CAPITAL RATIOS AND SHAREHOLDERS' EQUITY

9 Months Ended

Sep. 30, 2023

CAPITAL RATIOS AND SHAREHOLDERS' EQUITY

CAPITAL RATIOS AND SHAREHOLDERS' EQUITY

NOTE 6.           CAPITAL RATIOS AND SHAREHOLDERS’ EQUITY

The actual and required capital ratios are, as follows:

	September 30, 2023
					Minimum Regulatory
	Actual				Capital Requirements
(in thousands, except ratios)	Amount		Ratio		Amount		Ratio
Company (consolidated)
Total capital to risk-weighted assets	$	443,482	13.86	%	$	255,967	8.00	%
Common equity tier 1 capital to risk-weighted assets		351,029	10.97			143,981	4.50
Tier 1 capital to risk-weighted assets		371,649	11.62			191,976	6.00
Tier 1 capital to average assets (leverage ratio)		371,649	9.45			157,333	4.00
Bank
Total capital to risk-weighted assets	$	434,770	13.60	%	$	257,232	8.00	%
Common equity tier 1 capital to risk-weighted assets		402,937	12.61			144,594	4.50
Tier 1 capital to risk-weighted assets		402,937	12.61			192,792	6.00
Tier 1 capital to average assets (leverage ratio)		402,937	10.25			154,761	4.00

	December 31, 2022
					Minimum Regulatory
	Actual				Capital Requirements
(in thousands, except ratios)	Amount		Ratio		Amount		Ratio
Company (consolidated)
Total capital to risk-weighted assets	$	416,900	13.50	%	$	247,041	8.00	%
Common equity tier 1 capital to risk-weighted assets		326,513	10.57			138,960	4.50
Tier 1 capital to risk-weighted assets		347,133	11.24			185,281	6.00
Tier 1 capital to average assets (leverage ratio)		347,133	9.21			150,772	4.00
Bank
Total capital to risk-weighted assets	$	410,053	13.29	%	$	246,812	8.00	%
Common equity tier 1 capital to risk-weighted assets		380,286	12.33			138,832	4.50
Tier 1 capital to risk-weighted assets		380,286	12.33			185,110	6.00
Tier 1 capital to average assets (leverage ratio)		380,286	10.10			150,655	4.00

In order to be classified as “well-capitalized” under the relevant regulatory framework, (i) the Company must, on a consolidated basis, maintain a total risk-based capital ratio of 10.00% or greater and a Tier 1 risk-based capital ratio of 6.00% or greater; and (ii) the Bank must maintain a total risk-based capital ratio of 10.00% or greater, a Tier 1 risk-based capital ratio of 8.00% or greater, a common equity Tier 1 capital ratio of 6.50% or greater, and a leverage ratio of 5.00% or greater. At each date shown in the tables above, the Company and the Bank met the conditions to be classified as “well-capitalized” under the relevant regulatory framework.

Accumulated other comprehensive (loss) income

Components of accumulated other comprehensive loss is, as follows:

(in thousands)	September 30, 2023		December 31, 2022
Accumulated other comprehensive loss, before tax:
Net unrealized loss on AFS securities	$	(86,469)	$	(71,832)
Net unrealized loss on hedging derivatives		(4,640)		(2,333)
Net unrealized loss on post-retirement plans		(1,675)		(1,691)
Income taxes related to items of accumulated other comprehensive loss:
Net unrealized loss on AFS securities		19,939		16,586
Net unrealized loss on hedging derivatives		1,070		539
Net unrealized loss on post-retirement plans		375		391
Accumulated other comprehensive loss	$	(71,400)	$	(58,340)

The following table presents the components of other comprehensive income (loss) for the three and nine months ended September 30, 2023 and 2022:

(in thousands)	Before Tax		Tax Effect		Net of Tax
Three Months Ended September 30, 2023
Net unrealized loss on AFS securities:
Net unrealized loss arising during the period	$	(14,586)	$	3,363	$	(11,223)
Less: reclassification adjustment for gains (losses) realized in net income		—		—		—
Net unrealized loss on AFS securities		(14,586)		3,363		(11,223)
Net unrealized loss on hedging derivatives:
Net unrealized loss arising during the period		(3,395)		782		(2,613)
Less: reclassification adjustment for gains (losses) realized in net income		—		—		—
Net unrealized loss on cash flow hedging derivatives		(3,395)		782		(2,613)
Other comprehensive loss	$	(17,981)	$	4,145	$	(13,836)
Three Months Ended September 30, 2022
Net unrealized loss on AFS securities:
Net unrealized loss arising during the period	$	(26,889)	$	6,512	$	(20,377)
Less: reclassification adjustment for gains (losses) realized in net income		44		(10)		34
Net unrealized loss on AFS securities		(26,933)		6,522		(20,411)
Net unrealized loss on hedging derivatives:
Net unrealized loss arising during the period		(1,568)		361		(1,207)
Less: reclassification adjustment for gains (losses) realized in net income		—		—		—
Net unrealized loss on cash flow hedging derivatives		(1,568)		361		(1,207)
Other comprehensive loss	$	(28,501)	$	6,883	$	(21,618)

(in thousands)	Before Tax		Tax Effect		Net of Tax
Nine Months Ended September 30, 2023
Net unrealized loss on AFS securities:
Net unrealized loss arising during the period	$	(14,603)	$	3,345	$	(11,258)
Less: reclassification adjustment for gains realized in net income		34		(8)		26
Net unrealized loss on AFS securities		(14,637)		3,353		(11,284)
Net unrealized loss on hedging derivatives:
Net unrealized loss arising during the period		(2,307)		531		(1,776)
Less: reclassification adjustment for gains (losses) realized in net income		—		—		—
Net unrealized loss on hedging derivatives		(2,307)		531		(1,776)
Other comprehensive loss	$	(16,944)	$	3,884	$	(13,060)
Nine Months Ended September 30, 2022
Net unrealized loss on AFS securities:
Net unrealized loss arising during the period	$	(79,133)	$	18,474	$	(60,659)
Less: reclassification adjustment for gains realized in net income		53		(12)		41
Net unrealized loss on AFS securities		(79,186)		18,486		(60,700)
Net unrealized loss on hedging derivatives:
Net unrealized loss arising during the period		(5,446)		1,254		(4,192)
Less: reclassification adjustment for gains (losses) realized in net income		—		—		—
Net unrealized loss on cash flow hedging derivatives		(5,446)		1,254		(4,192)
Other comprehensive loss	$	(84,632)	$	19,740	$	(64,892)

The following table presents the changes in each component of accumulated other comprehensive income (loss), net of tax impacts, for the three and nine months ended September 30, 2023 and 2022:

	Net unrealized		Net gain (loss) on		Net unrealized
	gain (loss)		effective cash		loss
	on AFS		flow hedging		on pension
(in thousands)	Securities		derivatives		plans		Total
Three Months Ended September 30, 2023
Balance at beginning of period	$	(55,307)	$	(957)	$	(1,300)	$	(57,564)
Other comprehensive loss before reclassifications		(11,223)		(2,613)		—		(13,836)
Less: amounts reclassified from accumulated other comprehensive income		—		—		—		—
Total other comprehensive loss		(11,223)		(2,613)		—		(13,836)
Balance at end of period	$	(66,530)	$	(3,570)	$	(1,300)	$	(71,400)
Three Months Ended September 30, 2022
Balance at beginning of period	$	(38,304)	$	(2,115)	$	(552)	$	(40,971)
Other comprehensive loss before reclassifications		(20,377)		(1,207)		—		(21,584)
Less: amounts reclassified from accumulated other comprehensive income		34		—		—		34
Total other comprehensive loss		(20,411)		(1,207)		—		(21,618)
Balance at end of period	$	(58,715)	$	(3,322)	$	(552)	$	(62,589)
Nine Months Ended September 30, 2023
Balance at beginning of period	$	(55,246)	$	(1,794)	$	(1,300)	$	(58,340)
Other comprehensive loss before reclassifications		(11,258)		(1,776)		—		(13,034)
Less: amounts reclassified from accumulated other comprehensive income		26		—		—		26
Total other comprehensive loss		(11,284)		(1,776)		—		(13,060)
Balance at end of period	$	(66,530)	$	(3,570)	$	(1,300)	$	(71,400)
Nine Months Ended September 30, 2022
Balance at beginning of period	$	1,985	$	870	$	(552)	$	2,303
Other comprehensive loss before reclassifications		(60,659)		(4,192)		—		(64,851)
Less: amounts reclassified from accumulated other comprehensive income		41		—		—		41
Total other comprehensive loss		(60,700)		(4,192)		—		(64,892)
Balance at end of period	$	(58,715)	$	(3,322)	$	(552)	$	(62,589)

The following tables presents the amounts reclassified out of each component of accumulated other comprehensive income for three and nine months ended September 30, 2023 and 2022:

	Three Months Ended September 30,				Nine Months Ended September 30,				Affected Line Item where
(in thousands)	2023		2022		2023		2022		Net Income is Presented
Net realized gains on AFS securities:
Before tax	$	—	$	44	$	34	$	53	Non-interest income
Tax effect		—		(10)		(8)		(12)	Tax expense
Total reclassifications for the period	$	—	$	34	$	26	$	41
	Three Months Ended September 30,				Nine Months Ended September 30,				Affected Line Item where
(in thousands)	2023		2022		2023		2022		Net Income is Presented
Net realized loss on hedging derivatives:
Before tax	$	—	$	—	$	—	$	—	Non-interest income
Tax effect		—		—		—		—	Tax expense
Total reclassifications for the period	$	—	$	—	$	—	$	—