HERITAGE COMMERCE CORP [HTBK] Filings

10-Q 1 htbk-20220331x10q.htm 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION


	Washington, D.C. 20549

	FORM 10-Q


(MARK ONE)
☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2022
OR
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to

Commission file number 000-23877

Heritage Commerce Corp

(Exact name of Registrant as Specified in its Charter)

California (State or Other Jurisdiction of Incorporation or Organization)	77-0469558 (I.R.S. Employer Identification No.)
224 Airport Parkway, San Jose, California (Address of Principal Executive Offices)	95110 (Zip Code)

(408) 947-6900

(Registrant’s Telephone Number, Including Area Code)

N/A

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

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


Title of each class:	Trading Symbol:	Name of each exchange on which registered:
Common Stock, No Par Value	HTBK	The NASDAQ Stock Market LLC

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

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

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

Large accelerated filer ☐	Accelerated filer ☒	Non-accelerated filer ☐	Smaller reporting company ☐
			Emerging growth company ☐

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

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

The Registrant had 60,439,607 shares of Common Stock outstanding on April 29, 2022

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HERITAGE COMMERCE CORP

QUARTERLY REPORT ON FORM 10-Q

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		Page No.
Cautionary Note on Forward-Looking Statements		3

Part I. FINANCIAL INFORMATION

Item 1.	Consolidated Financial Statements (unaudited)	5

	Consolidated Balance Sheets	5

	Consolidated Statements of Income	6

	Consolidated Statements of Comprehensive Income	7

	Consolidated Statements of Changes in Shareholders’ Equity	8

	Consolidated Statements of Cash Flows	9

	Notes to Unaudited Consolidated Financial Statements	10

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	39

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	66

Item 4.	Controls and Procedures	66

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	67

Item 1A.	Risk Factors	67

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	67

Item 3.	Defaults Upon Senior Securities	67

Item 4.	Mine Safety Disclosures	67

Item 5.	Other Information	67

Item 6.	Exhibits	68

SIGNATURES		69

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Cautionary Note Regarding Forward-Looking Statements

This Report on Form 10-Q contains various statements that may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Rule 175 promulgated thereunder, and Section 21E of the Securities Exchange Act of 1934, as amended, Rule 3b-6 promulgated thereunder and are intended to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements about our expectations, beliefs, plans, objectives, assumptions or future events or performance are not historical facts and may be forward-looking. These forward-looking statements often can be, but are not always, identified by the use of words such as “assume,” “expect,” “intend,” “plan,” “project,” “believe,” “estimate,” “predict,” “anticipate,” “may,” “might,” “should,” “could,” “goal,” “potential” and similar expressions. We base these forward-looking statements on our current expectations and projections about future events, our assumptions regarding these events and our knowledge of facts at the time the statements are made. These statements include statements relating to our projected growth, anticipated future financial performance, and management’s long-term performance goals, as well as statements relating to the anticipated effects on results of operations and financial condition.

These forward-looking statements are subject to various risks and uncertainties that may be outside our control and our actual results could differ materially from our projected results. Risks and uncertainties that could cause our financial performance to differ materially from our goals, plans, expectations and projections expressed in forward-looking statements include those set forth in our filings with the Securities and Exchange Commission (“SEC”), Item 1A of the Heritage Commerce Corp’s (“the Company”) Annual Report on Form 10-K for the year ended December 31, 2021, and including, but not limited to the following:

●

geopolitical and domestic political developments that can increase levels of political and economic unpredictability and increase the volatility of financial markets;

●

conditions relating to the COVID-19 pandemic, and other infectious illness outbreaks that may arise in the future, on our customers, employees, businesses, liquidity, financial results and overall condition including severity and duration of the associated uncertainties in U.S. and global markets;

●

current and future economic and market conditions in the United States generally or in the communities we serve, including the effects of declines in property values and overall slowdowns in economic growth should these events occur;

●

effects of and changes in trade, monetary and fiscal policies and laws, including the interest rate policies of the Federal Open Market Committee of the Federal Reserve Board;

●

inflation and changes in the interest rate environment that reduce our margins and yields, the fair value of financial instruments or our level of loan originations, or increase the level of defaults, losses and prepayments on loans we have made and make;

●

changes in the level of nonperforming assets and charge offs and other credit quality measures, and their impact on the adequacy of our allowance for credit losses and our provision for credit losses;

●

volatility in credit and equity markets and its effect on the global economy;

●

our ability to effectively compete with other banks and financial services companies and the effects of competition in the financial services industry on our business;

●

our ability to achieve loan growth and attract deposits in our market area;

●

risks associated with concentrations in real estate related loans;

●

the relative strength or weakness of the commercial and real estate markets where our borrowers are located, including related asset and market prices;

●

credit related impairment charges to our securities portfolio;

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●

increased capital requirements for our continual growth or as imposed by banking regulators, which may require us to raise capital at a time when capital is not available on favorable terms or at all;

●

regulatory limits on Heritage Bank of Commerce’s ability to pay dividends to the Heritage Commerce Corp (the “Company”);

●

operational issues stemming from, and/or capital spending necessitated by, the potential need to adapt to industry changes in information technology systems, on which we are highly dependent;

●

our inability to attract, recruit, and retain qualified officers and other personnel could harm our ability to implement our strategic plan, impair our relationships with customers and adversely affect our business, results of operations and growth prospects;

●

possible adjustment of the valuation of our deferred tax assets;

●

our ability to keep pace with technological changes, including our ability to identify and address cyber-security risks such as data security breaches, “denial of service” attacks, “hacking” and identity theft;

●

inability of our framework to manage risks associated with our business, including operational risk and credit risk;

●

risks of loss of funding of Small Business Administration (“SBA”) or SBA loan programs, or changes in those programs;

●

compliance with applicable laws and governmental and regulatory requirements, including the Dodd-Frank Act and others relating to banking, consumer protection, securities, accounting and tax matters;

●

effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Public Company Accounting Oversight Board, the Financial Accounting Standards Board and other accounting standard setters;

●

the expense and uncertain resolution of litigation matters whether occurring in the ordinary course of business or otherwise;

●

availability of and competition for acquisition opportunities;

●

risks resulting from domestic terrorism;

●

risks resulting from social unrest and protests;

●

risks of natural disasters (including earthquakes and flooding) and other events beyond our control;

●

the lending activities undertaken by the Company in connection with the Small Business Administration’s Paycheck Protection Program, including risks to the Company with respect to the uncertain application by the Small Business Administration of loan eligibility, forgiveness and audit criteria;

●

our success in managing the risks involved in the foregoing factors.

Forward-looking statements speak only as of the date they are made. The Company does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made or to reflect the occurrence of unanticipated events. You should consider any forward looking statements in light of this explanation, and we caution you about relying on forward-looking statements.

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Part I—FINANCIAL INFORMATION

ITEM 1—CONSOLIDATED FINANCIAL STATEMENTS

HERITAGE COMMERCE CORP

CONSOLIDATED BALANCE SHEETS

(Unaudited)


	March 31,		December 31,
	2022		2021

	(Dollars in thousands)
Assets
Cash and due from banks	$	29,729	$	15,703
Other investments and interest-bearing deposits in other financial institutions		1,187,436		1,290,513
Total cash and cash equivalents		1,217,165		1,306,216
Securities available-for-sale, at fair value		111,217		102,252
Securities held-to-maturity, at amortized cost, net of allowance for credit losses of $39 at March 31, 2022
and $43 at December 31, 2021 (fair value of $690,784 at March 31, 2022 and $657,649 at December 31, 2021)		736,823		658,397
Loans held-for-sale - SBA, at lower of cost or fair value, including deferred costs		831		2,367
Loans, net of deferred fees		3,024,064		3,087,326
Allowance for credit losses on loans		(42,788)		(43,290)
Loans, net		2,981,276		3,044,036
Federal Home Loan Bank, Federal Reserve Bank stock and other investments, at cost		32,509		32,504
Company-owned life insurance		78,069		77,589
Premises and equipment, net		9,580		9,639
Goodwill		167,631		167,631
Other intangible assets		13,009		13,668
Accrued interest receivable and other assets		79,288		85,110
Total assets	$	5,427,398	$	5,499,409

Liabilities and Shareholders' Equity
Liabilities:
Deposits:
Demand, noninterest-bearing	$	1,811,943	$	1,903,768
Demand, interest-bearing		1,268,942		1,308,114
Savings and money market		1,447,434		1,375,825
Time deposits - under $250		38,417		38,734
Time deposits - $250 and over		93,161		94,700
CDARS - interest-bearing demand, money market and time deposits		30,008		38,271
Total deposits		4,689,905		4,759,412
Subordinated debt, net of issuance costs		39,987		39,925
Accrued interest payable and other liabilities		96,450		102,044
Total liabilities		4,826,342		4,901,381

Shareholders' equity:
Preferred stock, no par value; 10,000,000 shares authorized; none issued and outstanding
at March 31, 2022 and December 31, 2021		—		—
Common stock, no par value; 100,000,000 shares authorized;
60,407,846 shares issued and outstanding at March 31, 2022 and
60,339,837 shares issued and outstanding at December 31, 2021		498,763		497,695
Retained earnings		116,347		111,329
Accumulated other comprehensive loss		(14,054)		(10,996)
Total shareholders' equity		601,056		598,028
Total liabilities and shareholders' equity	$	5,427,398	$	5,499,409

See notes to consolidated financial statements (unaudited).

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HERITAGE COMMERCE CORP

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)


	Three Months Ended
	March 31,
	2022		2021

	(Dollars in thousands, except per share amounts)
Interest income:
Loans, including fees	$	35,101	$	33,836
Securities, taxable		3,444		1,728
Securities, exempt from Federal tax		297		429
Other investments, interest-bearing deposits
in other financial institutions and Federal funds sold		1,064		768
Total interest income		39,906		36,761

Interest expense:
Deposits		1,114		1,232
Subordinated debt		571		571
Total interest expense		1,685		1,803

Net interest income before provision for credit losses on loans		38,221		34,958
Provision for (recapture of) credit losses on loans		(567)		(1,512)
Net interest income after provision for credit losses on loans		38,788		36,470

Noninterest income:
Gain on warrants		637		—
Service charges and fees on deposit accounts		612		601
Increase in cash surrender value of life insurance		480		456
Gain on sales of SBA loans		156		550
Servicing income		106		182
Termination fees		—		90
Gain on proceeds from company owned life insurance		—		66
Other		469		356
Total noninterest income		2,460		2,301

Noninterest expense:
Salaries and employee benefits		13,821		13,958
Occupancy and equipment		2,437		2,274
Professional fees		1,080		1,719
Other		5,914		5,293
Total noninterest expense		23,252		23,244
Income before income taxes		17,996		15,527
Income tax expense		5,130		4,323
Net income	$	12,866	$	11,204

Earnings per common share:
Basic	$	0.21	$	0.19
Diluted	$	0.21	$	0.19

See notes to consolidated financial statements (unaudited).

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HERITAGE COMMERCE CORP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended
	March 31,
	2022		2021

		(Dollars in thousands)
Net income	$	12,866	$	11,204
Other comprehensive income (loss):
Change in net unrealized holding (losses) gains on available-for-sale
securities and I/O strips		(4,405)		(849)
Deferred income taxes		1,277		247
Change in net unamortized unrealized gain on securities available-for-
sale that were reclassified to securities held-to-maturity		—		(13)
Deferred income taxes		—		4
Change in unrealized (losses) gains on securities and I/O strips, net of
deferred income taxes		(3,128)		(611)

Change in net pension and other benefit plan liability adjustment		104		89
Deferred income taxes		(34)		(29)
Change in pension and other benefit plan liability, net of
deferred income taxes		70		60
Other comprehensive loss		(3,058)		(551)

Total comprehensive income	$	9,808	$	10,653

See notes to consolidated financial statements (unaudited).

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HERITAGE COMMERCE CORP

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited)


						Accumulated
						Other		Total
	Common Stock			Retained		Comprehensive		Shareholders’
	Shares	Amount		Earnings		Loss		Equity

	(Dollars in thousands, except per share amounts)
Balance, January 1, 2021	59,917,457	$	493,707	$	94,899	$	(10,717)	$	577,889
Net income	—		—		11,204		—		11,204
Other comprehensive loss	—		—		—		(551)		(551)
Issuance (forfeitures) of restricted stock awards, net	(34,358)		—		—		—		—
Amortization of restricted stock awards,
net of forfeitures and taxes	—		458		—		—		458
Cash dividend declared $0.13 per share	—		—		(7,789)		—		(7,789)
Stock option expense, net of forfeitures and taxes	—		132		—		—		132
Stock options exercised	49,235		320		—		—		320
Balance March 31, 2021	59,932,334	$	494,617	$	98,314	$	(11,268)	$	581,663

Balance, January 1, 2022	60,339,837		497,695		111,329		(10,996)		598,028
Net income	—		—		12,866		—		12,866
Other comprehensive loss	—		—		—		(3,058)		(3,058)
Amortization of restricted stock awards,
net of forfeitures and taxes	—		518		—		—		518
Cash dividend declared $0.13 per share	—		—		(7,848)		—		(7,848)
Stock option expense, net of forfeitures and taxes	—		149		—		—		149
Stock options exercised	68,009		401		—		—		401
Balance March 31, 2022	60,407,846	$	498,763	$	116,347	$	(14,054)	$	601,056

See notes to consolidated financial statements (unaudited).

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HERITAGE COMMERCE CORP

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Three Months Ended
	March 31,
	2022		2021

	(Dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	12,866	$	11,204
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of discounts and premiums on securities		675		1,071
Gain on sale of SBA loans		(156)		(550)
Proceeds from sale of SBA loans originated for sale		2,146		5,632
SBA loans originated for sale		(934)		(6,217)
Provision for (recapture of) credit losses on loans		(567)		(1,512)
Increase in cash surrender value of life insurance		(480)		(456)
Depreciation and amortization		283		243
Amortization of other intangible assets		659		733
Stock option expense, net		149		132
Amortization of restricted stock awards, net		518		458
Amortization of subordinated debt issuance costs		46		46
Gain on proceeds from company-owned life insurance		—		(66)
Effect of changes in:
Accrued interest receivable and other assets		7,053		623
Accrued interest payable and other liabilities		(5,475)		(1,085)
Net cash provided by operating activities		16,783		10,256

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of securities available-for-sale		(21,656)		—
Purchase of securities held-to-maturity		(109,610)		(40,366)
Maturities/paydowns/calls of securities available-for-sale		8,099		37,765
Maturities/paydowns/calls of securities held-to-maturity		30,709		30,601
Net change in loans		63,807		(84,038)
Changes in Federal Home Loan Bank stock and other investments		(5)		(4)
Purchase of premises and equipment		(224)		(4)
Proceeds from redemption of company-owned life insurance		—		624
Net cash (used in) investing activities		(28,880)		(55,422)

CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in deposits		(69,507)		364,616
Exercise of stock options		401		320
Payment of cash dividends		(7,848)		(7,789)
Net cash (used-in) provided by financing activities		(76,954)		357,147
Net increase in cash and cash equivalents		(89,051)		311,981
Cash and cash equivalents, beginning of period		1,306,216		1,131,073
Cash and cash equivalents, end of period	$	1,217,165	$	1,443,054

Supplemental disclosures of cash flow information:
Interest paid	$	1,112	$	1,242
Income taxes paid (refunds), net		(654)		(149)

Supplemental schedule of non-cash activity:
Transfer of loans held-for-sale to loan portfolio	$	480	$	—

See notes to consolidated financial statements (unaudited).

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HERITAGE COMMERCE CORP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2022

(Unaudited)

1) Basis of Presentation

The unaudited consolidated financial statements of Heritage Commerce Corp (the “Company” or “HCC”) and its wholly owned subsidiary, Heritage Bank of Commerce (the “Bank” or “HBC”), have been prepared pursuant to the rules and regulations for reporting on Form 10-Q. Accordingly, certain information and notes required by accounting principles generally accepted in the United States of America (“GAAP”) for annual financial statements are not included herein. The interim statements should be read in conjunction with the consolidated financial statements and notes that were included in the Company’s Form 10-K for the year ended December 31, 2021.

HBC is a commercial bank serving customers primarily located in Alameda, Contra Costa, Marin, San Benito, San Francisco, San Mateo, and Santa Clara counties of California. CSNK Working Capital Finance Corp. a California corporation, dba Bay View Funding (“Bay View Funding”) is a wholly owned subsidiary of HBC, and provides business-essential working capital factoring financing to various industries throughout the United States. No customer accounts for more than 10% of revenue for HBC or the Company. The Company reports its results for two segments: banking and factoring. The Company’s management uses segment results in its operating and strategic planning.

In management’s opinion, all adjustments necessary for a fair presentation of these consolidated financial statements have been included and are of a normal and recurring nature. All intercompany transactions and balances have been eliminated.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ significantly from these estimates. Material estimates that are particularly susceptible to significant change include the determination of the allowance for credit losses and any impairment of goodwill or intangible assets. It is reasonably possible the Company’s estimate of the allowance for credit losses and evaluation of impairment of goodwill or intangible assets could change as a result of the continued impact of the COVID-19 pandemic on the economy. The resulting change in these estimates could be material to the Company’s consolidated financial statements.

The results for the three months ended March 31, 2022 are not necessarily indicative of the results expected for any subsequent period or for the entire year ending December 31, 2022.

Reclassifications

Certain reclassifications of prior year balances have been made to conform to the current year presentation. These reclassifications had no impact on the Company’s consolidated financial position, results of operations or net change in cash and cash equivalents.

Adoption of New Accounting Standards

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes to simplify various aspects of the current guidance to promote consistent application of the standard among reporting entities by moving certain exceptions to the general principles. The amendments are effective as of January 1, 2021 and had no material impact on the consolidated financial statements.

Accounting Guidance Issued But Not Yet Adopted

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The ASU provides optional expedients and exceptions for applying GAAP to loan and lease agreements, derivative contracts, and other transactions affected by the anticipated transition

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away from London Inter-Bank Offered Rate (“LIBOR”) toward new interest rate benchmarks. For transactions that are modified because of reference rate reform and that meet certain scope guidance (i) modifications of loan agreements should be accounted for by prospectively adjusting the effective interest rate and the modification will be considered "minor" so that any existing unamortized origination fees/costs would carry forward and continue to be amortized and (ii) modifications of lease agreements should be accounted for as a continuation of the existing agreement with no reassessments of the lease classification and the discount rate or remeasurements of lease payments that otherwise would be required for modifications not accounted for as separate contracts. ASU 2020-04 also provides numerous optional expedients for derivative accounting. ASU 2020-04 is effective March 12, 2020 through December 31, 2022. An entity may elect to apply ASU 2020-04 for contract modifications as of January 1, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements are available to be issued. Once elected for a Topic or an Industry Subtopic within the Codification, the amendments in this ASU must be applied prospectively for all eligible contract modifications for that Topic or Industry Subtopic. The Company does not expect any material impact on its consolidated financial statements since the Company has an insignificant number of financial instruments applicable to this ASU.

In March 2022, the FASB issued ASU No. 2022-02 Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restrucurings and Vintage Disclosures, which 1) eliminates the accounting guidance for troubled debt restructurings ("TDRs") by creditors while enhancing the disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty; and 2) requires that an entity disclose current-period gross writeoffs by year of origination for financing receivables and net investments in leases. ASU 2022-02 is effective for fiscal years beginning after December 15, 2022 and the amendments should be applied prospectively, although the entity has the option to apply a modified retrospective transition method for the recognition and measurement of TDRs, resulting in a cumulative-effect adjustment to retained earnings in the period of adoption. The Company is currently evaluating the impact of adopting the new guidance on its consolidated financial statements.

2) Earnings Per Share

Basic earnings per common share is computed by dividing net income by the weighted average common shares outstanding. Diluted earnings per share reflect potential dilution from outstanding stock options using the treasury stock method. There were 1,048,267 and 1,019,481 weighted average stock options outstanding for the three months ended March 31, 2022 and 2021, respectively, considered to be antidilutive and excluded from the computation of diluted earnings per share. A reconciliation of these factors used in computing basic and diluted earnings per common share is as follows:


	Three Months Ended
	March 31,
	2022		2021

	(Dollars in thousands, except per share amounts)
Net income	$	12,866	$	11,204

Weighted average common shares outstanding for basic
earnings per common share		60,393,883		59,926,816
Dilutive potential common shares		527,952		477,397
Shares used in computing diluted earnings per common share		60,921,835		60,404,213

Basic earnings per share	$	0.21	$	0.19
Diluted earnings per share	$	0.21	$	0.19

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3) Accumulated Other Comprehensive Income (Loss) (“AOCI”)

The following table reflects the changes in AOCI by component for the periods indicated:


	Three Months Ended March 31, 2022 and 2021
			Unamortized
			Unrealized
	Unrealized		Gain on
	Gains (Losses) on		Available-
	Available-		for-Sale		Defined
	for-Sale		Securities		Benefit
	Securities		Reclassified		Pension
	and I/O		to Held-to-		Plan
	Strips		Maturity		Items(1)		Total

	(Dollars in thousands)
Beginning balance January 1, 2022, net of taxes	$	2,153	$	—	$	(13,149)	$	(10,996)
Other comprehensive (loss) before reclassification,
net of taxes		(3,128)		—		(3)		(3,131)
Amounts reclassified from other comprehensive income,
net of taxes		—		—		73		73
Net current period other comprehensive income (loss),
net of taxes		(3,128)		—		70		(3,058)

Ending balance March 31, 2022, net of taxes	$	(975)	$	—	$	(13,079)	$	(14,054)

Beginning balance January 1, 2021, net of taxes	$	3,929	$	261	$	(14,907)	$	(10,717)
Other comprehensive (loss) before reclassification,
net of taxes		(602)		—		(53)		(655)
Amounts reclassified from other comprehensive income (loss),
net of taxes		—		(9)		113		104
Net current period other comprehensive income (loss),
net of taxes		(602)		(9)		60		(551)

Ending balance March 31, 2021, net of taxes	$	3,327	$	252	$	(14,847)	$	(11,268)

(1)	This AOCI component is included in the computation of net periodic benefit cost (see Note 8—Benefit Plans) and includes split-dollar life insurance benefit plan.

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	Amounts Reclassified from
	AOCI
	Three Months Ended
	March 31,				Affected Line Item Where
Details About AOCI Components	2022		2021		Net Income is Presented

	(Dollars in thousands)
Amortization of unrealized gain on securities available-
for-sale that were reclassified to securities
held-to-maturity	$	—	$	13	Interest income on taxable securities
		—		(4)	Income tax expense
		—		9	Net of tax

Amortization of defined benefit pension plan items ⁽¹⁾
Prior transition obligation and actuarial losses ⁽²⁾		11		1
Prior service cost and actuarial losses ⁽³⁾		(114)		(161)
		(103)