$	23,463	$	(1,468)	$	(167)	$	1,151,083

In addition, at September 30, 2021 and December 31, 2020 the Company held $34.1 million and $40.1 million, respectively, in equity securities in a combination of FRB and FHLB stocks, which are required to be held for regulatory purposes and which are not marketable, and therefore are carried at cost.

Accrued interest on available-for-sale securities totaled $4.5 million and $3.5 million at September 30, 2021 and December 31, 2020, respectively, and was included in other assets in the Consolidated Balance Sheets.

Gross unrealized losses and fair value of available-for-sale securities for which an allowance for credit losses has not been recorded, by length of time that individual securities have been in a continuous unrealized loss position are as follows:

		Less than				12 Months
		12 Months				or Greater				Total
		Estimated				Estimated				Estimated
September 30, 2021	Number of	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(dollars in thousands)	Securities	Value		Losses		Value		Losses		Value		Losses
U. S. agency securities	45	$	200,153	$	3,135	$	47,078	$	591	$	247,231	$	3,726
Residential mortgage backed securities	109	769,073		10,332		48,869		1,550		817,942		11,882
Corporate bonds	6	26,699		304		—		—		26,699		304
Municipal bonds	11	38,213		629		—		—		38,213		629
	171	$	1,034,138	$	14,400	$	95,947	$	2,141	$	1,130,085	$	16,541

		Less than				12 Months
		12 Months				or Greater				Total
		Estimated				Estimated				Estimated
December 31, 2020	Number of	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(dollars in thousands)	Securities	Value		Losses		Value		Losses		Value		Losses
U. S. agency securities	28	$	46,412	$	67	$	41,320	$	560	$	87,732	$	627
Residential mortgage backed securities	35	170,178		782		6,419		51		176,597		833
Corporate bonds	3	5,764		8		—		—		5,764		8
	66	$	222,354	$	857	$	47,739	$	611	$	270,093	$	1,468

The majority of the AFS debt securities in an unrealized loss position as of September 30, 2021, consisted of debt securities issued by U.S. government agencies or U.S. government-sponsored enterprises. These securities carry the explicit and/or implicit guarantee of the U.S. government, are widely recognized as “risk free,” and have a long history of zero credit loss.

As of September 30, 2021, total gross unrealized losses were primarily attributable to changes in interest rates, relative to when the investment securities were purchased, and not due to the credit quality of the investment securities. However, as of September 30, 2021, the Company determined that part of the unrealized loss positions in AFS corporate and municipal securities could be the result of credit losses, and therefore, an allowance for credit losses of $256 thousand was recorded. The weighted average duration of debt securities, which comprise 99.9% of total investment securities, is 4.8 years. If quoted prices are not available, fair value is measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security's credit rating, prepayment assumptions and other factors such as credit loss assumptions. The Company does not intend to sell the investments and it is more likely than not that the Company will not have to sell the securities before recovery of its amortized cost basis, which may be at maturity.

The amortized cost and estimated fair value of investments available-for-sale at September 30, 2021 and December 31, 2020 by contractual maturity are shown in the table below. Contractual maturities for residential mortgage backed securities (“MBS”) are not shown as they may differ significantly from expected maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	September 30, 2021				December 31, 2020
	Amortized		Estimated		Amortized		Estimated
(dollars in thousands)	Cost		Fair Value		Cost		Fair Value
U.S. treasuries
After one year through five years	$	24,838	$	24,854	$	—	$	—
U. S. agency securities maturing:
One year or less	182,385		180,838		53,916		53,906
After one year through five years	97,969		98,179		110,083		110,777
Five years through ten years	76,272		74,689		17,087		17,240
Residential mortgage backed securities	1,206,867		1,203,136		811,328		825,001
Municipal bonds maturing:
One year or less	3,909		3,962		4,329		4,348
After one year through five years	24,618		26,133		26,622		28,272
Five years through ten years	70,937		73,293		69,309		73,389
After ten years	20,047		19,778		2,000		2,121
Corporate bonds maturing:
One year or less	13,928		14,148		5,218		5,220
After one year through five years	38,111		38,384		22,189		23,267
Five years through ten years	29,337		29,323		6,976		7,511
After ten years	—		—		—		—
Other	198		198		198		198
Allowance for Credit Losses	—		(256)		—		(167)
	$	1,789,416	$	1,786,659	$	1,129,255	$	1,151,083

For the nine months ended September 30, 2021, gross realized gains on sales of investments securities were $2.1 million and there were $47 thousand gross realized losses on sales of investment securities. For the nine months ended September 30, 2020, gross realized gains on sales of investments securities were $1.7 million, and there were no gross realized losses on sales of investment securities.

Proceeds from sales and calls of investment securities for the nine months ended September 30, 2021 were $164.6 million compared to $130.3 million for the same period in 2020.

The carrying value of securities pledged as collateral for certain government deposits, securities sold under agreements to repurchase, and certain lines of credit with correspondent banks at September 30, 2021 and December 31, 2020 was $240.2 million and $268.4 million, respectively, which is well in excess of required amounts in order to operationally provide significant reserve amounts for new business. As of September 30, 2021 and December 31, 2020, there were no holdings of securities of any one issuer, other than the U.S. Government and U.S. agency securities, which exceeded ten percent of shareholders’ equity.

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Mortgage Banking Derivatives

9 Months Ended

Sep. 30, 2021

Mortgage Banking Derivatives

Mortgage Banking Derivatives

Mortgage Banking DerivativesAs part of its mortgage banking activities, the Bank enters into interest rate lock commitments, which are commitments to originate loans where the interest rate on the loan is determined prior to funding and the customers have locked into that interest rate. The Bank then locks in the loan and interest rate with an investor and commits to deliver the loan if settlement occurs (“best efforts”) or commits to deliver the locked loan in a binding (“mandatory”) delivery program with an investor. Certain loans under interest rate lock commitments are covered under forward sales contracts of mortgage backed securities. Forward sales contracts of MBS are recorded at fair value with changes in fair value recorded in noninterest income. Interest rate lock commitments and commitments to deliver loans to investors are considered derivatives. The market value of interest rate lock commitments and best efforts contracts are not readily ascertainable with precision because they are not actively traded in stand-alone markets. The Bank determines the fair value of interest rate lock commitments and delivery contracts by measuring the fair value of the underlying asset, which is impacted by current interest rates, taking into consideration the probability that the interest rate lock commitments will close or will be funded.

Certain additional risks arise from these forward delivery contracts in that the counterparties to the contracts may not be able to meet the terms of the contracts. The Bank does not expect any counterparty to any MBS to fail to meet its obligation. Additional risks inherent in mandatory delivery programs include the risk that, if the Bank does not close the loans subject to interest rate risk lock commitments, it will still be obligated to deliver MBS to the counterparty under the forward sales agreement. Should this be required, the Bank could incur significant costs in acquiring replacement loans or MBS and such costs could have an adverse effect on mortgage banking operations.

The fair value of the mortgage banking derivatives is recorded as a freestanding asset or liability with the change in value being recognized in current earnings during the period of change.

The Bank has mortgage banking derivative financial instruments that are included in other assets, and are related to its interest rate lock commitments. The notional value of the mortgage banking derivative financial instruments was $137.0 million at September 30, 2021 and $367.7 million at December 31, 2020. The fair value of these mortgage banking derivative instruments was $1.6 million at September 30, 2021 and at $5.2 million at December 31, 2020.

Included in gain on sale of loans for the three and nine months ended September 30, 2021 there was a $21 thousand net loss relating to mortgage banking derivative instruments as compared to a net loss of $145 thousand and $309 thousand for the three and nine months ended September 30, 2020, respectively.

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Loans and Allowance for Credit Losses

9 Months Ended

Sep. 30, 2021

Receivables [Abstract]

Loans and Allowance for Credit Losses

Loans and Allowance for Credit Losses

The Bank makes loans to customers primarily in the Washington, D.C. metropolitan area and surrounding communities. A substantial portion of the Bank’s loan portfolio consists of loans to businesses secured by real estate and other business assets.

Loans, net of unamortized net deferred fees, at September 30, 2021 and December 31, 2020 are summarized by type as follows:

	September 30, 2021				December 31, 2020
(dollars in thousands)	Amount		%		Amount		%
Commercial	$	1,289,215	19 %		$	1,437,433	19	%
PPP loans	67,311		1 %		454,771		6	%
Income producing - commercial real estate	3,337,303		49	%	3,687,000		47	%
Owner occupied - commercial real estate	977,617		14 %		997,694		13	%
Real estate mortgage - residential	76,259		1 %		76,592		1	%
Construction - commercial and residential	824,133		12 %		873,261		11	%
Construction - C&I (owner occupied)	222,366		3 %		158,905		2	%
Home equity	55,527		1 %		73,167		1	%
Other consumer	1,132		—		1,389		—
Total loans	6,850,863		100	%	7,760,212		100	%
Less: allowance for credit losses	(82,906)				(109,579)
Net loans (1)	$	6,767,957			$	7,650,633

________________________________________

(1)Excludes accrued interest receivable of $40.0 million and $46.0 million at September 30, 2021 and December 31, 2020, respectively, which is recorded in other assets.

Unamortized net deferred fees amounted to $22.7 million and $30.8 million at September 30, 2021 and December 31, 2020, respectively.

As of September 30, 2021 and December 31, 2020, the Bank serviced $115 million and $124 million, respectively, of multifamily FHA loans, SBA loans and other loan participations that are not reflected as loan balances on the Consolidated Balance Sheets.

Loan Origination / Risk Management

Specific loan reserves are established based upon credit and/or collateral risks on an individual loan basis. The remainder of the portfolio, representing all loans not assigned an individual reserve, is segregated by call report codes and a loan-level PD/LGD cash flow method using an EAD model is applied. The loss rates are then modified to incorporate our reasonable and supportable forecast of future losses at the portfolio segment level, as well as any necessary qualitative adjustments.

The composition of the Company’s loan portfolio is heavily weighted toward commercial real estate, both owner occupied and income producing real estate. At September 30, 2021, owner occupied - commercial real estate and construction – C&I (owner occupied) represent approximately 17% of the loan portfolio. At September 30, 2021, non-owner occupied commercial real estate and real estate construction represented approximately 61% of the loan portfolio. The combined owner occupied and commercial real estate and construction loans represent approximately 78% of the loan portfolio. Real estate also serves as collateral for loans made for other purposes, resulting in 80% of all loans being secured by real estate. These loans are underwritten to mitigate lending risks typical of this type of loan such as declines in real estate values, changes in borrower cash flow and general economic conditions. The Bank typically requires a maximum loan to value of 80% and minimum cash flow debt service coverage of 1.15 to 1.0. Personal guarantees may be required, but may be limited. In making real estate commercial mortgage loans, the Bank generally requires that interest rates adjust not less frequently than five years.

The Company is also an active traditional commercial lender providing loans for a variety of purposes, including working capital, equipment and account receivable financing. This loan category represents approximately 19 % of the loan portfolio at September 30, 2021 and was generally variable or adjustable rate. Personal guarantees are generally required, but may be limited. Non-PPP SBA loans represent approximately 1% of the commercial loan category. In originating SBA loans, the Company assumes the risk of non-payment on the unguaranteed portion of the credit as well as potential recourse to the SBA guarantees. The Company generally sells the guaranteed portion of the loan generating noninterest income from the gains on sale, as well as servicing income on the portion participated. SBA loans are subject to the same cash flow analyses as other commercial loans. SBA loans are subject to a maximum loan size established by the SBA as well as internal loan size guidelines.

Approximately 1 % of the loan portfolio at September 30, 2021 consists of PPP loans to eligible customers. PPP loans are expected to primarily be repaid via forgiveness provisions (under the CARES Act and subsequent legislation) from the SBA. These loans are fully guaranteed as to principal and interest by the SBA and ultimately by the full faith and credit of the U.S. Government; as a result, they were approved utilizing different underwriting standards than the Bank's other commercial loans. PPP loans are included in the CECL model but do not carry an allowance for credit loss due to the aforementioned government guarantees.

Approximately 1% of the loan portfolio at September 30, 2021 consists of home equity loans and lines of credit and other consumer loans. These credits, while making up a small portion of the loan portfolio, demand the same emphasis on underwriting and credit evaluation as other types of loans advanced by the Bank.

Approximately 1 % of the loan portfolio consists of residential mortgage loans. The repricing duration of these loans was 21 months at September 30, 2021. These credits represent first liens on residential property loans originated by the Bank. While the Bank’s general practice is to originate and sell (servicing released) loans made by its Residential Lending department, from time to time certain loan characteristics do not meet the requirements of third party investors and these loans are instead maintained in the Bank’s portfolio until they are resold to another investor at a later date or mature.

Loans are secured primarily by duly recorded first deeds of trust or mortgages. In some cases, the Bank may accept a recorded junior trust position. In general, borrowers will have a proven ability to build, lease, manage and/or sell a commercial or residential project and demonstrate satisfactory financial condition. Additionally, an equity contribution toward the project is customarily required.

Construction loans require that the financial condition and experience of the general contractor and major subcontractors be satisfactory to the Bank. Guaranteed, fixed price contracts are required whenever appropriate, along with payment and performance bonds or completion bonds for larger scale projects.

Loans intended for residential land acquisition, lot development and construction are made on the premise that the land: 1) is or will be developed for building sites for residential structures, and 2) will ultimately be utilized for construction or

improvement of residential zoned real properties, including the creation of housing. Residential development and construction loans will finance projects such as single family subdivisions, planned unit developments, townhouses, and condominiums. Residential land acquisition, development and construction loans generally are underwritten with a maximum term of 36 months, including extensions approved at origination.

Commercial land acquisition and construction loans are secured by real property where loan funds will be used to acquire land and to construct or improve appropriately zoned real property for the creation of income producing or owner user commercial properties. Borrowers are generally required to put equity into each project at levels determined by the appropriate approval authority. Commercial land acquisition and construction loans generally are underwritten with a maximum term of 24 months.

Substantially all construction draw requests must be presented in writing on American Institute of Architects documents and certified either by the contractor, the borrower and/or the borrower’s architect. Each draw request shall also include the borrower’s soft cost breakdown certified by the borrower or their Chief Financial Officer. Prior to an advance, the Bank or its contractor inspects the project to determine that the work has been completed, to justify the draw requisition.

Commercial permanent loans are generally secured by improved real property which is generating income in the normal course of operation. Debt service coverage, assuming stabilized occupancy, must be satisfactory to support a permanent loan. The debt service coverage ratio is ordinarily at least 1.15 to 1.0. As part of the underwriting process, debt service coverage ratios are stress tested assuming a 200 basis point increase in interest rates from their current levels.

Commercial permanent loans generally are underwritten with a term not greater than 10 years or the remaining useful life of the property, whichever is lower. The preferred term is between 5 to 7 years, with amortization to a maximum of 25 years.

The Company’s loan portfolio includes acquisition, development and construction (“ADC”) real estate loans including both investment and owner occupied projects. ADC loans amounted to $1.4 billion at September 30, 2021. A portion of the ADC portfolio, both speculative and non-speculative, includes loan-funded interest reserves at origination. ADC loans that provide for the use of interest reserves represent approximately 57.5% of the outstanding ADC loan portfolio at September 30, 2021. The decision to establish a loan-funded interest reserve is made upon origination of the ADC loan and is based upon a number of factors considered during underwriting of the credit including: (1) the feasibility of the project; (2) the experience of the sponsor; (3) the creditworthiness of the borrower and guarantors; (4) the borrower equity contribution; and (5) the level of collateral protection. When appropriate, an interest reserve provides an effective means of addressing the cash flow characteristics of a properly underwritten ADC loan. The Company recognizes that one of the risks inherent in the use of interest reserves is the potential masking of underlying problems with the project and/or the borrower’s ability to repay the loan. In order to mitigate these inherent risks, the Company employs a series of reporting and monitoring mechanisms on all ADC loans, whether or not an interest reserve is provided, including: (1) construction and development timelines which are monitored on an ongoing basis which track the progress of a given project to the timeline projected at origination; (2) a construction loan administration department independent of the lending function; (3) third party independent construction loan inspection reports; (4) monthly interest reserve monitoring reports detailing the balance of the interest reserves approved at origination and the days of interest carry represented by the reserve balances as compared to the then current anticipated time to completion and/or sale of speculative projects; and (5) quarterly commercial real estate construction meetings among senior Company management, which includes monitoring of current and projected real estate market conditions. If a project has not performed as expected, it is not the customary practice of the Company to increase loan-funded interest reserves.

The following tables detail activity in the allowance for credit losses by portfolio segment for the three and nine months ended September 30, 2021 and 2020. PPP loans are excluded from these tables since they do not carry an allowance for credit loss, as these loans are fully guaranteed as to principal and interest by the SBA, whose guarantee is backed by the full faith and credit of the U.S. Government. Allocation of a portion of the allowance to one category of loans does not restrict the use of the allowance to absorb losses in other categories.

					Income Producing -				Owner Occupied -				Real Estate				Construction -
					Commercial				Commercial				Mortgage -				Commercial and				Home				Other
(dollars in thousands)	Commercial				Real Estate				Real Estate				Residential				Residential				Equity				Consumer		Total
Three Months Ended September 30, 2021
Allowance for credit losses:
Balance at beginning of period	$	21,348			$	45,970			$	12,995			$	882			$	10,427			$	897			$	41	$	92,560
Loans charged-off	(1,999)				—				—				—				—				—				(1)		(2,000)
Recoveries of loans previously charged-off	81				97				—				—				493				—				1		672
Net loans charged-off	(1,918)		—		97		—		—		—		—		—		493		—		—		—		—		(1,328)
Provision for credit losses	(2,503)				(4,636)				(1,050)				172				(179)				(129)				(1)		(8,326)
Ending balance	$	16,927	$	—	$	41,431	$	—	$	11,945	$	—	$	1,054	$	—	$	10,741	$	—	$	768	$	—	$	40	$	82,906
Nine Months Ended September 30, 2021
Allowance for credit losses:
Balance at beginning of period	$	26,569			$	55,385			$	14,000			$	1,020			$	11,529			$	1,039			$	37	$	109,579
Loans charged-off	(7,691)				(5,216)				—				—				(206)				—				(1)		(13,114)
Recoveries of loans previously charged-off	326				97				—				—				499								17		939
Net loans (charged-off) recoveries	(7,365)				(5,119)				—				—				293				—				16		(12,175)
Provision for credit losses- loans	(2,277)				(8,835)				(2,055)				34				(1,081)				(271)				(13)		(14,498)
Ending balance	$	16,927			$	41,431			$	11,945			$	1,054			$	10,741			$	768			$	40	$	82,906
As of September 30, 2021
Allowance for credit losses:
Individually evaluated for impairment	$	3,198			$	5,439			$	—			$	501			$	—			$	165			$	—	$	9,303
Collectively evaluated for impairment	13,729				35,992				11,945				553				10,741				603				40		73,603
Ending balance	$	16,927			$	41,431			$	11,945			$	1,054			$	10,741			$	768			$	40	$	82,906
Three Months Ended September 30, 2020
Allowance for credit losses:
Balance at beginning of period	28,078				51,863				12,341				1,550				13,808				1,112				44		108,796
Loans charged-off	(187)				(3,750)				(20)				—				(1,179)				(92)				—		(5,228)
Recoveries of loans previously charged-off	45				—				—				—				—				—				13		58
Net loans (charged-off) recoveries	(142)				(3,750)		—		(20)		—		—		—		(1,179)		—		(92)		—		13		(5,170)
Provision for credit losses- loans	(712)				7,327				769				321				(1,088)				(13)				(15)		6,589
Ending balance	27,224				55,440				13,090		—		1,871		—		11,541		—		1,007		—		42		110,215
Nine Months Ended September 30, 2020
Allowance for credit losses:
Balance at beginning of period, prior to adoption of ASC 326	$	18,832			$	29,265			$	5,838			$	1,557			$	17,485			$	656			$	25	$	73,658
Impact of adopting ASC 326	892				11,230				4,674				(301)				(6,143)				245				17		$	10,614
Loans charged-off	(7,332)				(4,300)				(20)				—				(2,947)				(92)				—		(14,691)
Recoveries of loans previously charged-off	116				—				—				—				—				—				20		136
Net loans (charged-off) recoveries	(7,216)				(4,300)				(20)				—				(2,947)				(92)				20		(14,555)
Provision for credit losses- loans	14,716				19,245				2,598				615				3,146				198				(20)		40,498
Ending balance	$	27,224			$	55,440			$	13,090			$	1,871			$	11,541			$	1,007			$	42	$	110,215
As of September 30, 2020
Allowance for credit losses:
Individually evaluated for impairment	$	9,593			$	5,999			$	670			$	1,148			$	204			$	—			$	3	$	17,617
Collectively evaluated for impairment	17,631				49,441				12,420				723				11,337				1,007				39		92,598
Ending balance	$	27,224			$	55,440			$	13,090			$	1,871			$	11,541			$	1,007			$	42	$	110,215

We recorded a reversal of $8.2 million and a positive $6.6 million provision for credit losses (inclusive of the PCL on loans and AFS debt securities) for the three months ended September 30, 2021 and 2020, respectively, under CECL. We recorded a reversal of $14.4 million and a positive $40.7 million provision for credit losses for the nine months ended September 30, 2021 and 2020, respectively, under CECL. We recorded $1.3 million and $5.2 million in net charge-offs during

the three months ended September 30, 2021 and 2020, respectively. We also recorded $12.2 million and $14.6 million in net charge-offs during the nine months ended September 30, 2021 and 2020, respectively.

A loan is considered collateral-dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral.

The following table presents the amortized cost basis of collateral-dependent loans by class of loans as of September 30, 2021 and December 31, 2020:

(dollars in thousands)	Business/Other Assets		Real Estate
September 30, 2021
Commercial	$	3,281	$	9,936
Income producing - commercial real estate	3,193		20,867
Owner occupied - commercial real estate	—		1,593
Real estate mortgage - residential	—		1,781
Construction - commercial and residential	—		—
Home equity	190		366
Other consumer	—		—
Total	$	6,664	$	34,543

(dollars in thousands)	Business/Other Assets		Real Estate
December 31, 2020
Commercial	$	11,326	$	4,026
Income producing - commercial real estate	3,193		15,686
Owner occupied - commercial real estate	—		23,159
Real estate mortgage - residential	—		2,932
Construction - commercial and residential	—		206
Home equity	—		415
Other consumer	—		—
Total	$	14,519	$	46,424

Credit Quality Indicators

The Company uses several credit quality indicators to manage credit risk in an ongoing manner. The Company’s primary credit quality indicators inform an internal credit risk rating system that categorizes loans into pass, watch, special mention, or classified categories. Credit risk ratings are applied individually to those classes of loans that have significant or unique credit characteristics that benefit from a case-by-case evaluation. These are typically loans to businesses or individuals in the classes which comprise the commercial portfolio segment. Groups of loans that are underwritten and structured using standardized criteria and characteristics, such as statistical models (e.g., credit scoring or payment performance), are typically risk rated and monitored collectively. These are typically loans to individuals in the classes which comprise the consumer portfolio segment.

The following are the definitions of the Company’s credit quality indicators:

Pass:	Loans in all classes that comprise the commercial and consumer portfolio segments that are not adversely rated, are contractually current as to principal and interest, and are otherwise in compliance with the contractual terms of the loan agreement. Management believes that there is a low likelihood of loss related to those loans that are considered pass.
Watch:	Loan paying as agreed with generally acceptable asset quality; however the obligor’s performance has not met expectations. Balance sheet and/or income statement has shown deterioration to the point that the obligor could not sustain any further setbacks. Credit is expected to be strengthened through improved obligor performance and/or additional collateral within a reasonable period of time.
Special Mention:	Loans in the classes that comprise the commercial portfolio segment that have potential weaknesses that deserve management’s close attention. If not addressed, these potential weaknesses may result in deterioration of the repayment prospects for the loan. The special mention credit quality indicator is not used for classes of loans that comprise the consumer portfolio segment. Management believes that there is a moderate likelihood of some loss related to those loans that are considered special mention.
Classified:	Classified (a) Substandard – Loans inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the company will sustain some loss if the deficiencies are not corrected. Loss potential, while existing in the aggregate amount of substandard loans, does not have to exist in individual loans classified substandard.
	Classified (b) Doubtful – Loans that have all the weaknesses inherent in a loan classified substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. The possibility of loss is extremely high, but because of certain important and reasonably specific pending factors, which may work to the advantage and strengthening of the assets, its classification as an estimated loss is deferred until its more exact status may be determined.

Based on the most recent analysis performed, amortized cost basis of loans by risk category, class and year of origination is as follows:

September 30, 2021 (dollars in thousands)	Prior		2017		2018	2019	2020	2021	Total
Commercial
Pass	407,791		190,479		211,058	129,448	103,135	164,058	1,205,969
Watch	14,162		8,798		17,857	6,721	7,927	2,959	58,424
Special Mention	980		9,952		381	98	—	—	11,411
Substandard	10,267		695		2,217	232	—	—	13,411
Total	433,200	—	209,924	—	231,513	136,499	111,062	167,017	1,289,215
PPP loans
Pass	—	—	—	—	—	—	32,381	34,930	67,311
Total	—	—	—	—	—	—	32,381	34,930	67,311
Income producing - commercial real estate
Pass	708,822		287,984		610,727	514,416	418,980	306,458	2,847,387
Watch	66,069		73,753		—	43,739	34,859	—	218,420
Special Mention	101,687		—		42,244	51,969	—	—	195,900
Substandard	61,542		—		8,512	5,542	—	—	75,596
Total	938,120	—	361,737	—	661,483	615,666	453,839	306,458	3,337,303
Owner occupied - commercial real estate
Pass	383,943		132,292		131,088	71,524	44,465	40,718	804,030
Watch	23,960		3,234		93,035	23,968	—	—	144,197
Special Mention	—		—		—	2,133	—	—	2,133
Substandard	23,512		—		—	3,745	—	—	27,257
Total	431,415	—	135,526	—	224,123	101,370	44,465	40,718	977,617

Real estate mortgage - residential
Pass	15,047				7,284				13,409		16,703		3,999		14,770		71,212
Watch	3,265				—				—		—		—		—		3,265
Substandard	1,698				—				—		84		—		—		1,782
Total	20,010		—		7,284		—		13,409		16,787		3,999		14,770		76,259
Construction - commercial and residential
Pass	60,130				160,792				185,229		128,722		181,470		60,289		776,632
Watch	506				43,913				—		3,082		—		—		47,501
Substandard	—		—						—		—				—		—
Total	60,636		—		204,705		—		185,229		131,804		181,470		60,289		824,133
Construction - C&I (owner occupied)																	—
Pass	21,522				52,731				23,581		30,809		57,911		647		187,201
Watch	685				396				3,254		15,112		15,718		—		35,165
Substandard	—				—				—		—		—		—		—
Total	22,207		—		53,127		—		26,835		45,921		73,629		647		222,366
Home Equity																	—
Pass	25,402				5,832				1,782		2,644		9,443		8,943		54,046
Watch	879				—				—		—		—		—		879
Substandard	556				—				—		46		—		—		602
Total	26,837		—		5,832		—		1,782		2,690		9,443		8,943		55,527
Other Consumer																	—
Pass	936				24				46		33		24		63		1,126
Substandard	6				—				—		—		—		—		6
Total	942		—		24		—		46		33		24		63		1,132
Total Recorded Investment	$	1,933,367	$	—	$	978,159	$	—	$	1,344,420	$	1,050,770	$	910,312	$	633,835	6,850,863
December 31, 2020 (dollars in thousands)	Prior				2016				2017		2018		2019		2020		Total
Commercial
Pass	323,660				111,886				249,541		211,551		164,166		227,095		1,287,899
Watch	31,903				5,315				19,145		21,013		7,740		7,979		93,095
Special Mention	4,969				1,692				8,969		3,385		5,599		2,169		26,783
Substandard	17,679				5,803				1,820		3,525		829		—		29,656
Total	378,211				124,696				279,475		239,474		178,334		237,243		1,437,433
PPP loans
Pass	—				—				—		—		—		454,771		454,771
Total	—				—				—		—		—		454,771		454,771
Income producing - commercial real estate																	—
Pass	560,915				347,946				397,953		622,276		643,388		512,387		3,084,865
Watch	152,367				62,912				91,636		89,852		44,555		34,195		475,517
Special Mention	213				—				—		—		51,969		—		52,182
Substandard	58,555				800				4,656		4,883		5,542		—		74,436
Total	772,050				411,658				494,245		717,011		745,454		546,582		3,687,000
Owner occupied - commercial real estate
Pass	343,371				100,272				111,996		136,644		59,681		49,584		801,548
Watch	16,014				5,011				2,640		10,338		15,501		—		49,504
Special Mention	418				—				—		83,110		19,091		—		102,619
Substandard	28,228				784				1,908		2,048		10,151		904		44,023
Total	388,031				106,067				116,544		232,140		104,424		50,488		997,694
Real estate mortgage - residential
Pass	16,310				2,693				10,199		12,746		18,209		10,116		70,273
Watch	1,996				699				—		728		—		—		3,423
Substandard	1,198				1,698				—		—		—		—		2,896

Total	19,504		5,090		10,199		13,474		18,209		10,116		76,592
Construction - commercial and residential
Pass	21,290		60,486		266,788		297,480		105,679		71,297		823,020
Watch	929		—		42,751		3,448		—		—		47,128
Special Mention	12		—		—		2,895		—		—		2,907
Substandard	—		—		206		—		—		—		206
Total	22,231		60,486		309,745		303,823		105,679		71,297		873,261
Construction - C&I (owner occupied)
Pass	8,278		10,476		6,637		30,340		22,209		40,101		118,041
Watch	3,573		—		2,118		4,935		—		—		10,626
Special Mention	124		—		—		—		14,436		15,678		30,238
Total	11,975		10,476		8,755		35,275		36,645		55,779		158,905
Home Equity
Pass	33,226		4,493		8,227		7,827		4,224		12,924		70,921
Watch	1,596		—		—		—		—		—		1,596
Substandard	603		—		—		—		47		—		650
Total	35,425		4,493		8,227		7,827		4,271		12,924		73,167
Other Consumer
Pass	929		190		64		74		94		31		1,382
Substandard	7		—		—		—		—		—		7
Total	936		190		64		74		94		31		1,389
Total Recorded Investment	$	1,628,363	$	723,156	$	1,227,254	$	1,549,098	$	1,193,110	$	1,439,231	$	7,760,212

The Company’s credit quality indicators are generally updated annually; however, credits rated watch or below are reviewed more frequently.

Nonaccrual and Past Due Loans

As part of the Company's comprehensive loan review process, management committees carefully evaluate loans that are past-due 30 days or more. The committees make a thorough assessment of the conditions and circumstances surrounding each delinquent loan. The Bank’s loan policy requires that loans be placed on nonaccrual if they are 90 days past-due, unless they are well secured and in the process of collection. Additionally, Credit Administration specifically analyzes the status of development and construction projects, sales activities and utilization of interest reserves in order to carefully and prudently assess potential increased levels of risk requiring additional reserves.

The table presents, by class of loan, an aging analysis and the recorded investments in loans past due as of September 30, 2021 and December 31, 2020:

			Loans		Loans		Loans						Total Recorded
	Current		30-59 Days		60-89 Days		90 Days or		Total Past				Investment in
(dollars in thousands)	Loans		Past Due		Past Due		More Past Due		Due Loans		Nonaccrual		Loans
September 30, 2021
Commercial	$	1,276,100	$	96	$	872	$	—	$	968	$	12,147	$	1,289,215
PPP loans	64,004		3,307		—		—		3,307		—		67,311
Income producing - commercial real estate	3,322,370		—		—		—		—		14,933		3,337,303
Owner occupied - commercial real estate	972,632		579		2,813		—		3,392		1,593		977,617
Real estate mortgage - residential	74,241		—		—		—		—		2,018		76,259
Construction - commercial and residential	821,051		—		3,082		—		3,082		—		824,133
Construction - C&I (owner occupied)	221,463		903		—		—		903		—		222,366
Home equity	54,575		127		269		—		396		556		55,527
Other consumer	1,080		52		—		—		52		—		1,132
Total	$	6,807,516	$	5,064	$	7,036	$	—	$	12,100	$	31,247	$	6,850,863
December 31, 2020
Commercial	$	1,394,244	$	6,411	$	21,426	$	—	$	27,837	$	15,352	$	1,437,433
PPP loans	454,771		—		—		—		—		—		454,771
Income producing - commercial real estate	3,616,207		—		51,913		—		51,913		18,880		3,687,000
Owner occupied - commercial real estate	960,364		10,630		3,542		—		14,172		23,158		997,694
Real estate mortgage – residential	72,231		1,430		—		—		1,430		2,931		76,592
Construction - commercial and residential	869,723		2,992		340		—		3,332		206		873,261
Construction- C&I (owner occupied)	158,905		—		—		—		—		—		158,905
Home equity	67,732		467		4,552		—		5,019		416		73,167
Other consumer	1,367		21		1		—		22		—		1,389
Total	$	7,595,544	$	21,951	$	81,774	$	—	$	103,725	$	60,943	$	7,760,212

The following presents the nonaccrual loans as of September 30, 2021 and December 31, 2020:

	September 30, 2021
	Nonaccrual with		Nonaccrual with		Total
	No Allowance		an Allowance		Nonaccrual
(dollars in thousands)	for Credit Loss		for Credit Loss		Loans
Commercial	$	7,113	$	5,034	$	12,147
Income producing - commercial real estate	4,620		10,313		14,933
Owner occupied - commercial real estate	1,593		—		1,593
Real estate mortgage - residential	84		1,934		2,018
Construction - commercial and residential	—		—		—
Home equity	366		190		556
Total (1)(2)	$	13,776	$	17,471	$	31,247

	December 31, 2020
	Nonaccrual with		Nonaccrual with		Total
	No Allowance		an Allowance		Nonaccrual
(dollars in thousands)	for Credit Loss		for Credit Loss		Loans
Commercial	$	3,263	$	12,089	$	15,352
Income producing - commercial real estate	6,500		12,380		18,880
Owner occupied - commercial real estate	18,941		4,217		23,158
Real estate mortgage - residential	1,234		1,697		2,931
Construction - commercial and residential	—		206		206
Home equity	416		—		416
Total (1)(2)	$	30,354	$	30,589	$	60,943

Note

(1)Excludes TDRs that were performing under their restructured terms totaling $10.2 million at September 30, 2021 and $10.5 million at December 31, 2020.

(2)Gross interest income of $1.4 million and $2.6 million would have been recorded for the nine months ended September 30, 2021 and September 30, 2020, respectively, if nonaccrual loans shown above had been current and in accordance with their original terms, while $23 thousand and $282 thousand interest income was actually recorded on such loans for the nine months ended September 30, 2021 and 2020 respectively. See Note 1 to the Consolidated Financial Statements for a description of the Company’s policy for placing loans on nonaccrual status.

Modifications

A modification of a loan constitutes a TDR when the borrower is experiencing financial difficulty and the modification constitutes a concession. The Company offers various types of concessions when modifying a loan. Commercial and industrial loans modified in a TDR often involve temporary interest-only payments, term extensions, and converting revolving credit lines to term loans. Additional collateral, a co-borrower, or a guarantor is often requested. The most common change in terms provided by the Company is an extension of an interest-only term. As of September 30, 2021, all performing TDRs were categorized as interest-only modifications.

Loans modified in a TDR for the Company may have the financial effect of increasing the specific allowance associated with the loan. An allowance for impaired consumer and commercial loans that have been modified in a TDR is measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s observable market price, or the estimated fair value of the collateral, less any selling costs, if the loan is collateral dependent. Management exercises significant judgment in developing these estimates.

In response to the COVID-19 pandemic and its economic impact to our customers, we implemented a short-term modification program that complies with the CARES Act and ASC 310-40 to provide temporary payment relief to those borrowers directly impacted by COVID-19 who were not more than 30 days past due as of December 31, 2019. This program allows for a deferral of payments for 90 days, which we extended for an additional 90 days, for a maximum of 180 days on a cumulative and successive basis. The deferred payments along with interest accrued during the deferral period are due and payable on the maturity date. As of September 30, 2021, we had ongoing temporary modifications on approximately 6 loans representing approximately $70 million (approximately 1.0% of total loans) in outstanding balances, as compared to 36 loans representing approximately $72 million (approximately 0.9% of total loans) at December 31, 2020. Additionally, none of the deferrals are reflected in the Company's asset quality measures (i.e. non-performing loans) due to the provision of the CARES Act that permits U.S. financial institutions to temporarily suspend the GAAP requirements to treat such short-term loan modifications as TDR. Similar provisions have also been confirmed by interagency guidance issued by the federal banking agencies and confirmed with staff members of the Financial Accounting Standards Board.

The following table presents by class, the recorded investment of loans modified in TDRs held by the Company for the periods ended September 30, 2021 and 2020.

	September 30, 2021
				Income		Owner
	Number			Producing -		Occupied -		Construction -
	of			Commercial		Commercial		Commercial
(dollars in thousands)	Contracts	Commercial		Real Estate		Real Estate		Real Estate		Total
Troubled debt restructurings
Restructured accruing	5	$	1,069	$	9,126	$	—	$	—	$	10,195
Restructured nonaccruing	2	—		6,342		—		—		6,342
Total	7	$	1,069	$	15,468	$	—	$	—	$	16,537
Specific allowance		$	146	$	3,225	$	—	$	—	$	3,371
Restructured and subsequently defaulted		$	—	$	6,342	$	—	$	—	$	6,342

	September 30, 2020
				Income		Owner
	Number			Producing -		Occupied -		Construction -
	of			Commercial		Commercial		Commercial
(dollars in thousands)	Contracts	Commercial		Real Estate		Real Estate		Real Estate		Total
Troubled debt restructurings
Restructured accruing	7	$	1,297	$	9,188	$	37	$	—	$	10,522
Restructured nonaccruing	4	138		6,342		2,370		—		8,850
Total	11	$	1,435	$	15,530	$	2,407	$	—	$	19,372
Specific allowance		$	227	$	629	$	—	$	—	$	856
Restructured and subsequently defaulted		$	138	$	11,161	$	2,370	$	—	$	13,669

The Company had seven TDRs at September 30, 2021 totaling approximately $16.5 million. Five of these loans totaling approximately $10.2 million are performing under their modified terms as of September 30, 2021.

For the first nine months of 2021 there were no performing TDR loans that defaulted on their modified terms; in the first nine months of 2020, two performing TDR loans, with a balance of $6.3 million, defaulted on their modified terms and were placed on nonaccrual status.

A default is considered to have occurred once the TDR is past due 90 days or more or it has been placed on nonaccrual status. For the nine months ended September 30, 2021, one previously nonperforming restructured loan had its collateral sold and all principal collected along with partial collection of delinquent interest; in addition, one restructured loan purchased as part of the 2014 acquisition of Virginia Heritage Bank has now had its full carrying value collected, while additional payments will recover previously written off principal and interest, and one nonperforming restructured loan was charged off. No similar

transactions occurred during the three months ended September 30, 2021. During the nine months ended September 30, 2021 and 2020, no loans were re-underwritten and removed from TDR status. Loans modified in a TDR are closely monitored for delinquency as an early indicator of possible future default. If loans modified in a TDR subsequently default, the Company evaluates the loan for possible further impairment. The allowance may be increased, adjustments may be made in the allocation of the allowance or partial charge-offs may be taken to further write-down the carrying value of the loan. For the nine months ended September 30, 2021 there were no loans modified in a TDR. For the nine months ended September 30, 2020 there were two loans modified in a TDR with a balance of $572 thousand.

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Leases

9 Months Ended

Sep. 30, 2021

Leases [Abstract]

Leases

Leases

A lease is defined as a contract that conveys the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration. On January 1, 2019, the Company adopted ASU No. 2016-2 “Leases” (Topic 842) and has adopted all subsequent ASUs that modified Topic 842. For the Company, Topic 842 primarily affected the accounting treatment for operating lease agreements in which the Company is the lessee.

Substantially all of the leases in which the Company is the lessee are comprised of real estate property for branch offices, ATM locations, and corporate office space. Substantially all of our leases are classified as operating leases, and as such, were previously not recognized on the Company’s Consolidated Balance Sheets. With the adoption of Topic 842, operating lease agreements were required to be recognized on the Consolidated Balance Sheets as a right-of-use (“ROU”) asset and a corresponding lease liability.

As of September 30, 2021, the Company had $30.1 million of operating lease ROU assets and $34.3 million of operating lease liabilities on the Company’s Consolidated Balance Sheets. As of December 31, 2020, the Company had $25.2 million of operating lease ROU assets and $28.0 million of operating lease liabilities on the Company’s Consolidated Balance Sheets. The Company elects not to recognize ROU assets and lease liabilities arising from short-term leases, leases with initial terms of twelve months or less, or equipment leases (deemed immaterial) on the Consolidated Balance Sheets.

The leases contain terms and conditions of options to extend or terminate the lease which are recognized as part of the ROU assets and lease liabilities when an economic benefit to exercise the option exists and there is a 90% probability that the Company will exercise the option. If these criteria are not met, the options are not included in ROU assets and lease liabilities.

As of September 30, 2021, our leases do not contain material residual value guarantees or impose restrictions or covenants related to dividends or the Company’s ability to incur additional financial obligations. As of September 30, 2021, there was one lease that has been signed but did not yet commence as of the reporting date that created significant rights and obligations for the Company.

The following table presents lease costs and other lease information.

	Three Months Ended								Nine Months Ended
(dollars in thousands)	September 30, 2021				September 30, 2020				September 30, 2021		September 30, 2020
Lease Cost
Operating Lease Cost (Cost resulting from lease payments)	$	1,960			$	2,248			$	6,132	$	6,253
Variable Lease Cost (Cost excluded from lease payments)	205				202				678		720
Sublease Income	(117)				(87)				(291)		(261)
Net Lease Cost	$	2,048			$	2,363			$	6,519	$	6,712
Operating Lease - Operating Cash Flows (Fixed Payments)	$	1,992			$	2,229			$	6,344	$	6,648
	September 30, 2021				December 31, 2020
Right-of-Use Assets - Operating Leases	$	30,080			$	25,237
Weighted Average Lease Term - Operating Leases	6.22			yrs	6.20			yrs
Weighted Average Discount Rate - Operating Leases	3.14		%		4.00		%

Future minimum payments for operating leases with initial or remaining terms of more than one year as of September 30, 2021 were as follows:

(dollars in thousands)
Twelve Months Ended:
September 30, 2022	$	1,910
September 30, 2023	4,517
September 30, 2024	6,550
September 30, 2025	5,792
September 30, 2026	4,815
Thereafter	12,097
Total Future Minimum Lease Payments	35,681
Amounts Representing Interest	(1,336)
Present Value of Net Future Minimum Lease Payments	$	34,345

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Other Derivatives

9 Months Ended

Sep. 30, 2021

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Other Derivatives

Other Derivatives

The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of its assets and liabilities and the use of derivative financial instruments.

Cash Flow Hedges of Interest Rate Risk

The Company uses interest rate swap agreements to assist in its interest rate risk management. The Company’s objective in using interest rate derivatives designated as cash flow hedges is to add stability to interest expense and to better manage its exposure to interest rate movements. To accomplish this objective, the Company utilizes interest rate swaps as part of its interest rate risk management strategy intended to mitigate the potential risk of rising interest rates on the Bank’s cost of funds. The notional amounts of the interest rate swaps designated as cash flow hedges do not represent amounts exchanged by the counterparties, but rather, the notional amount is used to determine, along with other terms of the derivative, the amounts to be exchanged between the counterparties. The interest rate swaps are designated as cash flow hedges and involve the receipt of variable rate amounts from one counterparty in exchange for the Company making fixed payments. The Company’s intent is to hedge its exposure to the variability in potential future interest rate conditions on existing financial instruments.

For derivatives designated as cash flow hedges, changes in the fair value of the derivative are initially reported in other comprehensive income (outside of earnings), net of tax, and subsequently reclassified to earnings when the hedged transaction affects earnings. The Company assesses the effectiveness of each hedging relationship by comparing the changes in cash flows of the derivative hedging instrument with the changes in cash flows of the designated hedged transactions.

The Company's sole designated cash flow hedge matured during April 2021. Thus, as of September 30, 2021 and December 31, 2020, the Company had zero and one, respectively, designated cash flow hedge interest rate swap transaction outstanding associated with the Company's variable rate deposits. Amounts reported in accumulated other comprehensive income related to designated cash flow hedge derivatives were reclassified to interest income/expense as interest payments were made/received on the Company’s variable-rate assets/liabilities.

Non-designated Hedges

Derivatives not designated as hedges are not speculative and result from a service the Company provides to certain customers. The Company executes interest rate caps and swaps with commercial banking customers to facilitate their respective risk management strategies. Those interest rate swaps are simultaneously hedged by offsetting derivatives that the Company executes with a third party, such that the Company minimizes its net risk exposure resulting from such transactions. As the interest rate derivatives associated with this program do not meet the strict hedge accounting requirements, changes in the fair value of both the customer derivatives and the offsetting derivatives are recognized directly in earnings.

The Company entered into credit risk participation agreements ("RPAs") with institutional counterparties, under which the Company assumes its pro-rata share of the credit exposure associated with a borrower's performance related to interest rate derivative contracts. The fair value of RPAs is calculated by determining the total expected asset or liability exposure of the derivatives to the borrowers and applying the borrowers' credit spread to that exposure. Total expected exposure incorporates both the current and potential future exposure of the derivatives, derived from using observable inputs, such as yield curves and volatilities.

Credit-risk-related Contingent Features

The Company has agreements with each of its derivative counterparties that contain a provision where if the Company defaults on any of its indebtedness, then the Company could also be declared in default on its derivative obligations.

The Company is exposed to credit risk in the event of nonperformance by the interest rate derivative counterparty. The Company minimizes this risk by entering into derivative contracts with only large, stable financial institutions, and the Company has not experienced, and does not expect, any losses from counterparty nonperformance on the interest rate derivatives. The Company monitors counterparty risk in accordance with the provisions of ASC Topic 815, "Derivatives and Hedging." In addition, the interest rate derivative agreements contain language outlining collateral-pledging requirements for each counterparty.

The interest rate derivative agreements detail: 1) that collateral be posted when the market value exceeds certain threshold limits associated with the secured party’s exposure; 2) if the Company defaults on any of its indebtedness (including default where repayment of the indebtedness has not been accelerated by the lender), then the Company could also be declared in default on its derivative obligations; 3) if the Company fails to maintain its status as a well-capitalized institution then the counterparty could terminate the derivative positions and the Company would be required to settle its obligations under the agreements.

The table below identifies the balance sheet category and fair value of the Company’s designated cash flow hedge derivative instruments and non-designated hedges as of September 30, 2021 and December 31, 2020. The Company has a minimum collateral posting threshold with its derivative counterparty. If the Company had breached any provisions under the agreement at September 30, 2021, it could have been required to settle its obligations under the agreement at the termination value.

	September 30, 2021					December 31, 2020
(dollars in thousands)	Notional Amount		Fair Value		Balance Sheet Category	Fair Value		Balance Sheet Category
Derivatives not designated as hedging instruments
Interest rate product	$	239,248	$	4,955	Other Assets	$	3,491	Other Assets
Mortgage banking derivatives	137,223		1,575		Other Assets	5,213		Other Assets
	$	376,471	$	6,530	Other Assets	$	8,704	Other Assets
Derivatives designated as hedging instruments
Interest rate product	$	—	$	—	Other Liabilities	$	516	Other Liabilities
Derivatives not designated as hedging instruments
Interest rate product	$	239,248	$	5,110	Other Liabilities	$	3,653	Other Liabilities
Other Contracts	26,542		63		Other Liabilities	118		Other Liabilities
	$	265,790	$	5,173	Other Liabilities	$	3,771	Other Liabilities
Liability position on balance sheet			$	5,173		$	4,287
Cash and other collateral			$	3,244		4,168
Net Derivative Amounts			$	1,929		$	119

The table below presents the pre-tax net gains (losses) of the Company’s designated cash flow hedges for the three and nine months ended September 30, 2021 and 2020:

The Effect of Fair Value and Cash Flow Hedge Accounting on Accumulated Other Comprehensive Income
	Amount of Gain (Loss) Recognized				Location of Gain or (Loss)	Amount of Gain or (Loss)
					Recognized from	Reclassified from Accumulated
Derivatives in Subtopic	in OCI on Derivative				Accumulated Other	OCI into Income
815-20 Hedging	Three Months Ended September 30,				Comprehensive Income into	Three Months Ended September 30,
Relationships (dollars in thousands)	2021		2020		Income	2021		2020
Derivatives in Cash Flow Hedging Relationships
Interest Rate Products	$	—	$	31	Interest Expense	$	—	$	(389)
Total	$	—	$	31		$	—	$	(389)
					Location of Gain or (Loss)	Amount of Gain or (Loss)
	Amount of Gain (Loss) Recognized				Recognized from	Reclassified from Accumulated
Derivatives in Subtopic	in OCI on Derivative				Accumulated Other	OCI into Income
815-20 Hedging	Nine Months Ended September 30,				Comprehensive Income into	Nine Months Ended September 30,
Relationships (dollars in thousands)	2021		2020		Income	2021		2020
Derivatives in Cash Flow Hedging Relationships
Interest Rate Products	$	1	$	(1,517)	Interest Expense	$	(445)	$	(755)
Total	$	1	$	(1,517)		$	(445)	$	(755)

    The table below presents the effect of the Company’s derivative financial instruments on the Consolidated Statements of Income for the three and nine months ended September 30, 2021 and 2020:

The Effect of Fair Value and Cash Flow Hedge Accounting on the Statements of Income
	Location and Amount of Gain or (Loss) Recognized in Income on
	Fair Value and Cash Flow Hedging Relationships (in 000's)
	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
	Interest Expense				Interest Expense
Total amounts of income and expense line items presented in the consolidated statement of income in which the effects of fair value or cash flow hedges are recorded	$	—	$	(389)	$	(445)	$	(755)
Gain or (loss) on cash flow hedging relationships in Subtopic 815-20
Interest contracts
Amount of gain or (loss) reclassified from accumulated other comprehensive income into income	$	—	$	(389)	$	(445)	$	(755)
Amount of gain or (loss) reclassified from accumulated other comprehensive income into income as a result that a forecasted transaction is no longer probable of occurring	$	—	$	—	$	—	$	—
Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income - Included Component	$	—	$	(389)	$	(445)	$	(755)
Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income - Excluded Component	$	—	$	—	$	—	$	—

Effect of Derivatives Not Designated as Hedging Instruments on the Statements of Income
		Amount of Income (Loss)
		Recognized in Income on
	Location of	Derivative
Derivatives Not Designated as Hedging	(Loss) Recognized in	Three Months Ended September 30,				Nine Months Ended September 30,
Instruments under Subtopic 815-20	Income on Derivative	2021		2020		2021		2020
Interest Rate Products	Other income / (expense)	$	277	$	(40)	$	261	$	(326)
Mortgage banking derivatives	Other income / (expense)	1,575		6,015		5,268		6,015
Other Contracts	Other income / (expense)	—		(13)		44		(77)
Total		$	1,852	$	5,962	$	5,573	$	5,612

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Long-Term Borrowings

9 Months Ended

Sep. 30, 2021

Long-term Debt, Unclassified [Abstract]

Long-Term Borrowings

Long-Term Borrowings

The following table presents information related to the Company’s long-term borrowings as of September 30, 2021 and December 31, 2020.

(dollars in thousands)	September 30, 2021		December 31, 2020
Subordinated Notes, 5.75%	$	70,000	$	70,000
Subordinated Notes, 5.0%	—		150,000
FHLB Advance, 1.81%	—		50,000
Less: unamortized debt issuance costs	(361)		(1,923)
Long-term borrowings	$	69,639	$	268,077

On August 5, 2014, the Company completed the sale of $70.0 million of its 5.75% subordinated notes, due September 1, 2024 (the “2024 Notes”). The 2024 Notes were offered to the public at par and qualify as Tier 2 capital for regulatory purposes to the fullest extent permitted under the Basel III Rule capital requirements. The net proceeds were approximately $68.8 million, which includes $1.2 million in deferred financing costs which are being amortized over the life of the 2024 Notes.

On July 26, 2016, the Company completed the sale of $150.0 million of its 5.00% Fixed-to-Floating Rate Subordinated Notes, due August 1, 2026 (the “2026 Notes”). The 2026 Notes were offered to the public at par and qualify as Tier 2 capital for regulatory purposes to the fullest extent permitted under the Basel III Rule capital requirements. The net proceeds were approximately $147.4 million, which includes $2.6 million in deferred financing costs which are being amortized over the life of the 2026 Notes. The Company paid the 2026 Notes in full on August 2, 2021 and accelerated deferred financing costs of $1.3 million on that date.

On February 26, 2020, the Bank borrowed $50 million dollars under its borrowing arrangement with the FHLB at a fixed rate of 1.81% with a maturity date of February 26, 2030 as part of the overall asset liability strategy and to support loan growth. In the first quarter of 2021, we realized a net gain of $911 thousand on the cancellation of this debt.

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Net Income per Common Share

9 Months Ended

Sep. 30, 2021

Earnings Per Share [Abstract]

Net Income per Common Share

Net Income per Common ShareThe calculation of net income per common share for the three and nine months ended September 30, 2021 and 2020 was as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
(dollars and shares in thousands, except per share data)	2021		2020		2021		2020
Basic:
Net income	$	43,609	$	41,346	$	135,071	$	93,325
Average common shares outstanding	31,959		32,229		31,931		32,434
Basic net income per common share	$	1.36	$	1.28	$	4.23	$	2.88
Diluted:
Net income	$	43,609	$	41,346	$	135,071	$	93,325
Average common shares outstanding	31,959		32,229		31,931		32,434
Adjustment for common share equivalents	72		22		62		24
Average common shares outstanding-diluted	32,031		32,251		31,993		32,458
Diluted net income per common share	$	1.36	$	1.28	$	4.22	$	2.88
Anti-dilutive shares	3		26		3		26

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Other Comprehensive Income

9 Months Ended

Sep. 30, 2021

Other Comprehensive Income

Other Comprehensive Income

Other Comprehensive IncomeThe following table presents the components of other comprehensive income (loss) for the three and nine months ended September 30, 2021 and 2020.

(dollars in thousands)	Before Tax		Tax Effect		Net of Tax
Three Months Ended September 30, 2021
Net unrealized gain (loss) on securities available-for-sale	$	(7,682)	$	1,979	$	(5,703)
Less: Reclassification adjustment for net gains (losses) included in net income	(1,519)		386		(1,133)
Total unrealized gain (loss)	(9,201)		2,365		(6,836)
Net unrealized gain (loss) on derivatives	—		—		—
Less: Reclassification adjustment for gain (loss) included in net income	—		—		—
Total unrealized gain (loss)	—		—		—
Other Comprehensive Income (Loss)	$	(9,201)	$	2,365	$	(6,836)
Three Months Ended September 30, 2020
Net unrealized gain (loss) on securities available-for-sale	$	(840)	$	216	$	(624)
Less: Reclassification adjustment for net gains (losses) included in net income	(115)		29		(86)
Total unrealized gain (loss)	(955)		245		(710)
Net unrealized gain (loss) on derivatives	31		(7)		24
Less: Reclassification adjustment for gain (loss) included in net income	389		(100)		289
Total unrealized gain (loss)	420		(107)		313
Other Comprehensive Income (Loss)	$	(535)	$	138	$	(397)
Nine Months Ended September 30, 2021
Net unrealized gain (loss) on securities available-for-sale	$	(22,437)	$	5,771	$	(16,666)
Less: Reclassification adjustment for net gains (losses) included in net income	(2,058)		524		(1,534)
Total unrealized gain (loss)	(24,495)		6,295		(18,200)
Net unrealized loss on derivatives	1,033		(264)		769
Less: Reclassification adjustment for gain (loss) included in net income	(517)		132		(385)
Total unrealized gain (loss)	516		(132)		384
Other Comprehensive Income (Loss)	$	(23,979)	$	6,163	$	(17,816)
Nine Months Ended September 30, 2020
Net unrealized gain (loss) on securities available-for-sale	$	18,402	$	(5,048)	$	13,354
Less: Reclassification adjustment for net gains included in net income	(1,650)		419		(1,231)
Total unrealized gain (loss)	16,752		(4,629)		12,123
Net unrealized gain (loss) on derivatives	(1,986)		662		(1,324)
Less: Reclassification adjustment for gain included in net income	688		(175)		513
Total unrealized gain (loss)	(1,298)		487		(811)
Other Comprehensive Income (Loss)	$	15,454	$	(4,142)	$	11,312

The following table presents the changes in each component of accumulated other comprehensive income (loss), net of tax, for the three and nine months ended September 30, 2021 and 2020.

	Securities				Accumulated Other
	Available				Comprehensive Income
(dollars in thousands)	For Sale		Derivatives		(Loss)
Three Months Ended September 30, 2021
Balance at Beginning of Period	$	4,804	$	(284)	$	4,520
Other comprehensive income before reclassifications	(5,703)		—		(5,703)
Amounts reclassified from accumulated other comprehensive income (loss)	(1,133)		—		(1,133)
Net other comprehensive income during period	(6,836)		—		(6,836)
Balance at End of Period	$	(2,032)	$	(284)	$	(2,316)
	Securities				Accumulated Other
	Available				Comprehensive Income
(dollars in thousands)	For Sale		Derivatives		(Loss)
Three Months Ended September 30, 2020
Balance at Beginning of Period	$	15,942	$	(1,274)	$	14,668
Other comprehensive income before reclassifications	(624)		24		(600)
Amounts reclassified from accumulated other comprehensive loss	(86)		289		203
Net other comprehensive income during period	(710)		313		(397)
Balance at End of Period	$	15,232	$	(961)	$	14,271
	Securities				Accumulated Other
	Available				Comprehensive Income
(dollars in thousands)	For Sale		Derivatives		(Loss)
Nine Months Ended September 30, 2021
Balance at Beginning of Period	$	16,168	$	(668)	$	15,500
Other comprehensive income (loss) before reclassifications	(16,666)		769		(15,897)
Amounts reclassified from accumulated other comprehensive income (loss)	(1,534)		(385)		(1,919)
Net other comprehensive income (loss) during period	(18,200)		384		(17,816)
Balance at End of Period	$	(2,032)	$	(284)	$	(2,316)
	Securities				Accumulated Other
	Available				Comprehensive Income
(dollars in thousands)	For Sale		Derivatives		(Loss)
Nine Months Ended September 30, 2020
Balance at Beginning of Period	$	3,109	$	(150)	$	2,959
Other comprehensive income (loss) before reclassifications	13,354		(1,324)		12,030
Amounts reclassified from accumulated other comprehensive loss	(1,231)		513		(718)
Net other comprehensive income (loss) during period	12,123		(811)		11,312
Balance at End of Period	$	15,232	$	(961)	$	14,271

The following tables present the amounts reclassified out of each component of accumulated other comprehensive income (loss) for the three and nine months ended September 30, 2021 and 2020.

	Amount Reclassified from
	Accumulated Other				Affected Line Item in
Details about Accumulated Other	Comprehensive (Loss) Income				the Statement Where
Comprehensive Income Components	Three Months Ended September 30,				Net Income is Presented
(dollars in thousands)	2021		2020
Realized gain on sale of investment securities	$	1,519	$	115	Gain on sale of investment securities
Interest income derivative deposits	—		(389)		Interest income on deposits
Income tax expense	(386)		71		Income tax expense
Total Reclassifications for the Period	$	1,133	$	(203)	Net Income
	Amount Reclassified from
	Accumulated Other				Affected Line Item in
Details about Accumulated Other	Comprehensive (Loss) Income				the Statement Where
Comprehensive Income Components	Nine Months Ended September 30,				Net Income is Presented
(dollars in thousands)	2021		2020
Realized gain on sale of investment securities	$	2,058	$	1,650	Gain on sale of investment securities
Interest income derivative deposits	517		(688)		Interest income on deposits
Income tax expense	(656)		(244)		Income tax expense
Total Reclassifications for the Period	$	1,919	$	718	Net Income

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Fair Value Measurements

9 Months Ended

Sep. 30, 2021

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

The fair value of an asset or liability is the price that would be received to sell that asset or paid to transfer that liability in an orderly transaction occurring in the principal market (or most advantageous market in the absence of a principal market) for such asset or liability. In estimating fair value, the Company utilizes valuation techniques that are consistent with the market approach, the income approach and/or the cost approach. Such valuation techniques are consistently applied. Inputs to valuation techniques include the assumptions that market participants would use in pricing an asset or liability. ASC Topic 820, “Fair Value Measurements and Disclosures,” establishes a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:

Level 1         Quoted prices in active exchange markets for identical assets or liabilities; also includes certain U.S. Treasury and other U.S. Government and agency securities actively traded in over-the-counter markets.

Level 2         Observable inputs other than Level 1 including quoted prices for similar assets or liabilities, quoted prices in less active markets, or other observable inputs that can be corroborated by observable market data; also includes derivative contracts whose value is determined using a pricing model with observable market inputs or can be derived principally from or corroborated by observable market data. This category generally includes certain U.S. Government and agency securities, corporate debt securities, derivative instruments, and residential mortgage loans held for sale.

Level 3     Unobservable inputs supported by little or no market activity for financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation; also includes observable inputs for single dealer nonbinding quotes not corroborated by observable market data. This category generally includes certain private equity investments, retained interests from securitizations, and certain collateralized debt obligations.

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

The tables below present the recorded amount of assets and liabilities measured at fair value on a recurring basis as of September 30, 2021 and December 31, 2020.

			Significant		Significant
			Other		Other
			Observable		Unobservable
	Quoted Prices		Inputs		Inputs		Total
(dollars in thousands)	(Level 1)		(Level 2)		(Level 3)		(Fair Value)
September 30, 2021
Assets:
Investment securities available-for-sale:
U.S. treasuries	$	—	$	24,854	$	—	$	24,854
U. S. agency securities	—		353,706		—		353,706
Residential mortgage backed securities	—		1,203,136		—		1,203,136
Municipal bonds	—		123,164		—		123,164
Corporate bonds	—		80,101		1,500		81,601
Loans held for sale	—		53,413		—		53,413
Interest rate caps	—		4,882		—		4,882
Mortgage banking derivatives	—		—		1,565		1,565
Total assets measured at fair value on a recurring basis as of September 30, 2021	$	—	$	1,843,256	$	3,065	$	1,846,321
Liabilities:
Interest rate swap derivatives	$	—	$	—	$	—	$	—
Derivative liability	—		73		—		73
Interest rate caps	—		5,037		—		5,037
Total liabilities measured at fair value on a recurring basis as of September 30, 2021	$	—	$	5,110	$	—	$	5,110
December 31, 2020
Assets:
Investment securities available-for-sale:
U. S. agency securities	$	—	$	181,921	$	—	$	181,921
Residential mortgage backed securities	—		825,001		—		825,001
Municipal bonds	—		108,113		—		108,113
Corporate bonds	—		34,350		1,500		35,850
Loans held for sale	—		88,205		—		88,205
Interest rate caps	—		3,413		—		3,413
Mortgage banking derivatives	—		—		5,213		5,213
Total assets measured at fair value on a recurring basis as of December 31, 2020	$	—	$	1,241,003	$	6,713	$	1,247,716
Liabilities:
Interest rate swap derivatives	$	—	$	516	$	—	$	516
Derivative liability	—		118		—		118
Interest rate caps	—		3,574		—		3,574
Total liabilities measured at fair value on a recurring basis as of December 31, 2020	$	—	$	4,208	$	—	$	4,208

Investment securities available-for-sale: Investment securities available-for-sale are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted prices, if available. If quoted prices are not available, fair value is measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions and other factors such as credit loss assumptions. Level 1 securities include those traded on an active exchange such as the New York Stock Exchange. Level 2 securities include U.S. agency debt securities, mortgage backed securities issued by Government Sponsored Entities and municipal bonds. Securities classified as Level 3 include securities in less liquid markets, the carrying amounts approximate the fair value.

Loans held for sale: The Company has elected to carry loans held for sale at fair value. This election reduces certain timing differences in the Consolidated Statement of Income and better aligns with the management of the portfolio from a business perspective. Fair value is derived from secondary market quotations for similar instruments. Gains and losses on sales of residential mortgage loans are recorded as a component of noninterest income in the Consolidated Statements of Income. Gains and losses on sales of multifamily FHA securities are recorded as a component of noninterest income in the Consolidated Statements of Income. As such, the Company classifies loans subjected to fair value adjustments as Level 2 valuation.

The following tables summarize the difference between the aggregate fair value and the aggregate unpaid principal balance for loans held for sale measured at fair value as of September 30, 2021 and December 31, 2020.

	September 30, 2021
			Aggregate Unpaid
(dollars in thousands)	Fair Value		Principal Balance		Difference
Loans held for sale	$	53,413	$	52,554	$	859

	December 31, 2020
			Aggregate Unpaid
(dollars in thousands)	Fair Value		Principal Balance		Difference
Loans held for sale	$	88,205	$	86,551	$	1,654

There were no residential mortgage loans held for sale that were 90 or more days past due or on nonaccrual status as of September 30, 2021 or December 31, 2020.

Interest rate swap derivatives: These derivative instruments consist of interest rate swap agreements, which are accounted for as cash flow hedges under ASC 815. The Company’s derivative position is classified within Level 2 of the fair value hierarchy and is valued using models generally accepted in the financial services industry and that use actively quoted or observable market input values from external market data providers and/or non-binding broker-dealer quotations. The fair value of the derivatives is determined using discounted cash flow models. These models’ key assumptions include the contractual terms of the respective contract along with significant observable inputs, including interest rates, yield curves, nonperformance risk and volatility. Derivative contracts are executed with a Credit Support Annex, which is a bilateral agreement that requires collateral postings when the market value exceeds certain threshold limits. These agreements protect the interests of the Company and its counterparties should either party suffer a credit rating deterioration.

Credit risk participation agreements: The Company enters into credit risk participation agreements (“RPAs”) with institutional counterparties, under which the Company assumes its pro-rata share of the credit exposure associated with a borrower’s performance related to interest rate derivative contracts. The fair value of RPAs is calculated by determining the total expected asset or liability exposure of the derivatives to the borrowers and applying the borrowers’ credit spread to that exposure. Total expected exposure incorporates both the current and potential future exposure of the derivatives, derived from using observable inputs, such as yield curves and volatilities. Accordingly, RPAs fall within Level 2.

Interest rate caps: The Company entered into an interest rate cap agreement ("cap") with an institutional counterparty, under which the Company will receive cash if and when market rates exceed the cap's strike rate. The fair value of the cap is calculated by determining the total expected asset or liability exposure of the derivatives. Total expected exposure incorporates both the current and potential future exposure of the derivative, derived from using observable inputs, such as yield curves and volatilities. Accordingly, the cap falls within Level 2.

Mortgage banking derivatives for loans settled on a mandatory basis: The Company relied on a third-party pricing service to value its mortgage banking derivative financial assets and liabilities, which the Company classifies as a Level 3

valuation. The external valuation model to estimate the fair value of its interest rate lock commitments to originate residential mortgage loans held for sale includes grouping the interest rate lock commitments by interest rate and terms, applying an estimated pull-through rate based on historical experience, and then multiplying by quoted investor prices determined to be reasonably applicable to the loan commitment groups based on interest rate, terms, and rate lock expiration dates of the loan commitment groups. The Company also relies on an external valuation model to estimate the fair value of its forward commitments to sell residential mortgage loans (i.e. an estimate of what the Company would receive or pay to terminate the forward delivery contract based on market prices for similar financial instruments), which includes matching specific terms and maturities of the forward commitments against applicable investor pricing.

Mortgage banking derivative for loans settled best efforts basis: The significant unobservable input (Level 3) used in the fair value measurement of the Company's interest rate lock commitments is the pull through ratio, which represents the percentage of loans currently in a lock position which management estimates will ultimately close. An increase in the pull through ratio (i.e. higher percentage of loans are estimated to close) will increase the gain or loss. The pull through ratio is largely dependent on the loan processing stage that a loan is currently in. The pull through rate is computed by the Company's secondary marketing consultant using historical data and the ratio is periodically reviewed by the Company for reasonableness.

The following is a reconciliation of activity for assets and liabilities measured at fair value based on Significant Other Unobservable Inputs (Level 3):

	Investment		Mortgage Banking
(dollars in thousands)	Securities		Derivatives		Total
Assets:
Beginning balance at January 1, 2021	$	1,500	$	5,213	$	6,713
Realized gain (loss) included in earnings	—		(3,648)		(3,648)
Migrated to level 2 valuation	—		—		—
Ending balance at September 30, 2021	$	1,500	$	1,565	$	3,065
Liabilities:
Beginning balance at January 1, 2021	$	—	$	—	$	—
Ending balance at September 30, 2021	$	—	$	—	$	—

	Investment		Mortgage Banking
(dollars in thousands)	Securities		Derivatives		Total
Assets:
Beginning balance at January 1, 2020	$	10,931	$	280	$	11,211
Realized (loss) gain included in earnings	—		5,735		5,735
Migrated to level 2 valuation	(9,233)		—		(9,233)
Ending balance at September 30, 2020	$	1,698	$	6,015	$	7,713
Liabilities:
Beginning balance at January 1, 2020	$	—	$	66	$	66
Realized gain included in earnings	—		(66)		(66)
Ending balance at September 30, 2020	$	—	$	—	$	—

The investment securities classified as Level 3 consist of one corporate bond of a local banking company which is not publicly traded, and for which the carrying amount approximates fair value.

For Level 3 assets measured at fair value on a recurring or nonrecurring basis as of September 30, 2021and December 31, 2020, the significant unobservable inputs used in the fair value measurements were as follows:

		September 30, 2021						December 31, 2020
(dollars in thousands)	Valuation Technique	Description	Range	Weighted Average (1)		Fair Value		Weighted Average (1)		Fair Value
Mortgage banking derivatives	Pricing Model	Pull Through Rate	84.2% - 87.0%	85.50	%	$	1,565	79.14	%	$	5,213

(1) Unobservable inputs for mortgage banking derivatives were weighted by loan amount.

Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis

The Company measures certain assets at fair value on a nonrecurring basis and the following is a general description of the methods used to value such assets.

At September 30, 2021, substantially all of the Company’s individually evaluated loans were evaluated based upon the fair value of the collateral. In accordance with ASC Topic 820, individually evaluated loans where an allowance is established based on the fair value of collateral require classification in the fair value hierarchy. When the fair value of the collateral is based on an observable market price or a current appraised value, the Company records the loan as nonrecurring Level 2. When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, the Company records the loan as nonrecurring Level 3.

Other real estate owned: Other real estate owned is initially recorded at fair value less estimated selling costs. Fair value is based upon independent market prices, appraised values of the collateral or management’s estimation of the value of the collateral, which the Company classifies as a Level 3 valuation. Assets measured at fair value on a nonrecurring basis are included in the table below:

			Significant		Significant
			Other		Other
			Observable		Unobservable
	Quoted Prices		Inputs		Inputs		Total
(dollars in thousands)	(Level 1)		(Level 2)		(Level 3)		(Fair Value)
September 30, 2021
Commercial	$	—	$	—	$	10,019	$	10,019
Income producing - commercial real estate	—		—		18,621		18,621
Owner occupied - commercial real estate	—		—		1,593		1,593
Real estate mortgage - residential	—		—		1,281		1,281
Construction - commercial and residential	—		—		—		—
Home equity	—		—		391		391
Other consumer	—		—		—		—
Other real estate owned	—		—		5,135		5,135
Total assets measured at fair value on a nonrecurring basis as of September 30, 2021	$	—	$	—	$	37,040	$	37,040

			Significant		Significant
			Other		Other
			Observable		Unobservable
	Quoted Prices		Inputs		Inputs		Total
(dollars in thousands)	(Level 1)		(Level 2)		(Level 3)		(Fair Value)
December 31, 2020
Commercial	$	—	$	—	$	9,285	$	9,285
Income producing - commercial real estate	—		—		21,638		21,638
Owner occupied - commercial real estate	—		—		21,930		21,930
Real estate mortgage - residential	—		—		2,602		2,602
Construction - commercial and residential	—		—		103		103
Home equity	—		—		416		416
Other real estate owned	—		—		4,987		4,987
Total assets measured at fair value on a nonrecurring basis as of December 31, 2020	$	—	$	—	$	60,961	$	60,961

Fair Value of Financial Instruments

The Company discloses fair value information about financial instruments for which it is practicable to estimate the value, whether or not such financial instruments are recognized on the balance sheet. Fair value is the amount at which a financial instrument could be exchanged in a current transaction between willing parties, other than in a forced sale or liquidation, and is best evidenced by quoted market price, if one exists.

Quoted market prices, if available, are shown as estimates of fair value. Because no quoted market prices exist for a portion of the Company’s financial instruments, the fair value of such instruments has been derived based on management’s assumptions with respect to future economic conditions, the amount and timing of future cash flows and estimated discount rates. Different assumptions could significantly affect these estimates. Accordingly, the net realizable value could be materially different from the estimates presented below. In addition, the estimates are only indicative of individual financial instrument values and should not be considered an indication of the fair value of the Company taken as a whole. The estimated fair value of the Company’s financial instruments at September 30, 2021 and December 31, 2020 are as follows:

					Fair Value Measurements
					Quoted Prices (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	Carrying
(dollars in thousands)	Value		Fair Value
September 30, 2021
Assets
Cash and due from banks	$	8,806	$	8,806	$	8,806	$	—	$	—
Federal funds sold	38,934		38,934		—		38,934		—
Interest bearing deposits with other banks	2,452,744		2,452,744		—		2,452,744		—
Investment securities	1,786,659		1,786,659		—		1,785,159		1,500
Accrued interest receivable	40,028		40,028		—		40,028		—
Loans held for sale	53,413		53,413		—		53,413		—
Loans	6,767,957		6,624,261		—		—		6,624,261
Annuity investment	14,206		14,206		—		14,206		—
Mortgage banking derivatives	1,565		1,565		—		—		1,565
Interest rate caps	4,882		4,882		—		4,882		—
Liabilities
Noninterest bearing deposits	2,836,418		2,836,418		—		2,836,418		—
Interest bearing deposits	6,080,567		6,080,567		—		6,080,567		—
Time deposits	751,503		761,212		—		761,212		—
Customer repurchase agreements	29,401		29,401		—		29,401		—
Borrowings	369,639		376,058		—		376,058		—
Interest rate swap derivatives	—		—		—		—		—
Credit risk participation agreement	73		73		—		73		—
Interest rate caps	5,037		5,037		—		5,037		—
December 31, 2020
Assets
Cash and due from banks	$	8,435	$	8,435	$	8,435	$	—	$	—
Federal funds sold	28,200		28,200		—		28,200
Interest bearing deposits with other banks	1,752,420		1,752,420		—		1,752,420
Investment securities	1,150,885		1,150,885		—		1,149,385		1,500
Accrued interest receivable	40,104		40,104		—		40,104		—
Loans held for sale	88,205		88,205		—		88,205		—
Loans	7,650,633		7,608,687		—		—		7,608,687
Annuity investment	14,468		14,468		—		14,468		—
Mortgage banking derivative	5,213		5,213		—		—		5,213
Interest rate caps	3,413		3,413		—		3,413		—
Liabilities
Noninterest bearing deposits	2,809,334		2,809,334		—		2,809,334		—
Interest bearing deposits	756,923		756,923		—		756,923		—
Time deposits	977,760		993,500		—		993,500		—
Customer repurchase agreements	26,726		26,726		—		26,726		—
Borrowings	568,077		575,435		—		575,435		—
Interest rate swap derivatives	516		516		—		516		—
Credit risk participation agreements	118		118		—		118		—
Interest rate caps	3,574		3,574		—		3,574		—

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Legal Contingencies

9 Months Ended

Sep. 30, 2021

Commitments and Contingencies Disclosure [Abstract]

Legal Contingencies

Legal Contingencies

There have been no material changes in the status of the legal proceedings previously disclosed in Part I, Item 3 of the Company's Annual Report on Form 10-K for the year ended December 31, 2020, except as follows. From time to time, the Company and its subsidiaries are involved in various legal proceedings incidental to their business in the ordinary course, including matters in which damages in various amounts are claimed. Based on information currently available, the Company does not believe that the liabilities (if any) resulting from such legal proceedings will have a material effect on the financial position of the Company. However, in light of the inherent uncertainties involved in such matters, ongoing legal expenses or an adverse outcome in one or more of these matters could materially and adversely affect the Company’s financial condition, results of operations or cash flows in any particular reporting period, as well as its reputation.

As previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, on January 25, 2021, the Company entered into a settlement agreement with respect to a previously disclosed shareholder demand letter, covering substantially the same subject matters as the disclosed civil securities class action litigation pending in the SDNY. The letter demanded that the Board undertake an investigation into the Board’s and management’s alleged violations of law and alleged breaches of fiduciary duties, and take appropriate actions following such investigation. On October 4, 2021, the DC Superior Court approved the settlement and dismissed the derivative action complaint. The Company has already begun executing on the terms of the settlement, including the payment of agreed-upon fees and expenses (which were fully covered by the Company’s D&O insurance policy).

In connection with the previously disclosed investigation by the SEC, the Company’s discussions with the Staff have progressed, and the Company continues to engage with the Staff, including senior Staff members, about a potential resolution or settlement of the Staff’s investigation with respect to the Company. The Company is hopeful that these discussions will lead to a timely resolution of the investigation as it relates to the Company and any current employees and directors on a mutually agreeable basis, but there can be no assurance that will be the case. There also can be no assurance that this would result in resolution of any charges against former employees or directors, given the Staff’s ongoing review of the factual record. Any agreements reached by the Company with the Staff would be subject to approval by the Commission, and there can be no assurance that it would be approved. We are unable to predict the outcome of the investigation or these discussions or whether any potential resolution would have a material impact on the Company.

The Company is also continuing discussions with the Staff of the Federal Reserve Board about a potential resolution or settlement of its investigation with respect to the Company. With respect to the other investigations described above, we are unable to predict their duration, scope or outcome.

As previously disclosed, the Company maintains director and officer insurance policies (“D&O Insurance Policies”) that provide coverage for the legal defense costs related to certain of the above-described investigations and litigations. When claims are covered by D&O Insurance Policies, the Company records a corresponding receivable against the incurred legal defense cost expense subject to coverage under the D&O Insurance Policies and then eliminates the receivable and expense when the claim is paid. Subject to any new developments to the above-described investigations and litigations that may occur over the next few months, the Company currently believes there is a possibility that the applicable D&O Insurance Policies may be exhausted as early as the fourth quarter of this year. Once the D&O Insurance Policies are exhausted, the Company will be responsible for paying the defense costs associated with the above-described investigations and litigations for itself and on behalf of any current and former Officers and Directors entitled to indemnification from the Company. Since the commencement of the above-described matters in 2018 through September 30, 2021, the Company’s D&O Insurance carriers have advanced defense cost claims to the Company and its current and former directors and officers in an aggregate of approximately $10 million, excluding the cost of settlements. Because this aggregate amount does not reflect total expenses incurred and includes costs related to certain proceedings that have since settled, this number is not intended to be and should not be used as an estimate of defense costs going forward. The Company cannot predict with any certainty the amount of defense costs that the Company may incur in the future in connection with currently ongoing and any potential future investigations and legal proceedings, as they are dependent on various factors, many of which are outside of the Company’s control.

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Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2021

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The Consolidated Financial Statements include the accounts of Eagle Bancorp, Inc. and its subsidiaries (the “Company”). Active subsidiaries include: EagleBank (the “Bank”), Eagle Insurance Services, LLC, Bethesda Leasing, LLC, and Landroval Municipal Finance, Inc., with all significant intercompany transactions eliminated.

The Consolidated Financial Statements of the Company included herein are unaudited. The Consolidated Financial Statements reflect all adjustments, consisting of normal recurring accruals that in the opinion of management, are necessary to present fairly the results for the periods presented. The amounts as of and for the year ended December 31, 2020 were derived from audited Consolidated Financial Statements. Certain information and note disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). In addition to the “Critical Accounting Policies” described below, the Company applies the accounting policies contained in Note 1 to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. The Company believes that the disclosures are adequate to make the information presented not misleading. Certain reclassifications have been made to amounts previously reported to conform to the current period presentation. Reclassifications had no effect on prior year net income or shareholders' equity.

Nature of Operations

Nature of Operations

The Company, through the Bank, conducts a full service community banking business, primarily in Northern Virginia, Suburban Maryland, and Washington, D.C. The primary financial services offered by the Bank include real estate, commercial and consumer lending, as well as traditional deposit and repurchase agreement products. The Bank is also active in the origination and sale of residential mortgage loans, the origination of small business loans, and the origination, securitization and sale of multifamily Federal Housing Administration (“FHA”) loans. The guaranteed portion of small business loans, guaranteed by the Small Business Administration (“SBA”), is typically sold to third party investors in a transaction apart from the loan’s origination. The Bank offers its products and services through eighteen banking offices, five lending centers and various electronic capabilities, including remote deposit services and mobile banking services. Eagle Insurance Services, LLC, a subsidiary of the Bank, offers access to insurance products and services through a referral program with a third party insurance broker. Landroval Municipal Finance, Inc., a subsidiary of the Bank, focuses on lending to municipalities by buying debt on the public market as well as direct purchase issuance. Bethesda Leasing, a subsidiary of the Bank, holds title to repossessed real estate.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates. The allowance for credit losses, the fair value of financial instruments and the status of contingencies are particularly susceptible to significant change.

Risks and Uncertainties

Risks and Uncertainties

The outbreak of COVID-19 in early 2020 adversely impacted a broad range of industries in which the Company’s customers operate. Vaccinations are readily available to those in the United States and in many other countries. Although management feels we're generally trending in a positive direction and strides have been made in the fight against COVID-19, we remain cautious given the potential for lingering effects of the pandemic, including vaccination efficacy against variants and the speed of vaccination adoption around the country, which could continue to impair some customers' ability to fulfill their financial obligations to the Company. The ongoing pandemic caused significant disruptions in the U.S. economy and disrupted banking and other financial activity in the areas in which the Company operates. While there has been no material adverse impact on the Company’s employees and operations to date, COVID-19 could still potentially create business continuity or credit issues for the Company depending on how much longer the pandemic lasts. Some lingering uncertainty regarding the continued spread of COVID-19 (including new variants) remains. Congress, the President, and the Federal Reserve took several actions designed to cushion the economic fallout. Most notably, the Coronavirus Aid, Relief and Economic Security (“CARES”) Act was signed into law at the end of March 2020 as a $2 trillion legislative package. The goal of the CARES Act

is to prevent a severe economic downturn through various measures, including direct financial aid to American families and economic stimulus to significantly impacted industry sectors. In addition to the general impact of COVID-19, certain provisions of the CARES Act as well as other follow-up stimulus legislative (including the $1.9 trillion "American Rescue Package") and regulatory relief efforts have had a material impact on the Company’s operations.

The Company’s business is dependent upon the willingness and ability of its employees and customers to conduct banking and other financial transactions. The response to control and manage COVID-19 has shown significant progress in many respects. If the response becomes unsuccessful as a result of vaccine efficacy against variants or delays in critical mass adoption of available vaccines, the Company could experience a material adverse effect on its business, financial condition, results of operations and cash flows. While it is not possible to know the full universe or extent that the impact of COVID-19, and resulting measures to curtail its spread, will have on the Company’s operations, the Company is disclosing potentially material items of which it is aware.

Financial position and results of operations

The Company’s interest income could be reduced due to COVID-19. In keeping with guidance from regulators, the Company has worked with COVID-19 affected borrowers throughout the pandemic to defer their payments, interest, and fees. While interest and fees will still accrue to income, through normal GAAP accounting, should eventual credit losses on these deferred payments emerge, interest income and fees accrued would need to be reversed. In such a scenario, interest income in future periods could be negatively impacted. Although accommodations of this type have slowed significantly, at this time the Company is unable to project the full extent of the materiality of such an impact, but recognizes the breadth of the economic impact may affect its borrowers’ ability to repay in future periods.

Capital and liquidity

While the Company believes that it has sufficient capital to withstand an extended economic recession brought about by COVID-19, its reported and regulatory capital ratios can be adversely impacted by credit losses. While we have adjusted our credit loss reserves in 2021 to reflect improving economic conditions, our reported and regulatory capital ratios could be further impacted by additional credit losses, if the economy experiences further volatility (either due to COVID-19 or otherwise). Additionally, on August 2, 2021, the Company redeemed $150 million in Fixed-to-Floating Subordinated Notes issued on July 26, 2016; discussed further below in Note 8—Long-Term Borrowings. The repayment of the Subordinated Debt reduced regulatory capital ratios at the Bank, but did not reduce regulatory capital ratios at the Company, with the exception of Total Capital to Risk Weighted Assets.

The Company maintains access to multiple sources of liquidity. Wholesale funding markets have remained open to us, and rates for short term funding have recently been low. If funding costs were to become elevated for an extended period of time, it could have an adverse effect on the Company’s net interest margin. If an extended recession caused large numbers of the Company’s customers to withdraw their funds faster than expected, the Company might become more reliant on volatile or more expensive sources of funding.

Asset valuation

The ongoing COVID-19 pandemic has caused and could continue to cause volatility and potential declines in the Company’s stock price.

Goodwill is subject to impairment testing at the reporting unit level and must be conducted at least annually. The Company performs impairment testing during the fourth quarter of each year or when events or changes in circumstances indicate the assets might be impaired.

Determining the fair value of a reporting unit under the goodwill impairment test is subjective and often involves the use of significant estimates and assumptions. Estimates of fair value are primarily determined using discounted cash flows, market comparisons and recent transactions. These approaches use significant estimates and assumptions including projected future cash flows, discount rates reflecting the market rate of return, projected growth rates and determination and evaluation of appropriate market comparables. Future events could cause the Company to conclude that goodwill or other intangibles have become impaired, which would result in recording an impairment loss. Any resulting impairment loss could have a material adverse impact on the Company's financial condition and results of operations. The Company determined that there were no triggering events and an impairment analysis was not performed as of September 30, 2021. Annual impairment testing of intangibles and goodwill as required by GAAP will be performed in the fourth quarter of 2021.

Business Continuity Plan

The Company implemented a remote working strategy for many of its employees last year in response to the COVID-19 pandemic. The Company did not incur additional material costs related to its continued deployment of the remote working strategy. As of September 30, 2021, the Company did not identify any material operational or internal control risks, or challenges to its ability to maintain its systems and controls, in light of the measures the Company took to prevent the spread of COVID-19. As concerns over the most severe impacts of the pandemic have abated, the Company's non-branch personnel returned to work on a "hybrid" basis starting November 1, 2021. The hybrid workplace allows certain employees to work remotely a portion of the week, but provides that each department has at least 50% of its staff in the office each day. We have established general guidelines for returning to the workplace that include having employees maintain safe distances, staggered work schedules to limit the number of employees in a single location, more frequent cleaning of our facilities and other practices encouraging a safe working environment during this challenging time, including required COVID-19 training programs. The Company does not currently face any material resource constraint through the implementation of its business continuity plans. We are monitoring jurisdictional guidelines and will continue to respond as appropriate.

Lending operations and accommodations to borrowers

In response to the COVID-19 pandemic and consistent with regulatory guidance, we also implemented a short-term loan modification program to provide temporary payment relief to certain borrowers who meet the program's qualifications. As of September 30, 2021, we had ongoing temporary modifications on approximately 6 loans representing approximately $70 million (approximately 1.0% of total loans) in outstanding balances, as compared to 36 loans representing approximately $72 million (approximately 0.9% of total loans) at December 31, 2020. Additionally, none of the deferrals are reflected in the Company's asset quality measures (i.e. non-performing loans) due to the provision of the CARES Act that permits U.S. financial institutions to temporarily suspend the U.S. GAAP requirements to treat such short-term loan modifications as troubled debt restructurings ("TDRs"). Similar provisions have also been confirmed by interagency guidance issued by the federal banking agencies and confirmed with staff members of the Financial Accounting Standards Board.

The Company actively participated in the Paycheck Protection Program (“PPP”), administered by the Small Business Administration (“SBA”). The PPP loans originated by the Bank generally have two-year or five-year terms and earn interest at 1% plus fees. The majority of these loans have been forgiven by the SBA in accordance with the terms of the program. As of September 30, 2021, PPP loans totaled $67.3 million through 109 business loans. The Company understands that loans funded through the PPP program are fully guaranteed by the U.S. government. Should those circumstances change, the Company could be required to provision additional allowance for credit loss through additional credit loss expense charges to earnings. We sold a total of approximately $170 million of PPP loans in the second quarter of 2021. Approximately $171 million in SBA principal was forgiven in the third quarter of 2021. Origination of new loans through the PPP has ceased, and the focus going forward will be on forgiveness.

Credit

The Company is working with customers directly affected by COVID-19. As a result of the current economic environment caused by the COVID-19 pandemic, the Company continues to engage in frequent communication with borrowers to better understand their situation and the challenges faced, allowing it to respond proactively as needs and issues arise. Should economic conditions worsen, the Company could experience increases in its required allowance for credit losses (“ACL”) and record provisions for credit losses. It is possible that the Company’s asset quality measures could worsen at future measurement periods if the effects of COVID-19, or related variants, are prolonged.

Loans

Loans

Loans held for investment are stated at the amount of unpaid principal reduced by deferred income (net of costs). Interest on loans is recognized using the simple-interest method on the daily balances of the principal amounts outstanding. Loan origination fees, net of direct loan origination costs, and commitment fees are deferred and amortized as an adjustment to yield over the life of the loan, or over the commitment period, as applicable.

A loan that has been modified or renewed is considered a TDR when two conditions are met: 1) the borrower is experiencing financial difficulty and 2) concessions are made for the borrower's benefit that would not otherwise be considered for a borrower or transaction with similar credit risk characteristics. The Company offers various types of concessions when modifying a loan. Commercial and industrial loans modified in a TDR often involve temporary interest-only payments, term extensions, and converting revolving credit lines to term loans. Additional collateral, a co-borrower, or a guarantor is often

requested. The most common change in terms provided by the Company is an extension of an interest-only term. As of September 30, 2021, all performing TDRs were categorized as interest-only modifications. Refer to the subsection above "Lending operations and accommodations to borrowers" for a discussion on the impact of the CARES Act on TDRs.

A loan is considered past due when a contractually due payment has not been received by the contractual due date. We place a loan on nonaccrual status when there is a clear indication that the borrower’s cash flow may not be sufficient to meet payments as they become due, which is generally when a loan is 90 days past due. When a loan is placed on nonaccrual status, all previously accrued and unpaid interest is reversed as a reduction of current period interest income. Interest income is subsequently recognized on a cash basis as long as the remaining book balance of the asset is deemed to be collectible. If collectability is questionable, then cash payments are applied to principal. A loan is placed back on accrual status when both principal and interest are current and it is probable that we will be able to collect all amounts due (both principal and interest) according to the terms of the loan agreement.

Allowance for Credit Losses- Loans

Allowance for Credit Losses- Loans

The ACL is an estimate of the expected credit losses in the loans held for investment portfolio.

Accounting Standards Codification ("ASC") 326, "Financial Instruments--Credit Losses" requires lifetime expected credit losses to be immediately recognized when a financial asset is originated or purchased. The ACL is a valuation account that is deducted from the amortized cost basis of loans to present the net amount expected to be collected on the loans. Loans, or portions thereof, are charged off against the allowance when they are deemed uncollectible.

Reserves on loans that do not share risk characteristics are evaluated on an individual basis (nonaccrual, TDR). Nonaccrual loans are specifically reviewed for loss potential and when deemed appropriate are assigned a reserve based on an individual evaluation. The remainder of the portfolio, representing all loans not assigned an individual reserve, is segregated by call report codes (the quarterly required regulatory report otherwise known as form FFIEC 041) and a loan-level probability of default (“PD”) / Loss Given Default (“LGD”) cash flow method with and using an exposure at default (“EAD”) model is applied. These historical loss rates are then modified to incorporate our reasonable and supportable forecast of future losses at the portfolio segment level.

The ACL also includes an amount for inherent risks not reflected in the historical analyses. Relevant factors include, but are not limited to, concentrations of credit risk, changes in underwriting standards, experience and depth of lending staff, and trends in delinquencies.

The Company uses regression analysis of historical internal and peer data (as Company loss data is insufficient) to determine suitable credit loss drivers to utilize when modeling lifetime PD and LGD. This analysis also determines how expected PD will be impacted by different forecasted levels of the loss drivers.

A similar process is employed to calculate a reserve assigned to off-balance sheet commitments, specifically unfunded loan commitments and letters of credit. Any needed reserve is recorded in reserve for unfunded commitments (“RUC”) on the Consolidated Balance Sheets. For periods beyond which we are able to develop reasonable and supportable forecasts, we revert to the historical loss rate on a straight-line basis over a twelve-month period.

The Company uses a loan level PD/LGD cash flow method with an EAD model to estimate expected credit losses. In accordance with ASC 326, expected credit losses are measured on a collective (pooled) basis for financial assets with similar risk characteristics. The bank groups collectively assessed loans using a call report code. Some unique loan types, such as PPP loans, are grouped separately due to their specific risk characteristics.

For each of these loan segments, the Company generates cash flow projections at the instrument level wherein payment expectations are adjusted for estimated prepayment speeds, PD rates, and LGD rates. The modeling of expected prepayment speeds is based on historical internal data. EAD is based on each instrument's underlying amortization schedule in order to estimate the bank's expected credit loss exposure at the time of the borrower's potential default.

For our cash flow model, management utilizes and forecasts regional unemployment by using a national forecast and estimating a regional adjustment based on historical differences between the two as the loss driver over our reasonable and supportable period of 18 months and reverts back to a historical loss rate over twelve months on a straight-line basis over the loan's remaining maturity. In 2021, unemployment projections have started to recover from elevated levels experienced in 2020 as a result of the COVID-19 pandemic. Unemployment projections materially inform our CECL ("current expected credit loss") economic forecast and resulted in a reduction to our ACL during the nine months ended September 30, 2021. Management

leverages economic projections from reputable and independent third parties to inform its loss driver forecasts over the forecast period.

While our methodology in establishing the ACL attributes portions of the ACL and RUC to the separate loan pools or segments, the entire ACL and RUC is available to absorb credit losses expected in the total loan portfolio and total amount of unfunded credit commitments, respectively. Portfolio segments are used to pool loans with similar risk characteristics and align with our methodology for measuring expected credit losses.

In addition to quantitative amounts as determined by our valuation models, we apply a qualitative factors overlay that incorporates trends and conditions and factors that the models may not fully capture in our judgement. These qualitative adjustments are evaluated quarterly to ensure these economic factor adjustments remain supportable and current.

The following table presents a breakdown of the provision for credit losses included in our Consolidated Statements of Income for the applicable periods (in thousands):

	Three Months Ended				Nine months ended
(dollars in thousands)	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
Provision (credit) for credit losses- loans	$	(8,326)	$	6,589	$	(14,498)	$	40,498
Provision (credit) for credit losses- AFS debt securities	123		18		89		156
Total provision (credit) for credit losses	$	(8,203)	$	6,607	$	(14,409)	$	40,654

A summary of our primary portfolio segments is as follows:

Commercial. The commercial loan portfolio comprises lines of credit and term loans for working capital, equipment, and other business assets across a variety of industries. These loans are used for general corporate purposes including financing working capital, internal growth, and acquisitions; and are generally secured by accounts receivable, inventory, equipment and other assets of our clients’ businesses.

Paycheck Protection Program. The PPP portfolio comprises loans issued under the SBA’s Paycheck Protection Program to support small businesses impacted by the pandemic. PPP loans are approved subject to limited underwriting criteria following SBA guidelines, are unsecured, and are fully guaranteed as to principal and interest by the SBA.

    Income producing commercial real estate. Income producing commercial real estate loans comprise permanent and bridge financing provided to professional real estate owners/managers of commercial and residential real estate projects and properties who have a demonstrated record of past success with similar properties. Collateral properties include apartment buildings, office buildings, hotels, mixed-use buildings, retail, data centers, warehouse, and shopping centers. The primary source of repayment on these loans is generally expected to come from lease or operation of the real property collateral. Income producing commercial real estate loans are impacted by fluctuation in collateral values, as well as rental demand and rates.

Owner occupied – commercial real estate. The owner occupied commercial real estate portfolio comprises permanent financing provided to operating companies and their related entities for the purchase or refinance of real property wherein their business operates. Collateral properties include industrial property, office buildings, religious facilities, mixed-use property, health care and educational facilities.

Real Estate Mortgage – Residential. Real estate mortgage residential loans comprise consumer mortgages for the purpose of purchasing or refinancing first lien real estate loans secured by primary-residence, second-home, and rental residential real property.

Construction – commercial and residential. The construction commercial and residential loan portfolio comprises of loans made to builders and developers of commercial and residential property, for both renovation, new construction, and development projects. Collateral properties include apartment buildings, mixed use property, residential condominiums, single and 1-4 residential property, and office buildings. The primary source of repayment on these loans is expected to come from the sale, permanent financing, or lease of the real property collateral. Construction loans are impacted by fluctuations in collateral values and the ability of the borrower or ultimate purchaser to obtain permanent financing.

Construction – commercial and industrial ("C&I") (owner occupied). The construction C&I (owner occupied) portfolio comprises loans to operating companies and their related entities for new construction or renovation of the real or

leased property in which they operate. Generally these loans contain provisions for conversion to an owner occupied commercial real estate or to a commercial loan after completion of construction. Collateral properties include industrial, healthcare, religious facilities, restaurants, and office buildings.

Home Equity. The home equity portfolio comprises consumer lines of credit and loans secured by subordinate liens on residential real property.

Other Consumer. The other consumer portfolio comprises consumer purpose loans not secured by real property, including personal lines of credit and loans, overdraft lines, and vehicle loans. This category also includes other loan items such as overdrawn deposit accounts as well as loans and loan payments in process.

The Company uses several credit quality indicators to manage credit risk in an ongoing manner. The Company’s primary credit quality indicators use an internal credit risk rating system that categorizes loans into pass, watch, special mention, or classified categories. We have several pass credit grades that are assigned to loans based on varying levels of risk, ranging from credits that are secured by cash or marketable securities, to watch credits which have all the characteristics of an acceptable credit risk but warrant more than the normal level of monitoring. Special mention loans are those that are currently protected by the sound worth and paying capacity of the borrower, but that are potentially weak and constitute an additional credit risk. These loans have the potential to deteriorate to a substandard grade due to the existence of financial or administrative deficiencies. Substandard loans have a well-defined weakness or weaknesses that jeopardizes the liquidation of the debt. They are characterized by the distinct possibility that we will sustain some loss if the deficiencies are not corrected. Some substandard loans are inadequately protected by the sound worth and paying capacity of the borrower and of the collateral pledged and may be considered impaired. Substandard loans can be accruing or can be on nonaccrual depending on the circumstances of the individual loans.

Loans classified as doubtful have all the weaknesses inherent in substandard loans with the added characteristics that the weaknesses make collection in full highly questionable and improbable. The possibility of loss is extremely high. All doubtful loans are on nonaccrual.

Classified loans represent the sum of loans graded substandard and doubtful. The methodology used in the estimation of the allowance, which is performed at least quarterly, is designed to be dynamic and responsive to changes in portfolio credit quality and forecasted economic conditions. Changes are reflected in the allowance on collectively assessed and individually assessed loans as the collectability of classified loans is evaluated with new information. As our portfolio has matured, historical loss ratios have been closely monitored. The review of the appropriateness of the allowance is performed by executive management and presented to management committees, Credit Oversight Committee (which replaced Directors Loan Committee), the Audit Committee, and the Board of Directors. The committees' reports to the Board are part of the Board review on a quarterly basis of our consolidated financial statements. When management determines that foreclosure is probable, and for certain collateral-dependent loans where foreclosure is not considered probable, expected credit losses are based on the estimated fair value of the collateral adjusted for selling costs, when appropriate. A loan is considered collateral-dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral.

Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayments when appropriate. The contractual term excludes expected extensions, renewals and modifications unless management has a reasonable expectation that a loan will be in a trouble debt restructuring.

We do not measure an ACL on accrued interest receivable balances because these balances are written off in a timely manner as a reduction to interest income when loans are placed on nonaccrual status.

Collateral Dependent Financial Assets

Collateral Dependent Financial Assets

Loans that do not share risk characteristics are evaluated on an individual basis. For collateral dependent financial assets where the Company has determined that foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and the Company expects repayment of the financial asset to be provided substantially through the sale of the collateral, the ACL is measured based on the difference between the fair value of the collateral and the amortized cost basis of the asset as of the measurement date. When repayment is expected to be from the operation of the collateral, expected credit losses are calculated as the amount by which the amortized cost basis of the financial asset exceeds the net present value ("NPV") from the operation of the collateral. When repayment is expected to be from the sale of the collateral, expected credit losses are calculated as the amount by which the amortized cost basis of the financial asset exceeds the fair value of the

underlying collateral less estimated cost to sell. The ACL may be zero if the fair value of the collateral at the measurement date exceeds the amortized cost basis of the financial asset.

A loan that has been modified or renewed is considered a TDR when two conditions are met: 1) the borrower is experiencing financial difficulty and 2) concessions are made for the borrower's benefit that would not otherwise be considered for a borrower or transaction with similar credit risk characteristics. The Company’s ACL reflects all effects of a TDR when an individual asset is specifically identified as a reasonably expected TDR. The Company has determined that a TDR is reasonably expected no later than the point when the lender concludes that modification is the best course of action and it is at least reasonably possible that the troubled borrower will accept some form of concession from the lender to avoid a default. Reasonably expected TDRs and executed non-performing TDRs are evaluated individually to determine the required ACL. Refer to the subsection above "Lending operations and accommodations to borrowers" for a discussion on the impact of the CARES Act on TDRs.

Allowance for Credit Losses - Available-for-Sale Debt Securities

Allowance for Credit Losses - Available-for-Sale Debt Securities

For Available for Sale ("AFS") debt securities in an unrealized loss position, the Company first assesses whether it intends to sell, or it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either criterion is met, the security’s amortized cost basis is written down to fair value through income. For AFS debt securities that do not meet the aforementioned criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. When evaluating whether credit loss exists, accounting guidance requires that the Company not consider the length of time that fair value has been less than amortized cost. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security is compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income. The entire amount of an impairment loss is recognized in earnings only when: (1) the Company intends to sell the security; or (2) it is more likely than not that the Company will have to sell the security before recovery of its amortized cost basis; or (3) the Company does not expect to recover the entire amortized cost basis of the security. In all other situations, only the portion of the impairment loss representing the credit loss must be recognized in earnings, with the remaining portion being recognized in shareholders’ equity as comprehensive income, net of deferred taxes. Changes in the allowance for credit losses are recorded as a provision for (or reversal of) credit losses. Losses are charged against the allowance when management believes the uncollectibility of an AFS security is confirmed or when either of the criteria regarding intent or requirement to sell is met. Any impairment not recorded through an allowance for credit loss is recognized in other comprehensive income as a non-credit-related impairment. The majority of available-for-sale debt securities as of September 30, 2021 and December 31, 2020 were issued by U.S. agencies. However, as of September 30, 2021 and December 31, 2020, the allowance for credit losses on AFS securities was $256 thousand and $167 thousand, respectively, based on the Company's determination that part of the unrealized loss positions in AFS corporate and municipal securities could be the result of credit losses. See Note 3 Investment Securities for more information.

We have made a policy election to exclude accrued interest from the amortized cost basis of available-for-sale debt securities and report accrued interest separately in other assets in the Consolidated Balance Sheets. Available-for-sale debt securities are placed on nonaccrual status when we no longer expect to receive all contractual amounts due, which is generally at 90 days past due. Accrued interest receivable is reversed against interest income when a security is placed on nonaccrual status. Accordingly, we do not recognize an allowance for credit loss against accrued interest receivable.

Loan Commitments and Allowance for Credit Losses on Off-Balance Sheet Credit Exposures

Loan Commitments and Allowance for Credit Losses on Off-Balance Sheet Credit Exposures

Financial instruments include off-balance sheet credit instruments such as commitments to make loans and commercial letters of credit issued to meet customer financing needs. The Company's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for off-balance sheet loan commitments is represented by the contractual amount of those instruments. Such financial instruments are recorded when they are funded.

The Company records a reserve for unfunded commitments (“RUC”) on off-balance sheet credit exposures through a charge to provision for credit loss expense in the Company’s Consolidated Statement of Income. The RUC on off-balance sheet credit exposures is estimated by loan segment at each balance sheet date under the current expected credit loss model using the same methodologies as portfolio loans, taking into consideration the likelihood that funding will occur, and is included in the RUC on the Company’s Consolidated Balance Sheet.

These statements should be read in conjunction with the audited Consolidated Financial Statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

Other New Authoritative Accounting Guidance

Other New Authoritative Accounting Guidance

Accounting Standards Adopted in 2021:

ASU 2019-12 "Income Taxes (Topic 740)" ("ASU 2019-12") simplifies the accounting for income taxes by removing certain exceptions and improves the consistent application of GAAP by clarifying and amending other existing guidance. ASU 2019-12 became effective for us on January 1, 2021 and did not have a material impact on our consolidated financial statements.

Accounting Standards Pending Adoption:

ASU 2020-4, "Reference Rate Reform (Topic 848)" ("ASU 2020-4") provides optional expedients and exceptions for applying GAAP to loan and lease agreements, derivative contracts, and other transactions affected by the anticipated transition away from LIBOR toward new interest rate benchmarks. For transactions that are modified because of reference rate reform and that meet certain scope guidance (i) modifications of loan agreements should be accounted for by prospectively adjusting the effective interest rate and the modification will be considered "minor" so that any existing unamortized origination fees/ costs would carry forward and continue to be amortized and (ii) modifications of lease agreements should be accounted for as a continuation of the existing agreement with no reassessments of the lease classification and the discount rate or remeasurements of lease payments that otherwise would be required for modifications not accounted for as separate contracts. ASU 2020-4 also provides numerous optional expedients for derivative accounting. ASU 2020-4 is effective March 12, 2020 through December 31, 2022. An entity may elect to apply ASU 2020-4 for contract modifications as of January 1, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements are available to be issued. Once elected for a Topic or an Industry Subtopic within the Codification, the amendments in this ASU must be applied prospectively for all eligible contract modifications for that Topic or Industry Subtopic. We anticipate this ASU will simplify any modifications we execute between the selected start date (yet to be determined) and December 31, 2022 that are directly related to LIBOR transition by allowing prospective recognition of the continuation of the contract, rather than extinguishment of the old contract resulting in writing off unamortized fees/costs. We do not anticipate that the LIBOR transition or the application of this ASU will have material effects on the Company's business operations and consolidated financial statements.

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Summary of Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2021

Accounting Policies [Abstract]

Schedule of breakdown of the provision for credit losses

The following table presents a breakdown of the provision for credit losses included in our Consolidated Statements of Income for the applicable periods (in thousands):

	Three Months Ended				Nine months ended
(dollars in thousands)	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
Provision (credit) for credit losses- loans	$	(8,326)	$	6,589	$	(14,498)	$	40,498
Provision (credit) for credit losses- AFS debt securities	123		18		89		156
Total provision (credit) for credit losses	$	(8,203)	$	6,607	$	(14,409)	$	40,654

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Investment Securities Available-for-Sale (Tables)

9 Months Ended

Sep. 30, 2021

Investments, Debt and Equity Securities [Abstract]

Schedule of amortized cost and estimated fair value of securities available-for-sale

Amortized cost and estimated fair value of securities available-for-sale are summarized as follows:

			Gross		Gross		Allowance		Estimated
September 30, 2021	Amortized		Unrealized		Unrealized		for Credit		Fair
(dollars in thousands)	Cost		Gains		Losses		Losses		Value
U.S. treasuries	$	24,838	$	16	$	—	$	—	$	24,854
U.S. agency securities	356,626		806		(3,726)		—		353,706
Residential mortgage backed securities	1,206,867		8,151		(11,882)		—		1,203,136
Municipal bonds	119,511		4,284		(629)		(2)		123,164
Corporate bonds	81,376		783		(304)		(254)		81,601
Other	$	198	—		—		—		198
	$	1,789,416	$	14,040	$	(16,541)	$	(256)	$	1,786,659

			Gross		Gross				Estimated
December 31, 2020	Amortized		Unrealized		Unrealized		Allowance for		Fair
(dollars in thousands)	Cost		Gains		Losses		Credit Losses		Value
U.S. agency securities	$	181,087	$	1,461	$	(627)	$	—	$	181,921
Residential mortgage backed securities	811,328		14,506		(833)		—		825,001
Municipal bonds	102,259		5,872		—		(18)		108,113
Corporate bonds	34,383		1,624		(8)		(149)		35,850
Other	$	198	—		—		—		198
	$	1,129,255	$	23,463	$	(1,468)	$	(167)	$	1,151,083

Schedule of gross unrealized losses and fair value by length of time that the individual available-for-sale securities have been in a continuous unrealized loss

Gross unrealized losses and fair value of available-for-sale securities for which an allowance for credit losses has not been recorded, by length of time that individual securities have been in a continuous unrealized loss position are as follows:

		Less than				12 Months
		12 Months				or Greater				Total
		Estimated				Estimated				Estimated
September 30, 2021	Number of	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(dollars in thousands)	Securities	Value		Losses		Value		Losses		Value		Losses
U. S. agency securities	45	$	200,153	$	3,135	$	47,078	$	591	$	247,231	$	3,726
Residential mortgage backed securities	109	769,073		10,332		48,869		1,550		817,942		11,882
Corporate bonds	6	26,699		304		—		—		26,699		304
Municipal bonds	11	38,213		629		—		—		38,213		629
	171	$	1,034,138	$	14,400	$	95,947	$	2,141	$	1,130,085	$	16,541

		Less than				12 Months
		12 Months				or Greater				Total
		Estimated				Estimated				Estimated
December 31, 2020	Number of	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(dollars in thousands)	Securities	Value		Losses		Value		Losses		Value		Losses
U. S. agency securities	28	$	46,412	$	67	$	41,320	$	560	$	87,732	$	627
Residential mortgage backed securities	35	170,178		782		6,419		51		176,597		833
Corporate bonds	3	5,764		8		—		—		5,764		8
	66	$	222,354	$	857	$	47,739	$	611	$	270,093	$	1,468

Schedule of amortized cost and estimated fair value of investments available-for-sale by contractual maturity

or residential mortgage backed securities (“MBS”) are not shown as they may differ significantly from expected maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	September 30, 2021				December 31, 2020
	Amortized		Estimated		Amortized		Estimated
(dollars in thousands)	Cost		Fair Value		Cost		Fair Value
U.S. treasuries
After one year through five years	$	24,838	$	24,854	$	—	$	—
U. S. agency securities maturing:
One year or less	182,385		180,838		53,916		53,906
After one year through five years	97,969		98,179		110,083		110,777
Five years through ten years	76,272		74,689		17,087		17,240
Residential mortgage backed securities	1,206,867		1,203,136		811,328		825,001
Municipal bonds maturing:
One year or less	3,909		3,962		4,329		4,348
After one year through five years	24,618		26,133		26,622		28,272
Five years through ten years	70,937		73,293		69,309		73,389
After ten years	20,047		19,778		2,000		2,121
Corporate bonds maturing:
One year or less	13,928		14,148		5,218		5,220
After one year through five years	38,111		38,384		22,189		23,267
Five years through ten years	29,337		29,323		6,976		7,511
After ten years	—		—		—		—
Other	198		198		198		198
Allowance for Credit Losses	—		(256)		—		(167)
	$	1,789,416	$	1,786,659	$	1,129,255	$	1,151,083

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Loans and Allowance for Credit Losses (Tables)

9 Months Ended

Sep. 30, 2021

Receivables [Abstract]

Schedule of loans, net of unamortized net deferred fees

Loans, net of unamortized net deferred fees, at September 30, 2021 and December 31, 2020 are summarized by type as follows:

	September 30, 2021				December 31, 2020
(dollars in thousands)	Amount		%		Amount		%
Commercial	$	1,289,215	19 %		$	1,437,433	19	%
PPP loans	67,311		1 %		454,771		6	%
Income producing - commercial real estate	3,337,303		49	%	3,687,000		47	%
Owner occupied - commercial real estate	977,617		14 %		997,694		13	%
Real estate mortgage - residential	76,259		1 %		76,592		1	%
Construction - commercial and residential	824,133		12 %		873,261		11	%
Construction - C&I (owner occupied)	222,366		3 %		158,905		2	%
Home equity	55,527		1 %		73,167		1	%
Other consumer	1,132		—		1,389		—
Total loans	6,850,863		100	%	7,760,212		100	%
Less: allowance for credit losses	(82,906)				(109,579)
Net loans (1)	$	6,767,957			$	7,650,633

________________________________________

(1)Excludes accrued interest receivable of $40.0 million and $46.0 million at September 30, 2021 and December 31, 2020, respectively, which is recorded in other assets.

Schedule of detail activity in the allowance for credit losses by portfolio segment

The following tables detail activity in the allowance for credit losses by portfolio segment for the three and nine months ended September 30, 2021 and 2020. PPP loans are excluded from these tables since they do not carry an allowance for credit loss, as these loans are fully guaranteed as to principal and interest by the SBA, whose guarantee is backed by the full faith and credit of the U.S. Government. Allocation of a portion of the allowance to one category of loans does not restrict the use of the allowance to absorb losses in other categories.

					Income Producing -				Owner Occupied -				Real Estate				Construction -
					Commercial				Commercial				Mortgage -				Commercial and				Home				Other
(dollars in thousands)	Commercial				Real Estate				Real Estate				Residential				Residential				Equity				Consumer		Total
Three Months Ended September 30, 2021
Allowance for credit losses:
Balance at beginning of period	$	21,348			$	45,970			$	12,995			$	882			$	10,427			$	897			$	41	$	92,560
Loans charged-off	(1,999)				—				—				—				—				—				(1)		(2,000)
Recoveries of loans previously charged-off	81				97				—				—				493				—				1		672
Net loans charged-off	(1,918)		—		97		—		—		—		—		—		493		—		—		—		—		(1,328)
Provision for credit losses	(2,503)				(4,636)				(1,050)				172				(179)				(129)				(1)		(8,326)
Ending balance	$	16,927	$	—	$	41,431	$	—	$	11,945	$	—	$	1,054	$	—	$	10,741	$	—	$	768	$	—	$	40	$	82,906
Nine Months Ended September 30, 2021
Allowance for credit losses:
Balance at beginning of period	$	26,569			$	55,385			$	14,000			$	1,020			$	11,529			$	1,039			$	37	$	109,579
Loans charged-off	(7,691)				(5,216)				—				—				(206)				—				(1)		(13,114)
Recoveries of loans previously charged-off	326				97				—				—				499								17		939
Net loans (charged-off) recoveries	(7,365)				(5,119)				—				—				293				—				16		(12,175)
Provision for credit losses- loans	(2,277)				(8,835)				(2,055)				34				(1,081)				(271)				(13)		(14,498)
Ending balance	$	16,927			$	41,431			$	11,945			$	1,054			$	10,741			$	768			$	40	$	82,906
As of September 30, 2021
Allowance for credit losses:
Individually evaluated for impairment	$	3,198			$	5,439			$	—			$	501			$	—			$	165			$	—	$	9,303
Collectively evaluated for impairment	13,729				35,992				11,945				553				10,741				603				40		73,603
Ending balance	$	16,927			$	41,431			$	11,945			$	1,054			$	10,741			$	768			$	40	$	82,906
Three Months Ended September 30, 2020
Allowance for credit losses:
Balance at beginning of period	28,078				51,863				12,341				1,550				13,808				1,112				44		108,796
Loans charged-off	(187)				(3,750)				(20)				—				(1,179)				(92)				—		(5,228)
Recoveries of loans previously charged-off	45				—				—				—				—				—				13		58
Net loans (charged-off) recoveries	(142)				(3,750)		—		(20)		—		—		—		(1,179)		—		(92)		—		13		(5,170)
Provision for credit losses- loans	(712)				7,327				769				321				(1,088)				(13)				(15)		6,589
Ending balance	27,224				55,440				13,090		—		1,871		—		11,541		—		1,007		—		42		110,215
Nine Months Ended September 30, 2020
Allowance for credit losses:
Balance at beginning of period, prior to adoption of ASC 326	$	18,832			$	29,265			$	5,838			$	1,557			$	17,485			$	656			$	25	$	73,658
Impact of adopting ASC 326	892				11,230				4,674				(301)				(6,143)				245				17		$	10,614
Loans charged-off	(7,332)				(4,300)				(20)				—				(2,947)				(92)				—		(14,691)
Recoveries of loans previously charged-off	116				—				—				—				—				—				20		136
Net loans (charged-off) recoveries	(7,216)				(4,300)				(20)				—				(2,947)				(92)				20		(14,555)
Provision for credit losses- loans	14,716				19,245				2,598				615				3,146				198				(20)		40,498
Ending balance	$	27,224			$	55,440			$	13,090			$	1,871			$	11,541			$	1,007			$	42	$	110,215
As of September 30, 2020
Allowance for credit losses:
Individually evaluated for impairment	$	9,593			$	5,999			$	670			$	1,148			$	204			$	—			$	3	$	17,617
Collectively evaluated for impairment	17,631				49,441				12,420				723				11,337				1,007				39		92,598
Ending balance	$	27,224			$	55,440			$	13,090			$	1,871			$	11,541			$	1,007			$	42	$	110,215

Schedule of amortized cost basis of collateral-dependent loans by class of loans

The following table presents the amortized cost basis of collateral-dependent loans by class of loans as of September 30, 2021 and December 31, 2020:

(dollars in thousands)	Business/Other Assets		Real Estate
September 30, 2021
Commercial	$	3,281	$	9,936
Income producing - commercial real estate	3,193		20,867
Owner occupied - commercial real estate	—		1,593
Real estate mortgage - residential	—		1,781
Construction - commercial and residential	—		—
Home equity	190		366
Other consumer	—		—
Total	$	6,664	$	34,543

(dollars in thousands)	Business/Other Assets		Real Estate
December 31, 2020
Commercial	$	11,326	$	4,026
Income producing - commercial real estate	3,193		15,686
Owner occupied - commercial real estate	—		23,159
Real estate mortgage - residential	—		2,932
Construction - commercial and residential	—		206
Home equity	—		415
Other consumer	—		—
Total	$	14,519	$	46,424

Schedule of the risk category of loans by class of loans

Based on the most recent analysis performed, amortized cost basis of loans by risk category, class and year of origination is as follows:

September 30, 2021 (dollars in thousands)	Prior		2017		2018	2019	2020	2021	Total
Commercial
Pass	407,791		190,479		211,058	129,448	103,135	164,058	1,205,969
Watch	14,162		8,798		17,857	6,721	7,927	2,959	58,424
Special Mention	980		9,952		381	98	—	—	11,411
Substandard	10,267		695		2,217	232	—	—	13,411
Total	433,200	—	209,924	—	231,513	136,499	111,062	167,017	1,289,215
PPP loans
Pass	—	—	—	—	—	—	32,381	34,930	67,311
Total	—	—	—	—	—	—	32,381	34,930	67,311
Income producing - commercial real estate
Pass	708,822		287,984		610,727	514,416	418,980	306,458	2,847,387
Watch	66,069		73,753		—	43,739	34,859	—	218,420
Special Mention	101,687		—		42,244	51,969	—	—	195,900
Substandard	61,542		—		8,512	5,542	—	—	75,596
Total	938,120	—	361,737	—	661,483	615,666	453,839	306,458	3,337,303
Owner occupied - commercial real estate
Pass	383,943		132,292		131,088	71,524	44,465	40,718	804,030
Watch	23,960		3,234		93,035	23,968	—	—	144,197
Special Mention	—		—		—	2,133	—	—	2,133
Substandard	23,512		—		—	3,745	—	—	27,257
Total	431,415	—	135,526	—	224,123	101,370	44,465	40,718	977,617

Real estate mortgage - residential
Pass	15,047				7,284				13,409		16,703		3,999		14,770		71,212
Watch	3,265				—				—		—		—		—		3,265
Substandard	1,698				—				—		84		—		—		1,782
Total	20,010		—		7,284		—		13,409		16,787		3,999		14,770		76,259
Construction - commercial and residential
Pass	60,130				160,792				185,229		128,722		181,470		60,289		776,632
Watch	506				43,913				—		3,082		—		—		47,501
Substandard	—		—						—		—				—		—
Total	60,636		—		204,705		—		185,229		131,804		181,470		60,289		824,133
Construction - C&I (owner occupied)																	—
Pass	21,522				52,731				23,581		30,809		57,911		647		187,201
Watch	685				396				3,254		15,112		15,718		—		35,165
Substandard	—				—				—		—		—		—		—
Total	22,207		—		53,127		—		26,835		45,921		73,629		647		222,366
Home Equity																	—
Pass	25,402				5,832				1,782		2,644		9,443		8,943		54,046
Watch	879				—				—		—		—		—		879
Substandard	556				—				—		46		—		—		602
Total	26,837		—		5,832		—		1,782		2,690		9,443		8,943		55,527
Other Consumer																	—
Pass	936				24				46		33		24		63		1,126
Substandard	6				—				—		—		—		—		6
Total	942		—		24		—		46		33		24		63		1,132
Total Recorded Investment	$	1,933,367	$	—	$	978,159	$	—	$	1,344,420	$	1,050,770	$	910,312	$	633,835	6,850,863
December 31, 2020 (dollars in thousands)	Prior				2016				2017		2018		2019		2020		Total
Commercial
Pass	323,660				111,886				249,541		211,551		164,166		227,095		1,287,899
Watch	31,903				5,315				19,145		21,013		7,740		7,979		93,095
Special Mention	4,969				1,692				8,969		3,385		5,599		2,169		26,783
Substandard	17,679				5,803				1,820		3,525		829		—		29,656
Total	378,211				124,696				279,475		239,474		178,334		237,243		1,437,433
PPP loans
Pass	—				—				—		—		—		454,771		454,771
Total	—				—				—		—		—		454,771		454,771
Income producing - commercial real estate																	—
Pass	560,915				347,946				397,953		622,276		643,388		512,387		3,084,865
Watch	152,367				62,912				91,636		89,852		44,555		34,195		475,517
Special Mention	213				—				—		—		51,969		—		52,182
Substandard	58,555				800				4,656		4,883		5,542		—		74,436
Total	772,050				411,658				494,245		717,011		745,454		546,582		3,687,000
Owner occupied - commercial real estate
Pass	343,371				100,272				111,996		136,644		59,681		49,584		801,548
Watch	16,014				5,011				2,640		10,338		15,501		—		49,504
Special Mention	418				—				—		83,110		19,091		—		102,619
Substandard	28,228				784				1,908		2,048		10,151		904		44,023
Total	388,031				106,067				116,544		232,140		104,424		50,488		997,694
Real estate mortgage - residential
Pass	16,310				2,693				10,199		12,746		18,209		10,116		70,273
Watch	1,996				699				—		728		—		—		3,423
Substandard	1,198				1,698				—		—		—		—		2,896

Total	19,504		5,090		10,199		13,474		18,209		10,116		76,592
Construction - commercial and residential
Pass	21,290		60,486		266,788		297,480		105,679		71,297		823,020
Watch	929		—		42,751		3,448		—		—		47,128
Special Mention	12		—		—		2,895		—		—		2,907
Substandard	—		—		206		—		—		—		206
Total	22,231		60,486		309,745		303,823		105,679		71,297		873,261
Construction - C&I (owner occupied)
Pass	8,278		10,476		6,637		30,340		22,209		40,101		118,041
Watch	3,573		—		2,118		4,935		—		—		10,626
Special Mention	124		—		—		—		14,436		15,678		30,238
Total	11,975		10,476		8,755		35,275		36,645		55,779		158,905
Home Equity
Pass	33,226		4,493		8,227		7,827		4,224		12,924		70,921
Watch	1,596		—		—		—		—		—		1,596
Substandard	603		—		—		—		47		—		650
Total	35,425		4,493		8,227		7,827		4,271		12,924		73,167
Other Consumer
Pass	929		190		64		74		94		31		1,382
Substandard	7		—		—		—		—		—		7
Total	936		190		64		74		94		31		1,389
Total Recorded Investment	$	1,628,363	$	723,156	$	1,227,254	$	1,549,098	$	1,193,110	$	1,439,231	$	7,760,212

Schedule by class of loan, an aging analysis and the recorded investments in loans past due

The table presents, by class of loan, an aging analysis and the recorded investments in loans past due as of September 30, 2021 and December 31, 2020:

			Loans		Loans		Loans						Total Recorded
	Current		30-59 Days		60-89 Days		90 Days or		Total Past				Investment in
(dollars in thousands)	Loans		Past Due		Past Due		More Past Due		Due Loans		Nonaccrual		Loans
September 30, 2021
Commercial	$	1,276,100	$	96	$	872	$	—	$	968	$	12,147	$	1,289,215
PPP loans	64,004		3,307		—		—		3,307		—		67,311
Income producing - commercial real estate	3,322,370		—		—		—		—		14,933		3,337,303
Owner occupied - commercial real estate	972,632		579		2,813		—		3,392		1,593		977,617
Real estate mortgage - residential	74,241		—		—		—		—		2,018		76,259
Construction - commercial and residential	821,051		—		3,082		—		3,082		—		824,133
Construction - C&I (owner occupied)	221,463		903		—		—		903		—		222,366
Home equity	54,575		127		269		—		396		556		55,527
Other consumer	1,080		52		—		—		52		—		1,132
Total	$	6,807,516	$	5,064	$	7,036	$	—	$	12,100	$	31,247	$	6,850,863
December 31, 2020
Commercial	$	1,394,244	$	6,411	$	21,426	$	—	$	27,837	$	15,352	$	1,437,433
PPP loans	454,771		—		—		—		—		—		454,771
Income producing - commercial real estate	3,616,207		—		51,913		—		51,913		18,880		3,687,000
Owner occupied - commercial real estate	960,364		10,630		3,542		—		14,172		23,158		997,694
Real estate mortgage – residential	72,231		1,430		—		—		1,430		2,931		76,592
Construction - commercial and residential	869,723		2,992		340		—		3,332		206		873,261
Construction- C&I (owner occupied)	158,905		—		—		—		—		—		158,905
Home equity	67,732		467		4,552		—		5,019		416		73,167
Other consumer	1,367		21		1		—		22		—		1,389
Total	$	7,595,544	$	21,951	$	81,774	$	—	$	103,725	$	60,943	$	7,760,212

Schedule of information related to nonaccrual loans by class

The following presents the nonaccrual loans as of September 30, 2021 and December 31, 2020:

	September 30, 2021
	Nonaccrual with		Nonaccrual with		Total
	No Allowance		an Allowance		Nonaccrual
(dollars in thousands)	for Credit Loss		for Credit Loss		Loans
Commercial	$	7,113	$	5,034	$	12,147
Income producing - commercial real estate	4,620		10,313		14,933
Owner occupied - commercial real estate	1,593		—		1,593
Real estate mortgage - residential	84		1,934		2,018
Construction - commercial and residential	—		—		—
Home equity	366		190		556
Total (1)(2)	$	13,776	$	17,471	$	31,247

	December 31, 2020
	Nonaccrual with		Nonaccrual with		Total
	No Allowance		an Allowance		Nonaccrual
(dollars in thousands)	for Credit Loss		for Credit Loss		Loans
Commercial	$	3,263	$	12,089	$	15,352
Income producing - commercial real estate	6,500		12,380		18,880
Owner occupied - commercial real estate	18,941		4,217		23,158
Real estate mortgage - residential	1,234		1,697		2,931
Construction - commercial and residential	—		206		206
Home equity	416		—		416
Total (1)(2)	$	30,354	$	30,589	$	60,943

Note

(1)Excludes TDRs that were performing under their restructured terms totaling $10.2 million at September 30, 2021 and $10.5 million at December 31, 2020.

(2)Gross interest income of $1.4 million and $2.6 million would have been recorded for the nine months ended September 30, 2021 and September 30, 2020, respectively, if nonaccrual loans shown above had been current and in accordance with their original terms, while $23 thousand and $282 thousand interest income was actually recorded on such loans for the nine months ended September 30, 2021 and 2020 respectively. See Note 1 to the Consolidated Financial Statements for a description of the Company’s policy for placing loans on nonaccrual status.

Schedule of loans modified in troubled debt restructurings

The following table presents by class, the recorded investment of loans modified in TDRs held by the Company for the periods ended September 30, 2021 and 2020.

	September 30, 2021
				Income		Owner
	Number			Producing -		Occupied -		Construction -
	of			Commercial		Commercial		Commercial
(dollars in thousands)	Contracts	Commercial		Real Estate		Real Estate		Real Estate		Total
Troubled debt restructurings
Restructured accruing	5	$	1,069	$	9,126	$	—	$	—	$	10,195
Restructured nonaccruing	2	—		6,342		—		—		6,342
Total	7	$	1,069	$	15,468	$	—	$	—	$	16,537
Specific allowance		$	146	$	3,225	$	—	$	—	$	3,371
Restructured and subsequently defaulted		$	—	$	6,342	$	—	$	—	$	6,342

	September 30, 2020
				Income		Owner
	Number			Producing -		Occupied -		Construction -
	of			Commercial		Commercial		Commercial
(dollars in thousands)	Contracts	Commercial		Real Estate		Real Estate		Real Estate		Total
Troubled debt restructurings
Restructured accruing	7	$	1,297	$	9,188	$	37	$	—	$	10,522
Restructured nonaccruing	4	138		6,342		2,370		—		8,850
Total	11	$	1,435	$	15,530	$	2,407	$	—	$	19,372
Specific allowance		$	227	$	629	$	—	$	—	$	856
Restructured and subsequently defaulted		$	138	$	11,161	$	2,370	$	—	$	13,669

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Leases (Tables)

9 Months Ended

Sep. 30, 2021

Leases [Abstract]

Schedule of lease costs and other lease information

The following table presents lease costs and other lease information.

	Three Months Ended								Nine Months Ended
(dollars in thousands)	September 30, 2021				September 30, 2020				September 30, 2021		September 30, 2020
Lease Cost
Operating Lease Cost (Cost resulting from lease payments)	$	1,960			$	2,248			$	6,132	$	6,253
Variable Lease Cost (Cost excluded from lease payments)	205				202				678		720
Sublease Income	(117)				(87)				(291)		(261)
Net Lease Cost	$	2,048			$	2,363			$	6,519	$	6,712
Operating Lease - Operating Cash Flows (Fixed Payments)	$	1,992			$	2,229			$	6,344	$	6,648
	September 30, 2021				December 31, 2020
Right-of-Use Assets - Operating Leases	$	30,080			$	25,237
Weighted Average Lease Term - Operating Leases	6.22			yrs	6.20			yrs
Weighted Average Discount Rate - Operating Leases	3.14		%		4.00		%

Schedule of future minimum payments for operating leases

Future minimum payments for operating leases with initial or remaining terms of more than one year as of September 30, 2021 were as follows:

(dollars in thousands)
Twelve Months Ended:
September 30, 2022	$	1,910
September 30, 2023	4,517
September 30, 2024	6,550
September 30, 2025	5,792
September 30, 2026	4,815
Thereafter	12,097
Total Future Minimum Lease Payments	35,681
Amounts Representing Interest	(1,336)
Present Value of Net Future Minimum Lease Payments	$	34,345

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Other Derivatives (Tables)

9 Months Ended

Sep. 30, 2021

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of balance sheet category and fair values of the derivative instruments

The table below identifies the balance sheet category and fair value of the Company’s designated cash flow hedge derivative instruments and non-designated hedges as of September 30, 2021 and December 31, 2020. The Company has a minimum collateral posting threshold with its derivative counterparty. If the Company had breached any provisions under the agreement at September 30, 2021, it could have been required to settle its obligations under the agreement at the termination value.

	September 30, 2021					December 31, 2020
(dollars in thousands)	Notional Amount		Fair Value		Balance Sheet Category	Fair Value		Balance Sheet Category
Derivatives not designated as hedging instruments
Interest rate product	$	239,248	$	4,955	Other Assets	$	3,491	Other Assets
Mortgage banking derivatives	137,223		1,575		Other Assets	5,213		Other Assets
	$	376,471	$	6,530	Other Assets	$	8,704	Other Assets
Derivatives designated as hedging instruments
Interest rate product	$	—	$	—	Other Liabilities	$	516	Other Liabilities
Derivatives not designated as hedging instruments
Interest rate product	$	239,248	$	5,110	Other Liabilities	$	3,653	Other Liabilities
Other Contracts	26,542		63		Other Liabilities	118		Other Liabilities
	$	265,790	$	5,173	Other Liabilities	$	3,771	Other Liabilities
Liability position on balance sheet			$	5,173		$	4,287
Cash and other collateral			$	3,244		4,168
Net Derivative Amounts			$	1,929		$	119

Schedule of pretax net gains (losses) of designated cash flow hedges

The table below presents the pre-tax net gains (losses) of the Company’s designated cash flow hedges for the three and nine months ended September 30, 2021 and 2020:

The Effect of Fair Value and Cash Flow Hedge Accounting on Accumulated Other Comprehensive Income
	Amount of Gain (Loss) Recognized				Location of Gain or (Loss)	Amount of Gain or (Loss)
					Recognized from	Reclassified from Accumulated
Derivatives in Subtopic	in OCI on Derivative				Accumulated Other	OCI into Income
815-20 Hedging	Three Months Ended September 30,				Comprehensive Income into	Three Months Ended September 30,
Relationships (dollars in thousands)	2021		2020		Income	2021		2020
Derivatives in Cash Flow Hedging Relationships
Interest Rate Products	$	—	$	31	Interest Expense	$	—	$	(389)
Total	$	—	$	31		$	—	$	(389)
					Location of Gain or (Loss)	Amount of Gain or (Loss)
	Amount of Gain (Loss) Recognized				Recognized from	Reclassified from Accumulated
Derivatives in Subtopic	in OCI on Derivative				Accumulated Other	OCI into Income
815-20 Hedging	Nine Months Ended September 30,				Comprehensive Income into	Nine Months Ended September 30,
Relationships (dollars in thousands)	2021		2020		Income	2021		2020
Derivatives in Cash Flow Hedging Relationships
Interest Rate Products	$	1	$	(1,517)	Interest Expense	$	(445)	$	(755)
Total	$	1	$	(1,517)		$	(445)	$	(755)

Schedule of the effect of derivative financial instruments on the Consolidated Statements of Operations

The table below presents the effect of the Company’s derivative financial instruments on the Consolidated Statements of Income for the three and nine months ended September 30, 2021 and 2020:

The Effect of Fair Value and Cash Flow Hedge Accounting on the Statements of Income
	Location and Amount of Gain or (Loss) Recognized in Income on
	Fair Value and Cash Flow Hedging Relationships (in 000's)
	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
	Interest Expense				Interest Expense
Total amounts of income and expense line items presented in the consolidated statement of income in which the effects of fair value or cash flow hedges are recorded	$	—	$	(389)	$	(445)	$	(755)
Gain or (loss) on cash flow hedging relationships in Subtopic 815-20
Interest contracts
Amount of gain or (loss) reclassified from accumulated other comprehensive income into income	$	—	$	(389)	$	(445)	$	(755)
Amount of gain or (loss) reclassified from accumulated other comprehensive income into income as a result that a forecasted transaction is no longer probable of occurring	$	—	$	—	$	—	$	—
Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income - Included Component	$	—	$	(389)	$	(445)	$	(755)
Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income - Excluded Component	$	—	$	—	$	—	$	—

Effect of Derivatives Not Designated as Hedging Instruments on the Statements of Income
		Amount of Income (Loss)
		Recognized in Income on
	Location of	Derivative
Derivatives Not Designated as Hedging	(Loss) Recognized in	Three Months Ended September 30,				Nine Months Ended September 30,
Instruments under Subtopic 815-20	Income on Derivative	2021		2020		2021		2020
Interest Rate Products	Other income / (expense)	$	277	$	(40)	$	261	$	(326)
Mortgage banking derivatives	Other income / (expense)	1,575		6,015		5,268		6,015
Other Contracts	Other income / (expense)	—		(13)		44		(77)
Total		$	1,852	$	5,962	$	5,573	$	5,612

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Long-Term Borrowings (Tables)

9 Months Ended

Sep. 30, 2021

Long-term Debt, Unclassified [Abstract]

Schedule of long-term borrowings

The following table presents information related to the Company’s long-term borrowings as of September 30, 2021 and December 31, 2020.

(dollars in thousands)	September 30, 2021		December 31, 2020
Subordinated Notes, 5.75%	$	70,000	$	70,000
Subordinated Notes, 5.0%	—		150,000
FHLB Advance, 1.81%	—		50,000
Less: unamortized debt issuance costs	(361)		(1,923)
Long-term borrowings	$	69,639	$	268,077

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Net Income per Common Share (Tables)

9 Months Ended

Sep. 30, 2021

Earnings Per Share [Abstract]

Schedule of calculation of net income per common share

The calculation of net income per common share for the three and nine months ended September 30, 2021 and 2020 was as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
(dollars and shares in thousands, except per share data)	2021		2020		2021		2020
Basic:
Net income	$	43,609	$	41,346	$	135,071	$	93,325
Average common shares outstanding	31,959		32,229		31,931		32,434
Basic net income per common share	$	1.36	$	1.28	$	4.23	$	2.88
Diluted:
Net income	$	43,609	$	41,346	$	135,071	$	93,325
Average common shares outstanding	31,959		32,229		31,931		32,434
Adjustment for common share equivalents	72		22		62		24
Average common shares outstanding-diluted	32,031		32,251		31,993		32,458
Diluted net income per common share	$	1.36	$	1.28	$	4.22	$	2.88
Anti-dilutive shares	3		26		3		26

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Other Comprehensive Income (Tables)

9 Months Ended

Sep. 30, 2021

Other Comprehensive Income

Schedule of components of other comprehensive income (loss)

The following table presents the components of other comprehensive income (loss) for the three and nine months ended September 30, 2021 and 2020.

(dollars in thousands)	Before Tax		Tax Effect		Net of Tax
Three Months Ended September 30, 2021
Net unrealized gain (loss) on securities available-for-sale	$	(7,682)	$	1,979	$	(5,703)
Less: Reclassification adjustment for net gains (losses) included in net income	(1,519)		386		(1,133)
Total unrealized gain (loss)	(9,201)		2,365		(6,836)
Net unrealized gain (loss) on derivatives	—		—		—
Less: Reclassification adjustment for gain (loss) included in net income	—		—		—
Total unrealized gain (loss)	—		—		—
Other Comprehensive Income (Loss)	$	(9,201)	$	2,365	$	(6,836)
Three Months Ended September 30, 2020
Net unrealized gain (loss) on securities available-for-sale	$	(840)	$	216	$	(624)
Less: Reclassification adjustment for net gains (losses) included in net income	(115)		29		(86)
Total unrealized gain (loss)	(955)		245		(710)
Net unrealized gain (loss) on derivatives	31		(7)		24
Less: Reclassification adjustment for gain (loss) included in net income	389		(100)		289
Total unrealized gain (loss)	420		(107)		313
Other Comprehensive Income (Loss)	$	(535)	$	138	$	(397)
Nine Months Ended September 30, 2021
Net unrealized gain (loss) on securities available-for-sale	$	(22,437)	$	5,771	$	(16,666)
Less: Reclassification adjustment for net gains (losses) included in net income	(2,058)		524		(1,534)
Total unrealized gain (loss)	(24,495)		6,295		(18,200)
Net unrealized loss on derivatives	1,033		(264)		769
Less: Reclassification adjustment for gain (loss) included in net income	(517)		132		(385)
Total unrealized gain (loss)	516		(132)		384
Other Comprehensive Income (Loss)	$	(23,979)	$	6,163	$	(17,816)
Nine Months Ended September 30, 2020
Net unrealized gain (loss) on securities available-for-sale	$	18,402	$	(5,048)	$	13,354
Less: Reclassification adjustment for net gains included in net income	(1,650)		419		(1,231)
Total unrealized gain (loss)	16,752		(4,629)		12,123
Net unrealized gain (loss) on derivatives	(1,986)		662		(1,324)
Less: Reclassification adjustment for gain included in net income	688		(175)		513
Total unrealized gain (loss)	(1,298)		487		(811)
Other Comprehensive Income (Loss)	$	15,454	$	(4,142)	$	11,312

Schedule of changes in each component of accumulated other comprehensive income (loss), net of tax

The following table presents the changes in each component of accumulated other comprehensive income (loss), net of tax, for the three and nine months ended September 30, 2021 and 2020.

	Securities				Accumulated Other
	Available				Comprehensive Income
(dollars in thousands)	For Sale		Derivatives		(Loss)
Three Months Ended September 30, 2021
Balance at Beginning of Period	$	4,804	$	(284)	$	4,520
Other comprehensive income before reclassifications	(5,703)		—		(5,703)
Amounts reclassified from accumulated other comprehensive income (loss)	(1,133)		—		(1,133)
Net other comprehensive income during period	(6,836)		—		(6,836)
Balance at End of Period	$	(2,032)	$	(284)	$	(2,316)
	Securities				Accumulated Other
	Available				Comprehensive Income
(dollars in thousands)	For Sale		Derivatives		(Loss)
Three Months Ended September 30, 2020
Balance at Beginning of Period	$	15,942	$	(1,274)	$	14,668
Other comprehensive income before reclassifications	(624)		24		(600)
Amounts reclassified from accumulated other comprehensive loss	(86)		289		203
Net other comprehensive income during period	(710)		313		(397)
Balance at End of Period	$	15,232	$	(961)	$	14,271
	Securities				Accumulated Other
	Available				Comprehensive Income
(dollars in thousands)	For Sale		Derivatives		(Loss)
Nine Months Ended September 30, 2021
Balance at Beginning of Period	$	16,168	$	(668)	$	15,500
Other comprehensive income (loss) before reclassifications	(16,666)		769		(15,897)
Amounts reclassified from accumulated other comprehensive income (loss)	(1,534)		(385)		(1,919)
Net other comprehensive income (loss) during period	(18,200)		384		(17,816)
Balance at End of Period	$	(2,032)	$	(284)	$	(2,316)
	Securities				Accumulated Other
	Available				Comprehensive Income
(dollars in thousands)	For Sale		Derivatives		(Loss)
Nine Months Ended September 30, 2020
Balance at Beginning of Period	$	3,109	$	(150)	$	2,959
Other comprehensive income (loss) before reclassifications	13,354		(1,324)		12,030
Amounts reclassified from accumulated other comprehensive loss	(1,231)		513		(718)
Net other comprehensive income (loss) during period	12,123		(811)		11,312
Balance at End of Period	$	15,232	$	(961)	$	14,271

Schedule of amounts reclassified out of accumulated other comprehensive (loss) income

The following tables present the amounts reclassified out of each component of accumulated other comprehensive income (loss) for the three and nine months ended September 30, 2021 and 2020.

	Amount Reclassified from
	Accumulated Other				Affected Line Item in
Details about Accumulated Other	Comprehensive (Loss) Income				the Statement Where
Comprehensive Income Components	Three Months Ended September 30,				Net Income is Presented
(dollars in thousands)	2021		2020
Realized gain on sale of investment securities	$	1,519	$	115	Gain on sale of investment securities
Interest income derivative deposits	—		(389)		Interest income on deposits
Income tax expense	(386)		71		Income tax expense
Total Reclassifications for the Period	$	1,133	$	(203)	Net Income
	Amount Reclassified from
	Accumulated Other				Affected Line Item in
Details about Accumulated Other	Comprehensive (Loss) Income				the Statement Where
Comprehensive Income Components	Nine Months Ended September 30,				Net Income is Presented
(dollars in thousands)	2021		2020
Realized gain on sale of investment securities	$	2,058	$	1,650	Gain on sale of investment securities
Interest income derivative deposits	517		(688)		Interest income on deposits
Income tax expense	(656)		(244)		Income tax expense
Total Reclassifications for the Period	$	1,919	$	718	Net Income

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Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2021

Fair Value Disclosures [Abstract]

Schedule of recorded amount of assets and liabilities measured at fair value on a recurring basis

The tables below present the recorded amount of assets and liabilities measured at fair value on a recurring basis as of September 30, 2021 and December 31, 2020.

			Significant		Significant
			Other		Other
			Observable		Unobservable
	Quoted Prices		Inputs		Inputs		Total
(dollars in thousands)	(Level 1)		(Level 2)		(Level 3)		(Fair Value)
September 30, 2021
Assets:
Investment securities available-for-sale:
U.S. treasuries	$	—	$	24,854	$	—	$	24,854
U. S. agency securities	—		353,706		—		353,706
Residential mortgage backed securities	—		1,203,136		—		1,203,136
Municipal bonds	—		123,164		—		123,164
Corporate bonds	—		80,101		1,500		81,601
Loans held for sale	—		53,413		—		53,413
Interest rate caps	—		4,882		—		4,882
Mortgage banking derivatives	—		—		1,565		1,565
Total assets measured at fair value on a recurring basis as of September 30, 2021	$	—	$	1,843,256	$	3,065	$	1,846,321
Liabilities:
Interest rate swap derivatives	$	—	$	—	$	—	$	—
Derivative liability	—		73		—		73
Interest rate caps	—		5,037		—		5,037
Total liabilities measured at fair value on a recurring basis as of September 30, 2021	$	—	$	5,110	$	—	$	5,110
December 31, 2020
Assets:
Investment securities available-for-sale:
U. S. agency securities	$	—	$	181,921	$	—	$	181,921
Residential mortgage backed securities	—		825,001		—		825,001
Municipal bonds	—		108,113		—		108,113
Corporate bonds	—		34,350		1,500		35,850
Loans held for sale	—		88,205		—		88,205
Interest rate caps	—		3,413		—		3,413
Mortgage banking derivatives	—		—		5,213		5,213
Total assets measured at fair value on a recurring basis as of December 31, 2020	$	—	$	1,241,003	$	6,713	$	1,247,716
Liabilities:
Interest rate swap derivatives	$	—	$	516	$	—	$	516
Derivative liability	—		118		—		118
Interest rate caps	—		3,574		—		3,574
Total liabilities measured at fair value on a recurring basis as of December 31, 2020	$	—	$	4,208	$	—	$	4,208

Schedule of aggregate fair value and the aggregate unpaid principal balance for loans held for sale measured at fair value

The following tables summarize the difference between the aggregate fair value and the aggregate unpaid principal balance for loans held for sale measured at fair value as of September 30, 2021 and December 31, 2020.

	September 30, 2021
			Aggregate Unpaid
(dollars in thousands)	Fair Value		Principal Balance		Difference
Loans held for sale	$	53,413	$	52,554	$	859

	December 31, 2020
			Aggregate Unpaid
(dollars in thousands)	Fair Value		Principal Balance		Difference
Loans held for sale	$	88,205	$	86,551	$	1,654

Schedule of the reconciliation of activity for assets and liabilities measured at fair value based on Significant Other Unobservable Inputs (Level 3)

The following is a reconciliation of activity for assets and liabilities measured at fair value based on Significant Other Unobservable Inputs (Level 3):

	Investment		Mortgage Banking
(dollars in thousands)	Securities		Derivatives		Total
Assets:
Beginning balance at January 1, 2021	$	1,500	$	5,213	$	6,713
Realized gain (loss) included in earnings	—		(3,648)		(3,648)
Migrated to level 2 valuation	—		—		—
Ending balance at September 30, 2021	$	1,500	$	1,565	$	3,065
Liabilities:
Beginning balance at January 1, 2021	$	—	$	—	$	—
Ending balance at September 30, 2021	$	—	$	—	$	—

	Investment		Mortgage Banking
(dollars in thousands)	Securities		Derivatives		Total
Assets:
Beginning balance at January 1, 2020	$	10,931	$	280	$	11,211
Realized (loss) gain included in earnings	—		5,735		5,735
Migrated to level 2 valuation	(9,233)		—		(9,233)
Ending balance at September 30, 2020	$	1,698	$	6,015	$	7,713
Liabilities:
Beginning balance at January 1, 2020	$	—	$	66	$	66
Realized gain included in earnings	—		(66)		(66)
Ending balance at September 30, 2020	$	—	$	—	$	—

Fair value measurement inputs and valuation techniques

For Level 3 assets measured at fair value on a recurring or nonrecurring basis as of September 30, 2021and December 31, 2020, the significant unobservable inputs used in the fair value measurements were as follows:

		September 30, 2021						December 31, 2020
(dollars in thousands)	Valuation Technique	Description	Range	Weighted Average (1)		Fair Value		Weighted Average (1)		Fair Value
Mortgage banking derivatives	Pricing Model	Pull Through Rate	84.2% - 87.0%	85.50	%	$	1,565	79.14	%	$	5,213

(1) Unobservable inputs for mortgage banking derivatives were weighted by loan amount.

Schedule of assets measured at fair value on nonrecurring basis

Assets measured at fair value on a nonrecurring basis are included in the table below:

			Significant		Significant
			Other		Other
			Observable		Unobservable
	Quoted Prices		Inputs		Inputs		Total
(dollars in thousands)	(Level 1)		(Level 2)		(Level 3)		(Fair Value)
September 30, 2021
Commercial	$	—	$	—	$	10,019	$	10,019
Income producing - commercial real estate	—		—		18,621		18,621
Owner occupied - commercial real estate	—		—		1,593		1,593
Real estate mortgage - residential	—		—		1,281		1,281
Construction - commercial and residential	—		—		—		—
Home equity	—		—		391		391
Other consumer	—		—		—		—
Other real estate owned	—		—		5,135		5,135
Total assets measured at fair value on a nonrecurring basis as of September 30, 2021	$	—	$	—	$	37,040	$	37,040

			Significant		Significant
			Other		Other
			Observable		Unobservable
	Quoted Prices		Inputs		Inputs		Total
(dollars in thousands)	(Level 1)		(Level 2)		(Level 3)		(Fair Value)
December 31, 2020
Commercial	$	—	$	—	$	9,285	$	9,285
Income producing - commercial real estate	—		—		21,638		21,638
Owner occupied - commercial real estate	—		—		21,930		21,930
Real estate mortgage - residential	—		—		2,602		2,602
Construction - commercial and residential	—		—		103		103
Home equity	—		—		416		416
Other real estate owned	—		—		4,987		4,987
Total assets measured at fair value on a nonrecurring basis as of December 31, 2020	$	—	$	—	$	60,961	$	60,961

Schedule of estimated fair values of financial instruments

The estimated fair value of the Company’s financial instruments at September 30, 2021 and December 31, 2020 are as follows:

					Fair Value Measurements
					Quoted Prices (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	Carrying
(dollars in thousands)	Value		Fair Value
September 30, 2021
Assets
Cash and due from banks	$	8,806	$	8,806	$	8,806	$	—	$	—
Federal funds sold	38,934		38,934		—		38,934		—
Interest bearing deposits with other banks	2,452,744		2,452,744		—		2,452,744		—
Investment securities	1,786,659		1,786,659		—		1,785,159		1,500
Accrued interest receivable	40,028		40,028		—		40,028		—
Loans held for sale	53,413		53,413		—		53,413		—
Loans	6,767,957		6,624,261		—		—		6,624,261
Annuity investment	14,206		14,206		—		14,206		—
Mortgage banking derivatives	1,565		1,565		—		—		1,565
Interest rate caps	4,882		4,882		—		4,882		—
Liabilities
Noninterest bearing deposits	2,836,418		2,836,418		—		2,836,418		—
Interest bearing deposits	6,080,567		6,080,567		—		6,080,567		—
Time deposits	751,503		761,212		—		761,212		—
Customer repurchase agreements	29,401		29,401		—		29,401		—
Borrowings	369,639		376,058		—		376,058		—
Interest rate swap derivatives	—		—		—		—		—
Credit risk participation agreement	73		73		—		73		—
Interest rate caps	5,037		5,037		—		5,037		—
December 31, 2020
Assets
Cash and due from banks	$	8,435	$	8,435	$	8,435	$	—	$	—
Federal funds sold	28,200		28,200		—		28,200
Interest bearing deposits with other banks	1,752,420		1,752,420		—		1,752,420
Investment securities	1,150,885		1,150,885		—		1,149,385		1,500
Accrued interest receivable	40,104		40,104		—		40,104		—
Loans held for sale	88,205		88,205		—		88,205		—
Loans	7,650,633		7,608,687		—		—		7,608,687
Annuity investment	14,468		14,468		—		14,468		—
Mortgage banking derivative	5,213		5,213		—		—		5,213
Interest rate caps	3,413		3,413		—		3,413		—
Liabilities
Noninterest bearing deposits	2,809,334		2,809,334		—		2,809,334		—
Interest bearing deposits	756,923		756,923		—		756,923		—
Time deposits	977,760		993,500		—		993,500		—
Customer repurchase agreements	26,726		26,726		—		26,726		—
Borrowings	568,077		575,435		—		575,435		—
Interest rate swap derivatives	516		516		—		516		—
Credit risk participation agreements	118		118		—		118		—
Interest rate caps	3,574		3,574		—		3,574		—

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Summary of Significant Accounting Policies - Narrative (Details) $ in Thousands		3 Months Ended	9 Months Ended
	Aug. 01, 2021 USD ($)	Sep. 30, 2021 USD ($) loan borrower store	Sep. 30, 2021 USD ($) store loan borrower	Sep. 30, 2020 USD ($) loan	Dec. 31, 2020 USD ($) loan
Property, Plant and Equipment [Line Items]
Short-term loan modification program, number of loans | loan		6	6		36
Short-term loan modification program, outstanding exposure		$ 70,000	$ 70,000		$ 72,000
Short-term loan modification program, outstanding exposure, percent		1.00%	1.00%		0.90%
Number of contracts modified in TDR | loan			0	2
PPP loans, net		$ 6,767,957	$ 6,767,957		$ 7,650,633
Proceeds from sale of SBA PPP loans			170,154	$ 0
Allowance for credit losses		256	$ 256		$ 167
Subordinated Notes, 5.0%
Property, Plant and Equipment [Line Items]
Repayments of debt	$ 150,000
PPP loans
Property, Plant and Equipment [Line Items]
Interest rate (as a percent)			1.00%
PPP loans, net		$ 67,300	$ 67,300
Number of borrowers | borrower		109	109
Proceeds from sale of SBA PPP loans		$ 170,000
PPP loans | Minimum
Property, Plant and Equipment [Line Items]
Term of the loans granted			2 years
PPP loans | Maximum
Property, Plant and Equipment [Line Items]
Term of the loans granted			5 years
Small Business Administration
Property, Plant and Equipment [Line Items]
Decrease for debt forgiveness		$ 171,000
Banking Services
Property, Plant and Equipment [Line Items]
Number of locations | store		18	18
Lending Services
Property, Plant and Equipment [Line Items]
Number of locations | store		5	5

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Summary of Significant Accounting Policies - Provision for credit losses (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Accounting Policies [Abstract]
Provision (credit) for credit losses- loans	$ (8,326)	$ 6,589	$ (14,498)	$ 40,498
Provision (credit) for credit losses- AFS debt securities	123	18	89	156
Total provision (credit) for credit losses	$ (8,203)	$ 6,607	$ (14,409)	$ 40,654

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Cash and Due from Banks (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Cash and Cash Equivalents [Abstract]
Deposits with other banks used as collateral	$ 7,600	$ 5,100
Cash and other collateral	$ 3,244	$ 4,168

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Investment Securities Available-for-Sale - Amortized cost and estimated fair value of securities available-for-sale (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	$ 1,789,416	$ 1,129,255
Gross Unrealized Gains	14,040	23,463
Gross Unrealized Losses	(16,541)	(1,468)
Allowance for credit losses	(256)	(167)
Investment securities	1,786,659	1,151,083
U.S. treasuries
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	24,838
Gross Unrealized Gains	16
Investment securities	24,854
U. S. agency securities
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	356,626	181,087
Gross Unrealized Gains	806	1,461
Gross Unrealized Losses	(3,726)	(627)
Investment securities	353,706	181,921
Residential mortgage backed securities
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	1,206,867	811,328
Gross Unrealized Gains	8,151	14,506
Gross Unrealized Losses	(11,882)	(833)
Investment securities	1,203,136	825,001
Municipal bonds
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	119,511	102,259
Gross Unrealized Gains	4,284	5,872
Gross Unrealized Losses	(629)
Allowance for credit losses	(2)	(18)
Investment securities	123,164	108,113
Corporate bonds
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	81,376	34,383
Gross Unrealized Gains	783	1,624
Gross Unrealized Losses	(304)	(8)
Allowance for credit losses	(254)	(149)
Investment securities	81,601	35,850
Other
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	198	198
Investment securities	$ 198	$ 198

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Investment Securities Available-for-Sale - Gross unrealized losses and fair value (Details) $ in Thousands	Sep. 30, 2021 USD ($) security	Dec. 31, 2020 USD ($) security
Debt Securities, Available-for-sale [Line Items]
Number of securities | security	171	66
Less than 12 months, estimated fair value	$ 1,034,138	$ 222,354
Less than 12 months, unrealized losses	14,400	857
12 months or greater, estimated fair value	95,947	47,739
12 months or greater, unrealized losses	2,141	611
Estimated fair value	1,130,085	270,093
Unrealized losses	$ 16,541	$ 1,468
U. S. agency securities
Debt Securities, Available-for-sale [Line Items]
Number of securities | security	45	28
Less than 12 months, estimated fair value	$ 200,153	$ 46,412
Less than 12 months, unrealized losses	3,135	67
12 months or greater, estimated fair value	47,078	41,320
12 months or greater, unrealized losses	591	560
Estimated fair value	247,231	87,732
Unrealized losses	$ 3,726	$ 627
Residential mortgage backed securities
Debt Securities, Available-for-sale [Line Items]
Number of securities | security	109	35
Less than 12 months, estimated fair value	$ 769,073	$ 170,178
Less than 12 months, unrealized losses	10,332	782
12 months or greater, estimated fair value	48,869	6,419
12 months or greater, unrealized losses	1,550	51
Estimated fair value	817,942	176,597
Unrealized losses	$ 11,882	$ 833
Corporate bonds
Debt Securities, Available-for-sale [Line Items]
Number of securities | security	6
Less than 12 months, estimated fair value	$ 26,699
Less than 12 months, unrealized losses	304
12 months or greater, estimated fair value	0
12 months or greater, unrealized losses	0
Estimated fair value	26,699
Unrealized losses	$ 304
Municipal bonds
Debt Securities, Available-for-sale [Line Items]
Number of securities | security	11	3
Less than 12 months, estimated fair value	$ 38,213	$ 5,764
Less than 12 months, unrealized losses	629	8
12 months or greater, estimated fair value	0	0
12 months or greater, unrealized losses	0	0
Estimated fair value	38,213	5,764
Unrealized losses	$ 629	$ 8

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Investment Securities Available-for-Sale - Expected maturities for residential mortgage backed securities (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Amortized Cost [Abstract]
Amortized Cost	$ 1,789,416	$ 1,129,255
Estimated Fair Value [Abstract]
Allowance for Credit Losses	(256)	(167)
Estimated Fair Value	1,786,659	1,151,083
U. S. agency securities
Amortized Cost [Abstract]
One year or less	182,385	53,916
After one year through five years	97,969	110,083
Five years through ten years	76,272	17,087
Amortized Cost	356,626	181,087
Estimated Fair Value [Abstract]
One year or less	180,838	53,906
After one year through five years	98,179	110,777
Five years through ten years	74,689	17,240
Residential mortgage backed securities
Amortized Cost [Abstract]
Residential mortgage backed securities	1,206,867	811,328
Amortized Cost	1,206,867	811,328
Estimated Fair Value [Abstract]
Residential mortgage backed securities	1,203,136	825,001
Municipal bonds
Amortized Cost [Abstract]
One year or less	3,909	4,329
After one year through five years	24,618	26,622
Five years through ten years	70,937	69,309
After ten years	20,047	2,000
Amortized Cost	119,511	102,259
Estimated Fair Value [Abstract]
One year or less	3,962	4,348
After one year through five years	26,133	28,272
Five years through ten years	73,293	73,389
After ten years	19,778	2,121
Corporate bonds
Amortized Cost [Abstract]
One year or less	13,928	5,218
After one year through five years	38,111	22,189
Five years through ten years	29,337	6,976
After ten years	0
Amortized Cost	81,376	34,383
Estimated Fair Value [Abstract]
One year or less	14,148	5,220
After one year through five years	38,384	23,267
Five years through ten years	29,323	7,511
After ten years	0
U.S. treasuries
Amortized Cost [Abstract]
After one year through five years	24,838	0
Amortized Cost	24,838
Estimated Fair Value [Abstract]
After one year through five years	24,854	0
Other
Amortized Cost [Abstract]
Residential mortgage backed securities	198	198
Amortized Cost	198	198
Estimated Fair Value [Abstract]
Residential mortgage backed securities	$ 198	$ 198

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Investment Securities Available-for-Sale - Additional Information (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2020
Debt Securities, Available-for-sale [Line Items]
Federal Reserve and Federal Home Loan Bank stock	$ 34,093		$ 40,104
Allowance for credit losses	$ 256		$ 167
Debt securities as percentage of total investment securities	99.90%
Debt securities weighted average duration	4 years 9 months 18 days
Gross realized gains on sales of investment securities	$ 2,100	$ 1,700
Gross realized losses on sales of investment	47	0
Proceeds from sale/call of available-for-sale securities	$ 164,569	$ 130,265
Holdings of securities of any one issuer	10.00%		10.00%
Other Assets
Debt Securities, Available-for-sale [Line Items]
Accrued interest on available for sale securities	$ 4,500		$ 3,500
Collateral Pledged
Debt Securities, Available-for-sale [Line Items]
Debt securities, available-for-sale, restricted	$ 240,200		$ 268,400

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Mortgage Banking Derivatives (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2020
Derivatives, Fair Value [Line Items]
Net loss relating to mortgage banking derivative instruments	$ (21)	$ (145)	$ (21)	$ (309)
Mortgage banking derivatives
Derivatives, Fair Value [Line Items]
Derivative asset, notional amount		$ 137,000		$ 137,000	$ 367,700
Mortgage banking derivatives | Other Assets
Derivatives, Fair Value [Line Items]
Derivative asset, notional amount	$ 1,600		$ 1,600
Derivative asset					$ 5,200

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Loans and Allowance for Credit Losses - Loans, Net of Amortization (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Jun. 30, 2021	Dec. 31, 2020	Sep. 30, 2020	Jun. 30, 2020	Dec. 31, 2019
Loans and Leases Receivable Disclosure [Line Items]
Loans	$ 6,850,863		$ 7,760,212
Less: allowance for credit losses	(82,906)	$ (92,560)	(109,579)	$ (110,215)	$ (108,796)	$ (73,658)
Loans, net	$ 6,767,957		$ 7,650,633
Financing receivable, percent	100.00%		100.00%
Accrued interest receivable and other assets
Loans and Leases Receivable Disclosure [Line Items]
Accrued interest on available for sale securities	$ 40,000		$ 46,000
Construction - C&I (owner occupied)
Loans and Leases Receivable Disclosure [Line Items]
Loans	222,366
Commercial
Loans and Leases Receivable Disclosure [Line Items]
Loans	1,289,215		1,437,433
Less: allowance for credit losses	$ (16,927)	(21,348)	$ (26,569)	(27,224)	(28,078)	(18,832)
Financing receivable, percent	19.00%		19.00%
PPP loans
Loans and Leases Receivable Disclosure [Line Items]
Loans	$ 67,311		$ 454,771
Financing receivable, percent	1.00%		6.00%
Income producing - commercial real estate
Loans and Leases Receivable Disclosure [Line Items]
Loans	$ 3,337,303		$ 3,687,000
Less: allowance for credit losses	$ (41,431)	(45,970)	$ (55,385)	(55,440)	(51,863)	(29,265)
Financing receivable, percent	49.00%		47.00%
Owner occupied - commercial real estate
Loans and Leases Receivable Disclosure [Line Items]
Loans	$ 977,617		$ 997,694
Less: allowance for credit losses	$ (11,945)	(12,995)	$ (14,000)	(13,090)	(12,341)	(5,838)
Financing receivable, percent	14.00%		13.00%
Real estate mortgage - residential
Loans and Leases Receivable Disclosure [Line Items]
Loans	$ 76,259		$ 76,592
Less: allowance for credit losses	$ (1,054)	(882)	$ (1,020)	(1,871)	(1,550)	(1,557)
Financing receivable, percent	1.00%		1.00%
Construction - commercial and residential
Loans and Leases Receivable Disclosure [Line Items]
Loans	$ 824,133		$ 873,261
Less: allowance for credit losses	(10,741)	(10,427)	(11,529)	(11,541)	(13,808)	(17,485)
Construction - commercial and residential | Commercial and Residential
Loans and Leases Receivable Disclosure [Line Items]
Loans	$ 824,133		$ 873,261
Financing receivable, percent	12.00%		11.00%
Construction - commercial and residential | Construction - C&I (owner occupied)
Loans and Leases Receivable Disclosure [Line Items]
Loans	$ 222,366		$ 158,905
Financing receivable, percent	3.00%		2.00%
Home equity
Loans and Leases Receivable Disclosure [Line Items]
Loans	$ 55,527		$ 73,167
Less: allowance for credit losses	$ (768)	(897)	$ (1,039)	(1,007)	(1,112)	(656)
Financing receivable, percent	1.00%		1.00%
Other consumer
Loans and Leases Receivable Disclosure [Line Items]
Loans	$ 1,132		$ 1,389
Less: allowance for credit losses	$ (40)	$ (41)	$ (37)	$ (42)	$ (44)	$ (25)
Financing receivable, percent	0.00%		0.00%

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Loans and Allowance for Credit Losses - Narrative (Details) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021 USD ($)	Sep. 30, 2020 USD ($)	Sep. 30, 2021 USD ($) qtr	Sep. 30, 2020 USD ($)	Dec. 31, 2020 USD ($)
Loans and Leases Receivable Disclosure [Line Items]
Deferred commitment fee	$ 22,700		$ 22,700		$ 30,800
Serving assets not reflected as loan balances	$ 115,000		$ 115,000		124,000
Loans secured by real estate (percent)	80.00%		80.00%
PPP loans, net	$ 6,767,957		$ 6,767,957		7,650,633
Provision for credit losses utilizing the newly adopted methodology			3,371	$ 856
Net charge-offs	1,328	$ 5,170	$ 12,175	14,555
Number of Nonperforming Restructured Loans, Charged Off | qtr			1
Criticized | ASU 2016-13
Loans and Leases Receivable Disclosure [Line Items]
Provision for credit losses utilizing the newly adopted methodology	8,200	6,600	$ 14,400	40,700
ADC Loans
Loans and Leases Receivable Disclosure [Line Items]
PPP loans, net	$ 1,400,000		$ 1,400,000
Percent of ADC loan portfolio using interest reserves	57.50%		57.50%
Owner Occupied Commercial Real Estate and Construction
Loans and Leases Receivable Disclosure [Line Items]
Percent of loan portfolio	17.00%		17.00%
Commercial Real Estate and Real Estate Construction Loans
Loans and Leases Receivable Disclosure [Line Items]
Percent of loan portfolio	78.00%		78.00%
Income Producing Commercial Real Estate and Real Estate Construction
Loans and Leases Receivable Disclosure [Line Items]
Percent of loan portfolio	61.00%		61.00%
Maximum loan to value (percent)	80.00%		80.00%
Income Producing Commercial Real Estate and Real Estate Construction | Minimum
Loans and Leases Receivable Disclosure [Line Items]
Minimum cash flow debt service coverage ratio	1.15		1.15
Income Producing Commercial Real Estate and Real Estate Construction | Maximum
Loans and Leases Receivable Disclosure [Line Items]
Minimum cash flow debt service coverage ratio	1.0		1.0
Commercial
Loans and Leases Receivable Disclosure [Line Items]
Percent of loan portfolio	19.00%		19.00%
Provision for credit losses utilizing the newly adopted methodology			$ 146	227
Net charge-offs	$ 1,918	142	$ 7,365	7,216
Commercial | Minimum
Loans and Leases Receivable Disclosure [Line Items]
Loan period, preferred term			5 years
Commercial | Maximum
Loans and Leases Receivable Disclosure [Line Items]
Loan period, preferred term			7 years
Loan period			10 years
Amortization term			25 years
Commercial | SBA Loans
Loans and Leases Receivable Disclosure [Line Items]
Percent of loan portfolio	1.00%		1.00%
PPP loans | SBA Loans
Loans and Leases Receivable Disclosure [Line Items]
Percent of loan portfolio	1.00%		1.00%
Consumer Portfolio Segment
Loans and Leases Receivable Disclosure [Line Items]
Percent of loan portfolio	1.00%		1.00%
Consumer Portfolio Segment | Land Acquisition Development and Construction Loans | Maximum
Loans and Leases Receivable Disclosure [Line Items]
Loan period			24 months
Real estate mortgage - residential
Loans and Leases Receivable Disclosure [Line Items]
Net charge-offs	$ 0	0	$ 0	0
Real estate mortgage - residential | Real Estate Loan
Loans and Leases Receivable Disclosure [Line Items]
Percent of loan portfolio	1.00%		1.00%
Repricing duration			21 months
Real estate mortgage - residential | Land Acquisition Development and Construction Loans | Maximum
Loans and Leases Receivable Disclosure [Line Items]
Loan period			36 months
Non-Performing Loans
Loans and Leases Receivable Disclosure [Line Items]
Troubled debt restructuring		$ 572		$ 572
Performing Financial Instruments
Loans and Leases Receivable Disclosure [Line Items]
Troubled debt restructuring	$ 10,200		$ 10,200		$ 10,500

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Loans and Allowance for Credit Losses - Detail activity in the allowance for credit losses by portfolio segment (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Allowance for Loan and Lease Losses [Roll Forward]
Beginning balance	$ 92,560	$ 108,796	$ 109,579	$ 73,658
Loans charged-off	(2,000)	(5,228)	(13,114)	(14,691)
Recoveries of loans previously charged-off	672	58	939	136
Net loans (charged-off) recoveries	(1,328)	(5,170)	(12,175)	(14,555)
Provision for credit losses- loans	8,326	(6,589)	14,498	(40,498)
Individually evaluated for impairment	9,303	17,617	9,303	17,617
Collectively evaluated for impairment	73,603	92,598	73,603	92,598
Ending Balance	82,906	110,215	82,906	110,215
Cumulative Effect, Period of Adoption, Adjustment
Allowance for Loan and Lease Losses [Roll Forward]
Ending Balance		10,614		10,614
Commercial
Allowance for Loan and Lease Losses [Roll Forward]
Beginning balance	21,348	28,078	26,569	18,832
Loans charged-off	(1,999)	(187)	(7,691)	(7,332)
Recoveries of loans previously charged-off	81	45	326	116
Net loans (charged-off) recoveries	(1,918)	(142)	(7,365)	(7,216)
Provision for credit losses- loans	2,503	712	2,277	(14,716)
Individually evaluated for impairment	3,198	9,593	3,198	9,593
Collectively evaluated for impairment	13,729	17,631	13,729	17,631
Ending Balance	16,927	27,224	16,927	27,224
Commercial | Cumulative Effect, Period of Adoption, Adjustment
Allowance for Loan and Lease Losses [Roll Forward]
Ending Balance		892		892
Income producing - commercial real estate
Allowance for Loan and Lease Losses [Roll Forward]
Beginning balance	45,970	51,863	55,385	29,265
Loans charged-off	0	(3,750)	(5,216)	(4,300)
Recoveries of loans previously charged-off	97	0	97	0
Net loans (charged-off) recoveries	97	(3,750)	(5,119)	(4,300)
Provision for credit losses- loans	4,636	(7,327)	8,835	(19,245)
Individually evaluated for impairment	5,439	5,999	5,439	5,999
Collectively evaluated for impairment	35,992	49,441	35,992	49,441
Ending Balance	41,431	55,440	41,431	55,440
Income producing - commercial real estate | Cumulative Effect, Period of Adoption, Adjustment
Allowance for Loan and Lease Losses [Roll Forward]
Ending Balance		11,230		11,230
Owner occupied - commercial real estate
Allowance for Loan and Lease Losses [Roll Forward]
Beginning balance	12,995	12,341	14,000	5,838
Loans charged-off	0	(20)	0	(20)
Recoveries of loans previously charged-off	0	0	0	0
Net loans (charged-off) recoveries	0	(20)	0	(20)
Provision for credit losses- loans	1,050	(769)	2,055	(2,598)
Individually evaluated for impairment	0	670	0	670
Collectively evaluated for impairment	11,945	12,420	11,945	12,420
Ending Balance	11,945	13,090	11,945	13,090
Owner occupied - commercial real estate | Cumulative Effect, Period of Adoption, Adjustment
Allowance for Loan and Lease Losses [Roll Forward]
Ending Balance		4,674		4,674
Real estate mortgage - residential
Allowance for Loan and Lease Losses [Roll Forward]
Beginning balance	882	1,550	1,020	1,557
Loans charged-off	0	0	0	0
Recoveries of loans previously charged-off	0	0	0	0
Net loans (charged-off) recoveries	0	0	0	0
Provision for credit losses- loans	(172)	(321)	(34)	(615)
Individually evaluated for impairment	501	1,148	501	1,148
Collectively evaluated for impairment	553	723	553	723
Ending Balance	1,054	1,871	1,054	1,871
Real estate mortgage - residential | Cumulative Effect, Period of Adoption, Adjustment
Allowance for Loan and Lease Losses [Roll Forward]
Ending Balance		(301)		(301)
Construction - commercial and residential
Allowance for Loan and Lease Losses [Roll Forward]
Beginning balance	10,427	13,808	11,529	17,485
Loans charged-off	0	(1,179)	(206)	(2,947)
Recoveries of loans previously charged-off	493	0	499	0
Net loans (charged-off) recoveries	493	(1,179)	293	(2,947)
Provision for credit losses- loans	179	1,088	1,081	(3,146)
Individually evaluated for impairment	0	204	0	204
Collectively evaluated for impairment	10,741	11,337	10,741	11,337
Ending Balance	10,741	11,541	10,741	11,541
Construction - commercial and residential | Cumulative Effect, Period of Adoption, Adjustment
Allowance for Loan and Lease Losses [Roll Forward]
Ending Balance		(6,143)		(6,143)
Home equity
Allowance for Loan and Lease Losses [Roll Forward]
Beginning balance	897	1,112	1,039	656
Loans charged-off	0	(92)	0	(92)
Recoveries of loans previously charged-off	0	0		0
Net loans (charged-off) recoveries	0	(92)	0	(92)
Provision for credit losses- loans	129	13	271	(198)
Individually evaluated for impairment	165	0	165	0
Collectively evaluated for impairment	603	1,007	603	1,007
Ending Balance	768	1,007	768	1,007
Home equity | Cumulative Effect, Period of Adoption, Adjustment
Allowance for Loan and Lease Losses [Roll Forward]
Ending Balance		245		245
Other consumer
Allowance for Loan and Lease Losses [Roll Forward]
Beginning balance	41	44	37	25
Loans charged-off	(1)	0	(1)	0
Recoveries of loans previously charged-off	1	13	17	20
Net loans (charged-off) recoveries	0	13	16	20
Provision for credit losses- loans	1	15	13	20
Individually evaluated for impairment	0	3	0	3
Collectively evaluated for impairment	40	39	40	39
Ending Balance	$ 40	42	$ 40	42
Other consumer | Cumulative Effect, Period of Adoption, Adjustment
Allowance for Loan and Lease Losses [Roll Forward]
Ending Balance		$ 17		$ 17

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Loans and Allowance for Credit Losses - Amortized cost basis of collateral-dependent loans (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Loans and Leases Receivable Disclosure [Line Items]
PPP loans, net	$ 6,767,957	$ 7,650,633
Business or Other Assets
Loans and Leases Receivable Disclosure [Line Items]
PPP loans, net	6,664	14,519
Business or Other Assets | Commercial
Loans and Leases Receivable Disclosure [Line Items]
PPP loans, net	3,281	11,326
Business or Other Assets | Income producing - commercial real estate
Loans and Leases Receivable Disclosure [Line Items]
PPP loans, net	3,193	3,193
Business or Other Assets | Owner occupied - commercial real estate
Loans and Leases Receivable Disclosure [Line Items]
PPP loans, net	0	0
Business or Other Assets | Real estate mortgage - residential
Loans and Leases Receivable Disclosure [Line Items]
PPP loans, net	0	0
Business or Other Assets | Construction - commercial and residential
Loans and Leases Receivable Disclosure [Line Items]
PPP loans, net	0	0
Business or Other Assets | Home equity
Loans and Leases Receivable Disclosure [Line Items]
PPP loans, net	190	0
Business or Other Assets | Other consumer
Loans and Leases Receivable Disclosure [Line Items]
PPP loans, net	0	0
Real Estate
Loans and Leases Receivable Disclosure [Line Items]
PPP loans, net	34,543	46,424
Real Estate | Commercial
Loans and Leases Receivable Disclosure [Line Items]
PPP loans, net	9,936	4,026
Real Estate | Income producing - commercial real estate
Loans and Leases Receivable Disclosure [Line Items]
PPP loans, net	20,867	15,686
Real Estate | Owner occupied - commercial real estate
Loans and Leases Receivable Disclosure [Line Items]
PPP loans, net	1,593	23,159
Real Estate | Real estate mortgage - residential
Loans and Leases Receivable Disclosure [Line Items]
PPP loans, net	1,781	2,932
Real Estate | Construction - commercial and residential
Loans and Leases Receivable Disclosure [Line Items]
PPP loans, net	0	206
Real Estate | Home equity
Loans and Leases Receivable Disclosure [Line Items]
PPP loans, net	366	415
Real Estate | Other consumer
Loans and Leases Receivable Disclosure [Line Items]
PPP loans, net	$ 0	$ 0

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Loans and Allowance for Credit Losses - Risk category of loans by class of loans (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Loans and Leases Receivable Disclosure [Line Items]
Prior	$ 1,933,367	$ 1,628,363
Four years before current fiscal year	978,159	723,156
Three before current fiscal year	1,344,420	1,227,254
Two years before current fiscal year	1,050,770	1,549,098
Fiscal year before current fiscal year	910,312	1,193,110
Current fiscal year	633,835	1,439,231
Total	6,850,863	7,760,212
Commercial
Loans and Leases Receivable Disclosure [Line Items]
Prior	433,200	378,211
Four years before current fiscal year	209,924	124,696
Three before current fiscal year	231,513	279,475
Two years before current fiscal year	136,499	239,474
Fiscal year before current fiscal year	111,062	178,334
Current fiscal year	167,017	237,243
Total	1,289,215	1,437,433
Commercial | Pass
Loans and Leases Receivable Disclosure [Line Items]
Prior	407,791	323,660
Four years before current fiscal year	190,479	111,886
Three before current fiscal year	211,058	249,541
Two years before current fiscal year	129,448	211,551
Fiscal year before current fiscal year	103,135	164,166
Current fiscal year	164,058	227,095
Total	1,205,969	1,287,899
Commercial | Watch
Loans and Leases Receivable Disclosure [Line Items]
Prior	14,162	31,903
Four years before current fiscal year	8,798	5,315
Three before current fiscal year	17,857	19,145
Two years before current fiscal year	6,721	21,013
Fiscal year before current fiscal year	7,927	7,740
Current fiscal year	2,959	7,979
Total	58,424	93,095
Commercial | Special Mention
Loans and Leases Receivable Disclosure [Line Items]
Prior	980	4,969
Four years before current fiscal year	9,952	1,692
Three before current fiscal year	381	8,969
Two years before current fiscal year	98	3,385
Fiscal year before current fiscal year		5,599
Current fiscal year		2,169
Total	11,411	26,783
Commercial | Substandard
Loans and Leases Receivable Disclosure [Line Items]
Prior	10,267	17,679
Four years before current fiscal year	695	5,803
Three before current fiscal year	2,217	1,820
Two years before current fiscal year	232	3,525
Fiscal year before current fiscal year		829
Total	13,411	29,656
PPP loans
Loans and Leases Receivable Disclosure [Line Items]
Fiscal year before current fiscal year	32,381
Current fiscal year	34,930	454,771
Total	67,311	454,771
PPP loans | Pass
Loans and Leases Receivable Disclosure [Line Items]
Fiscal year before current fiscal year	32,381
Current fiscal year	34,930	454,771
Total	67,311	454,771
Income producing - commercial real estate
Loans and Leases Receivable Disclosure [Line Items]
Prior	938,120	772,050
Four years before current fiscal year	361,737	411,658
Three before current fiscal year	661,483	494,245
Two years before current fiscal year	615,666	717,011
Fiscal year before current fiscal year	453,839	745,454
Current fiscal year	306,458	546,582
Total	3,337,303	3,687,000
Income producing - commercial real estate | Pass
Loans and Leases Receivable Disclosure [Line Items]
Prior	708,822	560,915
Four years before current fiscal year	287,984	347,946
Three before current fiscal year	610,727	397,953
Two years before current fiscal year	514,416	622,276
Fiscal year before current fiscal year	418,980	643,388
Current fiscal year	306,458	512,387
Total	2,847,387	3,084,865
Income producing - commercial real estate | Watch
Loans and Leases Receivable Disclosure [Line Items]
Prior	66,069	152,367
Four years before current fiscal year	73,753	62,912
Three before current fiscal year		91,636
Two years before current fiscal year	43,739	89,852
Fiscal year before current fiscal year	34,859	44,555
Current fiscal year		34,195
Total	218,420	475,517
Income producing - commercial real estate | Special Mention
Loans and Leases Receivable Disclosure [Line Items]
Prior	101,687	213
Three before current fiscal year	42,244
Two years before current fiscal year	51,969
Fiscal year before current fiscal year		51,969
Total	195,900	52,182
Income producing - commercial real estate | Substandard
Loans and Leases Receivable Disclosure [Line Items]
Prior	61,542	58,555
Four years before current fiscal year		800
Three before current fiscal year	8,512	4,656
Two years before current fiscal year	5,542	4,883
Fiscal year before current fiscal year		5,542
Total	75,596	74,436
Owner occupied - commercial real estate
Loans and Leases Receivable Disclosure [Line Items]
Prior	431,415	388,031
Four years before current fiscal year	135,526	106,067
Three before current fiscal year	224,123	116,544
Two years before current fiscal year	101,370	232,140
Fiscal year before current fiscal year	44,465	104,424
Current fiscal year	40,718	50,488
Total	977,617	997,694
Owner occupied - commercial real estate | Pass
Loans and Leases Receivable Disclosure [Line Items]
Prior	383,943	343,371
Four years before current fiscal year	132,292	100,272
Three before current fiscal year	131,088	111,996
Two years before current fiscal year	71,524	136,644
Fiscal year before current fiscal year	44,465	59,681
Current fiscal year	40,718	49,584
Total	804,030	801,548
Owner occupied - commercial real estate | Watch
Loans and Leases Receivable Disclosure [Line Items]
Prior	23,960	16,014
Four years before current fiscal year	3,234	5,011
Three before current fiscal year	93,035	2,640
Two years before current fiscal year	23,968	10,338
Fiscal year before current fiscal year		15,501
Total	144,197	49,504
Owner occupied - commercial real estate | Special Mention
Loans and Leases Receivable Disclosure [Line Items]
Prior	0	418
Two years before current fiscal year	2,133	83,110
Fiscal year before current fiscal year		19,091
Total	2,133	102,619
Owner occupied - commercial real estate | Substandard
Loans and Leases Receivable Disclosure [Line Items]
Prior	23,512	28,228
Four years before current fiscal year		784
Three before current fiscal year		1,908
Two years before current fiscal year	3,745	2,048
Fiscal year before current fiscal year		10,151
Current fiscal year		904
Total	27,257	44,023
Real estate mortgage - residential
Loans and Leases Receivable Disclosure [Line Items]
Prior	20,010	19,504
Four years before current fiscal year	7,284	5,090
Three before current fiscal year	13,409	10,199
Two years before current fiscal year	16,787	13,474
Fiscal year before current fiscal year	3,999	18,209
Current fiscal year	14,770	10,116
Total	76,259	76,592
Real estate mortgage - residential | Pass
Loans and Leases Receivable Disclosure [Line Items]
Prior	15,047	16,310
Four years before current fiscal year	7,284	2,693
Three before current fiscal year	13,409	10,199
Two years before current fiscal year	16,703	12,746
Fiscal year before current fiscal year	3,999	18,209
Current fiscal year	14,770	10,116
Total	71,212	70,273
Real estate mortgage - residential | Watch
Loans and Leases Receivable Disclosure [Line Items]
Prior	3,265	1,996
Four years before current fiscal year	0	699
Two years before current fiscal year		728
Total	3,265	3,423
Real estate mortgage - residential | Substandard
Loans and Leases Receivable Disclosure [Line Items]
Prior	1,698	1,198
Four years before current fiscal year		1,698
Two years before current fiscal year	84
Total	1,782	2,896
Construction - commercial and residential
Loans and Leases Receivable Disclosure [Line Items]
Prior	60,636	22,231
Four years before current fiscal year	204,705	60,486
Three before current fiscal year	185,229	309,745
Two years before current fiscal year	131,804	303,823
Fiscal year before current fiscal year	181,470	105,679
Current fiscal year	60,289	71,297
Total	824,133	873,261
Construction - commercial and residential | Pass
Loans and Leases Receivable Disclosure [Line Items]
Prior	60,130	21,290
Four years before current fiscal year	160,792	60,486
Three before current fiscal year	185,229	266,788
Two years before current fiscal year	128,722	297,480
Fiscal year before current fiscal year	181,470	105,679
Current fiscal year	60,289	71,297
Total	776,632	823,020
Construction - commercial and residential | Watch
Loans and Leases Receivable Disclosure [Line Items]
Prior	506	929
Four years before current fiscal year	43,913
Three before current fiscal year		42,751
Two years before current fiscal year	3,082	3,448
Total	47,501	47,128
Construction - commercial and residential | Special Mention
Loans and Leases Receivable Disclosure [Line Items]
Prior		12
Two years before current fiscal year		2,895
Total		2,907
Construction - commercial and residential | Substandard
Loans and Leases Receivable Disclosure [Line Items]
Three before current fiscal year		206
Total	0	206
Construction - C&I (owner occupied)
Loans and Leases Receivable Disclosure [Line Items]
Prior	22,207	11,975
Four years before current fiscal year	53,127	10,476
Three before current fiscal year	26,835	8,755
Two years before current fiscal year	45,921	35,275
Fiscal year before current fiscal year	73,629	36,645
Current fiscal year	647	55,779
Total	222,366	158,905
Construction - C&I (owner occupied) | Pass
Loans and Leases Receivable Disclosure [Line Items]
Prior	21,522	8,278
Four years before current fiscal year	52,731	10,476
Three before current fiscal year	23,581	6,637
Two years before current fiscal year	30,809	30,340
Fiscal year before current fiscal year	57,911	22,209
Current fiscal year	647	40,101
Total	187,201	118,041
Construction - C&I (owner occupied) | Watch
Loans and Leases Receivable Disclosure [Line Items]
Prior	685	3,573
Four years before current fiscal year	396
Three before current fiscal year	3,254	2,118
Two years before current fiscal year	15,112	4,935
Fiscal year before current fiscal year	15,718
Total	35,165	10,626
Construction - C&I (owner occupied) | Special Mention
Loans and Leases Receivable Disclosure [Line Items]
Prior		124
Fiscal year before current fiscal year		14,436
Current fiscal year		15,678
Total		30,238
Construction - C&I (owner occupied) | Substandard
Loans and Leases Receivable Disclosure [Line Items]
Prior	0
Total	0
Home equity
Loans and Leases Receivable Disclosure [Line Items]
Prior	26,837	35,425
Four years before current fiscal year	5,832	4,493
Three before current fiscal year	1,782	8,227
Two years before current fiscal year	2,690	7,827
Fiscal year before current fiscal year	9,443	4,271
Current fiscal year	8,943	12,924
Total	55,527	73,167
Home equity | Pass
Loans and Leases Receivable Disclosure [Line Items]
Prior	25,402	33,226
Four years before current fiscal year	5,832	4,493
Three before current fiscal year	1,782	8,227
Two years before current fiscal year	2,644	7,827
Fiscal year before current fiscal year	9,443	4,224
Current fiscal year	8,943	12,924
Total	54,046	70,921
Home equity | Watch
Loans and Leases Receivable Disclosure [Line Items]
Prior	879	1,596
Total	879	1,596
Home equity | Substandard
Loans and Leases Receivable Disclosure [Line Items]
Prior	556	603
Two years before current fiscal year	46
Fiscal year before current fiscal year		47
Total	602	650
Other consumer
Loans and Leases Receivable Disclosure [Line Items]
Prior	942	936
Four years before current fiscal year	24	190
Three before current fiscal year	46	64
Two years before current fiscal year	33	74
Fiscal year before current fiscal year	24	94
Current fiscal year	63	31
Total	1,132	1,389
Other consumer | Pass
Loans and Leases Receivable Disclosure [Line Items]
Prior	936	929
Four years before current fiscal year	24	190
Three before current fiscal year	46	64
Two years before current fiscal year	33	74
Fiscal year before current fiscal year	24	94
Current fiscal year	63	31
Total	1,126	1,382
Other consumer | Substandard
Loans and Leases Receivable Disclosure [Line Items]
Prior	6	7
Total	$ 6	$ 7

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Loans and Allowance for Credit Losses - Class of loan, an aging analysis and the recorded investments in loans past due (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Loans and Leases Receivable Disclosure [Line Items]
Non-Accrual	$ 31,247	$ 60,943
Loans	6,850,863	7,760,212
Construction - C&I (owner occupied)
Loans and Leases Receivable Disclosure [Line Items]
Loans	222,366
Commercial
Loans and Leases Receivable Disclosure [Line Items]
Non-Accrual	12,147	15,352
Loans	1,289,215	1,437,433
PPP loans
Loans and Leases Receivable Disclosure [Line Items]
Loans	67,311	454,771
Income producing - commercial real estate
Loans and Leases Receivable Disclosure [Line Items]
Non-Accrual	14,933	18,880
Loans	3,337,303	3,687,000
Owner occupied - commercial real estate
Loans and Leases Receivable Disclosure [Line Items]
Non-Accrual	1,593	23,158
Loans	977,617	997,694
Real estate mortgage - residential
Loans and Leases Receivable Disclosure [Line Items]
Non-Accrual	2,018	2,931
Loans	76,259	76,592
Construction - commercial and residential
Loans and Leases Receivable Disclosure [Line Items]
Non-Accrual	0	206
Loans	824,133	873,261
Construction - commercial and residential | Construction - C&I (owner occupied)
Loans and Leases Receivable Disclosure [Line Items]
Loans	222,366	158,905
Construction and Industrial, Owner Occupied | Construction - C&I (owner occupied)
Loans and Leases Receivable Disclosure [Line Items]
Loans		158,905
Home equity
Loans and Leases Receivable Disclosure [Line Items]
Non-Accrual	556	416
Loans	55,527	73,167
Other consumer
Loans and Leases Receivable Disclosure [Line Items]
Loans	1,132	1,389
Current
Loans and Leases Receivable Disclosure [Line Items]
Loans	6,807,516	7,595,544
Current | Construction - C&I (owner occupied)
Loans and Leases Receivable Disclosure [Line Items]
Loans	221,463
Current | Commercial
Loans and Leases Receivable Disclosure [Line Items]
Loans	1,276,100	1,394,244
Current | PPP loans
Loans and Leases Receivable Disclosure [Line Items]
Loans	64,004	454,771
Current | Income producing - commercial real estate
Loans and Leases Receivable Disclosure [Line Items]
Loans	3,322,370	3,616,207
Current | Owner occupied - commercial real estate
Loans and Leases Receivable Disclosure [Line Items]
Loans	972,632	960,364
Current | Real estate mortgage - residential
Loans and Leases Receivable Disclosure [Line Items]
Loans	74,241	72,231
Current | Construction - commercial and residential
Loans and Leases Receivable Disclosure [Line Items]
Loans	821,051	869,723
Current | Construction and Industrial, Owner Occupied | Construction - C&I (owner occupied)
Loans and Leases Receivable Disclosure [Line Items]
Loans		158,905
Current | Home equity
Loans and Leases Receivable Disclosure [Line Items]
Loans	54,575	67,732
Current | Other consumer
Loans and Leases Receivable Disclosure [Line Items]
Loans	1,080	1,367
Past Due
Loans and Leases Receivable Disclosure [Line Items]
Loans	12,100	103,725
Past Due | Commercial
Loans and Leases Receivable Disclosure [Line Items]
Loans	968	27,837
Past Due | PPP loans
Loans and Leases Receivable Disclosure [Line Items]
Loans	3,307
Past Due | Income producing - commercial real estate
Loans and Leases Receivable Disclosure [Line Items]
Loans		51,913
Past Due | Owner occupied - commercial real estate
Loans and Leases Receivable Disclosure [Line Items]
Loans	3,392	14,172
Past Due | Real estate mortgage - residential
Loans and Leases Receivable Disclosure [Line Items]
Loans		1,430
Past Due | Construction - commercial and residential
Loans and Leases Receivable Disclosure [Line Items]
Loans	3,082	3,332
Past Due | Construction and Industrial, Owner Occupied
Loans and Leases Receivable Disclosure [Line Items]
Loans	903
Past Due | Home equity
Loans and Leases Receivable Disclosure [Line Items]
Loans	396	5,019
Past Due | Other consumer
Loans and Leases Receivable Disclosure [Line Items]
Loans	52	22
30 to 59 days past due
Loans and Leases Receivable Disclosure [Line Items]
Loans	5,064	21,951
30 to 59 days past due | Commercial
Loans and Leases Receivable Disclosure [Line Items]
Loans	96	6,411
30 to 59 days past due | PPP loans
Loans and Leases Receivable Disclosure [Line Items]
Loans	3,307
30 to 59 days past due | Owner occupied - commercial real estate
Loans and Leases Receivable Disclosure [Line Items]
Loans	579	10,630
30 to 59 days past due | Real estate mortgage - residential
Loans and Leases Receivable Disclosure [Line Items]
Loans		1,430
30 to 59 days past due | Construction - commercial and residential
Loans and Leases Receivable Disclosure [Line Items]
Loans		2,992
30 to 59 days past due | Construction and Industrial, Owner Occupied
Loans and Leases Receivable Disclosure [Line Items]
Loans	903
30 to 59 days past due | Home equity
Loans and Leases Receivable Disclosure [Line Items]
Loans	127	467
30 to 59 days past due | Other consumer
Loans and Leases Receivable Disclosure [Line Items]
Loans	52	21
60-89 days past due
Loans and Leases Receivable Disclosure [Line Items]
Loans	7,036	81,774
60-89 days past due | Commercial
Loans and Leases Receivable Disclosure [Line Items]
Loans	872	21,426
60-89 days past due | Income producing - commercial real estate
Loans and Leases Receivable Disclosure [Line Items]
Loans		51,913
60-89 days past due | Owner occupied - commercial real estate
Loans and Leases Receivable Disclosure [Line Items]
Loans	2,813	3,542
60-89 days past due | Construction - commercial and residential
Loans and Leases Receivable Disclosure [Line Items]
Loans	3,082	340
60-89 days past due | Home equity
Loans and Leases Receivable Disclosure [Line Items]
Loans	269	4,552
60-89 days past due | Other consumer
Loans and Leases Receivable Disclosure [Line Items]
Loans		1
90 Days or More Past Due
Loans and Leases Receivable Disclosure [Line Items]
Loans	$ 0	$ 0

XML

Loans and Allowance for Credit Losses - Information related to nonaccrual loans by class (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2020
Loans and Leases Receivable Disclosure [Line Items]
Nonaccrual with No Allowance for Credit Loss	$ 13,776		$ 30,354
Nonaccrual with an Allowance for Credit Loss	17,471		30,589
Total Nonaccrual Loans	31,247		60,943
Interest on nonaccrual loans	1,400	$ 2,600
Actual nonaccrual, interest income	23	$ 282
Performing Financial Instruments
Loans and Leases Receivable Disclosure [Line Items]
Troubled debt restructuring	10,200		10,500
Commercial
Loans and Leases Receivable Disclosure [Line Items]
Nonaccrual with No Allowance for Credit Loss	7,113		3,263
Nonaccrual with an Allowance for Credit Loss	5,034		12,089
Total Nonaccrual Loans	12,147		15,352
Income producing - commercial real estate
Loans and Leases Receivable Disclosure [Line Items]
Nonaccrual with No Allowance for Credit Loss	4,620		6,500
Nonaccrual with an Allowance for Credit Loss	10,313		12,380
Total Nonaccrual Loans	14,933		18,880
Owner occupied - commercial real estate
Loans and Leases Receivable Disclosure [Line Items]
Nonaccrual with No Allowance for Credit Loss	1,593		18,941
Nonaccrual with an Allowance for Credit Loss	0		4,217
Total Nonaccrual Loans	1,593		23,158
Real estate mortgage - residential
Loans and Leases Receivable Disclosure [Line Items]
Nonaccrual with No Allowance for Credit Loss	84		1,234
Nonaccrual with an Allowance for Credit Loss	1,934		1,697
Total Nonaccrual Loans	2,018		2,931
Construction - commercial and residential
Loans and Leases Receivable Disclosure [Line Items]
Nonaccrual with No Allowance for Credit Loss	0		0
Nonaccrual with an Allowance for Credit Loss	0		206
Total Nonaccrual Loans	0		206
Home equity
Loans and Leases Receivable Disclosure [Line Items]
Nonaccrual with No Allowance for Credit Loss	366		416
Nonaccrual with an Allowance for Credit Loss	190		0
Total Nonaccrual Loans	$ 556		$ 416

XML

Loans and Allowance for Credit Losses - Modifications Narrative (Details) - loan	9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
Financing Receivable, Troubled Debt Restructuring [Line Items]
Number of contracts modified in TDR	0	2

XML

Loans and Allowance for Credit Losses - Loans modified in troubled debt restructurings (Details) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021 loan	Sep. 30, 2020 loan	Sep. 30, 2021 USD ($) contract	Sep. 30, 2020 USD ($) contract
Loans and Leases Receivable Disclosure [Line Items]
Number of loans - restructured accruing	1	1	5	7
Number of loans - restructured nonaccruing | contract			2	4
Number of TDR loans | contract			7	11
Restructured accruing			$ 10,195	$ 10,522
Restructured nonaccruing			6,342	8,850
Troubled debt restructured			16,537	19,372
Specific allowance			3,371	856
Restructured and subsequently defaulted			6,342	13,669
Commercial
Loans and Leases Receivable Disclosure [Line Items]
Restructured accruing			1,069	1,297
Restructured nonaccruing			0	138
Troubled debt restructured			1,069	1,435
Specific allowance			146	227
Restructured and subsequently defaulted			0	138
Income producing - commercial real estate
Loans and Leases Receivable Disclosure [Line Items]
Restructured accruing			9,126	9,188
Restructured nonaccruing			6,342	6,342
Troubled debt restructured			15,468	15,530
Specific allowance			3,225	629
Restructured and subsequently defaulted			6,342	11,161
Owner occupied - commercial real estate
Loans and Leases Receivable Disclosure [Line Items]
Restructured accruing			0	37
Restructured nonaccruing			0	2,370
Troubled debt restructured			0	2,407
Specific allowance			0	0
Restructured and subsequently defaulted			0	2,370
Construction Commercial Real Estate
Loans and Leases Receivable Disclosure [Line Items]
Restructured accruing			0	0
Restructured nonaccruing			0	0
Troubled debt restructured			0	0
Specific allowance			0	0
Restructured and subsequently defaulted			$ 0	$ 0

XML

Loans and Allowance for Credit Losses - TDR Narrative (Details) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021 loan	Sep. 30, 2020 loan	Sep. 30, 2021 USD ($) loan contract	Sep. 30, 2020 USD ($) loan contract
Loans and Leases Receivable Disclosure [Line Items]
Number of TDR loans | contract			7	11
Troubled debt restructuring, amount			$ 16,537	$ 19,372
Restructured and subsequently defaulted			$ 6,342	$ 13,669
Number of loans - restructured accruing	1	1	5	7
Number of loans paydowns | loan			0	0
Number of contracts modified in TDR | loan			0	2
Performing Financial Instruments
Loans and Leases Receivable Disclosure [Line Items]
Number of TDR loans | contract			5
Troubled debt restructuring, amount			$ 10,200
Non-Performing Loans
Loans and Leases Receivable Disclosure [Line Items]
Number of loans subsequent defaults reclassified to non-performing | loan			0	2
Restructured and subsequently defaulted				$ 6,300

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Leases - Narrative (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2021 USD ($) lease	Dec. 31, 2020 USD ($)
Leases [Abstract]
Operating lease right-of-use assets	$ 30,080	$ 25,237
Operating lease liabilities	$ 34,345	$ 28,022
Probability that lease options will be exercised	90.00%
Number of operating leases signed but not yet commenced | lease	1

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Leases - Lease Costs and Other Information (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2020
Leases [Abstract]
Operating Lease Cost (Cost resulting from lease payments)	$ 1,960	$ 2,248	$ 6,132	$ 6,253
Variable Lease Cost (Cost excluded from lease payments)	205	202	678	720
Sublease Income	(117)	(87)	(291)	(261)
Net Lease Cost	2,048	2,363	6,519	6,712
Operating Lease - Operating Cash Flows (Fixed Payments)	1,992	$ 2,229	6,344	$ 6,648
Right-of-Use Assets - Operating Leases	$ 30,080		$ 30,080		$ 25,237
Weighted Average Lease Term - Operating Leases	6 years 2 months 19 days		6 years 2 months 19 days		6 years 2 months 12 days
Weighted Average Discount Rate - Operating Leases	3.14%		3.14%		4.00%

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Leases - Future minimum payments for operating leases (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Twelve Months Ended:
June 30, 2022	$ 1,910
June 30, 2023	4,517
June 30, 2024	6,550
June 30, 2025	5,792
June 30, 2026	4,815
Thereafter	12,097
Total Future Minimum Lease Payments	35,681
Amounts Representing Interest	(1,336)
Present Value of Net Future Minimum Lease Payments	$ 34,345	$ 28,022

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Other Derivatives - Narrative (Details) - qtr	Sep. 30, 2021	Dec. 31, 2020
Designated Cash Flow Hedge | Interest rate swap derivatives
Derivative Instruments, Gain (Loss) [Line Items]
Number of interest rate derivatives held	0	1

XML

Other Derivatives - Balance Sheet Category and Fair Value (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Derivatives, Fair Value [Line Items]
Fair Value	$ 5,173	$ 4,287
Cash and other collateral	3,244	4,168
Not Designated as Hedging Instrument | Other Assets
Derivatives, Fair Value [Line Items]
Notional Amount	376,471
Fair Value	6,530	8,704
Net Derivative Amounts	1,929	119
Not Designated as Hedging Instrument | Other Assets | Interest rate product
Derivatives, Fair Value [Line Items]
Notional Amount	239,248
Fair Value	4,955	3,491
Not Designated as Hedging Instrument | Other Assets | Mortgage banking derivatives
Derivatives, Fair Value [Line Items]
Notional Amount	137,223
Fair Value	1,575	5,213
Not Designated as Hedging Instrument | Other Liabilities
Derivatives, Fair Value [Line Items]
Notional Amount	265,790
Fair Value	5,173	3,771
Not Designated as Hedging Instrument | Other Liabilities | Interest rate product
Derivatives, Fair Value [Line Items]
Notional Amount	239,248
Fair Value	5,110	3,653
Not Designated as Hedging Instrument | Other Liabilities | Other Contracts
Derivatives, Fair Value [Line Items]
Notional Amount	26,542
Fair Value	63	118
Designated Cash Flow Hedge | Other Liabilities | Interest rate product
Derivatives, Fair Value [Line Items]
Notional Amount	0
Fair Value	$ 0	$ 516

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Other Derivatives - Cash flow hedges (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Gain or (Loss) recognized in OCI on Derivative	$ 0	$ 31	$ 1,033	$ (1,986)
Designated Cash Flow Hedge
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Gain or (Loss) recognized in OCI on Derivative	0	31	1	(1,517)
Amount of gain or (loss) reclassified from accumulated other comprehensive income into income	0	(389)	(445)	(755)
Designated Cash Flow Hedge | Interest Expense
Derivative Instruments, Gain (Loss) [Line Items]
Amount of gain or (loss) reclassified from accumulated other comprehensive income into income	0	(389)	(445)	(755)
Designated Cash Flow Hedge | Interest Rate Products
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Gain or (Loss) recognized in OCI on Derivative	$ 0	$ 31	$ 1	$ (1,517)

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Other Derivatives - Designated cash flow hedges (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Reclassification of Cash Flow Hedge Gain (Loss) [Abstract]
Total amounts of income and expense line items presented in the consolidated statement of income in which the effects of fair value or cash flow hedges are recorded	$ 21	$ 145	$ 21	$ 309
Designated Cash Flow Hedge
Reclassification of Cash Flow Hedge Gain (Loss) [Abstract]
Amount of gain or (loss) reclassified from accumulated other comprehensive income into income	0	(389)	(445)	(755)
Interest Expenses
Reclassification of Cash Flow Hedge Gain (Loss) [Abstract]
Total amounts of income and expense line items presented in the consolidated statement of income in which the effects of fair value or cash flow hedges are recorded	0	(389)	(445)	(755)
Interest Expenses | Designated Cash Flow Hedge
Reclassification of Cash Flow Hedge Gain (Loss) [Abstract]
Amount of gain or (loss) reclassified from accumulated other comprehensive income into income	0	(389)	(445)	(755)
Amount of gain or (loss) reclassified from accumulated other comprehensive income into income as a result that a forecasted transaction is no longer probable of occurring	0	0	0	0
Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income - Included Component	0	(389)	(445)	(755)
Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income - Excluded Component	$ 0	$ 0	$ 0	$ 0

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Other Derivatives - Hedging instruments on statements of operations (Details) - Nonoperating Income (Expense) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Not Designated as Hedging Instrument
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Income (Loss) Recognized in Income on Derivative	$ 1,852	$ 5,962	$ 5,573	$ 5,612
Interest Rate Products
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Income (Loss) Recognized in Income on Derivative	277	(40)	261	(326)
Mortgage Banking
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Income (Loss) Recognized in Income on Derivative	1,575	6,015	5,268	6,015
Other Contracts
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Income (Loss) Recognized in Income on Derivative	$ 0	$ (13)	$ 44	$ (77)

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Long-Term Borrowings - Schedules of long-term Borrowings (Details) - USD ($)	Sep. 30, 2021	Dec. 31, 2020	Feb. 26, 2020	Jul. 26, 2016	Aug. 05, 2014
Long-Term Borrowings
Less: unamortized debt issuance costs	$ (361,000)	$ (1,923,000)
Long-term borrowings	69,639,000	268,077,000
Subordinated Notes, 5.75%
Long-Term Borrowings
Long-term borrowings, gross	$ 70,000,000	70,000,000
Interest rate (as a percent)	5.75%				5.75%
Subordinated Notes, 5.0%
Long-Term Borrowings
Long-term borrowings, gross	$ 0	150,000,000
Interest rate (as a percent)	5.00%			5.00%
FHLB Advance, 1.81%
Long-Term Borrowings
Long-term borrowings, gross	$ 0	$ 50,000,000	$ 50,000,000
Interest rate (as a percent)	1.81%		1.81%

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Long Term Borrowings - Narrative (Details) - USD ($)				3 Months Ended
	Aug. 02, 2021	Jul. 26, 2016	Aug. 05, 2014	Mar. 31, 2021	Sep. 30, 2021	Dec. 31, 2020	Feb. 26, 2020
Long-Term Borrowings
Payments of debt issuance costs	$ 1,300,000
Subordinated Notes, 5.75%
Long-Term Borrowings
Face amount			$ 70,000,000
Interest rate (as a percent)			5.75%		5.75%
Net proceeds from issuance of subordinated long-term debt			$ 68,800,000
Payments of debt issuance costs			$ 1,200,000
Long-term borrowings					$ 70,000,000	$ 70,000,000
Subordinated Notes, 5.0%
Long-Term Borrowings
Face amount		$ 150,000,000
Interest rate (as a percent)		5.00%			5.00%
Net proceeds from issuance of subordinated long-term debt		$ 147,400,000
Payments of debt issuance costs		$ 2,600,000
Long-term borrowings					$ 0	150,000,000
FHLB Advance, 1.81%
Long-Term Borrowings
Interest rate (as a percent)					1.81%		1.81%
Long-term borrowings					$ 0	$ 50,000,000	$ 50,000,000
Gain on cancellation of debt				$ 911,000

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Net Income per Common Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Earnings Per Share, Basic [Abstract]
Net income	$ 43,609	$ 41,346	$ 135,071	$ 93,325
Average common shares outstanding (in shares)	31,959	32,229	31,931	32,434
Basic net income per common share (in dollars per share)	$ 1.36	$ 1.28	$ 4.23	$ 2.88
Earnings Per Share, Diluted [Abstract]
Net income	$ 43,609	$ 41,346	$ 135,071	$ 93,325
Average common shares outstanding (in shares)	31,959	32,229	31,931	32,434
Adjustment for common share equivalents (in shares)	72	22	62	24
Average common shares outstanding-diluted (in shares)	32,031	32,251	31,993	32,458
Diluted net income per common share (in dollars per share)	$ 1.36	$ 1.28	$ 4.22	$ 2.88
Anti-dilutive shares (in shares)	3	26	3	26

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Other Comprehensive Income (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Before Tax
Net unrealized gain (loss) on securities available-for-sale	$ (7,682)	$ (840)	$ (22,437)	$ 18,402
Less: Reclassification adjustment for net gains (losses) included in net income	(1,519)	(115)	(2,058)	(1,650)
Total unrealized gain (loss)	(9,201)	(955)	(24,495)	16,752
Net unrealized gain (loss) on derivatives	0	31	1,033	(1,986)
Less: Reclassification adjustment for gain (loss) included in net income	0	389	(517)	688
Total unrealized gain (loss)	0	420	516	(1,298)
Other Comprehensive Income (Loss)	(9,201)	(535)	(23,979)	15,454
Tax Effect
Net unrealized gain (loss) on securities available-for-sale	1,979	216	5,771	(5,048)
Less: Reclassification adjustment for net gains (losses) included in net income	386	29	524	419
Total unrealized gain (loss)	2,365	245	6,295	(4,629)
Net unrealized gain (loss) on derivatives	0	(7)	(264)	662
Less: Reclassification adjustment for gain (loss) included in net income	0	(100)	132	(175)
Total unrealized gain (loss)	0	(107)	(132)	487
Other Comprehensive Income (Loss)	2,365	138	6,163	(4,142)
Net of Tax
Net unrealized gain (loss) on securities available-for-sale	(5,703)	(624)	(16,666)	13,354
Less: Reclassification adjustment for net gains (losses) included in net income	(1,133)	(86)	(1,534)	(1,231)
Total unrealized gain (loss) on investment securities	(6,836)	(710)	(18,200)	12,123
Net unrealized gain (loss) on derivatives	0	24	769	(1,324)
Less: Reclassification adjustment for gain (loss) included in net income	0	289	(385)	513
Total unrealized gain (loss)	0	313	384	(811)
Other comprehensive income (loss)	$ (6,836)	$ (397)	$ (17,816)	$ 11,312

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Other Comprehensive Income - Changes in accumulated other comprehensive income (loss), net of tax (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Debt Securities, Available-for-sale [Abstract]
Beginning balance	$ 4,804	$ 15,942	$ 16,168	$ 3,109
Other comprehensive income (loss) before reclassifications	(5,703)	(624)	(16,666)	13,354
Amounts reclassified from accumulated other comprehensive income (loss)	(1,133)	(86)	(1,534)	(1,231)
Net other comprehensive income (loss) during the period	(6,836)	(710)	(18,200)	12,123
Ending balance	(2,032)	15,232	(2,032)	15,232
Derivatives
Beginning balance	(284)	(1,274)	(668)	(150)
Other comprehensive income (loss) before reclassifications	0	24	769	(1,324)
Amounts reclassified from accumulated other comprehensive income (loss)	0	289	(385)	513
Total unrealized gain (loss)	0	313	384	(811)
Ending balance	(284)	(961)	(284)	(961)
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]
Beginning balance	4,520	14,668	15,500	2,959
Other comprehensive income (loss) before reclassifications	(5,703)	(600)	(15,897)	12,030
Amounts reclassified from accumulated other comprehensive income (loss)	(1,133)	203	(1,919)	(718)
Other comprehensive income (loss)	(6,836)	(397)	(17,816)	11,312
Ending balance	$ (2,316)	$ 14,271	$ (2,316)	$ 14,271

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Other Comprehensive Income - Amounts reclassified from accumulated other comprehensive income (loss) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Realized gain on sale of investment securities	$ 1,519	$ 115	$ 2,058	$ 1,650
Interest income derivative deposits	(6,590)	(10,995)	(21,288)	(44,055)
Income tax expense	(14,847)	(14,092)	(46,108)	(31,847)
Net Income	43,609	41,346	135,071	93,325
Reclassification out of Accumulated Other Comprehensive Income (Loss)
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Realized gain on sale of investment securities	1,519	115	2,058	1,650
Interest income derivative deposits	0	(389)	517	(688)
Income tax expense	(386)	71	(656)	(244)
Net Income	$ 1,133	$ (203)	$ 1,919	$ 718

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Fair Value Measurements - Assets and liabilities recorded at fair value on recurring basis (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Investment securities	$ 1,786,659	$ 1,151,083
U.S. treasuries
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Investment securities	24,854
U. S. agency securities
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Investment securities	353,706	181,921
Residential mortgage backed securities
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Investment securities	1,203,136	825,001
Loans held for sale	53,413	88,205
Municipal bonds
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Investment securities	123,164	108,113
Corporate bonds
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Investment securities	81,601	35,850
Recurring
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Loans held for sale	53,413	88,205
Assets measured at fair value on a nonrecurring basis	1,846,321	1,247,716
Derivative liability	73	118
Total liabilities measured at fair value on a recurring basis	5,110	4,208
Recurring | Interest rate swap derivatives
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Derivative liability	0	516
Recurring | Interest rate caps
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Derivative asset	4,882	3,413
Derivative liability	5,037	3,574
Recurring | U.S. treasuries
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Investment securities	24,854
Recurring | U. S. agency securities
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Investment securities	353,706	181,921
Recurring | Residential mortgage backed securities
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Investment securities	1,203,136	825,001
Recurring | Municipal bonds
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Investment securities	123,164	108,113
Recurring | Corporate bonds
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Investment securities	81,601	35,850
Recurring | Mortgage banking derivatives | Derivative Financial Instruments, Assets
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Derivative asset	1,565	5,213
Recurring | Fair Value, Inputs, Level 1
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Loans held for sale	0	0
Assets measured at fair value on a nonrecurring basis	0	0
Derivative liability	0	0
Total liabilities measured at fair value on a recurring basis	0	0
Recurring | Fair Value, Inputs, Level 1 | Interest rate swap derivatives
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Derivative liability	0	0
Recurring | Fair Value, Inputs, Level 1 | Interest rate caps
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Derivative asset	0	0
Derivative liability	0	0
Recurring | Fair Value, Inputs, Level 1 | U.S. treasuries
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Investment securities	0
Recurring | Fair Value, Inputs, Level 1 | U. S. agency securities
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Investment securities	0	0
Recurring | Fair Value, Inputs, Level 1 | Residential mortgage backed securities
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Investment securities	0	0
Recurring | Fair Value, Inputs, Level 1 | Municipal bonds
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Investment securities	0	0
Recurring | Fair Value, Inputs, Level 1 | Corporate bonds
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Investment securities	0	0
Recurring | Fair Value, Inputs, Level 1 | Mortgage banking derivatives | Derivative Financial Instruments, Assets
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Derivative asset	0	0
Recurring | Fair Value, Inputs, Level 2
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Loans held for sale	53,413	88,205
Assets measured at fair value on a nonrecurring basis	1,843,256	1,241,003
Derivative liability	73	118
Total liabilities measured at fair value on a recurring basis	5,110	4,208
Recurring | Fair Value, Inputs, Level 2 | Interest rate swap derivatives
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Derivative liability	0	516
Recurring | Fair Value, Inputs, Level 2 | Interest rate caps
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Derivative asset	4,882	3,413
Derivative liability	5,037	3,574
Recurring | Fair Value, Inputs, Level 2 | U.S. treasuries
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Investment securities	24,854
Recurring | Fair Value, Inputs, Level 2 | U. S. agency securities
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Investment securities	353,706	181,921
Recurring | Fair Value, Inputs, Level 2 | Residential mortgage backed securities
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Investment securities	1,203,136	825,001
Recurring | Fair Value, Inputs, Level 2 | Municipal bonds
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Investment securities	123,164	108,113
Recurring | Fair Value, Inputs, Level 2 | Corporate bonds
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Investment securities	80,101	34,350
Recurring | Fair Value, Inputs, Level 2 | Mortgage banking derivatives | Derivative Financial Instruments, Assets
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Derivative asset	0	0
Recurring | Fair Value, Inputs, Level 3
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Assets measured at fair value on a nonrecurring basis	3,065	6,713
Total liabilities measured at fair value on a recurring basis	0	0
Recurring | Fair Value, Inputs, Level 3 | Corporate bonds
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Investment securities	1,500	1,500
Recurring | Fair Value, Inputs, Level 3 | Mortgage banking derivatives | Derivative Financial Instruments, Assets
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Derivative asset	$ 1,565	$ 5,213

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Fair Value Measurements - Summary of difference between aggregate fair value and aggregate unpaid principal balance (Details) - Residential mortgage backed securities - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Fair Value	$ 53,413	$ 88,205
Aggregate Unpaid Principal Balance	52,554	86,551
Difference	859	1,654
Loans 90 or more days past due	0	0
Loans in nonaccrual status	$ 0	$ 0

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Fair Value Measurements - Reconciliation of activity for assets and liabilities measured at fair value (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
Assets:
Beginning balance	$ 6,713	$ 11,211
Realized gain (loss) included in earnings	(3,648)	5,735
Migrated to level 2 valuation	0	(9,233)
Ending balance	3,065	7,713
Liabilities:
Beginning balance	0	66
Realized gain included in earnings		(66)
Ending balance	0	0
Investment Securities
Assets:
Beginning balance	1,500	10,931
Realized gain (loss) included in earnings	0	0
Migrated to level 2 valuation	0	(9,233)
Ending balance	1,500	1,698
Liabilities:
Beginning balance	0	0
Realized gain included in earnings		0
Ending balance	0	0
Mortgage Banking Derivatives
Assets:
Beginning balance	5,213	280
Realized gain (loss) included in earnings	(3,648)	5,735
Migrated to level 2 valuation	0	0
Ending balance	1,565	6,015
Liabilities:
Beginning balance	0	66
Realized gain included in earnings		(66)
Ending balance	$ 0	$ 0

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Fair Value Measurements - Debt Securities (Details) - Mortgage banking derivatives - Pricing Model - Fair Value, Inputs, Level 3 - Measurement Input, Pull Through Rate $ in Thousands	Sep. 30, 2021 USD ($)	Dec. 31, 2020 USD ($)
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Fair value	$ 1,565	$ 5,213
Weighted Average
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Measurement input	0.8550	0.7914
Minimum
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Measurement input	0.842
Maximum
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Measurement input	0.870

XML

Fair Value Measurements - Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis (Details) - Non Recurring - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Other real estate owned	$ 5,135	$ 4,987
Assets measured at fair value on a nonrecurring basis	37,040	60,961
Commercial
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Impaired loans	10,019	9,285
Income producing - commercial real estate
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Impaired loans	18,621	21,638
Owner occupied - commercial real estate
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Impaired loans	1,593	21,930
Real estate mortgage - residential
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Impaired loans	1,281	2,602
Construction - commercial and residential
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Impaired loans	0	103
Home equity
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Impaired loans	391	416
Other consumer
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Impaired loans	0
Fair Value, Inputs, Level 1
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Other real estate owned	0	0
Assets measured at fair value on a nonrecurring basis	0	0
Fair Value, Inputs, Level 1 | Commercial
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Impaired loans	0	0
Fair Value, Inputs, Level 1 | Income producing - commercial real estate
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Impaired loans	0	0
Fair Value, Inputs, Level 1 | Owner occupied - commercial real estate
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Impaired loans	0	0
Fair Value, Inputs, Level 1 | Real estate mortgage - residential
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Impaired loans	0	0
Fair Value, Inputs, Level 1 | Construction - commercial and residential
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Impaired loans	0	0
Fair Value, Inputs, Level 1 | Home equity
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Impaired loans	0	0
Fair Value, Inputs, Level 1 | Other consumer
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Impaired loans	0
Fair Value, Inputs, Level 2
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Other real estate owned	0	0
Assets measured at fair value on a nonrecurring basis	0	0
Fair Value, Inputs, Level 2 | Commercial
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Impaired loans	0	0
Fair Value, Inputs, Level 2 | Income producing - commercial real estate
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Impaired loans	0	0
Fair Value, Inputs, Level 2 | Owner occupied - commercial real estate
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Impaired loans	0	0
Fair Value, Inputs, Level 2 | Real estate mortgage - residential
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Impaired loans	0	0
Fair Value, Inputs, Level 2 | Construction - commercial and residential
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Impaired loans	0	0
Fair Value, Inputs, Level 2 | Home equity
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Impaired loans	0	0
Fair Value, Inputs, Level 2 | Other consumer
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Impaired loans	0
Fair Value, Inputs, Level 3
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Other real estate owned	5,135	4,987
Assets measured at fair value on a nonrecurring basis	37,040	60,961
Fair Value, Inputs, Level 3 | Commercial
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Impaired loans	10,019	9,285
Fair Value, Inputs, Level 3 | Income producing - commercial real estate
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Impaired loans	18,621	21,638
Fair Value, Inputs, Level 3 | Owner occupied - commercial real estate
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Impaired loans	1,593	21,930
Fair Value, Inputs, Level 3 | Real estate mortgage - residential
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Impaired loans	1,281	2,602
Fair Value, Inputs, Level 3 | Construction - commercial and residential
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Impaired loans	0	103
Fair Value, Inputs, Level 3 | Home equity
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Impaired loans	391	$ 416
Fair Value, Inputs, Level 3 | Other consumer
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Impaired loans	$ 0

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Fair Value Measurements - Estimated fair value of company's financial instruments (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Federal funds sold	$ 38,934	$ 28,200
Interest bearing deposits with other banks	2,452,744	1,752,420
Investment securities	1,786,659	1,151,083
Interest bearing deposits	812,410	756,923
Customer repurchase agreements	29,401	26,726
Fair Value, Inputs, Level 2 | Credit risk participation agreements
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Derivative liability	73	118
Carrying Value
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Cash and due from banks	8,806	8,435
Federal funds sold	38,934	28,200
Interest bearing deposits with other banks	2,452,744	1,752,420
Investment securities	1,786,659	1,150,885
Accrued interest receivable	40,028	40,104
Loans held for sale	53,413	88,205
Loans	6,767,957	7,650,633
Annuity investment	14,206	14,468
Noninterest bearing deposits	2,836,418	2,809,334
Interest bearing deposits	6,080,567	756,923
Time deposits	751,503	977,760
Customer repurchase agreements	29,401	26,726
Borrowings	369,639	568,077
Carrying Value | Mortgage banking derivatives
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Derivative asset	1,565	5,213
Carrying Value | Interest rate swap derivatives
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Derivative liability	0	516
Carrying Value | Credit risk participation agreements
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Derivative liability	73	118
Carrying Value | Interest rate caps
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Derivative asset	4,882	3,413
Derivative liability	5,037	3,574
Fair Value
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Cash and due from banks	8,806	8,435
Federal funds sold	38,934	28,200
Interest bearing deposits with other banks	2,452,744	1,752,420
Investment securities	1,786,659	1,150,885
Accrued interest receivable	40,028	40,104
Loans held for sale	53,413	88,205
Loans	6,624,261	7,608,687
Annuity investment	14,206	14,468
Noninterest bearing deposits	2,836,418	2,809,334
Interest bearing deposits	6,080,567	756,923
Time deposits	761,212	993,500
Customer repurchase agreements	29,401	26,726
Borrowings	376,058	575,435
Fair Value | Mortgage banking derivatives
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Derivative asset	1,565	5,213
Fair Value | Interest rate swap derivatives
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Derivative liability	0	516
Fair Value | Credit risk participation agreements
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Derivative liability	73	118
Fair Value | Interest rate caps
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Derivative asset	4,882	3,413
Derivative liability	5,037	3,574
Fair Value | Fair Value, Inputs, Level 1
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Cash and due from banks	8,806	8,435
Federal funds sold	0	0
Interest bearing deposits with other banks	0	0
Investment securities	0	0
Accrued interest receivable	0	0
Loans held for sale	0	0
Loans	0	0
Annuity investment	0	0
Noninterest bearing deposits	0	0
Interest bearing deposits	0	0
Time deposits	0	0
Customer repurchase agreements	0	0
Borrowings	0	0
Fair Value | Fair Value, Inputs, Level 1 | Mortgage banking derivatives
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Derivative asset	0	0
Fair Value | Fair Value, Inputs, Level 1 | Interest rate swap derivatives
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Derivative liability	0	0
Fair Value | Fair Value, Inputs, Level 1 | Credit risk participation agreements
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Derivative liability	0	0
Fair Value | Fair Value, Inputs, Level 1 | Interest rate caps
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Derivative asset	0	0
Derivative liability	0	0
Fair Value | Fair Value, Inputs, Level 2
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Cash and due from banks	0	0
Federal funds sold	38,934	28,200
Interest bearing deposits with other banks	2,452,744	1,752,420
Investment securities	1,785,159	1,149,385
Accrued interest receivable	40,028	40,104
Loans held for sale	53,413	88,205
Loans	0	0
Annuity investment	14,206	14,468
Noninterest bearing deposits	2,836,418	2,809,334
Interest bearing deposits	6,080,567	756,923
Time deposits	761,212	993,500
Customer repurchase agreements	29,401	26,726
Borrowings	376,058	575,435
Fair Value | Fair Value, Inputs, Level 2 | Mortgage banking derivatives
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Derivative asset	0	0
Fair Value | Fair Value, Inputs, Level 2 | Interest rate swap derivatives
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Derivative liability	0	516
Fair Value | Fair Value, Inputs, Level 2 | Interest rate caps
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Derivative asset	4,882	3,413
Derivative liability	5,037	3,574
Fair Value | Fair Value, Inputs, Level 3
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Cash and due from banks	0	0
Federal funds sold	0
Interest bearing deposits with other banks	0
Investment securities	1,500	1,500
Accrued interest receivable	0	0
Loans held for sale	0	0
Loans	6,624,261	7,608,687
Annuity investment	0	0
Noninterest bearing deposits	0	0
Interest bearing deposits	0	0
Time deposits	0	0
Customer repurchase agreements	0	0
Borrowings	0	0
Fair Value | Fair Value, Inputs, Level 3 | Mortgage banking derivatives
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Derivative asset	1,565	5,213
Fair Value | Fair Value, Inputs, Level 3 | Interest rate swap derivatives
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Derivative liability	0	0
Fair Value | Fair Value, Inputs, Level 3 | Credit risk participation agreements
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Derivative liability	0	0
Fair Value | Fair Value, Inputs, Level 3 | Interest rate caps
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Derivative asset	0	0
Derivative liability	$ 0	$ 0

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Legal Contingencies (Details) $ in Millions	9 Months Ended
	Sep. 30, 2021 USD ($)
D&O Insurance Policies | Settled Litigation
Loss Contingencies [Line Items]
Litigation settlement amount	$ 10