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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

___________

FORM 10-Q

___________


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

For the quarterly period ended March 31, 2022


☐			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: 001-35913

___________

TRISTATE CAPITAL HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

___________

Pennsylvania

20-4929029

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

One Oxford Centre

(412)

304-0304

301 Grant Street, Suite 2700

(Registrant’s telephone number, including area code)

Pittsburgh,

Pennsylvania

15219

(Address of principal executive offices)

(Zip Code)

___________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, no par value

TSC

Nasdaq Global Select Market

Depositary Shares, Each Representing a 1/40th Interest in a Share of 6.75% Fixed-to-Floating Rate Series A Non-Cumulative Perpetual Preferred Stock

TSCAP

Nasdaq Global Select Market

Depositary Shares, Each Representing a 1/40th Interest in a Share of 6.375% Fixed-to-Floating Rate Series B Non-Cumulative Perpetual Preferred Stock

TSCBP

Nasdaq Global Select Market

___________

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. ý 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) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ý Yes ¨ No

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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 ý No

___________

As of April 30, 2022, there were 33,636,862 shares of the registrant’s common stock, no par value, outstanding.

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TRISTATE CAPITAL HOLDINGS, INC. AND SUBSIDIARIES

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS		4
PART I – FINANCIAL INFORMATION
	ITEM 1. FINANCIAL STATEMENTS	6
	UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION	6
	UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME	7
	UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME	8
	UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY	9
	UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS	10
	NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	12
	ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	46
	ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	74
	ITEM 4. CONTROLS AND PROCEDURES	74
PART II – OTHER INFORMATION
	ITEM 1. LEGAL PROCEEDINGS	75
	ITEM 1A. RISK FACTORS	75
	ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	75
	ITEM 3. DEFAULTS UPON SENIOR SECURITIES	75
	ITEM 4. MINE SAFETY DISCLOSURES	75
	ITEM 5. OTHER INFORMATION	75
	ITEM 6. EXHIBITS	76
SIGNATURES		77

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements reflect our current views with respect to, among other things, future events, and our financial performance, as well as our goals and objectives for future operations, financial and business trends, business prospects and management’s outlook or expectations for earnings, revenues, expenses, capital levels, liquidity levels, asset quality or other future financial or business performance, strategies or expectations. These statements are often, but not always, made through the use of words or phrases such as “achieve,” “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “goal,” “intend,” “maintain,” “may,” “opportunity,” “outlook,” “plan,” “potential,” “predict,” “projection,” “seek,” “should,” “sustain,” “target,” “trend,” “will,” “will likely result,” and “would,” or the negative version of those words or other comparable of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, and beliefs of assumptions made by management, many of which, by their nature, are inherently uncertain. Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions and uncertainties that change over time and are difficult to predict, including, but not limited to, the following:

•risks associated with COVID-19 and their expected impact and duration, including effects on our operations, our clients, economic conditions and the demand for our products and services;

•risks associated with the acquisition of our Company by Raymond James Financial, Inc., including risks related to our failure to satisfy conditions of the closing of the acquisition, which could result in the acquisition not closing, which in turn could have a material adverse impact on the value of our stock;

•deterioration of our asset quality;

•our level of non-performing assets and the costs associated with resolving problem loans, including litigation and other costs;

•possible additional loan and lease losses and impairment, changes in the value of collateral securing our loans and leases and the collectability of loans and leases, particularly as a result of the COVID-19 pandemic and the programs implemented by the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, including its automatic loan forbearance provisions;

•our ability to prudently manage our growth and execute our strategy;

•possible changes in the speed of loan prepayments by customers and loan origination or sales volumes;

•business and economic conditions generally and in the financial services industry, nationally and within our local market areas, including the effects of an increase in unemployment levels, slowdowns in economic growth and changes in demand for products or services or the value of assets under management;

•changes in management personnel;

•our ability to recruit and retain key employees;

•our ability to maintain important deposit customer relationships and our reputation and otherwise avoid liquidity risks;

•our ability to provide investment management performance competitive with our peers and benchmarks;

•operational risks associated with our business, including technology and cyber-security related risks;

•risks related to the phasing out of London Interbank Offered Rate (“LIBOR”) and changes in the manner of calculating reference rates, as well as the impact of the phase out of LIBOR and introduction of alternative reference rates on the value of loans and other financial instruments that are linked to LIBOR;

•volatility and direction of market interest rates;

•increased competition in the financial services industry, particularly from regional and national institutions;

•negative perceptions or publicity with respect to any products or services we offer;

•adverse judgments or other resolution of pending and future legal proceedings, and cost incurred in defending such proceedings;

•changes in accounting policies, accounting standards, or authoritative accounting guidance;

•any impairment of our goodwill or other intangible assets;

•our ability to develop and provide competitive products and services that appeal to our customers and target markets;

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•fluctuations in the carrying value of the assets under management held by our Chartwell Investment Partners, LLC subsidiary, as well as the relative and absolute investment performance of such subsidiary’s investment products;

•changes in the laws, rules, regulations, interpretations or policies relating to financial institutions, accounting, tax, trade, monetary and fiscal matters , including economic stimulus programs, and potential expenses associated with complying with such laws and regulations;

•our ability to comply with applicable capital and liquidity requirements, including our ability to generate liquidity internally or raise capital on favorable terms;

•regulatory limits on our ability to receive dividends from our subsidiaries and pay dividends to shareholders;

•changes and direction of government policy towards and intervention in the U.S. financial system;

•natural disasters and adverse weather, acts of terrorism, regional or national civil unrest, cyber-attacks, an outbreak of hostilities or war, a public health outbreak (such as COVID-19) or other international or domestic calamities, and other matters beyond our control;

•the effects of any reputation, credit, interest rate, market, operational, legal, liquidity, regulatory or compliance risk resulting from developments related to any of the risks discussed above; and

•other factors that are discussed in the section entitled “Risk Factors” in our Annual Report on Form 10-K, filed with the SEC, which is accessible at www.sec.gov.

The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in this document. If one or more events related to these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may differ materially from what we anticipate. Accordingly, you should not place undue reliance on any such forward-looking statements. New factors emerge from time to time, and it is not possible for us to predict which will arise. Any forward-looking statement speaks only as of the date on which it is made, and we do not undertake any obligation to update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

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PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

TRISTATE CAPITAL HOLDINGS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION


(Dollars in thousands)	March 31, 2022		December 31, 2021
ASSETS

Cash	$	345	$	340
Interest-earning deposits with other institutions	459,743		449,302
Federal funds sold	21,786		2,374
Cash and cash equivalents	481,874		452,016
Debt securities available-for-sale, at fair value	714,162		586,325
Debt securities held-to-maturity, at amortized cost, net	807,606		802,576

Equity securities, at fair value	4,867		4,975
Federal Home Loan Bank stock	11,802		11,802
Total investment securities	1,538,437		1,405,678

Loans and leases held-for-investment	11,246,919		10,763,324
Allowance for credit losses on loans and leases	(25,024)		(28,563)
Loans and leases held-for-investment, net	11,221,895		10,734,761
Accrued interest receivable	25,891		25,060
Investment management fees receivable, net	8,390		8,641
Goodwill	41,660		41,660
Intangible assets, net of accumulated amortization of $14,769 and $14,292, respectively	19,863		20,340
Office properties and equipment, net of accumulated depreciation of $20,062 and $19,217, respectively	22,303		19,833
Operating lease right-of-use asset	41,527		35,116

Bank owned life insurance	99,535		98,928

Prepaid expenses and other assets	176,292		162,819
Total assets	$	13,677,667	$	13,004,852

LIABILITIES AND SHAREHOLDERS’ EQUITY

Liabilities:
Deposits	$	12,165,476	$	11,504,389
Borrowings, net	470,262		470,163
Accrued interest payable on deposits and borrowings	4,138		1,841
Deferred tax liability, net	716		6,326

Operating lease liability	43,744		36,937
Other accrued expenses and other liabilities	155,193		148,474
Total liabilities	12,839,529		12,168,130

Shareholders’ Equity:
Preferred stock, no par value; Shares authorized - 150,000;
Series A Shares issued and outstanding - 40,250 and 40,250, respectively	38,468		38,468
Series B Shares issued and outstanding - 80,500 and 80,500, respectively	77,611		77,611
Series C Shares issued and outstanding - 694 and 683, respectively	66,565		65,465
Common stock, voting, no par value; Shares authorized - 51,653,347; Shares issued - 36,161,627 and 35,665,531, respectively; Shares outstanding - 33,636,462 and 33,263,498, respectively	335,674		334,566
Common stock non-voting, no par value; Shares authorized - 6,653,347; Shares issued - none	—		—
Additional paid-in capital	44,997		42,655
Retained earnings	338,274		319,766
Accumulated other comprehensive loss, net	(21,082)		(3,424)
Treasury stock (2,525,165 and 2,402,033 shares, respectively)	(42,369)		(38,385)
Total shareholders’ equity	838,138		836,722
Total liabilities and shareholders’ equity	$	13,677,667	$	13,004,852

See accompanying notes to unaudited condensed consolidated financial statements.

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TRISTATE CAPITAL HOLDINGS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME


	Three Months Ended March 31,
(Dollars in thousands, except per share data)	2022		2021

Interest income:
Loans and leases	$	61,228	$	49,186
Investments	6,157		2,646
Interest-earning deposits	192		160
Total interest income	67,577		51,992

Interest expense:
Deposits	10,746		10,754
Borrowings	3,230		2,582
Total interest expense	13,976		13,336
Net interest income	53,601		38,656
Provision for credit losses	563		224
Net interest income after provision for credit losses	53,038		38,432
Non-interest income:
Investment management fees	9,085		9,000
Service charges on deposits	415		316
Net gain (loss) on the sale and call of debt securities	—		(1)
Swap fees	4,660		2,711
Commitment and other loan fees	601		326
Bank owned life insurance income	606		429
Other income (loss)	(270)		870
Total non-interest income	15,097		13,651
Non-interest expense:
Compensation and employee benefits	24,994		19,921
Premises and equipment expense	1,989		1,406
Professional fees	2,280		1,324
FDIC insurance expense	1,584		1,125
General insurance expense	371		298
State capital shares tax expense	798		650
Travel and entertainment expense	696		441
Technology and data services	4,123		3,100
Intangible amortization expense	478		478

Marketing and advertising	896		684
Other operating expenses	2,976		1,851
Total non-interest expense	41,185		31,278
Income before tax	26,950		20,805
Income tax expense	5,309		4,605
Net income	$	21,641	$	16,200
Preferred stock dividends	3,133		3,059
Net income available to common shareholders	$	18,508	$	13,141

Earnings per common share:
Basic	$	0.49	$	0.36
Diluted	$	0.48	$	0.35

See accompanying notes to unaudited condensed consolidated financial statements.

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TRISTATE CAPITAL HOLDINGS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


	Three Months Ended March 31,
(Dollars in thousands)	2022		2021

Net income	$	21,641	$	16,200

Other comprehensive income (loss):

Unrealized holding losses on debt securities, net of tax benefit of $(7,251) and $(303), respectively	(22,822)		(954)

Reclassification adjustment for gains included in net income on debt securities, net of tax expense of $0 and $0, respectively	—		(1)

Unrealized holding gains on derivatives, net of tax expense of $1,453 and $565, respectively	4,573		1,683

Reclassification adjustment for losses included in net income on derivatives, net of tax benefit of $187 and $204, respectively	591		642

Other comprehensive income (loss), net of tax	(17,658)		1,370

Total comprehensive income	$	3,983	$	17,570

See accompanying notes to unaudited condensed consolidated financial statements.

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TRISTATE CAPITAL HOLDINGS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY


(Dollars in thousands)	Preferred Stock		Common Stock		Additional Paid-in-Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss), Net		Treasury Stock		Total Shareholders’ Equity
Balance, December 31, 2020	$	177,143	$	331,098	$	33,824	$	254,054	$	(2,697)	$	(36,277)	$	757,145
Net income	—		—		—		16,200		—		—		16,200
Other comprehensive income	—		—		—		—		1,370		—		1,370
Preferred stock dividends	1,100		—		—		(3,059)		—		—		(1,959)
Exercise of stock options	—		972		(576)		—		—		—		396
Purchase of treasury stock	—		—		—		—		—		(1,471)		(1,471)


Stock-based compensation	—		—		2,605		—		—		—		2,605
Balance, March 31, 2021	$	178,243	$	332,070	$	35,853	$	267,195	$	(1,327)	$	(37,748)	$	774,286

Balance, December 31, 2021	$	181,544	$	334,566	$	42,655	$	319,766	$	(3,424)	$	(38,385)	$	836,722

Net income	—		—		—		21,641		—		—		21,641
Other comprehensive loss	—		—		—		—		(17,658)		—		(17,658)

Preferred stock dividends	1,100		—		—		(3,133)		—		—		(2,033)
Exercise of stock options	—		1,108		(714)		—		—		—		394
Purchase of treasury stock	—		—		—		—		—		(3,984)		(3,984)


Stock-based compensation	—		—		3,056		—		—		—		3,056
Balance, March 31, 2022	$	182,644	$	335,674	$	44,997	$	338,274	$	(21,082)	$	(42,369)	$	838,138

See accompanying notes to unaudited condensed consolidated financial statements.

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TRISTATE CAPITAL HOLDINGS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


	Three Months Ended March 31,
(Dollars in thousands)	2022		2021
Cash flows from operating activities:
Net income	$	21,641	$	16,200
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and intangible amortization expense	1,322		1,100
Amortization of deferred financing costs	99		54
Impairment on historic tax credit investments	450		450
Provision for credit losses	563		224
Net loss (gain) on the sale of loans and leases	225		(627)
Stock-based compensation expense	3,056		2,605
Net gain on the sale and call of debt securities	—		1

Income from equity securities	124		—
Income from debt securities trading	—		(105)
Purchase of debt securities trading	—		(9,440)
Proceeds from the sale of debt securities trading	—		9,545
Net amortization of premiums and discounts on debt securities	2,308		3,037
Decrease (increase) in investment management fees receivable, net	251		(281)
Increase in accrued interest receivable	(831)		(1,424)
Increase in accrued interest payable	2,297		288
Bank owned life insurance income	(607)		(428)
Increase in income taxes payable	4,852		3,327
Decrease in prepaid income taxes	874		1,186
Deferred tax provision	—		50
Decrease in accounts payable and other accrued expenses	(7,112)		(11,997)



Other, net	(1,434)		(4,175)
Net cash provided by operating activities	28,078		9,590
Cash flows from investing activities:
Purchase of debt securities available-for-sale	(176,178)		(82,802)
Purchase of debt securities held-to-maturity	(37,537)		(389,107)
Purchase of equity securities	(16)		—


Principal repayments and maturities of debt securities available-for-sale	17,870		28,530
Principal repayments and maturities of debt securities held-to-maturity	35,457		48,543

Investment in low-income housing and historic tax credits	(915)		(1,104)
Investment in small business investment companies	(1,036)		(180)
Net redemption of Federal Home Loan Bank stock	—		2,000
Net increase in loans and leases, net	(491,948)		(310,647)

Proceeds from the sale of loans and leases	3,934		5,311

Additions to office properties and equipment	(3,315)		(1,988)

Net cash used in investing activities	(653,684)		(701,444)

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	Three Months Ended March 31,
(Dollars in thousands)	2022		2021
Cash flows from financing activities:
Net increase in deposit accounts	661,087		760,930
Net decrease in Federal Home Loan Bank advances	—		(50,000)
Proceeds from line of credit advances	—		5,200
Repayment of line of credit advances	—		(10,200)




Net proceeds from exercise of stock options	394		396


Purchase of treasury stock, net of reissuance	(3,984)		(1,471)

Dividends paid on preferred stock	(2,033)		(1,959)
Net cash provided by financing activities	655,464		702,896
Net change in cash and cash equivalents during the period	29,858		11,042
Cash and cash equivalents at beginning of the period	452,016		435,442
Cash and cash equivalents at end of the period	$	481,874	$	446,484

Supplemental disclosure of cash flow information:
Cash paid (received) during the period for:
Interest expense	$	11,580	$	12,994
Income taxes	$	(417)	$	11



Other non-cash activity:
Operating lease right-of-use asset	$	6,807	$	—


Unsettled purchase of debt securities held-to-maturity	$	4,770	$	—

Transfer of debt securities available-for-sale to held-to-maturity	$	—	$	480,769


Series C dividend paid in kind	$	1,100	$	1,100

See accompanying notes to unaudited condensed consolidated financial statements.

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TRISTATE CAPITAL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

[1] BASIS OF INFORMATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF OPERATION

TriState Capital Holdings, Inc. (“we,” “us,” “our,” the “holding company,” the “parent company,” or the “Company”) is a registered bank holding company pursuant to the Bank Holding Company Act of 1956, as amended. The Company has three wholly owned subsidiaries: TriState Capital Bank, a Pennsylvania-chartered state bank (the “Bank”); Chartwell Investment Partners, LLC, a registered investment adviser (“Chartwell”); and Chartwell TSC Securities Corp., a registered broker-dealer (“CTSC Securities”).

The Bank was established to serve the commercial banking needs of middle-market businesses and financial services providers and focused private banking needs of high-net-worth individuals nation-wide. The Bank has two wholly owned subsidiaries: TSC Equipment Finance LLC (“TSC Equipment Finance”), established to hold and manage loans and leases of our equipment finance business, and Meadowood Asset Management, LLC (“Meadowood”), established to hold and manage other real estate owned by the Bank and/or foreclosed properties for the Bank.

Chartwell provides investment management services primarily to institutional investors, mutual funds and individual investors. CTSC Securities supports marketing efforts for the proprietary investment products provided by Chartwell, including shares of mutual funds advised and/or administered by Chartwell.

The Company and the Bank are subject to regulatory examination and supervision by the Federal Deposit Insurance Corporation (“FDIC”), the Pennsylvania Department of Banking and Securities and the Board of Governors of the Federal Reserve System (“Federal Reserve”). Since the Bank’s consolidated total assets exceeded $10 billion for four consecutive quarters, as of December 31, 2021, the Company and the Bank are subject to regulatory examination and supervision of the Consumer Financial Protection Bureau (“CFPB”) with respect to certain consumer protection laws. Chartwell is a registered investment adviser regulated by the U.S. Securities and Exchange Commission (“SEC”). CTSC Securities is regulated by the SEC and the Financial Industry Regulatory Authority, Inc. (“FINRA”).

The Bank conducts business through its main office located in Pittsburgh, Pennsylvania, as well as its four additional representative offices in Cleveland, Ohio; Philadelphia, Pennsylvania; Edison, New Jersey; and New York, New York. Chartwell conducts business through its office located in Berwyn, Pennsylvania, and CTSC Securities conducts business through its office located in Pittsburgh, Pennsylvania.

On October 20, 2021, the Company announced that it entered into a definitive agreement under which Raymond James Financial, Inc. (“Raymond James”) will acquire the outstanding shares of stock of the Company for consideration that is a combination of cash and Raymond James stock at a fixed exchange rate, valued in aggregate at approximately $1.10 billion based on the trading value of Raymond James’ stock on the announcement date. The Company’s shareholders approved the transaction on February 28, 2022. The acquisition is subject to customary closing conditions, including receipt of regulatory approvals, and is currently expected to close by the end of the second quarter of 2022.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted accounting principles in the United States (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of certain assets and liabilities, disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of related revenues and expenses during the reporting period. Although our current estimates contemplate current conditions and how we expect them to change in the future, it is reasonably possible that actual conditions could be different than those anticipated in the estimates, which could materially affect the financial results of our operations and financial condition.

Material estimates that are particularly susceptible to significant changes relate to the determination of the allowance for credit losses on loans and leases, valuation of goodwill and other intangible assets and their evaluation for impairment, fair value measurements and deferred income taxes and their related recoverability, each of which is discussed later in this section.

CONSOLIDATION

Our consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, the Bank, Chartwell and CTSC Securities, after elimination of inter-company accounts and transactions. The accounts of the Bank, in turn, include its wholly owned subsidiaries, TSC Equipment Finance and Meadowood, after elimination of inter-company accounts and transactions. The unaudited condensed consolidated financial statements of the Company presented herein have been prepared

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pursuant to SEC rules for Quarterly Reports on Form 10-Q and do not include all of the information and note disclosures required by GAAP for a full year presentation. In the opinion of management, all adjustments (consisting of normal, recurring adjustments) and disclosures considered necessary for the fair presentation of the accompanying unaudited condensed consolidated financial statements have been included. Interim results are not necessarily reflective of the results of the entire year. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements of the Company and the related notes for the fiscal year ended December 31, 2021, included in the Company’s Annual Report on Form 10-K filed with the SEC on March 1, 2022.

CASH AND CASH EQUIVALENTS

For purposes of reporting cash flows, the Company has defined cash and cash equivalents as cash, interest-earning deposits with other institutions, federal funds sold and short-term investments that have an original maturity of 90 days or less. Under agreements with certain of its derivative counterparties, the Company is required to maintain minimum cash collateral posting thresholds with such counterparties. The cash subject to these agreements is considered restricted for these purposes.

BUSINESS COMBINATIONS

The Company accounts for business combinations using the acquisition method of accounting. Under this method of accounting, the acquired company’s net assets are recorded at fair value as of the date of acquisition, and the results of operations of the acquired company are combined with our results from that date forward. Acquisition costs are expensed when incurred. The difference between the purchase price, which includes an initial measurement of any contingent earn out, and the fair value of the net assets acquired (including identified intangibles) is recorded as goodwill in the consolidated statements of financial condition. A change in the initial estimate of any contingent earn out amount is recorded to non-interest expense in the consolidated statements of income.

INVESTMENT SECURITIES

The Company’s investments are classified as either: (1) held-to-maturity, which are debt securities that the Company intends to hold until maturity and are reported at amortized cost, net of allowance for credit losses; (2) trading, which are debt securities bought and held principally for the purpose of selling them in the near term and are reported at fair value, with unrealized gains and losses included in non-interest income; (3) available-for-sale, which are debt securities not classified as either held-to-maturity or trading securities and are reported at fair value, with unrealized gains and losses reported as a component of accumulated other comprehensive income (loss), on an after-tax basis; or (4) equity securities, which are reported at fair value, with unrealized gains and losses included in non-interest income.

The cost of securities sold is determined on a specific identification basis. Amortization of premiums and accretion of discounts are recorded to interest income on investments over the estimated life of the security utilizing the level yield method. Management evaluates expected credit losses on held-to-maturity debt securities on a collective or pool basis, by investment category and credit rating. The Company measures credit losses by comparing the present value of cash flows expected to be collected to the amortized cost of the security considering historical credit loss information, adjusted for current conditions and reasonable and supportable economic forecasts. The Company’s investment securities can be classified into the following pools based on similar risk characteristics: (1) U.S. government agencies, (2) state and local municipalities, (3) domestic corporations, including trust preferred securities, and (4) non-agency securitizations. The Company’s U.S. government agency securities are issued by U.S. government entities and agencies and are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by major rating agencies and have a long history of no credit losses. For the remaining pools of securities, the credit rating of the issuers, the investment’s cash flow characteristics and the underlying instruments securitizing certain bonds are the most relevant risk characteristics of the investment portfolio. The Company’s investment policy only allows for purchases of investments with investment grade credit ratings and the Company continuously monitors for changes in credit ratings. Probability of default and loss given default rates are based on historical averages for each investment pool, adjusted to reflect the impact of a single, forward-looking forecast of certain macroeconomic variables, such as unemployment rates and interest rate spreads, which management considers to be both reasonable and supportable. The forecast of these macroeconomic variables is applied over a period of three years and reverts to historical averages over a two-year reversion period.

Management evaluates available-for-sale debt securities in an unrealized loss position quarterly for expected credit losses. Management first determines whether it intends to sell or if it is more likely than not that it will be required to sell the impaired securities. This determination considers current and forecasted liquidity requirements, regulatory and capital requirements, and securities portfolio management. If the Company intends to sell an available-for-sale security with a fair value below amortized cost or if it is more likely than not that it will be required to sell such a security before recovery, the security’s amortized cost is written down to fair value through current period earnings. For available-for-sale debt securities that the Company does not intend to sell or it is more likely than not that it will not be required to sell before recovery, a provision for credit losses is recorded through current period earnings for the amount of the valuation decline below amortized cost that is attributable to credit losses. Management considers the extent to which fair value is less than amortized cost, credit ratings and other factors related to

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the security in assessing whether credit loss exists. The Company measures credit loss by comparing the present value of cash flows expected to be collected to the amortized cost of the security. An allowance for credit losses is measured by the difference that the present value of cash flows expected to be collected is less than the amortized cost, limited by the amount that the fair value is less than the amortized cost. The remaining difference between the security’s fair value and amortized cost (that is, the decline in fair value not attributable to credit losses) is recognized in other comprehensive income (loss), in the consolidated statements of comprehensive income and the shareholders’ equity section of the consolidated statements of financial condition, on an after-tax basis. Changes in the allowance for credit losses are recorded as provision for credit losses. Losses are charged against the allowance when management believes the security is uncollectible or management intends to sell or is required to sell the security.

The recognition of interest income on a debt security is discontinued when any principal or interest payment becomes 90 days past due, at which time the debt security is placed on non-accrual status. All accrued and unpaid interest on such debt security is then reversed. Accrued interest receivable is excluded from the estimate of expected credit losses.

FEDERAL HOME LOAN BANK STOCK

The Bank is a member of the Federal Home Loan Bank (“FHLB”) of Pittsburgh. Member institutions are required to invest in FHLB stock. The stock is carried at cost, which approximates its liquidation value, and it is evaluated for impairment based on the ultimate recoverability of the par value. The following matters are considered by management when evaluating the FHLB stock for impairment: the ability of the FHLB to make payments required by law or regulation and the level of such payments in relation to the operating performance of the FHLB; the impact of legislative and regulatory changes on the institution and its customer base; and the Company’s intent and ability to hold its FHLB stock for the foreseeable future. Management believes the Company’s holdings in the FHLB stock were recoverable at par value as of March 31, 2022 and December 31, 2021. Cash and stock dividends are reported as interest income on investments in the consolidated statements of income.

LOANS AND LEASES

Loans and leases held-for-investment are stated at amortized cost. Amortized cost is the unpaid principal balance, net of deferred loan fees and costs. Loans held-for-sale are stated at the lower of cost or fair value. Interest income on loans is accrued at the contractual rate on the principal amount outstanding. Deferred loan fees and costs are amortized to interest income over the estimated life of the loan, taking into consideration scheduled payments and prepayments.

The Company considers a loan to be a troubled debt restructuring (“TDR”) when there is a concession made to a financially troubled borrower without adequate consideration provided to the Company. The Company evaluates any loan reasonably expected to become a TDR, regardless of whether the loan is on accrual or non-accrual status. Once a loan is deemed to be a TDR, the Company considers whether the loan should be placed on non-accrual status. In assessing accrual status, the Company considers the likelihood that repayment and performance according to the original contractual terms will be achieved, as well as the borrower’s historical payment performance. A loan is designated and reported as a TDR until such loan is either paid off or sold unless the restructuring agreement specifies an interest rate equal to or greater than the rate that would be accepted at the time of the restructuring for a new loan with comparable risk and it is fully expected that the remaining principal and interest will be collected according to the restructured agreement.

The recognition of interest income on a loan is discontinued when, in management’s opinion, it is probable the borrower is unable to meet payments as they become due or when the loan becomes 90 days past due, whichever occurs first, at which time the loan is placed on non-accrual status. All accrued and unpaid interest on such loans is then reversed. The interest ultimately collected is applied to reduce principal if there is doubt about the collectability of principal. If a borrower brings a loan current for which accrued interest has been reversed, then the recognition of interest income on the loan is resumed once the loan has been current for a period of six consecutive months or greater.

The Company is a party to financial instruments with off-balance sheet risk, such as commitments to extend credit, in the normal course of business to meet the financing needs of its customers. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the lending agreement with such customer. Commitments generally have fixed expiration dates or other termination clauses (e.g., loans due on demand) and may require payment of a fee. Since some of the commitments are expected to expire without being drawn upon, the unfunded commitment amount does not necessarily represent future cash requirements. The Company evaluates each customer’s creditworthiness on a case-by-case basis using the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments. The amount of collateral obtained, if deemed necessary by the Company upon extension of a commitment, is based on management’s credit evaluation of the borrower.

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OTHER REAL ESTATE OWNED

Real estate owned, other than bank premises, is recorded at fair value less estimated selling costs. Fair value is determined based on an independent appraisal. Expenses related to holding the property are charged against earnings when incurred. Depreciation is not recorded on other real estate owned (“OREO”) properties.

ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LEASES

The allowance for credit losses is a valuation account that is deducted from the amortized cost of loans and leases to present management’s best estimate of the net amount expected to be collected. Adjustments to the allowance for credit losses are established through provisions for credit losses that are recorded in the consolidated statements of income. Loans and leases are charged off against the allowance for credit losses when management believes that the principal is uncollectible. If, at a later time, amounts are recovered with respect to loans and leases previously charged off, the recovered amount is credited to allowance for credit losses. Accrued interest receivable is excluded from the estimate of expected credit losses.

The allowance for credit losses represents estimates of expected credit losses for homogeneous loan pools that share similar risk characteristics such as commercial and industrial (“C&I”) loans and leases, commercial real estate (“CRE”) loans, and private banking loans, which include consumer lines of credit and residential mortgages. The Company periodically reassesses each loan pool to ensure that the loans within the pool continue to share similar risk characteristics. Non-accrual loans and loans designated as TDRs are assessed individually using a discounted cash flow method or, where a loan is collateral dependent, based upon the fair value of the collateral less estimated selling costs.

The collateral on our private banking loans that are secured by cash, marketable securities and/or cash value life insurance is monitored daily and requires borrowers to continually replenish such collateral as a result of changes in its fair value. Therefore, it is expected that the fair value of the collateral securing each loan will exceed the loan’s amortized cost and no allowance for credit losses would be required under Accounting Standard Codification (“ASC”) 326-20-35-6, “Financial Assets Secured by Collateral Maintenance Provisions.”

In estimating the general allowance for credit losses for loans evaluated on a collective or pool basis, management considers past events, current conditions, and reasonable and supportable economic forecasts, including historical charge-offs and subsequent recoveries. Management also considers qualitative factors that influence our credit quality, including, but not limited to, delinquency and non-performing loan trends, changes in loan underwriting guidelines and credit policies, and the results of internal loan reviews. Finally, management considers the impact of changes in current and forecasted local and regional economic conditions in the markets that we serve.

Management bases the computation of the general allowance for credit losses on two factors: the primary factor and the secondary factor. The primary factor is based on the inherent risk identified by management within each of the Company’s three loan portfolios based on the historical loss experience of each loan portfolio. Management has developed a methodology that is applied to each of the three primary loan portfolios: C&I loans and leases, CRE loans and private banking loans (other than those secured by cash, marketable securities and/or cash value life insurance).

For each portfolio, management estimates expected credit losses over the life of each loan utilizing lifetime or cumulative loss rate methodology, which identifies macroeconomic factors and asset-specific characteristics that are correlated with credit loss experience, including loan age, loan type, leverage, risk rating, interest rate spread and industry. The lifetime loss rate is applied to the amortized cost of the loan. This methodology builds on default and recovery probabilities by utilizing pool-specific historical loss rates to calculate expected credit losses. These pool-specific historical loss rates may be adjusted for a forecast of certain macroeconomic variables, as further discussed below, and other factors such as differences in underwriting standards, portfolio mix, or when historical asset terms do not reflect the contractual terms of the financial assets being evaluated as of the measurement date. Each time the Company measures expected credit losses, the Company assesses the relevancy of historical loss information and considers any necessary adjustments to address any differences in asset-specific characteristics.

The allowance for credit losses represents management’s current estimate of expected credit losses in the loan and lease portfolio. Expected credit losses are estimated over the contractual term of the loans, which includes extension or renewal options that are not unconditionally cancellable by the Company and are adjusted for expected prepayments when appropriate. Management’s judgment takes into consideration past events, current conditions and reasonable and supportable economic forecasts including general economic conditions, diversification and seasoning of the loan portfolio, historic loss experience, identified credit problems, delinquency levels and adequacy of collateral. Although management believes it has used the best information available in making such determinations, and that the present allowance for credit losses represents management’s best estimate of current expected credit losses, future adjustments to the allowance may be necessary, and net income may be adversely affected if circumstances differ substantially from the assumptions used in determining the level of the allowance.

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The lifetime loss rates are estimated by analyzing a combination of internal and external data related to historical performance of each loan pool over a complete economic cycle. Loss rates are based on historical averages for each loan pool, adjusted to reflect the impact of a single, forward-looking forecast of certain macroeconomic variables such as gross domestic product, unemployment rates, corporate bond credit spreads and commercial property values, which management considers to be both reasonable and supportable. The single, forward-looking forecast of these macroeconomic variables is applied over the remaining life of the loan pools. The development of the reasonable and supportable forecast incorporates an assumption that each macroeconomic variable will revert to a long-term expectation starting in years two to four of the forecast and largely completing within the first five years of the forecast.

The secondary factor is intended to capture additional risks related to events and circumstances that management believes have an impact on the performance of the loan portfolio that are not considered as part of the primary factor. Although this factor is more subjective in nature, the methodology focuses on internal and external trends in pre-specified categories, or risk factors, and applies a quantitative percentage that drives the secondary factor. Nine risk factors have been identified and each risk factor is assigned an allowance level based on management’s judgment as to the expected impact of each risk factor on each loan portfolio and is monitored on a quarterly basis. As the trend in any risk factor changes, management evaluates the need for a corresponding change to occur in the allowance associated with each respective risk factor to provide the most appropriate estimate of allowance for credit losses on loans and leases.

The Company also maintains an allowance for credit losses on off-balance sheet credit exposures for unfunded loan commitments. This allowance is reflected as a component of other liabilities which represents management’s current estimate of expected losses in the unfunded loan commitments. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life based on management’s consideration of past events, current conditions and reasonable and supportable economic forecasts. Management tracks the level and trends in unused commitments and takes into consideration the same factors as those considered for purposes of the allowance for credit losses on outstanding loans. Unconditionally cancellable loans are excluded from the calculation of allowance for credit losses on off-balance sheet credit exposures.

INVESTMENT MANAGEMENT FEES

Revenue from contracts with customers is recognized when promised services are delivered to our customers in an amount we expect to receive in exchange for those services (i.e., the transaction price). Payment for the majority of our services is considered to be variable consideration, as the amount of revenue we expect to receive is subject to factors outside of our control, including market conditions. Variable consideration is only included in revenue when amounts are not subject to significant reversal, which is generally when uncertainty around the amount of revenue to be received is resolved. We record deferred revenue from contracts with customers when payment is received prior to the performance of our obligation to the customer.

We earn investment management fees for performing portfolio management for retail and institutional clients. Such fees are generally calculated as a percentage of the value of client assets or, for certain pooled assets such as mutual funds, on the net asset value of assets managed. The value of these assets is impacted by market fluctuations and net inflows or outflows of assets. Fees are generally collected quarterly and are based on balances either at the beginning of the quarter or the end of the quarter, or on average balances throughout the quarter. Asset management fees are recognized on a monthly basis (i.e., over time) as the services are performed.

Investment management fees receivable represent amounts due for contractual investment management services provided to the Company’s clients, primarily institutional investors, mutual funds and individual investors. Management performs credit evaluations of its customers’ financial condition when it is deemed to be necessary and does not require collateral. The Company provides an allowance for uncollectible accounts based on specifically identified receivables. The Company has not experienced any losses on receivables for investment management fees for the three months ended March 31, 2022 and 2021. The Company had no allowance for credit losses on investment management fees as of March 31, 2022 and December 31, 2021.

GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill represents the excess of the cost of an acquisition over the fair value of the net assets acquired. Goodwill is not amortized and is subject to at least annual assessments for impairment by applying a fair value-based test. The Company reviews goodwill annually and again at any quarter-end if a material event occurs during the quarter that may affect goodwill. If goodwill testing is required, an assessment of qualitative factors can be completed before performing a goodwill impairment test. If an assessment of qualitative factors determines it is more likely than not that the fair value of a reporting unit exceeds its carrying amount, then a goodwill impairment test is not required.

Other intangible assets represent purchased assets that may lack physical substance but can be distinguished from goodwill because of contractual or other legal rights. The Company has determined that certain of its acquired mutual fund client relationships meet the criteria to be considered indefinite-lived assets because the Company expects both the renewal of these

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contracts and the cash flows generated by these assets to continue indefinitely. Accordingly, the Company does not amortize these intangible assets, but instead reviews these assets annually or more frequently whenever events or circumstances occur indicating that the recorded indefinite-lived assets may be impaired. Each reporting period, the Company assesses whether events or circumstances have occurred which indicate that the indefinite life criteria are no longer met. If the indefinite life criteria are no longer met, the Company assesses whether the carrying value of these assets exceeds its fair value. If the carrying value exceeds the fair value of the assets, an impairment loss is recorded in an amount equal to any such excess and the assets are reclassified to finite-lived. Other intangible assets that the Company has determined to have finite lives, such as its trade names, client lists and non-compete agreements are amortized over their estimated useful lives. These finite-lived intangible assets are amortized on a straight-line basis over their estimated useful lives, which range from four to 25 years. Finite-lived intangibles are evaluated for impairment on an annual basis or more frequently whenever events or circumstances occur indicating that the carrying amount of such assets may not be recoverable.

OFFICE PROPERTIES AND EQUIPMENT

Office properties and equipment are stated at cost less accumulated depreciation. Office properties include furniture, fixtures and leasehold improvements. Equipment includes computer equipment and internal use software. Depreciation is computed utilizing the straight-line method over the estimated useful lives of the related assets, except for leasehold improvements, which are amortized over the terms of the respective leases or the estimated useful lives of the improvements, whichever is shorter. Estimated useful lives are dependent upon the nature and condition of the asset and range from three to 10 years. Repairs and maintenance are charged to expense as incurred, while improvements that extend the useful life of the assets are capitalized and depreciated to non-interest expense over the estimated remaining life of the asset.

OPERATING LEASES

The Company is a lessee in noncancellable operating leases, primarily for its office spaces and other office equipment. The Company records operating leases as a right-of-use asset and an offsetting lease liability in the consolidated statements of financial condition at the present value of the unpaid lease payments. The Company generally uses its incremental borrowing rate as the discount rate for operating leases. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for lease payments made at or before the lease commencement date, plus any initial direct costs incurred less any lease incentives received. For operating leases, the right-of-use asset is subsequently measured throughout the lease term at the carrying amount of the lease liability, plus initial direct costs, plus (minus) any prepaid (accrued) lease payments, less the unamortized balance of lease incentives received. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

BANK OWNED LIFE INSURANCE

Bank owned life insurance (“BOLI”) policies on certain officers and employees are recorded at net cash surrender value on the consolidated statements of financial condition. Upon termination of a BOLI policy, the Company receives the cash surrender value. BOLI benefits are payable to the Company upon the death of the insured. Changes in net cash surrender value are recognized as non-interest income in the consolidated statements of income.

DEPOSITS

Deposits are stated at principal outstanding. Interest on deposits is accrued and charged to interest expense daily and is paid or credited in accordance with the terms of the respective accounts.

BORROWINGS

The Company records FHLB advances, line of credit borrowings, senior notes payable and subordinated notes payable at their principal amount, net of debt issuance costs. Interest expense is recognized based on the coupon rate of the obligations. Costs associated with the acquisition of subordinated notes payable are amortized to interest expense over the expected term of the borrowing.

INCOME TAXES

The Company utilizes the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the tax effects of differences between the financial statement and tax basis of assets and liabilities. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities with regard to a change in tax rates is recognized in income in the period that includes the enactment date. Management assesses all available evidence to determine the amount of deferred tax assets that are more likely than not to be realized. The available evidence used in connection with the assessments includes taxable income in prior periods, projected taxable income, potential tax planning strategies and projected reversals of deferred tax items. These assessments involve a degree of subjectivity and may undergo significant change. Changes to the evidence used in the assessments could have a material adverse effect on the Company’s results of operations in the period in which they occur. The Company considers uncertain tax positions that it has

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taken or expects to take on a tax return. Any interest and penalties related to unrecognized tax benefits would be recognized in income tax expense in the consolidated statements of income.

EARNINGS PER COMMON SHARE

Earnings per common share (“EPS”) is computed using the two-class method. The two-class method is an earnings allocation formula that determines earnings per share for common stock and participating securities, according to dividends and participation rights in undistributed earnings. Under this method, net earnings is reduced by the amount of dividends declared in the current period for common shareholders and participating security holders. The remaining earnings or “undistributed earnings” are allocated between common stock and participating securities to the extent that each security may share in earnings as if all the earnings for the period had been distributed.

The two-class method requires the Company’s Series C perpetual non-cumulative convertible non-voting preferred stock (the “Series C Preferred Stock”) and outstanding warrants to be treated as participating classes of securities in the computation of EPS. In addition, net income is reduced by dividends declared on all series of preferred stock to derive net income available to common shareholders. Basic EPS is computed by dividing net income allocable to common shareholders by the weighted average number of the Company’s common shares outstanding for the period, excluding non-vested restricted stock. Diluted EPS reflects the potential dilution upon the exercise of stock options and warrants, and the vesting of restricted stock awards granted utilizing the treasury stock method.

STOCK-BASED COMPENSATION

The Company accounts for its stock-based compensation awards based on estimated fair values of stock-based awards made to employees and directors. Compensation cost for all stock-based payments is based on the estimated grant-date fair value. The value of the portion of the award that is ultimately expected to vest is included in compensation and employee benefits expense in the consolidated statements of income and recorded as a component of additional paid-in capital. Compensation expense for all awards is recognized on a straight-line basis over the requisite service period for the entire grant.

DERIVATIVES AND HEDGING ACTIVITIES

All derivatives are evaluated at inception as to whether they are hedging or non-hedging activities. All derivatives are recognized as either assets or liabilities on the consolidated statements of financial condition and measured at fair value. For derivatives designated as fair value hedges, changes in the fair value of the derivative and the hedged item related to the hedged risk are recognized in earnings. Any hedge ineffectiveness would be recognized in the income statement line item pertaining to the hedged item. For derivatives designated as cash flow hedges, changes in fair value of the effective portion of the cash flow hedges are reported in accumulated other comprehensive income (loss). When the cash flows associated with the hedged item are realized, the gain or loss included in accumulated other comprehensive income (loss) is recognized in the consolidated statements of income. The Company also has interest rate derivative positions that are not designated as hedging instruments. Changes in the fair value of derivatives not designated in hedging relationships are recorded directly in earnings. The Company is required to have minimum collateral posting thresholds with certain of its derivative counterparties, and this collateral is considered restricted cash.

The Company executes interest rate derivatives with its commercial banking customers to facilitate their respective risk management strategies. The Company generates swap fee income through these transactions. These derivatives are simultaneously and economically hedged by offsetting derivatives that the Company executes with a third party, such that the Company generally eliminates its interest rate exposure resulting from such transactions and these derivatives are not designated as hedging instruments. Swap fees are based on the notional amount and weighted maturity of each individual transaction and are collected and recorded to non-interest income in the consolidated statements of income when the transaction is executed.

FAIR VALUE MEASUREMENT

Fair value is defined as the exchange price that would be received to sell an asset or paid to transfer a liability in a principal or most advantageous market for the asset or liability in an orderly transaction between market participants as of the measurement date, using assumptions market participants would use when pricing such an asset or liability. An orderly transaction assumes exposure to the market for a customary period for marketing activities prior to the measurement date and not a forced liquidation or distressed sale. Fair value measurement and disclosure guidance provides a three-level hierarchy that prioritizes the inputs of valuation techniques used to measure fair value into three broad categories:

•Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities.

•Level 2 – Observable inputs such as quoted prices for similar assets and liabilities in active markets, quoted prices for similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.

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•Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies, and similar techniques that use significant unobservable inputs.

Fair value must be recorded for certain assets and liabilities every reporting period on a recurring basis or, under certain circumstances, on a non-recurring basis.

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Unrealized holding gains and the non-credit component of unrealized losses on the Company’s debt securities available-for-sale are included in accumulated other comprehensive income (loss), net of applicable income taxes. Also included in accumulated other comprehensive income (loss) is the remaining unamortized balance of the unrealized holding gains (non-credit losses), net of applicable income taxes, that existed on the transfer date for debt securities reclassified into the held-to-maturity category from the available-for-sale category.

Unrealized holding gains (losses) on the effective portion of the Company’s cash flow hedge derivatives are included in accumulated other comprehensive income (loss), net of applicable income taxes, which will be reclassified to interest expense as interest payments are made on the Company’s debt.

Income tax effects in accumulated other comprehensive income (loss) are released as investments are sold or mature and as liabilities are extinguished.

TREASURY STOCK

The repurchase of the Company’s common stock is recorded at cost. At the time of reissuance, the treasury stock account is reduced using the average cost method. Gains and losses on the reissuance of common stock are recorded in additional paid-in capital, to the extent additional paid-in capital from any previous net gains on treasury share transactions exists. Any net deficiency is charged to retained earnings.

RECLASSIFICATION

Certain items previously reported have been reclassified to conform with the current year’s reporting presentation and are considered immaterial.

RECENT ACCOUNTING DEVELOPMENTS

In March 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2022-02—Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. ASU 2022-02 eliminates the separate recognition and measurement guidance for TDRs such that creditors will apply the same guidance to all loan modifications when determining whether a modification results in a new receivable or a continuation of an existing receivable. The ASU also enhances existing loan modification related financial statement disclosures while also requiring new disclosure of current-period gross charge-offs by year of origination for financing receivables and net investments in leases. For entities that have adopted the current expected credit loss (“CECL”) methodology, the ASU is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years with early adoption permitted. The Company is currently evaluating the impact of adopting ASU 2022-02 on its consolidated financial statements.

In March 2022, the FASB issued ASU 2022-01—Derivatives and Hedging (Topic 815): Fair Value Hedging—Portfolio Layer Method. ASU 2022-01 establishes the portfolio-layer method, which expands an entity’s ability to achieve fair value hedge accounting for hedges of financial assets in a closed portfolio. The ASU is effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years with early adoption permitted. The Company is currently evaluating the impact of adopting ASU 2022-01 on its consolidated financial statements.

On October 28, 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. This ASU is effective for annual and interim periods in fiscal years beginning after December 15, 2022 and provides an exception to fair value measurement for revenue contracts acquired in business combinations. Early adoption is permitted for both interim and annual financial statements that have not yet been issued (or made available for issuance). The Company is currently evaluating the impact of adopting ASU 2021-05 on its consolidated financial statements.

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[2] INVESTMENT SECURITIES

Debt securities available-for-sale and held-to-maturity were comprised of the following as of March 31, 2022:


	March 31, 2022
(Dollars in thousands)	Amortized Cost		Gross Unrealized Appreciation		Gross Unrealized Depreciation		Allowance for Credit Losses (1)		Estimated Fair Value
Debt securities available-for-sale:
U.S. treasury notes	$	99,416	$	—	$	2,757	$	—	$	96,659
Corporate bonds	153,425		245		2,619		—		151,051
Non-agency residential mortgage-backed securities	307,202		3,599		21,953		—		288,848


Trust preferred securities	13,635		118		150		—		13,603
Agency collateralized mortgage obligations	15,585		12		56		—		15,541
Agency mortgage-backed securities	147,458		21		10,445		—		137,034
Agency debentures	6,733		104		—		—		6,837
Municipal bonds	5,181		—		592		—		4,589
Total debt securities available-for-sale	$	748,635	$	4,099	$	38,572	$	—	$	714,162

(1)Available-for-sale debt securities are recorded on the consolidated statements of financial condition at estimated fair value, which includes allowance for credit losses, if applicable.


	March 31, 2022
(Dollars in thousands)	Amortized Cost		Gross Unrealized Appreciation		Gross Unrealized Depreciation		Estimated Fair Value		Allowance for Credit Losses (1)
Debt securities held-to-maturity:
U.S. treasury notes	$	39,120	$	—	$	3,156	$	35,964	$	—
Corporate bonds	25,165		226		110		25,281		11
Agency debentures	66,540		131		2,749		63,922		—
Municipal bonds	410		—		—		410		—
Non-agency residential mortgage-backed securities	173,010		—		13,683		159,327		34
Agency mortgage-backed securities	503,406		176		37,869		465,713		—
Total debt securities held-to-maturity	$	807,651	$	533	$	57,567	$	750,617	$	45

(1)Held-to-maturity debt securities are recorded on the consolidated statements of financial condition at amortized cost, net of allowance for credit losses.

During the first quarter of 2021, the Company transferred $480.8 million in fair value of previously designated available-for-sale agency mortgage-backed securities to held-to-maturity.

Debt securities available-for-sale and held-to-maturity were comprised of the following as of December 31, 2021:


	December 31, 2021
(Dollars in thousands)	Amortized Cost		Gross Unrealized Appreciation		Gross Unrealized Depreciation		Allowance for Credit Losses (1)		Estimated Fair Value
Debt securities available-for-sale:

Corporate bonds	$	145,568	$	897	$	273	$	—	$	146,192
Trust preferred securities	13,610		200		183		—		13,627
Non-agency residential mortgage-backed securities	281,282		—		4,164		—		277,118

Agency collateralized mortgage obligations	16,458		42		2		—		16,498
Agency mortgage-backed securities	122,044		32		1,599		—		120,477
Agency debentures	6,732		496		—		—		7,228
Municipal bonds	5,189		—		4		—		5,185
Total debt securities available-for-sale	$	590,883	$	1,667	$	6,225	$	—	$	586,325

(1)Available-for-sale debt securities are recorded on the consolidated statements of financial condition at estimated fair value, which includes allowance for credit losses, if applicable.

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	December 31, 2021
(Dollars in thousands)	Amortized Cost		Gross Unrealized Appreciation		Gross Unrealized Depreciation		Estimated Fair Value			Allowance for Credit Losses (1)










Debt securities held-to-maturity:
U.S. treasury notes	$	39,097	$	12	$	443	$	38,666	—	$	—
Corporate bonds	25,167		827		16		25,978			71
Agency debentures	36,794		534		395		36,933			—
Municipal bonds	890		1		—		891			—
Non-agency residential mortgage-backed securities	184,731		1		3,088		181,644			65
Agency mortgage-backed securities	516,033		570		8,753		507,850			—
Total debt securities held-to-maturity	$	802,712	$	1,945	$	12,695	$	791,962		$	136

(1)Held-to-maturity debt securities are recorded on the consolidated statements of financial condition at amortized cost, net of allowance for credit losses.

Interest income on investment securities was as follows:


	Three Months Ended March 31,
(Dollars in thousands)	2022		2021
Taxable interest income	$	5,997	$	2,429
Non-taxable interest income	22		35
Dividend income	138		182
Total interest income on investment securities	$	6,157	$	2,646

As of March 31, 2022, the contractual maturities of the debt securities were:


	March 31, 2022
	Available-for-Sale				Held-to-Maturity
(Dollars in thousands)	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Due in less than one year	$	27,500	$	27,498	$	410	$	410
Due from one to five years	172,225		168,923		35,165		34,882
Due from five to ten years	57,883		56,118		103,627		97,833
Due after ten years	491,027		461,623		668,449		617,492
Total debt securities	$	748,635	$	714,162	$	807,651	$	750,617

Prepayments may shorten the contractual lives of the collateralized mortgage obligations, mortgage-backed securities and collateralized loan obligations.

Proceeds from the sale and call of debt securities available-for-sale and held-to-maturity and related gross realized gains and losses were:


	Available-for-Sale				Held-to-Maturity
	Three Months Ended March 31,				Three Months Ended March 31,
(Dollars in thousands)	2022		2021		2022		2021
Proceeds from sales	$	—	$	—	$	—	$	—
Proceeds from calls	—		17,311		—		3,555
Total proceeds	$	—	$	17,311	$	—	$	3,555

Gross realized gains	$	—	$	—	$	—	$	—
Gross realized losses	—		1		—		—
Net realized gains	$	—	$	(1)	$	—	$	—

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There were $27.1 million of debt securities held-to-maturity that were pledged as collateral for certain deposit relationships as of March 31, 2022.

Changes in the allowance for credit losses on held-to-maturity securities were as follows for the three months ended March 31, 2022 and 2021:


	Three Months Ended March 31, 2022
(Dollars in thousands)	Corporate Bonds		Non-agency Securitizations		Municipal Bonds		Agency Debentures and Securitizations		U.S. Treasury Notes		Total
Balance, beginning of period	$	71	$	65	$	—	$	—	$	—	$	136

Provision (credit) for credit losses	(60)		(31)		—		—		—		(91)
Charge-offs	—		—		—		—		—		—
Recoveries	—		—		—		—		—		—
Balance, end of period	$	11	$	34	$	—	$	—	$	—	$	45


	Three Months Ended March 31, 2021
(Dollars in thousands)	Corporate Bonds		Non-agency Securitizations		Municipal Bonds		Agency Debentures and Securitizations		U.S. Treasury Notes		Total
Balance, beginning of period	$	79	$	70	$	—	$	—	$	—	$	149

Provision (credit) for credit losses	(24)		35		—		—		—		11
Charge-offs	—		—		—		—		—		—
Recoveries	—		—		—		—		—		—
Balance, end of period	$	55	$	105	$	—	$	—	$	—	$	160

The following tables show the fair value and gross unrealized losses on debt securities available-for-sale, by investment category and length of time that the individual securities have been in a continuous unrealized loss position as of March 31, 2022 and December 31, 2021:


	March 31, 2022
	Less than 12 Months				12 Months or More				Total
(Dollars in thousands)	Fair value		Unrealized losses		Fair value		Unrealized losses		Fair value		Unrealized losses
Debt securities available-for-sale:
U.S. Treasury Notes	$	96,659	$	2,757	$	—	$	—	$	96,659	$	2,757
Corporate bonds	87,923		1,411		18,350		1,208		106,273		2,619
Trust preferred securities	2,064		60		2,289		90		4,353		150


Non-agency residential mortgage-backed securities	266,999		21,953		—		—		266,999		21,953
Agency collateralized mortgage obligations	12,984		56		—		—		12,984		56
Agency mortgage-backed securities	133,551		10,444		88		1		133,639		10,445

Municipal bonds	4,589		592		—		—		4,589		592
Temporarily impaired debt securities available-for-sale (1)	$	604,769	$	37,273	$	20,727	$	1,299	$	625,496	$	38,572

(1)The number of investment positions with unrealized losses totaled 72 for available-for-sale securities.

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	December 31, 2021
	Less than 12 Months				12 Months or More				Total
(Dollars in thousands)	Fair value		Unrealized losses		Fair value		Unrealized losses		Fair value		Unrealized losses
Debt securities available-for-sale:

Corporate bonds	$	20,191	$	118	$	11,808	$	155	$	31,999	$	273
Trust preferred securities	2,046		76		2,270		107		4,316		183
Non-agency mortgage-backed securities	277,118		4,164		—		—		277,118		4,164

Agency collateralized mortgage obligations	1,600		2		—		—		1,600		2
Agency mortgage-backed securities	119,320		1,599		89		—		119,409		1,599
Municipal bonds	5,185		4		—		—		5,185		4
Temporarily impaired debt securities available-for-sale (1)	$	425,460	$	5,963	$	14,167	$	262	$	439,627	$	6,225

(1)The number of investment positions with unrealized losses totaled 39 for available-for-sale securities.

The changes in the fair values of our agency collateralized mortgage obligations and agency mortgage-backed securities are primarily the result of interest rate fluctuations. These agency securities are either explicitly or implicitly guaranteed by the U.S. government, highly rated, and have a long history of no credit losses.

To assess for credit losses on debt securities available-for-sale in unrealized loss position, management evaluates the underlying issuer’s financial performance and the related credit rating information through a review of publicly available financial statements and other publicly available information. The most recent assessment for credit losses did not identify any issues related to the ultimate repayment of principal and interest on these debt securities. In addition, the Company has the ability and intent to hold debt securities in an unrealized loss position until recovery of their amortized cost. Based on this, no allowance for credit losses has been recognized on debt securities available-for-sale in an unrealized loss position.

The Company monitors the credit quality of debt securities held-to-maturity including credit ratings quarterly. The following tables present the amortized costs basis of debt securities held-to-maturity by Moody’s bond credit rating.


	March 31, 2022
(Dollars in thousands)	Aaa		Aa		A		Baa		Ba		Total
Debt securities held-to-maturity:
Corporate bonds	$	—	$	—	$	—	$	25,165	$	—	$	25,165
Agency debentures	66,540		—		—		—		—		66,540
Municipal bonds	—		—		410		—		—		410
Non-agency residential mortgage-backed securities	173,010		—		—		—		—		173,010
Agency mortgage-backed securities	503,406		—		—		—		—		503,406
U.S. treasury notes	39,120		—		—		—		—		39,120
Total debt securities held-to-maturity	$	782,076	$	—	$	410	$	25,165	$	—	$	807,651

Accrued interest receivable of $1.5 million and $1.6 million on debt securities held-to-maturity as of March 31, 2022 and December 31, 2021, respectively, was excluded from the amortized cost used in the calculation of allowance for credit losses. The Company had no debt securities held-to-maturity that were past due as of March 31, 2022.

There were no outstanding debt securities classified as trading as of March 31, 2022 and December 31, 2021.

Equity securities consisted of mutual funds investing in short-duration, investment grade corporate bonds. The investments in these securities were $4.9 million and $5.0 million as of March 31, 2022 and December 31, 2021, respectively.

There was $11.8 million and $11.8 million in FHLB stock outstanding as of March 31, 2022 and December 31, 2021, respectively.

[3] LOANS AND LEASES

The Company generates loans through the private banking and middle-market banking channels. The private banking channel primarily includes loans made to high-net-worth individuals, trusts and businesses that are typically secured by cash, marketable securities and/or cash value life insurance. The middle-market banking channel consists of the Company’s C&I loan and lease portfolio and CRE loan portfolio, which serve middle-market businesses and real estate developers in our primary markets.

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Loans and leases held-for-investment were comprised of the following:


	March 31, 2022
(Dollars in thousands)	Private Banking		Commercial and Industrial		Commercial Real Estate		Total
Loans and leases held-for-investment, before deferred fees and costs	$	7,253,933	$	1,560,668	$	2,420,958	$	11,235,559
Net deferred loan costs (fees)	14,229		3,641		(6,510)		11,360
Loans and leases held-for-investment, net of deferred fees and costs	7,268,162		1,564,309		2,414,448		11,246,919
Allowance for credit losses on loans and leases	(2,060)		(5,116)		(17,848)		(25,024)
Loans and leases held-for-investment, net	$	7,266,102	$	1,559,193	$	2,396,600	$	11,221,895


	December 31, 2021
(Dollars in thousands)	Private Banking		Commercial and Industrial		Commercial Real Estate		Total
Loans and leases held-for-investment, before deferred fees and costs	$	6,870,961	$	1,509,418	$	2,369,335	$	10,749,714
Net deferred loan costs (fees)	15,537		4,005		(5,932)		13,610
Loans and leases held-for-investment, net of deferred fees and costs	6,886,498		1,513,423		2,363,403		10,763,324
Allowance for credit losses on loans and leases	(1,891)		(8,453)		(18,219)		(28,563)
Loans and leases held-for-investment, net	$	6,884,607	$	1,504,970	$	2,345,184	$	10,734,761

The Company’s customers have unused loan commitments based on the availability of eligible collateral or other terms and conditions under their loan agreements. Included in unused loan commitments are commitments to fund loans secured by residential properties, commercial real estate, construction loans, business lines of credit and other unused commitments of loans in various stages of funding. Not all commitments will fund or fully fund as customers often only draw on a portion of their available credit. The amount of unfunded commitments, including standby letters of credit, as of March 31, 2022 and December 31, 2021, was $11.54 billion and $10.74 billion, respectively. The interest rate for each commitment is based on the prevailing market conditions at the time of funding. The total unfunded commitments above included loans in the process of origination totaling approximately $120.4 million and $162.0 million as of March 31, 2022 and December 31, 2021, respectively, which extend over varying periods of time.

Also included in commitments is unused availability under demand loans for our private banking clients secured by cash, marketable securities and/or cash value life insurance. Because these loans are demand loans, the company is not obligated to fund or fully fund draw requests.

The Company issues standby letters of credit in the normal course of business. Standby letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party. Standby letters of credit generally are contingent upon the failure of the customer to perform according to the terms of the underlying contract with the third party. The Company would be required to perform under a standby letter of credit when drawn upon by the guaranteed party in the case of non-performance by the Company’s customer. Collateral may be obtained based on management’s credit assessment of the customer. The amount of unfunded commitments related to standby letters of credit as of March 31, 2022 and December 31, 2021, included in the total unfunded commitments above, was $57.3 million and $60.8 million, respectively. Should the Company be obligated to perform under any standby letters of credit, the Company will seek repayment from the customer for amounts paid. During the three months ended March 31, 2022 and 2021, there were draws on letters of credit totaling $4.2 million and $3,000, respectively, which were repaid by the borrowers. Most of these commitments are expected to expire without being drawn upon and the total amount does not necessarily represent future cash requirements.

The allowance for credit losses on off-balance-sheet credit exposures was $3.4 million and $2.9 million as of March 31, 2022 and December 31, 2021, respectively, which includes allowance for credit losses on unfunded loan commitments and standby letters of credit. The Company recorded a provision on off-balance sheet exposures as liabilities of $500,000 for the three months ended March 31, 2022, and a credit to provision on off-balance sheet exposures as liabilities of $433,000 for the three months ended March 31, 2021.

[4] ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LEASES

Our allowance for credit losses represents our current estimate of expected credit losses in the portfolio at a specific point in time. This estimate includes credit losses associated with loans and leases evaluated on a collective or pool basis, as well as expected credit losses of the individually evaluated loans and leases that do not share similar risk characteristics. Management evaluates the adequacy

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of the allowance at least quarterly, and in doing so relies on various factors including, but not limited to, assessment of historical loss experience, delinquency and non-accrual trends, portfolio growth, underlying collateral coverage and current economic conditions, and economic forecasts over a reasonable and supportable period of time. This evaluation is subjective and requires material estimates that may change over time. The calculation of the allowance for credit losses on loans and leases takes into consideration the inherent risk identified within each of the Company’s three primary loan portfolios. The lifetime loss rates are estimated by analyzing a combination of internal and external data related to historical performance of each loan pool over a complete economic cycle. Results for the three months ended March 31, 2022 and 2021 are presented under CECL methodology. Refer to Note 1, Summary of Significant Accounting Policies, to our unaudited condensed consolidated financial statements for more details on the Company’s policy on allowance for credit losses on loans and leases.

The following discusses key characteristics and risks within each primary loan portfolio:

Private Banking Loans

Our private banking lending business is conducted on a national basis. This loan portfolio primarily includes loans made to high-net-worth individuals, trusts and businesses that are typically secured by marketable securities, cash, and/or cash value life insurance. The Company actively monitors the value of the collateral securing these loans on a daily basis and requires borrowers to continually replenish such collateral as a result of changes in its fair value. Therefore, it is expected that the fair value of the collateral value securing each loan will exceed the loan’s amortized cost and no allowance for credit loss would be required under ASC 326-20-35-6, “Financial Assets Secured by Collateral Maintenance Provisions.”

This portfolio also has some loans that are secured by residential real estate or other financial assets and some that are unsecured loans. The primary sources of repayment for these loans are the income and/or assets of the borrower. The underlying collateral is the most important indicator of risk for this loan portfolio. The overall lower risk profile of this portfolio is driven by loans secured by cash, marketable securities and/or cash value life insurance, which were 99.2% and 99.0% of total private banking loans as of March 31, 2022 and December 31, 2021, respectively.

Commercial Banking: Commercial and Industrial Loans and Leases

This loan portfolio primarily includes loans and leases made to financial services and other service and/or manufacturing companies generally for the purposes of financing production, operating capacity, accounts receivable, inventory, equipment, acquisitions and/or recapitalizations. Cash flow from the borrower’s operations is the primary source of repayment for these loans and leases; however, most loans are collateralized by commercial assets.

The borrower’s industry and local and regional economic conditions are important indicators of risk for this loan portfolio. Collateral for these types of loans at times does not have sufficient value in a distressed or liquidation scenario to satisfy the outstanding debt. C&I loans collateralized by marketable securities are treated the same as private banking loans for purposes of the calculation of the allowance for credit losses on loans and leases.

Commercial Banking: Commercial Real Estate Loans

This loan portfolio includes loans secured by commercial purpose real estate, including both owner-occupied properties and investment properties for various purposes including office, industrial, multifamily, retail, hospitality, healthcare and self-storage. The primary source of repayment for CRE loans secured by owner-occupied properties is cash flow from the borrower’s operations. Individual project cash flows, global cash flows and liquidity from the developer, or the sale of the property, are the primary sources of repayment for CRE loans secured by investment properties. Also included in this portfolio are commercial construction loans to finance the construction or renovation of structures as well as to finance the acquisition and development of raw land for various purposes. The increased level of risk for these loans is generally confined to the construction period. If problems arise, the project may not be completed and as such, may not provide sufficient cash flow on its own to service the debt or have sufficient value in a liquidation to cover the outstanding principal.

The underlying purpose and collateral of the loans are important indicators of risk for this loan portfolio. Additional risks exist and are dependent on several factors such as the condition of the local and regional economies, whether or not the project is owner-occupied, the type of project, and the experience and resources of the developer.

On a monthly basis, management monitors various credit quality indicators for the loan portfolio, including delinquency, non-performing status, changes in risk ratings, changes in the underlying performance of the borrowers and other relevant factors. On a daily basis, the Company monitors the collateral of loans secured by cash, marketable securities and/or cash value life insurance within the private banking portfolio which further reduces the risk profile of that portfolio. Refer to Note 1, Summary of Significant Accounting Policies, to our unaudited condensed consolidated financial statements for the Company’s policy for determining past due status of loans.

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Loan risk ratings are assigned based upon the creditworthiness of the borrower and the quality of the collateral for loans secured by marketable securities. Loan risk ratings are reviewed on an ongoing basis according to internal policies and applicable regulatory guidance. Loans within the pass rating are believed to have a lower risk of loss than loans that are risk rated as special mention, substandard or doubtful, which are believed to have an increasing risk of loss. Management also monitors the loan portfolio through a formal periodic review process. All non-pass rated loans are reviewed monthly and higher risk-rated loans within the pass category are reviewed three times a year.

The Company’s risk ratings are consistent with regulatory guidance and are as follows:

Pass – A pass loan is currently performing in accordance with its contractual terms.

Special Mention – A special mention loan has potential weaknesses that warrant management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects or in our credit position at some future date. Economic and market conditions beyond the customer’s control may in the future necessitate this classification.

Substandard – A substandard loan is not adequately protected by the net worth and/or paying capacity of the obligor or by the collateral pledged, if any. Substandard loans have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. These loans are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

Doubtful – A doubtful loan has all the weaknesses inherent in a loan categorized as 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 following table presents the amortized cost of loans by portfolio, risk rating and year of origination:


	As of March 31, 2022
(Dollars in thousands)	2022		2021		2020		2019		2018		Prior		Revolving Loans (1)		Total
Private Banking:
Pass	$	535	$	20,528	$	50,621	$	37,485	$	39,863	$	53,960	$	7,065,170	$	7,268,162
Special mention	—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—
Total private banking loans	535		20,528		50,621		37,485		39,863		53,960		7,065,170		7,268,162
Commercial and Industrial:
Pass	119,481		218,812		133,113		173,683		54,171		62,277		785,537		1,547,074
Special mention	—		—		1,203		—		—		130		4,000		5,333
Substandard	—		—		—		1,734		—		604		9,564		11,902
Doubtful	—		—		—		—		—		—		—		—
Total commercial and industrial loans	119,481		218,812		134,316		175,417		54,171		63,011		799,101		1,564,309
Commercial Real Estate:
Pass	160,798		581,607		526,695		400,020		288,032		396,281		46,129		2,399,562
Special mention	—		1,796		—		—		—		370		—		2,166
Substandard	—		—		261		5,114		615		6,730		—		12,720
Doubtful	—		—		—		—		—		—		—		—
Total commercial real estate loans	160,798		583,403		526,956		405,134		288,647		403,381		46,129		2,414,448
Loans and leases held-for-investment	$	280,814	$	822,743	$	711,893	$	618,036	$	382,681	$	520,352	$	7,910,400	$	11,246,919

(1)The Company had no revolving loans which were converted to term loans included in loans and leases held-for-investment as of March 31, 2022.

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	As of December 31, 2021
(Dollars in thousands)	2021		2020		2019		2018		2017		Prior		Revolving Loans (1)		Total
Private Banking:
Pass	$	21,365	$	57,722	$	29,935	$	54,082	$	7,121	$	50,545	$	6,665,728	$	6,886,498
Special mention	—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—
Total private banking loans	21,365		57,722		29,935		54,082		7,121		50,545		6,665,728		6,886,498
Commercial and Industrial:
Pass	240,980		156,216		186,879		55,729		39,523		25,328		787,778		1,492,433
Special mention	—		1,353		—		—		—		138		3,826		5,317
Substandard	—		—		1,757		—		578		41		8,984		11,360
Doubtful	—		375		—		3,938		—		—		—		4,313
Total commercial and industrial loans	240,980		157,944		188,636		59,667		40,101		25,507		800,588		1,513,423
Commercial Real Estate:
Pass	572,630		512,139		454,762		333,477		187,090		251,809		35,617		2,347,524
Special mention	—		—		—		—		—		2,288		—		2,288
Substandard	—		261		5,395		621		—		7,314		—		13,591
Doubtful	—		—		—		—		—		—		—		—
Total commercial real estate loans	572,630		512,400		460,157		334,098		187,090		261,411		35,617		2,363,403
Loans and leases held-for-investment	$	834,975	$	728,066	$	678,728	$	447,847	$	234,312	$	337,463	$	7,501,933	$	10,763,324

(1)The Company had no revolving loans which were converted to term loans included in loans and leases held-for-investment as of December 31, 2021.

Accrued interest receivable of $22.2 million and $21.8 million on loans and leases as of March 31, 2022 and December 31, 2021, respectively, was excluded from the amortized cost used in the calculation of allowance for credit losses.

Changes in the allowance for credit losses on loans and leases were as follows for the three months ended March 31, 2022 and 2021:


	Three Months Ended March 31, 2022
(Dollars in thousands)	Private Banking		Commercial and Industrial		Commercial Real Estate		Total
Balance, beginning of period	$	1,891	$	8,453	$	18,219	$	28,563
Provision (credit) for credit losses	169		975		(490)		654
Charge-offs	—		(4,312)		—		(4,312)
Recoveries	—		—		119		119
Balance, end of period	$	2,060	$	5,116	$	17,848	$	25,024


	Three Months Ended March 31, 2021
(Dollars in thousands)	Private Banking		Commercial and Industrial		Commercial Real Estate		Total
Balance, beginning of period	$	2,047	$	5,254	$	27,329	$	34,630
Provision (credit) for credit losses	(280)		3,101		(2,608)		213
Charge-offs	—		(199)		—		(199)
Recoveries	—		—		—		—
Balance, end of period	$	1,767	$	8,156	$	24,721	$	34,644

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The following tables present the age analysis of past due loans and leases segregated by class:


	March 31, 2022
(Dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total
Private banking	$	180	$	382	$	—	$	562	$	7,267,600	$	7,268,162
Commercial and industrial	2,338		—		—		2,338		1,561,971		1,564,309
Commercial real estate	615		—		—		615		2,413,833		2,414,448
Loans and leases held-for-investment	$	3,133	$	382	$	—	$	3,515	$	11,243,404	$	11,246,919


	December 31, 2021
(Dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total
Private banking	$	678	$	—	$	—	$	678	$	6,885,820	$	6,886,498
Commercial and industrial	—		—		4,313		4,313		1,509,110		1,513,423
Commercial real estate	—		—		—		—		2,363,403		2,363,403
Loans and leases held-for-investment	$	678	$	—	$	4,313	$	4,991	$	10,758,333	$	10,763,324

Individually Evaluated Loans

Management monitors the delinquency status of the Company’s loan portfolio on a monthly basis. Loans are considered non-performing when interest and principal are 90 days or more past due or management has determined that it is probable the borrower is unable to meet payments as they become due. The risk of loss is generally highest for non-performing loans.

The following tables present the Company’s amortized cost of individually evaluated loans and related information on those loans as of and for the three months ended March 31, 2022 and as of and for the twelve months ended December 31, 2021:


	As of and for the Three Months Ended March 31, 2022
(Dollars in thousands)	Amortized Cost		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With a related allowance recorded:
Private banking	$	—	$	—	$	—	$	—	$	—
Commercial and industrial	11,902		11,907		386		14,802		146
Commercial real estate	615		615		20		617		5
Total with a related allowance recorded	12,517		12,522		406		15,419		151
Without a related allowance recorded:
Private banking	—		—		—		—		—
Commercial and industrial	—		—		—		—		—
Commercial real estate	—		—		—		—		—
Total without a related allowance recorded	—		—		—		—		—
Total:
Private banking	—		—		—		—		—
Commercial and industrial	11,902		11,907		386		14,802		146
Commercial real estate	615		615		20		617		5
Total	$	12,517	$	12,522	$	406	$	15,419	$	151

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	As of and for the Twelve Months Ended December 31, 2021
(Dollars in thousands)	Amortized Cost		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With a related allowance recorded:
Private banking	$	—	$	—	$	—	$	—	$	—
Commercial and industrial	15,673		19,989		4,646		19,553		786
Commercial real estate	1,139		1,139		37		1,139		56
Total with a related allowance recorded	16,812		21,128		4,683		20,692		842
Without a related allowance recorded:
Private banking	—		—		—		—		—
Commercial and industrial	—		—		—		—		—
Commercial real estate	—		—		—		—		—
Total without a related allowance recorded	—		—		—		—		—
Total:
Private banking	—		—		—		—		—
Commercial and industrial	15,673		19,989		4,646		19,553		786
Commercial real estate	1,139		1,139		37		1,139		56
Total	$	16,812	$	21,128	$	4,683	$	20,692	$	842

Individually evaluated loans were $12.5 million and $16.8 million as of March 31, 2022 and December 31, 2021, respectively. There was no interest income recognized on individually evaluated loans that were also on non-accrual status for the three months ended March 31, 2022, and the twelve months ended December 31, 2021. As of March 31, 2022 and December 31, 2021, there were no loans 90 days or more past due and still accruing interest income.

The Company estimates allowance for credit losses individually for loans that do not share similar risk characteristics, including non-accrual loans and loans designated as TDRs, using a discounted cash flow method or based on the fair value of the collateral less estimated selling costs. Based on those evaluations, there were specific reserves totaling $406,000 and $4.7 million as of March 31, 2022 and December 31, 2021, respectively. Refer to Note 1, Summary of Significant Accounting Policies, to our unaudited condensed consolidated financial statements for the Company’s policy on evaluating loans for expected credit losses and interest income.

The following tables present the allowance for credit losses on loans and leases and amortized costs of individually evaluated loans:


	March 31, 2022
(Dollars in thousands)	Private Banking		Commercial and Industrial		Commercial Real Estate		Total
Allowance for credit losses on loans and leases:
Individually evaluated for impairment	$	—	$	386	$	20	$	406
Collectively evaluated for impairment	2,060		4,730		17,828		24,618
Total allowance for credit losses on loans and leases	$	2,060	$	5,116	$	17,848	$	25,024
Loans and leases held-for-investment:
Individually evaluated for impairment	$	—	$	11,902	$	615	$	12,517
Collectively evaluated for impairment	7,268,162		1,552,407		2,413,833		11,234,402
Loans and leases held-for-investment	$	7,268,162	$	1,564,309	$	2,414,448	$	11,246,919

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	December 31, 2021
(Dollars in thousands)	Private Banking		Commercial and Industrial		Commercial Real Estate		Total
Allowance for credit losses on loans and leases:
Individually evaluated for impairment	$	—	$	4,646	$	37	$	4,683
Collectively evaluated for impairment	1,891		3,807		18,182		23,880
Total allowance for credit losses on loans and leases	$	1,891	$	8,453	$	18,219	$	28,563
Loans and leases held-for-investment:
Individually evaluated for impairment	$	—	$	15,673	$	1,139	$	16,812
Collectively evaluated for impairment	6,886,498		1,497,750		2,362,264		10,746,512
Loans and leases held-for-investment	$	6,886,498	$	1,513,423	$	2,363,403	$	10,763,324

Troubled Debt Restructuring

The aggregate recorded investment in individually evaluated loans with terms modified through a TDR on non-accrual was $0 as of March 31, 2022 and December 31, 2021. The aggregate recorded investment in individually evaluated loans with terms modified through a TDR also accruing interest was $12.5 million as of March 31, 2022 and December 31, 2021. There were no unused commitments on loans designated as TDR as of March 31, 2022 and December 31, 2021.

The modifications made to restructured loans typically consist of an extension of the payment terms or the deferral of principal payments. Loans with an amortized cost of approximately $3.0 million as of March 31, 2022, that have been modified as a TDR within the prior 12 months, were 30 days past due as of March 31, 2022. There were no loans modified as TDRs within 12 months of the corresponding balance sheet date with payment defaults during the three months ended March, 31, 2021.

There were no loans newly designated as TDRs during the three months ended March 31, 2022.

The financial effects of our modifications made to loans newly designated as TDRs during the three months ended March 31, 2021,

were as follows:


	Three Months Ended March 31, 2021
(Dollars in thousands)	Count	Recorded Investment at the time of Modification		Current Recorded Investment		Allowance for Credit Losses on Loans and Leases at the time of Modification		Current Allowance for Credit Losses on Loans and Leases
Commercial Real Estate:
Extended term, deferred principal	2	$	4,454	$	4,454	$	445	$	445
Total	2	$	4,454	$	4,454	$	445	$	445

Other Real Estate Owned

As of March 31, 2022 and December 31, 2021, the balance of OREO was $2.0 million. There were no residential mortgage loans that were in the process of foreclosure as of March 31, 2022.

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[5] DEPOSITS

As of March 31, 2022 and December 31, 2021, deposits were comprised of the following:


	Interest Rate Range	Weighted Average Interest Rate		Balance
(Dollars in thousands)	March 31, 2022	March 31, 2022	December 31, 2021	March 31, 2022		December 31, 2021
Demand and savings accounts:
Noninterest-bearing checking accounts	—	—	—	$	790,272	$	776,256
Interest-bearing checking accounts	0.05 to 1.70%	0.54%	0.35%	4,160,546		4,318,523
Money market deposit accounts	0.10 to 3.25%	0.55%	0.40%	6,615,404		5,632,093
Total demand and savings accounts				11,566,222		10,726,872
Certificates of deposit	0.10 to 2.55%	0.39%	0.41%	599,254		777,517
Total deposits				$	12,165,476	$	11,504,389
Weighted average rate on interest-bearing accounts		0.54%	0.38%

As of March 31, 2022 and December 31, 2021, the Bank had total brokered deposits of $1.21 billion and $955.5 million, respectively. Reciprocal deposits through Certificate of Deposit Account Registry Service® (“CDARS®”) and Insured Cash Sweep® (“ICS®”) totaled $1.85 billion and $2.06 billion as of March 31, 2022 and December 31, 2021, respectively, and were not considered brokered deposits.

As of March 31, 2022 and December 31, 2021, certificates of deposit with balances of $100,000 or more, excluding brokered and reciprocal deposits, totaled $453.4 million and $477.0 million, respectively. As of March 31, 2022 and December 31, 2021, certificates of deposit with balances of $250,000 or more, excluding brokered and reciprocal deposits, totaled $125.3 million and $126.4 million.

The contractual maturity of certificates of deposit was as follows:


(Dollars in thousands)	March 31, 2022		December 31, 2021
12 months or less	$	540,410	$	693,339
12 months to 24 months	52,714		72,735
24 months to 36 months	6,130		11,443



Total	$	599,254	$	777,517

Interest expense on deposits was as follows:


	Three Months Ended March 31,
(Dollars in thousands)	2022		2021
Interest-bearing checking accounts	$	3,707	$	2,793
Money market deposit accounts	6,352		5,964
Certificates of deposit	687		1,997
Total interest expense on deposits	$	10,746	$	10,754

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[6] BORROWINGS

As of March 31, 2022 and December 31, 2021, borrowings were comprised of the following:


	March 31, 2022				December 31, 2021
(Dollars in thousands)	Interest Rate	Ending Balance		Maturity Date	Interest Rate	Ending Balance		Maturity Date
FHLB borrowings:

Issued 3/21/2022	0.75%	$	50,000	6/20/2022	—%	$	—
Issued 3/2/2022	0.65%	50,000		6/2/2022	—%	—
Issued 3/1/2022	0.63%	150,000		6/1/2022	—%	—
Issued 12/20/2021	—%	—			0.30%	50,000		3/21/2022
Issued 12/2/2021	—%	—			0.27%	50,000		3/2/2022
Issued 12/1/2021	—%	—			0.27%	150,000		3/1/2022


Subordinated notes payable (net of debt issuance costs of $1,738 and $1,792, respectively)	5.75%	95,762		5/15/2030	5.75%	95,708		5/15/2030
Senior notes payable (net of debt issuance costs of $500 and $545, respectively)	2.25%	124,500		12/15/2024	2.25%	124,455		12/15/2024
Total borrowings, net		$	470,262			$	470,163

On December 15, 2021, the Company issued a senior unsecured fixed-to-floating rate note (the “Senior Note”) to Raymond James in the amount of $125 million. The Senior Note, which matures on December 15, 2024, bears interest at a fixed annual rate of 2.25% from the date of issuance to December 15, 2022, and thereafter until maturity at a floating annual rate, reset quarterly, equal to the then current three-month Secured Overnight Financing Rate (SOFR). The Senior Note is not redeemable prior to December 15, 2022. On and after December 15, 2022, the Senior Note is redeemable on any interest payment date at 100% of the principal amount thereof, plus accrued and unpaid interest to the redemption date.

In 2020, the Company completed underwritten public offerings of subordinated notes due 2030, raising aggregate proceeds of $97.5 million. The subordinated notes have a term of 10 years at a fixed-to-floating rate of 5.75%. The subordinated notes constitute Tier 2 capital for the Company under federal regulatory capital rules. Beginning on May 15, 2025, with respect to the subordinated notes issued on May 11, 2020, and August 15, 2025, with respect to the subordinated notes issued on June 3, 2020, and on any interest payment date thereafter, the Company may redeem the subordinated notes, in whole or in part, at a redemption price equal to 100% of the principal amount of the notes to be redeemed plus accrued and unpaid interest to, but excluding, the date of redemption.

The Bank’s FHLB borrowing capacity is based on the collateral value of certain securities held in safekeeping at the FHLB, if applicable, and loans pledged to the FHLB. The Bank submits a quarterly Qualifying Collateral Report (“QCR”) to the FHLB to update the value of the loans pledged. As of March 31, 2022, the Bank’s borrowing capacity is based on the information provided in its December 31, 2021 QCR filing. As of March 31, 2022, the Bank had pledged loans of $1.52 billion with the FHLB, for a gross borrowing capacity of $1.09 billion, of which $250.0 million was outstanding in advances. As of December 31, 2021, there was $250.0 million outstanding in advances from the FHLB. When the Bank borrows from the FHLB, interest is charged at the FHLB’s posted rates at the time of the borrowing.

The Bank maintains an unsecured line of credit of $10.0 million with M&T Bank and an unsecured line of credit of $20.0 million with Texas Capital Bank. As of March 31, 2022 and December 31, 2021, there were no outstanding borrowings under these lines of credit, and they are available to the Bank at the lenders’ discretion. In addition, the Bank maintains an $8.0 million unsecured line of credit with PNC Bank for private label credit card facilities for certain existing commercial clients of the Bank, of which $3.4 million in notional value of credit cards have been issued. The clients of the Bank are responsible for repaying any balances due on these credit cards directly to PNC; however, if the customer fails to repay PNC, the Bank could be required to satisfy the obligation to PNC and initiate collection from its customer as part of the existing credit facility of that customer. In August 2021, the Bank entered into a standby letter of credit with PNC Bank for $643,000, which expires on August 16, 2022.

The Company maintains an unsecured line of credit of $75.0 million with The Huntington National Bank. As of March 31, 2022, and December 31, 2021 there were no outstanding borrowings under this line of credit.

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Interest expense on borrowings was as follows:


	Three Months Ended March 31,
(Dollars in thousands)	2022		2021
FHLB borrowings	$	1,026	$	1,072
Line of credit borrowings	—		55
Senior and subordinated notes payable	2,204		1,455
Total interest expense on borrowings	$	3,230	$	2,582

[7] STOCK TRANSACTIONS

During the three months ended March 31, 2022 and 2021, the Company paid dividends of $2.0 million on its 6.75% Fixed-to-Floating Rate Series A Non-Cumulative Perpetual Preferred Stock, no par value (the “Series A Preferred Stock”) and its 6.375% Fixed-to-Floating Rate Series B Non-Cumulative Perpetual Preferred Stock, no par value (the “Series B Preferred Stock”). During the three months ended March 31, 2022, the Company paid an in-kind dividend of 11 shares of the Series C Preferred Stock, plus cash paid in lieu of a fractional share.

Under authorization by the Board of Directors of the Company (the “Board”), the Company is permitted to repurchase its common stock up to prescribed amounts, of which $7.3 million remained available as of March 31, 2022. The Board also authorized the Company to utilize some of the share repurchase program authorizations to cancel certain options to purchase shares of its common stock granted by the Company. The company did not repurchase any shares under this program during the three months ended March 31, 2022 and 2021.

During the three months ended March 31, 2022, treasury shares increased 123,132, or approximately $4.0 million, in connection with the net settlement of equity awards exercised or vested. During the three months ended March 31, 2021, treasury shares increased 73,384, or approximately $1.5 million, in connection with the net settlement of equity awards exercised or vested.

Under prior authorization of the Board, stock option cancellation programs were approved to allow for certain outstanding and vested stock option awards to be canceled by the option holder at a price based on the closing day’s stock price less the option exercise price. There were no such cancellations during the three months ended March 31, 2022 and 2021.

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The tables below show the changes in the Company’s preferred and common shares outstanding during the periods indicated:


	Number of Preferred Shares Outstanding	Number of Common Shares Outstanding	Number of Treasury Shares
Balance, December 31, 2021	121,433	33,263,498	2,402,033
Issuance of preferred stock	11	—	—

Issuance of restricted common stock	—	476,325	—

Forfeitures of restricted common stock	—	(14,479)	—
Exercise of stock options	—	34,250	—

Increase in treasury stock related to equity awards	—	(123,132)	123,132

Balance, March 31, 2022	121,444	33,636,462	2,525,165

Balance, December 31, 2020	121,400	32,620,150	2,299,422
Issuance of preferred stock	—	—	—
Issuance of common stock	—	—	—
Issuance of restricted common stock	—	585,386	—
Forfeitures of restricted common stock	—	(10,547)	—
Exercise of stock options	—	39,000	—
Purchase of treasury stock	—	—	—
Increase in treasury stock related to equity awards	—	(73,384)	73,384
Reissuance of treasury stock	—	—	—
Balance, March 31, 2021	121,400	33,160,605	2,372,806

[8] REGULATORY CAPITAL

The Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory – and possibly additional discretionary – actions by regulators that, if undertaken, could have a direct and material adverse effect on the Company’s and the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of the Company’s and the Bank’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Company’s and the Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weighting and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios (set forth in the tables below) of Common Equity Tier 1 (“CET 1”) capital, Tier 1 capital and Total capital to risk-weighted assets, and of Tier 1 capital to average assets (as each term is defined in the applicable regulations). As of March 31, 2022 and December 31, 2021, TriState Capital Holdings, Inc. and TriState Capital Bank exceeded all capital adequacy requirements to which they were subject.

Insured depository institutions are categorized as well capitalized if they meet minimum capital ratios as set forth in the tables below. The Bank exceeded the capital ratios necessary to be well capitalized under the regulatory framework for prompt corrective action. There have been no conditions or events since the filing of the most recent Call Report for the period ending March 31, 2022 that management believes have materially changed the Bank’s capital adequacy, as presented in the tables below.

A banking organization is also subject to certain limitations on capital distributions and discretionary bonus payments to executive officers if the organization does not maintain a capital conservation buffer of CET 1 capital to risk-weighted assets ratio of 2.5% or more, in addition to the minimum risk-based capital adequacy levels shown in the tables below. As of March 31, 2022 and December 31, 2021, both the Company and the Bank had CET 1 capital above the levels required to avoid limitations on capital distributions and discretionary bonus payments.

In 2020, U.S. federal regulatory authorities issued a final rule that provides banking organizations that adopt CECL during the 2020 calendar year with the option to delay the impact of CECL on regulatory capital for up to two years, beginning January 1, 2020, followed by a three-year transition period. As the Company adopted CECL on December 31, 2020, the Company elected to utilize the

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remainder of the two-year delay of CECL’s impact on its regulatory capital, from December 31, 2020 through December 31, 2021, followed by the three-year transition period of CECL impact on regulatory capital, from January 1, 2022 through December 31, 2024.

The following tables set forth certain information concerning the Company’s and the Bank’s regulatory capital as of March 31, 2022 and December 31, 2021:


	March 31, 2022
	Actual				For Capital Adequacy Purposes				To be Well Capitalized Under Prompt Corrective Action Provisions
(Dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio
Total risk-based capital ratio
Company	$	926,930	13.23	%	$	560,586	8.00	%	N/A		N/A
Bank	$	1,007,981	14.42	%	$	559,025	8.00	%	$	698,782	10.00	%
Tier 1 risk-based capital ratio
Company	$	807,115	11.52	%	$	420,440	6.00	%	N/A		N/A
Bank	$	983,928	14.08	%	$	419,269	6.00	%	$	559,025	8.00	%
Common equity tier 1 risk-based capital ratio
Company	$	624,472	8.91	%	$	315,330	4.50	%	N/A		N/A
Bank	$	983,928	14.08	%	$	314,452	4.50	%	$	454,208	6.50	%
Tier 1 leverage ratio
Company	$	807,115	6.16	%	$	524,449	4.00	%	N/A		N/A
Bank	$	983,928	7.52	%	$	523,676	4.00	%	$	654,595	5.00	%


	December 31, 2021
	Actual				For Capital Adequacy Purposes				To be Well Capitalized Under Prompt Corrective Action Provisions
(Dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio
Total risk-based capital ratio
Company	$	910,320	13.43	%	$	542,409	8.00	%	N/A		N/A
Bank	$	986,657	14.60	%	$	540,639	8.00	%	$	675,798	10.00	%
Tier 1 risk-based capital ratio
Company	$	788,910	11.64	%	$	406,807	6.00	%	N/A		N/A
Bank	$	960,955	14.22	%	$	405,479	6.00	%	$	540,639	8.00	%
Common equity tier 1 risk-based capital ratio
Company	$	607,367	8.96	%	$	305,105	4.50	%	N/A		N/A
Bank	$	960,955	14.22	%	$	304,109	4.50	%	$	439,269	6.50	%
Tier 1 leverage ratio
Company	$	788,910	6.36	%	$	496,431	4.00	%	N/A		N/A
Bank	$	960,955	7.76	%	$	495,417	4.00	%	$	619,271	5.00	%

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[9] EARNINGS PER COMMON SHARE

The computation of basic and diluted earnings per common share for the periods presented were as follows:


	Three Months Ended March 31,
(Dollars in thousands, except per share data)	2022		2021

Basic earnings per common share:
Net income	$	21,641	$	16,200
Less: Preferred dividends on Series A and Series B	1,962		1,962
Less: Preferred dividends on Series C	1,171		1,097
Net income available to common shareholders	$	18,508	$	13,141

Allocation of net income available:
Common shareholders	$	15,575	$	11,127
Series C convertible preferred shareholders	2,480		1,685
Warrant shareholders	453		329
Total	$	18,508	$	13,141

Basic weighted average common shares outstanding:
Basic common shares	31,699,023		31,224,474
Series C convertible preferred stock, as-if converted	5,047,272		4,727,272
Warrants, as-if exercised	922,438		922,438

Basic earnings per common share	$	0.49	$	0.36

Diluted earnings per common share:
Income available to common shareholders after allocation	$	15,575	$	11,127

Diluted weighted average common shares outstanding:
Basic common shares	31,699,023		31,224,474
Restricted stock - dilutive	956,414		801,798
Stock options - dilutive	119,410		160,762
Diluted common shares	32,774,847		32,187,034

Diluted earnings per common share	$	0.48	$	0.35

	Three Months Ended March 31,
Anti-dilutive shares:	2022		2021
Restricted stock	48,147		71,810

Series C convertible preferred stock, as-if converted	5,047,272		4,727,272
Warrants, as-if exercised	922,438		922,438
Total anti-dilutive shares	6,017,857		5,721,520

The Series C Preferred Stock and warrants are anti-dilutive under the treasury stock method compared to the basic EPS calculation under the two-class method.

[10] DERIVATIVES AND HEDGING ACTIVITY

RISK MANAGEMENT OBJECTIVE OF USING 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 debt funding and through the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing and duration of the Company’s known or expected cash payments related to certain of the Company’s FHLB borrowings and to manage the volatility of the change in fair value related to certain of the Company’s equity investments. The Company also has derivatives that are a result of a service the Company provides to certain qualifying customers.

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When providing this service, the Company generally enters into an offsetting derivative transaction in order to eliminate its interest rate risk exposure resulting from such transactions.

FAIR VALUES OF DERIVATIVE INSTRUMENTS ON THE STATEMENTS OF FINANCIAL CONDITION

The tables below present the fair value of the Company’s derivative financial instruments as well as their classification on the unaudited condensed consolidated statements of financial condition as of March 31, 2022 and December 31, 2021:

Asset Derivatives

Liability Derivatives

as of March 31, 2022

(Dollars in thousands)

Balance Sheet Location

Fair Value

Balance Sheet Location

Fair Value

Derivatives designated as hedging instruments:

Interest rate products

Other assets

5,617

Other liabilities

362

Derivatives not designated as hedging instruments:

Interest rate products

Other assets

97,531

Other liabilities

97,439

Total

Other assets

103,148

Other liabilities

97,801

Asset Derivatives

Liability Derivatives

as of December 31, 2021

(Dollars in thousands)

Balance Sheet Location

Fair Value

Balance Sheet Location

Fair Value

Derivatives designated as hedging instruments:

Interest rate products

Other assets

1,217

Other liabilities

2,838

Derivatives not designated as hedging instruments:

Interest rate products

Other assets

88,956

Other liabilities

88,919

Total

Other assets

90,173

Other liabilities

91,757

The following tables show the impact legally enforceable master netting agreements had on the Company’s derivative financial instruments as of March 31, 2022 and December 31, 2021:


	Offsetting of Derivative Assets
	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Statement of Financial Position		Net Amounts of Assets presented in the Statement of Financial Position		Gross Amounts Not Offset in the Statement of Financial Position				Net Amount

(Dollars in thousands)							Financial Instruments		Cash Collateral Received
March 31, 2022	$	103,148	$	—	$	103,148	$	(14,815)	$	—	$	88,333

December 31, 2021	$	90,173	$	—	$	90,173	$	(13,929)	$	—	$	76,244


	Offsetting of Derivative Liabilities
	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Statement of Financial Position		Net Amounts of Liabilities presented in the Statement of Financial Position		Gross Amounts Not Offset in the Statement of Financial Position				Net Amount

(Dollars in thousands)							Financial Instruments		Cash Collateral Posted
March 31, 2022	$	97,801	$	—	$	97,801	$	(14,815)	$	(3,327)	$	79,659

December 31, 2021	$	91,757	$	—	$	91,757	$	(13,929)	$	(59,898)	$	17,930

CASH FLOW HEDGES OF INTEREST RATE RISK

The Company’s objectives in using certain interest rate derivatives are to add stability to net interest income and to manage its exposure to interest rate movements. To accomplish these objectives, the Company primarily uses interest rate swaps as part of its

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interest rate risk management strategy. The Company has entered into derivative contracts to hedge the variable cash flows associated with certain FHLB borrowings. These interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company effectively making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.

The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income (loss) and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings. The Company’s cash flow hedge derivatives did not have any hedge ineffectiveness recognized in earnings during the three months ended March 31, 2022.

Characteristics of the Company’s interest rate derivative transactions designated as cash flow hedges of interest rate risk as of March 31, 2022, were as follows:


(Dollars in thousands)	Notional Amount		Effective Rate (1)	Estimated Increase/ (Decrease) to Interest Expense in the Next Twelve Months		Maturity Date	Remaining Term (in Months)
Interest rate products:

Issued 5/30/2019	$	50,000	2.05%	$	130	6/1/2022	2
Issued 5/30/2019	50,000		2.03%	89		6/1/2023	14
Issued 5/30/2019	50,000		2.04%	95		6/1/2024	26
Issued 3/2/2020	50,000		0.98%	(438)		3/2/2025	35
Issued 3/20/2020	50,000		0.60%	(657)		3/20/2025	36
Total	$	250,000		$	(781)

(1)The effective rate is adjusted for the difference between the three-month FHLB advance rate and three-month LIBOR.

The tables below present the effective portion of the Company’s cash flow hedge instruments in the unaudited condensed consolidated statements of income and accumulated other comprehensive income (loss):


		Three Months Ended March 31,				Three Months Ended March 31,
(Dollars in thousands)		2022		2021		2022		2021
Derivatives designated as hedging instruments:	Location of Gain (Loss) Recognized in Income on Derivatives	Realized Gain (Loss) Recognized in Income on Derivatives				Unrealized Gain (Loss) Recognized in Accumulated Other Comprehensive Income on Derivatives
Interest rate products	Interest expense	$	(778)	$	(846)	$	6,026	$	2,216

NON-DESIGNATED HEDGES

The Company does not use derivatives for trading or speculative purposes. Derivatives not designated as hedges are not speculative and result from a service the Company provides to certain customers. The Company executes interest rate derivatives with its commercial and private banking customers to facilitate their respective risk management strategies. Those derivatives are simultaneously and economically hedged by offsetting derivatives that the Company executes with a third party, such that the Company generally eliminates its interest rate exposure resulting from such transactions. Changes in the fair value of derivatives not designated in hedging relationships are recorded directly in earnings. As of March 31, 2022, the Company had interest rate derivative transactions with an aggregate notional amount of $4.99 billion related to this program.

The table below presents the effect of the Company’s non-designated hedge instruments in the unaudited condensed consolidated statements of income:


		Three Months Ended March 31,
(Dollars in thousands)		2022		2021
Derivatives not designated as hedging instruments:	Location of Gain (Loss) Recognized in Income on Derivatives	Amount of Gain (Loss) Recognized in Income on Derivatives
Interest rate products	Non-interest income	$	12	$	31

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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, 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.

The Company has agreements with certain of its derivative counterparties that contain a provision where, if either the Company or the counterparty fails to maintain its status as a well-capitalized or adequately capitalized institution, then the Company or the counterparty could be required to terminate any outstanding derivative positions and settle its obligations under the agreement.

As of March 31, 2022, the termination value of derivatives for which the Company had master netting arrangements with the counterparty and in a net liability position was $3.3 million, including accrued interest. As of March 31, 2022, the Company has minimum collateral posting thresholds with certain of its derivative counterparties and has posted collateral of $4.9 million which is considered restricted cash. If the Company had breached any of these provisions as of March 31, 2022, it could have been required to settle its obligations under the agreements at their termination value.

[11] DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair value estimates of financial instruments are based on the present value of expected future cash flows, quoted market prices of similar financial instruments, if available, and other valuation techniques. These valuations are significantly affected by discount rates, cash flow assumptions and risk assumptions used. Therefore, fair value estimates may not be substantiated by comparison to independent markets and are not intended to reflect the proceeds that may be realized in an immediate settlement of instruments. Accordingly, the aggregate fair value amounts presented below do not represent the underlying value of the Company.

FAIR VALUE MEASUREMENTS

In accordance with U.S. GAAP, the Company must account for certain financial assets and liabilities at fair value on a recurring and non-recurring basis. The Company utilizes a three-level fair value hierarchy of valuation techniques to estimate the fair value of its financial assets and liabilities based on whether the inputs to those valuation techniques are observable or unobservable. The fair value hierarchy gives the highest priority to quoted prices with readily available independent data in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable market inputs (Level 3). When various inputs for measurement fall within multiple levels of the fair value hierarchy, the lowest level input that has a significant impact on fair value measurement is used.

Financial assets and liabilities are categorized based upon the following characteristics or inputs to the valuation techniques:

•Level 1 – Financial assets and liabilities for which inputs are observable and are obtained from reliable quoted prices for identical assets or liabilities in actively traded markets. This is the most reliable fair value measurement and includes, for example, active exchange-traded equity securities.

•Level 2 – Financial assets and liabilities for which values are based on quoted prices in markets that are not active or for which values are based on similar assets or liabilities that are actively traded. Level 2 also includes pricing models in which the inputs are corroborated by market data, such as matrix pricing.

•Level 3 – Financial assets and liabilities for which values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. Level 3 inputs include assumptions of a source independent of the reporting entity or the reporting entity’s own assumptions that are supported by little or no market activity or observable inputs.

The Company is responsible for the valuation process and as part of this process may use data from outside sources in establishing fair value. The Company performs due diligence to understand the inputs used or how the data was calculated or derived and corroborates the reasonableness of external inputs in the valuation process.

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RECURRING FAIR VALUE MEASUREMENTS

The following tables represent assets and liabilities measured at fair value on a recurring basis as of March 31, 2022 and December 31, 2021:


	March 31, 2022
(Dollars in thousands)	Level 1		Level 2		Level 3		Total Assets / Liabilities at Fair Value
Financial assets:
Debt securities available-for-sale:
U.S. treasury notes	$	96,659	$	—	$	—	$	96,659
Corporate bonds	$	—	$	151,051	$	—	$	151,051
Trust preferred securities	—		13,603		—		13,603
Non-agency residential mortgage-backed securities	—		288,848		—		288,848
Agency collateralized mortgage obligations	—		15,541		—		15,541
Agency mortgage-backed securities	—		137,034		—		137,034
Agency debentures	—		6,837		—		6,837
Municipal bonds	—		4,589		—		4,589
Equity securities	4,867		—		—		4,867
Interest rate swaps	—		103,148		—		103,148

Total financial assets	101,526		720,651		—		822,177

Financial liabilities:
Interest rate swaps	—		97,801		—		97,801


Total financial liabilities	$	—	$	97,801	$	—	$	97,801


	December 31, 2021
(Dollars in thousands)	Level 1		Level 2		Level 3		Total Assets / Liabilities at Fair Value
Financial assets:
Debt securities available-for-sale:

Corporate bonds	$	—	$	146,192	$	—	$	146,192
Trust preferred securities	—		13,627		—		13,627

Non-agency mortgage-backed securities	—		277,118		—		277,118

Agency collateralized mortgage obligations	—		16,498		—		16,498
Agency mortgage-backed securities	—		120,477		—		120,477
Agency debentures	—		7,228		—		7,228
Municipal bonds	—		5,185		—		5,185
Equity securities	4,975		—		—		4,975
Interest rate swaps	—		90,173		—		90,173

Total financial assets	4,975		676,498		—		681,473

Financial liabilities:
Interest rate swaps	—		91,757		—		91,757


Total financial liabilities	$	—	$	91,757	$	—	$	91,757

INVESTMENT SECURITIES

Generally, debt securities are valued using pricing for similar securities, recently executed transactions, and other pricing models utilizing observable inputs and therefore are classified as Level 2. U.S. treasury securities and equity securities (including mutual funds) are classified as Level 1 because these securities are in actively traded markets.

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INTEREST RATE SWAPS

The fair value of interest rate swaps is estimated using inputs that are observable or that can be corroborated by observable market data and therefore are classified as Level 2. These fair value estimations include primarily market observable inputs such as the forward LIBOR swap curve.

NON-RECURRING FAIR VALUE MEASUREMENTS

Certain financial assets and financial liabilities are measured at fair value on a non-recurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances, such as when there is evidence of impairment.

The following tables represent the balances of assets measured at fair value on a non-recurring basis as of March 31, 2022 and December 31, 2021:


	March 31, 2022
(Dollars in thousands)	Level 1		Level 2		Level 3		Total Assets at Fair Value
Loans measured for impairment, net	$	—	$	—	$	12,111	$	12,111
Other real estate owned	—		—		2,005		2,005
Total assets	$	—	$	—	$	14,116	$	14,116


	December 31, 2021
(Dollars in thousands)	Level 1		Level 2		Level 3		Total Assets at Fair Value
Loans measured for impairment, net	$	—	$	—	$	12,129	$	12,129
Other real estate owned	—		—		2,005		2,005
Total assets	$	—	$	—	$	14,134	$	14,134

As of March 31, 2022 and December 31, 2021, the Company recorded $406,000 and $4.7 million, respectively, of specific reserves to allowance for credit losses on loans and leases as a result of adjusting the fair value of individually evaluated loans.

INDIVIDUALLY EVALUATED LOANS

The Company evaluates individually loans that do not share similar risk characteristics, including non-accrual loans and loans designated as TDRs. Specific allowance for credit losses is measured based on a market approach, discounted cash flow of ongoing operations, discounted at the loan’s original effective interest rate, or a calculation of the fair value of the underlying collateral less estimated selling costs. Our policy is to obtain appraisals on collateral supporting individually evaluated loans on an annual basis, unless circumstances dictate a shorter time frame. Appraisals are reduced by estimated costs to sell the collateral, and, under certain circumstances, additional factors that may arise and cause us to believe our recoverable value may be less than the independent appraised value. Accordingly, individually evaluated loans are classified as Level 3.

OTHER REAL ESTATE OWNED

OREO is comprised of property acquired through foreclosure or voluntarily conveyed by borrowers. These assets are recorded on the date acquired at fair value, less estimated disposition costs, with the fair value being determined by appraisal. Our policy is to obtain appraisals on collateral supporting OREO on an annual basis, unless circumstances dictate a shorter time frame. Appraisals are reduced by estimated costs to sell the collateral and, under certain circumstances, additional factors that may arise and cause us to believe our recoverable value may be less than the independent appraised value. Accordingly, OREO is classified as Level 3.

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LEVEL 3 VALUATION

The following tables present additional quantitative information about assets measured at fair value on a recurring and non-recurring basis and for which we have utilized Level 3 inputs to determine fair value as of March 31, 2022 and December 31, 2021:

March 31, 2022

(Dollars in thousands)

Fair Value

Valuation Techniques (1)(2)

Significant Unobservable Inputs

Weighted Average Discount Rate

Loans measured for impairment, net

12,111

Other

Discount due to restructured nature of operations

Other real estate owned

2,005

Collateral

Appraisal value and discount due to salability conditions

12%

(1)Fair value is generally determined through independent appraisals of the underlying collateral, which may include Level 3 inputs that are not identifiable, or by using the discounted cash flow of ongoing operations if the loan is not collateral dependent.

(2)The collateral which is used in the valuation of these loans is commercial real estate.

December 31, 2021

(Dollars in thousands)

Fair Value

Valuation Techniques (1)(2)

Significant Unobservable Inputs

Weighted Average
Discount Rate

Loans measured for impairment, net

12,129

Other

Discount due to restructured nature of operations

Other real estate owned

2,005

Collateral

Appraisal value and discount due to salability conditions

12%

(2)The collateral which is used in the valuation of these loans is commercial real estate.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The following table summarizes the carrying amounts and estimated fair values of financial instruments:


		March 31, 2022				December 31, 2021
(Dollars in thousands)	Fair Value Level	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Financial assets:
Cash and cash equivalents	1	$	481,874	$	481,874	$	452,016	$	452,016
Debt securities available-for-sale	1	96,659		96,659		—		—
Debt securities available-for-sale	2	617,503		617,503		586,325		586,325
Debt securities held-to-maturity	1	39,120		35,964		39,098		38,666
Debt securities held-to-maturity	2	768,486		714,653		763,478		753,296
Equity securities	1	4,867		4,867		4,975		4,975

Federal Home Loan Bank stock	2	11,802		11,802		11,802		11,802

Loans and leases held-for-investment, net	3	11,221,895		11,195,503		10,734,761		10,717,430
Accrued interest receivable	2	25,891		25,891		25,060		25,060
Investment management fees receivable, net	2	8,390		8,390		8,641		8,641
Bank owned life insurance	2	99,535		99,535		98,928		98,928
Other real estate owned	3	2,005		2,005		2,005		2,005
Interest rate swaps	2	103,148		103,148		90,173		90,173


Financial liabilities:
Deposits	2	$	12,165,476	$	12,147,795	$	11,504,389	$	11,504,856
Borrowings, net	2	470,262		469,075		470,163		474,949

Interest rate swaps	2	97,801		97,801		91,757		91,757

During the three months ended March 31, 2022 and 2021, there were no transfers between fair value Levels 1, 2 or 3.

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The following methods and assumptions were used to estimate the fair value of each class of financial instruments as of March 31, 2022 and December 31, 2021:

CASH AND CASH EQUIVALENTS

The carrying amount approximates fair value.

INVESTMENT SECURITIES

The fair values of debt securities available-for-sale, debt securities held-to-maturity, debt securities trading and equity securities are based on quoted market prices for the same or similar securities, recently executed transactions and third-party pricing models. U.S. treasury securities and equity securities (including mutual funds) are classified as Level 1 because these securities are in

actively traded markets.

FEDERAL HOME LOAN BANK STOCK

The carrying value of our FHLB stock, which is carried at cost, approximates fair value.

LOANS AND LEASES HELD-FOR-INVESTMENT

The fair value of loans and leases held-for-investment is estimated by discounting the future cash flows using market rates (utilizing both unobservable and certain observable inputs when applicable) at which similar loans would be made to borrowers with similar credit ratings over the estimated remaining maturities. Impaired loans are generally valued at the fair value of the associated collateral.

ACCRUED INTEREST RECEIVABLE

The carrying amount approximates fair value.

INVESTMENT MANAGEMENT FEES RECEIVABLE

The carrying amount approximates fair value.

BANK OWNED LIFE INSURANCE

The fair value of general account BOLI is based on the insurance contract net cash surrender value.

OTHER REAL ESTATE OWNED

OREO is carried at fair value less estimated selling costs.

DEPOSITS

The fair value of demand deposits is the amount payable on demand as of the reporting date, i.e., their carrying amounts. The fair value of fixed maturity deposits is estimated using a discounted cash flow calculation that applies the rates currently offered for deposits of similar remaining maturities.

BORROWINGS

The fair value of borrowings is calculated by discounting scheduled cash flows through the estimated maturity using period end market rates for borrowings of similar remaining maturities.

INTEREST RATE SWAPS

The fair value of interest rate swaps is estimated through the assistance of an independent third party and compared to the fair value determined by the swap counterparty to establish reasonableness.

OFF-BALANCE SHEET INSTRUMENTS

Fair values for the Company’s off-balance sheet instruments, which consist of lending commitments, standby letters of credit and risk participation agreements related to interest rate swap agreements, are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing. Management believes that the fair value of these off-balance sheet instruments is not significant.

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[12] CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following tables show the changes in accumulated other comprehensive income (loss) net of tax, for the periods presented:


	Three Months Ended March 31,
	2022						2021
(Dollars in thousands)	Debt Securities		Derivatives		Total		Debt Securities		Derivatives		Total
Balance, beginning of period	$	(2,385)	$	(1,039)	$	(3,424)	$	3,834	$	(6,531)	$	(2,697)
Change in unrealized holding gains (losses)	(22,822)		4,573		(18,249)		(954)		1,683		729
Losses (gains) reclassified from other comprehensive income	—		591		591		(1)		642		641


Net other comprehensive income (loss)	(22,822)		5,164		(17,658)		(955)		2,325		1,370
Balance, end of period	$	(25,207)	$	4,125	$	(21,082)	$	2,879	$	(4,206)	$	(1,327)

[13] CONTINGENT LIABILITIES

Following the public announcement of the Agreement and Plan of Merger (the “Merger Agreement”) dated as of October 20, 2021, among the Company, Raymond James Financial, Inc. (“Raymond James”), Macaroon One LLC (“Merger Sub 1”) and Macaroon Two LLC (“Merger Sub 2”), six lawsuits were filed by purported stockholders of the Company against the Company and the members of the Company’s board of directors. Each complaint contains allegations contending, among other things, that the proxy statement/ prospectus contained within the Registration Statement on Form S-4 filed in connection with the proposed acquisition of the Company by Raymond James failed to disclose certain allegedly material information in violation of federal securities laws. The complaints seek injunctive relief enjoining the acquisition, attorneys’ and experts’ fees, and other remedies. The outcome of the pending and any additional future litigation is uncertain. If any case is not resolved, the lawsuit(s) could prevent or delay completion of the acquisition and result in substantial costs to Raymond James and the Company, including any costs associated with the indemnification of directors and officers. One of the conditions to the closing of the acquisition is the absence of any order, injunction, law, regulation or other legal restraints preventing, prohibiting or making illegal the completion of the acquisition or any other transactions contemplated by the Merger Agreement. As such, if the plaintiffs are successful in obtaining an order or injunction prohibiting the completion of the acquisition on the agreed-upon terms, then the acquisition may not be completed within the expected timeframe or at all. The defense or settlement of any lawsuit or claim that remains unresolved at the time the acquisition is completed may adversely affect the combined company’s business, financial condition, results of operations and cash flows.

From time to time the Company is a party to various litigation matters incidental to the conduct of its business. The Company is not aware of any other material unasserted claims. In the opinion of management, there are no other potential claims that could have a material adverse effect on the Company’s financial position, liquidity or results of operations.

[14] SEGMENTS

The Company operates two reportable segments: Bank and Investment Management.

•The Bank segment provides commercial banking services to middle-market businesses and private banking services to high-net-worth individuals through the Bank subsidiary.

•The Investment Management segment provides advisory and sub-advisory investment management services primarily to institutional investors, mutual funds and individual investors through the Chartwell subsidiary. It also supports marketing efforts for Chartwell’s proprietary investment products through the CTSC Securities subsidiary.

The following tables provide financial information for the two segments of the Company as of and for the periods indicated. The information provided under the caption “Parent and Other” represents general operating activity of the Company not considered to be

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a reportable segment, which includes parent company activity as well as eliminations and adjustments that are necessary for purposes of reconciliation to the consolidated amounts.


(Dollars in thousands)	March 31, 2022		December 31, 2021
Assets:
Bank	$	13,602,380	$	12,926,161
Investment management	82,435		86,563
Parent and other	(7,148)		(7,872)
Total assets	$	13,677,667	$	13,004,852

Three Months Ended March 31, 2022

Three Months Ended March 31, 2021

(Dollars in thousands)

Bank

Investment
Management

Parent
and Other

Consolidated

Bank

Investment
Management

Parent
and Other

Consolidated

Income statement data:

Interest income

67,561

TriState Capital Holdings, Inc. 10-Q