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What changed in COMMUNITY FINANCIAL SYSTEM, INC.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of COMMUNITY FINANCIAL SYSTEM, INC.'s 2023 and 2024 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 2024 report.

+620 added−551 removedSource: 10-K (2025-02-28) vs 10-K (2023-12-31)

Top changes in COMMUNITY FINANCIAL SYSTEM, INC.'s 2024 10-K

620 paragraphs added · 551 removed · 459 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

72 edited+49 added−15 removed80 unchanged
Biggest changeIf these or other regulations are adopted in a form similar to what has been proposed, they will impose limitations on the manner in which the Company may structure compensation for its employees, which could adversely affect the Company’s ability to hire, retain and motivate key employees.
Biggest changeIf these or other regulations are adopted in a form similar to what has been proposed, they will impose limitations on the manner in which the Company may structure compensation for its employees, which could adversely affect the Company’s ability to hire, retain and motivate key employees. 11 Table of Contents The ongoing effects of the Dodd-Frank Act, as well as the recent and possible future changes to the regulatory framework as a result of the Economic Growth Act and future proposals make it difficult to assess the overall financial impact of the Dodd-Frank Act and related regulatory developments on the Company and the banking industry.
The Company believes that the local character of its business, knowledge of the customers and their needs, and its comprehensive retail and business products, together with responsive decision-making at the branch, regional levels and its digital banking service offerings, enable the Bank to compete effectively in its geographic market.
The Company believes that the local character of its business, knowledge of the customers and their needs, and its comprehensive retail and business products, together with responsive decision-making at the branch and regional levels and its digital banking service offerings, enable the Bank to compete effectively in its geographic market.
As the estimated loss to the DIF will be periodically adjusted the FDIC could cease collection early, if the FDIC has collected enough to recover actual or estimated losses, extend the special assessment collection period one or more quarters beyond the initial eight-quarter collection period, if actual or estimated losses exceed the amounts collected, and impose a final shortfall special assessment on a one-time basis after certain receiverships terminate, if actual losses exceed the amounts collected.
As the estimated loss to the DIF will be periodically adjusted the FDIC could cease collection early, if the FDIC has collected enough to recover actual or estimated losses, extend the special assessment collection period one or more quarters beyond the initial collection period, if actual or estimated losses exceed the amounts collected, and impose a final shortfall special assessment on a one-time basis after certain receiverships terminate, if actual losses exceed the amounts collected.
The Company’s business philosophy is to operate as a diversified financial services enterprise providing a broad array of banking and other financial services to retail, commercial, institutional and municipal customers. The Company is a registered financial holding company which wholly-owns two significant subsidiaries: Community Bank, N.A. (the “Bank” or “CBNA”), and Benefit Plans Administrative Services, Inc. (“BPAS”).
The Company’s business philosophy is to operate as a diversified financial services enterprise providing a broad array of banking and other financial services to retail, commercial, institutional and governmental customers. The Company is a registered financial holding company which wholly-owns two significant subsidiaries: Community Bank, N.A. (the “Bank” or “CBNA”), and Benefit Plans Administrative Services, Inc. (“BPAS”).
In order to compete with other financial service providers, the Company stresses the community nature of its operations and the development of profitable customer relationships across all lines of business. The Company’s employee benefit trust and plan administration business competes on a national scale and provides geographic diversification for the Company.
In order to compete with other financial service providers, the Company stresses the community nature of its operations and the development of profitable customer relationships across all lines of business. The Company’s employee benefits, trust and plan administration business competes on a national scale and provides geographic diversification for the Company.
Karaivanov ​ 42 ​ Director, President and Chief Executive Officer. Mr. Karaivanov assumed his current position on January 1, 2024. He previously served as Executive Vice President and Chief Operating Officer from October 2022 to December 2023 and Executive Vice President of Financial Services and Corporate Development from June 2021 to September 2022.
Karaivanov ​ 43 ​ Director, President and Chief Executive Officer. Mr. Karaivanov assumed his current position on January 1, 2024. He previously served as Executive Vice President and Chief Operating Officer from October 2022 to December 2023 and Executive Vice President of Financial Services and Corporate Development from June 2021 to September 2022.
Prior to joining the Company, he was the Managing Director of Lazard Middle Market’s Financial Institutions Group from June 2018 through June 2021. Prior to Lazard, he was the Managing Director of RBC Capital Markets’ Financial Institutions Group from April 2011 through June 2018. Joseph E. Sutaris ​ 56 ​ Executive Vice President and Chief Financial Officer. Mr.
Prior to joining the Company, he was the Managing Director of Lazard Middle Market’s Financial Institutions Group from June 2018 through June 2021. Prior to Lazard, he was the Managing Director of RBC Capital Markets’ Financial Institutions Group from April 2011 through June 2018. Joseph E. Sutaris ​ 57 ​ Executive Vice President and Chief Financial Officer. Mr.
The Bank is well capitalized under regulatory standards administered by the OCC. For additional information on our capital requirements see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Shareholders’ Equity and Regulatory Capital” and Note O to the Financial Statements.
The Bank is well capitalized under regulatory standards administered by the OCC. For additional information on the Company’s capital requirements see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Shareholders’ Equity and Regulatory Capital” and Note O to the Financial Statements.
As of December 31, 2023, BPAS owns five subsidiaries: Benefit Plans Administrative Services, LLC (“BPA”), a provider of defined contribution plan administration services; Northeast Retirement Services, LLC (“NRS”), a provider of institutional transfer agency, master recordkeeping services, fund administration, trust, and retirement plan services; BPAS Actuarial & Pension Services, LLC (“BPAS-APS”), a provider of actuarial and benefit consulting services; BPAS Trust Company of Puerto Rico, a Puerto Rican trust company; and Hand Benefits & Trust Company (“HB&T”), a provider of collective investment fund administration and institutional trust services.
As of December 31, 2024, BPAS owns five subsidiaries: Benefit Plans Administrative Services, LLC (“BPA”), a provider of defined contribution plan administration services; Northeast Retirement Services, LLC (“NRS”), a provider of institutional transfer agency, master recordkeeping services, fund administration, trust, and retirement plan services; BPAS Actuarial & Pension Services, LLC (“BPAS-APS”), a provider of actuarial and benefit consulting services; BPAS Trust Company of Puerto Rico, a provider of trust and benefit plan administration services; and Hand Benefits & Trust Company (“HB&T”), a provider of collective investment fund administration and institutional trust services.
The Bank was in compliance with the rules and requirements of the FHLB at December 31, 2023. Deposit Insurance Deposits of the Bank are insured up to the applicable limits by the Deposit Insurance Fund (“DIF”) and are subject to deposit insurance assessments to maintain the DIF.
The Bank was in compliance with the rules and requirements of the FHLB at December 31, 2024. Deposit Insurance Deposits of the Bank are insured up to the applicable limits by the Deposit Insurance Fund (“DIF”) and are subject to deposit insurance assessments to maintain the DIF.
The Capital Rules do not change the total risk-based PCA capital requirement for any capital category. The Capital Rules prescribe a standardized approach for risk weighted-assets that expands the risk-weight categories from the four Basel I-derived categories (0%, 20%, 50% and 100%) to a larger and more risk-sensitive number of categories, depending on the nature of the asset.
The Capital Rules do not change the total risk-based PCA capital requirement for any capital category. 12 Table of Contents The Capital Rules prescribe a standardized approach for risk weighted-assets that expands the risk-weight categories from the four Basel I-derived categories (0%, 20%, 50% and 100%) to a larger and more risk-sensitive number of categories, depending on the nature of the asset.
The GLB Act requires all financial institutions to adopt privacy policies, restrict the sharing of nonpublic customer data with nonaffiliated parties and establishes procedures and practices to protect customer data from unauthorized access.
The GLB Act requires all financial institutions to adopt privacy policies, restrict the sharing of nonpublic customer data with nonaffiliated parties and establish procedures and practices to protect customer data from unauthorized access.
To the extent the Bank is in need of capital, the Company could be expected to provide additional capital, including borrowings from the FRB for such purpose. Both the Company and the Bank are subject to extensive supervision and regulation, which focus on, among other things, the protection of depositors’ funds.
To the extent the Bank is in need of regulatory capital, the Company would be expected to provide additional capital, including borrowings from the FRB for such purpose. Both the Company and the Bank are subject to extensive supervision and regulation, which focus on, among other things, the protection of depositors’ funds.
The Bank has created policies and procedures to comply with these consumer protection requirements. 12 Table of Contents The CFPB has implemented the ability-to-repay and qualified mortgage (QM) provisions of the Truth in Lending Act (the “QM Rule”) and has recently taken steps to modify the QM Rule.
The Bank has created policies and procedures to comply with these consumer protection requirements. 13 Table of Contents The CFPB has implemented the ability-to-repay and qualified mortgage (QM) provisions of the Truth in Lending Act (the “QM Rule”) and has taken steps to modify the QM Rule.
The Company offers a wide range of learning and development programs that support a broad scope of the Company’s talent development initiatives, making continuous learning a part of each employee’s relationship with the Company in a growth-oriented environment.
The Company offers a wide range of learning and development programs, both internally and externally, that support a broad scope of the Company’s talent development initiatives making continuous learning a part of each employee’s relationship with the Company in a growth-oriented environment.
Wealth Management Services Through the Bank’s Nottingham Trust division, CISI, Carta Group, Nottingham, and Wealth Partners, the Company provides wealth management, retirement planning, higher educational planning, fiduciary, risk management, trust services and personal financial planning services. The Company offers investment alternatives including stocks, bonds, exchange-traded funds, mutual funds, insurance and advisory products.
Wealth Management Services Through the Bank’s Nottingham Trust division, CISI, Carta Group, Nottingham, and Wealth Partners, the Company provides wealth management, retirement planning, higher educational planning, fiduciary, risk management, trust services and personal financial planning services. The Company offers a range of investment products including stocks, bonds, exchange-traded funds, mutual funds, insurance and advisory products.
As of December 31, 2023, the Bank operates 193 full-service branches and 12 drive-thru only locations throughout 42 counties of Upstate New York, six counties of Northeastern Pennsylvania, 12 counties of Vermont, and one county of Western Massachusetts, offering a range of commercial and retail banking services. The Bank owns the following operating subsidiaries: The Carta Group, Inc.
As of December 31, 2024, the Bank operates 185 full-service branches and 11 drive-thru only locations throughout 42 counties of Upstate New York, six counties of Northeastern Pennsylvania, 12 counties of Vermont, and one county of Western Massachusetts, offering a range of commercial and retail banking services. The Bank owns the following operating subsidiaries: The Carta Group, Inc.
The Dodd-Frank Act also weakens the federal preemption rules that are applicable to national banks and gives attorney generals for the states certain powers to enforce federal consumer protection laws.
The Dodd-Frank Act also clarified the federal preemption rules that are applicable to national banks and gives state attorney generals for the states certain powers to enforce federal consumer protection laws.
Excluding the $1.5 million expense accrual associated with the special assessment, FDIC insurance expense in 2023 totaled $8.0 million, compared to $5.5 million in 2022 and $4.1 million in 2021. 9 Table of Contents Under the Federal Deposit Insurance Act, if the FDIC finds that an institution has engaged in unsafe and unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC, the FDIC may determine that such violation or unsafe or unsound practice or condition require the termination of deposit insurance.
Excluding the expense accruals associated with the special assessment, FDIC insurance expense in 2024 totaled $8.9 million, compared to $8.0 million in 2023 and $5.5 million in 2022. 9 Table of Contents Under the Federal Deposit Insurance Act (“FDIA”), if the FDIC finds that an institution has engaged in unsafe and unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC, the FDIC may determine that such violation or unsafe or unsound practice or condition require the termination of deposit insurance.
Workforce planning sessions are conducted periodically across all our business areas to ensure market competitive pay and staff development actions that support our commitment to the development of our employees. ​ Growth and Development The Company continues to broaden the scope of its talent development initiatives across its widening geographically diverse footprint in order to sustain a value-driven and growth-oriented environment where employees can perform at their peak and the next generation of leaders are prepared to lead.
The Company conducts workforce planning sessions periodically across all business areas to ensure market competitive pay for employees and actions to support commitment to the professional development of employees. ​ Growth and Development The Company continues to broaden the scope of its talent development initiatives across its widening geographically diverse footprint in order to sustain a value-driven and growth-oriented environment where employees can perform at their peak and the next generation of leaders are prepared to lead.
Aggregate assets acquired were $5.1 million, including $4.9 million of customer list intangible assets and the Company recorded goodwill of $3.0 million. ​ 3 Table of Contents Axiom Realty Group On March 1, 2023, the Company, through its subsidiary CBNA, completed the acquisition of certain assets of Axiom Realty Group, which includes Axiom Capital Corp., Axiom Realty Management, LLC and Axiom Realty Advisors, LLC (collectively referred to as “Axiom”), a commercial real estate finance and advisory firm, for $1.8 million in cash.
Net assets acquired were $4.5 million, including $5.5 million of customer list intangible assets, and the Company recorded $4.4 million of goodwill in conjunction with the acquisition. 2023 – Axiom Realty Group On March 1, 2023, the Company, through its subsidiary CBNA, completed the acquisition of certain assets of Axiom Realty Group, which includes Axiom Capital Corp., Axiom Realty Management, LLC and Axiom Realty Advisors, LLC (collectively referred to as “Axiom”), a commercial real estate finance and advisory firm, for $1.8 million in cash.
Under the assessment rate schedule effective for 2023, which increased two basis points from the prior year, the initial base assessment rate for large and highly complex insured depository institutions ranges from five to 32 basis points, and the total base assessment rate, after applying the unsecured debt and brokered deposit adjustments, ranges from two and one-half to 42 basis points.
Under the assessment rate schedule effective for 2024, the initial base assessment rate for large and highly complex insured depository institutions ranges from five to 32 basis points, and the total base assessment rate, after applying the unsecured debt and brokered deposit adjustments, ranges from two and one-half to 42 basis points.
In connection with the merger, the Company added eight full-service offices to its branch service network and acquired approximately $583.6 million of identifiable assets, including $436.8 million of loans, $11.3 million of investment securities and $8.0 million of core deposit intangibles, as well as $522.3 million of deposits. Goodwill of $42.1 million was recognized as a result of the merger.
In connection with the merger, the Company added eight full-service offices to its branch service network and acquired approximately $583.6 million of identifiable assets, including $436.8 million of loans, $11.3 million of investment securities and $8.0 million of core deposit intangibles, as well as $522.3 million of deposits.
USA Patriot Act The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (“USA Patriot Act”) imposes obligations on U.S. financial institutions, including banks and broker-dealer subsidiaries, to implement policies, procedures and controls which are reasonably designed to detect and report instances of money laundering and the financing of terrorism.
Compliance with these requirements may begin on January 1, 2026. ​ USA Patriot Act The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (“USA Patriot Act”) imposes obligations on U.S. financial institutions, including banks and broker-dealer subsidiaries, to implement policies, procedures and controls which are reasonably designed to detect and report instances of money laundering and the financing of terrorism.
Significant recent CFPB developments that may affect operations and compliance costs include: ● continued focus on fair lending, including promoting racial and economic equity for underserved, vulnerable and marginalized communities; ● focused efforts on enforcing certain compliance obligations the CFPB deems a priority, such as automobile loan servicing, debt collection, deposit, overdraft and other services fees, mortgage origination and servicing, and remittances, among others; and ● rulemaking plans concerning, among others, overdrafts, interchange fees, consumers’ access to their financial information and requirements for financial institutions to collect, report and make public certain information concerning credit applications made by women-owned, minority-owned and small businesses. ​ The CFPB has broad powers to supervise and enforce consumer protection laws, including laws that apply to banks in order to prohibit unfair, deceptive or abusive acts or practices (“UDAAP”).
Significant recent CFPB developments that may affect operations and compliance costs include: ● continued focus on fair lending, including promoting racial and economic equity for underserved, vulnerable and marginalized communities; ● focused efforts on enforcing certain compliance obligations the CFPB deems a priority, such as automobile loan servicing, debt collection, deposit, overdraft and other services fees, mortgage origination and servicing, and remittances, among others; and ● rulemaking plans concerning, among others, overdrafts, consumers’ access to their financial information and requirements for financial institutions to collect, and publicly report, certain demographic information concerning some business credit applicants, loan approvals, and denials. ​ The CFPB has broad powers to supervise and enforce consumer protection laws, including laws that apply to banks in order to prohibit unfair, deceptive or abusive acts or practices (“UDAAP”).
Item 1. Business Community Bank System, Inc. (the “Company”) was incorporated on April 15, 1983, under the Delaware General Corporation Law. Its principal office is located at 5790 Widewaters Parkway, DeWitt, New York 13214.
Item 1. Business Community Financial System, Inc. (the “Company”) was incorporated on April 15, 1983, under the Delaware General Corporation Law. Its principal office is located at 5790 Widewaters Parkway, DeWitt, New York 13214. The Company was formerly named Community Bank System, Inc. until May 15, 2024.
Compensation and Benefits ​ The success and growth of the Company’s business is largely dependent on its ability to attract, develop, and retain a population of talented and high-performing employees with a diversity of background and skill sets at all levels of our organization.
Compensation and Benefits ​ The success and growth of the Company’s business is largely dependent on its ability to attract, develop, and retain a population of skilled and high-performing employees with varied backgrounds and skill sets at all levels of the organization.
The Bank’s FDIC insurance for 2023 was based on assessment rates ranging between five and six basis points compared to assessment rates ranging between three and four basis points for 2022.
The Bank’s FDIC insurance for 2024 was based on assessment rates ranging between five and seven basis points compared to assessment rates ranging between five and six basis points for 2023.
Banking institutions that do not maintain a capital conservation buffer of 2.5% or more will face constraints on dividends, common share repurchases and incentive compensation based on the amount of the shortfall. 11 Table of Contents The Capital Rules provide for a number of deductions from and adjustments to CET1.
The capital conservation buffer is designed to absorb losses during periods of economic stress. Banking institutions that do not maintain a capital conservation buffer of 2.5% or more will face constraints on dividends, common share repurchases and incentive compensation based on the amount of the shortfall. The Capital Rules provide for a number of deductions from and adjustments to CET1.
The special assessment is anticipated to be collected over eight quarterly assessment periods beginning in 2024 at an annual rate of approximately 13.4 basis points of uninsured deposits that exceeded $5 billion as of December 31, 2022.
As of December 31, 2024, the special assessment is anticipated to be collected over ten quarterly assessment periods that began in 2024 at an annual rate of approximately 13.4 basis points of uninsured deposits that exceeded $5 billion as of December 31, 2022 for the first eight quarterly assessment periods, and an annual rate of approximately 6.8 basis points of uninsured deposits that exceeded $5 billion as of December 31, 2022 for the last two quarterly assessment periods.
The Company’s employee base is concentrated in New York, Pennsylvania and New England where the Bank maintains its retail bank branch presence, with approximately 2,087 employees in New York, 269 in Pennsylvania, and 287 in Vermont and Massachusetts. Approximately 206 of the Company’s employee base is located outside of its retail banking footprint.
The Company’s employee base is concentrated in New York, Pennsylvania and New England where the Bank maintains its retail bank branch presence, with approximately 2,115 employees in New York, 279 in Pennsylvania, and 309 in Vermont, Massachusetts and New Hampshire. Approximately 215 of the Company’s employee base is located outside of its retail banking footprint.
A violation of the consumer protection and privacy laws, and in particular UDAAP, could have serious legal, financial, and reputational consequences. ​ 10 Table of Contents The final rules issued by the FRB, SEC, OCC, FDIC, and Commodity Futures Trading Commission implementing Section 619 of the Dodd-Frank Act (commonly known as the Volcker Rule) prohibit insured depository institutions and companies affiliated with insured depository institutions from (1) engaging in short-term proprietary trading of certain securities, derivatives, commodity futures and options on these instruments, for their own account and (2) sponsoring certain covered funds, subject to certain limited exceptions.
The final rules issued by the FRB, SEC, OCC, FDIC, and Commodity Futures Trading Commission implementing Section 619 of the Dodd-Frank Act (commonly known as the Volcker Rule) prohibit insured depository institutions and companies affiliated with insured depository institutions from (1) engaging in short-term proprietary trading of certain securities, derivatives, commodity futures and options on these instruments, for their own account and (2) sponsoring certain covered funds, subject to certain limited exceptions.
The Company recorded a $1.5 million expense accrual in 2023 associated with this special assessment.
The Company recorded a $0.2 million and a $1.5 million expense accrual associated with this special assessment in 2024 and 2023, respectively.
The Company recorded a $1.2 million customer list intangible and recognized $0.6 million of goodwill in conjunction with the acquisition. ​ Elmira Savings Bank On May 13, 2022, the Company completed its merger with Elmira Savings Bank (“Elmira”), a New York State chartered savings bank headquartered in Elmira, New York, for $82.2 million in cash.
Aggregate assets acquired were $5.2 million, including $5.0 million of customer list intangible assets, and the Company recorded goodwill of $3.0 million. 2022 – Elmira Savings Bank On May 13, 2022, the Company completed its merger with Elmira Savings Bank (“Elmira”), a New York State chartered savings bank headquartered in Elmira, New York, for $82.2 million in cash.
The Company paid $2.9 million in cash and recorded a $1.4 million customer list intangible asset and $1.5 million of goodwill in conjunction with the acquisition. 4 Table of Contents Services Banking The Bank is a community bank committed to the philosophy of serving the financial needs of customers in local communities.
The Company recorded a $2.9 million customer list intangible asset and a $0.1 million intangible asset for a noncompete agreement and recognized $0.5 million of goodwill in conjunction with the acquisitions. Services Banking The Bank is a community bank committed to the philosophy of serving the financial needs of customers in local communities.
The rule does not govern overdraft fees on the payment of checks and certain other forms of bill payments. The Bank Secrecy Act The Bank Secrecy Act (“BSA”) requires all financial institutions, including banks and securities broker-dealers, to, among other things, establish a risk-based system of internal controls reasonably designed to prevent money laundering and the financing of terrorism.
The Bank Secrecy Act The Bank Secrecy Act (“BSA”) requires all financial institutions, including banks and securities broker-dealers, to, among other things, establish a risk-based system of internal controls reasonably designed to prevent money laundering and the financing of terrorism.
Insurance Services Through OneGroup, the Company offers personal and commercial lines of insurance and other risk management products and services. In addition, OneGroup offers employee benefit related services. OneGroup represents many leading and specialty insurance companies. Segment Information The Company has identified three reportable operating business segments: Banking, Employee Benefit Services and All Other.
Insurance Services Through OneGroup, the Company offers personal and commercial lines of insurance and other risk management products and services. In addition, OneGroup offers employee benefit related services. OneGroup represents many leading and specialty insurance companies.
Culture and Diversity and Attracting a Talented Workforce The Company is committed to fostering a diverse and inclusive environment where there is a sense of purpose, belonging, and work ownership, driven by our core values and service to our customers. We aspire to empower our workforce to achieve their full potential.
Culture and Attracting a Talented Workforce The Company is committed to fostering an inclusive environment where there is a sense of purpose, belonging, and work ownership driven by the Company’s core values and service to customers.
As of December 31, 2023, the Company had 2,849 total employees, which included 2,687 full-time employees and 162 part-time and temporary employees.
As of December 31, 2024, the Company had 2,918 total employees, which included 2,730 full-time employees and 188 part-time and temporary employees.
Prior to joining the Company, she served as the Chief Human Resources Officer of HSBC US from February 2016 through September 2021 and as its Senior Vice President - Talent Acquisition from May 2009 through February 2016. Michael N. Abdo ​ 46 ​ Executive Vice President and General Counsel. Mr. Abdo assumed his current position in July 2022.
She joined the Company as Executive Vice President and Chief Human Resources Officer on October 1, 2021. Prior to joining the Company, she served as the Chief Human Resources Officer of HSBC US from February 2016 through September 2021 and as its Senior Vice President - Talent Acquisition from May 2009 through February 2016. Michael N.
Anti-Money Laundering Act of 2020 The Anti-Money Laundering Act of 2020 (“AMLA”) amends the BSA and was enacted in January 2021. The AMLA was intended to reform and modernize U.S. bank secrecy and anti-money laundering laws. The Company has and will continue to review and monitor its anti-money laundering program to ensure it complies with the provisions of the AMLA.
Anti-Money Laundering Act of 2020 The Anti-Money Laundering Act of 2020 (“AMLA”) amends the BSA and was enacted in January 2021. The AMLA was intended to reform and modernize U.S. bank secrecy and anti-money laundering laws.
In addition, the Equal Credit Opportunity Act and the Fair Housing Act prohibits discrimination in lending practices. The Bank’s failure to comply with the provisions of the CRA could, at a minimum, result in regulatory restrictions on its activities and the activities of the Company.
The Bank’s failure to comply with the provisions of the CRA could, at a minimum, result in regulatory restrictions on its activities and the activities of the Company.
Failure to comply with these sanctions could have serious legal, financial, and reputational consequences. 13 Table of Contents Sarbanes-Oxley Act of 2002 The Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley Act”) implemented a broad range of corporate governance, accounting and reporting reforms for companies that have securities registered under the Securities Exchange Act of 1934, as amended.
Sarbanes-Oxley Act of 2002 The Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley Act”) implemented a broad range of corporate governance, accounting and reporting reforms for companies that have securities registered under the Securities Exchange Act of 1934, as amended.
Because the Bank’s total consolidated assets exceed $10 billion, the Bank is subject to the direct supervision of the CFPB. The CFPB has issued numerous regulations and amendments under which the Company and the Bank may continue to incur additional expense in connection with its ongoing compliance obligations.
The CFPB has issued numerous regulations and amendments under which the Company and the Bank may continue to incur additional expense in connection with its ongoing compliance obligations.
The Bank is a nationally-chartered bank and is subject to extensive regulation and supervision by the Office of the Comptroller of the Currency (“OCC”) as its primary federal regulator, and as to certain matters, the FRB, the Consumer Financial Protection Bureau (“CFPB”), and the FDIC. 7 Table of Contents The Company is also subject to the jurisdiction of the SEC and is subject to disclosure and regulatory requirements under the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended.
The Bank is a nationally-chartered bank and is subject to extensive regulation and supervision by the Office of the Comptroller of the Currency (“OCC”) as its primary federal regulator, and as to certain matters, the FRB, the Consumer Financial Protection Bureau (“CFPB”), and the FDIC.
This summary is not complete and the reader should refer to these laws and regulations for more detailed information.
Set forth below is a description of the material laws and regulations applicable to the Company and the Bank. This summary is not complete and the reader should refer to these laws and regulations for more detailed information.
The Company, as a financial holding company, is subject to extensive regulation and supervision by the Board of Governors of the Federal Reserve System (“FRB”) as its primary federal regulator.
The Company and its subsidiaries are subject to the laws and regulations of the federal government and, where applicable, the states and jurisdictions in which they conduct business. The Company, as a financial holding company, is subject to extensive regulation and supervision by the Board of Governors of the Federal Reserve System (“FRB”) as its primary federal regulator.
The specific impact of the Dodd-Frank Act on the Company’s current activities or new financial activities the Company may consider in the future, the Company’s financial performance, and the markets in which the Company operates depends on the manner in which the relevant agencies continue to develop and implement the required rules and regulations and the reaction of market participants to these regulatory developments.
The specific impact of the Dodd-Frank Act on the Company’s current activities or new financial activities the Company may consider in the future, the Company’s financial performance, and the markets in which the Company operates depends on the manner in which the relevant agencies continue to develop and implement the required rules and regulations and the reaction of market participants to these regulatory developments. 10 Table of Contents Pursuant to FRB regulations mandated by the Dodd-Frank Act, interchange fees on debit card transactions are limited to a maximum of $0.21 per transaction plus 5 basis points of the transaction amount.
He served as Associate General Counsel from 2013 to 2020 and as Senior Vice President and Senior Associate General Counsel from January 2020 to July 2022. Prior to joining the Company in 2013, he was an associate with Cadwalader Wickersham & Taft. Jeffrey M. Levy ​ 62 ​ Senior Vice President and Chief Banking Officer. Mr.
Prior to joining the Company in 2013, he was an associate with Cadwalader Wickersham & Taft. Jeffrey M. Levy ​ 63 ​ Senior Vice President and Chief Banking Officer. Mr. Levy assumed his current position on January 1, 2024.
Accordingly, the Company’s compensation philosophy includes elements that reinforce our values, reward our colleagues and maximize long-term performance. We employ various benchmarking measures to ensure our colleagues are paid fairly based on the job that they hold and their performance in that role.
Accordingly, the Company’s compensation philosophy includes elements that reinforce the Company’s core values, reward employees for their achievements and maximize continued performance with long-term retention. The Company employs benchmarking measures to ensure employees are paid fairly based on their job and performance.
Sutaris joined the Company in April 2011 as part of the acquisition of Wilber National Bank where he served as the Executive Vice President, Chief Financial Officer, Treasurer and Secretary. Maureen Gillan-Myer ​ 56 ​ Executive Vice President and Chief Human Resources Officer. Ms. Gillan-Myer assumed her current position in October 2021.
Sutaris joined the Company in April 2011 as part of the acquisition of Wilber National Bank where he served as the Executive Vice President, Chief Financial Officer, Treasurer and Secretary. On November 7, 2024, Mr.
Insurance Agencies – 2022 During 2022, the Company, through its subsidiary OneGroup, completed acquisitions of certain assets of insurance agencies for an aggregate amount of $3.5 million in cash. The Company recorded a $2.9 million customer list intangible asset and a $0.1 million intangible asset for a noncompete agreement and recognized $0.5 million of goodwill in conjunction with the acquisitions.
Goodwill of $42.1 million was recognized as a result of the merger. 2022 – Financial Services Companies During 2022, the Company, through its subsidiary OneGroup, completed acquisitions of certain assets of insurance agencies for an aggregate amount of $3.5 million in cash.
Certain lines of business are marketed primarily through unaffiliated financial advisors, while others are marketed directly to plan sponsors and fund companies.
Certain lines of business are marketed primarily through unaffiliated financial advisors, while others are marketed directly to plan sponsors and fund companies. In order to compete with large national firms, the Company stresses its consultative approach to complex engagements.
Community Reinvestment Act of 1977 Under the CRA, the Bank is required to help meet the credit needs of its communities, including low- and moderate-income neighborhoods. Although the Bank must follow the requirements of CRA, it does not limit the Bank’s discretion to develop products and services that are suitable for a particular community or establish lending requirements or programs.
Although the Bank must follow the requirements of CRA, it does not limit the Bank’s discretion to develop products and services that are suitable for a particular community or establish lending requirements or programs. In addition, the Equal Credit Opportunity Act and the Fair Housing Act prohibits discrimination in lending practices.
Employee Benefit Services Through BPAS and its subsidiaries, the Company operates a national practice that provides employee benefit trust, collective investment fund, retirement plan and health savings account administration, fund administration, transfer agency, actuarial, and health and welfare consulting services to a diverse array of clients spanning the United States and Puerto Rico.
The Bank is a member of the Federal Reserve System, the Federal Home Loan Bank of New York and the Federal Home Loan Bank of Boston (as a non-member bank) (collectively, referred to as “FHLB”), and its deposits are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to applicable limits. 4 Table of Contents Employee Benefit Services Through BPAS and its subsidiaries, the Company operates a national practice that provides employee benefit trust, collective investment fund, retirement plan and health savings account administration, fund administration, transfer agency, actuarial, and health and welfare consulting services to a diverse array of clients spanning the United States and the Commonwealth of Puerto Rico.
In order to compete with large national firms, the Company stresses its consultative approach to complex engagements. 5 Table of Contents Human Capital Resources The Company’s employees are asked to embody the core values of integrity, excellence, teamwork and humility. These values are what makes the Company’s culture strong.
The program intends to provide customers with interconnected solutions and enhance customer retention. 5 Table of Contents Human Capital Resources The Company’s employees are asked to embody the core values of integrity, excellence, teamwork and humility. These values are what makes the Company’s culture strong.
Included in the All Other segment are the Wealth Management and Insurance operations. Information about the Company’s reportable business segments is included in Note S of the “Notes to Consolidated Financial Statements” filed herewith in Part II. Competition The banking and financial services industry is highly competitive in the New York, Pennsylvania, Vermont, and Massachusetts markets.
Segment Information The Company has identified four reportable operating business segments: Banking and Corporate, Employee Benefit Services, Insurance Services and Wealth Management Services. Information about the Company’s reportable business segments is included in Note T of the “Notes to Consolidated Financial Statements” filed herewith in Part II.
Supervision and Regulation General The banking industry is highly regulated with numerous statutory and regulatory requirements that are designed primarily for the protection of depositors and the financial system. Set forth below is a description of the material laws and regulations applicable to the Company and the Bank.
This includes offering a variety of health and welfare benefits as well as a holistic wellbeing program. Supervision and Regulation General The banking industry is highly regulated with numerous statutory and regulatory requirements that are designed primarily for the protection of depositors and the financial system.
To that end, leaders across the businesses and the Company’s human resource professionals have increased shared responsibility and accountability into recruitment and selection processes.
To that end, leaders across the businesses and the Company’s human resource professionals have increased shared responsibility in recruitment and selection processes. In 2024, the Company continued to engage in partnership opportunities and provided resources in support of employment opportunities for Military and Veteran Military families.
Blocked assets (e.g., property and bank deposits) cannot be paid out, withdrawn, set off or transferred in any manner without a license from OFAC.
Blocked assets (e.g., property and bank deposits) cannot be paid out, withdrawn, set off or transferred in any manner without a license from OFAC. Failure to comply with these sanctions could have serious legal, financial, and reputational consequences. The Company has approved policies and procedures that are designed to comply with OFAC and its regulations.
Most of the rule’s requirements will be applicable beginning January 1, 2026 while the remaining requirements, including the data reporting requirements, will be applicable on January 1, 2027. ​ 14 Table of Contents Information about Our Executive Officers The executive officers of the Company and the Bank who are elected by the Board of Directors are as follows: Name Age Position Dimitar A.
The substance or impact of pending or future legislation or regulation, or the application thereof, cannot be predicted. ​ 16 Table of Contents Information about Our Executive Officers The executive officers of the Company and the Bank who are elected by the Board of Directors are as follows: Name Age Position Dimitar A.
The FRB also adopted requirements in the final rule that issuers include two unaffiliated networks for routing debit transactions that are applicable to the Company and the Bank. The Dodd-Frank Act established the CFPB and empowered it to exercise broad rulemaking, supervision, and enforcement authority for a wide range of consumer protection laws.
The Dodd-Frank Act established the CFPB and empowered it to exercise broad rulemaking, supervision, and enforcement authority for a wide range of consumer protection laws. Because the Bank’s total consolidated assets exceed $10 billion, the Bank is subject to the direct supervision of the CFPB.
Pursuant to FRB regulations mandated by the Dodd-Frank Act, interchange fees on debit card transactions are limited to a maximum of $0.21 per transaction plus 5 basis points of the transaction amount. A debit card issuer may recover an additional one cent per transaction for fraud prevention purposes if the issuer complies with certain fraud-related requirements prescribed by the FRB.
A debit card issuer may recover an additional one cent per transaction for fraud prevention purposes if the issuer complies with certain fraud-related requirements prescribed by the FRB. The FRB also adopted requirements in the final rule that issuers include two unaffiliated networks for routing debit transactions that are applicable to the Company and the Bank.
Of the Company’s 2,849 employees, 2,061 are in the Banking segment (1,914 full-time employees and 147 part-time and temporary employees), 418 employees are in the Employee Benefit Services segment (412 full-time employees and six part-time and temporary employees), and 370 employees are in the All Other segment (361 full-time employees and nine part-time and temporary employees).
Of the Company’s 2,918 employees, 2,079 are in the Banking and Corporate segment (1,913 full-time employees and 166 part-time and temporary employees), 459 employees are in the Employee Benefit Services segment (448 full-time employees and 11 part-time and temporary employees), 267 are in the Insurance Services segment (256 full-time employees and 11 part-time and temporary employees), and 113 employees are in the Wealth Management Services segment (all are full-time employees).
Acquisition History (2021-2023) Financial Services Companies – 2023 During 2023, the Company, through its subsidiaries OneGroup, Wealth Partners and BPAS, completed the acquisition of certain assets of financial services companies. The acquired companies provide insurance, wealth management and benefit plan recordkeeping services and are headquartered in New York, Pennsylvania and Florida.
The Company recorded a $1.2 million customer list intangible and recognized $0.6 million of goodwill in conjunction with the acquisition. ​ 2023 – Financial Services Companies During 2023, the Company, through its subsidiaries OneGroup, Wealth Partners and BPAS, completed the acquisition of certain assets of financial services companies.
Total aggregate consideration for these acquisitions was $8.1 million, including $6.7 million in cash and $1.4 million in contingent consideration arrangements. There were no adjustments to the fair value of the contingent consideration arrangements associated with these acquisitions during 2023.
The acquired companies provide insurance, wealth management and benefit plan recordkeeping services and are headquartered in New York, Pennsylvania and Florida. Total aggregate consideration for these acquisitions was $8.2 million, including $6.8 million in cash and $1.4 million in contingent consideration arrangements.
In 2023, we introduced our Culture and Diversity Strategic Pillars and initiatives. These strategic pillars support our commitment to knowing, respecting, and leveraging each person’s unique talents, which helps both respect diversity of thought but also drive impact within the organization.
These strategic pillars support the Company’s commitment to knowing, respecting, and leveraging each person’s unique talents, which in turn drives impact within the organization. 6 Table of Contents The goal of the Company’s recruitment efforts is to provide fair opportunity to all and to build a positive reputation internally and externally.
Changes in applicable law or regulations, and in their interpretation and application by regulatory agencies, cannot be predicted, and may have a material effect on the Company’s business and results. The Company and its subsidiaries are subject to the laws and regulations of the federal government and, where applicable, the states and jurisdictions in which they conduct business.
New laws and regulations, more complex regulations, and changes in regulators’ interpretations and application of existing laws and regulations cannot be predicted and may have a material adverse effect on the Company’s businesses and results.
The Company is committed to establishing a culture that prioritizes employees’ well-being and fosters inclusivity, development of job related skills and personal growth.
The Company aspires to empower its workforce to achieve their full potential and enable the development of job-related skills and personal growth in a culture that prioritizes employees’ wellbeing and fosters inclusivity. Employees feel safe to share ideas, receive support, and take risks without the fear of judgment or retaliation.
In addition to learning and development programs, the Company transformed its performance management process in 2023 from traditional annual reviews to ongoing, more frequent dialogue and coaching conversations.
In addition to learning and development programs, in 2024 the Company continued its performance management review process to provide enhanced tools and encourage ongoing and more frequent feedback. These dialogues are intended to achieve higher performance, engagement and commitment, improving outcomes and productivity.
The Company is committed to providing tools and resources to support employees’ overall health and wellbeing. This includes offering a variety of health and welfare benefits as well as a holistic wellbeing program.
The townhall included a Q&A segment where the CEO answered questions on a variety of topics. The intent is to conduct these townhalls twice a year. Health and Safety The health and safety of the Company’s employees is of utmost importance. The Company is committed to providing tools and resources to support employees’ overall health and wellbeing.
The Company supports a hybrid work environment allowing certain employees to work in the office or remotely to provide flexibility for employees balancing busy professional and personal lives. Engagement The Company is committed to creating a top tier workplace filled with highly satisfied and engaged employees.
The Company also continued its partnership with organizations that expanded its sourcing efforts and helped to identify a more diverse slate of candidates for employment. Engagement The Company is committed to creating a top-tier workplace filled with highly satisfied and engaged employees.
Removed
Thomas Gregory Associates Insurance Brokers, Inc. On August 2, 2021, the Company, through its subsidiary OneGroup, completed its acquisition of certain assets of Thomas Gregory Associates Insurance Brokers, Inc. (“TGA”), a specialty-lines insurance broker based in the Boston, Massachusetts area for $13.1 million, including $11.6 million in cash and contingent consideration valued at $1.5 million.
Added
Acquisition History (2022-2024) 2024 – Insurance Agencies During 2024, the Company, through its subsidiary OneGroup, completed acquisitions of three insurance agencies headquartered in New York and two insurance agencies headquartered in Florida. Total aggregate consideration for these acquisitions was $10.3 million, including $9.6 million in cash and contingent consideration with an estimated fair value of $0.7 million at acquisition date.
Removed
The total allowable maximum performance-based contingent consideration pursuant to the acquisition agreement was $3.4 million. As of December 31, 2023, the remaining contingent consideration is valued at $1.0 million, based on an estimated probability of achievement, and $2.4 million of contingent consideration has been paid.
Added
Net assets acquired were $6.4 million, including $6.8 million of customer list intangible assets and the Company recorded goodwill of $3.9 million. ​ 3 Table of Contents 2024 – Creative Plan Designs Limited On February 1, 2024, the Company, through its subsidiary BPA, completed the acquisition of certain assets of Creative Plan Designs Limited (“CPD”), a financial services company that provides employee benefit plan design, administration and consulting services.
Removed
The Company recorded a $10.9 million customer list intangible asset and $2.2 million of goodwill in conjunction with the acquisition. ​ Fringe Benefits Design of Minnesota, Inc.
Added
Total consideration was $5.9 million in cash plus contingent consideration with an estimated fair value of $3.0 million at acquisition date.
Removed
On July 1, 2021, the Company, through its subsidiary BPA, completed its acquisition of FBD, a provider of retirement plan administration and benefit consulting services with offices in Minnesota and South Dakota, for $16.7 million, including $15.3 million in cash and contingent consideration valued at $1.4 million.
Added
The Bank is in the process of expanding its branch presence in new, more densely populated markets within its geographic footprint including the Albany, Buffalo, Rochester and Syracuse regions of New York, the Lehigh Valley region of Pennsylvania and Springfield, Massachusetts. The expansion will also include the Bank’s first physical branch in Southern New Hampshire.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeWhile the federal regulators have made statements ensuring that depositors of these recently failed banks would have access to their deposits, including uninsured deposit accounts, there is no guarantee that such actions will be successful in restoring customer confidence in community and regional banks and the banking system more broadly or that any future bank failures will receive the same treatment. ​ Adverse regulatory findings or new regulatory requirements arising from the recent bank failures could increase the Company’s expenses, reduce the Company’s revenues and affect the Company’s operations. ​ The Company anticipates increased regulatory scrutiny, within the course of routine examinations and new regulations designed to address the recent negative developments in the banking industry, all of which may increase the Company’s costs of doing business and reduce its profitability. ​ Risk Related to Acquisition and De Novo Expansion Activity Acquisition and de novo expansion activity could adversely affect the Company’s financial condition and result of operations.
Biggest changeAdverse regulatory findings or new regulatory requirements arising from the recent bank failures could increase the Company’s expenses, reduce the Company’s revenues and affect the Company’s operations. ​ The Company anticipates increased regulatory scrutiny, within the course of routine examinations and new regulations designed to address the recent negative developments in the banking industry, all of which may increase the Company’s costs of doing business and reduce its profitability. ​ 29 Table of Contents Risk Related to Acquisition and De Novo Expansion Activity Acquisition and de novo expansion activity could adversely affect the Company’s financial condition and result of operations.
Recent negative developments affecting the banking industry have eroded customer confidence in the banking system and may have adverse impacts on the Company’s business. ​ The recent high-profile collapse of certain U.S. banks has generated significant market volatility among publicly traded bank holding companies and, in particular, community and regional banks.
Recent negative developments affecting the banking industry have eroded customer confidence in the banking system and may have adverse impacts on the Company’s business. ​ The high-profile collapse of certain U.S. banks has generated significant market volatility among publicly traded bank holding companies and, in particular, community and regional banks.
Failure to satisfy any of these three capital requirements will result in limits on paying dividends, engaging in share repurchases and paying discretionary bonuses. These limitations establish a maximum percentage of eligible retained income that could be utilized for such actions and potentially limit the Company’s ability to pay dividends, engage in share repurchases and pay discretionary bonuses.
Failure to satisfy any of these three capital requirements will result in limits on paying dividends, engaging in share repurchases, and paying discretionary bonuses. In addition, these limitations establish a maximum percentage of eligible retained income that could be utilized for such actions and potentially limit the Company’s ability to pay dividends, engage in share repurchases, and pay discretionary bonuses.
As a result, the Company must comply with an evolving set of legal requirements in this area, including substantive cybersecurity standards as well as requirements for notifying regulators and affected individuals in the event of a data security incident, in particular the new SEC cybersecurity disclosure requirements that may require the Company to expend additional costs in the event of a material cybersecurity breach.
As a result, the Company must comply with an evolving set of legal requirements in this area, including substantive cybersecurity standards as well as requirements for notifying regulators and affected individuals in the event of a data security incident, in particular the SEC cybersecurity disclosure requirements that may require the Company to expend additional costs in the event of a material cybersecurity breach.
Actions taken by the Federal Reserve, including changes in its target funds rate, balance sheet management, and lending facilities are beyond the Company’s control and difficult to predict. These actions can affect interest rates and the value of financial instruments and other assets and liabilities and can impact the Company’s borrowers.
Actions taken by the Federal Reserve Board, including changes in its target funds rate, balance sheet management, and lending facilities are beyond the Company’s control and difficult to predict. These actions can affect interest rates and the value of financial instruments and other assets and liabilities and can impact the Company’s borrowers.
The Company’s employees are its most important resource, and in many areas of the financial services industry, competition for qualified personnel is intense and certain of the Company’s competitors have directly targeted its employees, including competitors who are outside of our geographic footprint offering work from home opportunities.
The Company’s employees are its most important resource, and in many areas of the financial services industry, competition for qualified personnel is intense and certain of the Company’s competitors have directly targeted its employees, including competitors who are outside of the Company’s geographic footprint offering work from home opportunities.
For example, a slowdown in consumer demand due to increased inflation could limit the ability of firms to pass on fast-rising costs for labor, transportation and other inputs, weighing on earnings and potentially leading to an equity market downturn.
For example, a slowdown in consumer demand due to increased inflation could limit the ability of firms to pass on fast-rising costs for labor, tariffs, transportation and other inputs, weighing on earnings and potentially leading to an equity market downturn.
In addition, unemployment or underemployment, sustained low economic growth, the level of or change in interest rates, inflationary pressures or recessionary conditions could reduce deposit balances and diminish customer demand for the products and services offered by the Company’s businesses.
In addition, unemployment or underemployment, sustained low economic growth, the level of or change in interest rates, tariffs, inflationary pressures or recessionary conditions could reduce deposit balances and diminish customer demand for the products and services offered by the Company’s businesses.
The ability of the Company to satisfy its obligations and pay cash dividends to its shareholders is primarily dependent on the earnings of and dividends from its subsidiary bank and BPAS. However, payment of dividends by the bank subsidiary is limited by dividend restrictions and capital requirements imposed by bank regulations.
The ability of the Company to satisfy its obligations and pay cash dividends to its shareholders is primarily dependent on the earnings of and dividends from the Bank and BPAS. However, payment of dividends by the Bank is limited by dividend restrictions and capital requirements imposed by bank regulations.
The Company’s main markets are located in the states of New York, Pennsylvania, Vermont and Massachusetts. Most of the Company’s customers are individuals and small and medium-sized businesses which are dependent upon the regional economy.
The Company’s main markets are located in the states of New York, Pennsylvania, Vermont, Massachusetts, and New Hampshire. Most of the Company’s customers are individuals and small and medium-sized businesses which are dependent upon the regional economy.
Numerous factors, including lack of liquidity for resale of certain investment securities, absence of reliable pricing information for investment securities, the economic condition of state and local municipalities, adverse changes in the business climate, adverse actions by regulators, unanticipated changes in the competitive environment or a decision to change the operations or dispose of an operating unit could have a negative effect on the investment portfolio, goodwill or other intangible assets in future periods.
Numerous factors, including lack of liquidity for resale of certain investment securities, absence of reliable pricing information for investment securities, the economic condition of state and local governments, adverse changes in the business climate, adverse actions by regulators, unanticipated changes in the competitive environment or a decision to change the operations or dispose of an operating unit could have a negative effect on the investment portfolio, goodwill or other intangible assets in future periods.
Where quoted market prices are not available, the Company may make fair value determinations based on internally developed models or other means which ultimately rely to some degree on management judgment. Some of these and other assets and liabilities may have no direct observable price levels, making their valuation particularly subjective, as they are based on significant estimation and judgment.
Where quoted market prices are not available, the Company may make fair value determinations based on internally developed models or other means which ultimately rely to some degree on management’s judgment. Some of these and other assets and liabilities may have no direct observable price levels, making their valuation particularly subjective, as they are based on significant estimation and judgment.
Failures of certain third party service providers to provide contracted services could adversely affect the Company’s ability to deliver products and services to customers and cause the Company to incur significant expense. 21 Table of Contents The Company’s ability to attract and retain qualified employees is critical to the success of its business, and failure to do so may have a materially adverse effect on the Company’s performance.
Failures of certain third-party service providers to provide contracted services could adversely affect the Company’s ability to deliver products and services to customers and cause the Company to incur significant expense. 25 Table of Contents The Company’s ability to attract and retain qualified employees is critical to the success of its business, and failure to do so may have a materially adverse effect on the Company’s performance.
Any such losses could have a material adverse effect on the Company’s financial condition and results of operations. 22 Table of Contents Conditions in the insurance market could adversely affect the Company’s earnings. Revenue from insurance fees and commissions could be negatively affected by fluctuating premiums in the insurance markets or other factors beyond the Company’s control.
Any such losses could have a material adverse effect on the Company’s financial condition and results of operations. 26 Table of Contents Conditions in the insurance market could adversely affect the Company’s earnings. Revenue from insurance fees and commissions could be negatively affected by fluctuating premiums in the insurance markets or other factors beyond the Company’s control.
The Risk Committee of the Board of Directors oversees the Company’s efforts to manage risks through actions such as reviewing the Bank’s credit risk, liquidity and interest rate risk, monitoring the quality and risk profile of the Bank’s loan portfolio and credit administration, evaluating the Company’s securities portfolio to ensure that the Company’s objectives related to diversification, asset quality, liquidity, profitability and pledging are met, overseeing the Company’s enterprise risk management functions and overseeing the Company’s information security and cybersecurity functions. 15 Table of Contents Risks Related to the Company’s Business Interest Rate Risk Changes in interest rates affect our profitability, assets and liabilities.
The Risk Committee of the Board of Directors (the "Board") oversees the Company’s efforts to manage risks through actions such as reviewing the Bank’s credit risk, liquidity and interest rate risk, monitoring the quality and risk profile of the Bank’s loan portfolio and credit administration, evaluating the Company’s securities portfolio to ensure that the Company’s objectives related to diversification, asset quality, liquidity, profitability and pledging are met, overseeing the Company’s enterprise risk management functions and overseeing the Company’s information security and cybersecurity functions. 17 Table of Contents Risks Related to the Company’s Business Interest Rate Risk Changes in interest rates affect the Company’s profitability, assets and liabilities.
The Company may be required to record impairment charges related to goodwill, other intangible assets and the investment portfolio. The Company may be required to record impairment charges in respect to goodwill, other intangible assets and the investment portfolio.
The Company may be required to record impairment charges in respect to goodwill, other intangible assets and the investment portfolio.
This could lead to a material adverse effect on the Company’s financial condition and results of operations through resulting increases in the Company’s allowance for credit losses, provision for credit losses and net charge - offs. ​ Legal, Regulatory, and Compliance Risk The Company is or may become involved in lawsuits, legal proceedings, information-gathering requests, investigations, and proceedings by governmental agencies or other parties that may lead to adverse consequences.
This could lead to a material adverse effect on the Company’s financial condition and results of operations through resulting increases in the Company’s allowance for credit losses, provision for credit losses and net charge - offs. ​ 19 Table of Contents Legal, Regulatory, and Compliance Risk The Company is or may become involved in lawsuits, legal proceedings, information-gathering requests, investigations, and proceedings by governmental agencies or other parties that may lead to adverse consequences.
Management’s Discussion and Analysis of Financial Condition and Results of Operations, under Critical Accounting Policies and Estimates. ​ 23 Table of Contents The Company’s business and results of operations may be adversely affected by the U.S. and global financial markets, fiscal, monetary, and regulatory policies, and economic conditions generally.
Management’s Discussion and Analysis of Financial Condition and Results of Operations, under Critical Accounting Policies and Estimates. ​ 27 Table of Contents The Company’s business and results of operations may be adversely affected by the U.S. and global financial markets, fiscal, monetary, and regulatory policies, and economic conditions generally.
In the event it became unlikely that the Bank would be able to maintain a positive tangible equity balance, it would either seek an approval from its primary federal regulator to maintain access to its FHLB borrowing facilities or transfer its eligible collateral to the FRB to avoid disruption in its wholesale borrowing capacity. 16 Table of Contents The Company depends on dividends from its banking subsidiary and BPAS for cash revenues to support common dividend payments and other uses, but those dividends are subject to restrictions.
In the event it became unlikely that the Bank would be able to maintain a positive tangible equity balance, it would either seek an approval from its primary federal regulator to maintain access to its FHLB borrowing facilities or transfer its eligible collateral to the FRB to avoid disruption in its wholesale borrowing capacity. 18 Table of Contents The Company depends on dividends from the Bank and BPAS for cash revenues to support common dividend payments and other uses, but those dividends are subject to restrictions.
Failure to successfully keep pace with technological changes affecting the financial services industry could have a material adverse impact on the Company’s financial condition and results of operations. 19 Table of Contents The Company is exposed to fraud in many aspects of the services and products that it provides.
Failure to successfully keep pace with technological changes affecting the financial services industry could have a material adverse impact on the Company’s financial condition and results of operations. The Company is exposed to fraud in many aspects of the services and products that it provides.
Additionally, U.S. energy and commodity markets may be adversely affected by the current or anticipated impact of climate change, extreme weather events or natural disasters, the emergence or continuation of widespread health emergencies or pandemics, cyber attacks or campaigns, military conflict, terrorism or other geopolitical events.
Additionally, U.S. energy and commodity markets may be adversely affected by the current or anticipated impact of climate change, extreme weather events or natural disasters, the emergence or continuation of widespread health emergencies or pandemics, cyberattacks or campaigns, military conflict, terrorism or other geopolitical events.
The economic developments in connection with the pandemic, including supply chain disruptions, increased inflation, changes to the Company’s customers’ industries, and the potential emergence of new pandemics in the U.S. and abroad have adversely impacted and may continue to adversely impact financial markets and macroeconomic conditions and could result in additional market volatility and disruptions globally.
The economic developments in connection with the pandemic, including supply chain disruptions, increased inflation, changes to the Company’s customers’ industries, and the potential emergence of pandemics and other health crises in the U.S. and abroad have adversely impacted and may continue to adversely impact financial markets and macroeconomic conditions and could result in additional market volatility and disruptions globally.
Changes to existing U.S. laws and regulatory policies and evolving priorities, including those related to financial regulation, consumer compliance, taxation, fiscal policy, climate change, and healthcare, may adversely impact U.S. or global economic activity and the Company’s customers and its earnings and operations.
Changes to existing U.S. laws and regulatory policies and evolving priorities, including those related to financial regulation, consumer compliance, taxation, fiscal policy, trade policy such as tariffs, climate change, and healthcare, may adversely impact U.S. or global economic activity and the Company’s customers and its earnings and operations.
Finally, technological change is influencing how individuals and firms conduct their financial affairs and changing the delivery channels for financial services, with the result that the Company may have to contend with a broader range of competitors including many that are not located within the geographic footprint of its banking office network.
Finally, technological change is influencing how individuals and firms conduct their financial affairs and changing the delivery channels for financial services, with the result that the Company may have to contend with a broader range of competitors including many that are not located within the geographic footprint of the Bank’s branch network.
For example, higher inflation, or volatility and uncertainty related to inflation, could reduce demand for the Company’s products, adversely affect the creditworthiness of the Company’s borrowers, or result in lower values for the Company’s investment securities and other interest-earning assets.
For example, higher inflation, or volatility and uncertainty related to inflation, could reduce demand for the Company’s products, adversely affect the creditworthiness of the Company’s borrowers, or result in lower values for the Company’s investment securities and other interest-earning assets. Actions taken by the U.S.
At December 31, 2023, 11% of the loan portfolio was acquired and was not underwritten by the Company at origination, and therefore is not necessarily reflective of the Company’s historical credit risk experience.
At December 31, 2024, 9% of the loan portfolio was acquired and was not underwritten by the Company at origination, and therefore is not necessarily reflective of the Company’s historical credit risk experience.
The Company’s failure to comply with laws, regulations or policies could result in civil or criminal sanctions, restrictions to its business model, and money penalties by state and federal agencies, and/or reputation damage, which could have a material adverse effect on the Company’s business, financial condition and results of operations.
The Company’s failure to comply (or to ensure that agents and third-party service providers comply) with laws, regulations or policies could result in civil or criminal sanctions, restrictions to its business model, and money penalties by state and federal agencies, and/or reputation damage, which could have a material adverse effect on the Company’s business, financial condition and results of operations.
Accordingly, the local economic conditions in these areas have a significant impact on the demand for the Company’s products and services as well as the ability of the Company’s customers to repay loans, the value of the collateral securing loans and the stability of the Company’s deposit funding sources.
Accordingly, the local economic conditions in these areas have a significant impact on the demand for the Company’s products and services as well as the ability of the Company’s customers to repay loans, the value of the collateral securing loans and the stability of the Company’s deposit funding sources. An economic downturn in these markets could negatively impact the Company.
It is possible that over time the allowance for credit losses will be inadequate to cover credit losses in the portfolio because of unanticipated adverse changes in the economy, market conditions or events adversely affecting specific customers, industries or markets. Mortgage banking income may experience significant volatility.
It is possible that over time the allowance for credit losses will be inadequate to cover credit losses in the portfolio because of unanticipated adverse changes in the economy, market conditions or events adversely affecting specific customers, industries or markets.
The Company offers a wide variety of products and services many of which could be vulnerable to fraud. Although the Company has various processes and controls in place to mitigate fraud, the risk cannot be eliminated and certain exposures are outside the Company’s control.
The Company offers a wide variety of products and services many of which could be vulnerable to fraud. The sophistication and skills of bad actors are increasing in scope and capabilities. Although the Company has various processes and controls in place to mitigate fraud, the risk cannot be eliminated and certain exposures are outside the Company’s control.
Pandemics, epidemics or disease outbreaks in the U.S. or globally, including the COVID-19 pandemic, have disrupted, and may in the future disrupt, our business, which could materially affect our results of operations, financial condition, liquidity and future expectations.
Pandemics, epidemics or disease outbreaks in the U.S. or globally, have disrupted, and may in the future disrupt, the Company’s business, which could materially affect results of operations, financial condition, liquidity and future expectations.
Fraud or fraudulent attempts may also increase as (a) volumes of services and products expand, (b) those who are committing fraud adapt their methods to circumvent existing controls, become more sophisticated and more determined, and (c) services and product offerings expand. The foregoing and other factors may cause the Company’s operational losses to increase as a result.
Fraud or fraudulent attempts may also increase as (a) volumes of services and products expand, (b) those who are committing fraud adapt their methods to circumvent existing controls, become more sophisticated and more determined, and (c) services and product offerings expand.
Any of these developments could adversely affect the Company’s consumer and commercial businesses, its customers, its securities portfolios, including the risk of lower re-investment rates within those portfolios, its level of loan net charge-offs and provision for credit losses, the carrying value of its deferred tax assets, its capital levels, its liquidity and its results of operations.
Any of these developments could adversely affect the Company’s consumer and commercial businesses, its customers, its securities portfolios, including the risk of lower re-investment rates within those portfolios, its level of loan net charge-offs and provision for credit losses, the carrying value of its deferred tax assets, its capital levels, its liquidity and its results of operations. 28 Table of Contents The Company’s consumer businesses can be negatively affected by adverse economic conditions and governmental policies.
In addition, credit risk may be exacerbated when the collateral held by the Company cannot be realized upon or is liquidated at prices not sufficient to recover the full amount of the credit or derivative exposure due to the Company.
In addition, credit risk may be exacerbated when the Company’s collateral is not under its control, cannot recover funds by liquidating the collateral, or is liquidated at prices not sufficient to recover the full amount of the credit or derivative exposure due to the Company.
Despite the Company’s security measures and business continuity plans, the Company and its third party service providers may be the subject of sophisticated and targeted attacks intended to obtain unauthorized access to assets or confidential information, destroy data, disable or degrade service, or sabotage systems, often through the introduction of computer viruses or malware, ransomware, phishing attacks, cyber-attacks, or breaches due to errors or malfeasance by employees, contractors and others who have access to or obtain unauthorized access to the Company’s systems and networks.
Like other financial services businesses, the Company and its third - party service providers have been the victim of sophisticated and targeted cyberattacks intended to obtain unauthorized access to assets or confidential information, destroy data, disable or degrade service, or sabotage systems, often through the introduction of computer viruses or malware, ransomware, phishing attacks, cyber-attacks, or breaches due to errors or malfeasance by employees, contractors and others who have access to or obtain unauthorized access to the Company’s systems and networks.
The Company is subject to a variety of operational risks, including reputational risk, legal and compliance risk, the risk of fraud or theft by employees or outsiders, which may adversely affect the Company’s business and results of operations.
The foregoing and other factors may cause the Company’s operational losses to increase as a result. 23 Table of Contents The Company is subject to a variety of operational risks, including reputational risk, legal and compliance risk, the risk of fraud or theft by employees or outsiders, which may adversely affect the Company’s business and results of operations.
A prolonged economic downturn in these markets could negatively impact the Company. The financial services industry is highly competitive and creates competitive pressures that could adversely affect the Company’s revenue and profitability. The financial services industry in which the Company operates is highly competitive.
The financial services industry is highly competitive and creates competitive pressures that could adversely affect the Company’s revenue and profitability. The financial services industry in which the Company operates is highly competitive.
In particular, U.S. markets may be affected by the level and volatility of interest rates, availability and market conditions of financing, economic growth, historically high levels of inflation, supply chain disruptions, consumer spending, employment levels, labor shortages, wage escalation or stagnation, changes in home prices, commercial property values, the growth of global trade and commerce, the availability and cost of capital and credit, and investor sentiment and confidence.
In particular, U.S. markets may be affected by the new government administration, including but not limited to government agency staff reductions and related operating issues, uncertainty related to policy changes that directly or indirectly impact consumer spending and business investment, the level and volatility of interest rates, availability and market conditions of financing, economic growth, historically high levels of inflation, supply chain disruptions, consumer spending, employment levels, labor shortages, wage escalation or stagnation, changes in home prices, commercial property values, the growth of global trade and commerce, the availability and cost of capital and credit, and investor sentiment and confidence.
The macroeconomic environment driving these conditions include elevated interest rates and increases in vacancy rates, particularly for office real estate.
The macroeconomic environment driving these conditions include elevated interest rates, increases in property expenses, such as casualty insurance, decreases in rents, and increases in vacancy rates, particularly for office real estate.
Many of these transactions expose the Company to credit risk in the event of a default by a counterparty or client.
Many of these transactions expose the Company to credit risk in the event a counterparty or client fails to perform its contractual obligations.
The Company and its subsidiaries are subject to extensive state and federal regulation, supervision and legislation that govern nearly every aspect of its operations. The Company, as a financial holding company, is subject to regulation by the FRB and its banking subsidiary is subject to regulation by the OCC.
The Company and its subsidiaries are subject to extensive state and federal regulation, supervision and legislation that govern nearly every aspect of its operations.
The ongoing effects of the Dodd-Frank Act, as well as continued rule-making and possible future changes to the regulatory requirements, may substantially impact the Company’s and the Bank’s operations.
The Dodd-Frank Act, as amended by the Economic Growth Act, instituted major changes to the banking and financial institutions regulatory regimes in the financial services sector. The ongoing effects of the Dodd-Frank Act, as well as continued rule-making and possible future changes to the regulatory requirements, may substantially impact the Company’s and the Bank’s operations.
The Company performed extensive credit due diligence prior to each acquisition and marked the loans to fair value upon acquisition, with such fair valuation considering expected credit losses that existed at the time of acquisition.
The Company performed extensive credit due diligence prior to each acquisition and marked the loans to fair value upon acquisition, with such fair valuation considering expected credit losses that existed at the time of acquisition. However, there is a risk that credit losses could be larger than currently anticipated, thus adversely affecting earnings.
The COVID-19 pandemic adversely affected businesses, economies and financial markets worldwide, placed constraints on the operations of businesses, decreased consumer mobility and activity, and caused significant economic volatility in the United States and international capital markets. Any new pandemic or other public health crisis could have a material impact on our business, financial condition and results of operations going forward.
The COVID-19 pandemic adversely affected businesses, economies and financial markets worldwide, placed constraints on the operations of businesses, decreased consumer mobility and activity, and caused significant economic volatility in the United States and international capital markets.
The occurrence of any of these risks could result in a diminished ability to operate the Company’s business, potential liability to clients, reputational damage, and regulatory intervention, which could adversely affect our business, financial condition, and results of operations, perhaps materially. 20 Table of Contents The Company’s information systems may experience an interruption or security breach and expose the Company to additional operational, compliance, cybersecurity and legal risks.
The occurrence of any of these risks could result in a diminished ability to operate the Company’s business, potential liability to clients, reputational damage, and regulatory intervention, which could adversely affect the Company’s business, financial condition, and results of operations, perhaps materially.
New initiatives and proposed rulemaking by such regulatory agencies may significantly limit the types of products the Company may offer and the fees it may charge for its services which may have a material impact on the Company’s fee income. The Company may also be required to add additional compliance personnel or incur other significant compliance-related expenses.
New initiatives by applicable regulatory agencies may significantly limit the types and the terms of the products the Company may offer and the fees it may charge for its services which may have a material impact on the Company’s fee income.
Changes in regulations could subject the Company, among other things, to additional costs for compliance, reduced revenues and limit the types of financial services and products it can offer and/or increase the ability of non-banks to offer competing financial services and products.
Changes in regulations could subject the Company, among other things, to additional costs for compliance, reduced revenues and limit the types of financial services and products it can offer and/or increase the ability of non-banks to offer competing financial services and products. 20 Table of Contents Regulatory agencies, including the CPFB, may introduce new regulatory initiatives or pursue more aggressive enforcement policies with respect to a range of regulatory compliance matters.
These regulations affect deposit and lending practices, capital levels and structure, investment practices, dividend policy, and growth. These regulatory authorities have extensive discretion in connection with their supervisory and enforcement activities, including the imposition of restrictions on the operation of a bank, the classification of assets by a bank, and the adequacy of a bank’s allowance for credit losses.
These regulatory authorities have extensive discretion in connection with their supervisory and enforcement activities, including the imposition of restrictions on the operation of a bank, the risk ratings or classifications of loans and investments by a bank, and the adequacy of a bank’s allowance for credit losses.
The effective use of technology increases efficiency and enables financial institutions to better serve customers and to reduce costs. The Company’s future success depends, in part, upon its ability to address the needs of its customers by using technology to provide products and services that will satisfy customer demands, as well as to create additional efficiencies in the Company’s operations.
The Company’s future success depends, in part, upon its ability to address the needs of its customers by using technology to provide products and services that will satisfy customer demands, as well as to create additional efficiencies in the Company’s operations. The Company or its third-party vendors may incorporate artificial intelligence technology into certain business processes, services, or products.
The results of such proceedings could lead to delays in or prohibition to acquire other companies, significant penalties, including monetary penalties, damages, adverse judgments, settlements, fines, injunctions, restrictions on the way in which the Company conducts its business, or reputational harm. 17 Table of Contents Although the Company establishes accruals for legal proceedings when information related to the loss contingencies represented by those matters indicates both that a loss is probable and that the amount of loss can be reasonably estimated, the Company does not have accruals for all legal or regulatory proceedings where it faces a risk of loss.
Although the Company establishes accruals for legal proceedings when information related to the loss contingencies represented by those matters indicates both that a loss is probable and that the amount of loss can be reasonably estimated, the Company does not have accruals for all legal or regulatory proceedings where it faces a risk of loss.
The methods used to obtain unauthorized access, disable or degrade service or sabotage systems are constantly evolving and may be difficult to anticipate or to detect for long periods of time. The constantly changing nature of the threats means that the Company may not be able to prevent all data security breaches or misuse of data.
The Company is not aware of any material losses it has incurred relating to cyberattacks or other information security breaches. 24 Table of Contents The methods used to obtain unauthorized access, disable or degrade service or sabotage systems are constantly evolving and may be difficult to anticipate or to detect for long periods of time.
The Company’s business, results of operations or competitive position may be adversely affected as a result.
The Company may also be required to add additional compliance personnel or incur other significant compliance-related expenses. The Company’s business, results of operations or competitive position may be adversely affected as a result.
In addition, governmental proposals to permit student loan obligations to be discharged in bankruptcy proceedings could, if enacted into law, encourage certain of the Company’s customers to declare personal bankruptcy and thereby trigger defaults and charge-offs of consumer loans extended to those customers. 24 Table of Contents Pandemics, epidemics, disease outbreaks and other public health crises, such as the COVID-19 pandemic, have disrupted our business and operations, and future outbreaks or reemergence of the COVID-19 pandemic could materially adversely impact our business, financial condition, liquidity and results of operations.
In addition, governmental proposals to permit student loan obligations to be discharged in bankruptcy proceedings could, if enacted into law, encourage certain of the Company’s customers to declare personal bankruptcy and thereby trigger defaults and charge-offs of consumer loans extended to those customers.
The Company may face increased costs to address and report on these matters, which could have an adverse impact on the Company’s business and financial condition. If the Company is unable to adequately address environmental, social, and governance matters that are of importance to regulators, investors and customers, it could negatively impact the Company’s reputation and the Company’s business results.
The Company may face increased costs to address these matters, which could have an adverse impact on the Company’s business and financial condition.
The Company may also rely on representations of those customers, counterparties or other third parties, such as independent auditors, as to the accuracy and completeness of that information. Reliance on inaccurate or misleading financial statements, credit reports or other information could have a material adverse impact on business and, in turn, the Company’s financial condition and results of operations.
Reliance on inaccurate or misleading financial statements, credit reports or other information could have a material adverse impact on business and, in turn, the Company’s financial condition and results of operations. The Company may be required to record impairment charges related to goodwill, other intangible assets and the investment portfolio.
Changes to the regulatory laws governing these businesses could affect the Company’s ability to deliver or expand its services and adversely impact its operating and financial condition. The Dodd-Frank Act, as amended by the Economic Growth Act, instituted major changes to the banking and financial institutions regulatory regimes in the financial services sector.
Changes to the regulatory laws governing these businesses, or changes in regulatory policy or a regulator's interpretation of a law or regulation, could affect the Company’s ability to deliver or expand its services and adversely impact its operating and financial condition.
Credit and Lending Risk The allowance for credit losses may be insufficient. The Company’s business depends on the creditworthiness of its customers.
If the Bank is unable to pay dividends to the Company, the Company might not be able to service its debt, pay its obligations or pay dividends on its common stock. Credit and Lending Risk The allowance for credit losses may be insufficient. The Company’s business depends on the creditworthiness of its customers.
The Company relies heavily on existing and emerging communications and information systems to conduct its business.
The Company’s information systems may experience an interruption or security breach and expose the Company to additional operational, compliance, cybersecurity and legal risks. The Company relies heavily on existing and emerging communications and information systems to conduct its business.
The Company competes on the basis of several factors, including capital, access to capital, revenue generation, quality customer service, products, services, transaction execution, innovation, reputation and price. Over time, certain sectors of the financial services industry have become more concentrated, as institutions involved in a broad range of financial services have been acquired by or merged into other firms.
Over time, certain sectors of the financial services industry have become more concentrated, as institutions involved in a broad range of financial services have been acquired by or merged into other firms. These developments have resulted in additional competitors gaining greater capital and other resources, such as a broader range of products and services and geographic diversity.
See “Supervision and Regulation” for more information about the regulations to which the Company is subject. 18 Table of Contents Basel III capital rules generally require insured depository institutions and their holding companies to hold more capital, which could limit our ability to pay dividends, engage in share repurchases and pay discretionary bonuses.
Failure to maintain and implement adequate programs to combat money laundering and terrorist financing could also have serious reputational consequences. Basel III capital rules generally require insured depository institutions and their holding companies to hold more capital, which could limit the Company’s ability to pay dividends, engage in share repurchases and pay discretionary bonuses.
Operational Risk The Company continually encounters technological change and the failure to understand and adapt to these changes could have a negative impact on the business. The financial services industry is continually undergoing rapid technological change with frequent introductions of new technology-driven products and services.
If the Company is unable to adequately address corporate responsibility matters that are of importance to stakeholders, it could negatively impact the Company’s reputation and the Company’s business results. Operational Risk The Company continually encounters technological change and the failure to understand and adapt to these changes could have a negative impact on the business.
Increased regulation and stakeholder expectations related to environmental, social, and governance factors could negatively affect our operating results. There is increased public awareness and concern by investors, customers, and governmental and nongovernmental organizations on a variety of environmental, social, and sustainability matters.
Changes in stakeholder expectations related to corporate responsibility matters could negatively affect the Company’s operating results. There are changes in public awareness and concern by various stakeholders on a variety of corporate responsibility matters. These changes may include more compliance requirements or changes in expectations by stakeholders.
However, there is a risk that credit losses could be larger than currently anticipated, thus adversely affecting earnings. 25 Table of Contents General Risks Trading activity in the Company’s common stock could result in material price fluctuations.
General Risks Trading activity in the Company’s common stock could result in material price fluctuations.
Removed
Department of Labor, state attorneys general, state insurance regulators and law enforcement authorities.
Added
Furthermore, bank regulators have the authority to require the Company to make provisions for credit losses or otherwise recognize loan charge-offs following their periodic review of the Company’s loan portfolio, underwriting procedures, and allowance for losses on such loans.
Removed
In addition, under the current administration, regulatory agencies, including the CPFB, have introduced new regulatory initiatives and pursued more aggressive enforcement policies with respect to a range of regulatory compliance matters.
Added
Any increase in the allowance for credit losses or in loan charge-offs as required by such regulatory authorities could have a material adverse effect on the Company’s financial condition and results of operations. Mortgage banking income may experience significant volatility.
Removed
This increased awareness may include more restrictive or expansive environmental standards, more prescriptive reporting of environmental, social, and governance metrics, and other compliance requirements. In particular, the U.S. government is increasing its focus on climate change issues, including proposed disclosure requirements by the SEC that could result in additional compliance costs.
Added
Department of Labor, state attorneys general, state insurance regulators and law enforcement authorities. The results of such proceedings could lead to delays in or prohibition to acquire other companies, significant penalties, including monetary penalties, dividend and/or asset growth restrictions, damages, adverse judgments, settlements, fines, injunctions, restrictions on the way in which the Company conducts its business, or reputational harm.
Removed
These developments could result in the Company’s competitors gaining greater capital and other resources, such as a broader range of products and services and geographic diversity.
Added
The Company, as a financial holding company, is subject to regulation by the FRB and its banking subsidiary is subject to regulation by the OCC as well as the FDIC, CFPB, and other federal and state agencies. These regulations affect deposit and lending practices, capital levels and structure, investment practices, dividend policy, and growth.
Removed
The Company’s consumer businesses can be negatively affected by adverse economic conditions and governmental policies.
Added
Regulators continue to focus on consumer protection, including product design and pricing constructs, account management and security, credit bureau reporting, disclosure rules, marketing and debt collection practices.
Added
Any new requirements or increased enforcement of existing requirements could materially and adversely impact the Company’s revenue growth and profitability, including, as a result of increased scrutiny of pricing, underwriting and account management practices; the imposition of fines and customer remediation; higher compliance costs; reputational harm; restrictions on the Company’s ability to offer certain products or services, appropriately price for the value of products or work with certain business partners; and changes to business practices generally.
Added
While the Company has developed policies and procedures designed to assist in compliance with these laws and regulations, no assurance is given that compliance policies and procedures will be effective.
Added
See “Supervision and Regulation” for more information about the regulations to which the Company is subject. Federal banking agencies periodically conduct examinations of the Company’s business, including compliance with laws and regulations; the failure to comply with any supervisory actions to which the Company becomes subject to as a result of such examinations could adversely affect the Company.
Added
Federal bank regulatory authorities periodically conduct comprehensive examinations of the Company’s business, including compliance with laws and regulations.
Added
If, as a result of an examination, such banking agencies were to determine that the financial condition, capital resources, asset quality, earnings prospects, management, liquidity, asset sensitivity, risk management or other aspects of any of the Company’s operations had become unsatisfactory, or that the Company was in violation of any law or regulation, it may take a number of different remedial actions as it deems appropriate.
Added
If the Company becomes subject to such regulatory actions, the Company’s business, financial condition, earnings and reputation could be adversely affected. The Company is subject to numerous laws designed to protect consumers, including the Community Reinvestment Act and fair lending laws, and the failure to comply with these laws could lead to a wide variety of sanctions.
Added
The Community Reinvestment Act (“CRA”) requires the OCC to assess the Company’s performance in meeting the credit needs of the communities the Company serves, including low- and moderate-income neighborhoods. If the OCC determines that the Company needs to improve the Company’s performance or are in substantial non-compliance with CRA requirements, various adverse regulatory consequences may ensue.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

15 edited+6 added−3 removed24 unchanged
Biggest changeBoth of these executives, along with the other professionals in the Information Security and Information Technology Departments, have the appropriate knowledge and expertise to effectively assess and manage the Company’s cybersecurity risk and establish a system of internal controls in an effort to safeguard the Company’s network and comply with regulatory requirements. 26 Table of Contents The Company’s cybersecurity framework includes an assessment of the Company’s hardware, software, and data platforms across its lines of business, as well as the risks associated with the Company’s business, identification of areas inside and outside of the Company that expose it to cybersecurity threats, and employing policies, systems and safeguards to manage those cybersecurity risks.
Biggest changeBoth of these executives, along with the other professionals in the Information Security and Information Technology Departments, have the appropriate knowledge and expertise to effectively assess and manage the Company’s cybersecurity risk and establish a system of internal controls in an effort to safeguard the Company’s network and comply with regulatory requirements.
Such attacks may take various forms, including the introduction of computer viruses or malware, ransomware, phishing attacks, cyber-attacks, or breaches due to errors or malfeasance by employees, contractors and others who have access to or obtain unauthorized access to the Company’s systems and networks. To date, these threats and attacks have not resulted in a material cybersecurity incident.
Such attacks may take various forms, including the introduction of computer viruses or malware, ransomware, phishing attacks, cyberattacks, or breaches due to errors or malfeasance by employees, contractors and others who have access to or obtain unauthorized access to the Company’s systems and networks. To date, these threats and attacks have not resulted in a material cybersecurity incident.
In addition, cybersecurity risk is a fundamental risk of the Company which is overseen by the Risk Committee of the Board, which consists of the entire Board, including Directors with experience in risk management, internal audit, cybersecurity and/or the operations of financial service companies. In particular, the Chair of the Board, Eric E.
In addition, cybersecurity risk is a fundamental risk of the Company which is overseen by the Risk Committee of the Board, including Directors with experience in risk management, internal audit, cybersecurity and/or the operations of financial service companies. In particular, the Chair of the Board, Eric E.
These solutions and services help with the prevention, detection, mitigation and remediation of cybersecurity threats and incidents. The Company’s Internal Audit Department further assists the Company to ensure that the proper safeguards are in place to protect the Company’s information by conducting internal audits on certain aspects of the information security program.
These solutions and services help with the prevention, detection, mitigation and remediation of cybersecurity threats and incidents. 31 Table of Contents The Company’s Internal Audit Department further assists the Company to ensure that the proper safeguards are in place to protect the Company’s information by conducting internal audits on certain aspects of the information security program.
The IT Steering Committee is comprised of key executives such as the President and Chief Executive Officer and Chief Financial Officer, as well as senior employees that specialize in technology and information security, including the Company’s CISO, Chief Technology Officer, and Chief Risk Officer, and a representative from the Board.
The IT Steering Committee is comprised of key executives such as the President and Chief Executive Officer and Chief Financial Officer, as well as senior employees that specialize in technology and information security, including the Company’s CISO, Chief Technology Officer, and Chief Risk Officer, and representatives from the Board.
The primary executives responsible for the oversight of risk and cybersecurity are the Company’s Chief Risk Officer, who has over 36 years of experience in the banking industry, including 25 years as a national bank examiner for the Office of the Comptroller of the Currency, and the Company’s Chief Information Security Officer (“CISO”), who has an educational and experiential background in information technology and information security for public companies (bachelors degree in computer science and service as the Company’s CISO for the past nine years, with 10 prior years of information technology and information security experience).
The primary executives responsible for the oversight of risk and cybersecurity are the Company’s Chief Risk Officer, who has over 37 years of experience in the banking industry, including 25 years as a national bank examiner for the Office of the Comptroller of the Currency, and the Company’s Chief Information Security Officer (“CISO”), who has an educational and experiential background in information technology and information security for public companies (bachelor’s degree in computer science and service as the Company’s CISO for the past 10 years, with 10 prior years of information technology and information security experience).
Set forth below is an overview of the Company’s cybersecurity process, the role of management and the Board, and whether any risks from cybersecurity threats have materially affected or are reasonably likely to materially affect the Company.
Set forth below is an overview of the Company’s risks associated with cybersecurity, its cybersecurity process, the role of management and the Board, and whether any risks from cybersecurity threats have materially affected or are reasonably likely to materially affect the Company.
The Risk Committee meets six times a year during which management provides updates to the committee regarding the material risks facing the Company.
The Risk Committee meets five times a year during which management provides updates to the committee regarding the material risks facing the Company.
The CISO also conducts and participates in annual table top exercises with management and on occasion, with representatives from the Board, in order to be prepared in the event of a material cybersecurity event. The Company’s cybersecurity process and its ability to assess, manage, and remediate cybersecurity risks further centers around good communication among management.
The CISO also conducts and participates in annual table top exercises with management, and periodically with Directors, in order to be prepared in the event of a material cybersecurity event. The Company’s cybersecurity process and its ability to assess, manage, and remediate cybersecurity risks further centers around good communication among management.
Stickels, has experience with the risks associated with operating a financial institution based upon his prior service as the President of Oneida Financial Corp. In addition, Lead Director Susan E.
Stickels, has experience with the risks associated with operating a financial institution based upon his prior service as the President of Oneida Financial Corp. In addition, Lead Director Susan E. Skerritt, the former Chief Executive Officer and President of Deutsche Bank Trust Company Americas, as well as director Kerrie D.
Cybersecurity Process and Management’s Role Management is responsible for designing and implementing policies, processes and procedures and deploying physical and virtual technology and safeguards to measure, monitor and control cybersecurity risk.
For more information on risks to the Company from cybersecurity threats, see “Risk Factors – Operational Risks”. Cybersecurity Process and Management’s Role Management is responsible for designing and implementing policies, processes and procedures and deploying physical and virtual technology and safeguards to measure, monitor and control cybersecurity risk.
On an annual basis, the Board’s Audit Committee also receives reports from outside consultants who perform various IT related audits, and the Company’s independent registered public accounting firm regarding the effectiveness of the Company’s cybersecurity program in connection with its review of the Company’s financial statements. 28 Table of Contents Risks Associated with Cybersecurity The Company is often targeted in an effort to obtain unauthorized access to its financial records and confidential information, destroy data, disable or degrade service, or sabotage systems.
On an annual basis, the Board’s Audit Committee also receives reports from outside consultants who perform various IT related audits, and the Company’s independent registered public accounting firm regarding the effectiveness of the Company’s cybersecurity program in connection with its review of the Company’s financial statements. ​ ​ ​ 33 Table of Contents
Board of Directors’ Role in Cybersecurity An integral part of Company’s risk management oversight, which includes information security, is the role of the Board. This is reinforced by the independence and reporting structure of the Chief Risk Officer, who oversees the CISO and reports to the Board Risk Committee and administratively to the President and Chief Executive Officer.
This is reinforced by the independence and reporting structure of the Chief Risk Officer, who oversees the CISO and reports to the Board Risk Committee and administratively to the President and Chief Executive Officer.
When the Company becomes aware of such events, the CISO engages with the impacted third party service providers to understand the incident, assess the risk that the Company’s information was released, and determine methods by which the Company can mitigate the damage, if any, and fulfill its notification obligations to impacted parties. 27 Table of Contents In an effort to remain vigilant against cybersecurity attacks, the Company further provides annual and ongoing training to all of its employees so that they have an understanding and appreciation of the cybersecurity environment and risks and the Company’s policies to combat such risks.
When the Company becomes aware of such events, the CISO engages with the impacted third-party service providers to understand the incident, assess the risk that the Company’s information was released, and determine methods by which the Company can mitigate the damage, if any, and fulfill its notification obligations to impacted parties.
Skerritt, the former Chief Executive Officer and President of Deutsche Bank Trust Company Americas, has received the Cyber-Risk Oversight Certification issued by the National Association of Corporate Directors (“NACD”), and utilizes her business experience and cyber-risk expertise to assist the Risk Committee in its evaluation of management’s cybersecurity process. Kerrie D.
MacPherson have received the Cyber-Risk Oversight Certification issued by the National Association of Corporate Directors (“NACD”), and utilize their business experience and cyber-risk expertise to assist the Risk Committee in its evaluation of management’s cybersecurity systems.
Removed
MacPherson, the Chair of the Audit Committee, has also received the Cyber-Risk Oversight Certification issued by the NACD. Mark E. Tryniski, the Company’s former President and Chief Executive Officer, serves on the Board and has considerable experience in the management of financial service companies and the cybersecurity process based upon his service with the Company. Director Jeffery J.
Added
Risks Associated with Cybersecurity The Company is often targeted in an effort to obtain unauthorized access to its financial records and confidential information, destroy data, disable or degrade service, or sabotage systems.
Removed
Knauss has also been selected by the Board to serve on the IT Steering Committee as its representative due to his technology experience developed through his ownership and management of a digital marketing firm. Director Knauss plays a valuable role in the oversight of the IT Steering Committee and is able to impart his knowledge and experience to the committee.
Added
The Company’s cybersecurity framework includes an assessment of the Company’s hardware, software, and data platforms across its lines of business; the risks associated with the Company’s business; areas inside and outside of the Company that expose it to cybersecurity threats. As part of this framework, the Company employs policies, systems and safeguards to manage cybersecurity risks.
Removed
For more information on risks to the Company from cybersecurity threats, see “Risk Factors – Operational Risks”.
Added
In an effort to remain vigilant against cybersecurity attacks, the Company further provides annual and ongoing training to all of its employees so that they have an understanding and appreciation of the cybersecurity environment and risks and the Company’s policies to combat such risks.
Added
For cybersecurity incidents, including, but not limited to, incidents that are deemed material pursuant to SEC cybersecurity disclosure rules or that significantly impact vital services provided by the Company, notification to the Board will occur at or about the time the incident is discovered.
Added
Less severe incidents will be reported by management at the next Board or Risk Committee meeting. 32 Table of Contents Board of Directors’ Role in Cybersecurity An integral part of Company’s risk management oversight, which includes information security, is the role of the Board.
Added
Directors Knauss and Singh also serve as Board representatives on the Company’s IT Steering Committee and provide valuable oversight and insight to the committee based on their respective roles as (i) the former CEO of a digital marketing firm and (ii) current CEO of PAR Technology Corporation (“PAR”), a global food service technology company providing leading omnichannel cloud-based software and hardware solutions to the restaurant and retail industries.

Item 2. Properties

Properties — owned and leased real estate

3 edited+2 added−1 removed1 unchanged
Biggest changeWith respect to the Employee Benefit Services segment, the Company operates 13 customer service facilities and one facility for back office operations, all of which are leased. With respect to the All Other segment, the Company operates 21 customer service facilities, 20 of which are leased. Some properties contain tenant leases or subleases.
Biggest changeThe majority of the Company’s properties are used by the Banking and Corporate segment which operates 185 full-service bank branches, 11 drive-thru only bank facilities and 21 facilities for back office banking and corporate operations. The Employee Benefit Services segment uses 16 properties including 15 customer service facilities and one facility for back office operations, all of which are leased.
Real property and related banking facilities owned by the Company at December 31, 2023 had a net book value of $104.1 million, of which $2.7 million was held for sale, and none of the properties were subject to any material encumbrances.
Real property and related banking facilities owned by the Company at December 31, 2024 had a net book value of $106.1 million, of which $1.4 million was held for sale, and none of the properties were subject to any material encumbrances.
For the year ended December 31, 2023, the Company paid $9.5 million of rental fees for facilities leased for its operations. The Company believes that its facilities are suitable and adequate for the Company’s current operations. ​
For the year ended December 31, 2024, the Company paid $11.2 million of rental fees for facilities leased for its operations. The Company believes that its facilities are suitable and adequate for the Company’s current operations. ​
Removed
The Company has 260 properties, of which 159 are owned and 101 are under lease arrangements. With respect to the Banking segment, the Company operates 193 full-service branches, 12 drive-thru only facilities and 20 facilities for back office banking operations.
Added
The Company has 257 properties, of which 152 are owned and 105 are under lease arrangements, excluding 18 properties that are in process of being opened for business in connection with the Bank’s de novo branch expansions, of which three are owned and 15 are under lease arrangements.
Added
The Insurance Services segment uses 22 customer service facilities, all of which are leased. Certain properties are shared for operations of multiple segments, including most of the properties in use by the Wealth Management Services segment. Certain properties also contain tenant leases or subleases.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

7 edited+0 added−0 removed4 unchanged
Biggest changeTotal return values were calculated as of December 31 of each indicated year assuming a $100 investment on December 31, 2018 and reinvestment of dividends. ​ 30 Table of Contents Equity Compensation Plan Information The following table provides information as of December 31, 2023 with respect to shares of common stock that may be issued under the Company’s existing equity compensation plans. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Number of Securities ​ ​ Number of ​ ​ ​ ​ Remaining Available ​ ​ Securities to be ​ ​ ​ ​ For Future Issuance ​ ​ Issued upon ​ Weighted-average ​ Under Equity ​ ​ Exercise of ​ Exercise Price ​ Compensation Plans ​ ​ Outstanding ​ of Outstanding ​ (excluding securities ​ ​ Options, Warrants ​ Options, Warrants ​ reflected in the first Plan Category ​ and Rights (1) ​ and Rights (2) ​ column) Equity compensation plans approved by security holders: ​ 2004 Long-term Incentive Plan 114,389 ​ $ 32.62 0 2014 Long-term Incentive Plan 1,390,002 ​ 51.77 0 2022 Long-term Incentive Plan ​ 368,164 ​ ​ 36.41 ​ 580,938 Equity compensation plans not approved by security holders 0 ​ 0 0 Total 1,872,555 ​ $ 47.58 580,938 ​ (1) The number of securities includes 230,701 shares of unvested restricted stock, including performance award restricted stock, comprised of 110,533 shares associated with the 2014 Long-term Incentive Plan and 120,168 shares associated with the 2022 Long-term Incentive Plan.
Biggest changeTotal return values were calculated as of December 31 of each indicated year assuming a $100 investment on December 31, 2019 and reinvestment of dividends. ​ 36 Table of Contents Equity Compensation Plan Information The following table provides information as of December 31, 2024 with respect to shares of common stock that may be issued under the Company’s existing equity compensation plans. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Number of Securities ​ ​ Number of ​ ​ ​ ​ Remaining Available ​ ​ Securities to be ​ ​ ​ ​ for Future Issuance ​ ​ Issued upon ​ Weighted-average ​ Under Equity ​ ​ Exercise of ​ Exercise Price ​ Compensation Plans ​ ​ Outstanding ​ of Outstanding ​ (excluding securities ​ ​ Options, Warrants ​ Options, Warrants ​ reflected in the first Plan Category ​ and Rights (1) ​ and Rights (2) ​ column) Equity compensation plans approved by security holders: ​ 2004 Long-term Incentive Plan 30,002 ​ $ 23.04 0 2014 Long-term Incentive Plan 1,129,405 ​ 55.87 0 2022 Long-term Incentive Plan ​ 739,150 ​ ​ 34.49 ​ 1,235,610 Equity compensation plans not approved by security holders 0 ​ 0 0 Total 1,898,557 ​ $ 47.03 1,235,610 (1) The number of securities includes 254,630 shares of unvested restricted stock, including performance award restricted stock, comprised of 41,649 shares associated with the 2014 Long - term Incentive Plan and 212,981 shares associated with the 2022 Long - term Incentive Plan.
Stock Repurchase Program At its December 2023 meeting, the Board approved a new stock repurchase program authorizing the repurchase, at the discretion of senior management, of up to 2,697,000 shares of the Company’s common stock, in accordance with securities and banking laws and regulations, during the twelve-month period starting January 1, 2024.
At its December 2023 meeting, the Board approved a stock repurchase program authorizing the repurchase, at the discretion of senior management, of up to 2,697,000 shares of the Company’s common stock, in accordance with securities and banking laws and regulations, during the twelve - month period starting January 1, 2024.
However, because the substantial majority of the funds available for the payment of dividends by the Company are derived from the subsidiary Bank, future dividends will depend largely upon the earnings of the Bank, its financial condition, its need for funds and applicable governmental policies and regulations. 29 Table of Contents The following graph compares cumulative total shareholders returns on the Company’s common stock over the last five fiscal years to the S&P 600 Commercial Banks Index, the NASDAQ Bank Index, the S&P 500 Index, and the KBW Regional Banking Index.
However, because the substantial majority of the funds available for the payment of dividends by the Company are derived from the subsidiary Bank, future dividends will depend largely upon the earnings of the Bank, its financial condition, its need for funds and applicable governmental policies and regulations. 35 Table of Contents The following graph compares cumulative total shareholders returns on the Company’s common stock over the last five fiscal years to the S&P 600 Commercial Banks Index, the NASDAQ Bank Index, the S&P 500 Index, and the KBW Regional Banking Index.
At its December 2022 meeting, the Board approved a stock repurchase program authorizing the repurchase, at the discretion of senior management, of up to 2,697,000 shares of the Company’s common stock, in accordance with securities and banking laws and regulations, during the twelve-month period starting January 1, 2023.
Stock Repurchase Program At its December 2024 meeting, the Board approved a new stock repurchase program authorizing the repurchase, at the discretion of senior management, of up to 2,628,000 shares, or 5.0% of the Company’s common stock outstanding, in accordance with securities and banking laws and regulations, during the twelve - month period starting January 1, 2025.
There were 53,328,534 shares of common stock outstanding on January 31, 2024, held by approximately 3,528 registered shareholders of record. The Company has historically paid regular quarterly cash dividends on its common stock, and declared a cash dividend of $0.45 per share for the first quarter of 2024.
There were 52,712,324 shares of common stock outstanding on January 31, 2025, held by approximately 3,317 registered shareholders of record. The Company has historically paid regular quarterly cash dividends on its common stock and declared a cash dividend of $0.46 per share for the first quarter of 2025.
(2) Excluding the impact of unvested restricted stock, including performance award restricted stock, the total weighted-average exercise price is $54.27, the weighted-average exercise price associated with the 2014 Long-term Incentive Plan is $56.24 and the weighted-average exercise price associated with the 2022 Long-term Incentive Plan is $54.06.
(2) Excluding the impact of unvested restricted stock, including performance award restricted stock, the total weighted - average exercise price is $54.31, the weighted - average exercise price associated with the 2014 Long - term Incentive Plan is $58.01 and the weighted - average exercise price associated with the 2022 Long - term Incentive Plan is $48.45.
There were 607,161 shares of treasury stock purchases made under this authorization in 2023. 31 Table of Contents The following table presents stock purchases made during the fourth quarter of 2023: ​ Issuer Purchases of Equity Securities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total ​ ​ ​ ​ Total Number of Shares ​ ​ ​ ​ Number of ​ Average ​ Purchased as Part of ​ Maximum Number of Shares ​ ​ Shares ​ Price Paid ​ Publicly Announced ​ That May Yet be Purchased Period ​ Purchased ​ Per Share ​ Plans or Programs ​ Under the Plans or Programs October 1-31, 2023 (1) 61,249 ​ $ 39.63 60,000 2,137,000 November 1-30, 2023 40,000 ​ 41.03 40,000 2,097,000 December 1-31, 2023 7,161 ​ 45.34 7,161 2,089,839 Total (1) 108,410 ​ $ 40.52 107,161 (1) Included in the common shares repurchased were 1,249 shares acquired by the Company in connection with the administration of a deferred compensation plan.
There were 1,000,000 shares of treasury stock purchases made under this authorization in 2024. 37 Table of Contents The following table presents stock purchases made during the fourth quarter of 2024: ​ Issuer Purchases of Equity Securities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total ​ ​ ​ ​ Total Number of Shares ​ ​ ​ ​ Number of ​ Average ​ Purchased as Part of ​ Maximum Number of Shares ​ ​ Shares ​ Price Paid ​ Publicly Announced ​ That May Yet be Purchased Period ​ Purchased ​ Per Share ​ Plans or Programs ​ Under the Plans or Programs October 1-31, 2024 (1) 826 ​ $ 57.28 0 1,697,000 November 1-30, 2024 0 ​ 0.00 0 1,697,000 December 1-31, 2024 0 ​ 0.00 0 1,697,000 Total (1) 826 ​ $ 57.28 0 (1) Included in the common shares repurchased were 826 shares acquired by the Company in connection with the administration of a deferred compensation plan.

Item 7. Management's Discussion & Analysis

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

294 edited+63 added−67 removed85 unchanged
Biggest changeIf the Company does update or correct one or more forward-looking statements, investors and others should not conclude that the Company will make additional updates or corrections with respect thereto or with respect to other forward-looking statements. ​ 72 Table of Contents Reconciliation of GAAP to Non-GAAP Measures Table 20: GAAP to Non-GAAP Reconciliations ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (000’s omitted) 2023 2022 2021 Income statement data ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pre-tax, pre-provision net revenue ​ ​ ​ Net income (GAAP) ​ $ 131,924 ​ $ 188,081 ​ $ 189,694 ​ Income taxes ​ 36,307 ​ 52,233 ​ 51,654 ​ Income before income taxes ​ 168,231 ​ 240,314 ​ 241,348 ​ Provision for credit losses ​ 11,203 ​ 14,773 ​ (8,839) ​ Pre-tax, pre-provision net revenue (non-GAAP) ​ 179,434 ​ 255,087 ​ 232,509 ​ Acquisition expenses ​ 63 ​ 5,021 ​ 701 ​ Acquisition-related contingent consideration adjustment ​ ​ 3,280 ​ ​ (300) ​ ​ 200 ​ Restructuring expenses ​ ​ 1,163 ​ ​ 0 ​ ​ 0 ​ Loss on sales of investment securities ​ ​ 52,329 ​ ​ 0 ​ ​ 0 ​ Gain on debt extinguishment ​ (242) ​ 0 ​ 0 ​ Litigation accrual ​ 5,800 ​ 0 ​ (100) ​ Unrealized loss (gain) on equity securities ​ 47 ​ 44 ​ (17) ​ Adjusted pre-tax, pre-provision net revenue (non-GAAP) ​ $ 241,874 ​ $ 259,852 ​ $ 233,293 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pre-tax, pre-provision net revenue per share ​ ​ ​ ​ Diluted earnings per share (GAAP) ​ $ 2.45 ​ $ 3.46 ​ $ 3.48 ​ Income taxes ​ 0.67 ​ 0.96 ​ 0.95 ​ Income before income taxes ​ 3.12 ​ 4.42 ​ 4.43 ​ Provision for credit losses ​ 0.21 ​ 0.27 ​ (0.16) ​ Pre-tax, pre-provision net revenue per share (non-GAAP) ​ 3.33 ​ 4.69 ​ 4.27 ​ Acquisition expenses ​ 0.00 ​ 0.09 ​ 0.01 ​ Acquisition-related contingent consideration adjustment ​ ​ 0.06 ​ ​ 0.00 ​ ​ 0.00 ​ Restructuring expenses ​ ​ 0.02 ​ ​ 0.00 ​ ​ 0.00 ​ Loss on sales of investment securities ​ 0.97 ​ 0.00 ​ 0.00 ​ Gain on debt extinguishment ​ ​ 0.00 ​ ​ 0.00 ​ ​ 0.00 ​ Litigation accrual ​ 0.11 ​ 0.00 ​ 0.00 ​ Unrealized loss (gain) on equity securities ​ 0.00 ​ 0.00 ​ 0.00 ​ Adjusted pre-tax, pre-provision net revenue per share (non-GAAP) ​ $ 4.49 ​ $ 4.78 ​ $ 4.28 ​ ​ 73 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (000’s omitted) 2023 2022 2021 Net income ​ ​ ​ Net income (GAAP) ​ $ 131,924 ​ $ 188,081 ​ $ 189,694 ​ Acquisition expenses ​ 63 ​ 5,021 ​ 701 ​ Tax effect of acquisition expenses ​ ​ (13) ​ ​ (1,091) ​ ​ (150) ​ Subtotal (non-GAAP) ​ ​ 131,974 ​ ​ 192,011 ​ ​ 190,245 ​ Loss on sales of investment securities ​ ​ 52,329 ​ ​ 0 ​ ​ 0 ​ Tax effect of loss on sales of investment securities ​ (10,989) ​ 0 ​ 0 ​ Subtotal (non-GAAP) ​ 173,314 ​ 192,011 ​ 190,245 ​ Gain on debt extinguishment ​ (242) ​ 0 ​ 0 ​ Tax effect of gain on debt extinguishment ​ 51 ​ 0 ​ 0 ​ Subtotal (non-GAAP) ​ ​ 173,123 ​ ​ 192,011 ​ ​ 190,245 ​ Acquisition-related contingent consideration adjustment ​ ​ 3,280 ​ ​ (300) ​ ​ 200 ​ Tax effect of acquisition-related contingent consideration adjustment ​ ​ (689) ​ ​ 65 ​ ​ (43) ​ Subtotal (non-GAAP) ​ ​ 175,714 ​ ​ 191,776 ​ ​ 190,402 ​ Acquisition-related provision for credit losses ​ ​ 0 ​ ​ 3,927 ​ ​ 0 ​ Tax effect of acquisition-related provision for credit losses ​ ​ 0 ​ ​ (853) ​ ​ 0 ​ Subtotal (non-GAAP) ​ 175,714 ​ 194,850 ​ 190,402 ​ Unrealized loss (gain) on equity securities ​ 47 ​ 44 ​ (17) ​ Tax effect of unrealized loss (gain) on equity securities ​ (10) ​ (10) ​ 4 ​ Subtotal (non-GAAP) ​ ​ 175,751 ​ ​ 194,884 ​ ​ 190,389 ​ Restructuring expenses ​ ​ 1,163 ​ ​ 0 ​ ​ 0 ​ Tax effect of restructuring expenses ​ ​ (244) ​ ​ 0 ​ ​ 0 ​ Subtotal (non-GAAP) ​ 176,670 ​ 194,884 ​ 190,389 ​ Litigation accrual ​ ​ 5,800 ​ ​ 0 ​ ​ (100) ​ Tax effect of litigation accrual ​ (1,218) ​ 0 ​ 21 ​ Operating net income (non-GAAP) ​ 181,252 ​ 194,884 ​ 190,310 ​ Amortization of intangibles ​ 14,511 ​ 15,214 ​ 14,051 ​ Tax effect of amortization of intangibles ​ (3,047) ​ (3,307) ​ (3,007) ​ Subtotal (non-GAAP) ​ 192,716 ​ 206,791 ​ 201,354 ​ Acquired non-PCD loan accretion ​ (3,741) ​ (4,292) ​ (3,989) ​ Tax effect of acquired non-PCD loan accretion ​ 786 ​ 933 ​ 854 ​ Adjusted net income (non-GAAP) ​ $ 189,761 ​ $ 203,432 ​ $ 198,219 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Return on average assets ​ ​ ​ ​ ​ Adjusted net income (non-GAAP) ​ $ 189,761 ​ $ 203,432 ​ $ 198,219 ​ Average total assets ​ 15,242,884 ​ 15,567,139 ​ 14,835,025 ​ Adjusted return on average assets (non-GAAP) ​ 1.24 % 1.31 % 1.34 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Return on average equity ​ ​ ​ ​ ​ Adjusted net income (non-GAAP) ​ $ 189,761 ​ $ 203,432 ​ $ 198,219 ​ Average total equity ​ 1,595,724 ​ 1,733,521 ​ 2,064,105 ​ Adjusted return on average equity (non-GAAP) ​ 11.89 % 11.74 % 9.60 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net interest margin ​ ​ ​ ​ ​ Net interest income ​ $ 437,285 ​ $ 420,630 ​ $ 374,412 ​ Total average interest-earning assets ​ 14,078,061 ​ 14,548,665 ​ 13,393,383 ​ Net interest margin ​ 3.11 % 2.89 % 2.80 % ​ ​ 74 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (000's omitted) 2023 2022 2021 Income statement data (continued) ​ ​ ​ Net interest margin (FTE) (non - GAAP) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net interest income ​ $ 437,285 ​ $ 420,630 ​ $ 374,412 ​ Fully tax - equivalent adjustment ​ ​ 4,242 ​ ​ 4,074 ​ ​ 3,393 ​ Fully tax - equivalent net interest income ​ ​ 441,527 ​ ​ 424,704 ​ ​ 377,805 ​ Total average interest - earning assets ​ ​ 14,078,061 ​ ​ 14,548,665 ​ ​ 13,393,383 ​ Net interest margin (FTE) (non - GAAP) ​ ​ 3.14 % ​ 2.92 % ​ 2.82 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Earnings per common share ​ ​ ​ Diluted earnings per share (GAAP) ​ $ 2.45 ​ $ 3.46 ​ $ 3.48 ​ Acquisition expenses ​ 0.00 ​ 0.09 ​ 0.01 ​ Tax effect of acquisition expenses ​ 0.00 ​ (0.02) ​ 0.00 ​ Subtotal (non-GAAP) ​ 2.45 ​ 3.53 ​ 3.49 ​ Loss on sales of investment securities ​ ​ 0.97 ​ ​ 0.00 ​ ​ 0.00 ​ Tax effect of loss on sales of investment securities ​ ​ (0.21) ​ ​ 0.00 ​ ​ 0.00 ​ Subtotal (non - GAAP) ​ ​ 3.21 ​ ​ 3.53 ​ ​ 3.49 ​ Gain on debt extinguishment ​ ​ 0.00 ​ ​ 0.00 ​ ​ 0.00 ​ Tax effect of gain on debt extinguishment ​ ​ 0.00 ​ ​ 0.00 ​ ​ 0.00 ​ Subtotal (non - GAAP) ​ ​ 3.21 ​ ​ 3.53 ​ ​ 3.49 ​ Acquisition-related contingent consideration adjustment ​ 0.06 ​ 0.00 ​ 0.00 ​ Tax effect of acquisition-related contingent consideration adjustment ​ (0.01) ​ 0.00 ​ 0.00 ​ Subtotal (non-GAAP) ​ 3.26 ​ 3.53 ​ 3.49 ​ Acquisition-related provision for credit losses ​ 0.00 ​ 0.07 ​ 0.00 ​ Tax effect of acquisition-related provision for credit losses ​ 0.00 ​ (0.02) ​ 0.00 ​ Subtotal (non-GAAP) ​ ​ 3.26 ​ ​ 3.58 ​ ​ 3.49 ​ Unrealized loss (gain) on equity securities ​ ​ 0.00 ​ ​ 0.00 ​ ​ 0.00 ​ Tax effect of unrealized loss (gain) on equity securities ​ ​ 0.00 ​ ​ 0.00 ​ ​ 0.00 ​ Subtotal (non-GAAP) ​ ​ 3.26 ​ ​ 3.58 ​ ​ 3.49 ​ Restructuring expenses ​ ​ 0.02 ​ ​ 0.00 ​ ​ 0.00 ​ Tax effect of restructuring expenses ​ ​ 0.00 ​ ​ 0.00 ​ ​ 0.00 ​ Subtotal (non-GAAP) ​ 3.28 ​ 3.58 ​ 3.49 ​ Litigation accrual ​ 0.11 ​ 0.00 ​ 0.00 ​ Tax effect of litigation accrual ​ (0.03) ​ 0.00 ​ 0.00 ​ Operating earnings per share (non-GAAP) ​ 3.36 ​ 3.58 ​ 3.49 ​ Amortization of intangibles ​ 0.27 ​ 0.28 ​ 0.26 ​ Tax effect of amortization of intangibles ​ (0.06) ​ (0.06) ​ (0.06) ​ Subtotal (non-GAAP) ​ 3.57 ​ 3.80 ​ 3.69 ​ Acquired non-PCD loan accretion ​ (0.07) ​ (0.08) ​ (0.07) ​ Tax effect of acquired non-PCD loan accretion ​ 0.01 ​ 0.02 ​ 0.02 ​ Diluted adjusted net earnings per share (non-GAAP) ​ $ 3.51 ​ $ 3.74 ​ $ 3.64 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Noninterest operating revenues ​ ​ ​ ​ Noninterest revenues (GAAP) ​ $ 214,834 ​ $ 258,725 ​ $ 246,235 ​ Loss on sales of investment securities ​ ​ 52,329 ​ ​ 0 ​ ​ 0 ​ Gain on debt extinguishment ​ ​ (242) ​ ​ 0 ​ ​ 0 ​ Unrealized loss (gain) on equity securities ​ ​ 47 ​ ​ 44 ​ ​ (17) ​ Total adjusted noninterest revenues (non-GAAP) ​ $ 266,968 ​ $ 258,769 ​ $ 246,218 ​ ​ ​ 75 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (000’s omitted) 2023 2022 2021 ​ Noninterest operating expenses ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Noninterest expenses (GAAP) ​ $ 472,685 ​ $ 424,268 ​ $ 388,138 ​ Amortization of intangibles ​ (14,511) ​ (15,214) ​ (14,051) ​ Acquisition expenses ​ ​ (63) ​ ​ (5,021) ​ ​ (701) ​ Acquisition-related contingent consideration adjustment ​ ​ (3,280) ​ ​ 300 ​ ​ (200) ​ Restructuring expenses ​ (1,163) ​ 0 ​ 0 ​ Litigation accrual ​ ​ (5,800) ​ ​ 0 ​ ​ 100 ​ Total adjusted noninterest expenses (non-GAAP) ​ $ 447,868 ​ $ 404,333 ​ $ 373,286 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Efficiency ratio - GAAP ​ ​ ​ ​ Noninterest expenses (GAAP) – numerator ​ $ 472,685 ​ $ 424,268 ​ $ 388,138 ​ Net interest income (GAAP) ​ $ 437,285 ​ $ 420,630 ​ $ 374,412 ​ Noninterest revenues (GAAP) ​ ​ 214,834 ​ ​ 258,725 ​ ​ 246,235 ​ Total revenues (GAAP) – denominator ​ $ 652,119 ​ $ 679,355 ​ $ 620,647 ​ Efficiency ratio (GAAP) ​ ​ 72.5 % ​ 62.5 % ​ 62.5 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating efficiency ratio – non-GAAP ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating expenses (non-GAAP) - numerator ​ $ 447,868 ​ $ 404,333 ​ $ 373,286 ​ Fully tax-equivalent net interest income ​ $ 441,527 ​ $ 424,704 ​ $ 377,805 ​ Noninterest revenues ​ 214,834 ​ 258,725 ​ 246,235 ​ Acquired non-PCD loan accretion ​ (3,741) ​ (4,292) ​ (3,989) ​ Unrealized loss (gain) on equity securities ​ 47 ​ 44 ​ (17) ​ Loss on sales of investment securities ​ ​ 52,329 ​ ​ 0 ​ ​ 0 ​ Gain on debt extinguishment ​ (242) ​ 0 ​ 0 ​ Operating revenues (non-GAAP) - denominator ​ $ 704,754 ​ $ 679,181 ​ $ 620,034 ​ Operating efficiency ratio (non-GAAP) ​ 63.5 % 59.5 % 60.2 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance sheet data ​ ​ ​ ​ ​ ​ Total assets ​ ​ ​ ​ ​ ​ ​ ​ ​ Total assets (GAAP) ​ $ 15,555,753 ​ $ 15,835,651 ​ $ 15,552,657 ​ Intangible assets ​ (897,987) ​ (902,837) ​ (864,335) ​ Deferred taxes on goodwill and intangible assets ​ 45,198 ​ 46,130 ​ 44,160 ​ Total tangible assets (non-GAAP) ​ $ 14,702,964 ​ $ 14,978,944 ​ $ 14,732,482 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total common equity ​ ​ ​ ​ ​ ​ ​ Shareholders’ equity (GAAP) ​ $ 1,697,937 ​ $ 1,551,705 ​ $ 2,100,807 ​ Intangible assets ​ (897,987) ​ (902,837) ​ (864,335) ​ Deferred taxes on goodwill and intangible assets ​ 45,198 ​ 46,130 ​ 44,160 ​ Total tangible common equity (non-GAAP) ​ $ 845,148 ​ $ 694,998 ​ $ 1,280,632 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Shareholders' equity-to-assets ratio ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total shareholders' equity (GAAP) - numerator ​ $ 1,697,937 ​ $ 1,551,705 ​ $ 2,100,807 ​ Total assets (GAAP) - denominator ​ $ 15,555,753 ​ $ 15,835,651 ​ $ 15,552,657 ​ Shareholders' equity-to-assets ratio (GAAP) ​ ​ 10.92 % ​ 9.80 % ​ 13.51 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Tangible equity-to-assets ratio ​ ​ ​ ​ ​ ​ ​ Total tangible common equity (non-GAAP) - numerator ​ $ 845,148 ​ $ 694,998 ​ $ 1,280,632 ​ Total tangible assets (non-GAAP) - denominator ​ $ 14,702,964 ​ $ 14,978,944 ​ $ 14,732,482 ​ Tangible equity-to-assets ratio (non-GAAP) ​ 5.75 % 4.64 % 8.69 % ​ ​ 76 Table of Contents
Biggest changeIf the Company does update or correct one or more forward-looking statements, investors and others should not conclude that the Company will make additional updates or corrections with respect thereto or with respect to other forward-looking statements. ​ 76 Table of Contents Reconciliation of GAAP to Non-GAAP Measures Table 20: GAAP to Non-GAAP Reconciliations ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (000’s omitted) 2024 2023 2022 Operating pre-tax, pre-provision net revenue (non-GAAP) ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income (GAAP) ​ $ 182,481 ​ $ 131,924 ​ $ 188,081 Income taxes ​ 54,223 ​ 36,307 ​ 52,233 Income before income taxes ​ 236,704 ​ 168,231 ​ 240,314 Provision for credit losses ​ 22,773 ​ 11,203 ​ 14,773 Pre-tax, pre-provision net revenue (non-GAAP) ​ 259,477 ​ 179,434 ​ 255,087 Acquisition expenses ​ 213 ​ 63 ​ 5,021 Acquisition-related contingent consideration adjustments ​ ​ 244 ​ ​ 3,280 ​ ​ (300) Restructuring expenses ​ ​ 0 ​ ​ 1,163 ​ ​ 0 Litigation accrual ​ ​ 138 ​ ​ 5,800 ​ ​ 0 Loss on sales of investment securities ​ ​ 487 ​ ​ 52,329 ​ ​ 0 Gain on debt extinguishment ​ 0 ​ (242) ​ 0 Unrealized (gain) loss on equity securities ​ (1,231) ​ 47 ​ 44 Amortization of intangible assets ​ ​ 14,259 ​ ​ 14,511 ​ ​ 15,214 Operating pre-tax, pre-provision net revenue (non-GAAP) ​ $ 273,587 ​ $ 256,385 ​ $ 275,066 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating pre-tax, pre-provision net revenue per share (non-GAAP) ​ ​ ​ Diluted earnings per share (GAAP) ​ $ 3.44 ​ $ 2.45 ​ $ 3.46 Income taxes ​ 1.02 ​ 0.67 ​ 0.96 Income before income taxes ​ 4.46 ​ 3.12 ​ 4.42 Provision for credit losses ​ 0.43 ​ 0.21 ​ 0.27 Pre-tax, pre-provision net revenue per share (non-GAAP) ​ 4.89 ​ 3.33 ​ 4.69 Acquisition expenses ​ 0.00 ​ 0.00 ​ 0.09 Acquisition-related contingent consideration adjustments ​ ​ 0.00 ​ ​ 0.06 ​ ​ 0.00 Restructuring expenses ​ ​ 0.00 ​ ​ 0.02 ​ ​ 0.00 Litigation accrual ​ ​ 0.00 ​ ​ 0.11 ​ ​ 0.00 Loss on sales of investment securities ​ 0.01 ​ 0.97 ​ 0.00 Gain on debt extinguishment ​ ​ 0.00 ​ ​ 0.00 ​ ​ 0.00 Unrealized (gain) loss on equity securities ​ (0.02) ​ 0.00 ​ 0.00 Amortization of intangible assets ​ ​ 0.27 ​ ​ 0.27 ​ ​ 0.28 Operating pre-tax, pre-provision net revenue per share (non-GAAP) ​ $ 5.15 ​ $ 4.76 ​ $ 5.06 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating net income (non-GAAP) ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income (GAAP) ​ $ 182,481 ​ $ 131,924 ​ $ 188,081 Acquisition expenses ​ ​ 213 ​ ​ 63 ​ ​ 5,021 Tax effect of acquisition expenses ​ ​ (40) ​ ​ (13) ​ ​ (1,091) Subtotal (non-GAAP) ​ ​ 182,654 ​ ​ 131,974 ​ ​ 192,011 Acquisition-related contingent consideration adjustments ​ ​ 244 ​ ​ 3,280 ​ ​ (300) Tax effect of acquisition-related contingent consideration adjustments ​ ​ (46) ​ ​ (689) ​ ​ 65 Subtotal (non-GAAP) ​ ​ 182,852 ​ ​ 134,565 ​ ​ 191,776 Acquisition-related provision for credit losses ​ ​ 0 ​ ​ 0 ​ ​ 3,927 Tax effect of acquisition-related provision for credit losses ​ ​ 0 ​ ​ 0 ​ ​ (853) Subtotal (non-GAAP) ​ ​ 182,852 ​ ​ 134,565 ​ ​ 194,850 Litigation accrual ​ ​ 138 ​ ​ 5,800 ​ ​ 0 Tax effect of litigation accrual ​ ​ (26) ​ ​ (1,218) ​ ​ 0 Subtotal (non-GAAP) ​ ​ 182,964 ​ ​ 139,147 ​ ​ 194,850 Restructuring expenses ​ ​ 0 ​ ​ 1,163 ​ ​ 0 Tax effect of restructuring expenses ​ ​ 0 ​ ​ (244) ​ ​ 0 Subtotal (non-GAAP) ​ ​ 182,964 ​ ​ 140,066 ​ ​ 194,850 Loss on sales of investment securities ​ ​ 487 ​ ​ 52,329 ​ ​ 0 Tax effect of loss on sales of investment securities ​ ​ (93) ​ ​ (10,989) ​ ​ 0 Subtotal (non-GAAP) ​ ​ 183,358 ​ ​ 181,406 ​ ​ 194,850 Gain on debt extinguishment ​ ​ 0 ​ ​ (242) ​ ​ 0 Tax effect of gain on debt extinguishment ​ ​ 0 ​ ​ 51 ​ ​ 0 Subtotal (non-GAAP) ​ ​ 183,358 ​ ​ 181,215 ​ ​ 194,850 Unrealized (gain) loss on equity securities ​ ​ (1,231) ​ ​ 47 ​ ​ 44 Tax effect of unrealized (gain) loss on equity securities ​ ​ 234 ​ ​ (10) ​ ​ (10) Subtotal (non-GAAP) ​ ​ 182,361 ​ ​ 181,252 ​ ​ 194,884 Amortization of intangible assets ​ ​ 14,259 ​ ​ 14,511 ​ ​ 15,214 Tax effect of amortization of intangible assets ​ ​ (2,709) ​ ​ (3,047) ​ ​ (3,307) Operating net income (non-GAAP) ​ $ 193,911 ​ $ 192,716 ​ $ 206,791 ​ 77 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (000's omitted) 2024 2023 2022 Operating diluted earnings per share (non-GAAP) ​ ​ ​ Diluted earnings per share (GAAP) ​ $ 3.44 ​ $ 2.45 ​ $ 3.46 ​ Acquisition expenses ​ 0.00 ​ 0.00 ​ 0.09 ​ Tax effect of acquisition expenses ​ ​ 0.00 ​ ​ 0.00 ​ ​ (0.02) ​ Subtotal (non-GAAP) ​ ​ 3.44 ​ ​ 2.45 ​ ​ 3.53 ​ Acquisition-related contingent consideration adjustments ​ ​ 0.00 ​ ​ 0.06 ​ ​ 0.00 ​ Tax effect of acquisition-related contingent consideration adjustments ​ ​ 0.00 ​ ​ (0.01) ​ ​ 0.00 ​ Subtotal (non-GAAP) ​ 3.44 ​ 2.50 ​ 3.53 ​ Acquisition-related provision for credit losses ​ 0.00 ​ 0.00 ​ 0.07 ​ Tax effect of acquisition-related provision for credit losses ​ 0.00 ​ 0.00 ​ (0.02) ​ Subtotal (non-GAAP) ​ 3.44 ​ 2.50 ​ 3.58 ​ Litigation accrual ​ 0.00 ​ 0.11 ​ 0.00 ​ Tax effect of litigation accrual ​ ​ 0.00 ​ ​ (0.03) ​ ​ 0.00 ​ Subtotal (non-GAAP) ​ ​ 3.44 ​ ​ 2.58 ​ ​ 3.58 ​ Restructuring expenses ​ ​ 0.00 ​ ​ 0.02 ​ ​ 0.00 ​ Tax effect of restructuring expenses ​ ​ 0.00 ​ ​ 0.00 ​ ​ 0.00 ​ Subtotal (non-GAAP) ​ ​ 3.44 ​ ​ 2.60 ​ ​ 3.58 ​ Loss on sales of investment securities ​ ​ 0.01 ​ ​ 0.97 ​ ​ 0.00 ​ Tax effect of loss on sales of investment securities ​ 0.00 ​ (0.21) ​ 0.00 ​ Subtotal (non-GAAP) ​ 3.45 ​ 3.36 ​ 3.58 ​ Gain on debt extinguishment ​ 0.00 ​ 0.00 ​ 0.00 ​ Tax effect of gain on debt extinguishment ​ ​ 0.00 ​ ​ 0.00 ​ ​ 0.00 ​ Subtotal (non-GAAP) ​ ​ 3.45 ​ ​ 3.36 ​ ​ 3.58 ​ Unrealized (gain) loss on equity securities ​ ​ (0.02) ​ ​ 0.00 ​ ​ 0.00 ​ Tax effect of unrealized (gain) loss on equity securities ​ ​ 0.00 ​ ​ 0.00 ​ ​ 0.00 ​ Subtotal (non-GAAP) ​ 3.43 ​ 3.36 ​ 3.58 ​ Amortization of intangible assets ​ ​ 0.27 ​ ​ 0.27 ​ ​ 0.28 ​ Tax effect of amortization of intangible assets ​ (0.05) ​ (0.06) ​ (0.06) ​ Operating diluted earnings per share (non-GAAP) ​ $ 3.65 ​ $ 3.57 ​ $ 3.80 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Return on assets ​ ​ ​ ​ ​ Net income (GAAP) ​ $ 182,481 ​ $ 131,924 ​ $ 188,081 ​ Average total assets ​ 15,990,697 ​ 15,242,884 ​ 15,567,139 ​ Return on assets (GAAP) ​ 1.14 % 0.87 % 1.21 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating return on assets (non-GAAP) ​ ​ ​ ​ ​ Operating net income (non-GAAP) ​ $ 193,911 ​ $ 192,716 ​ $ 206,791 ​ Average total assets ​ 15,990,697 ​ 15,242,884 ​ 15,567,139 ​ Operating return on assets (non-GAAP) ​ 1.21 % 1.26 % 1.33 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Return on equity ​ ​ ​ ​ ​ Net income (GAAP) ​ $ 182,481 ​ $ 131,924 ​ $ 188,081 ​ Average total equity ​ 1,695,794 ​ 1,595,724 ​ 1,733,521 ​ Return on equity (GAAP) ​ 10.76 % 8.27 % 10.85 % ​ 78 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (000’s omitted) 2024 2023 2022 Operating return on equity (non-GAAP) ​ ​ ​ Operating net income (non-GAAP) ​ $ 193,911 ​ $ 192,716 ​ $ 206,791 ​ Average total equity ​ ​ 1,695,794 ​ ​ 1,595,724 ​ ​ 1,733,521 ​ Operating return on equity (non-GAAP) ​ ​ 11.43 % ​ 12.08 % ​ 11.93 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net interest margin ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net interest income ​ $ 449,117 ​ $ 437,285 ​ $ 420,630 ​ Total average interest-earning assets ​ ​ 14,754,880 ​ ​ 14,078,061 ​ ​ 14,548,665 ​ Net interest margin ​ ​ 3.04 % ​ 3.11 % ​ 2.89 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net interest margin (FTE) (non-GAAP) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net interest income ​ $ 449,117 ​ $ 437,285 ​ $ 420,630 ​ Fully tax-equivalent adjustment (non-GAAP) ​ ​ 3,721 ​ ​ 4,242 ​ ​ 4,074 ​ Fully tax-equivalent net interest income (non-GAAP) ​ ​ 452,838 ​ ​ 441,527 ​ ​ 424,704 ​ Total average interest-earning assets ​ 14,754,880 ​ ​ 14,078,061 ​ ​ 14,548,665 ​ Net interest margin (FTE) (non-GAAP) ​ ​ 3.07 % ​ 3.14 % ​ 2.92 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating noninterest revenues (non-GAAP) ​ ​ ​ ​ ​ ​ ​ ​ ​ Noninterest revenues (GAAP) ​ $ 297,186 ​ $ 214,834 ​ $ 258,725 ​ Loss on sales of investment securities ​ ​ 487 ​ ​ 52,329 ​ ​ 0 ​ Gain on debt extinguishment ​ ​ 0 ​ ​ (242) ​ ​ 0 ​ Unrealized (gain) loss on equity securities ​ ​ (1,231) ​ ​ 47 ​ ​ 44 ​ Total operating noninterest revenues (non-GAAP) ​ $ 296,442 ​ $ 266,968 ​ $ 258,769 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating noninterest expenses (non-GAAP) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Noninterest expenses (GAAP) ​ $ 486,825 ​ $ 472,685 ​ $ 424,268 ​ Acquisition expenses ​ ​ (213) ​ ​ (63) ​ ​ (5,021) ​ Acquisition-related contingent consideration adjustments ​ ​ (244) ​ ​ (3,280) ​ ​ 300 ​ Restructuring expenses ​ ​ 0 ​ ​ (1,163) ​ ​ 0 ​ Litigation accrual ​ ​ (138) ​ ​ (5,800) ​ ​ 0 ​ Amortization of intangible assets ​ ​ (14,259) ​ ​ (14,511) ​ ​ (15,214) ​ Total operating noninterest expenses (non-GAAP) ​ $ 471,971 ​ $ 447,868 ​ $ 404,333 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating revenues (non-GAAP) ​ ​ ​ ​ ​ ​ ​ ​ ​ Net interest income (GAAP) ​ $ 449,117 ​ $ 437,285 ​ $ 420,630 ​ Noninterest revenues (GAAP) ​ 297,186 ​ 214,834 ​ 258,725 ​ Total revenues (GAAP) ​ 746,303 ​ 652,119 ​ 679,355 ​ Loss on sales of investment securities ​ ​ 487 ​ ​ 52,329 ​ ​ 0 ​ Gain on debt extinguishment ​ ​ 0 ​ ​ (242) ​ ​ 0 ​ Unrealized (gain) loss on equity securities ​ ​ (1,231) ​ ​ 47 ​ ​ 44 ​ Total operating revenues (non-GAAP) ​ $ 745,559 ​ $ 704,253 ​ $ 679,399 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Noninterest revenues/total revenues ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total noninterest revenues (GAAP) – numerator ​ $ 297,186 ​ $ 214,834 ​ $ 258,725 ​ Total revenues (GAAP) – denominator ​ 746,303 ​ 652,119 ​ 679,355 ​ Noninterest revenues/total revenues (GAAP) ​ ​ 39.8 % ​ 32.9 % ​ 38.1 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating noninterest revenues/operating revenues (FTE) (non-GAAP) ​ ​ ​ ​ ​ ​ ​ ​ ​ Total operating noninterest revenues (non-GAAP) – numerator ​ $ 296,442 ​ $ 266,968 ​ $ 258,769 ​ Total operating revenues (non-GAAP) ​ ​ 745,559 ​ ​ 704,253 ​ ​ 679,399 ​ Fully tax-equivalent adjustment (non-GAAP) ​ ​ 3,721 ​ ​ 4,242 ​ ​ 4,074 ​ Total operating revenues (FTE) (non-GAAP) – denominator ​ ​ 749,280 ​ ​ 708,495 ​ ​ 683,473 ​ Operating noninterest revenues/operating revenues (FTE) (non-GAAP) ​ ​ 39.6 % ​ 37.7 % ​ 37.9 % ​ 79 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (000’s omitted) 2024 2023 2022 ​ Efficiency ratio (GAAP) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total noninterest expenses (GAAP) – numerator ​ $ 486,825 ​ $ 472,685 ​ $ 424,268 ​ Total revenues (GAAP) – denominator ​ 746,303 ​ 652,119 ​ 679,355 ​ Efficiency ratio (GAAP) ​ ​ 65.2 % ​ 72.5 % ​ 62.5 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating efficiency ratio (non-GAAP) ​ ​ ​ ​ Total operating noninterest expenses (non-GAAP) – numerator ​ $ 471,971 ​ $ 447,868 ​ $ 404,333 ​ Total operating revenues (FTE) (non-GAAP) – denominator ​ 749,280 ​ 708,495 ​ 683,473 ​ Operating efficiency ratio (non-GAAP) ​ ​ 63.0 % ​ 63.2 % ​ 59.2 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Return on tangible equity (non-GAAP) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income (GAAP) ​ $ 182,481 ​ $ 131,924 ​ $ 188,081 ​ Average shareholders’ equity ​ ​ 1,695,794 ​ ​ 1,595,724 ​ ​ 1,733,521 ​ Average goodwill and intangible assets, net ​ ​ (902,681) ​ ​ (900,058) ​ ​ (891,647) ​ Average deferred taxes on goodwill and intangible assets, net ​ ​ 44,908 ​ ​ 45,664 ​ ​ 45,145 ​ Average tangible common equity (non-GAAP) ​ ​ 838,021 ​ ​ 741,330 ​ ​ 887,019 ​ Return on tangible equity (non-GAAP) ​ ​ 21.78 % ​ 17.80 % ​ 21.20 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating return on tangible equity (non-GAAP) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating net income (non-GAAP) ​ $ 193,911 ​ $ 192,716 ​ $ 206,791 ​ Average tangible common equity (non-GAAP) ​ 838,021 ​ 741,330 ​ 887,019 ​ Operating return on tangible equity (non-GAAP) ​ ​ 23.14 % ​ 26.00 % ​ 23.31 % ​ 80 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (000’s omitted) 2024 2023 2022 Total tangible assets (non-GAAP) ​ ​ ​ ​ ​ ​ ​ ​ ​ Total assets (GAAP) ​ $ 16,386,044 ​ $ 15,555,753 ​ $ 15,835,651 ​ Goodwill and intangible assets, net ​ (901,471) ​ (897,987) ​ (902,837) ​ Deferred taxes on goodwill and intangible assets, net ​ 44,618 ​ 45,198 ​ 46,130 ​ Total tangible assets (non-GAAP) ​ $ 15,529,191 ​ $ 14,702,964 ​ $ 14,978,944 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total tangible common equity (non-GAAP) ​ ​ ​ ​ ​ ​ ​ Shareholders’ equity (GAAP) ​ $ 1,762,835 ​ $ 1,697,937 ​ $ 1,551,705 ​ Goodwill and intangible assets, net ​ (901,471) ​ (897,987) ​ (902,837) ​ Deferred taxes on goodwill and intangible assets, net ​ 44,618 ​ 45,198 ​ 46,130 ​ Total tangible common equity (non-GAAP) ​ $ 905,982 ​ $ 845,148 ​ $ 694,998 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Shareholders’ equity-to-assets ratio at year end ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total shareholders' equity (GAAP) - numerator ​ $ 1,762,835 ​ $ 1,697,937 ​ $ 1,551,705 ​ Total assets (GAAP) - denominator ​ ​ 16,386,044 ​ ​ 15,555,753 ​ ​ 15,835,651 ​ Shareholders’ equity-to-assets ratio at year end (GAAP) ​ ​ 10.76 % ​ 10.92 % ​ 9.80 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Tangible equity-to-tangible assets ratio at year end (non-GAAP) ​ ​ ​ ​ ​ ​ ​ Total tangible common equity (non-GAAP) - numerator ​ $ 905,982 ​ $ 845,148 ​ $ 694,998 ​ Total tangible assets (non-GAAP) - denominator ​ ​ 15,529,191 ​ ​ 14,702,964 ​ ​ 14,978,944 ​ Tangible equity-to-tangible assets ratio at year end (non-GAAP) ​ 5.83 % 5.75 % 4.64 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Book value (GAAP) ​ ​ ​ ​ ​ ​ ​ Total shareholders’ equity (GAAP) – numerator ​ $ 1,762,835 ​ $ 1,697,937 ​ $ 1,551,705 ​ Period end common shares outstanding – denominator ​ ​ 52,668 ​ ​ 53,327 ​ ​ 53,737 ​ Book value (GAAP) ​ $ 33.47 ​ $ 31.84 ​ $ 28.88 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Tangible book value (non-GAAP) ​ ​ ​ ​ ​ ​ ​ Total tangible common equity (non-GAAP) – numerator ​ $ 905,982 ​ $ 845,148 ​ $ 694,998 ​ Period end common shares outstanding – denominator ​ ​ 52,668 ​ ​ 53,327 ​ ​ 53,737 ​ Tangible book value (non-GAAP) ​ $ 17.20 ​ $ 15.85 ​ $ 12.93 ​ ​ ​
Accordingly, in addition to the liquidity provided by balance sheet cash flows, liquidity must be supplemented with additional sources such as credit lines from correspondent banks and borrowings from the FHLB and the FRB. Other funding alternatives may also be appropriate from time to time, including wholesale and retail repurchase agreements, large certificates of deposit and the brokered CD market.
Accordingly, in addition to the liquidity provided by balance sheet cash flows, liquidity must be supplemented with additional sources such as borrowings from the FHLB and the FRB and credit lines from correspondent banks. Other funding alternatives may also be appropriate from time to time, including wholesale and retail repurchase agreements, large certificates of deposit and the brokered CD market.
Therefore, to satisfy both the minimum risk-based capital ratios and the capital conservation buffer as of December 31, 2023 and 2022, the Company and the Bank must maintain: (i) Common equity Tier 1 capital to total risk-weighted assets (“Common equity tier 1 capital ratio”) of at least 7.0%, (ii) Tier 1 capital to total risk-weighted assets (“Tier 1 risk-based capital ratio”) of at least 8.5%, and (iii) Total capital (Tier 1 capital plus Tier 2 capital) to total risk-weighted assets (“Total risk-based capital ratio”) of at least 10.5%.
Therefore, to satisfy both the minimum risk-based capital ratios and the capital conservation buffer as of December 31, 2024, 2023 and 2022, the Company and the Bank must maintain: (i) Common equity Tier 1 capital to total risk-weighted assets (“Common equity tier 1 capital ratio”) of at least 7.0%, (ii) Tier 1 capital to total risk-weighted assets (“Tier 1 risk-based capital ratio”) of at least 8.5%, and (iii)Total capital (Tier 1 capital plus Tier 2 capital) to total risk-weighted assets (“Total risk-based capital ratio”) of at least 10.5%.
It is used to calculate liquidity over two time periods: first, the amount of cash that could be made available within 30 days (calculated as liquid assets less short-term liabilities as a percentage of average assets); and second, a projection of subsequent cash availability over an additional 60 days.
It is used to calculate liquidity over two time periods: first, the amount of cash that could be made available within 30 days (calculated as liquid assets less estimated short-term liabilities as a percentage of average assets); and second, a projection of subsequent cash availability over an additional 60 days.
Other expenses were up $10.5 million, or 66.8%, in 2023 primarily driven by higher FDIC insurance expenses due to a higher base assessment rate and a $1.5 million accrual for a special assessment, the impact of elevated fraud losses and a reduced pension-related benefit.
Other expenses were up $10.5 million, or 66.8%, in 2023 primarily driven by higher FDIC insurance expenses due to a higher base assessment rate and a $1.5 million accrual for a special assessment, the impact of elevated customer-related fraud losses and a reduced pension-related benefit.
Although adjusted pre-tax, pre-provision net revenue is a non-GAAP measure, the Company’s management believes this information helps investors and analysts measure and compare the Company’s performance through a credit cycle by excluding the volatility in the provision for credit losses associated with the impact of CECL, helps investors and analysts measure underlying core performance and improves comparability to other organizations that have not engaged in acquisitions or restructuring activities.
Although operating pre-tax, pre-provision net revenue is a non-GAAP measure, the Company’s management believes this information helps investors and analysts measure and compare the Company’s performance through a credit cycle by excluding the volatility in the provision for credit losses associated with the impact of CECL, helps investors and analysts measure underlying core performance and improves comparability to other organizations that have not engaged in acquisitions or restructuring activities.
The results of the stress tests as of December 31, 2023 indicate the Company has sufficient sources of liquidity for the next year in all simulated stressed scenarios. To measure longer-term liquidity, a baseline projection of growth in interest-earning assets and interest-bearing liabilities for five years is made to reflect how liquidity levels could change over time.
The results of the stress tests as of December 31, 2024 indicate the Company has sufficient sources of liquidity for the next year in all simulated stressed scenarios. To measure longer-term liquidity, a baseline projection of growth in interest-earning assets and interest-bearing liabilities for five years is made to reflect how liquidity levels could change over time.
The impact that the economic factors have on the model is affected by the severity of the scenarios used, the product type mix, and the interaction of the economic factors with other quantitative and qualitative factors in the model, as changes in any particular factor or input may not occur at the same rate or be directionally consistent across all loan segments.
The impact that the economic factors have on the model is affected by the upside or downside severity of the scenarios used, the product type mix, and the interaction of the economic factors with other quantitative and qualitative factors in the model, as changes in any particular factor or input may not occur at the same rate or be directionally consistent across all loan segments.
This MD&A contains certain forward-looking statements with respect to the financial condition, results of operations, and business of the Company. These forward-looking statements involve certain risks and uncertainties. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements are provided under the caption “Forward-Looking Statements” on page 72 .
This MD&A contains certain forward-looking statements with respect to the financial condition, results of operations, and business of the Company. These forward-looking statements involve certain risks and uncertainties. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements are provided under the caption “Forward-Looking Statements” on page 76 .
These increases were attributable to the aforementioned higher average loan balances and the impact of a 67 basis point higher loan yield due to market-related increases in interest rates on new loans, a significant increase in variable and adjustable-rate loan yields driven by rising market interest rates, including the treasury and prime rates during 2023.
These increases were attributable to the aforementioned higher average loan balances and the impact of a 67 basis point higher loan yield due to market-related increases in interest rates on new loans and a significant increase in floating and adjustable-rate loan yields driven by rising market interest rates, including the treasury and prime rates during 2023.
Nonperforming loan levels in the consumer installment category are typically very low in comparison to the other portfolios because they are generally charged off before they reach non-performing status, and consequently the increase in the amount of non-performing consumer installment loans at the end of 2023 as compared to one year earlier was nominal.
Nonperforming loan levels in the consumer installment category are typically very low in comparison to the other portfolios because they are generally charged off before they reach non-performing status, and consequently the increase in the amount of non-performing consumer installment loans at the end of 2024 as compared to one year earlier was nominal.
The Company is required to collateralize certain local municipal deposits in excess of FDIC coverage with marketable securities from its investment portfolio. Due to this stipulation, as well as the competitive bidding nature of municipal time deposits, management considers this funding source to share some of the same attributes as borrowings.
The Company is required to collateralize certain local governmental deposits in excess of FDIC coverage with marketable securities from its investment portfolio. Due to this stipulation, as well as the competitive bidding nature of governmental time deposits, management considers this funding source to share some of the same attributes as borrowings.
Unless otherwise noted, all earnings per share (“EPS”) figures disclosed in the MD&A refer to diluted EPS. The term “this year” and equivalent terms refer to results in calendar year 2023, “last year” and equivalent terms refer to calendar year 2022, and all references to income statement results correspond to full-year activity unless otherwise noted.
Unless otherwise noted, all earnings per share (“EPS”) figures disclosed in the MD&A refer to diluted EPS. The term “this year” and equivalent terms refer to results in calendar year 2024, “last year” and equivalent terms refer to calendar year 2023, and all references to income statement results correspond to full-year activity unless otherwise noted.
Income Taxes The Company estimates its income tax expense based on the amount it expects to owe the respective taxing authorities, plus the impact of deferred tax items. Taxes are discussed in more detail in Note I of the Consolidated Financial Statements beginning on page 118.
Income Taxes The Company estimates its income tax expense based on the amount it expects to owe the respective taxing authorities, plus the impact of deferred tax items. Taxes are discussed in more detail in Note I of the Consolidated Financial Statements beginning on page 121.
Factors that could cause actual results to differ from those discussed in the forward-looking statements include: (1) adverse developments in the banking industry related to recent bank failures and the potential impact of such developments on customer confidence and regulatory responses to these developments; (2) current and future economic and market conditions, including the effects of changes in housing or vehicle prices, higher unemployment rates, disruptions in the commercial real estate market, labor shortages, supply chain disruption, inability to obtain raw materials and supplies, U.S. fiscal debt, budget and tax matters, geopolitical matters and conflicts, and any changes in global economic growth; (3) the effect of, and changes in, monetary and fiscal policies and laws, including future changes in Federal and state statutory income tax rates and interest rate and other policy actions of the Board of Governors of the Federal Reserve System; (4) the effect of changes in the level of checking or savings account deposits on the Company’s funding costs and net interest margin including the possibility of a sudden withdrawal of the Company’s deposits due to rapid spread of information or disinformation regarding the Company’s well-being; (5) future provisions for credit losses on loans and debt securities; (6) changes in nonperforming assets; (7) the effect of a fall in stock market or bond prices on the Company’s fee income businesses, including its employee benefit services, wealth management, and insurance businesses; (8) risks related to credit quality; (9) inflation, interest rate, liquidity, market and monetary fluctuations; (10) the strength of the U.S. economy in general and the strength of the local economies where the Company conducts its business; (11) the timely development of new products and services and customer perception of the overall value thereof (including features, pricing and quality) compared to competing products and services; (12) changes in consumer spending, borrowing and savings habits; (13) technological changes and implementation and financial risks associated with transitioning to new technology-based systems involving large multi-year contracts; (14) the ability of the Company to maintain the security, including cybersecurity, of its financial, accounting, technology, data processing and other operating systems, facilities and data, including customer data; (15) effectiveness of the Company’s risk management processes and procedures, reliance on models which may be inaccurate or misinterpreted, the Company’s ability to manage its credit or interest rate risk, the sufficiency of its allowance for credit losses and the accuracy of the assumptions or estimates used in preparing the Company’s financial statements and disclosures; (16) failure of third parties to provide various services that are important to the Company’s operations; (17) any acquisitions or mergers that might be considered or consummated by the Company and the costs and factors associated therewith, including differences in the actual financial results of the acquisition or merger compared to expectations and the realization of anticipated cost savings and revenue enhancements; (18) the ability to maintain and increase market share and control expenses; (19) the nature, timing and effect of changes in banking regulations or other regulatory or legislative requirements affecting the respective businesses of the Company and its subsidiaries, including changes in laws and regulations concerning taxes, accounting, banking, service fees, risk management, securities, capital requirements and other aspects of the financial services industry; (20) changes in the Company’s organization, compensation and benefit plans and in the availability of, and compensation levels for, employees in its geographic markets; (21) the outcome of pending or future litigation and government proceedings; (22) the effect of opening new branches to expand the Company’s geographic footprint, including the cost associated with opening and operating the branches and the uncertainty surrounding their success including the ability to meet expectations for future deposit and loan levels and commensurate revenues; (23) the effects of natural disasters could create economic and financial disruption; (24) other risk factors outlined in the Company’s filings with the SEC from time to time; and (25) the success of the Company at managing the risks of the foregoing.
Factors that could cause actual results to differ from those discussed in the forward - looking statements include: (1) adverse developments in the banking industry related to bank failures and the potential impact of such developments on customer confidence and regulatory responses to these developments; (2) current and future economic and market conditions, including the effects of changes in housing or vehicle prices, higher unemployment rates, disruptions in the commercial real estate market, labor shortages, supply chain disruption, inability to obtain raw materials and supplies, U.S. fiscal debt, budget and tax matters, geopolitical matters and conflicts, and any changes in global economic growth; (3) the effect of, and changes in, monetary and fiscal policies and laws, including future changes in Federal and state statutory income tax rates and interest rate and other policy actions of the Board of Governors of the Federal Reserve System; (4) the effect of changes in the level of checking or savings account deposits on the Company's funding costs and net interest margin including the possibility of a sudden withdrawal of the Company's deposits due to rapid spread of information or disinformation regarding the Company's well - being; (5) future provisions for credit losses on loans and debt securities; (6) changes in nonperforming assets; (7) the effect of a fall in stock market or bond prices on the Company's fee income businesses, including its employee benefit services, wealth management, and insurance businesses; (8) risks related to credit quality; (9) inflation, interest rate, liquidity, market and monetary fluctuations; (10) the strength of the U.S. economy in general and the strength of the local economies where the Company conducts its business; (11) the timely development of new products and services and customer perception of the overall value thereof (including features, pricing and quality) compared to competing products and services; (12) changes in consumer spending, borrowing and savings habits; (13) technological changes and implementation and financial risks associated with transitioning to new technology - based systems involving large multi - year contracts; (14) the ability of the Company to maintain the security, including cybersecurity, of its financial, accounting, technology, data processing and other operating systems, facilities and data, including customer data; (15) effectiveness of the Company's risk management processes and procedures, reliance on models which may be inaccurate or misinterpreted, the Company's ability to manage its credit or interest rate risk, the sufficiency of its allowance for credit losses and the accuracy of the assumptions or estimates used in preparing the Company's financial statements and disclosures; (16) failure of third parties to provide various services that are important to the Company's operations; (17) any acquisitions or mergers that might be considered or consummated by the Company and the costs and factors associated therewith, including differences in the actual financial results of the acquisition or merger compared to expectations and the realization of anticipated cost savings and revenue enhancements; (18) the ability to maintain and increase market share and control expenses; (19) the nature, timing and effect of changes in banking regulations or other regulatory or legislative requirements affecting the respective businesses of the Company and its subsidiaries, including changes in laws and regulations concerning taxes, accounting, banking, service fees, risk management, securities, capital requirements and other aspects of the financial services industry; (20) changes in the Company's organization, compensation and benefit plans and in the availability of, and compensation levels for, employees in its geographic markets; (21) the outcome of pending or future litigation and government proceedings; (22) the effect of opening new branches to expand the Company's geographic footprint, including the cost associated with opening and operating the branches and the uncertainty surrounding their success including the ability to meet expectations for future deposit and loan levels and commensurate revenues; (23) the effects of natural disasters could create economic and financial disruption; (24) the effects from changes in governmental leadership which expose the Company and its customers to a variety of political, economic, and regulatory risks, including the risk of changes in laws (including labor, trade, tax and other laws) and the potential for disruption in governmental agencies, services provided by the government, and funding of government sponsored projects; (25) other risk factors outlined in the Company's filings with the SEC from time to time; and (26) the success of the Company at managing the risks of the foregoing. ​ The foregoing list of important factors is not all-inclusive.
This increase was driven by increases in the average balance of the business lending, consumer indirect, consumer mortgage and home equity portfolios due to strong organic growth and the impact of the Elmira acquisition, partially offset by a decrease in the average balance of the consumer direct portfolio.
This increase was driven by increases in the average balance of the business lending, consumer indirect, consumer mortgage and home equity portfolios due to strong organic growth and the impact of the Elmira acquisition in May 2022, partially offset by a decrease in the average balance of the consumer direct portfolio.
Nonpublic, non-time deposits are frequently considered to be an attractive source of funding because they are generally stable, do not need to be collateralized, carry a relatively low rate, generate fee income and provide a strong customer base for which a variety of loan, deposit and other financial service-related products can be cross-sold.
Non-governmental, non-time deposits are frequently considered to be an attractive source of funding because they are generally stable, do not need to be collateralized, carry a relatively low interest rate, generate fee income and provide a strong customer base for which a variety of loan, deposit and other financial service-related products can be cross-sold.
The required capital conservation buffer is 2.5% as of December 31, 2023 and 2022.
The required capital conservation buffer is 2.5% as of December 31, 2024, 2023 and 2022.
Further details regarding the methodologies applied to estimate the various components of the ACL are provided in Note A, “Summary of Significant Accounting Policies”, starting on page 84. 33 Table of Contents Pension, Post-Retirement and Other Employee Benefit Plans The Company provides a qualified defined benefit pension to eligible employees and retirees, other post-retirement health and life insurance benefits to certain retirees, an unfunded supplemental pension plan for certain key executives and an unfunded stock balance plan for certain of its nonemployee directors.
Further details regarding the methodologies applied to estimate the various components of the ACL are provided in Note A, “Summary of Significant Accounting Policies”, starting on page 89. 39 Table of Contents Pension, Post-Retirement and Other Employee Benefit Plans The Company provides a qualified defined benefit pension to eligible employees and retirees, other post-retirement health and life insurance benefits to certain retirees, an unfunded supplemental pension plan for certain key executives and an unfunded stock balance plan for certain of its nonemployee directors.
This five-year measure reflects ample liquidity for loan and other asset growth over the next five years. 54 Table of Contents The possibility of a funding crisis exists at all financial institutions.
This five-year measure reflects ample liquidity for loan and other asset growth over the next five years. 59 Table of Contents The possibility of a funding crisis exists at all financial institutions.
The change in accumulated other comprehensive loss also reflected a positive $4.1 million adjustment in the overfunded status of the Company’s employee retirement plans. Shares outstanding decreased by 0.4 million during the year due to the repurchase of 580,938 shares during 2023, partially offset by share issuances under employee stock plans and deferred compensation arrangements.
The change in accumulated other comprehensive loss also reflected a positive $4.1 million adjustment in the overfunded status of the Company’s employee retirement plans. Shares outstanding decreased by 0.4 million during the year due to the repurchase of 0.6 million shares during 2023, partially offset by share issuances under employee stock plans and deferred compensation arrangements.
A decrease in the expected long-term rate of return on plan assets of 100 basis points would reduce the net periodic pension income by $2.4 million, while an increase of 100 basis points would increase net periodic pension income by $2.4 million.
A decrease in the expected long-term rate of return on plan assets of 100 basis points would reduce the net periodic pension income by $2.6 million, while an increase of 100 basis points would increase net periodic pension income by $2.6 million.
Indicators include: core liquidity and funding needs such as the core basic surplus, unencumbered securities to average assets, and free FHLB and FRB loan collateral to average assets; heightened funding needs indicators such as average loans to average deposits, average public and nonpublic deposits to total funding, and average borrowings to total funding; capital at risk indicators including regulatory ratios; asset quality indicators; and decrease in funds availability indicators which are a combination of internal and external factors such as increased restrictions on borrowing or downturns in the credit market.
Indicators include: core liquidity and funding needs such as the core basic surplus, unencumbered securities to average assets, and free FHLB and FRB loan collateral to average assets; heightened funding needs indicators such as average loans to average deposits, average governmental and nongovernmental deposits to total funding, and average borrowings to total funding; capital at risk indicators including regulatory ratios; asset quality indicators; and decrease in funds availability indicators which are a combination of internal and external factors such as increased restrictions on borrowing or downturns in the credit market.
The rate on interest-bearing deposits of 0.94% was 78 basis points higher than 2022, primarily due to an increase in certain product rates in response to changes in market interest rates during the year and a higher proportion of average time deposit balances that carry a higher average rate than interest checking, savings and money market deposits.
The rate on interest-bearing deposits of 0.94% was 78 basis points higher than 2022, primarily due to an increase in certain product rates in response to changes in market interest rates during 2023 and a higher proportion of average time deposit balances that generally carry a higher average rate than interest checking, savings and money market deposits.
New Accounting Pronouncements See “New Accounting Pronouncements” Section of Note A of the notes to the consolidated financial statements on page 97 for recently issued accounting pronouncements applicable to the Company that have not yet been adopted. 71 Table of Contents Forward-Looking Statements This report contains comments or information that constitute forward-looking statements (within the meaning of the Private Securities Litigation Reform Act of 1995), which involve significant risks and uncertainties.
New Accounting Pronouncements See “New Accounting Pronouncements” Section of Note A of the notes to the consolidated financial statements on page 101 for recently issued accounting pronouncements applicable to the Company that have not yet been adopted. ​ 75 Table of Contents Forward-Looking Statements This report contains comments or information that constitute forward - looking statements (within the meaning of the Private Securities Litigation Reform Act of 1995), which involve significant risks and uncertainties.
For more information regarding the risk factor associated with the possibility of a funding crisis, refer to the discussion under the heading “Item 1A. Risk Factors” beginning on page 15.
For more information regarding the risk factor associated with the possibility of a funding crisis, refer to the discussion under the heading “Item 1A. Risk Factors” beginning on page 17 .
Furthermore, during 2023, 2022 and 2021, the Company also performed a quarterly analysis to determine if triggering events occurred that would necessitate an interim qualitative or quantitative assessment of goodwill or other intangible impairment. No triggering event or impairment was noted during these interim analyses.
Furthermore, during 2024, 2023 and 2022, the Company performed a quarterly analysis to determine if triggering events occurred that would necessitate an interim qualitative or quantitative assessment of goodwill or other intangible impairment. No triggering event or impairment was noted during these interim analyses.
The inputs for the qualitative analysis that require management judgment include macroeconomic conditions, industry and market conditions, financial performance of the reporting unit and other relevant events that affect the fair value of a reporting unit. During 2023, the Company performed quantitative goodwill analyses for all of the Company’s operating segments.
The inputs for the qualitative analysis that require management judgment include macroeconomic conditions, industry and market conditions, financial performance of the reporting unit and other relevant events that affect the fair value of a reporting unit. During 2024, the Company performed qualitative goodwill analyses for all of the Company’s operating segments.
Adjustments are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, acquired loans, delinquency level, risk ratings or term of loans as well as actual and forecasted macroeconomic trends, including unemployment rates and changes in property values such as home prices, commercial real estate prices and automobile prices, gross domestic product, median household income net of inflation and other relevant factors in comparison to longer-term performance.
Adjustments are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, size and credit quality of acquired loans, delinquency level, risk ratings or term of loans as well as actual and forecasted macroeconomic trends, including unemployment rates and changes in property values such as home prices, commercial real estate prices, including office-specific property prices, automobile prices, office-specific property vacancy rates, gross domestic product, median household income net of inflation and other relevant factors in comparison to longer-term performance.
The difference between the initial amortized cost basis and the par value of the loan is a noncredit discount or premium, which is amortized into interest income over the life of the loan. Subsequent changes to the allowance for credit losses are recorded as provision for, or reversal of, credit losses.
The difference between the initial amortized cost basis and the par value of the loan is a noncredit discount or premium, which is amortized into interest income over the life of the loan. Subsequent changes to the allowance for credit losses are recorded in the provision for credit losses.
A summary of the accounting policies used by management is disclosed in Note A, “Summary of Significant Accounting Policies”, starting on page 84. 32 Table of Contents Allowance for Credit Losses The allowance for credit losses (“ACL”) represents management’s judgment of an estimated amount of lifetime losses expected to be incurred on outstanding loans at the balance sheet date.
A summary of the accounting policies used by management is disclosed in Note A, “Summary of Significant Accounting Policies”, starting on page 89. 38 Table of Contents Allowance for Credit Losses The allowance for credit losses (“ACL”) represents management’s judgment of an estimated amount of lifetime losses expected to be incurred on outstanding loans at the balance sheet date.
The 4.84% yield on loans in 2023 increased 67 basis points as compared to 4.17% in 2022 due to market-related increases in interest rates on new loans, a significant increase in variable and adjustable-rate loan yields driven by rising market interest rates, including the prime rate, and a high level of new loan originations.
The 4.84% yield on loans in 2023 increased 67 basis points as compared to 4.17% in 2022 due to market-related increases in interest rates on new loans, a significant increase in variable and adjustable-rate loan yields driven by rising market interest rates, including the prime rate and the Secured Overnight Financing Rate, as well as a high level of new loan originations.
The unallocated allowance is maintained for potential inherent losses in the specific portfolios that are not captured due to model imprecision. The unallocated allowance of $1.0 million at year-end 2023 was consistent with December 31, 2022. The changes in year-over-year allowance allocations reflect management’s continued refinement of its loss estimation techniques.
The unallocated allowance is maintained for potential inherent losses in the specific portfolios that are not captured due to model imprecision. The unallocated allowance of $1.0 million at year-end 2024 was consistent with 2023. The changes in year-over-year allowance allocations reflect management’s continued refinement of its loss estimation techniques.
This amount is determined by adjusting the amounts reported in the Bank Call Report by intercompany deposits, which are not external customers and are therefore eliminated in consolidation, and municipal deposits which are collateralized by certain pledged investment securities.
This amount is determined by adjusting the amounts reported in the Bank Call Report by subtracting intercompany deposits, which are not external customers and are therefore eliminated in consolidation, and governmental deposits which are collateralized by certain pledged investment securities.
The following discussion and analysis should be read in conjunction with the Company’s Consolidated Financial Statements and related notes that appear on pages 78 through 144. All references in the discussion to the financial condition and results of operations refer to the consolidated position and results of the Company and its subsidiaries taken as a whole.
The following discussion and analysis should be read in conjunction with the Company’s Consolidated Financial Statements and related notes that appear on pages 84 through 151. All references in the discussion to the financial condition and results of operations refer to the consolidated position and results of the Company and its subsidiaries taken as a whole.
Net income and earnings per share for 2023 were impacted by certain notable non-operating items including a $52.3 million pre-tax realized loss on the sales of investment securities, a $5.8 million litigation accrual associated with the expected settlement of a threatened collective and class action matter, $3.3 million of acquisition-related contingent consideration adjustments associated with potential future contingent consideration payments for the FBD and TGA acquisitions completed in 2021, and $1.2 million of restructuring expenses linked to a retail workforce optimization strategy.
Net income and earnings per share for 2023 were unfavorably impacted by certain notable non-operating items including a $52.3 million pre-tax realized loss on the sales of investment securities, a $5.8 million litigation accrual associated with a threatened collective and class action matter that was settled in 2024, $3.3 million of acquisition-related contingent consideration adjustments associated with potential future contingent consideration payments for the FBD and TGA acquisitions completed in 2021, and $1.2 million of restructuring expenses linked to a retail workforce optimization strategy.
However, the Company has many long-standing relationships with municipal entities throughout its markets and the deposits held by these customers have provided a relatively attractive and stable funding source over an extended period of time. The mix of average deposits shifted as compared with the prior year as customers moved to higher yielding deposit accounts.
However, the Company has many long-standing relationships with governmental entities throughout its markets and the deposits held by these customers have provided a relatively attractive and stable funding source over an extended period of time. 71 Table of Contents The mix of average deposits shifted as compared with the prior year as customers moved to higher yielding deposit accounts.
The average quarter-end delinquency ratio for total loans in 2023 was 0.88%, as compared to an average of 0.80% in 2022, and 1.20% in 2021. 62 Table of Contents The Company’s senior management, special asset officers and business lending management review all delinquent and nonaccrual loans and OREO regularly in order to identify deteriorating situations, monitor known problem credits and discuss any needed changes to collection efforts, if warranted.
The average quarter-end delinquency ratio for total loans in 2024 was 1.05%, as compared to an average of 0.88% in 2023, and 0.80% in 2022. ​ 67 Table of Contents The Company’s senior management, special asset officers and business lending management review all delinquent and nonaccrual loans and OREO regularly in order to identify deteriorating situations, monitor known problem credits and discuss any needed changes to collection efforts, if warranted.
The Company also provides supplemental reporting of its interest income, net interest income and net interest margin on a “fully tax-equivalent” (“FTE”) basis, which includes an adjustment to interest income and net interest income that represents taxes that would have been paid had nontaxable investment securities and loans been taxable.
The Company also provides supplemental reporting of its interest income, net interest income and net interest margin on a fully tax-equivalent (“FTE”) basis, which includes an adjustment to interest income and net interest income that represents taxes that would have been paid had nontaxable investment securities and loans been taxable.
Business development and marketing expenses increased due to the Company’s investment in digital marketing initiatives and higher levels of targeted advertisements intended to generate deposit inflows. Legal and professional fees were up primarily as a result of legal fees associated with various matters.
Business development and marketing expenses increased due to the Company’s investment in digital marketing initiatives and higher levels of targeted advertisements intended to generate deposit inflows. Legal and professional fees were up primarily as a result of legal fees associated with various matters, including the lawsuit previously mentioned.
The allowance for credit losses increased to $66.7 million at the end of 2023 from $61.1 million as of year-end 2022. During 2023, economic forecasts remained stable and the Company experienced organic loan growth, which drove the increase in the allowance for credit losses. The Company recorded a provision for credit losses of $11.2 million during 2023.
The allowance for credit losses increased to $66.7 million at the end of 2023 from $61.1 million as of year-end 2022. During 2023, economic forecasts remained stable and the Company experienced organic loan growth. The Company recorded a provision for credit losses of $11.2 million during 2023.
Interest income and yields are on a fully tax-equivalent (“FTE”) basis using a marginal income tax rate of 24.4% in 2023 and 24.3% in 2022. Average balances are computed by totaling the daily ending balances in a period and dividing by the number of days in that period.
Interest income and yields are on a fully tax-equivalent (“FTE”) basis using a marginal income tax rate of 25.0% for 2024, 24.4% in 2023 and 24.3% in 2022. Average balances are computed by totaling the daily ending balances in a period and dividing by the number of days in that period.
Table 4 indicates that a higher yield on interest-earning assets created $112.7 million of incremental interest income, while a lower average interest-earning asset balance had an unfavorable impact of $14.9 million on interest income. Average loans increased $1.17 billion, or 14.6%, in 2023.
A higher yield on interest-earning assets created $112.7 million of incremental interest income, while a lower average interest-earning asset balance had an unfavorable impact of $14.9 million on interest income in 2023. Average loans increased $1.17 billion, or 14.6%, in 2023.
Despite the strong competition the Company faces from the financing subsidiaries of vehicle manufacturers and other financial intermediaries, the Company will continue to strive to grow these key portfolios through varying market conditions over the long term. 60 Table of Contents As shown in Table 12, 76.3% of the Company’s loan portfolio is tied to fixed interest rates while 23.7% is tied to floating or adjustable interest rates.
Despite the strong competition the Company faces from the financing subsidiaries of vehicle manufacturers and other financial intermediaries, the Company will continue to strive to grow these key portfolios through varying market conditions over the long term. 65 Table of Contents As shown in Table 12, 73.3% of the Company’s loan portfolio is tied to fixed interest rates while 26.7% is tied to floating or adjustable interest rates.
The resulting difference is not intended to represent an expected increase in allowance levels, as future conditions are uncertain and there are several other quantitative and qualitative factors that will also fluctuate at the same time that economic conditions are changing, which would affect the results of the ACL calculation.
The resulting difference is not intended to represent an expected increase in allowance levels, as future conditions are uncertain and there are several other quantitative and qualitative factors that will also fluctuate concurrent with changing economic conditions, which would affect the results of the ACL calculation.
If the final resolution of taxes payable differs from its estimates due to regulatory determination or legislative or judicial actions, adjustments to tax expense may be required. The effective income tax rate for 2023 was 21.6%, compared to 21.7% in 2022 and 21.4% in 2021.
If the final resolution of taxes payable differs from its estimates due to regulatory determination or legislative or judicial actions, adjustments to tax expense may be required. The effective income tax rate for 2024 was 22.9%, compared to 21.6% in 2023 and 21.7% in 2022.
Public fund deposit balances tend to be more volatile than nonpublic deposits because they are heavily impacted by the seasonality of tax collection and fiscal spending patterns, as well as the longer-term financial position of the local government entities, which can change from year to year.
Governmental deposit balances tend to be more volatile than non-governmental deposits because they are heavily impacted by the seasonality of tax collection and fiscal spending patterns, as well as the longer-term financial position of the local government entities, which can change from year to year.
The Company’s larger criticized credits are also reviewed on a quarterly basis by senior management, senior credit administration management, special assets officers and business lending management to monitor their status and discuss relationship management plans. Business lending management reviews the criticized business loan portfolio on a monthly basis.
The Company’s larger criticized credits are also reviewed on a quarterly basis by senior management, senior credit administration management, special assets officers and business lending management to monitor their status and discuss relationship management plans.
Additionally, acquisition-related contingent consideration adjustments increased as result of an increase in probability of achievement of the earn-out objectives associated with previous acquisitions.
Additionally, acquisition-related contingent consideration adjustments were elevated as result of an increase in probability of achievement of the earn-out objectives associated with previous acquisitions.
This growth was a result of a $0.04 increase in dividends per share for the year, partially offset by a slight decrease in outstanding shares.
This growth was a result of a $0.04 increase in dividends per share for the year, partially offset by a 1.2% decrease in outstanding shares.
Operating revenues, a non-GAAP measure, is defined as net interest income on a FTE basis excluding acquired non-PCD loan accretion plus noninterest revenues, excluding loss on sales of investment securities, gain on debt extinguishment and unrealized gain (loss) on equity securities.
Operating revenues, a non-GAAP measure, is defined as net interest income on a FTE basis plus noninterest revenues, excluding loss on sales of investment securities, gain on debt extinguishment, and unrealized gain (loss) on equity securities.
The yield on average interest earning assets increased 80 basis points compared to the prior year, as the yields on average loans, investments and interest-earning cash equivalents all improved. The Company’s total cost of funds increased 60 basis points from last year as the rate paid on interest-bearing deposits and borrowings both increased.
The yield on average interest earning assets increased 51 basis points compared to the prior year, as the yields on average loans, investments and interest-earning cash equivalents all improved. The Company’s total cost of funds increased 61 basis points from the prior year as the rate paid on interest-bearing deposits and borrowings both increased.
The adjustment attempts to enhance the comparability of the performance of assets that have different tax liabilities. ​ 45 Table of Contents As discussed above and disclosed in Table 4 below, the change in net interest income (FTE basis) may be analyzed by segregating the volume and rate components of the changes in interest income and interest expense for each underlying category.
The adjustment enhances the comparability of the performance of assets that have different tax liabilities. ​ 50 Table of Contents As discussed above and disclosed in Table 4 below, the change in net interest income (FTE basis) may be analyzed by segregating the volume and rate components of the changes in interest income and interest expense for each underlying category.
Lower ratios correlate to better operating efficiency. The 2023 GAAP efficiency ratio of 72.5% increased 10.0 percentage points from the 2022 GAAP efficiency ratio as noninterest expenses increased 11.4% while total revenues decreased 4.0% primarily as a result of the loss on sales of investment securities in connection with the Company’s first quarter balance sheet repositioning.
The 2023 GAAP efficiency ratio of 72.5% increased 10.0 percentage points from the 2022 GAAP efficiency ratio as noninterest expenses increased 11.4% while total revenues decreased 4.0% primarily as a result of the loss on sales of investment securities in connection with the Company’s first quarter balance sheet repositioning.
The Company calculated that this hypothetical scenario would increase the ACL and provision for credit losses as of and for the year ended December 31, 2023 by approximately $3.7 million, and decrease net income by $2.9 million (net of tax). This change is reflective of the sensitivity of the various economic factors used in the ACL model.
The Company calculated that this hypothetical scenario would increase the ACL and provision for credit losses as of and for the year ended December 31, 2024 by approximately $4.7 million, and decrease net income by $3.5 million (net of tax). This change is reflective of the sensitivity of the various economic factors used in the ACL model.
The scenario-weighted average unemployment rate and GDP growth forecasts used in the ACL model at December 31, 2023 were 4.5% and 1.7%, respectively, compared to 4.5% and 1.2% at December 31, 2022, respectively.
The scenario-weighted average unemployment rate and GDP growth forecasts used in the ACL model at December 31, 2024 were 4.8% and 1.8%, respectively, compared to 4.5% and 1.7% at December 31, 2023, respectively.
(2) Excluding the impact of $16.0 million in book value of qualified school construction bonds in the Company’s portfolio which earn income primarily through income tax credits, the weighted-average yield of obligations of state and political subdivisions maturing after one year but within five years is 2.47%.
(2) Excluding the impact of $15.9 million in book value of qualified school construction bonds in the Company's portfolio which earn income primarily through income tax credits, the weighted - average yield of obligations of state and political subdivisions maturing after one year but within five years is 2.62%.
The hypothetical downside forecast includes assumptions of a weakening economy represented by a cumulative decline in real GDP of 2.6%, enhanced geopolitical tensions, elevated inflation, a peak unemployment rate of 7.7% and an average unemployment rate of 6.4%.
The hypothetical downside forecast includes assumptions of a weakening economy represented by a cumulative decline in real GDP of 2.6%, enhanced geopolitical tensions, elevated inflation, a peak unemployment rate of 8.3% and an average unemployment rate of 6.9%.
In addition, the Company provides supplemental reporting for “adjusted pre-tax, pre-provision net revenues,” which excludes the provision for credit losses, acquisition expenses, acquisition-related contingent consideration adjustment, restructuring expenses, unrealized gain (loss) on equity securities, loss on sales of investment securities, litigation accrual and gain on debt extinguishment from income before income taxes.
In addition, the Company provides supplemental reporting for “operating pre-tax, pre-provision net revenues,” which excludes the provision for credit losses, acquisition expenses, acquisition-related contingent consideration adjustments, litigation accrual, restructuring expenses, gain on debt extinguishment, loss on sales of investment securities, unrealized gain (loss) on equity securities and amortization of intangible assets from income before income taxes.
Wealth management services include trust services provided by the Nottingham Trust division of CBNA, investment products and services provided by Community Investment Services, Inc. (“CISI”), The Carta Group, Inc. (“Carta Group”) and OneGroup Wealth Partners, Inc. (“Wealth Partners”), as well as asset management provided by Nottingham Advisors, Inc. (“Nottingham”).
Wealth Management Services include trust services provided by Nottingham Trust, a division of CBNA, broker-dealer and investment advisory services provided by Community Investment Services, Inc. (“CISI”), The Carta Group, Inc. (“Carta Group”) and OneGroup Wealth Partners, Inc. (“Wealth Partners”), as well as asset management provided by Nottingham Advisors, Inc. (“Nottingham”).
For additional financial information on the Company’s regulatory capital, refer to Note O – Regulatory Matters in the Notes to Consolidated Financial Statements. The shareholders’ equity-to-assets ratio was 10.92% at the end of 2023 compared to 9.80% at the end of 2022.
For additional financial information on the Company’s regulatory capital, refer to Note O – Regulatory Matters in the Notes to Consolidated Financial Statements. The shareholders’ equity-to-assets ratio was 10.76% at the end of 2024 compared to 10.92% at the end of 2023.
The Company manages organic and acquired growth in a manner that enables it to continue to maintain and grow its capital base over time and maintain its ability to take advantage of future strategic growth opportunities. Cash dividends declared on common stock in 2023 of $95.5 million represented an increase of 1.7% over the prior year.
The Company manages organic and acquired growth in a manner that enables it to continue to maintain and grow its capital base over time and maintain its ability to take advantage of future strategic growth opportunities. Cash dividends declared on common stock in 2024 of $96.0 million represented an increase of 0.5% over the prior year.
Consumer mortgages increased $272.5 million, or 9.0%, between the end of 2022 and the end of 2023, driven by organic growth, and includes the impact of selling $6.1 million of consumer mortgage production in the secondary market.
Consumer mortgages increased $272.5 million, or 9.0%, between the end of 2022 and the end of 2023, driven by organic growth, and includes the impact of selling $6.1 million of consumer mortgage production in the secondary market. Home equity loans increased $12.5 million, or 2.9%, between the end of 2022 and the end of 2023.
The decrease in average deposits and the change in deposit mix towards a higher time deposit balance was primarily due to higher customer expenditure levels in the inflationary environment and customers responding to changes in market interest rates by moving funds into higher yielding account types, as well as increased rate competition from other banks and non-depository financial institutions.
The increase in average deposits and the change in deposit mix towards a higher time deposit balance was primarily due to customers responding to changes in market interest rates by moving funds into higher yielding account types, as well as increased rate competition from other banks and non-depository financial institutions.
While certain national trends are emerging related to commercial real estate, in particular the office sector, the Company determined that its exposure is primarily located in geographical areas that show stable or increasing demand and have vacancy rates below the national average.
While certain national trends persist related to commercial real estate, in particular the office and multifamily sectors, the Company determined that its exposure is primarily located in geographical areas that show stable or increasing demand and have vacancy rates below the national average.
For the year ended December 31, 2023, a decrease in the discount rate of 100 basis points would reduce the net periodic pension income by $1.1 million, while an increase in the discount rate of 100 basis points would increase the net periodic pension income by $0.9 million.
For the year ended December 31, 2024, a decrease in the discount rate of 100 basis points would reduce the net periodic pension income by $1.2 million, while an increase in the discount rate of 100 basis points would increase the net periodic pension income by $0.7 million.
As shown in Table 4, higher interest rates on interest-bearing liabilities resulted in an increase in interest expense of $80.9 million, while higher average interest-bearing liability balances resulted in a $0.1 million increase in interest expense. Interest expense as a percentage of average earning assets for 2023 increased 58 basis points to 0.74% from 0.16% in the prior year.
As shown in Table 4, higher interest rates on interest-bearing liabilities resulted in an increase in interest expense of $80.2 million, while higher average interest-bearing liability balances resulted in a $10.1 million increase in interest expense. Interest expense as a percentage of average interest-earning assets for 2024 increased 58 basis points to 1.32% from 0.74% in the prior year.
Further detail on the assumptions used and a comparison between 2023 and 2022 assumptions is included in Note J, “Pension and Other Benefit Plans”, starting on page 120.
Further detail on the assumptions used and a comparison between 2024 and 2023 assumptions is included in Note J, “Pension and Other Benefit Plans”, starting on page 123.
The return on average equity ratio decreased in 2023 as net income decreased, which was impacted by the aforementioned loss on sales of investment securities, while average equity decreased due primarily to an increase in the average accumulated other comprehensive loss related to the Company’s investment securities portfolio.
The return on average equity ratio decreased in 2023 as net income decreased, which was impacted by the aforementioned loss on sales of investment securities, which was only partially offset by a decrease in average equity due primarily to an increase in the average accumulated other comprehensive loss related to the Company’s investment securities portfolio.
Noninterest Expenses As shown in Table 6, noninterest expenses of $472.7 million in 2023 were $48.4 million, or 11.4%, higher than 2022, reflective of an accrual associated with the expected settlement of a threatened collective and class action matter, an increase in salaries and employee benefits, primarily driven by merit and market-related increases in employee wages, higher employee medical expenses and certain executive retirement expenses, as well as increases in other expenses, acquisition-related contingent consideration adjustment, data processing and communications expenses, business development and marketing expenses, legal and professional fees, restructuring expenses and occupancy and equipment expenses.
These increases were partially offset by decreases in legal and professional fees, amortization of intangible assets, restructuring expenses, acquisition-related contingent consideration adjustments and litigation expenses. ​ Noninterest expenses of $472.7 million in 2023 were $48.4 million, or 11.4%, higher than 2022, reflective of an accrual associated with the expected settlement of a threatened collective and class action matter, an increase in salaries and employee benefits, primarily driven by merit and market-related increases in employee wages, higher employee medical expenses and certain executive retirement expenses, as well as increases in other expenses, acquisition-related contingent consideration adjustment, data processing and communications expenses, business development and marketing expenses, legal and professional fees, restructuring expenses and occupancy and equipment expenses.
As of year-end 2023, delinquency ratios for business lending, consumer installment loans, consumer mortgages and home equity loans were 0.61%, 1.20%, 1.49%, and 1.42%, respectively.
Year-end 2023 delinquency rates for business lending, consumer installment loans, consumer mortgages and home equity loans were 0.61%, 1.20%, 1.49%, and 1.42%, respectively.
Insurance services revenues increased $7.3 million, or 18.3%, in 2023 driven primarily by a strong premium market and organic expansion, along with growth resulting from acquisitions between the periods.
Insurance services revenues increased $7.3 million, or 18.3%, in 2023 attributable to a strong premium market and organic expansion, along with growth resulting from acquisitions between the periods.
Overall funding is comprised of three primary sources that possess a variety of maturity, stability and price characteristics: deposits of individuals, partnerships and corporations (nonpublic deposits), municipal deposits that are collateralized for amounts not covered by FDIC insurance (public funds), and external borrowings.
Overall funding is comprised of three primary sources that possess a variety of maturity, stability and price characteristics: deposits of individuals, partnerships and corporations (non-governmental deposits), governmental deposits that are collateralized for amounts not covered by FDIC insurance (governmental deposits), and external borrowings.
Non-time deposits (noninterest checking, interest checking, savings and money markets) represented approximately 90% of the Company’s average deposit funding base in 2023 versus 93% last year, while time deposits this year represent approximately 10% of total average deposits compared to 7% in 2022.
Non-time deposits (noninterest checking, interest checking, savings and money markets) represented approximately 85% of the Company’s average deposit funding base in 2024 versus 90% last year, while time deposits this year represent approximately 15% of total average deposits compared to 10% in 2023.
Wealth management services revenues increased $0.3 million, or 0.9%, in 2023 as more favorable investment market conditions drove increases in assets under management between the periods. Assets under management within the wealth management businesses increased $1.4 billion to $8.7 billion at December 31, 2023 as compared to one year earlier, a new quarter-end record.
Assets under management and administration within the wealth management businesses increased $1.4 billion to $13.2 billion at December 31, 2024 as compared to one year earlier, a new year-end record. Wealth management services revenues increased $0.3 million, or 0.9%, in 2023 as more favorable investment market conditions drove increases in assets under management between the periods.
The cost of interest-bearing deposits of 0.94% in 2023 was 78 basis points higher than the 0.16% cost of interest-bearing deposits in 2022 as a result of the aforementioned deposit mix shift and increases in the average rates paid on interest checking, savings, money market and time deposits due to market conditions.
The cost of interest-bearing deposits of 1.66% in 2024 was 72 basis points higher than the 0.94% cost of interest-bearing deposits in 2023 as a result of the aforementioned deposit mix shift and increases in the average rates paid on interest checking, savings, money market and time deposits due to market conditions.
Total full-time equivalent staff at the end of 2023 was 2,669 compared to 2,803 at December 31, 2022 and 2,743 at the end of 2021.
Total full-time equivalent staff at the end of 2024 was 2,698 compared to 2,669 at December 31, 2023 and 2,803 at the end of 2022.
Total non-personnel, noninterest expenses, excluding acquisition-related expenses, restructuring expenses and litigation accrual, increased $18.4 million, or 11.3%, in 2023, reflective of increases in other expenses, data processing and communications expenses, business development and marketing expenses, legal and professional fees and occupancy and equipment expenses, partially offset by a decrease in amortization of intangible assets.
Total non-personnel, noninterest expenses, excluding amortization of intangible assets, acquisition-related expenses, restructuring expenses and litigation accrual, increased $5.1 million, or 3.1%, in 2024, reflective of increases in data processing and communications expenses, occupancy and equipment expenses, business development and marketing expenses, partially offset by a decrease in legal and professional fees.
As displayed in Table 3 on page 45, the percentage of funding from deposits in 2023 was lower than the level in 2022, primarily due to the increase in average overnight borrowings and average term borrowings in 2023 that were needed to support the funding of strong loan growth.
As displayed in Table 3 on page 50 , the percentage of funding from deposits in 2024 was lower than the level in 2023, primarily due to the increase in average overnight borrowings and average term borrowings in 2024 that were needed to support the funding of strong loan growth that outpaced the increase in deposit balances.
Executive Summary The Company’s business philosophy is to operate as a diversified financial services enterprise providing a broad array of banking and other financial services, including benefits administration, insurance services and wealth management services, to retail, commercial, institutional and municipal customers. The Company’s banking subsidiary is Community Bank, N.A. (the “Bank” or “CBNA”). The Company’s Benefit Plans Administrative Services, Inc.
Executive Summary The Company’s business philosophy is to operate as a diversified financial services enterprise providing a broad array of banking and other financial services, including employee benefit services, insurance services and wealth management services, to retail, commercial, institutional and governmental customers. The Company’s banking subsidiary is Community Bank, N.A. (the “Bank” or “CBNA”).

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeDeposit balance and mix changes and the resultant deposit and funding betas are assumed to move in a manner that reflects the Company’s (i) long-term historical relationship between the Company’s deposit rate movement and changes in the federal funds rate, (ii) recent interest rate cycle experience, (iii) significant management judgment and (iv) other factors, including recent market behaviors of customers and competitors. ​ 77 Table of Contents Net Interest Income Sensitivity Model ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Calculated annualized increase Calculated annualized increase ​ ​ ​ (decrease) in projected net interest (decrease) in projected net interest ​ ​ ​ income at December 31, 2023 income at December 31, 2023 ​ Interest rate scenario (000’s omitted) (%) ​ +200 basis points ​ $ (16,149) ​ (3.6) % +100 basis points ​ $ (8,563) ​ (1.9) % -100 basis points ​ $ 5,960 ​ 1.3 % -200 basis points ​ $ 8,527 ​ 1.9 % ​ Projected NII over the 12-month forecast period decreases in the up 100 and up 200 rate environments largely due to deposits and overnight borrowings repricing higher in year 1, which are only partially offset by loans repricing higher. ​ Projected NII increases in the down 100 and down 200 rate environments due to lower funding costs which are partially offset by lower income on loans. ​ The analysis does not represent a Company forecast and should not be relied upon as being indicative of expected operating results.
Biggest changeNet Interest Income Sensitivity Model ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Calculated annualized increase Calculated annualized increase ​ ​ ​ (decrease) in projected net interest (decrease) in projected net interest ​ ​ ​ income at December 31, 2024 income at December 31, 2024 ​ Interest rate scenario (000’s omitted) (%) ​ +200 basis points ​ $ (8,578) ​ (1.7) % +100 basis points ​ $ (4,416) ​ (0.9) % -100 basis points ​ $ 1,736 ​ 0.3 % -200 basis points ​ $ (16) ​ (0.0) % ​ Projected NII over the 12-month forecast period decreases in the up 100 and up 200 interest rate environments largely due to deposits and overnight borrowings repricing higher in year 1, which are only partially offset by loans repricing higher.
The following reflects the Company’s estimated NII sensitivity as compared to the base case scenario over the subsequent twelve months based on: ● Balance sheet levels using December 31, 2023 as a starting point. ● The model assumes the Company’s average deposit balances will increase approximately 1.0% over the next twelve months. ● The model assumes the Company’s average earning asset balances will increase approximately 5.6% over the next twelve months, largely due to forecasted loan growth. ● Cash flows on earning assets are based on contractual maturity, optionality, and amortization schedules along with applicable prepayments derived from internal historical data and external sources. ● The model assumes no additional investment security purchases over the next twelve months.
The following reflects the Company’s estimated NII sensitivity as compared to the base case scenario over the subsequent twelve months based on: ● Balance sheet levels using December 31, 2024 as a starting point. ● The model assumes the Company’s average deposit balances will increase approximately 1.6% over the next twelve months. ● The model assumes the Company’s average earning asset balances will increase approximately 2.3% over the next twelve months, largely due to forecasted loan growth. ● Cash flows on earning assets are based on contractual maturity, optionality, and amortization schedules along with applicable prepayments derived from internal historical data and external sources. ● The model assumes no additional investment security purchases over the next twelve months.
Management believes that the tax risk of the Company’s municipal investments associated with potential future changes in statutory, judicial and regulatory actions is minimal. Treasury, agency, mortgage-backed and collateralized mortgage obligation securities issued by government agencies comprise 88.6% of the total portfolio and are currently rated AAA by Moody’s Investor Services and AA+ by Standard & Poor’s.
Management believes that the tax risk of the Company’s municipal investments associated with potential future changes in statutory, judicial and regulatory actions is minimal. Treasury, agency, mortgage-backed and collateralized mortgage obligation securities issued by government agencies comprise 90.4% of the total portfolio and are currently rated AAA by Moody’s Investor Services and AA+ by Standard & Poor’s.
Obligations of state and political subdivisions account for 11.2% of the total portfolio, of which, 96.2% carry a minimum rating of A-. The remaining 0.2% of the portfolio is comprised of other investment grade securities. The Company does not have material foreign currency exchange rate risk exposure.
Obligations of state and political subdivisions account for 9.4% of the total portfolio, of which 95.7% carry a minimum rating of A-. The remaining 0.2% of the portfolio is comprised of other investment grade securities. The Company does not have material foreign currency exchange rate risk exposure.
The ongoing monitoring and management of both interest rate risk and liquidity over the short and long term time horizons is an important component of the Company’s asset/liability management process, which is governed by guidelines established in the policies reviewed and approved annually by the Company’s Board.
Therefore, almost all the market risk in the investment portfolio is related to interest rates. 81 Table of Contents The ongoing monitoring and management of both interest rate risk and liquidity over the short - and long - term time horizons is an important component of the Company’s asset/liability management process, which is governed by guidelines established in the policies reviewed and approved annually by the Company’s Board.
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Therefore, almost all the market risk in the investment portfolio is related to interest rates.
Added
Deposit balance and mix changes and the resultant deposit and funding betas are assumed to move in a manner that reflects the Company’s (i) long-term historical relationship between the Company’s deposit rate movement and changes in the federal funds rate, (ii) recent interest rate cycle experience, (iii) significant management judgment and (iv) other factors, including recent market behaviors of customers and competitors.
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Projected NII increases in the down 100 interest rate environment due to lower funding costs which are partially offset by lower income on loans.
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Projected NII in the down 200 rate environment is fairly neutral due to lower income on investments and loans being almost fully offset by lower funding costs. 82 Table of Contents The analysis does not represent a Company forecast and should not be relied upon as being indicative of expected operating results.

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