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What changed in SIERRA BANCORP's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of SIERRA BANCORP's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+584 added−366 removedSource: 10-K (2024-03-22) vs 10-K (2023-03-09)

Top changes in SIERRA BANCORP's 2023 10-K

584 paragraphs added · 366 removed · 275 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

82 edited+236 added−6 removed85 unchanged
Biggest changeThe interagency rule has not been finalized, however the Company is monitoring this proposed rule so that our CRA efforts are in compliance with any changes to the current rules once implemented. ​ ​ Privacy and Data Security The Gramm-Leach-Bliley Act, also known as the Financial Modernization Act of 1999 (the “Financial Modernization Act”), imposed requirements on financial institutions with respect to consumer privacy.
Biggest changePrivacy and Data Security The Gramm-Leach-Bliley Act, also known as the Financial Modernization Act of 1999 (the “Financial Modernization Act”), imposed requirements on financial institutions with respect to consumer privacy. Financial institutions, however, are required to comply with state law if it is more protective of consumer privacy than the Financial Modernization Act.
The Company has elected to exclude accumulated other comprehensive income (“AOCI”) from regulatory capital. In addition, all of the Company’s trust preferred securities qualify for treatment as Tier 1 Capital, subject to a limit of 25% of Tier 1 capital.
The Company has elected to exclude accumulated other comprehensive income (“AOCI”) from regulatory capital. In addition, all the Company’s trust preferred securities qualify for treatment as Tier 1 Capital, subject to a limit of 25% of Tier 1 capital.
The increase in assessment rate is intended to increase the likelihood that the reserve ratio of the DIF reaches the statutory minimum of 1.35% by the statutory deadline of September 30, 2028. We are generally unable to control the amount of premiums that we are required to pay for FDIC deposit insurance.
The increase in assessment rate is intended to increase the likelihood that the reserve ratio of the DIF reaches the statutory minimum of 1.35% by the statutory deadline of September 30, 2028. We are generally unable to control the amount of premiums we are required to pay for FDIC deposit insurance.
Furthering the Company’s philosophy to attract and retain a pool of talented and motivated employees who will continue to advance the purpose and contribute to the Company’s overall success, compensation and benefits programs include: an equity-based compensation plan, health/dental/vision insurances, supplemental insurance, life insurance, 401(K) plan, benefits under the Family Medical Leave Act, workers’ compensation, paid vacation and sick days, holiday pay, training/education, leave for bereavement, military service and jury duty.
Furthering our philosophy to attract and retain a pool of talented and motivated employees who will continue to advance the purpose and contribute to the Company’s overall success, compensation and benefits programs include: an equity-based compensation plan, health/dental/vision insurances, supplemental insurance, life insurance, 401(K) plan, benefits under the Family Medical Leave Act, workers’ compensation, paid vacation and sick days, holiday pay, training/education, and leave for bereavement, military service and jury duty.
In general, the guidelines, as amended, establish the following supervisory criteria as preliminary indications of possible CRE concentration risk: (1) the institution’s total construction, land development and other land loans represent 100% or more of Tier 1 risk-based capital plus allowance for credit losses on loans and leases; or (2) total CRE loans as defined in the regulatory guidelines represent 300% or more of Tier 1 risk-based capital plus allowance for credit losses on loans and leases, and the institution’s CRE loan portfolio has increased by 50% or more during the prior 36 month period.
In general, the guidelines, as amended, establish the following supervisory criteria as preliminary indications of possible CRE concentration risk: (1) the institution’s total construction, land development and other land loans represent 100% or more of Tier 1 risk-based capital plus allowance for credit losses on loans; or (2) total CRE loans as defined in the regulatory guidelines represent 300% or more of Tier 1 risk-based capital plus allowance for credit losses on loans, and the institution’s CRE loan portfolio has increased by 50% or more during the prior 36 month period.
Tier 2 capital includes the following supplemental capital elements: (i) allowance for credit losses on loans and leases (but not more than 1.25% of an institution’s risk-weighted assets); (ii) perpetual preferred stock and related surplus not qualifying as core capital; (iii) hybrid capital instruments, perpetual debt and mandatory convertible debt instruments; and, (iv) term subordinated debt and intermediate-term preferred stock and related surplus.
Tier 2 capital includes the following supplemental capital elements: (i) allowance for credit losses on loans (but not more than 1.25% of an institution’s risk-weighted assets); (ii) perpetual preferred stock and related surplus not qualifying as core capital; (iii) hybrid capital instruments, perpetual debt and mandatory convertible debt instruments; and (iv) term subordinated debt and intermediate-term preferred stock and related surplus.
Community Reinvestment Act The Bank is subject to certain requirements and reporting obligations involving Community Reinvestment Act (“CRA”) activities. The CRA generally requires federal banking agencies to evaluate the record of a financial institution in meeting the credit needs of its local communities, including low and moderate income neighborhoods.
Community Reinvestment Act The Bank is subject to certain requirements and reporting obligations involving Community Reinvestment Act (“CRA”) activities. The CRA generally requires federal banking agencies to evaluate the record of a financial institution in meeting the credit needs of its local communities, including low-and moderate-income (“LMI”) neighborhoods.
Incentive Compensation In June 2010, the FRB and the FDIC issued comprehensive final guidance on incentive compensation policies intended to help ensure that banking organizations do not undermine their own safety and soundness by encouraging excessive risk-taking.
Incentive Compensation In June 2010, the FRB and the FDIC issued comprehensive final guidance on incentive compensation policies intended to help ensure banking organizations do not undermine their own safety and soundness by encouraging excessive risk-taking.
A qualifying community banking organization that opts into the community bank leverage ratio framework and maintains a leverage ratio greater than 9 percent will be considered to have met the minimum capital requirements for the well capitalized category under the Prompt Corrective Action framework, and any other capital or leverage requirements to which the qualifying banking organization is subject (see below for further discussion of the requirements for well capitalized and the Prompt Corrective Action framework).
A qualifying community banking organization that opts into the community bank leverage ratio framework and maintains a leverage ratio greater than nine percent will be considered to have met the minimum capital requirements for the well capitalized category under the Prompt Corrective Action framework, and any other capital or leverage requirements to which the qualifying banking organization is subject (see below for further discussion of the requirements for well capitalized and the Prompt Corrective Action framework).
On January 1, 2022, the Company increased its minimum wage to $20 per hour in an effort to attract and retain skilled and highly trained employees. Community banking is often considered a relationship banking model rather than a purely transactional banking model. The Company’s employees are critical to the Company’s ability to develop and grow relationships with its clients.
On January 1, 2022, the Company increased its minimum wage to $20 per hour in an effort to attract and retain skilled and highly trained employees. Community banking is often considered a relationship banking model rather than a purely transactional banking model. Therefore, our employees are critical to the Company’s ability to develop and grow relationships with its clients.
These guidelines were issued in response to the agencies’ concerns that rising CRE concentrations might expose institutions to unanticipated earnings and capital volatility in the event of adverse changes in the commercial real estate market. The guidelines identify certain concentration levels that, if exceeded, will expose the institution to additional supervisory analysis with regard to the institution’s CRE concentration risk.
These guidelines were issued in response to the agencies’ concerns that rising CRE concentrations might expose institutions to unanticipated earnings and capital volatility in the event of adverse changes in the commercial real estate market. The guidelines identify certain concentration levels that, if exceeded, will expose the institution to additional supervisory analysis of the institution’s CRE concentration risk.
Hanford: Hanford Office 427 West Lacey Boulevard ​ ​ Lindsay: Lindsay Office 142 South Mirage Avenue ​ ​ Lompoc: Lompoc Office 705 West Central Avenue ​ ​ Ojai: Ojai Office 402 West Ojai Avenue ​ ​ Paso Robles: Paso Robles Office 1207 Spring Street ​ ​ Pismo Beach: Pismo Beach Office 1401 Dolliver Street ​ ​ Roseville: ​ Loan Production Office 915 Highland Point Dr., Ste. 160 ​ ​ Reedley: Reedley Office 1095 West Manning Ave. ​ ​ San Luis Obispo: San Luis Obispo Office 500 Marsh Street ​ ​ Santa Barbara: Santa Barbara Office 21 East Carrillo Street ​ ​ Santa Paula: Santa Paula Office 901 East Main Street ​ ​ Selma: Selma Office 2450 McCall Avenue ​ ​ Tehachapi: Tehachapi Downtown Office 224 West “F” Street ​ ​ ​ 2 Table of Contents Templeton: ​ ​ Three Rivers: ​ Agricultural Credit Center 613 South Main Street ​ Three Rivers Office 40884 Sierra Drive ​ ​ ​ Tulare: Tulare Office 246 East Tulare Avenue Tulare Prosperity Office 1430 East Prosperity Avenue ​ Ventura: Ventura Office 89 South California Street ​ ​ Visalia: Visalia Mooney Office 2515 South Mooney Blvd.
Hanford: Hanford Office 427 West Lacey Boulevard ​ ​ Lindsay: Lindsay Office 142 South Mirage Avenue ​ ​ Lompoc: Lompoc Office 705 West Central Avenue ​ ​ Ojai: Ojai Office 402 West Ojai Avenue ​ ​ Paso Robles: Paso Robles Office 1207 Spring Street ​ ​ Pismo Beach: Pismo Beach Office 1401 Dolliver Street ​ ​ Roseville: ​ Loan Production Office 915 Highland Point Dr., Ste. 160 ​ ​ Reedley: Reedley Office 1095 West Manning Ave. ​ ​ San Luis Obispo: San Luis Obispo Office 500 Marsh Street ​ ​ Santa Barbara: Santa Barbara Office 21 East Carrillo Street ​ ​ Santa Paula: Santa Paula Office 901 East Main Street ​ ​ Selma: Selma Office 2450 McCall Avenue ​ ​ Tehachapi: Tehachapi Downtown Office 224 West “F” Street ​ ​ ​ 2 Table of Contents Templeton: ​ ​ Three Rivers: ​ Commercial Credit Center 613 South Main Street ​ Three Rivers Office 40884 Sierra Drive ​ Templeton Regional Office 624 South Main Street ​ ​ Tulare: Tulare Office 246 East Tulare Avenue Tulare Prosperity Office 1430 East Prosperity Avenue ​ Ventura: Ventura Office 89 South California Street ​ ​ Visalia: Visalia Mooney Office 2515 South Mooney Blvd.
Innovative technologies have lowered traditional barriers of entry and enabled many of these companies to offer services that were previously considered traditional banking products, and we have witnessed increased competition from companies that circumvent the banking system by facilitating payments via the internet, mobile devices, prepaid cards, and other means.
Innovative technologies have lowered traditional barriers of entry and enabled many of these companies to offer products and services previously considered traditional banking offerings, and we have witnessed increased competition from companies that circumvent the banking system by facilitating payments via the internet, mobile devices, prepaid cards, and other means.
There are also a number of unregulated companies competing for business in our markets, with financial products targeted at profitable customer segments. Many of those companies are able to compete across geographic boundaries and provide meaningful alternatives to banking products and services. These competitive trends are likely to continue.
There are also a number of unregulated companies targeted at profitable customer segments competing for business in our markets. Many of those companies are able to compete across geographic boundaries and provide meaningful alternatives to banking products and services. These competitive trends are likely to continue.
Those laws include the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Truth in Lending Act, the Truth in Savings Act, the Electronic Fund Transfer Act, the Expedited Funds Availability Act, the Home Mortgage Disclosure Act, the Fair Housing Act, the Real Estate Settlement Procedures Act, the Fair Debt Collection Practices Act, the Right to Financial Privacy Act, the Service Members Civil Relief Act, the Americans With Disabilities Act, and respective state-law counterparts to these laws, as well as state usury laws and laws regarding unfair and deceptive acts and practices.
Those laws include the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Truth in Lending Act, the Truth in Savings Act, the Electronic Fund Transfer Act, the Expedited Funds Availability Act, the Home Mortgage Disclosure Act, the Fair Housing Act, the Real Estate Settlement Procedures Act, the Fair Debt Collection Practices Act, the Right to Financial Privacy Act, the Servicemembers Civil Relief Act, the Americans with Disabilities Act, and respective state-law counterparts to these laws, as well as state usury laws and laws regarding unfair and deceptive acts and practices.
The Bank is also subject to laws and regulations requiring that all extensions of credit to our executive officers, directors, principal shareholders and related parties must, among other things, be made on substantially the same terms and follow credit underwriting procedures no less stringent than those prevailing at the time for comparable transactions with persons not related to the Bank.
The Bank is also subject to laws and regulations requiring that all extensions of credit to our executive officers, directors, principal shareholders and related parties must, among 6 Table of Contents other things, be made on substantially the same terms and follow credit underwriting procedures no less stringent than those prevailing at the time for comparable transactions with persons not related to the Bank.
The regulatory agencies will review, as part of their regular risk-focused examination process, the incentive compensation arrangements of banking organizations, such as the Company, that are not “large, complex banking organizations.” Where appropriate, the regulatory agencies will take supervisory or enforcement action to address perceived deficiencies in an institution’s incentive compensation arrangements or related risk-management, control, and governance processes.
The regulatory agencies will review, as part of their regular risk-focused examination process, the incentive compensation arrangements of banking organizations, such as the Company, that are not “large, complex banking organizations.” Where appropriate, the regulatory agencies will take supervisory or enforcement action to address perceived deficiencies in an institution’s 13 Table of Contents incentive compensation arrangements or related risk-management, control, and governance processes.
As of December 31, 2022, the Company’s only other subsidiaries were Sierra Statutory Trust II, Sierra Capital Trust III, and Coast Bancorp Statutory Trust II, which were formed solely to facilitate the issuance of capital trust pass-through securities (“TRUPS”).
As of December 31, 2023, the Company’s only other subsidiaries were Sierra Statutory Trust II, Sierra Capital Trust III, and Coast Bancorp Statutory Trust II, which were formed solely to facilitate the issuance of capital trust pass-through securities (“TRUPS”).
We attract deposits throughout our market area via referrals from existing customers, direct-mail campaigns, a customer-oriented product mix, and competitive pricing, and by offering convenient locations, drive-through banking, and various other delivery channels. We strive to retain our deposit customers by providing a consistently high level of service.
We attract deposits throughout our market area via referrals from existing customers and, direct-mail campaigns by offering a customer-oriented product mix, competitive pricing, convenient locations, drive-through banking, and multiple delivery channels. We strive to retain our deposit customers by providing a consistently high level of service.
Such privacy requirements direct financial institutions to: (i) provide notice to customers regarding privacy policies and practices; (ii) inform customers regarding the conditions under which their non-public personal information may be disclosed to non-affiliated third parties; and (iii) give customers an option to prevent disclosure of such information to non-affiliated third parties.
Such privacy requirements direct financial institutions to: (i) provide notice to customers regarding privacy policies and practices; (ii) inform customers regarding the conditions under which their non-public 12 Table of Contents personal information may be disclosed to non-affiliated third parties; and (iii) give customers an option to prevent disclosure of such information to non-affiliated third parties.
The Company’s employees’ desire for active community involvement enables the Company to sponsor a number of local community events and initiatives, including holiday toy and food drives, and planting trees in fire damaged areas of the National Forest, in partnership with One Tree Planted and the Sequoia conservancy in Sequoia National Park.
The Company’s employees’ desire for active community involvement enables the Company to sponsor a number of local community events and initiatives, including holiday toy and food drives, and tree plantings in fire damaged areas of the National Forest in partnership with One Tree Planted and the Sequoia conservancy in Sequoia National Park.
A bank may be treated as though it were in the next lower capital category if, after notice and the opportunity for a hearing, the appropriate federal agency finds an unsafe or unsound condition or practice merits a downgrade, but no bank may be treated as “critically undercapitalized” unless its actual tangible equity to assets ratio 8 Table of Contents warrants such treatment.
A bank may be treated as though it were in the next lower capital category if, after notice and the opportunity for a hearing, the appropriate federal agency finds an unsafe or unsound condition or practice merits a downgrade, but no bank may be treated as “critically undercapitalized” unless its actual tangible equity to assets ratio warrants such treatment.
Recent Accounting Pronouncements Information on recent accounting pronouncements is contained in Note 2 to the consolidated financial statements. Competition The banking business in California is generally highly competitive, including in our market areas. Continued consolidation within the banking industry has heightened competition in recent periods, including many bank transactions within our market in 2022.
Recent Accounting Pronouncements Information on recent accounting pronouncements is contained in Note 2 to the consolidated financial statements. Competition The banking business in California is generally highly competitive. Continued consolidation within the banking industry, including many bank transactions within our market in 2023, has heightened competition in recent periods.
Employees are also encouraged to continue their higher education at accredited colleges and universities and may receive assistance from the Company for their participation. In order to develop a workforce that aligns with the Company’s corporate values, it regularly sponsors local community events so that its employees can better integrate themselves in communities.
Employees are also encouraged to continue their higher education at accredited colleges and universities and may receive assistance from the Company for their participation. In order to develop a workforce that aligns with the Company’s corporate values, we regularly sponsors local community events so our employees can better integrate themselves in our communities.
The following items are defined as core capital elements: (i) common shareholders’ equity; (ii) qualifying non-cumulative perpetual preferred stock and related surplus (and, in the case of holding companies, senior perpetual preferred stock issued to the U.S.
The following items are defined as core capital elements: (i) common shareholders’ equity; (ii) qualifying non-cumulative 7 Table of Contents perpetual preferred stock and related surplus (and, in the case of holding companies, senior perpetual preferred stock issued to the U.S.
Our efforts to comply with government and regulatory mandates on consumer protection and privacy, anti-terrorism, and other initiatives have resulted in significant ongoing expense to the Bank, including compliance staffing costs and other expenses associated with compliance-related software.
Our efforts to comply with government and regulatory mandates on consumer protection and privacy, anti-money laundering, and other initiatives have resulted in significant ongoing expense to the Bank, including compliance staffing costs and other expenses associated with compliance-related software.
A qualifying community banking organization with a leverage ratio of greater than 9 percent may opt into the community bank leverage ratio framework if it has average consolidated total assets of less than $10 billion, has off-balance-sheet exposures, which are not unconditionally cancelable, of 25% or less of total consolidated assets, and has total trading assets and trading liabilities of 5 percent or less of total consolidated assets.
A qualifying community banking organization with a leverage ratio of greater than nine percent may opt into the community bank leverage ratio framework if it has average consolidated total assets of less than $10 billion, has off-balance-sheet exposures, which are not unconditionally cancelable, of 25% or less of total consolidated assets, and has total trading assets and trading liabilities of five percent or less of total consolidated assets.
The Company also increased the discretionary overdraft privilege amount for both commercial and consumer customers, but is limiting the number of daily overdraft fees to four per day (previously five per day) and is no longer charging a fee for continuous overdrafts (previously a $35 charge after the 10 th consecutive day an account is in an overdraft position).
The Company also increased the discretionary overdraft privilege amount for both commercial and consumer customers, but limited the number of daily overdraft fees to four per day (previously five per day) and no longer charged a fee for continuous overdrafts (previously a $35 charge after the 10 th consecutive day an account is in an overdraft position).
These agencies have adopted risk-based capital guidelines to provide a systematic analytical framework that imposes regulatory capital requirements based on differences in risk profiles among banking organizations, considers off-balance sheet exposures in evaluating capital adequacy, and minimizes disincentives to holding liquid, low- 7 Table of Contents risk assets.
These agencies have adopted risk-based capital guidelines to provide a systematic analytical framework that imposes regulatory capital requirements based on differences in risk profiles among banking organizations, considers off-balance sheet exposures in evaluating capital adequacy, and minimizes disincentives to holding liquid, low-risk assets.
The statute also 10 Table of Contents directed federal regulators, including the Federal Reserve and the FDIC, to establish standards for the security of consumer information, and requires financial institutions to disclose their privacy policies to consumers annually.
The statute also directed federal regulators, including the Federal Reserve and the FDIC, to establish standards for the security of consumer information, and requires financial institutions to disclose their privacy policies to consumers annually.
USA Patriot Act of 2001 The impact of the USA Patriot Act of 2001 (the “Patriot Act”) on financial institutions of all kinds has been significant and wide ranging.
USA Patriot Act of 2001 The impact of the USA Patriot Act of 2001 (the “Patriot Act”) on financial institutions has been significant and wide ranging.
On June 9, 2022, the DFPI’s proposed commercial financing disclosure regulations were approved, which became effective on December 9, 2022.
On June 9, 2022, the DFPI’s proposed commercial financing disclosure regulations were approved and became effective on December 9, 2022.
With respect to commercial bank competitors, our business is dominated by a relatively small number of major banks that operate a large number of offices within our geographic footprint.
With respect to commercial bank competitors, our business is dominated by a relatively small number of major banks operating a large number of offices within our geographic footprint.
Further, the bank must not be an advance approaches banking organization. The final rule became effective January 1, 2020 and banks that meet the qualifying criteria can elect to use the community bank leverage framework starting with the quarter ended March 31, 2020.
Further, the bank must not be an advance approaches banking organization. The final rule became effective January 1, 2020 and banks meeting the qualifying criteria could elect to use the community bank leverage framework starting with the quarter ended March 31, 2020.
The rule does not apply to other types of transactions, such as check automated clearinghouse (“ACH”) and recurring debit card transactions.
The rule does not apply to other types of transactions, such as check automated clearinghouse (“ACH”) 11 Table of Contents and recurring debit card transactions.
In October 2010, the FDIC adopted a revised restoration plan to ensure that the DIF’s 9 Table of Contents designated reserve ratio (“DRR”) reaches 1.35% of insured deposits by September 30, 2020, the deadline mandated by the Dodd-Frank Act.
In October 2010, the FDIC adopted a revised restoration plan to ensure that the DIF’s designated reserve ratio (“DRR”) reached 1.35% of insured deposits by September 30, 2020, the deadline mandated by the Dodd-Frank Act.
In addition, the Company provides opportunities to its employees to improve or maintain their skills in their current position as well as to enhance future opportunities at the Company. The Company's employees are notified periodically of available internal course offerings and educational seminars run by outside parties, including but not limited to the American Bankers Association and Bankers Compliance Group.
In addition, we provide opportunities for employees to improve or maintain their skills in their current position as well as to enhance skills for future opportunities. The Company's employees are notified periodically of available internal course offerings and educational seminars run by outside parties, including but not limited to the American Bankers Association and Bankers Compliance Group.
We also offer our customers community-oriented, personalized service, and rely on local promotional activity and personal contact by our employees. As noted above, layered onto our traditional personal-contact banking philosophy are technology-driven initiatives that improve customer access and convenience. Human Capital As of December 31, 2022, the Company had 442 full-time and 46 part-time employees.
We also offer our customers community-oriented, personalized service, and rely on local promotional activity and personal contact by our employees. As noted above, layered onto our traditional personal-contact banking philosophy are technology-driven initiatives to improve customer access and convenience. Human Capital As of December 31, 2023, the Company had 491 full-time and 41 part-time employees.
It cannot be predicted whether, or in what form, any such legislation or regulations may be enacted or the extent to which the business of the Company or the Bank would be affected thereby. Article I.
It cannot be predicted whether, or in what form, any such legislation or regulations may be enacted or the extent to which the business of the Company or the Bank would be affected thereby. ​ 14 Table of Contents Article I. ITEM 1A.
They can also offer certain services that we do not provide directly but may offer indirectly through correspondent institutions, and by virtue of their greater capitalization those banks have legal lending limits that are substantially higher than ours.
They can also offer certain services we do not provide directly, although wet may offer these indirectly through correspondent institutions, and by virtue of their greater capitalization those banks have legal lending limits substantially higher than ours.
Under the Patriot Act, financial institutions are subject to prohibitions regarding specified financial transactions and account relationships, as well as enhanced due diligence and “know your customer” standards in their dealings with foreign financial institutions and foreign customers. The Patriot Act also requires all financial institutions to establish anti-money laundering programs.
Under the Patriot Act, financial institutions are subject to prohibitions regarding specified financial transactions and account relationships, as well as enhanced due diligence and “know your customer” standards in their dealings with higher risk, including foreign individuals and entities. The Patriot Act also requires all financial institutions to establish an anti-money laundering programs.
At December 31, 2022, the Company had consolidated assets of $3.6 billion (including gross loans of $2.1 billion), liabilities totaling $3.3 billion (including deposits of $2.8 billion), and shareholders’ equity of $303.6 million. The Company’s liabilities include $35.5 million in debt obligations due to its trust subsidiaries, related to TRUPS issued by those entities.
At December 31, 2023, the Company had consolidated assets of $3.7 billion (including gross loans of $2.1 billion), liabilities totaling $3.4 billion (including deposits of $2.8 billion), and shareholders’ equity of $338.1 million. The Company’s liabilities include $35.7 million in debt obligations due to its trust subsidiaries, related to TRUPS issued by those entities.
As of the third quarter of 2022, the Company is no longer charging customers for nonsufficient fund (NSF) fees.
As of the third quarter of 2022, the Company no longer charged customers for nonsufficient fund (NSF) fees.
Our growth in the ensuing years has largely been organic in nature but includes four whole-bank acquisitions: Sierra National Bank in 2000, Santa Clara Valley Bank in 2014, Coast National Bank in 2016, and Ojai Community Bank in October 2017. Our recent business activity included the establishment of an agricultural loan production office in April 2022.
Our growth in the ensuing years has largely been organic in nature but includes four whole-bank acquisitions: Sierra National Bank in 2000, Santa Clara Valley Bank in 2014, Coast National Bank in 2016, and Ojai Community Bank in October 2017. An agricultural loan production office was opened in 2022.
At December 31, 2022, the population of our workforce was as follows: ​ ​ ​ Gender ​ % of Total Women ​ 76% Men ​ 24% ​ ​ ​ Ethnicity ​ % of Total Asian ​ 4% Black or African American ​ 1% Hispanic or Latino ​ 49% Native Hawaiian or Other Pacific Islander ​ 1% Two or more races ​ 5% White ​ 39% Unspecified ​ 1% ​ The Company recognizes that a diverse workforce brings fresh perspectives that can help strengthen and improve how we serve our communities.
At December 31, 2023, the population of our workforce was as follows: ​ ​ ​ Gender ​ % of Total Women ​ 75% Men ​ 25% ​ ​ ​ Ethnicity ​ % of Total Asian ​ 5% Black or African American ​ 1% Hispanic or Latino ​ 50% Native Hawaiian or Other Pacific Islander ​ 0% Two or more races ​ 5% White ​ 38% Unspecified ​ 1% ​ The Company recognizes a diverse workforce brings fresh perspectives that help strengthen and improve how we serve our communities.
The rule became effective on April 1, 2022, with a compliance date of May 1, 2022. ​ On January 3, 2023, the federal banking agencies issued a joint statement on crypto-asset risks to banking organizations following events which exposed vulnerabilities in the crypto-asset sector, including the risk of fraud and scams, legal uncertainties, significant volatility, and contagion risk.
On January 3, 2023, the federal banking agencies issued a joint statement on crypto-asset risks to banking organizations following events which exposed vulnerabilities in the crypto-asset sector, including the risk of fraud and scams, legal uncertainties, significant volatility, and contagion risk.
The majority of the CPRA’s provisions will be in force January 1, 2023, with a look-back to January 2022. ​ On November 23, 2021, the federal banking agencies issued a final rule requiring banking organizations that experience a computer-security incident to notify its primary Federal regulator of the occurrence of an event that rises to the level of a “notification incident.” Generally, a notification incident occurs when a banking organization has suffered a computer-security incident that has a reasonable likelihood of materially disrupting or degrading the banking organization or its operations.
On November 23, 2021, the federal banking agencies issued a final rule requiring banking organizations that experience a computer-security incident to notify its primary Federal regulator of the occurrence of an event that rises to the level of a “notification incident.” Generally, a notification incident occurs when a banking organization has suffered a computer-security incident that has a reasonable likelihood of materially disrupting or degrading the banking organization or its operations.
The rule also requires bank service providers to notify each affected banking organization if that bank service provider experiences a computer-security incident that has caused, or is reasonably likely to cause, a material service disruption or degradation for four or more hours.
The rule also requires bank service providers to notify each affected banking organization if that bank service provider experiences a computer-security incident that has caused, or is reasonably likely to cause, a material service disruption or degradation for four or more hours. The rule became effective on April 1, 2022, with a compliance date of May 1, 2022.
Interest, fees, and other income on real-estate secured loans, which is by far the largest segment of our portfolio, totaled $77.7 million, or 62% of net interest plus other income in 2022, and $84.1 million, or 61% of net interest plus other income in 2021.
Interest, fees, and other income on real-estate secured loans, which is by far the largest segment of our portfolio, totaled $82.2 million, or 59% of net interest plus other income in 2023, and $77.7 million, or 60% of net interest plus other income in 2022.
Bank of the Sierra ranks fifth on the 2022 market share list with 4.6% of total deposits. In Tulare County, however, where the Bank was originally formed, we rank second for deposit market share with 18.8% of total deposits at June 30, 2022 and had the largest number of branch locations (13), including our online branch).
Bank of the Sierra ranked fifth on the 2023 market share list with 5.1% of total deposits. In Tulare County, however, where the Bank was originally formed, we ranked first for deposit market share with 21.6% of total deposits at June 30, 2023 and had the largest number of branch locations (13), including our online branch.
Risk-based capital ratio (“RBC”) requirements are discussed in greater detail in the following section. Prompt Corrective Action Provisions Federal law requires each federal banking agency to take prompt corrective action to resolve the problems of insured financial institutions, including but not limited to those that fall below one or more of the prescribed minimum capital ratios.
Prompt Corrective Action Provisions Federal law requires each federal banking agency to take prompt corrective action to resolve the problems of insured financial institutions, including but not limited to those that fall below one or more of the prescribed minimum capital ratios.
The Company invests in its employees’ future by sponsoring and prioritizing continued education throughout its employee ranks. The Company requires certain of its employees and directors to participate in educational activities and training 5 Table of Contents curriculum, which stay abreast of current compliance, human resource and enterprise risk, including cyber risk, issues.
The Company invests in its employees’ future by sponsoring and prioritizing continued education throughout its employee ranks. The Company requires certain of its employees and directors to participate in educational activities and training curriculum to stay current on industry-related topics, including compliance, human resource, cyber and other enterprise risks.
The Bank maintains a program to meet the requirements of the FACT Act and the Bank believes it is currently in compliance with these requirements. 12 Table of Contents Interstate Banking and Branching The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the “Interstate Act”), together with Dodd-Frank, relaxed prior interstate branching restrictions under federal law by permitting, subject to regulatory approval, state and federally chartered commercial banks to establish branches in states where the laws permit banks chartered in such states to establish branches.
Interstate Banking and Branching The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the “Interstate Act”), together with Dodd-Frank, relaxed prior interstate branching restrictions under federal law by permitting, subject to regulatory approval, state and federally chartered commercial banks to establish branches in states where the laws permit banks chartered in such states to establish branches.
In June 2018, the California Consumer Privacy Act (“CCPA”) was signed into law, creating new privacy rights for Californians and significant new data protection obligations for businesses. The CCPA went into effect Jan. 1, 2020. California’s Office of the Attorney General has enforcement authority. The CCPAadded required notices about personal information we collect, use, share, and disclose for business purposes.
In June 2018, the California Consumer Privacy Act (“CCPA”) was signed into law, creating new privacy rights for Californians and significant new data protection obligations for businesses. The CCPA went into effect January 1, 2020. California’s Office of the Attorney General has enforcement authority.
As noted above, gross loans totaled $2.1 billion at December 31, 2022, and the percentage of our total loan and lease portfolio for each of the principal types of credit we extend was as follows: (i) loans secured by real estate (91.4%); (ii) agricultural production loans (1.4%); (iii) commercial and industrial loans and leases, including SBA loans and Paycheck Protection Program (PPP) loans (3.8%); (iv) mortgage warehouse loans (3.2%); and (v) consumer loans (0.2%).
As noted above, gross loans totaled $2.1 billion at December 31, 2023 and the percentage of our total loan portfolio for each of the principal types of credit we extend was as follows: (i) loans secured by real estate (86.7%); (ii)other commercial loans, including agricultural production and SBA loans (7.5%); (iii) mortgage warehouse loans (5.6%); and (iv) consumer loans (0.2%).
Strong competition for deposits and loans among financial institutions and non-banks alike affects interest rates and terms on which financial products are offered to customers. Mergers between financial institutions have created additional 4 Table of Contents pressures within the financial services industry to streamline operations, reduce expenses, and increase revenues in order to remain competitive.
Strong competition for deposits and loans among financial institutions and non-banks including financial technology firms, affects financial product interest rates and terms offered to customers. Mergers between financial institutions have created additional pressures within the financial services industry to streamline operations, reduce expenses, and increase revenues to remain competitive.
The Company has been the Bank’s sole shareholder since August 2001. The Company exists primarily for the purpose of holding the stock of the Bank and of such other subsidiaries it may acquire or establish.
The Company exists primarily for the purpose of holding the stock of the Bank and of such other subsidiaries it may acquire or establish.
Competition is also impacted by federal and state interstate banking laws which permit banking organizations to expand into other states. The relatively large California market has been particularly attractive to out-of-state institutions. For years we have countered rising competition by offering a broad array of products with flexibility in structure and terms that cannot always be matched by our competitors.
The relatively large California market has been particularly attractive to out-of-state institutions. 4 Table of Contents For years we have countered rising competition by offering a broad array of products with flexibility in structure and terms that cannot always be matched by our competitors.
The Company believes that it is in full compliance with the regulatory guidance on incentive compensation policies. Sarbanes-Oxley Act of 2002 The Company is subject to the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”) which addresses, among other issues, corporate governance, auditing and accounting, executive compensation, and enhanced and timely disclosure of corporate information.
Sarbanes-Oxley Act of 2002 The Company is subject to the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”) which addresses, among other issues, corporate governance, auditing and accounting, executive compensation, and enhanced and timely disclosure of corporate information.
At December 31, 2022, the Bank’s total construction, land development and other land loans represented 5% of Tier 1 risk-based capital plus allowance for credit losses on loans and leases.
At December 31, 2023, the Bank’s total construction, land development and other land loans represented 1% of Tier 1 risk-based capital plus allowance for credit losses on loans. At December 31, 2023, the Bank’s total CRE loans as defined in the regulatory guidelines represented 243% of Tier 1 risk-based capital plus allowance for credit losses on loans.
Furthermore, loan categories that could be considered to be concentrations include commercial real estate loans (59.2%); with the most concentrated segments in retail (13.4%), office space (12.6%) and loans in the hotel industry (7.6%).
Loan categories that could be considered to be concentrations include commercial real estate loans (63.4%); with the most concentrated segments in retail (15.0%), office space (9.6%) and loans in the hotel industry (8.3%).
Based on June 30, 2022, FDIC combined market share data for the 29 cities within which the Company currently maintains branches, the largest portion of deposits belongs to Wells Fargo Bank with (21.6%) of total combined deposits, followed by Bank of America (16.9%), JPMorgan Chase (13.8%), and Union Bank (6.8%).
Based on June 30, 2023, FDIC combined market share data for the 27 cities within which the Company currently maintains branches, the largest portion of deposits belongs to Wells Fargo Bank with (20.6%) of total combined deposits, followed by Bank of America (17.4%), JPMorgan Chase (15.4%), and U.S. Bank (6.3%).
To ensure that account access preferences are addressed for all customers, we provide the following options: an internet branch which provides the ability to open deposit accounts online; an online banking option with bill-pay and mobile banking capabilities, including mobile check deposit; online lending solutions for consumers and small businesses; a customer service center that is accessible by toll-free telephone during business hours; and an automated telephone banking system that is generally accessible 24 hours a day, seven days a week.
We provide multiple account access options to meet both new and existing customer needs: an online account opening platform; online banking with bill-pay and mobile banking capabilities, including mobile check deposit; online lending solutions for consumers and small businesses; a customer service center that is accessible by toll-free telephone during business hours; and an automated telephone banking system that is generally accessible 24 hours a day, seven days a week.
On a full-time equivalent (“FTE”) basis staffing stood at 491 at December 31, 2022, up from 480 FTE employees at December 31, 2021.
On a full-time equivalent (“FTE”) basis staffing stood at 485 at December 31, 2023, down from 491 at December 31, 2022.
ITEM 1. BUSINESS General The Company Sierra Bancorp (the “Company”) is a California corporation headquartered in Porterville, California, and is a registered bank holding company under federal banking laws. The Company was formed to serve as the holding company for Bank of the Sierra (the “Bank”) and it’s subsidiaries, two special purpose entities organized to facilitate repossessed assets.
ITEM 1. BUSINESS General The Company Sierra Bancorp (the “Company”) is a California corporation headquartered in Porterville, California, and is a registered bank holding company under federal banking laws. The Company was formed to serve as the holding company for Bank of the Sierra (the “Bank”). The Company has been the Bank’s sole shareholder since August 2001.
Overdrafts The Electronic Funds Transfer Act, as implemented by the Federal Reserve’s Regulation E, governs transfers initiated through automated teller machines (“ATMs”), point-of-sale terminals, and other electronic banking services.
Attorney General determines that immediate disclosure would pose a substantial risk to national security or public safety. Overdrafts The Electronic Funds Transfer Act, as implemented by the Federal Reserve’s Regulation E, governs transfers initiated through automated teller machines (“ATMs”), point-of-sale terminals, and other electronic banking services.
The cost to the Bank for these development, operations, and marketing activities cannot be calculated with any degree of certainty. We hold no patents or licenses (other than licenses required by bank regulatory agencies), franchises, or concessions. We are not dependent on a single customer or group of related customers for a material portion of our core deposits.
We hold no patents or licenses (other than licenses required by bank regulatory agencies), franchises, or 3 Table of Contents concessions. We are not dependent on a single customer or group of related customers for a material portion of our core deposits.
Financial institutions, however, are required to comply with state law if it is more protective of consumer privacy than the Financial Modernization Act. The Financial Modernization Act generally prohibits disclosure of consumer information to non-affiliated third parties unless the consumer has been given the opportunity to object and has not objected to such disclosure.
The Financial Modernization Act generally prohibits disclosure of consumer information to non-affiliated third parties unless the consumer has been given the opportunity to object and has not objected to such disclosure.
In connection with its assessment of CRA performance, the FDIC assigns a rating of “outstanding,” “satisfactory,” “needs to improve” or “substantial noncompliance.” The Bank most recently received a “satisfactory” CRA assessment rating in August 2022.
In connection with its assessment of CRA performance, the FDIC assigns a rating of “outstanding,” “satisfactory,” “needs to improve” or “substantial noncompliance.” The Bank most recently received a “satisfactory” CRA assessment rating in August 2022. On October 24, 2023, the Federal Reserve Board along with the FDIC and OCC issued a final rule amending the three-decade-old CRA regulations.
The Company continuously evaluates its overdraft practices and monitors potential legislative and regulatory changes, as well as other regulatory guidance related to overdrafts. 11 Table of Contents Consumer Financial Protection and Financial Privacy Dodd-Frank created the Consumer Financial Protection Bureau (the “CFPB”) as an independent entity with broad rulemaking, supervisory and enforcement authority over consumer financial products and services including deposit products, residential mortgages, home-equity loans and credit cards.
Consumer Financial Protection and Financial Privacy Dodd-Frank created the Consumer Financial Protection Bureau (the “CFPB”) as an independent entity with broad rulemaking, supervisory and enforcement authority over consumer financial products and services including deposit products, residential mortgages, home-equity loans and credit cards.
At December 31, 2022, the Company had 47 employees working remotely and 157 employees working in hybrid arrangements. The Company has long been committed to comprehensive and competitive compensation and benefits programs as the Company recognizes that it operates in intensely competitive environments for talent.
In addition, flexible working arrangements have been found to create efficiencies while promoting employee health and safety. At December 31, 2023 the Company had 46 employees working remotely and 157 working in hybrid arrangements. The Company has long been committed to comprehensive and competitive compensation and benefits programs as we recognizes we operate in intensely competitive environments for talent.
Based on our capital levels at December 31, 2022 and 2021, the Company and the Bank met all capital adequacy requirements to which they are subject,utilizing the Capital Simplification for Qualifying Community Bank Organization. For more information on the Company’s capital, see Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operation – Capital Resources.
Based on our capital levels at December 31, 2023 and 2022, the Company and the Bank met all capital adequacy requirements to which they are subject, utilizing the Capital Simplification for Qualifying Community Bank Organization.
Visalia Downtown Office 128 East Main Street ​ Woodlake: Woodlake Office 232 N. Valencia Boulevard ​ ​ ​ Complementing the Bank’s stand-alone offices are specialized lending units which include our Agricultural, SBA and Mortgage Warehouse lending divisions. We also have ATMs at all but one of our branch locations and nine non-branch locations.
Visalia Downtown Office 128 East Main Street ​ Woodlake: Woodlake Office 232 N. Valencia Boulevard ​ ​ ​ Complementing the Bank’s stand-alone offices are specialized lending units which include our Commercial and Industrial, Mortgage Warehouse, and Real Estate lending divisions. Our Commercial team focuses on a variety of commercial lending including agricultural loans.
The Company has not elected to become a financial holding company but may do so at some point in the future if deemed appropriate in view of opportunities or circumstances at the time. 6 Table of Contents The BHC Act requires the prior approval of the FRB for the direct or indirect acquisition of more than five percent of the voting shares of a commercial bank or its parent holding company.
The Company has not elected to become a financial holding company but may do so at some point in the future if deemed appropriate in view of opportunities or circumstances at the time.
These changes to our NSF fees, overdraft fees and discretionary overdraft privilege program are not expected to have a material impact on deposit fee income.
These changes to our NSF fees, overdraft fees and discretionary overdraft privilege program did not expected have a material impact on deposit fee income. The Company continuously evaluates its overdraft practices and monitors potential and final legislative and regulatory changes, as well as regulatory guidance related to overdrafts.
SEC rules promulgated pursuant to Sarbanes-Oxley impose obligations and restrictions on auditors and audit committees intended to enhance their independence from Management, and include extensive additional disclosure, corporate governance and other related rules. 13 Table of Contents Commercial Real Estate Lending Concentrations As a part of their regulatory oversight, the federal regulators have issued guidelines on sound risk management practices with respect to a financial institution’s concentrations in commercial real estate (“CRE”) lending activities.
Commercial Real Estate Lending Concentrations As a part of their regulatory oversight, the federal regulators have issued guidelines on sound risk management practices with respect to a financial institution’s concentrations in commercial real estate (“CRE”) lending activities.
Total deposits however remained unchanged at $2.8 billion at December 31, 2022, and December 31, 2021, respectively. 3 Table of Contents Our officers and employees are continually searching for ways to increase public convenience, enhance customer access to payment systems, and enable us to improve our competitive position with the development of new products and services.
Our officers and employees are continually searching for ways to increase public convenience, enhance customer access to payment systems, and enable us to improve our competitive position with the development of new products and services. The cost to the Bank for these development, operations, and marketing activities cannot be calculated with any degree of certainty.
The CCPA provides California residents rights regarding their personal information specifically related to exercising access, data portability and deletion rights. There are also California breach notification and disclosure requirements. In November 2020, the California Privacy Rights Act (CPRA) a ballot initiative, amending the CCPA which includes additional privacy protections for consumers, was passed.
The CCPA added required notices about personal information we collect, use, share, and disclose for business purposes. The CCPA provides California residents rights regarding their personal information specifically related to exercising access, data portability and deletion rights. There are also California breach notification and disclosure requirements.
At December 31, 2022, the Company had 122,596 deposit accounts down slightly from 123,176 at December 31, 2021.
At December 31, 2023, the Company had 120,701 deposit accounts down from 122,596 at December 31, 2022. Total deposits of $2.8 billion at December 31, 2023 remained unchanged from December 31, 2022.
As of December 31, 2022 and 2021, both the Company and the Bank qualified as well capitalized for regulatory capital purposes, utilizing the Capital Simplification for Qualifying Community Bank Organization. At each successively lower capital category, an insured bank is subject to increased restrictions on its operations.
At each successively lower capital category, an insured bank is subject to increased restrictions on its operations.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe Company also owns unencumbered property on which 17 of our other offices are located, namely the following branches: Bakersfield Ming, California City, Dinuba, Exeter, Farmersville, Fresno Shaw, Hanford, Lindsay, Lompoc, Porterville West Olive, San Luis Obispo, Santa Paula, Tehachapi Downtown, Three Rivers, Tulare, Visalia Mooney and Woodlake.
Biggest changeSubsequent to the close of this transaction, the Company now owns unencumbered property on which six of our other offices are located, namely the following branches: California City, Farmersville, Lompoc, San Luis Obispo, Tulare, and Visalia Mooney.
LEGAL PROCEEDINGS For information on litigation matters, see Note 14, Commitments and Contingencies, in Item 8 of this report. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. ​ 27 Table of Contents PART II
LEGAL PROCEEDINGS For information on litigation matters, see Note 14, Commitments and Contingencies, in Item 8 of this report. ​ ITEM 4. MINE SAFETY DISCLOSURES Not applicable. ​ 29 Table of Contents PART II
Both of those buildings are situated on unencumbered property owned by the Company.
Both of those buildings are situated on unencumbered property owned by the Company. In December 2023 the Company sold and leased back 11 branch locations.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 27 ​ ​ ​ ​ PART II ​ ​ 28 ​ ​ ​ ​ ​ Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities 28 ​ ​ ​ ​ ​
Biggest changeItem 4. Mine Safety Disclosures 29 ​ ​ ​ ​ PART II ​ ​ 30 ​ ​ ​ ​ ​ Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities 30 ​ ​ ​ ​ ​

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeBMI Banks Index ​ 100.00 ​ 83.54 ​ 114.74 ​ 100.10 ​ 136.10 ​ 112.89 ​ Source: S&P Global Market Intelligence ​ 30 Table of Contents (f) Stock Repurchases On October 20, 2022 the Board approved the 2022 Share Repurchase Plan by authorizing 630,000 shares of common stock for repurchase and expires on October 31, 2023.
Biggest changeBMI Banks Index ​ 100.00 ​ 137.36 ​ 119.83 ​ 162.92 ​ 135.13 ​ 147.41 ​ Source: S&P Global Market Intelligence (f) Stock Repurchases In October 2023, the Board approved the 2023 Share Repurchase Plan by authorizing 1,000,000 shares of common stock for repurchase beginning at the end of the expiration of the current share repurchase program on October 31, 2023 and expiring on October 31, 2024.
However, with the prior approval of the California Commissioner of Department of Financial Protection and Innovation, the Bank may declare a larger dividend, in an amount not exceeding the greatest of (i) the retained earnings of the Bank, (ii) the net income of the Bank for its last fiscal year, or (iii) the net income of the Bank for its current fiscal year. 28 Table of Contents The Company’s ability to pay dividends is also limited by state law.
However, with the prior approval of the California Commissioner of Department of Financial Protection and Innovation, the Bank may declare a larger dividend, in an amount not exceeding the greatest of (i) the retained earnings of the Bank, (ii) the net income of the Bank for its last fiscal year, or (iii) the net income of the Bank for its current fiscal year. 30 Table of Contents The Company’s ability to pay dividends is also limited by state law.
There were 758 registered holders of record on that date, and per Broadridge, an investor communication company, there were 6,260 beneficial holders with shares held under a street name, including “objecting beneficial owners” whose names and addresses are unavailable. Since some holders maintain multiple accounts, it is likely that the above numbers overstate the actual number of the Company’s shareholders.
There were 685 registered holders of record on that date; and per Broadridge, an investor communication company, there were 7,733 beneficial holders with shares held under a street name, including “objecting beneficial owners” whose names and addresses are unavailable. Since some holders maintain multiple accounts, it is likely that the above numbers overstate the actual number of the Company’s shareholders.
(c) Dividends The Company paid cash dividends totaling $13.9 million, or $0.92 per share in 2022 and $13.2 million, or $0.87 per share in 2021, which represents 41% of annual net earnings for 2022 and 31% for 2021.
(c) Dividends The Company paid cash dividends totaling $13.7 million, or $0.92 per share in 2023 and $13.9 million, or $0.92 per share in 2022, which represents 39% of annual net earnings for 2023 and 41% for 2022.
There were no stock repurchase transactions during the fourth quarter of 2022 and all 630,000 shares of common stock authorized under the 2022 Share Repurchase Plan remain available for repurchase at the end of 2022. ​ ​ 31 Table of Contents ITEM 6. [RESERVED]
There were no stock repurchase transactions during the fourth quarter of 2023. 1,000,000 shares of common stock authorized under the 2023 Share Repurchase Plan were available for repurchase at the end of 2023. ​ 32 Table of Contents ITEM 6. [RESERVED] ​ ​
(d) Securities Authorized for Issuance under Equity Compensation Plans The following table provides information as of December 31, 2022 with respect to stock options and restricted stock units outstanding, and available under our 2017 Stock Incentive Plan and the now-terminated 2007 Stock Incentive Plan, which are our only equity compensation plans other than an employee benefit plan meeting the qualification requirements of Section 401(a) of the Internal Revenue Code: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Plan Category Number of Securities to be Issued Upon Vesting of Restricted Stock Units ​ Number of Securities to be Issued Upon Exercise of Outstanding Options Weighted-Average Exercise Price of Outstanding Options Number of Securities Remaining Available for Future Issuance Equity compensation plans approved by security holders ​ 175,619 ​ 175,619 ​ $ — ​ 382,006 ​ ​ 29 Table of Contents (e) Performance Graph Below is a five-year performance graph comparing the cumulative total return on the Company’s common stock to the cumulative total returns of the Nasdaq Composite Index (a broad equity market index), the S&P Bank Index, and the S&P $1 billion to $5 billion Bank Index (the latter two qualifying as peer bank indices), assuming a $100 investment on December 31, 2017 and the reinvestment of dividends. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Period Ending Index 12/31/2017 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 Sierra Bancorp ​ 100.00 ​ 92.56 ​ 115.32 ​ 98.37 ​ 115.63 ​ 94.14 Nasdaq Composite Index ​ 100.00 ​ 97.16 ​ 132.81 ​ 192.47 ​ 235.15 ​ 158.65 S&P U.S.
(d) Securities Authorized for Issuance under Equity Compensation Plans The following table provides information as of December 31, 2023 with respect to stock options and restricted stock units outstanding, and available under our 2023 Equity Compensation Plan and the now-terminated 2017 and 2007 Stock Incentive Plans, which are our only equity compensation plans other than an employee benefit plan meeting the qualification requirements of Section 401(a) of the Internal Revenue Code: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Plan Category Number of Securities to be Issued Upon Vesting of Restricted Stock Units ​ Number of Securities to be Issued Upon Exercise of Outstanding Options Weighted-Average Exercise Price of Outstanding Options Number of Securities Remaining Available for Future Issuance Equity compensation plans approved by security holders ​ 238,179 ​ 343,449 ​ $ 25.02 ​ 292,581 ​ 31 Table of Contents (e) Performance Graph Below is a five-year performance graph comparing the cumulative total return on the Company’s common stock to the cumulative total returns of the Nasdaq Composite Index (a broad equity market index), the S&P Bank Index, and the S&P $1 billion to $5 billion Bank Index (the latter two qualifying as peer bank indices), assuming a $100 investment on December 31, 2018 and the reinvestment of dividends. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Period Ending Index 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 Sierra Bancorp ​ 100.00 ​ 124.58 ​ 106.27 ​ 124.92 ​ 101.71 ​ 113.35 Nasdaq Composite Index ​ 100.00 ​ 136.69 ​ 198.10 ​ 242.03 ​ 163.28 ​ 236.17 S&P U.S.
The following table summarizes trades of the Company’s Common Stock, setting forth the approximate high and low sales prices and volume of trading for the periods indicated, based upon information available via public sources: ​ ​ ​ ​ ​ ​ ​ ​ ​ Sale Price Of The Company's ​ Approximate Trading Calendar ​ Common Stock ​ Volumes Quarter End High Low Shares March 31, 2022 ​ 28.92 ​ 24.80 ​ 2,239,100 June 30, 2022 ​ 25.15 ​ 20.77 ​ 1,887,200 September 30, 2022 ​ 22.99 ​ 19.62 ​ 1,560,800 December 31, 2022 ​ 22.53 ​ 19.72 ​ 1,869,800 ​ (b) Holders As of January 31, 2023 there were an estimated 7,018 shareholders of the Company’s Common Stock.
The following table summarizes trades of the Company’s Common Stock, setting forth the approximate high and low sales prices and volume of trading for the periods indicated, based upon information available via public sources: ​ ​ ​ ​ ​ ​ ​ ​ ​ Sale Price of the Company's ​ Approximate Trading Calendar ​ Common Stock ​ Volumes Quarter End High Low Shares March 31, 2023 ​ 22.48 ​ 17.03 ​ 2,101,200 June 30, 2023 ​ 18.35 ​ 15.01 ​ 3,174,700 September 30, 2023 ​ 22.32 ​ 16.30 ​ 1,959,800 December 31, 2023 ​ 20.29 ​ 16.75 ​ 1,499,100 ​ (b) Holders As of January 31, 2024 there were an estimated 8,403 shareholders of the Company’s Common Stock.
Removed
SmallCap Banks Index ​ 100.00 ​ 83.44 ​ 104.69 ​ 95.08 ​ 132.36 ​ 116.69 S&P U.S.
Added
SmallCap Banks Index ​ 100.00 ​ 125.46 ​ 113.94 ​ 158.62 ​ 139.85 ​ 140.55 S&P U.S.
Removed
There were 370,000 shares purchased under the 2021 Share Repurchase Plan which had authorized 1,000,000 shares of common stock for repurchase and expired on October 31, 2022.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeItem 6. Reserved 32 ​ ​ ​ ​ ​ Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 32 ​ ​ ​ ​ ​ Item 7A. Quantitative and Qualitative Disclosures about Market Risk 62 ​ ​ ​ ​ ​ Item 8. Financial Statements and Supplementary Data 63 ​ ​ ​ ​ ​
Biggest changeItem 6. Reserved 33 ​ ​ ​ ​ ​ Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 33 ​ ​ ​ ​ ​ Item 7A. Quantitative and Qualitative Disclosures about Market Risk 62 ​ ​ ​ ​ ​ Item 8. Financial Statements and Supplementary Data 63 ​ ​ ​ ​ ​

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeAlthough not reflected in the loan totals below and not currently comprising a material part of our lending activities, the Company also occasionally originates and sells, or participates out portions of, loans to non-affiliated investors. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loan and Lease Distribution ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (dollars in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, ​ 2022 2021 2020 2019 2018 Real estate: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1-4 family residential construction ​ $ — ​ $ 21,368 ​ $ 48,490 ​ $ 105,715 ​ $ 105,187 Other construction/land ​ ​ 18,357 ​ ​ 25,188 ​ ​ 71,443 ​ ​ 91,010 ​ ​ 108,268 1-4 family - closed-end ​ ​ 417,092 ​ ​ 290,236 ​ ​ 140,280 ​ ​ 200,742 ​ ​ 237,530 Equity lines ​ ​ 21,638 ​ ​ 26,915 ​ ​ 38,472 ​ ​ 50,091 ​ ​ 56,932 Multi-family residential ​ ​ 91,485 ​ ​ 53,385 ​ ​ 61,834 ​ ​ 54,432 ​ ​ 54,893 Commercial real estate - owner occupied ​ ​ 323,895 ​ ​ 334,581 ​ ​ 343,607 ​ ​ 344,412 ​ ​ 302,052 Commercial real estate - non-owner occupied ​ ​ 891,197 ​ ​ 880,279 ​ ​ 1,059,685 ​ ​ 412,454 ​ ​ 438,349 Farmland ​ ​ 113,594 ​ ​ 106,765 ​ ​ 129,968 ​ ​ 144,063 ​ ​ 151,513 Total real estate ​ ​ 1,877,258 ​ ​ 1,738,717 ​ ​ 1,893,779 ​ ​ 1,402,919 ​ ​ 1,454,724 Agricultural ​ ​ 28,193 ​ ​ 34,098 ​ ​ 45,001 ​ ​ 48,231 ​ ​ 49,162 Commercial and industrial ​ ​ 77,695 ​ ​ 109,213 ​ ​ 207,784 ​ ​ 117,230 ​ ​ 129,712 Mortgage warehouse lines ​ ​ 65,439 ​ ​ 101,184 ​ ​ 307,679 ​ ​ 189,103 ​ ​ 91,813 Consumer loans ​ ​ 4,232 ​ ​ 4,649 ​ ​ 5,721 ​ ​ 7,978 ​ ​ 9,119 Total loans and leases ​ ​ 2,052,817 ​ ​ 1,987,861 ​ ​ 2,459,964 ​ ​ 1,765,461 ​ ​ 1,734,530 Allowance for credit losses on loans ​ ​ (23,060) ​ ​ (14,256) ​ ​ (17,738) ​ ​ (9,923) ​ ​ (9,750) Total loans and leases, net ​ $ 2,029,757 ​ $ 1,973,605 ​ $ 2,442,226 ​ $ 1,755,538 ​ $ 1,724,780 Percentage of Total Loans and Leases ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Real estate: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1-4 family residential construction ​ ​ 0.00% ​ ​ 1.07% ​ ​ 1.97% ​ ​ 5.99% ​ ​ 6.06% Other construction/land ​ ​ 0.89% ​ ​ 1.27% ​ ​ 2.90% ​ ​ 5.16% ​ ​ 6.24% 1-4 family - closed-end ​ ​ 20.32% ​ ​ 14.60% ​ ​ 5.70% ​ ​ 11.37% ​ ​ 13.69% Equity lines ​ ​ 1.05% ​ ​ 1.35% ​ ​ 1.56% ​ ​ 2.84% ​ ​ 3.28% Multi-family residential ​ ​ 4.46% ​ ​ 2.69% ​ ​ 2.51% ​ ​ 3.08% ​ ​ 3.16% Commercial real estate - owner occupied ​ ​ 15.78% ​ ​ 16.83% ​ ​ 13.97% ​ ​ 19.51% ​ ​ 17.41% Commercial real estate - non-owner occupied ​ ​ 43.42% ​ ​ 44.28% ​ ​ 43.08% ​ ​ 23.36% ​ ​ 25.28% Farmland ​ ​ 5.53% ​ ​ 5.37% ​ ​ 5.28% ​ ​ 8.16% ​ ​ 8.74% Total real estate ​ ​ 91.45% ​ ​ 87.47% ​ ​ 76.98% ​ ​ 79.45% ​ ​ 83.88% Agricultural ​ ​ 1.37% ​ ​ 1.72% ​ ​ 1.83% ​ ​ 2.73% ​ ​ 2.83% Commercial and industrial ​ ​ 3.78% ​ ​ 5.48% ​ ​ 8.45% ​ ​ 6.64% ​ ​ 7.48% Mortgage warehouse lines ​ ​ 3.19% ​ ​ 5.09% ​ ​ 12.51% ​ ​ 10.71% ​ ​ 5.29% Consumer loans ​ ​ 0.21% ​ ​ 0.23% ​ ​ 0.23% ​ ​ 0.45% ​ ​ 0.53% ​ ​ ​ 100.01% ​ ​ 100.00% ​ ​ 100.00% ​ ​ 100.00% ​ ​ 100.00% ​ The Company’s loan and lease balances increased in 2022, mostly from the purchase of high quality jumbo mortgage pools early in the year.
Biggest changeAlthough not reflected in the loan totals below and not currently comprising a material part of our lending activities, the Company also occasionally originates and sells, or participates out portions of, loans to non-affiliated investors. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loan Distribution ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (dollars in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, ​ 2023 2022 2021 2020 2019 Real estate: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential real estate ​ ​ 413,262 ​ ​ 438,731 ​ ​ 317,151 ​ ​ 178,752 ​ ​ 250,833 Commercial real estate ​ ​ 1,325,493 ​ ​ 1,308,328 ​ ​ 1,268,245 ​ ​ 1,465,126 ​ ​ 811,298 Other construction/land ​ ​ 6,267 ​ ​ 18,358 ​ ​ 46,556 ​ ​ 119,933 ​ ​ 196,725 Farmland ​ ​ 67,510 ​ ​ 113,594 ​ ​ 106,765 ​ ​ 129,968 ​ ​ 144,063 Total real estate ​ ​ 1,812,532 ​ ​ 1,879,011 ​ ​ 1,738,717 ​ ​ 1,893,779 ​ ​ 1,402,919 Other commercial ​ ​ 157,762 ​ ​ 104,135 ​ ​ 143,311 ​ ​ 252,785 ​ ​ 165,461 Mortgage warehouse lines ​ ​ 116,000 ​ ​ 65,439 ​ ​ 101,184 ​ ​ 307,679 ​ ​ 189,103 Consumer loans ​ ​ 4,090 ​ ​ 4,232 ​ ​ 4,649 ​ ​ 5,721 ​ ​ 7,978 Total loans ​ ​ 2,090,384 ​ ​ 2,052,817 ​ ​ 1,987,861 ​ ​ 2,459,964 ​ ​ 1,765,461 Allowance for credit losses on loans ​ ​ (23,500) ​ ​ (23,060) ​ ​ (14,256) ​ ​ (17,738) ​ ​ (9,923) Total loans, net ​ $ 2,066,884 ​ $ 2,029,757 ​ $ 1,973,605 ​ $ 2,442,226 ​ $ 1,755,538 Percentage of Total loans ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Real estate: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential real estate ​ ​ 19.77% ​ ​ 21.37% ​ ​ 15.95% ​ ​ 7.27% ​ ​ 14.21% Commercial real estate ​ ​ 63.41% ​ ​ 63.73% ​ ​ 63.81% ​ ​ 59.55% ​ ​ 45.95% Other construction/land ​ ​ 0.30% ​ ​ 0.89% ​ ​ 2.34% ​ ​ 4.88% ​ ​ 11.14% Farmland ​ ​ 3.23% ​ ​ 5.53% ​ ​ 5.37% ​ ​ 5.28% ​ ​ 8.16% Total real estate ​ ​ 86.71% ​ ​ 91.52% ​ ​ 87.47% ​ ​ 76.98% ​ ​ 79.46% Other commercial ​ ​ 7.54% ​ ​ 5.08% ​ ​ 7.21% ​ ​ 10.28% ​ ​ 9.37% Mortgage warehouse lines ​ ​ 5.55% ​ ​ 3.19% ​ ​ 5.09% ​ ​ 12.51% ​ ​ 10.72% Consumer loans ​ ​ 0.20% ​ ​ 0.21% ​ ​ 0.23% ​ ​ 0.23% ​ ​ 0.45% ​ ​ ​ 100.00% ​ ​ 100.00% ​ ​ 100.00% ​ ​ 100.00% ​ ​ 100.00% ​ The Company’s loan balances increased $37.1 million or 2% in 2023.
In general, the guidelines, as amended, establish the following supervisory criteria as preliminary indications of possible CRE concentration risk: (1) the institution’s total construction, land development and other land loans represent 100% or more of Tier 1 risk-based capital plus allowance for credit losses loans and leases; or (2) total CRE loans as defined in the regulatory guidelines represent 300% or more of Tier 1 risk-based capital plus allowance for credit losses on loans and leases, and the institution’s CRE loan portfolio has increased by 50% or more during the prior 36 month period.
In general, the guidelines, as amended, establish the following supervisory criteria as preliminary indications of possible CRE concentration risk: (1) the institution’s total construction, land development and other land loans represent 100% or more of Tier 1 risk-based capital plus allowance for credit losses loans; or (2) total CRE loans as defined in the regulatory guidelines represent 300% or more of Tier 1 risk-based capital plus allowance for credit losses on loans, and the institution’s CRE loan portfolio has increased by 50% or more during the prior 36 month period.
Management anticipates that the Bank will have sufficient earnings to provide dividends to the holding company to meet its funding requirements for the foreseeable future and the Bank is not subject to any regulatory restrictions for paying dividends to the holding company, other than the legal and regulatory limitations on dividend payments, as outlined in Item 5(c) Dividends in this Form 10-K.
Management anticipates the Bank will have sufficient earnings to provide dividends to the holding company to meet its funding requirements for the foreseeable future and the Bank is not subject to any regulatory restrictions for paying dividends to the holding company, other than the legal and regulatory limitations on dividend payments, as outlined in Item 5(c) Dividends in this Form 10-K.
There was also a favorable mix variance of $2.0 million primarily from the purchase of CLOs at floating higher interest rates, which was partially offset by a decrease in loan and lease balances and an increase in higher cost interest bearing liabilities in 2022 compared to 2021.
There was also a favorable mix variance of $2.0 million primarily from the purchase of CLOs at floating higher interest rates, which was partially offset by a decrease in loan balances and an increase in higher cost interest bearing liabilities in 2022 compared to 2021.
These new ag loan production teams were hired to develop relationships within our footprint for both loans and deposits. These new loans should provide additional diversification of the loan portfolio and provide floating rate loan products which complement the fixed rate real estate loans.
These new loan production teams were hired to develop relationships within our footprint for both loans and deposits. These new loans should provide additional diversification of the loan portfolio and provide floating rate loan products which complement the fixed rate real estate loans.
Upon adoption of CECL, the Company was required to make an adjustment to equity, net of taxes, equal to the difference between the allowance for credit losses calculated under the CECL method and the allowance for loan and lease losses as calculated under the incurred loss method as of December 31, 2021.
Upon adoption of CECL, the Company was required to make an adjustment to equity, net of taxes, equal to the difference between the allowance for credit losses calculated under the CECL method and the allowance for loan losses as calculated under the incurred loss method as of December 31, 2021.
However, as previously noted under the Allowance for Loan and Lease Losses section above in March 2020, the Company elected under Section 4014 of the Coronavirus Aid, Relief, and Economic Security (CARES) Act to defer the implementation of CECL.
However, as previously noted under the Allowance for Loan Losses section above in March 2020, the Company elected under Section 4014 of the Coronavirus Aid, Relief, and Economic Security (CARES) Act to defer the implementation of CECL.
Note 2 to the consolidated financial statements provides a more comprehensive discussion of the accounting guidance we conform to and the methodology we use to determine an appropriate allowance for credit losses on loans and leases.
Note 2 to the consolidated financial statements provides a more comprehensive discussion of the accounting guidance we conform to and the methodology we use to determine an appropriate allowance for credit losses on loans.
(5) Net interest margin represents net interest income as a percentage of average interest-earning assets (tax-equivalent). 36 Table of Contents The Volume and Rate Variances table below sets forth the dollar difference for the comparative periods in interest earned or paid for each major category of interest-earning assets and interest-bearing liabilities, and the amount of such change attributable to fluctuations in average balances (volume) or differences in average interest rates.
(5) Net interest margin represents net interest income as a percentage of average interest-earning assets (tax-equivalent). 38 Table of Contents The Volume and Rate Variances table below sets forth the dollar difference for the comparative periods in interest earned or paid for each major category of interest-earning assets and interest-bearing liabilities, and the amount of such change attributable to fluctuations in average balances (volume) or differences in average interest rates.
The Company has a higher level of actual balance sheet liquidity than might otherwise be the case since we utilize a letter of credit from the FHLB rather than investment securities for certain pledging requirements. That letter of credit, which is backed by loans pledged to the FHLB by the Company, totaled $127.9 million at December 31, 2022.
The Company has a higher level of actual balance sheet liquidity than might otherwise be the case since we utilize a letter of credit from the FHLB rather than investment securities for certain pledging requirements. That letter of credit, which is backed by loans pledged to the FHLB by the Company, totaled $127.9 million at December 31, 2023.
The following table sets forth the Company’s and the Bank’s regulatory capital ratios at the dates indicated: ​ ​ ​ ​ ​ ​ December 31, ​ To Be Well Capitalized Under Prompt Corrective Action Regulations (CBLR Framework) (1) 2022 ​ ​ ​ ​ Tier 1 (Core) Capital to average total assets ​ ​ ​ ​ Sierra Bancorp and subsidiary ​ 10.30% ​ 9.00% Bank of the Sierra ​ 10.99% ​ 9.00% ​ ​ ​ ​ ​ 2021 ​ ​ ​ ​ Tier 1 (Core) Capital to average total assets ​ ​ ​ ​ Sierra Bancorp and subsidiary ​ 10.43% ​ 8.50% Bank of the Sierra ​ 11.31% ​ 8.50% (1) Under interim transition final guidance, the community bank leverage ratio minimum requirement was reduced to 8.5% for calendar year 2021. ​ At the end of 2022, as our Community Bank Leverage Ratio exceeded 9.0%, the Company and the Bank were both classified as “well capitalized,” the highest rating of the categories defined under the Bank Holding Company Act and the Federal Deposit Insurance Corporation Improvement Act of 1991, and our regulatory capital ratios remained above the median for peer financial institutions.
The following table sets forth the Company’s and the Bank’s regulatory capital ratios at the dates indicated: ​ ​ ​ ​ ​ ​ December 31, ​ To Be Well Capitalized Under Prompt Corrective Action Regulations (CBLR Framework) (1) 2023 ​ ​ ​ ​ Tier 1 (Core) Capital to average total assets ​ ​ ​ ​ Sierra Bancorp and subsidiary ​ 10.32% ​ 9.00% Bank of the Sierra ​ 11.29% ​ 9.00% ​ ​ ​ ​ ​ 2022 ​ ​ ​ ​ Tier 1 (Core) Capital to average total assets ​ ​ ​ ​ Sierra Bancorp and subsidiary ​ 10.30% ​ 9.00% Bank of the Sierra ​ 10.99% ​ 9.00% (1) Under interim transition final guidance, the community bank leverage ratio minimum requirement was reduced to 8.5% for calendar year 2021. ​ At the end of 2023, as our Community Bank Leverage Ratio exceeded 9.0%, the Company and the Bank were both classified as “well capitalized,” the highest rating of the categories defined under the Bank Holding Company Act and the Federal Deposit Insurance Corporation Improvement Act of 1991, and our regulatory capital ratios remained above the median for peer financial institutions.
The loan and lease loss (benefit) provision for 2021 and 2020 were favorably impacted by the following factors: most charge-offs were recorded against pre-established reserves, which alleviated what otherwise might have been a need for reserve replenishment; loss rates for most loan types have been declining, thus having a positive impact on general reserves required for performing loans; and, new loans booked have been underwritten using continued tighter credit standards.
The loan loss (benefit) provision for 2021 was favorably impacted by the following factors: most charge-offs were recorded against pre-established reserves, which alleviated what otherwise might have been a need for reserve replenishment; loss rates for most loan types have been declining, thus having a positive impact on general reserves required for performing loans; and new loans booked have been underwritten using continued tighter credit standards.
Detailed cash flow projections are reviewed by Management on a monthly basis, with various stress scenarios applied to assess our ability to meet liquidity needs under unusual or adverse conditions. Liquidity ratios are also calculated and reviewed on a regular basis.
Detailed cash flow projections are reviewed by Management on a quarterly basis, with various stress scenarios applied to assess our ability to meet liquidity needs under unusual or adverse conditions. Liquidity ratios are also calculated and reviewed on a regular basis.
Upon implementation the Company recorded a $10.4 million increase in the allowance for credit losses, which included a $0.9 million reserve for unfunded commitments as an adjustment to equity, net of deferred taxes.
Upon implementation the Company recorded a $10.4 million pre-tax increase in the allowance for credit losses, which included a $0.9 million reserve for unfunded commitments as an adjustment to equity, net of deferred taxes.
(2) Yields and net interest margin have been computed on a tax equivalent basis. (3) Loans are gross of the allowance for possible loan and lease losses. Net loan fees have been included in the calculation of interest income.
(2) Yields and net interest margin have been computed on a tax equivalent basis. (3) Loans are gross of the allowance for possible credit losses. Net loan fees have been included in the calculation of interest income.
The Company had $9.0 million invested in separate account BOLI at December 31, 2022. This separate account BOLI closely matched participant-directed investment allocations that can include equity, bond, or real estate indices, and are thus subject to gains or losses which often contribute to significant fluctuations in income (and associated expense accruals).
The Company had $9.9 million invested in separate account BOLI at December 31, 2023. This separate account BOLI closely matched participant-directed investment allocations that can include equity, bond, or real estate indices, and are thus subject to gains or losses which often contribute to significant fluctuations in income (and associated expense accruals).
The Company’s goodwill and other intangible assets are evaluated annually for potential impairment following FASB guidelines and based on those analytics Management has determined that no impairment exists as of December 31, 2022.
The Company’s goodwill and other intangible assets are evaluated annually for potential impairment following FASB guidelines and based on those analytics Management has determined that no impairment exists as of December 31, 2023.
While those ratios are merely indicators and are not measures of actual liquidity, they are closely monitored, and we are committed to maintaining adequate liquidity resources to draw upon should unexpected needs arise. The Company, on occasion, experiences cash needs as the result of loan growth, deposit outflows, asset purchases or liability repayments.
While 59 Table of Contents those ratios are merely indicators and are not measures of actual liquidity, they are closely monitored, and we are committed to maintaining adequate liquidity resources to draw upon should unexpected needs arise. The Company, on occasion, experiences cash needs as the result of loan growth, deposit outflows, asset purchases or liability repayments.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This discussion presents Management’s analysis of the Company’s financial condition as of December 31, 2022 and 2021, and the results of operations for each year in the three-year period ended December 31, 2022.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This discussion presents Management’s analysis of the Company’s financial condition as of December 31, 2023 and 2022, and the results of operations for each year in the three-year period ended December 31, 2023.
The increase in 2022 was due mostly to the strategic hiring of new loan production teams, increases to the Company’s minimum wage, and standard annual increases to our employee’s base compensation.
The increase in 2022 was due mostly to the strategic hiring and geographic expansion of new loan production teams, increases to the Company’s minimum wage, and standard annual increases to our employee’s base compensation.
Thenet interest margin compression was caused by an unfavorable rate variance of $1.8 million since the weighted average yield on interest-earning assets increased by only 15 basis points and the weighted average cost of interest-bearing liabil­ities increased by 39 basis points in 2022 compared to 2021.
The net interest margin compression in 2022 as compared to 2021 was caused by an unfavorable rate variance of $1.8 million since the weighted average yield on interest-earning assets increased by only 15 basis points and the weighted average cost of interest-bearing liabil­ities increased by 39 basis points.
Our net deferred tax asset is evaluated as of every reporting date pursuant to FASB guidance, and we have determined that no impairment exists. Deposits Deposits represent another key balance sheet category impacting the Company’s net interest margin and profitability metrics.
Our net deferred tax asset is evaluated as of every reporting date pursuant to FASB guidance, and we have determined that no impairment exists. 55 Table of Contents Deposits Deposits represent another key balance sheet category impacting the Company’s net interest margin and profitability metrics.
The 2022 provision for credit losses on loans and leases loss benefit arose from the impact of $11.5 million in net charge-offs during the year ending 2022.
The 2022 provision for credit losses on loans loss benefit arose from the impact of $11.5 million in net charge-offs during the year ending 2022.
Loan and Lease Portfolio The Company’s loan and lease portfolio represents the single largest portion of invested assets, substantially greater than the investment portfolio or any other asset category, and the quality and diversification of the loan and lease portfolio are important considerations when reviewing the Company’s financial condition. 44 Table of Contents The Loan and Lease Distribution table that follows sets forth by loan type the Company’s gross loans and leases outstanding, and the percentage distribution in each category at the dates indicated.
Loan Portfolio The Company’s loan portfolio represents the single largest portion of invested assets, substantially greater than the investment portfolio or any other asset category, and the quality and diversification of the loan portfolio are important considerations when reviewing the Company’s financial condition. 45 Table of Contents The Loan Distribution table that follows sets forth by loan type the Company’s gross loans outstanding and the percentage distribution in each category at the dates indicated.
The positive impact of average asset growth in 2022 along with a 15 bps increase in yield was negatively impacted by a 39 bps increase in yield on interest bearing liabilities due to certificates of deposits and shifting from a net sold position to a net purchased position.
The positive impact of average asset growth in 2022 along with a 15 basis points increase in yield was negatively impacted by a 39 basis points increase in yield on interest bearing liabilities due to certificates of deposits and shifting from a net sold position to a net purchased position.
The Company had junior subordinated debentures totaling $35.5 million at December 31, 2022 and $35.3 million December 31, 2021, in the form of long-term borrowings from trust subsidiaries formed specifically to issue trust preferred securities. The small increase resulted from the amortization of discount on junior subordinated debentures that were part of our acquisition of Coast Bancorp in 2016.
The Company had junior subordinated debentures totaling $35.7 million at December 31, 2023 and $35.5 million December 31, 2022, in the form of long-term borrowings from trust subsidiaries formed specifically to issue trust preferred securities. The small increase resulted from the amortization of discount on junior subordinated debentures that were part of our acquisition of Coast Bancorp in 2016.
As of December 31, 2022, unpledged debt securities plus pledged securities in excess of current pledging requirements comprised $1.1 billion of the Company’s investment balances, as compared to $853.2 million at December 31, 2021. Other sources of potential liquidity include but are not necessarily limited to any outstanding fed funds sold and vault cash.
As of December 31, 2023, unpledged debt securities plus pledged securities in excess of current pledging requirements comprised $1.2 billion of the Company’s investment balances, as compared to $1.1 billion at December 31, 2022. Other sources of potential liquidity include but are not necessarily limited to any outstanding fed funds sold and vault cash.
The provision for credit losses on loans and leases for 2022 was elevated due to the impact of two loan relationships as previously discussed above.
The provision for credit losses on loans for 2022 was elevated due to the impact of two loan relationships as previously discussed above.
Net loan fees (costs) and loan acquisition FMV amortization were $0.9 million, $4.2 million, and $1.9 million for the years ended December 31, 2022, 2021, and 2020 respectively. (4) Non-accrual loans are slotted by loan type and have been included in total loans for purposes of total interest earning assets.
Net loan fees (costs) and loan acquisition FMV amortization were $(0.3) million, $0.9 million, and $4.2 million for the years ended December 31, 2023, 2022, and 2021 respectively. (4) Non-accrual loans are slotted by loan type and have been included in total loans for purposes of total interest earning assets.
Further, the bank must not be an advance approaches banking organization. 57 Table of Contents The final rule became effective January 1, 2020 and banks that met the qualifying criteria were able to elect to use the community bank leverage framework starting with the quarter ended March 31, 2020.
Further, the bank must not be an advance approaches banking organization. The final rule became effective January 1, 2020 and banks that met the qualifying criteria were able to elect to use the community bank leverage framework starting with the quarter ended March 31, 2020.
The increase in 2022 was primarily from an increase in core processing costs. In late 2022, the Company renegotiated its core processing contract and expects annual savings from this renegotiation of approximately $1.0 million.
The Company renegotiated its core processing contract which resulted in overall savings. The increase in 2022 was primarily from an increase in core processing costs. In late 2022, the Company renegotiated its core processing contract and expects annual savings from this renegotiation of approximately $1.0 million.
We do not foresee any circumstances that would cause the Company or the Bank to be less than “well capitalized”, although no assurance can be given that this will not occur.
We do not foresee any circumstances that would cause the Company or the Bank to be less than “well capitalized,” although no assurance can be given that this will not occur.
Our market risk exposure is primarily that of interest rate risk, and we have established policies and procedures to monitor and limit our earnings and balance sheet exposure to changes in interest rates.
Our market risk 60 Table of Contents exposure is primarily that of interest rate risk, and we have established policies and procedures to monitor and limit our earnings and balance sheet exposure to changes in interest rates.
To meet short-term needs, we can borrow overnight funds from other financial institutions, draw advances via Federal Home Loan Bank lines of credit, or solicit brokered deposits if customer deposits are not immediately obtainable from local sources. Availability on lines of credit from correspondent banks and the FHLB totaled $955.9 million at December 31, 2022.
To meet short-term needs, we can borrow overnight funds from other financial institutions, draw advances via Federal Home Loan Bank lines of credit, or solicit brokered deposits if customer deposits are not immediately obtainable from local sources. Availability on lines of credit from correspondent banks and the FHLB totaled $961.5 million at December 31, 2023.
This line item consists of a variety of fees including service charges on corporate accounts, treasury management fees, charges on corporate and consumer accounts including treasury management fees, ATM fees, overdraft income, and monthly service charges on certain accounts.
This line item consists of a variety of fees including service charges on corporate accounts, treasury management fees, charges on corporate and consumer accounts including treasury management fees, ATM fees, overdraft income, monthly service charges on certain accounts and debit card interchange.
The Company was also eligible to borrow approximately $42.3 million at the Federal Reserve Discount Window based on pledged assets at December 31, 2022. Furthermore, funds can be obtained by drawing down excess cash that might be available in the Company’s correspondent bank deposit accounts, or by liquidating unpledged investments or other readily saleable assets.
The Company was also eligible to borrow approximately $392.0 million at the Federal Reserve Discount Window based on pledged assets at December 31, 2023. Furthermore, funds can be obtained by drawing down excess cash that might be available in the Company’s correspondent bank deposit accounts, or by liquidating unpledged investments or other readily saleable assets.
Permanent differences include but are not limited to tax-exempt interest income, BOLI income or loss, and certain book expenses that are not allowed as tax deductions. The Company’s investments in state, county and municipal bonds provided $8.8 million of federal tax-exempt income in 2022, $6.2 million in 2021, and $5.7 million in 2020.
Permanent differences include but are not limited to tax-exempt interest income, BOLI income or loss, and certain book expenses that are not allowed as tax deductions. The Company’s investments in state, county and municipal bonds provided $10.9 million of federal tax-exempt income in 2023, $8.8 million in 2022, and $6.2 million in 2021.
The average balance of non-earning cash and due from banks, which can be used to determine trends, was $79.3 million for 2022, $75.7 million for 2021 and $72.0 million for 2020. Premises and Equipment Premises and equipment are stated on our books at cost, less accumulated depreciation, and amortization.
The average balance of non-earning cash and due from banks, which can be used to determine trends, was $80.8 million for 2023, $79.3 million for 2022 and $75.7 million for 2021. Premises and Equipment Premises and equipment are stated on our books at cost, less accumulated depreciation, and amortization.
Moreover, in addition to life insurance proceeds of $0.4 million in both 2022 and 2021 and $0.07 million in 2020, net increases in the cash surrender value of bank-owned life insurance added $2.6 million to tax-exempt income in 2021; and $2.4 million in 2020, but reduced tax-exempt income by $1.0 million in 2022.
Moreover, in addition to life insurance proceeds of $0.9 million in 2023 and $0.4 million in both 2022 and 2021, net increases in the cash surrender value of bank-owned life insurance added $1.8 million to tax-exempt income in 2023, and $2.6 million to tax-exempt income in 2021, but reduced tax-exempt income by $1.0 million in 2022.
In Management’s opinion, the Company’s critical accounting estimates deal primarily with the following areas: the establishment of an allowance for credit losses on loans and leases, as explained in detail in Note 2 to the consolidated financial statements and in the “Provision for Credit Losses on Loans and Leases” and “Allowance for Credit Losses on Loans and Leases” sections of this discussion and analysis; the valuation of impaired loans and foreclosed assets, as discussed in Note 2 to the consolidated financial statements; income taxes and deferred tax assets and liabilities, especially with regard to the ability of the Company to recover deferred tax assets as discussed in the “Provision for Income Taxes” and “Other Assets” sections of this discussion and analysis; and goodwill and other intangible assets, which are evaluated annually for impairment and for which we have determined that no impairment exists, as discussed in Note 2 to the consolidated financial statements and in the “Other Assets” section of this discussion and analysis.
In Management’s opinion, the Company’s critical accounting estimates deal primarily with the following areas: the establishment of an allowance for credit losses on loans, as explained in detail in Note 2 to the consolidated financial statements and in the “Provision for Credit Losses on Loans” and “Allowance for Credit Losses on Loans” sections of this discussion and analysis; income taxes and deferred tax assets and liabilities, especially with regard to the ability of the Company to recover deferred tax assets as discussed in the “Provision for Income Taxes” and “Other Assets” sections of this discussion and analysis; and Goodwill which is evaluated annually for impairment and for which we have determined that no impairment exists, as discussed in Note 2 to the consolidated financial statements and in the “Other Assets” section of this discussion and analysis.
The allowance for credit losses on loans and leases is at a level that, in Management’s judgment, is adequate to absorb probable credit losses on loans related to individually identified loans as well as probable credit losses in the remaining loan portfolio.
The allowance for credit losses on loans is at a level that, in Management’s judgment, is adequate to absorb expected credit losses on loans related to individually identified loans as well as expected credit losses in the remaining loan portfolio.
Our tax credits consist primarily of those generated by investments in low-income housing tax credit funds. We had a total of $10.1 million invested in low-income housing tax credit funds as of December 31, 2022 and $2.9 million as of December 31, 2021, which are included in other assets rather than in our investment portfolio.
Our tax credits consist primarily of those generated by investments in low-income housing tax credit funds. We had a total of $14.4 million invested in low-income housing tax credit funds as of December 31, 2023 and $10.1 million as of December 31, 2022, which are included in other assets rather than in our investment portfolio.
That means that even if taxable income stayed at the same level through 2037, our tax accrual rate would gradually increase. Financial Condition Assets totaled $3.6 billion at December 31, 2022, an increase of $237.6 million, or 7%, for the year.
That means that even if taxable income stayed at the same level through 2037, our tax accrual rate would gradually increase. Financial Condition Assets totaled $3.7 billion at December 31, 2023, an increase of $121.2 million, or 3%, for the year.
The ratio of the allowance to nonperforming loans was 118% at December 31, 2022, relative to 315% at December 31, 2021, and 233% at December 31, 2020. As described above, a separate allowance of $0.8 million for potential losses inherent in unused commitments is included in other liabilities at December 31, 2022.
The ratio of the allowance to nonperforming loans was 294% at December 31, 2023, relative to 118% at December 31, 2022, and 315% at December 31, 2021. As described above, a separate allowance of $0.5 million for potential losses inherent in unused commitments is included in other liabilities at December 31, 2023.
However, the separate-account BOLI used to offset deferred compensation fluctuates significantly from year-to-year as many of our deferred compensation participants are invested in equity-index style funds. In the comparative years ending 2022 over 2021, BOLI income decreased $3.6 million, however in 2021 over 2020, BOLI income increased by $0.2 million or 10%.
However, the separate-account BOLI used to offset deferred compensation fluctuates significantly from year-to-year as many of our deferred compensation participants are invested in equity-index style funds. In the comparative years ending 2023 over 2022, BOLI income increased $2.8 million; however, in 2022 over 2021, BOLI income decreased $3.6 million.
Loan processing costs, which include expenses for property appraisals and inspections, loan collections, demand and foreclosure activities, loan servicing, loan sales, and other miscellaneous lending costs, increased by $0.1 million or 10% in 2022 as compared to 2021 and decreased by $0.6 million, or 49%, in 2021 as compared to 2020.
Loan processing costs, which include expenses for property appraisals and inspections, loan collections, demand and foreclosure activities, loan servicing, loan sales, and other miscellaneous lending costs, increased by $0.1 million or 9% in 2023 as compared to 2022 and increased by $0.1 million or 10% in 2022 as compared to 2021.
When no balance sheet growth is incorporated and a stable interest rate environment is assumed, projected annual net interest income is about $2.6 million lower, or 2% than in our standard simulation.
When no balance sheet growth is incorporated and a stable interest rate environment is assumed, projected annual net interest income is about $11.7 million lower, or 9% than in our standard simulation.
This ratio was 249% at December 31, 2021 and declined to 246% at December 31, 2022. At December 31, 2022, the Bank’s total construction, land development and other land loans represented 5% of Tier 1 risk-based capital plus allowance for credit losses on loans and leases.
This ratio was 246% at December 31, 2022 and declined to 243% at December 31, 2023. At December 31, 2023, the Bank’s total construction, land development and other land loans represented 1% of Tier 1 risk-based capital plus allowance for credit losses on loans.
The Company’s books also reflect a net cash surrender value for general account BOLI of $43.2 million at December 31, 2022 and 2021. General account BOLI produces income that is used to help offset expenses associated with executive salary continuation plans, director retirement plans and other employee benefits.
The Company’s books also reflect a net cash surrender value for general account BOLI of $41.7 million and $43.2 million, respectively for the years ending December 31, 2023 and 2022. General account BOLI produces income that is used to help offset expenses associated with executive salary continuation plans, director retirement plans and other employee benefits.
Off-balance sheet obligations pose potential credit risk to the Company, and a $0.8 million reserve for unfunded commitments is reflected as a liability in our consolidated balance sheet at December 31, 2022, up $0.6 million from the previous year. The unused commitments related to mortgage warehouse are unconditionally cancellable at any time.
Off-balance sheet obligations pose potential credit risk to the Company, and a $0.5 million reserve for unfunded commitments is reflected as a liability in our consolidated balance sheet at December 31, 2023, down $0.3 million from the previous year. The unused commitments related to mortgage warehouse are unconditionally cancellable at any time.
(4) The efficiency ratio is a non-GAAP measure and is a calculation of noninterest expense as a percentage of the sum of net interest income and noninterest income excluding net gains (losses) from securities and bank owned life insurance income. ​ Overview of the Results of Operations and Financial Condition Results of Operations Summary The Company recognized net income of $33.7 million in 2022 relative to $43.0 million in 2021 and $35.4 million in 2020.
(3) The efficiency ratio is a non-GAAP measure and is a calculation of noninterest expense as a percentage of the sum of net interest income and noninterest income excluding net gains (losses) from securities and bank owned life insurance income. 34 Table of Contents Overview of the Results of Operations and Financial Condition Results of Operations Summary The Company recognized net income of $34.8 million in 2023 relative to $33.7 million in 2022 and $43.0 million in 2021.
Total Professional Services costs, which includes directors fees, decreased by $4.7 million or 53% in 2022 as compared to 2021 and increased by $3.8 million, or 77%, in 2021 as compared to 2020. Professional Services costs consists of legal and accounting, acquisition, and other professional services costs.
Total Professional Services costs, which consists of legal and accounting, acquisition, directors fees, and other professional services costs, increased by $3.1 million in 2023 as compared to 2022 and decreased by $4.7 million or 53% in 2022 as compared to 2021.
Aggregate investments totaled $1.3 billion, or 35% of total assets at December 31, 2022, as compared to $1.2 billion, or 35% of total assets at December 31, 2021.
Aggregate investments totaled $1.3 billion, or 36% of total assets at December 31, 2023, as compared to $1.3 billion, or 35% of total assets at December 31, 2022.
Long term debt was $49.2 million at December 31, 2022 as compared to $49.1 million for the year ended December 31, 2021.
Long term debt was $49.3 million at December 31, 2023 as compared to $49.2 million for the year ended December 31, 2022.
Net income per diluted share was $2.24 in 2022, as compared to $2.80 in 2021 and $2.32 for 2020. The Company’s return on average assets and return on average equity were 0.97% and 10.66%, respectively, in 2022, as compared to 1.29% and 12.05%, respectively, in 2021 and 1.22% and 10.80%, respectively, for 2020.
Net income per diluted share was $2.36 in 2023, as compared to $2.24 in 2022 and $2.80 for 2021. The Company’s return on average assets and return on average equity were 0.94% and 11.30%, respectively, in 2023, as compared to 0.97% and 10.66%, respectively, in 2022 and 1.29% and 12.05%, respectively, for 2021.
Overdraft income on both consumer and corporate accounts totaled $4.6 million (net of restitution) in 2022; $4.9 million in 2021 and $5.1 million in 2020. Debit card fees consists of interchange fees from our customers’ use of debit cards for electronic funds transactions.
Overdraft income on both consumer and corporate accounts totaled $5.3 million in 2023; $4.6 million (net of restitution) in 2022 and $4.9 million in 2021. Debit card fees (included in service charges on deposit accounts) consists of interchange fees from our customers’ use of debit cards for electronic funds transactions.
The Company’s balance of noninterest earning cash and balances due from correspondent banks totaled $72.8 million, or 2% of total assets at December 31, 2022, and $63.1 million, or 2% of total assets at December 31, 2021.
The Company’s balance of noninterest earning cash and balances due from correspondent banks totaled $73.7 million, or 2% of total assets at December 31, 2023, and $72.8 million, or 2% of total assets at December 31, 2022.
The following is a summary of the major factors that impacted the Company’s results of operations for the years presented in the consolidated financial statements. ● Net interest income improved by 1% in 2022 over 2021 due to both growth and mix of earning assets partially offset by an increase in the cost of interest-bearing liabilities, and 4% in 2021 over 2020, due 33 Table of Contents primarily to a lower cost of interest-bearing liabilities and growth in earning assets, partially offset by lower yields on earning assets.
The following is a summary of the major factors that impacted the Company’s results of operations for the years presented in the consolidated financial statements. ● Net interest income improved by 3% in 2023 over 2022, and by 1% in 2022 over 2021, due to both growth and mix of earning assets partially offset by an increase in the cost of interest-bearing liabilities.
The majority of the Company’s noninterest expense is comprised of operating costs that facilitate offering a full range of banking services to our customers. 35 Table of Contents Net Interest Income and Net Interest Margin Net interest income was $109.6 million in 2022 as compared to $109.0 million in 2021 and $104.8 million in 2020.
The majority of the Company’s noninterest expense is comprised of operating costs that facilitate offering a full range of banking services to our customers. Net Interest Income and Net Interest Margin Net interest income was $112.4 million in 2023 as compared to $109.6 million in 2022 and $109.0 million in 2021.
The 2022 versus 2021 volume variance is due mostly to increases in average balances, resulting from growth in investment portfolio balances, mostly in floating rate commercial loan obligations, partially offset by a decline in average loan balances.
The 2022 versus 2021 volume variance is due mostly to increases in average balances, resulting from growth in investment portfolio balances, mostly in floating rate CLOs, 39 Table of Contents partially offset by a decline in average loan balances.
With the provision for credit losses on loans and leases recorded in 2022 we were able to maintain our allowance for credit losses on loans and leases at a level that, in Management’s judgment, is adequate to absorb probable credit losses on loans and leases related to individually identified loans as well as probable credit losses in the remaining loan portfolio.
With the provision for credit losses on loans recorded in 2023 we were able to maintain our allowance for credit losses on loans at a level that, in Management’s judgment, is adequate to absorb expected credit losses over the remaining contractual life on loans related to individually identified loans as well as expected credit losses over the remaining contractual life in the remaining loan portfolio.
The Company’s net interest margin, which is tax-equivalent net interest income as a percentage of average interest-earning assets declined by 9 basis points to 3.47% in 2022, and declined by 39 basis points to 3.56% in 2021 as compared to 2020.
The Company’s net interest margin, which is tax-equivalent net interest income as a percentage of average interest-earning assets, declined by 10 basis points to 3.37% in 2023 and declined by nine basis points to 3.47% in 2022 as compared to 2021.
The Company’s tax-equivalent overhead efficiency ratio was 60.2% in 2022, 59.9% in 2021, and 57.2% in 2020. The overhead efficiency ratio represents total noninterest expense divided by the sum of fully tax-equivalent net interest and noninterest income, with the provision for loan and lease losses and investment gains/losses excluded from the equation.
The Company’s tax-equivalent overhead efficiency ratio was 63.9% in 2023, 60.2% in 2022, and 59.9% in 2021. The overhead efficiency ratio represents total noninterest expense divided by the sum of fully tax-equivalent net interest and noninterest income, with the provision for credit losses on loans and gains/losses excluded from the equation.
As demonstrated by the expansion of the lending teams both in 2022 and 2021, management remains focused on organic loan growth which totaled $292.2 million during 2022.
As demonstrated by the expansion of the lending teams both in 2023 and 2022, management remains focused on organic loan growth which totaled $185.3 million and $292.2 million, respectively during the years ending 2023 and 2022.
Interest credit rates on general account BOLI do not change frequently so the income has typically been fairly consistent with $1.0 million, of general account BOLI income recorded for all three years ending December 31, 2022, 2021, and 2020.
Interest credit rates on general account BOLI do not change frequently so the income has typically been fairly consistent with $0.9 million of general account BOLI income recorded for the year ending December 31, 2023 and $1.0 million record for the two ending December 31, 2022 and 2021.
The Company generally maintains a double leverage ratio of under 125%. The double leverage ratio was 119.9% at December 31, 2022 as compared to 118.1% at December 31, 2021.
The Company generally maintains a double leverage ratio of under 125%. The double leverage ratio was 121.2% at December 31, 2023 as compared to 119.9% at December 31, 2022.
Critical accounting estimates are those that involve the most complex and subjective decisions and assessments and have the greatest potential impact on the Company’s stated results of operations.
Actual results may differ from those estimates under divergent conditions. Critical accounting estimates are those that involve the most complex and subjective decisions and assessments and have the greatest potential impact on the Company’s stated results of operations.
The increase in noninterest expense in 2022 was due mostly to a $4.6 million increase in salary and benefits expense primarily for new loan production teams and a $0.7 million restitution payment to customers charged nonsufficient fund fees on representments in the past five 34 Table of Contents years, partially offset by lower legal costs, telecommunications, and a positive variance in director’s deferred compensation expense which is linked to the unfavorable changes in bank-owned life insurance income.
The increase in noninterest expense in 2022 was due mostly to a $4.6 million increase in salary and benefits expense primarily for new loan production teams and a $0.7 million restitution payment to customers charged nonsufficient fund fees on representments in the past five years, partially offset by lower legal costs, telecommunications, and a positive variance in director’s deferred compensation expense which is linked to the unfavorable changes in bank-owned life insurance income. ● The Company recorded income tax provisions of $11.6 million, $11.3 million and $14.2 million for the years ending 2023, 2022 and 2021 respectively, or 25% of pre-tax income.
Information concerning average balances and rates paid by deposit type for the past three fiscal years is contained in the Distribution, Rate, and Yield table located in the previous section under “Results of Operations–Net Interest Income and Net Interest Margin.” A 54 Table of Contents distribution of the Company’s deposits showing the period-end balance and percentage of total deposits by type is presented as of the dates noted in the following table: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Deposit Distribution ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (dollars in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2022 2021 2020 2019 2018 Interest bearing demand deposits ​ $ 150,875 ​ $ 129,783 ​ $ 109,938 ​ $ 91,212 ​ $ 101,243 Noninterest bearing demand deposits ​ ​ 1,088,199 ​ ​ 1,084,544 ​ ​ 943,664 ​ ​ 690,950 ​ ​ 662,527 NOW ​ ​ 490,707 ​ ​ 614,770 ​ ​ 558,407 ​ ​ 458,600 ​ ​ 434,483 Savings ​ ​ 456,980 ​ ​ 450,785 ​ ​ 368,420 ​ ​ 294,317 ​ ​ 283,953 Money market ​ ​ 139,795 ​ ​ 147,793 ​ ​ 131,232 ​ ​ 118,933 ​ ​ 123,807 Customer time deposits ​ ​ 399,608 ​ ​ 293,897 ​ ​ 412,945 ​ ​ 464,362 ​ ​ 460,327 Brokered deposits ​ ​ 120,000 ​ ​ 60,000 ​ ​ 100,000 ​ ​ 50,000 ​ ​ 50,000 Total deposits ​ $ 2,846,164 ​ $ 2,781,572 ​ $ 2,624,606 ​ $ 2,168,374 ​ $ 2,116,340 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Percentage of Total Deposits ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest bearing demand deposits ​ ​ 5.30% ​ ​ 4.67% ​ ​ 4.19% ​ ​ 4.21% ​ ​ 4.78% Noninterest bearing demand deposits ​ ​ 38.23% ​ ​ 38.99% ​ ​ 35.95% ​ ​ 31.86% ​ ​ 31.31% NOW ​ ​ 17.24% ​ ​ 22.10% ​ ​ 21.28% ​ ​ 21.15% ​ ​ 20.53% Savings ​ ​ 16.06% ​ ​ 16.21% ​ ​ 14.04% ​ ​ 13.57% ​ ​ 13.42% Money market ​ ​ 4.91% ​ ​ 5.31% ​ ​ 5.00% ​ ​ 5.48% ​ ​ 5.85% Customer time deposits ​ ​ 14.04% ​ ​ 10.57% ​ ​ 15.73% ​ ​ 21.42% ​ ​ 21.75% Brokered deposits ​ ​ 4.22% ​ ​ 2.16% ​ ​ 3.81% ​ ​ 2.31% ​ ​ 2.36% Total ​ ​ 100.00% ​ ​ 100.00% ​ ​ 100.00% ​ ​ 100.00% ​ ​ 100.00% ​ Deposit balances reflect net growth of $64.6 million, or 2%, in 2022 and $157.0 million, or 6%, during 2021.
Information concerning average balances and rates paid by deposit type for the past three fiscal years is contained in the Distribution, Rate, and Yield table located in the previous section under “Results of Operations–Net Interest Income and Net Interest Margin.” A distribution of the Company’s deposits showing the period-end balance and percentage of total deposits by type is presented as of the dates noted in the following table: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Deposit Distribution ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (dollars in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2023 2022 2021 2020 2019 Interest bearing demand deposits ​ $ 128,784 ​ $ 150,875 ​ $ 129,783 ​ $ 109,938 ​ $ 91,212 Noninterest bearing demand deposits ​ ​ 1,020,772 ​ ​ 1,088,199 ​ ​ 1,084,544 ​ ​ 943,664 ​ ​ 690,950 NOW ​ ​ 405,163 ​ ​ 490,707 ​ ​ 614,770 ​ ​ 558,407 ​ ​ 458,600 Savings ​ ​ 370,806 ​ ​ 456,980 ​ ​ 450,785 ​ ​ 368,420 ​ ​ 294,317 Money market ​ ​ 145,591 ​ ​ 139,795 ​ ​ 147,793 ​ ​ 131,232 ​ ​ 118,933 Customer time deposits ​ ​ 555,107 ​ ​ 399,608 ​ ​ 293,897 ​ ​ 412,945 ​ ​ 464,362 Brokered deposits ​ ​ 135,000 ​ ​ 120,000 ​ ​ 60,000 ​ ​ 100,000 ​ ​ 50,000 Total deposits ​ $ 2,761,223 ​ $ 2,846,164 ​ $ 2,781,572 ​ $ 2,624,606 ​ $ 2,168,374 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Percentage of Total Deposits ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest bearing demand deposits ​ ​ 4.66% ​ ​ 5.30% ​ ​ 4.67% ​ ​ 4.19% ​ ​ 4.21% Noninterest bearing demand deposits ​ ​ 36.98% ​ ​ 38.23% ​ ​ 38.99% ​ ​ 35.95% ​ ​ 31.86% NOW ​ ​ 14.67% ​ ​ 17.24% ​ ​ 22.10% ​ ​ 21.28% ​ ​ 21.15% Savings ​ ​ 13.43% ​ ​ 16.06% ​ ​ 16.21% ​ ​ 14.04% ​ ​ 13.57% Money market ​ ​ 5.27% ​ ​ 4.91% ​ ​ 5.31% ​ ​ 5.00% ​ ​ 5.48% Customer time deposits ​ ​ 20.10% ​ ​ 14.04% ​ ​ 10.57% ​ ​ 15.73% ​ ​ 21.42% Brokered deposits ​ ​ 4.89% ​ ​ 4.22% ​ ​ 2.16% ​ ​ 3.81% ​ ​ 2.31% Total ​ ​ 100.00% ​ ​ 100.00% ​ ​ 100.00% ​ ​ 100.00% ​ ​ 100.00% ​ Deposit balances reflected a decline of $84.9 million, or 3%, in 2023 and $64.6 million, or 2%, in 2022.
Capital Resources The Company had total shareholders’ equity of $303.6 million at December 31, 2022 as compared to $362.5 million at December 31, 2021.
Capital Resources The Company had total shareholders’ equity of $338.1 million at December 31, 2023 as compared to $303.6 million at December 31, 2022.
At December 31, 2022 and December 31, 2021, the Company had the following sources of primary and secondary liquidity (dollars in thousands): ​ ​ ​ ​ ​ ​ ​ Primary and Secondary Liquidity Sources ​ ​ December 31, 2022 ​ ​ December 31, 2021 Cash and due from banks ​ $ 77,131 ​ $ 257,528 Unpledged investment securities ​ ​ 1,097,164 ​ ​ 806,132 Excess pledged securities ​ ​ 43,096 ​ ​ 47,024 FHLB borrowing availability ​ ​ 718,842 ​ ​ 787,519 Unsecured lines of credit ​ ​ 237,000 ​ ​ 305,000 Funds available through fed discount window ​ ​ 42,278 ​ ​ 50,608 Totals ​ $ 2,215,511 ​ $ 2,253,811 ​ The Company’s primary liquidity ratio and net loans to deposits ratio was 40% and 72%, respectively, at December 31, 2022, as compared to internal policy guidelines of “greater than 15%” and “less than 95%.” Other liquidity ratios reviewed 59 Table of Contents periodically by Management and the Board include the Community Bank leverage ratio, net change in overnight position and wholesale funding to total assets (including ratios and sub-limits for the various components comprising wholesale funding).
At December 31, 2023 and December 31, 2022, the Company had the following sources of primary and secondary liquidity (dollars in thousands): ​ ​ ​ ​ ​ ​ ​ Primary and Secondary Liquidity Sources ​ ​ December 31, 2023 ​ ​ December 31, 2022 Cash and due from banks ​ $ 78,602 ​ $ 77,131 Unpledged investment securities ​ ​ 792,965 ​ ​ 1,097,164 Excess pledged securities ​ ​ 382,965 ​ ​ 43,096 FHLB borrowing availability ​ ​ 586,726 ​ ​ 718,842 Unsecured lines of credit ​ ​ 374,785 ​ ​ 237,000 Funds available through fed discount window ​ ​ 392,034 ​ ​ 42,278 Totals ​ $ 2,608,077 ​ $ 2,215,511 ​ The Company’s primary liquidity ratio and net loans to deposits ratio was 31% and 76%, respectively, at December 31, 2023, as compared to internal policy guidelines of “greater than 15%” and “less than 95%.” Other liquidity ratios reviewed periodically by Management and the Board include the Community Bank leverage ratio, net change in overnight position and wholesale funding to total assets (including ratios and sub-limits for the various components comprising wholesale funding).
Financial Condition Summary The Company’s assets totaled $3.6 billion at December 31, 2022 as compared to $3.4 billion at December 31, 2021. Total liabilities were $3.3 billion at December 31, 2022 as compared to $3.0 billion at the end of 2021, and shareholders’ equity totaled $325.7 million at December 31, 2022 compared to $362.5 million at December 31, 2021.
Financial Condition Summary The Company’s assets totaled $3.7 billion at December 31, 2023 as compared to $3.6 billion at December 31, 2022. Total liabilities were $3.4 billion at December 31, 2023 as compared to $3.3 billion at the end of 2022, and shareholders’ equity totaled $338.1 million at December 31, 2023 compared to $303.6 million at December 31, 2022.
Critical accounting areas are evaluated on an ongoing basis to ensure that the Company’s financial statements incorporate the most recent expectations with regard to those areas. ​ 32 Table of Contents The following table presents selected historical financial information concerning the Company, which should be read in conjunction with our audited consolidated financial statements, including the related notes, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere herein. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Selected Financial Data ​ ​ ​ ​ ​ ​ ​ ​ ​ (dollars in thousands, except per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of and for the years ended December 31, Operating Data 2022 2021 2020 Provision for income taxes ​ ​ 11,256 ​ ​ 14,187 ​ ​ 11,079 Net income ​ ​ 33,659 ​ ​ 43,012 ​ ​ 35,444 Selected Balance Sheet Summary ​ ​ ​ ​ ​ ​ ​ ​ ​ Total loans and leases, net ​ ​ 2,029,757 ​ ​ 1,973,605 ​ ​ 2,442,226 Total assets ​ ​ 3,608,590 ​ ​ 3,371,014 ​ ​ 3,220,742 Total deposits ​ ​ 2,846,164 ​ ​ 2,781,572 ​ ​ 2,624,606 Total liabilities ​ ​ 3,305,008 ​ ​ 3,008,520 ​ ​ 2,876,846 Total shareholders' equity ​ ​ 303,582 ​ ​ 362,494 ​ ​ 343,896 Net loans to total deposits ​ ​ 71.32% ​ ​ 70.95% ​ ​ 93.05% Per Share Data ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income per basic share ​ ​ 2.25 ​ ​ 2.82 ​ ​ 2.33 Net income per diluted share ​ ​ 2.24 ​ ​ 2.80 ​ ​ 2.32 Book value ​ ​ 20.01 ​ ​ 23.74 ​ ​ 22.35 Cash dividends ​ ​ 0.93 ​ ​ 0.87 ​ ​ 0.80 Weighted average common shares outstanding basic ​ ​ 14,955,756 ​ ​ 15,241,957 ​ ​ 15,216,749 Weighted average common shares outstanding diluted ​ ​ 15,022,755 ​ ​ 15,353,445 ​ ​ 15,280,325 Key Operating Ratios: ​ ​ ​ ​ ​ ​ ​ ​ ​ Performance Ratios: (1) ​ ​ ​ ​ ​ ​ ​ ​ ​ Return on average equity ​ ​ 10.66% ​ ​ 12.05% ​ ​ 10.80% Return on average assets ​ ​ 0.97% ​ ​ 1.29% ​ ​ 1.22% Average equity to average assets ratio ​ ​ 9.06% ​ ​ 10.72% ​ ​ 11.28% Net interest margin (tax-equivalent) ​ ​ 3.47% ​ ​ 3.56% ​ ​ 3.95% Efficiency ratio (tax-equivalent) (4) ​ ​ 60.16% ​ ​ 59.92% ​ ​ 57.18% Asset Quality Ratios: (1) ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-performing loans to total loans (2) ​ ​ 0.95% ​ ​ 0.23% ​ ​ 0.31% Non-performing assets to total loans and other real estate owned (2) ​ ​ 0.95% ​ ​ 0.23% ​ ​ 0.35% Net (recoveries) charge-offs to average loans ​ ​ 0.58% ​ ​ (0.01%) ​ ​ 0.04% Allowance for credit losses on loans and leases to total loans at period end ​ ​ 1.12% ​ ​ 0.72% ​ ​ 0.72% Allowance for credit losses on loans and leases to nonaccrual loans ​ ​ 117.78% ​ ​ 315.26% ​ ​ 233.46% Regulatory Capital Ratios: (3) ​ ​ ​ ​ ​ ​ ​ ​ ​ Tier 1 capital to adjusted average assets (leverage ratio) ​ ​ 10.30% ​ ​ 10.43% ​ ​ 10.50% (1) Asset quality ratios are end of period ratios.
Critical accounting areas are evaluated on an ongoing basis to ensure that the Company’s financial statements incorporate the most recent expectations with regard to those areas. 33 Table of Contents The following table presents selected historical financial information concerning the Company, which should be read in conjunction with our audited consolidated financial statements, including the related notes, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere herein. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Selected Financial Data ​ ​ ​ ​ ​ ​ ​ ​ ​ (dollars in thousands, except per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of and for the years ended December 31, Operating Data 2023 2022 2021 Net interest income ​ $ 112,405 ​ $ 109,615 ​ $ 109,026 Credit loss expense ​ $ 3,681 ​ $ 10,667 ​ $ (3,650) Noninterest income ​ $ 30,400 ​ $ 30,770 ​ $ 28,079 Noninterest expense ​ $ 92,660 ​ $ 84,803 ​ $ 83,556 Provision for income taxes ​ $ 11,620 ​ $ 11,256 ​ $ 14,187 Net income ​ $ 34,844 ​ $ 33,659 ​ $ 43,012 Selected Balance Sheet Summary ​ ​ ​ ​ ​ ​ ​ ​ ​ Total loans, net ​ $ 2,066,884 ​ $ 2,029,757 ​ $ 1,973,605 Total assets ​ $ 3,729,799 ​ $ 3,608,590 ​ $ 3,371,014 Total deposits ​ $ 2,761,223 ​ $ 2,846,164 ​ $ 2,781,572 Total liabilities ​ $ 3,391,702 ​ $ 3,305,008 ​ $ 3,008,520 Total shareholders' equity ​ $ 338,097 ​ $ 303,582 ​ $ 362,494 Net loans to total deposits ​ ​ 74.85% ​ ​ 71.32% ​ ​ 70.95% Per Share Data ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income per basic share ​ $ 2.37 ​ $ 2.25 ​ $ 2.82 Net income per diluted share ​ $ 2.36 ​ $ 2.24 ​ $ 2.80 Book value ​ $ 22.85 ​ $ 20.01 ​ $ 23.74 Cash dividends ​ $ 0.93 ​ $ 0.93 ​ $ 0.87 Weighted average common shares outstanding basic ​ ​ 14,706,141 ​ ​ 14,955,756 ​ ​ 15,241,957 Weighted average common shares outstanding diluted ​ ​ 14,737,870 ​ ​ 15,022,755 ​ ​ 15,353,445 Key Operating Ratios: ​ ​ ​ ​ ​ ​ ​ ​ ​ Performance Ratios: (1) ​ ​ ​ ​ ​ ​ ​ ​ ​ Return on average equity ​ ​ 11.30% ​ ​ 10.66% ​ ​ 12.05% Return on average assets ​ ​ 0.94% ​ ​ 0.97% ​ ​ 1.29% Average equity to average assets ratio ​ ​ 8.31% ​ ​ 9.06% ​ ​ 10.72% Net interest margin (tax-equivalent) ​ ​ 3.37% ​ ​ 3.47% ​ ​ 3.56% Efficiency ratio (tax-equivalent) (3) ​ ​ 63.90% ​ ​ 60.16% ​ ​ 59.92% Asset Quality Ratios: (1) ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-performing loans to total loans ​ ​ 0.38% ​ ​ 0.95% ​ ​ 0.23% Non-performing assets to total loans and other real estate owned ​ ​ 0.38% ​ ​ 0.95% ​ ​ 0.23% Net (recoveries) charge-offs to average loans ​ ​ 0.18% ​ ​ 0.58% ​ ​ (0.01%) Allowance for credit losses on loans to total loans at period end ​ ​ 1.12% ​ ​ 1.12% ​ ​ 0.72% Allowance for credit losses on loans to nonaccrual loans ​ ​ 294.30% ​ ​ 117.78% ​ ​ 315.26% Regulatory Capital Ratios: (2) ​ ​ ​ ​ ​ ​ ​ ​ ​ Tier 1 capital to adjusted average assets (leverage ratio) ​ ​ 10.32% ​ ​ 10.30% ​ ​ 10.43% (1) Asset quality ratios are end of period ratios.
The small increase resulted from the amortization of debt issuance costs. 56 Table of Contents The details of the Company’s short-term borrowings are presented in the table below, for the years noted: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Short-term Borrowings ​ ​ ​ ​ ​ ​ ​ ​ ​ (dollars in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2022 ​ 2021 ​ 2020 Repurchase Agreements ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at December 31 ​ $ 109,169 ​ $ 106,937 ​ $ 39,138 Average amount outstanding ​ ​ 110,387 ​ ​ 70,443 ​ ​ 34,614 Maximum amount outstanding at any month end ​ ​ 118,014 ​ ​ 106,937 ​ ​ 41,449 Average interest rate for the year ​ ​ 0.29% ​ ​ 0.30% ​ ​ 0.40% ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fed funds purchased ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at December 31 ​ $ 125,000 ​ $ — ​ $ 100,000 Average amount outstanding ​ ​ 16,980 ​ ​ 1,561 ​ ​ 1,918 Maximum amount outstanding at any month end ​ ​ 125,000 ​ ​ — ​ ​ 100,000 Average interest rate for the year ​ ​ 4.08% ​ ​ 0.06% ​ ​ 0.21% ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ FHLB advances ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at December 31 ​ $ 94,000 ​ $ — ​ $ 42,900 Average amount outstanding ​ ​ 30,728 ​ ​ 3,625 ​ ​ 54,244 Maximum amount outstanding at any month end ​ ​ 103,100 ​ ​ 5,000 ​ ​ 195,100 Average interest rate for the year ​ ​ 3.44% ​ ​ 0.06% ​ ​ 0.19% ​ Other Noninterest Bearing Liabilities Other liabilities are principally comprised of accrued interest payable, other accrued but unpaid expenses, and certain clearing amounts.
The small increase resulted from the amortization of debt issuance costs. 57 Table of Contents The details of the Company’s short-term borrowings are presented in the table below, for the years noted: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Short-term Borrowings ​ ​ ​ ​ ​ ​ ​ ​ ​ (dollars in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2023 ​ 2022 ​ 2021 Repurchase Agreements ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at December 31 ​ $ 107,121 ​ $ 109,169 ​ $ 106,937 Average amount outstanding ​ ​ 90,294 ​ ​ 110,387 ​ ​ 70,443 Maximum amount outstanding at any month end ​ ​ 107,121 ​ ​ 118,014 ​ ​ 106,937 Average interest rate for the year ​ ​ 0.27% ​ ​ 0.29% ​ ​ 0.30% ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fed funds purchased ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at December 31 ​ $ 130,000 ​ $ 125,000 ​ $ — Average amount outstanding ​ ​ 94,815 ​ ​ 16,980 ​ ​ 1,561 Maximum amount outstanding at any month end ​ ​ 165,000 ​ ​ 125,000 ​ ​ — Average interest rate for the year ​ ​ 5.25% ​ ​ 4.08% ​ ​ 0.06% ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ FHLB advances ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at December 31 ​ $ 150,500 ​ $ 94,000 ​ $ — Average amount outstanding ​ ​ 130,622 ​ ​ 30,728 ​ ​ 3,625 Maximum amount outstanding at any month end ​ ​ 362,700 ​ ​ 103,100 ​ ​ 5,000 Average interest rate for the year ​ ​ 5.40% ​ ​ 3.44% ​ ​ 0.06% ​ Other Noninterest Bearing Liabilities Other liabilities are principally comprised of accrued interest payable, other accrued but unpaid expenses, and certain clearing amounts.
Investment securities that were pledged as collateral for Federal Home Loan Bank borrowings, repurchase agreements, public deposits and other purposes as required or permitted by law totaled $183.5 million at December 31, 2022 and $167.2 million at December 31, 2021, leaving $1.1 billion in unpledged debt securities at December 31, 2022 and $806.1 million at December 31, 2021.
Investment securities that were pledged as collateral for Federal Home Loan Bank borrowings, repurchase agreements, public deposits and other purposes as required or permitted by law totaled $543.9 million at December 31, 2023 and $165.8 million at December 31, 2022, leaving $793.0 million in unpledged debt securities at December 31, 2023 and $1.1 billion in unpledged debt securities at December 31, 2022.
Provision for Loan and Lease Losses and Provision for Credit Losses Credit risk is inherent in the business of making loans. The Company sets aside an allowance for credit losses on loans and leases, a contra-asset account, through periodic charges to earnings which are reflected in the income statement as the provision for loan and lease losses.
The Company sets aside an allowance for credit losses on loans, a contra-asset account, through periodic charges to earnings which are reflected in the income statement as the provision for credit losses on loans.
The Company recorded a provision for credit losses on loans and leases of $10.9 million in 2022; a benefit for loan and lease losses of $3.7 million in 2021, and a provision for loan and lease losses of $8.6 million in 2020.
The Company recorded a provision for credit losses on loans of $4.1 million in 2023; a provision for loan losses of $10.9 million in 2022, and a benefit for loan losses of $3.7 million in 2021.
The increase in average earning assets in 2022 over 2021 was due primarily to purchases of investment securities, partially offset by decreases in the average balance of loans.
The net interest margin in 2023 was 10 basis points lower than 2022. The increase in average earning assets in 2022 over 2021 was due primarily to purchases of investment securities, partially offset by decreases in the average balance of loans.
Total non-deposit interest-bearing liabilities increased $221.5 million, or 116%, in 2022, due primarily to increases in overnight fed funds purchased, customer repurchase agreements, and FHLB advances. Non-deposit interest-bearing liabilities decreased $25.8 million, or 12%, in 2021, due primarily to decreases in overnight fed funds purchased, and FHLB advances.
Total non-deposit interest-bearing liabilities increased $139.7 million, or 28%, in 2023, due primarily to increases in term FHLB advances. Non-deposit interest-bearing liabilities increased $221.5 million, or 116%, in 2022, due primarily to increases in overnight fed funds purchased, customer repurchase agreements, and FHLB advances.
See Note 3, Investment Securities for additional information. 51 Table of Contents ​ ​ The following Investment Portfolio table reflects the carrying amount for each primary category of investment securities for the past three years: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Investment Portfolio-Available for Sale ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (dollars in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, ​ ​ 2022 ​ 2021 ​ 2020 ​ Carrying Amount Percent Carrying Amount Percent Carrying Amount Percent Available for sale ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. government agencies ​ $ 50,599 ​ ​ 3.98% ​ $ 1,574 ​ ​ 0.16% ​ $ 1,800 ​ ​ 0.33% Mortgage-backed securities ​ ​ 122,532 ​ ​ 9.63% ​ ​ 306,727 ​ ​ 31.52% ​ ​ 314,435 ​ ​ 57.80% State and political subdivisions ​ ​ 205,980 ​ ​ 16.20% ​ ​ 304,268 ​ ​ 31.25% ​ ​ 227,739 ​ ​ 41.87% Corporate bonds ​ ​ 57,435 ​ ​ 4.52% ​ ​ 28,529 ​ ​ 2.93% ​ ​ — ​ ​ — Collateralized loan obligations ​ ​ 498,377 ​ ​ 39.19% ​ ​ 332,216 ​ ​ 34.13% ​ ​ — ​ ​ — Total available for sale ​ ​ 934,923 ​ ​ 73.51% ​ ​ 973,314 ​ ​ 100.00% ​ ​ 543,974 ​ ​ 100.00% Held to maturity ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. government agencies ​ ​ 6,047 ​ ​ 0.48% ​ ​ — ​ ​ — ​ ​ — ​ ​ — Mortgage-backed securities ​ ​ 157,473 ​ ​ 12.38% ​ ​ — ​ ​ — ​ ​ — ​ ​ — State and political subdivisions ​ ​ 173,361 ​ ​ 13.63% ​ ​ — ​ ​ — ​ ​ — ​ ​ — Total held to maturity ​ ​ 336,881 ​ ​ 26.49% ​ ​ — ​ ​ — ​ ​ — ​ ​ — Total securities ​ $ 1,271,804 ​ ​ 100.00% ​ $ 973,314 ​ ​ 100.00% ​ $ 543,974 ​ ​ 100.00% ​ Based on an analysis of its available for sale securities with unrealized losses as of December 31, 2022, The Company determined their decline in value was unrelated to credit loss and was primarily the result of interest rate changes and market spreads subsequent to acquisition.
The following Investment Portfolio table reflects the carrying amount for each primary category of investment securities for the past three years: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Investment Portfolio ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (dollars in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, ​ ​ 2023 ​ 2022 ​ 2021 ​ Carrying Amount Percent Carrying Amount Percent Carrying Amount Percent Available for sale ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. government agencies ​ $ 102,749 ​ ​ 7.67% ​ $ 50,599 ​ ​ 3.98% ​ $ 1,574 ​ ​ 0.16% Mortgage-backed securities ​ ​ 99,544 ​ ​ 7.43% ​ ​ 122,532 ​ ​ 9.63% ​ ​ 306,727 ​ ​ 31.51% State and political subdivisions ​ ​ 194,206 ​ ​ 14.50% ​ ​ 205,980 ​ ​ 16.20% ​ ​ 304,268 ​ ​ 31.26% Corporate bonds ​ ​ 52,040 ​ ​ 3.89% ​ ​ 57,435 ​ ​ 4.52% ​ ​ 28,529 ​ ​ 2.93% Collateralized loan obligations ​ ​ 570,662 ​ ​ 42.61% ​ ​ 498,377 ​ ​ 39.18% ​ ​ 332,216 ​ ​ 34.13% Total available for sale ​ ​ 1,019,201 ​ ​ 76.10% ​ ​ 934,923 ​ ​ 73.51% ​ ​ 973,314 ​ ​ 100.00% Held to maturity ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. government agencies ​ ​ 5,522 ​ ​ 0.41% ​ ​ 6,047 ​ ​ 0.48% ​ ​ — ​ ​ — Mortgage-backed securities ​ ​ 142,295 ​ ​ 10.62% ​ ​ 157,473 ​ ​ 12.38% ​ ​ — ​ ​ — State and political subdivisions ​ ​ 172,240 ​ ​ 12.86% ​ ​ 173,361 ​ ​ 13.63% ​ ​ — ​ ​ — Total held to maturity ​ ​ 320,057 ​ ​ 23.90% ​ ​ 336,881 ​ ​ 26.49% ​ ​ — ​ ​ — Total securities ​ $ 1,339,258 ​ ​ 100.00% ​ $ 1,271,804 ​ ​ 100.00% ​ $ 973,314 ​ ​ 100.00% ​ Based on an analysis of its available for sale securities with unrealized losses as of December 31, 2023, the Company determined their decline in value was unrelated to credit loss and was primarily the result of interest rate changes and market spreads subsequent to acquisition.

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