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What changed in FIRST INTERSTATE BANCSYSTEM INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of FIRST INTERSTATE BANCSYSTEM 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.

+458 added−452 removedSource: 10-K (2025-02-28) vs 10-K (2024-02-29)

Top changes in FIRST INTERSTATE BANCSYSTEM INC's 2024 10-K

458 paragraphs added · 452 removed · 336 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

63 edited+24 added−21 removed100 unchanged
Biggest changeFor example, a risk weight of 0% is assigned to cash and United States government securities, a risk weight of 50% generally is assigned to prudently underwritten first lien one- to four-family residential mortgages, a risk weight of 100% is assigned to commercial and consumer loans, a risk weight of 150% is assigned to certain past due loans, and a risk weight of between 0% to 600% is assigned to permissible equity interests, depending on certain specified factors. 8 Table of Conten ts In addition to establishing the minimum regulatory capital requirements, the regulations limit capital distributions and certain discretionary bonus payments to management if the institution does not hold a “capital conservation buffer” consisting of 2.5% of common equity Tier 1 capital to risk-weighted assets above the amount necessary to meet its minimum risk-based capital requirements.
Biggest changeFor example, a risk weight of 0% is assigned to cash and United States government securities, a risk weight of 50% generally is assigned to prudently underwritten first lien one- to four-family residential mortgages, a risk weight of 100% is assigned to commercial and consumer loans, a risk weight of 150% is assigned to certain past due loans, and a risk weight of between 0% to 600% is assigned to permissible equity interests, depending on certain specified factors.
Each loan must meet minimum underwriting standards specified in our credit policies and procedures, which generally specify that loans: (1) are made to borrowers generally located within or adjacent to our market footprint or own businesses and/or real estate within or adjacent to our footprint, with limited exceptions that may include participation loans and loans to national accounts; (2) are made only for identified legal purposes; (3) have specifically identified sources of repayment; (4) mature within designated maximum maturity periods that coincide with repayment sources; (5) are appropriately collateralized whenever possible; (6) are supported by current credit information; (7) do not exceed the Bank’s legal lending limit; (8) include medium-term fixed interest rates or variable rates that are adjusted within designated time frames; and (9) require compliance with laws and regulations including a flood zone and risk determination prior to closing.
Each loan must meet minimum underwriting standards specified in our credit policies and procedures, which generally specify that loans: (1) are made to borrowers who are generally located within or adjacent to our market footprint or own businesses and/or real estate within or adjacent to our footprint, with limited exceptions that may include participation loans and loans to national accounts; (2) are made only for identified legal purposes; (3) have specifically identified sources of repayment; (4) mature within designated maximum maturity periods that coincide with repayment sources; (5) are appropriately collateralized whenever possible; (6) are supported by current credit information; (7) do not exceed the Bank’s legal lending limit; (8) include medium-term fixed interest rates or variable rates that are adjusted within designated time frames; and (9) require compliance with laws and regulations including a flood zone and risk determination prior to closing.
Also included in Tier 2 capital is the allowance for credit losses limited to a maximum of 1.25% of risk-weighted assets and, for institutions like us that have exercised an opt-out election regarding the treatment of Accumulated Other Comprehensive Income (“AOCI”), up to 45.0% of net unrealized gains on available-for-sale equity securities with readily determinable fair market values.
Also included in Tier 2 capital is the allowance for credit losses (“ACL”) limited to a maximum of 1.25% of risk-weighted assets and, for institutions like us that have exercised an opt-out election regarding the treatment of Accumulated Other Comprehensive Income (“AOCI”), up to 45.0% of net unrealized gains on available-for-sale equity securities with readily determinable fair market values.
With our focus on community banking, we adhere to common values that have long provided a foundation for our growth and success: (1) Put people first, always; (2) Seek greatness; (3) Demonstrate integrity; (4) Celebrate success; and (5) Be committed to our communities. These values support our commitment to our employees, our clients, our communities, and our shareholders.
With our focus on community banking, we adhere to common values that have long provided a foundation for our growth and success: (1) Put people first; (2) Seek greatness; (3) Demonstrate integrity; (4) Celebrate success; and (5) Be committed to our communities. These values support our commitment to our employees, our clients, our communities, and our shareholders.
Community banking encompasses commercial, governmental, and consumer banking services provided through our Bank: primarily the acceptance of deposits, the extension of credit, mortgage loan origination and servicing, and wealth management, which includes trust, employee benefit, investment management, insurance, agency, and custodial services to individuals, businesses, and nonprofit organizations.
Community banking encompasses commercial, governmental, and consumer banking services provided through our Bank, which primarily include the acceptance of deposits, the extension of credit, mortgage loan origination and servicing, and wealth management, which includes trust, employee benefit, investment management, insurance, agency, and custodial services to individuals, businesses, and nonprofit organizations.
In certain circumstances, the Federal Reserve may require us to divest of non-bank entities or limit the activities of those entities even if the activities are otherwise permitted to bank holding companies under governing law.
In certain circumstances, the Federal Reserve may require us to divest of non-bank entities or limit the activities of those entities even if the activities are otherwise permitted for bank holding companies under governing law.
Under the Montana Bank Act, if the Department of Administration determines an impairment of a bank’s capital exists, it may notify the bank’s board of directors of the impairment and require payment of an assessment on the bank stock.
Under the Montana Bank Act, if the Department of Administration determines an impairment of a bank’s capital exists, it may notify the Bank’s Board of the impairment and require payment of an assessment on the bank stock.
Although final rules had not been adopted as of as of December 31, 2023, if these or other regulations are adopted in a form similar to the proposed rule-making, they could impose limitations on the manner in which we may structure compensation for our executives. Cybersecurity Federal regulators have issued two related statements regarding cybersecurity.
Although final rules had not been adopted as of December 31, 2024, if these or other regulations are adopted in a form similar to the proposed rule-making, they could impose limitations on the manner in which we may structure compensation for our executives. Cybersecurity Federal regulators have issued two related statements regarding cybersecurity.
We operate 304 banking offices, including branches and detached drive-up facilities, in communities across 14 states—Arizona, Colorado, Idaho, Iowa, Kansas, Minnesota, Missouri, Montana, Nebraska, North Dakota, Oregon, South Dakota, Washington, and Wyoming.
We operate 300 banking offices, including branches and detached drive-up facilities, in communities across 14 states—Arizona, Colorado, Idaho, Iowa, Kansas, Minnesota, Missouri, Montana, Nebraska, North Dakota, Oregon, South Dakota, Washington, and Wyoming.
The Class A common stock is traded on the NASDAQ stock market, or NASDAQ, under the symbol “FIBK.” Since our initial public offering, we have expanded our market reach through organic growth and strategic acquisitions, including our acquisitions of Mountain West Bank, United Bank, N.A., Flathead Bank of Bigfork, Bank of the Cascades, Inland Northwest Bank, Idaho Independent Bank, Community 1st Bank, and GWB.
Our common stock is traded on the NASDAQ Global Select Market, or NASDAQ, under the symbol “FIBK.” Since our initial public offering, we have expanded our market reach through organic growth and strategic acquisitions, including our acquisitions of Mountain West Bank, United Bank, N.A., Flathead Bank of Bigfork, Bank of the Cascades, Inland Northwest Bank, Idaho Independent Bank, Community 1st Bank, and GWB.
We plan to continue to advance our business in a disciplined and prudent manner, fueled by organic growth in our existing market areas and expansion into new and complementary markets when appropriate acquisition and other opportunities arise. 3 Table of Conten ts Community Banking We have one operating segment—community banking.
We plan to continue to advance our business in a disciplined and prudent manner, fueled by organic growth in our existing market areas and expansion into new and complementary markets when appropriate acquisition and other opportunities arise. 3 Table of Contents Community Banking We have one operating segment—community banking.
In addition, the Bank may not pay dividends in excess of the previous two years’ net earnings without providing notice to the Montana Division. The capital buffer rules adopted by the federal banking regulators in accordance with the Basel Accords impose further limitations on the Bank’s ability to pay dividends.
In addition, the Bank may not pay dividends in excess of the previous two years’ net earnings without providing notice to the Montana Division. 7 Table of Contents The capital buffer rules adopted by the federal banking regulators in accordance with the Basel Accords impose further limitations on the Bank’s ability to pay dividends.
These services include the administration of estates and personal trusts, management of investment accounts for individuals, employee benefit plans and charitable foundations, and insurance planning. 4 Table of Conten ts Centralized Services We have centralized certain operational activities to provide consistent service levels to our clients across the Bank, which helps us gain efficiency in management of those activities as well as ensure regulatory compliance.
These services include the administration of estates and personal trusts, management of investment accounts for individuals, employee benefit plans and charitable foundations, and insurance planning. Centralized Services We have centralized certain operational activities to provide consistent service levels to our clients across the Bank, which helps us gain efficiency in management of those activities as well as ensure regulatory compliance.
As of June 30, 2023, based on publicly available information provided by the FDIC, we believe the Bank controlled approximately 16.6% of the total deposits of all insured depository institutions located in Montana. As such, the state limitation may limit our ability to directly or indirectly acquire additional banks located in Montana.
As of June 30, 2024, based on publicly available information provided by the FDIC, we believe the Bank controlled approximately 16.4% of the total deposits of all insured depository institutions located in Montana. As such, the state limitation may limit our ability to directly or indirectly acquire additional banks located in Montana.
We are subject to the interchange fee cap and having at least two unaffiliated payment card networks because our assets exceed $10 billion. 10 Table of Conten ts Client Privacy and Other Consumer Protections Federal and State laws impose client privacy requirements on any company engaged in financial activities, including us.
We are subject to the interchange fee cap and having at least two unaffiliated payment card networks because our assets exceed $10 billion. Client Privacy and Other Consumer Protections Federal and State laws impose client privacy requirements on any company engaged in financial activities, including us.
In connection with its assessment of CRA performance, the appropriate bank regulatory agency assigns a rating of “outstanding,” “satisfactory,” “needs to improve,” or “substantial noncompliance.” The Bank received an “outstanding” rating on its most recently published CRA examination.
In connection with its assessment of CRA performance, the appropriate bank regulatory agency assigns a rating of “outstanding,” “satisfactory,” “needs to improve,” or “substantial noncompliance.” The Bank received a “satisfactory” rating on its most recently published CRA examination.
In October 2023, the Federal Reserve proposed revising Regulation II to lower the cap from its current rate of 21 cents and .05% of the transaction, plus a one-cent fraud-prevention adjustment, to 14.4 cents and .04% per transaction and a 1.3 cents fraud-prevention adjustment, effective June 30, 2025.
The final rule became effective July 1, 2023. In October 2023, the Federal Reserve proposed revising Regulation II to lower the cap from its current rate of 21 cents and .05% of the transaction, plus a one-cent fraud-prevention adjustment, to 14.4 cents and .04% per transaction and a 1.3 cents fraud-prevention adjustment, effective June 30, 2025.
For additional discussion on cybersecurity, see Part I, Item 1C, “Cybersecurity” included herein. Human Capital Culture is critically important to the Company’s success; our people are our number one priority. We approach our culture with an aspirational lens. It is not a stand-alone initiative or program—it is integrated in our systems, our processes, and our DNA.
For additional discussion on cybersecurity, see Part I, Item 1C, “Cybersecurity” included herein. 12 Table of Contents Human Capital Culture is critically important to the Company’s success; our people are our number one priority. We approach our culture with an aspirational lens. It is not a stand-alone initiative or program—it is integrated in our systems, and our processes.
As the regulatory framework for bank holding companies and banks continues to evolve and become more complex, the cost of complying with regulatory requirements continues to increase. 6 Table of Conten ts Financial and Bank Holding Company First Interstate is a bank holding company and has registered as a financial holding company under regulations issued by the Federal Reserve.
As the regulatory framework for bank holding companies and banks continues to evolve and become more complex, the cost of complying with regulatory requirements continues to increase. Financial and Bank Holding Company First Interstate is a bank holding company and has registered as a financial holding company under regulations issued by the Federal Reserve.
The Bank is not, however, currently subject to a specific regulatory dividend limitation. 7 Table of Conten ts The Federal Reserve has issued a policy statement regarding the payment of dividends and the repurchase of common stock by bank holding companies.
The Bank is not, however, currently subject to a specific regulatory dividend limitation. The Federal Reserve has issued a policy statement regarding the payment of dividends and the repurchase of common stock by bank holding companies.
Centralized operational activities generally support our banking offices in the delivery of products and services to clients and include: • marketing; • credit review; • loan servicing; • credit card issuance and servicing; • mortgage loan sales and servicing; • indirect consumer loan purchasing and processing; • loan collections; and • other operational activities.
Centralized operational activities generally support our banking offices in the delivery of products and services to clients and include: • marketing; • credit review; • loan servicing; • credit card issuance and servicing; • mortgage loan sales and servicing; • loan collections; and • other operational activities.
Regulatory Authorities As a public company with our securities listed for trading on the NASDAQ stock market, we are subject to the disclosure and regulatory requirements of the Securities and Exchange Commission, or SEC, including under the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, or the Exchange Act, and the rules and listing standards of the NASDAQ stock market.
Regulatory Authorities As a public company with our securities listed for trading on the NASDAQ, we are subject to the disclosure and regulatory requirements of the Securities and Exchange Commission, or SEC, including under the Securities Act, the Exchange Act, and the rules and listing standards of the NASDAQ.
We offer the following compensation and benefit programs as part of our total rewards package: • Competitive Total Compensation • Base salary • Pay for performance short-term and long-term incentive programs for eligible employees • Comprehensive Benefit Programs • Medical, dental, and vision plans • 401(k) plan with a 100% match on the first 6% contributed • Paid time off • Health savings accounts with employer contribution • Flexible spending accounts • Company paid childcare assistance program • Student debt employer repayment program • Additional Benefits: short-term disability; long-term disability; employee assistance program; free or discounted banking products and services; wellness program; and flexible work arrangements Growth and Development In our ongoing commitment to fostering a dynamic and competitive workforce, we have dedicated significant time and resources to nurture our talent.
We offer the following compensation and benefit programs as part of our total rewards package: • Competitive Total Compensation • Base salary • Short-term Incentive Plan (for eligible employees) • Long-term Incentive Plan (for eligible employees) • Referral incentive programs • Comprehensive Benefit Programs • Medical, dental, and vision plans • 401(k) plan with a 100% match on the first 6% contributed • Paid time off 13 Table of Contents • Health savings accounts with employer contribution • Flexible spending accounts • Company paid childcare assistance program • Student debt employer repayment program • Additional Benefits: short-term disability; long-term disability; employee assistance program; free or discounted banking products and services; wellness program; and flexible work arrangements Growth and Development As part of our commitment to fostering a dynamic and competitive workforce, we have invested significant time and resources to develop and empower our talent.
Through our bank subsidiary, First Interstate Bank, we deliver a comprehensive range of banking products and services—including online and mobile banking—to individuals, businesses, government entities, and others throughout our market areas. 2 Table of Conten ts We are proud to provide lending opportunities to clients that participate in a wide variety of industries, including: • Agriculture • Healthcare • Professional services • Technology • Construction • Hospitality • Real Estate Development • Tourism • Education • Housing • Retail • Wholesale trade • Governmental services Historically, the Company’s authorized common stock had consisted of 200,000,000 shares, of which 100,000,000 shares were designated as Class A common stock and 100,000,000 were designated as Class B common stock.
Through our bank subsidiary, First Interstate Bank, we deliver a comprehensive range of banking products and services—including online and mobile banking—to individuals, businesses, government entities, and others throughout our market areas. 2 Table of Contents We are proud to provide lending opportunities to clients that participate in a wide variety of industries, including: • Agriculture • Healthcare • Professional services • Technology • Construction • Hospitality • Real Estate Development • Tourism • Education • Housing • Retail • Wholesale trade • Governmental services Historically, our authorized common stock had consisted of two classes of common stock: Class A common stock and Class B common stock.
In determining the amount of risk-weighted assets for purposes of calculating risk-based capital ratios, all assets, including certain off-balance sheet assets (for example, recourse obligations, direct credit substitutes, residual interests), are multiplied by a risk weight factor assigned by the regulations based on the risks believed inherent in the type of asset.
In determining the amount of risk-weighted assets for purposes of calculating risk-based capital ratios, all assets, including certain off-balance sheet assets (for example, recourse obligations, direct credit substitutes, residual interests), are multiplied by a risk weight factor assigned by the regulations based on the risks believed inherent in the type of asset. 8 Table of Contents Higher levels of capital are required for asset categories believed to present greater risk.
These include enhanced risk management and corporate governance processes specified by the regulators. The Federal Reserve has authority to bring an enforcement action against a bank or bank holding company and all “institution-affiliated parties” of a bank or bank holding company, including directors, officers, stockholders, and under certain circumstances, attorneys, appraisers, and accountants for the bank or holding company.
The Federal Reserve has authority to bring an enforcement action against a bank or bank holding company and all “institution-affiliated parties” of a bank or bank holding company, including directors, officers, stockholders, and under certain circumstances, attorneys, appraisers, and accountants for the bank or holding company.
While each loan must meet minimum underwriting standards, qualified bankers are granted levels of credit authority for approving and pricing loans to assure that banking offices are responsive to competitive issues and community needs in each market area. Lending authorization is established at individual, branch, and market levels.
While each loan must meet minimum underwriting standards, qualified bankers are granted levels of credit authority for approving and pricing loans to assure that banking offices are responsive to competitive issues and community needs in each market area. Credit authorization is established by individual role and assigned based on the credit experience, credit acumen and performance of each banker.
Market Area The following table reflects our deposit market share and branch locations by state: Deposit Market Share and Branch Locations by State % of Market Deposits (1) Deposit Market Share Rank (1) Number of Branches (2) Arizona 0.3 21 9 Colorado 0.5 26 20 Idaho 4.3 8 22 Iowa 1.9 9 45 Kansas 0.1 158 2 Minnesota — 305 1 Missouri 0.1 142 6 Montana 16.6 2 42 Nebraska 2.5 7 44 North Dakota 0.1 74 1 Oregon 2.5 9 33 South Dakota 0.5 5 46 Washington 0.4 29 18 Wyoming 13.7 1 15 Total 304 (1) Source: FDIC.gov-data as of June 30, 2023.
Market Area The following table reflects our deposit market share and branch locations by state: Deposit Market Share and Branch Locations by State % of Market Deposits (1) Deposit Market Share Rank (1) Number of Branches (2) Arizona 0.3 22 10 Colorado 0.4 29 19 Idaho 4.3 8 20 Iowa 1.9 8 45 Kansas 0.1 169 2 Minnesota — 298 1 Missouri 0.1 144 6 Montana 16.4 2 41 Nebraska 2.2 8 44 North Dakota 0.1 73 1 Oregon 2.5 9 33 South Dakota 0.4 5 46 Washington 0.4 30 17 Wyoming 13.2 1 15 Total 300 (1) Source: FDIC.gov-data as of June 30, 2024.
As of December 31, 2023, we had consolidated assets of $30.7 billion, deposits of $23.3 billion, loans held for investment of $18.3 billion, and total stockholders’ equity of $3.2 billion. Our mission is to help people and their money work better together.
As of December 31, 2024, we had consolidated assets of $29.1 billion, deposits of $23.0 billion, loans held for investment of $17.8 billion, and total stockholders’ equity of $3.3 billion. Our mission is to help people and their money work better together.
Our values guide how we make decisions, treat each other, and serve our clients. Employee Base As of December 31, 2023, we employed 3,585 full-time equivalent employees, with none represented by a collective bargaining agreement. This represents a decrease of 198 employees from December 31, 2022.
Our values guide how we make decisions, treat each other, and serve our clients. Workforce As of December 31, 2024, we employed 3,481 employees, with none represented by a collective bargaining agreement. This represents a decrease of 104 employees from December 31, 2023.
Website Access to SEC Filings The Company’s electronic filings with the SEC, including Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and Proxy Statements, as well as amendments to these reports and statements filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, are made available at no cost through our website at www.FIBK.com by clicking through the “Financials” tab found there and selecting “SEC Filings,” as soon as reasonably practicable after the Company files such material with, or furnishes such materials to, the SEC.
In light of these Executive Orders, we are continuing to analyze our policies to ensure compliance with laws while retaining our commitment to creating an inclusive and equitable environment for employees and clients alike. 14 Table of Contents Website Access to SEC Filings The Company’s electronic filings with the SEC, including Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and Proxy Statements, as well as amendments to these reports and statements filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, are made available at no cost through our website at www.FIBK.com by clicking through the “Financials” tab found there and selecting “SEC Filings,” as soon as reasonably practicable after the Company files such material with, or furnishes such materials to, the SEC.
The approach we take in our benefit offerings is a holistic one to address our employees’ total well-being, which includes aspects of their health, physical, mental/emotional, social, and financial needs.
We make data-driven decisions regarding employee compensation based on the job, experience, and performance. The approach we take in our benefit offerings is a holistic one to address our employees’ total well-being, which includes aspects of their health, physical, mental/emotional, social, and financial needs.
We operate in markets with a diverse employment base covering numerous industries and we believe our community bank approach to providing client service is a competitive advantage that strengthens the Company’s ability to effectively provide financial products and services to businesses and individuals in its markets. 5 Table of Conten ts Competition There is significant competition among commercial banks in our market areas.
(2) As of December 31, 2024. 5 Table of Contents We operate in markets with a diverse employment base covering numerous industries and we believe our community bank approach to providing client service is a competitive advantage that strengthens the Company’s ability to effectively provide financial products and services to businesses and individuals in its markets.
On October 18, 2022, the FDIC finalized a rule that would increase initial base deposit insurance assessment rates by two basis points, beginning with the first quarterly assessment period of 2023.
On October 18, 2022, the FDIC finalized a rule that would increase initial base deposit insurance assessment rates by two basis points, beginning with the first quarterly assessment period of 2023 and in 2024 the FDIC Board maintained the designated reserve ratio for the DIF at two basis points for 2025.
Management endeavors to respond proactively to any instances of non-compliance and to implement and update appropriate procedures to prevent instances of non-compliance and other violations from occurring. 11 Table of Conten ts USA PATRIOT Act The USA PATRIOT Act of 2001 amended the Bank Secrecy Act of 1970 and the Money Laundering Control Act of 1986 and adopted additional measures requiring insured depository institutions, broker-dealers, and certain other financial institutions to have policies, procedures, and controls to detect, prevent, and report money laundering and terrorist financing.
USA PATRIOT Act The USA PATRIOT Act of 2001 amended the Bank Secrecy Act of 1970 and the Money Laundering Control Act of 1986 and adopted additional measures requiring insured depository institutions, broker-dealers, and certain other financial institutions to have policies, procedures, and controls to detect, prevent, and report money laundering and terrorist financing.
The FDIC was required by the Dodd-Frank Act to take actions necessary to cause the DIF to reach a reserve ratio of 1.35% of total estimated insured deposits by September 30, 2020. On September 30, 2018, the DIF Reserve Ratio reached 1.36%.
The FDIC was required by the Dodd-Frank Act to take actions necessary to cause the DIF to reach a reserve ratio of 1.35% of total estimated insured deposits by September 30, 2020. As of September 30, 2020, the FDIC had announced that the ratio was 1.30% due largely to consequences of the COVID-19 pandemic.
Although the Bank’s policies and procedures are designed to achieve compliance with all fair lending and CRA requirements, instances of non-compliance are occasionally identified through normal operational activities.
Although the Bank’s policies and procedures are designed to achieve compliance with all fair lending and CRA requirements, instances of non-compliance are occasionally identified through normal operational activities. Management endeavors to respond proactively to any instances of non-compliance and to implement and update appropriate procedures to prevent instances of non-compliance and other violations from occurring.
The extensive regulation of the Bank limits both the activities in which the Bank may engage and the conduct of its permitted activities. Further, the laws and regulations impose reporting and information collection obligations on the Bank. The Bank incurs significant costs relating to compliance with various laws and regulations and the collection and retention of information.
Further, the laws and regulations impose reporting and information collection obligations on the Bank. The Bank incurs significant costs relating to compliance with various laws and regulations and the collection and retention of information.
Compensation and Benefits We strive to provide competitive wages, benefits, and programs that meet the varying needs of our workforce. We continually review our programs to ensure we remain competitive and take care of our employees. In 2023, we increased the salary threshold for the Childcare Assistance Program (CCAP) from $60,000 to $70,000.
Compensation and Benefits We strive to provide competitive wages, benefits, and programs that meet the varying needs of our workforce. We continually review our programs to ensure we remain competitive and take care of our employees.
On October 3, 2022, the Federal Reserve finalized a rule that amends Regulation II to specify, among other things, that debit card issuers should enable all debit card transactions, including card-not-present transactions such as online payments, to be processed on at least two unaffiliated payment card networks. The final rule became effective July 1, 2023.
The Federal Reserve also has rules governing routing and exclusivity that require issuers to offer two unaffiliated networks for routing transactions on each debit or prepaid product. 10 Table of Contents On October 3, 2022, the Federal Reserve finalized a rule that amends Regulation II to specify, among other things, that debit card issuers should enable all debit card transactions, including card-not-present transactions such as online payments, to be processed on at least two unaffiliated payment card networks.
The proposed rule requires covered institutions to establish policies and procedures for monitoring and evaluating their compensation practices. The comment period ended in July 2016, but the SEC is expected to resurrect this issue as a new proposed rule in 2024.
The proposed rule requires covered institutions to establish policies and procedures for monitoring and evaluating their compensation practices. The comment period ended in July 2016 and a notice of proposed rulemaking was released in May 2024.
The Company accrued $10.5 million in the fourth quarter of 2023 for the special assessment. The ultimate impact and timing of recognition will depend on the final outcome of the ongoing FDIC deliberations. The special assessment is in addition to the assessment rates finalized as part of FDIC’s Amended Restoration Plan.
The Company accrued $10.5 million in the fourth quarter of 2023 and an additional $1.5 million in the first quarter of 2024 for the special assessment. The special assessment is in addition to the assessment rates finalized as part of FDIC’s Amended Restoration Plan.
Deposits at the Bank are insured by the Federal Deposit Insurance Corporation, or the FDIC, up to statutory limits. We also offer repurchase agreements primarily to commercial and municipal depositors. Under repurchase agreements, we sell investment securities held by the Bank to our clients under an agreement to repurchase the investment securities at a specified time or on demand.
Deposit Products We offer traditional depository products including checking, savings, and time deposits. Deposits at the Bank are insured by the Federal Deposit Insurance Corporation, or the FDIC, up to statutory limits. We also offer repurchase agreements primarily to commercial and municipal depositors.
The Community Reinvestment Act (“CRA”) generally requires the federal banking agencies to evaluate the record of a financial institution in meeting the credit needs of its local communities, including low- and moderate-income neighborhoods.
The CFPB has promulgated numerous regulations relating to consumer financial services-related topics, such as mortgage origination disclosures, mortgage servicing practices, and others. 11 Table of Contents The Community Reinvestment Act (“CRA”) generally requires the federal banking agencies to evaluate the record of a financial institution in meeting the credit needs of its local communities, including low- and moderate-income neighborhoods.
The Dodd-Frank Wall Street Reform and Consumer Protection Act prohibits, among other things, lending practices to consumers that are unfair, deceptive, or abusive. The CFPB has promulgated numerous regulations relating to consumer financial services-related topics, such as mortgage origination disclosures, mortgage servicing practices, and others.
The Dodd-Frank Wall Street Reform and Consumer Protection Act prohibits, among other things, lending practices to consumers that are unfair, deceptive, or abusive.
As of September 30, 2020, the FDIC had announced that the ratio had declined to 1.30% due largely to consequences of the COVID-19 pandemic. The FDIC adopted a plan to restore the fund to the 1.35% ratio within eight years, but did not change its assessment schedule.
The FDIC adopted a plan to restore the fund to the 1.35% ratio within eight years, but did not change its assessment schedule.
The Company provides employees an opportunity to participate in a Bank-sponsored service project annually, marking the second Wednesday in September as our Commitment to Community Volunteer Day. We close all offices in the afternoon on Volunteer Day so employees can lend a hand in their community, either as teams or as individuals.
We close all offices in the afternoon on Volunteer Day so employees can lend a hand in their community, either as teams or as individuals.
We are currently subject to the regulatory capital framework and guidelines reached by Basel III as adopted by the Federal Reserve. The Federal Reserve has risk-based capital adequacy guidelines intended to measure capital adequacy with regard to a banking organization’s balance sheet, including off-balance sheet exposures such as unused portions of loan commitments, letters of credit, and recourse arrangements.
The Federal Reserve has risk-based capital adequacy guidelines intended to measure capital adequacy with regard to a banking organization’s balance sheet, including off-balance sheet exposures such as unused portions of loan commitments, letters of credit, and recourse arrangements. 6 Table of Contents The extensive regulation of the Bank limits both the activities in which the Bank may engage and the conduct of its permitted activities.
We take pride in creating a workplace environment that values our employees for their differences while ensuring equity in all we do. We are committed to advocating for the rights and respect of all and actively participate in achieving this by setting an example. In 2023 the Company focused its efforts on education, employee connection, and communications.
We take pride in creating a workplace that values diverse perspectives while ensuring fair and equitable opportunities for all employees. We are committed to advocating for the rights and respect of all and actively participate in achieving this by setting an example of this leadership in the communities we call home.
Safety and Soundness Standards and Other Supervisory and Enforcement Mechanisms The federal banking agencies have adopted guidelines establishing standards for safety and soundness, asset quality and earnings, loan documentation, credit underwriting, interest rate risk exposure, internal controls, and audit systems.
In addition, Regulation O imposes lending limits on loans to insiders and their related interests and imposes, in certain circumstances, requirements for prior approval of the loans by the Bank Board. 9 Table of Contents Safety and Soundness Standards and Other Supervisory and Enforcement Mechanisms The federal banking agencies have adopted guidelines establishing standards for safety and soundness, asset quality and earnings, loan documentation, credit underwriting, interest rate risk exposure, internal controls, and audit systems.
If the institution fails to submit an acceptable plan within the time allowed by the agency or fails in any material respect to implement an accepted plan, the agency must, by order, require the institution to correct the deficiency and may take other supervisory action. 9 Table of Conten ts Pursuant to the Dodd-Frank Act, federal banking regulators impose additional supervisory measures on banking organizations such as us when they exceed $10 billion in assets.
If the institution fails to submit an acceptable plan within the time allowed by the agency or fails in any material respect to implement an accepted plan, the agency must, by order, require the institution to correct the deficiency and may take other supervisory action.
Additionally, specialized staff support services have been centralized to enable our branches to more efficiently serve their markets. These services include: • credit risk management; • finance; • human resource management; • internal audit; • facilities management; • technology; • risk management; • legal; • compliance; and • other support services.
These services include: • credit risk management; • finance; • human resource management; • internal audit; • facilities management; • technology; • risk management; • legal; • compliance; and • other support services.
On March 24, 2022, the record date for our first annual stockholders’ meeting following the completion of the Great Western Bank (“GWB”) acquisition on February 1, 2022, all outstanding shares and rights to acquire shares of Class B common stock were automatically converted into the same number of outstanding shares and rights to acquire the same number of shares, as applicable, of Class A common stock.
In March 2022, following the completion of our acquisition of Great Western Bank (“GWB”) in February 2022, all outstanding shares of our Class B common stock automatically converted into shares of our Class A common stock on a one-for-one basis. On May 24, 2023, our shareholders approved a conversion of our state of incorporation from Montana to Delaware.
We have a vested interest in the strength of our communities and strive to make them better places to live and work. Each year, the Company creates commitment to community plans for all our markets, which includes donating a portion of our net income before tax for charitable purposes.
Each year, the Company creates commitment to community plans for all our markets, which includes donating a portion of our net income before tax for charitable purposes. These plans help align strategies for philanthropy, volunteering and leadership, financial education outreach, community development, and sustainability.
Our compensation strategies are designed to pay for performance, pay competitively within our markets, and support pay equity among comparable jobs and markets across the company. We make data-driven decisions regarding employee compensation based on the job, experience, and performance.
Our compensation strategies are designed to pay for performance, pay competitively within our markets, and support pay equity among comparable jobs and markets across the company. Our job architecture consists of grade-based pay ranges in which we maintain a structure of roles and leveling that provide for career opportunities and are aligned with market salary data.
Credit granted over the authority of our loan officers are approved by designated Credit Officers and/or the Chief Credit Officer with the concurrence of our Chief Risk Officer as necessary. Deposit Products We offer traditional depository products including checking, savings, and time deposits.
Credit authorization is granted under the direction of our Chief Credit Officer and is reviewed on an ongoing basis. Loan requests over the authority of our bankers are approved by designated Credit Officers and/or the Chief Credit Officer with the concurrence of our Chief Risk Officer as necessary. Under the direction of James A.
Interchange fees are charges that merchants pay to us and other card-issuing banks for processing electronic payment transactions. The Federal Reserve also has rules governing routing and exclusivity that require issuers to offer two unaffiliated networks for routing transactions on each debit or prepaid product.
Interchange fees are charges that merchants pay to us and other card-issuing banks for processing electronic payment transactions.
As of December 31, 2023, approximately 68.2% of our workforce was female, 31.6% was male, and 0.2% have not declared.
As of December 31, 2024, approximately 67.8% of our workforce was female, 32.0% was male, and 0.2% have not declared. The executive team is comprised of 75.0% female and 25.0% male, and the Company’s senior leadership team was 55.6% female and 44.4% male.
These plans help align strategies for philanthropy, volunteering and leadership, financial education outreach, community development, and sustainability. We encourage employees to take active leadership roles within their communities to further demonstrate our values and help us respond to the needs of the markets we serve.
We encourage employees to take active leadership roles within their communities to further demonstrate our values and help us respond to the needs of the markets we serve. The Company provides employees an opportunity to participate in a Bank-sponsored service project annually, marking the second Wednesday in September as our Commitment to Community Volunteer Day.
Leaders in our organization are held accountable for encouraging participation, reviewing and sharing team results, holding action-oriented engagement discussions, and submitting an annual action plan to encourage engagement throughout the year. Aggregated employee engagement data is provided to the Board of Directors as a key indicator of the health of our workforce.
Leaders across the organization are held accountable for fostering engagement through active participation, sharing team results, and creating actionable engagement plans. The aggregated results are shared with the Company’s board of directors (the “Board”), serving as a key indicator of the overall health of our workforce.
Wealth Management We provide a wide range of trust, employee benefit, investment management, insurance, agency, and custodial services to individuals, businesses, and nonprofit organizations.
Additionally, the Company is a member of the IntraFi Network, which enables us to offer our customers insurance coverage on interest-bearing demand, money market and certificate of deposit balances in excess of the FDIC insurance limits. 4 Table of Contents Wealth Management We provide a wide range of trust, employee benefit, investment management, insurance, agency, and custodial services to individuals, businesses, and nonprofit organizations.
In 2023, we made strides in employee development, offering multifaceted development programs centered around neuroscience and emotional intelligence. This initiative was complimented by role-based training programs and on-demand learning opportunities and resources, reinforcing our commitment to equipping our workforce with the skills needed to excel in our markets.
We made meaningful progress in our development programs centered on emotional intelligence, and manager effectiveness. These initiatives were further enhanced by role-specific training programs and on-demand learning opportunities, ensuring our employees are equipped with the skills necessary to excel in their roles.
The executive team is comprised of 75.0% female and 25.0% male, and the Company’s senior leadership team was 45.5% female and 54.5% male. 12 Table of Conten ts Commitment to Community / Volunteerism We are “all-in” when it comes to giving back—with time, money, and heart.
Commitment to Community / Volunteerism We are “all-in” when it comes to giving back—with time, money, and heart. We have a vested interest in the strength of our communities and strive to make them better places to live and work.
Removed
The Class A common stock had one vote per share while the Class B common stock had five votes per share and was convertible to Class A common stock on a share-for-share basis.
Added
At the effective time of the conversion, each outstanding share of our Class A common stock became an outstanding share of our common stock. All shares of our outstanding capital stock are now composed solely of shares of common stock.
Removed
As a result, we now have only one class of common stock outstanding and issuable upon exercise of outstanding rights to acquire common stock, all with equivalent voting rights: namely, common stock.
Added
The Company’s chief operating decision maker is its Chief Executive Officer who is charged with management of the Company and is responsible for the evaluation of operating performance and decision making about the allocation of resources to the operating segment.
Removed
Credit authorization is established and assigned based on the credit experience and credit acumen of each branch loan officer. Credit authorization is under the direction of our Chief Credit Officer or such officer’s designee and is reviewed on an ongoing basis.
Added
Reuter, who was recently appointed as our President and Chief Executive Officer effective as of November 2024, we are conducting an internal review and assessment of our internal credit policies.
Removed
All outstanding repurchase agreements are due in one business day. Additionally, the Company is a member of the IntraFi Network, which allows banking clients insured cash sweep products with access to FDIC insurance protection on deposits that exceed FDIC insurance limits.
Added
Any resulting improvements made to our current credit policies are anticipated to include enhanced executive-level oversight of underwriting standards, credit authorization levels and underwriting decisions, with increased executive-level scrutiny for any future lending decisions for loans with larger exposures. The Company anticipates expanding its current credit committee structure to include the approval of credit decisions above certain lending thresholds.
Removed
Higher levels of capital are required for asset categories believed to present greater risk.
Added
Under repurchase agreements, we sell investment securities held by the Bank to our clients under an agreement to repurchase the investment securities at a specified time or on demand. All outstanding repurchase agreements are due in one business day.
Removed
In addition, Regulation O imposes lending limits on loans to insiders and their related interests and imposes, in certain circumstances, requirements for prior approval of the loans by the Bank board of directors.
Added
To reduce operating costs and capitalize on the technical capabilities of selected vendors, we also leverage third-party service providers to selectively outsource certain bank operations and services, such as certain data processing, loan servicing, credit card servicing, and deposit processing systems. Additionally, specialized staff support services have been centralized to enable our branches to more efficiently serve their markets.
Removed
As of June 30, 2023, the DIF balance was $117 billion and the DIF Reserve Ratio had decreased from 1.25% as of December 31, 2022 to 1.1% as of June 30, 2023.
Added
Competition There is significant competition among commercial banks in our market areas.
Removed
Despite this decrease, caused in part by the costs associated with the bank failures in the first half of 2023, the FDIC projects that the DIF Reserve Ratio will reach the statutory minimum ahead of the statutory deadline of September 30, 2028, consistent with the FDIC’s Amended Restoration Plan which became effective as of January 1, 2023.
Added
We are currently subject to the regulatory capital framework and guidelines reached by Basel III as adopted by the Federal Reserve.
Removed
Employee Engagement Our employee engagement strategy is focused on creating and maintaining a work environment where all employees’ voices are heard. The organization’s success is measured by assessing the consistency in which we meet workplace needs and the activation of progress by local-level leaders.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAs a result, we may not be successful in making the improvements necessary to remediate the material weakness identified by management, or do so in a timely manner, or identify and remediate additional control deficiencies, including material weaknesses, in the future. 29 Table of Conten ts If we are unable to remediate these combined deficiencies resulting in a material weakness, or are otherwise unable to maintain effective internal control over financial reporting: our ability to record, process and report financial information accurately, and to prepare financial statements within required time periods, could be adversely affected; our liquidity, our access to capital markets, the perceptions of our creditworthiness, and our ability to complete acquisitions may be adversely affected; and we may be unable to maintain compliance with applicable securities laws and the Nasdaq Stock Market LLC listing requirements, which could subject us to litigation or investigations requiring management resources and payment of legal and other expenses which may negatively impact results of operations and financial condition, could negatively affect investor confidence in the accuracy and completeness of our financial statements, and could adversely impact our stock price.
Biggest changeIf we are unable to maintain effective internal control over financial reporting: our ability to record, process and report financial information accurately, and to prepare financial statements within required time periods, could be adversely affected; our liquidity, our access to capital markets, the perceptions of our creditworthiness, and our ability to complete acquisitions may be adversely affected; and we may be unable to maintain compliance with applicable securities laws and the rules and listing standards of the NASDAQ, which could subject us to litigation or investigations requiring management resources and payment of legal and other expenses which may negatively impact results of operations and financial condition, could negatively affect investor confidence in the accuracy and completeness of our financial statements, and could adversely impact our stock price. 26 Table of Contents We may not effectively implement technology-facilitated products and services or be successful in marketing these products and services to our clients, which could negatively impact our business.
One or more large, successful claims against us in excess of our available insurance coverage, or changes in our insurance policies, including premium increases or large deductible or co-insurance requirements, could have an adverse effect on our business, operating results, and financial condition.
One or more large, successful claims against us in excess of our available insurance coverage, or changes in our insurance policies, including premium increases or large deductible or co-insurance requirements, could have an adverse effect on our insurance coverage and on our business, operating results, and financial condition.
Many of the companies with which we compete for experienced personnel have greater acceptance of remote or hybrid work environments, which may increase the competition for talent. Costs associated with repossessed properties, including environmental remediation, may adversely impact our results of operations, cash flows, and financial condition. A significant portion of our loan portfolio is secured by real property.
Many of the companies with which we compete for experienced personnel have greater acceptance of remote or hybrid work environments, which may increase the competition for talent. Costs associated with repossessed properties, including potential environmental remediation, may adversely impact our results of operations, cash flows, and financial condition. A significant portion of our loan portfolio is secured by real property.
If significant, sustained, or repeated, a system failure or disruption could compromise our ability to operate effectively, damage our reputation, result in a loss of client business, and/or subject us to additional regulatory scrutiny and possible financial liability. Any of the failures or disruptions mentioned above could negatively impact our financial condition, results of operations, cash flows, and prospects.
If significant, sustained, or repeated, a system failure or disruption could compromise our ability to operate effectively, damage our reputation, result in a loss of client business, and/or subject us to additional regulatory scrutiny and possible financial liability. Any of the failures or disruptions mentioned above could negatively impact our financial condition, results of operations, and cash flows.
Similarly, the occurrence of a natural or man-made disaster in our market areas could impair the value of the collateral we hold for real estate secured loans. Any factor or combination of factors identified above could negatively impact our business, financial condition, results of operations, and prospects.
Similarly, the occurrence of a natural or man-made disaster in our market areas could impair the value of the collateral we hold for real estate secured loans. Any factor or combination of factors identified above could negatively impact our business, financial condition, and results of operations.
These events could reduce our earnings and cause volatility in its financial results for any fiscal quarter or year and have a material, adverse effect on our financial condition and/or results of operations and prospects. Climate change manifesting as physical or transition risks could adversely affect our operations, businesses and customers.
These events could reduce our earnings and cause volatility in its financial results for any fiscal quarter or year and have a material, adverse effect on our financial condition and/or results of operations. Climate change manifesting as physical or transition risks could adversely affect our operations, businesses and customers.
Furthermore, relatively low unemployment rates may lead to significant increases in labor costs such as salaries, wages, and employee benefits expenses as we compete for qualified and skilled employees, which could negatively impact our results of operations and prospects.
Furthermore, relatively low unemployment rates may lead to significant increases in labor costs such as salaries, wages, and employee benefits expenses as we compete for qualified and skilled employees, which could negatively impact our results of operations.
Regardless, if any of the events or circumstances described below actually occur, our business, financial condition, results of operations, and prospects could be harmed. These risks are not the only ones we may face.
Regardless, if any of the events or circumstances described below actually occur, our business, financial condition, and results of operations could be harmed. These risks are not the only ones we may face.
These factors include: • general economic conditions; • prevailing market conditions; • our historical performance and capital structure; • estimates of our business potential and earnings prospects; • an overall assessment of our management; • our performance relative to our peers; • market demand for our shares; • impact of potential large sales by investors with significant holdings, including members of the Scott Family shareholder group; • perceptions of the banking industry in general; • political influences on investor sentiment; • consumer confidence; • consummation of a strategic acquisition or other implementation of our expansion plans; • international or domestic hostilities, or other international or domestic calamities, including wars or international conflicts with respect to which the United States may or may not be directly involved; and • global conditions, earthquakes, tsunamis, tornados, floods, fires, pandemics, and other natural catastrophic events.
These factors include: • general economic conditions; • prevailing market conditions; • our historical performance and capital structure; 29 Table of Contents • estimates of our business potential and earnings prospects; • an overall assessment of our management; • our performance relative to our peers; • market demand for our shares; • impact of potential large sales by investors with significant holdings, including members of the Scott Family shareholder group; • perceptions of the banking industry in general; • political influences on investor sentiment; • consumer confidence; • consummation of a strategic acquisition or other implementation of our expansion plans; • international or domestic hostilities, or other international or domestic calamities, including wars or international conflicts with respect to which the United States may or may not be directly involved; and • global conditions, earthquakes, tsunamis, tornados, floods, fires, pandemics, and other natural catastrophic events.
Our success in the competitive environment in which we operate requires consistent investment of capital and human resources in innovation and technology, particularly in light of the current “FinTech” environment, in which financial institutions are investing significantly in new technologies, such as artificial intelligence (AI), machine learning, blockchain and other distributed ledger technologies, and developing potentially industry-changing new products, services and industry standards in order to attract clients.
Our success in the competitive environment in which we operate requires consistent investment of capital and human resources in innovation and technology, particularly in light of the current “FinTech” environment, in which financial institutions are investing significantly in new technologies, such as AI, machine learning, blockchain and other distributed ledger technologies, and developing potentially industry-changing new products, services and industry standards in order to attract clients.
If we are unable to appropriately assess a cybersecurity incident in the context of required analyses then we could face compliance issues under these laws and regulations, and we could be subject to lawsuits, regulatory fines or investigations, or other liabilities, any of which could adversely affect our business and operating results.
If we are unable to appropriately assess a cybersecurity incident in the context of required analyses, then we could face compliance risk under these laws and regulations, and we could be subject to lawsuits, regulatory fines or investigations, or other liabilities, any of which could adversely affect our business and operating results.
At times, the stock markets, including the NASDAQ Stock Market on which our common stock is listed, may experience significant price and volume fluctuations.
At times, the stock markets, including the NASDAQ on which our common stock is listed, may experience significant price and volume fluctuations.
Our common stock is not a bank savings account or deposit and, therefore, is not insured against loss by the FDIC, any other deposit insurance fund, or any other public or private entity. As a result, holders of our common stock could lose some or all of their investment.
An investment in our common stock is not an insured deposit. Our common stock is not a bank savings account or deposit and, therefore, is not insured against loss by the FDIC, any other deposit insurance fund, or any other public or private entity. As a result, holders of our common stock could lose some or all of their investment.
The inability to attract and retain clients or to effectively compete for new business may have a material and adverse effect on our financial condition and results of operations. The Company also experiences competition from non-bank companies inside and outside of its market area and, in some cases, from companies other than those traditionally considered financial sector participants.
The inability to attract and retain clients or to effectively compete for new business may have a material and adverse effect on our financial condition and results of operations. 28 Table of Contents The Company also experiences competition from non-bank companies inside and outside of its market area and, in some cases, from companies other than those traditionally considered financial sector participants.
Regulatory authorities have imposed cease and desist orders and significant civil money penalties against institutions found to be violating these regulations. If any of the foregoing were to come to pass, our business, financial condition, or results of operations could be materially and adversely affected. Federal deposit insurance premiums could increase further in the future.
Regulatory authorities have imposed cease and desist orders and significant civil money penalties against institutions found to be violating these regulations. If any of the foregoing were to come to pass, our business, financial condition, or results of operations could be materially and adversely affected. 17 Table of Contents Federal deposit insurance premiums could increase further in the future.
As a result, the market price of our common stock is likely to be similarly volatile and investors in our common stock may experience a decrease in the value of their shares, including decreases unrelated to our operating performance or prospects.
As a result, the market price of our common stock is likely to be similarly volatile and investors in our common stock may experience a decrease in the value of their shares, including decreases unrelated to our operating performance.
This contagion risk can also occur when a perceived lack of trust in the banking system spreads throughout the industry based upon the results of a few poorly managed larger financial institutions.
This contagion risk can also occur when a perceived lack of trust in the banking system spreads throughout the industry based upon the results of a few poorly managed, or allegedly poorly managed, larger financial institutions.
Uncertainties continue regarding the potential for a renegotiation of international trade agreements by the Biden administration after changes in United States trade policies, legislation, treaties, and tariffs were enacted by the Trump administration.
Uncertainties continue regarding the potential for a renegotiation of international trade agreements by the Trump administration after changes in United States trade policies, legislation, treaties, and tariffs were taken by the Biden administration.
To the extent that our activities or the activities of our clients involve the storage and transmission of confidential information, security breaches, and viruses could expose us to claims, regulatory scrutiny, litigation, and other possible liabilities.
To the extent that our activities or the activities of our clients involve the storage and transmission of confidential information, security breaches and malware could expose us to claims, regulatory scrutiny, litigation, and other possible liabilities.
The Federal Reserve stated its current objective is to return the rate of inflation to 2% and it has been aggressively acting to achieve this goal. Throughout 2022 and 2023, the Federal Reserve has raised the federal funds rate to its current targeted rate between 5.25% and 5.5% in an effort to curb inflation.
The Federal Reserve stated its current objective is to return the rate of inflation to 2% and it has been aggressively acting to achieve this goal. Throughout 2022 and through July 2023, the Federal Reserve raised the federal funds rate to a targeted rate between 5.25% and 5.5% in an effort to curb inflation.
We are subject to various privacy, information security, and data protection laws, including: (i) certain limitations on our ability to share non-public personal information about our clients with non-affiliated third parties; (ii) requirements for certain disclosures to clients about our information collection, sharing, and security practices and that afford clients the right to “opt out” of any information sharing by us with non-affiliated third parties (with certain exceptions); and (iii) requirements that we develop, implement, and maintain a written information security program containing appropriate safeguards based on our size and complexity, the nature and scope of our activities, and the sensitivity of client information we process, as well as plans for responding to data security breaches.
We are subject to various and constantly evolving privacy, information security, and data protection laws and regulatory guidance, including without limitation: (i) certain limitations on our ability to share non-public personal information about our clients with non-affiliated third parties; (ii) requirements for certain disclosures to clients about our information collection, sharing, and security practices and that afford clients the right to “opt out” of any information sharing by us with non-affiliated third parties (with certain exceptions); and (iii) requirements that we develop, implement, and maintain a written information security program containing appropriate safeguards based on our size and complexity, the nature and scope of our activities, and the sensitivity of client information we process, as well as plans for responding to data security breaches.
A flattening or inversion of the yield curve or a negative interest rate environment in the United States could create downward pressure on our net interest margin. 21 Table of Conten ts Changes in interest rates may have an adverse effect on the value of our investment securities.
A flattening or inversion of the yield curve or a negative interest rate environment in the United States could create downward pressure on our net interest margin. 21 Table of Contents Changes in interest rates may have an adverse effect on the value of our investment securities.
We have incurred and expect to incur certain non-recurring costs associated with mergers. These costs include financial advisory, legal, accounting, consulting and other advisory fees, severance/employee benefit-related costs, public company filing fees and other regulatory fees, printing costs, and other related costs. 27 Table of Conten ts We may incur substantial costs in connection with the integration of acquired companies.
We have incurred and expect to incur certain non-recurring costs associated with mergers. These costs include financial advisory, legal, accounting, consulting and other advisory fees, severance/employee benefit-related costs, public company filing fees and other regulatory fees, printing costs, and other related costs. We may incur substantial costs in connection with the integration of acquired companies.
Regional and local economic conditions, competitive pressures, and the policies of regulatory authorities, including monetary policies of the Federal Reserve and the speed of their implementation, affect interest income and interest expense. As of December 31, 2023, 40.2% of our loans were advanced to our clients on a variable or adjustable-rate basis.
Regional and local economic conditions, competitive pressures, and the policies of regulatory authorities, including monetary policies of the Federal Reserve and the speed of their implementation, affect interest income and interest expense. As of December 31, 2024, 40.3% of our loans were advanced to our clients on a variable or adjustable-rate basis.
The Federal Reserve also indicated in December 2023 that there may be interest rate decreases during 2024, although we cannot control or predict with certainty changes in interest rates.
The Federal Reserve also indicated in December 2024 that there may be further interest rate decreases during 2025, although we cannot control or predict with certainty changes in interest rates.
To the extent these intangible assets are deemed unrecoverable, a non-cash impairment charge would be recorded which could have a material adverse effect on our results of operations. 23 Table of Conten ts The Company relies on other companies to provide certain key components of its business infrastructure.
To the extent these intangible assets are deemed unrecoverable, a non-cash impairment charge would be recorded which could have a material adverse effect on our results of operations. 24 Table of Contents The Company relies on other companies to provide certain key components of its business infrastructure.
The hardware and software we purchase from suppliers to facilitate financial services and perform company operations are also at risk of having embedded malware, viruses, and other methods intended to develop unauthorized access to confidential information.
For example, the hardware and software we purchase from suppliers and vendors to facilitate financial services and perform company operations are at risk of having embedded malware, viruses, and other methods intended to develop unauthorized access to confidential information.
We may not be successful in retaining key employees or finding and integrating suitable successors in the event of key employee loss or unavailability. 24 Table of Conten ts We may not be able to attract and retain qualified employees to operate our business effectively, which could have an adverse effect on our business.
We may not be successful in retaining key employees or finding and integrating suitable successors in the event of key employee loss or unavailability. 25 Table of Contents We may not be able to attract and retain qualified employees to operate our business effectively, which could have an adverse effect on our business.
Financial services institutions and companies engaged in data processing have reported breaches in the security of their websites or other systems, some of which have involved sophisticated and targeted attacks intended to obtain unauthorized access to confidential information, destroy data, disable or degrade service, or sabotage systems, often through the introduction of computer viruses, malware, ransomware, cyber-attacks, and other means.
Financial services institutions have reported breaches in the security of their websites or other systems, some of which have involved sophisticated and targeted attacks intended to obtain unauthorized access to confidential information, destroy data, disable or degrade service, achieve illicit financial gain, or sabotage systems, often through the introduction of computer viruses, malware, ransomware, cyber-attacks, and other means.
As a result, these increases in interest rates could result in increased loan defaults, foreclosures, and charge-offs and could necessitate further increases to the allowance for credit losses, any of which could have a material adverse effect on our business, financial condition, or results of operations.
As a result, these increases in interest rates could result in increased loan defaults, foreclosures, and charge-offs and could necessitate further increases to the ACL, any of which could have a material adverse effect on our business, financial condition, or results of operations.
Further, we cannot be sure that insurers will not deny coverage as to any claim, and some security incidents may be outside the scope of our coverage, including in instances where they are considered force majeure events. Security incidents may result in increased costs for cybersecurity insurance.
Further, we cannot be sure that insurers will not deny coverage as to any claim, and some security incidents may be outside the scope of our coverage, including in instances where they are considered force majeure events, or there are applicable sub-limits on our coverage. Security incidents may result in increased costs for cybersecurity insurance.
We maintain an allowance for credit losses based upon, among other things, historical experience, delinquency trends, economic conditions, and regular reviews of loan portfolio quality. Based upon such factors, management makes various assumptions and judgments about the ultimate collectability of our loan portfolio and provides an allowance for credit losses.
We maintain an ACL based upon, among other things, historical experience, delinquency trends, economic conditions, and regular reviews of loan portfolio quality. Based upon such factors, management makes various assumptions and judgments about the ultimate collectability of our loan portfolio and provides an ACL.
Tariffs and retaliatory tariffs have been imposed, and additional tariffs and retaliatory tariffs are periodically discussed. 19 Table of Conten ts A trade war or other governmental action related to tariffs or international trade agreements or policies, as well as COVID-19 or other potential epidemics or pandemics, have the potential to negatively impact our and/or our clients’ costs, demand for our clients’ products, and/or the U.S. economy or certain sectors thereof and, thus, adversely affect our business, financial condition, and results of operations.
Tariffs and retaliatory tariffs have been imposed, and additional tariffs and retaliatory tariffs are periodically discussed. 19 Table of Contents If maintained, the newly announced tariffs and the potential escalation of trade disputes, a trade war or other governmental action related to tariffs or international trade agreements or policies, as well as potential epidemics or pandemics, have the potential to negatively impact our and/or our clients’ costs, demand for our clients’ products, and/or the U.S. economy or certain sectors thereof and, thus, adversely affect our business, financial condition, and results of operations.
Both the scope of the laws and regulations and the intensity of the supervision to which our business is subject have increased in recent years in response, we believe, to various factors including the 2008 financial crisis as well as technological and market changes. Regulatory enforcement and fines have also increased across the banking and financial services sector.
Both the scope of the laws and regulations and the intensity of the supervision to which our business is subject have increased in recent years in response, we believe, to various factors including the 2008 financial crisis and 2023 banking crisis as well as technological and market changes.
Any security compromise in our industry, whether actual or perceived, could harm our reputation; erode customer confidence in our security measures; negatively affect our ability to attract new customers; or subject us to third-party lawsuits, regulatory fines or investigations, or other liability, any of which could adversely affect our business and operating results.
Any compromise of our network or data, or any security incident experienced by a member of our supply chain, whether actual or perceived, could harm our reputation; erode customer confidence in our security measures; negatively affect our ability to attract new customers; or subject us to third-party lawsuits, regulatory fines or investigations, or other liability, any of which could adversely affect our business and operating results.
Deterioration in economic conditions could result in the following consequences, any of which could have a material adverse effect on our business, financial condition, liquidity, and results of operations: • demand for our products and services may decline; • loan delinquencies, problem assets, and foreclosures may increase; • increases in the provisions for credit losses and loans and lease charge-offs; • decrease in net interest income derived from lending activities; • collateral for loans, especially real estate, may decline in value; • future borrowing power of our clients may be reduced; • the value of our securities portfolio may decline; • the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us; and • increases in our operating expenses associated with attending to the effects of the above noted consequences. 18 Table of Conten ts Volatility and uncertainty related to inflation and the effects of inflation, which may lead to increased costs for businesses and consumers and potentially contribute to poor business and economic conditions generally, may enhance or contribute to some of the risks discussed herein.
Deterioration in economic conditions could result in the following consequences, any of which could have a material adverse effect on our business, financial condition, liquidity, and results of operations: • demand for our products and services may decline; 18 Table of Contents • loan delinquencies, problem assets, and foreclosures may increase; • increases in the provisions for credit losses and loans and lease charge-offs; • decrease in net interest income derived from lending activities; • collateral for loans, especially real estate, may decline in value; • future borrowing power of our clients may be reduced; • the value of our securities portfolio may decline; • the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us; and • increases in our operating expenses associated with attending to the effects of the above noted consequences.
You should consider carefully the following important factors in evaluating us and our business before you make an investment decision about our securities. 14 Table of Conten ts Regulatory and Compliance Risks New governmental regulations and/or changes in existing governmental regulations could have a material adverse effect on the Company.
You should consider carefully the following important factors in evaluating us and our business before you make an investment decision about our securities. Regulatory and Compliance Risks New governmental regulations and/or changes in existing governmental regulations, or in the way such regulations are interpreted or enforced, could have a material adverse effect on the Company.
We are reliant upon certain external vendors to provide products and services necessary to maintain our day-to-day operations and we outsource many of our major systems, such as certain data processing, loan servicing, and deposit processing systems.
We are reliant upon certain external vendors to provide products and services necessary to maintain our day-to-day operations and we currently outsource, or may outsource in the future, many of our major systems, such as certain data processing, loan servicing, credit card servicing, and deposit processing systems.
If it is not more likely than not that the fair value of the reporting unit is in excess of the carrying value, the fair value of net assets is estimated based on analyses of our market value, discounted cash flows, and peer values.
If it is not more likely than not that the fair value of the reporting unit is in excess of the carrying value, the fair value of net assets is estimated based on analyses of our market value, discounted cash flows, and peer values. Consequently, the determination of goodwill is sensitive to market-based economics and other key assumptions.
Despite efforts to ensure the integrity of our systems, cyber threats are rapidly evolving and we may not be able to anticipate or prevent all such attacks, nor may we be able to implement guaranteed preventive measures against such security breaches.
Despite efforts to evaluate threats to the security of our systems and data and to implement controls and policies and procedures designed to address the same, cyber threats are rapidly evolving, and we may not be able to anticipate or prevent all such attacks, nor may we be able to implement guaranteed preventive measures against such security breaches.
Clients may shift their deposits into higher-cost products, or the Company may need to raise its interest rates to remain competitive in the marketplace.
Clients may shift their deposits into higher-cost products, or the Company may need to raise its interest rates to remain competitive in the marketplace. Higher funding costs reduce the Company’s net interest income and net income.
In recent years, the CFPB has increased its scrutiny of fee-based business models and various fees on consumer financial products and services, including depositor, overdraft and late fee charges. For example, in February 2023, the CFPB proposed changes that would limit the amount of late fees that could be charged for late credit card payments.
In recent years, the CFPB has increased its scrutiny of fee-based business models and various fees on consumer financial products and services, including depositor, overdraft and late fee charges. For example, in March 2024, the CFPB finalized a rule that limits the amount of late fees that could be charged for late credit card payments.
Events involving adverse developments that affect financial institutions, transactional counterparties or other companies in the banking industry, or concerns or rumors about these or similar events, have in the past and may in the future lead to erosion of confidence in the banking system, deposit volatility, liquidity issues, stock price volatility, and other adverse developments.
Events like the recent bank failures and the related negative media that involve adverse developments affecting financial institutions, transactional counterparties or other companies in the banking industry, or the development of concerns or rumors about these or similar events, have in the past and may in the future lead to erosion of confidence in the banking system, deposit volatility, liquidity issues, stock price volatility, and other adverse developments.
Adverse events or circumstances could impact the recoverability of these intangible assets including loss of core deposits, significant losses of customer accounts and/or balances, increased competition or adverse changes in the economy.
Identifiable intangible assets other than goodwill consist of core deposit intangibles and other intangible assets (primarily customer relationships). Adverse events or circumstances could impact the recoverability of these intangible assets including loss of core deposits, significant losses of customer accounts and/or balances, increased competition or adverse changes in the economy.
Our success depends, in part, on our ability to adapt our products and services to evolving industry standards and client expectations. There is increasing pressure to provide products and services at lower prices.
Our success depends, in part, on our ability to adapt our products and services to evolving industry standards and client expectations. There is increasing pressure to provide products and services at lower prices. Lower prices can reduce our net interest margin and revenues from our fee-based products and services.
Many of these changes have occurred as a result of the Dodd-Frank Act and its implementing regulations. The Company expects its business will remain subject to extensive regulation and supervision.
Regulatory enforcement and fines have also increased across the banking and financial services sector. Many of these changes have occurred as a result of the Dodd-Frank Act and its implementing regulations. The Company expects its business will remain subject to extensive regulation and supervision.
We must comply with the CRA, the Equal Credit Opportunity Act, the Fair Housing Act, and other fair lending laws and regulations that impose non-discriminatory lending and other requirements on financial institutions.
Any failure to comply with laws and regulations, including the Community Reinvestment Act (CRA) and fair lending laws, could lead to material penalties. We must comply with the CRA, the Equal Credit Opportunity Act, the Fair Housing Act, and other fair lending laws and regulations that impose non-discriminatory lending and other requirements on financial institutions.
Denial-of-service attacks have been launched against several large financial services institutions, primarily resulting in inconvenience. Future ransomware and cyber-attacks could be more disruptive and damaging. Hacking and identity theft risks, in particular, could cause serious reputational harm to the Company and the Bank.
Denial-of-service attacks have been launched against several large financial services institutions, primarily resulting in inconvenience, but can also cause operational disruption. Ransomware and other types of cyber-attacks could be more disruptive and damaging. Hacking and identity theft risks arising from instances of data loss or compromise could also cause serious reputational harm to the Company and the Bank.
Operational Risks Our Company faces cybersecurity risks, including “ denial-of-service attacks, ” “ hacking, ” and “ identity theft ” that could result in the disclosure of confidential information, adversely affect our business or reputation, and create significant legal and financial exposure.
Operational Risks Our Company faces cybersecurity risks, including denial-of-service attacks, network intrusions, business e-mail compromise, and other malicious behavior could result in the disclosure of confidential information, adversely affect our business or reputation, and create significant legal, operational, and financial exposure.
These supervisory actions may result in higher capital requirements, higher deposit insurance premiums, and limitations on the Company’s activities that could have a material adverse effect on its business and profitability.
Federal and state banking regulators possess broad powers to take supervisory actions as they deem appropriate. These supervisory actions may result in higher capital requirements, higher deposit insurance premiums, and limitations on the Company’s activities that could have a material adverse effect on its business and profitability.
The Federal Reserve increased the federal funds target range by 525 basis points between March 16, 2022 and July 26, 2023 in an effort to dampen increasing inflation rates. With the general inflationary pressures easing, the Federal Reserve slowed its pace of raising interest rates in the second half of 2023.
The Federal Reserve increased the federal funds target range by 525 basis points between March 16, 2022 and July 26, 2023 in an effort to dampen increasing inflation rates.
We establish and maintain systems of internal operational and accounting controls that provide us with critical information used to manage our business. These systems are subject to various inherent limitations, including cost, judgments used in decision-making, assumptions about the likelihood of future events, the soundness of our systems, the possibility of human error, and the risk of fraud.
These systems are subject to various inherent limitations, including cost, judgments used in decision-making, assumptions about the likelihood of future events, the soundness of our systems, the possibility of human error, and the risk of fraud.
The ability of our Bank to pay dividends to us is subject to, among other things, its earnings, financial condition, and need for funds, as well as federal and state governmental policies and regulations applicable to us and the Bank, which limit the amount that may be paid as dividends without prior approval.
The ability of our Bank to pay dividends to us is subject to, among other things, its earnings, financial condition, and need for funds, as well as federal and state governmental policies and regulations applicable to us and the Bank, which limit the amount that may be paid as dividends without prior approval. 30 Table of Contents Although we have historically paid dividends to our stockholders, we have no obligation to continue doing so and may change our dividend policy at any time without notice to our stockholders.
The remediation costs and any other financial liabilities associated with an environmental hazard could have a material, adverse effect on our cash flows, financial condition, and results of operations. If our systems of internal operating and accounting controls were to become ineffective, our financial information could be negatively impacted.
The remediation costs and any other financial liabilities associated with an environmental hazard could have a material, adverse effect on our cash flows, financial condition, and results of operations.
While we believe we comply with all applicable tax laws, rules, and regulations in the relevant jurisdictions, the tax authorities may determine that we owe additional taxes or apply existing laws and regulations differently, which could result in a significant increase in liabilities for taxes and interest in excess of accrued liabilities and harm our business and financial condition. 15 Table of Conten ts New tax legislative initiatives, including increases in the corporate tax rate, may be enacted, negatively impacting our effective tax rate at the federal and state level, and potentially adversely affecting our tax positions or tax liabilities.
While we believe we comply with all applicable tax laws, rules, and regulations in the relevant jurisdictions, the tax authorities may determine that we owe additional taxes or apply existing laws and regulations differently, which could result in a significant increase in liabilities for taxes and interest in excess of accrued liabilities and harm our business and financial condition.
These and other tax related items could increase our future tax expense, could change our future intentions regarding the use of our earnings, and could have a material adverse effect on our business, financial condition and results of operations.
These and other tax related items could increase our future tax expense, could change our future intentions regarding the use of our earnings, and could have a material adverse effect on our business, financial condition and results of operations. 16 Table of Contents We may be subject to more stringent capital requirements in the future, the impact of which could have a material risk to our operations.
The techniques used by cyber criminals change frequently, may not be recognized until launched or later, and can originate from a wide variety of sources, including outside groups such as external service providers.
The techniques used by cyber criminals change frequently, may be novel (for example, “zero-day” vulnerabilities), and/or may not be recognized until launched or later (for example, threat actor evading detection for some time), and can originate from a wide variety of sources, including external service providers.
Our computer systems and network infrastructure are subject to security risks and could be susceptible to cyber-attacks, such as denial-of-service attacks, hacking, malware, terrorist activities, or identity theft.
Our computer systems and network infrastructure and those of third-party service providers on which we are dependent, are subject to security risks and could be susceptible to cyber-attacks, such as denial-of-service attacks, hacking, malware, terrorist activities, and other cybersecurity incidents.
With the general inflationary pressures easing, the Federal Reserve slowed it’s pace of raising interest rates in the second half of 2023. As market interest rates rise, we experience competitive pressures to increase the rates we pay on deposits, which may decrease our net interest income.
With the general inflationary pressures easing, the Federal Reserve paused raising interest rates during the second half of 2023 and decreased the federal funds rate by 100 basis points between September and December 2024. As market interest rates rise, we experience competitive pressures to increase the rates we pay on deposits, which may decrease our net interest income.
Our network could be vulnerable to unauthorized access, computer viruses, malware, phishing schemes, and other internal and external security breaches. We may be required to spend significant capital and other resources to protect against threats, or to alleviate problems caused by security breaches or malicious software.
We may be required to spend significant capital and other resources to protect against threats, or to alleviate problems caused by security breaches or malicious software.
Our loans held for investment portfolio are concentrated in commercial real estate and commercial business loans. As of December 31, 2023, we had $11.8 billion of commercial loans, including $8.9 billion of commercial real estate loans, representing approximately 64.5% of our loans held for investment portfolio. Commercial loans may involve greater risks than our other types of lending.
As of December 31, 2024, we had $12.1 billion of commercial loans, including $9.3 billion of commercial real estate loans, representing approximately 68.0% of our loans held for investment portfolio. Commercial loans may involve greater risks than our other types of lending.
Certain elements of the federal government have also expressed an interest in increased regulation of these types of fees. Any of these changes or new legislation could increase our future compliance and other operating expenses and could have a material adverse effect on our business, financial condition, and results of operation.
Any of these changes or new legislation could increase our future compliance and other operating expenses and could have a material adverse effect on our business, financial condition, and results of operation. Negative developments in the banking industry could result in increased regulatory scrutiny.
United States trade policies and other factors beyond the Company’s control, including the imposition of tariffs and retaliatory tariffs, may adversely impact our business, financial condition, and results of operations.
As a result, an increase in credit losses could have a material adverse effect on our earnings, financial condition, and results of operations. United States trade policies and other factors beyond the Company’s control, including the imposition of tariffs and retaliatory tariffs, may adversely impact our business, financial condition, and results of operations.
These and other provisions may have the effect of inhibiting a third party from making a proposal to acquire us or of impeding a change of control under circumstances that otherwise could provide the holders of our common stock with the opportunity to realize a premium over the then-prevailing market price of such common stock. 28 Table of Conten ts Further, the acquisition of specified amounts of our common stock (in some cases, the acquisition or control of more than 5% of our voting stock) may require certain regulatory approvals, including the approval of the Federal Reserve and one or more of our state banking regulatory agencies.
These and other provisions may have the effect of inhibiting a third party from making a proposal to acquire us or of impeding a change of control under circumstances that otherwise could provide the holders of our common stock with the opportunity to realize a premium over the then-prevailing market price of such common stock.
Any increase in the Bank's FDIC premiums could have an adverse effect on its business, financial condition and results of operations. FDIC insurance premiums could increase in the future in response to similar declining economic conditions. Credit Risks We may be subject to lending risks and risks associated with loan sector concentrations, which could adversely affect the Company.
FDIC insurance premiums could increase in the future in response to similar declining economic conditions. Credit Risks We may be subject to lending risks and risks associated with loan sector concentrations, which could adversely affect the Company. We take on credit risk by virtue of making loans and extending loan commitments and letters of credit.
We also cannot be sure that our existing cybersecurity insurance will continue to be available on acceptable terms, in sufficient amounts to cover any claims we submit, or at all.
While we do maintain cyber liability insurance to mitigate the financial risks associated with security incidents that is reviewed annually, we cannot be sure that our existing cybersecurity insurance will continue to be available on acceptable terms, in sufficient amounts to cover any claims we submit, or at all.
Any potential adverse reactions to our financial condition or status in the marketplace, as compared to its competitors, could limit our ability to attract and retain clients and to compete for new business opportunities.
Some of our larger competitors may have greater capital and resources than the Company, higher lending limits, and products and services not offered by us. Any potential adverse reactions to our financial condition or status in the marketplace, as compared to its competitors, could limit our ability to attract and retain clients and to compete for new business opportunities.
Any future deficiencies, weaknesses, or losses related to internal operating control systems could have an adverse effect on our business, financial condition, results of operations, and prospects. We may not effectively implement technology-facilitated products and services or be successful in marketing these products and services to our clients, which could negatively impact our business.
Any future deficiencies, weaknesses, or losses related to internal operating control systems could have an adverse effect on our business, financial condition, results of operations, and prospects.
Consequently, the determination of the fair value of goodwill is sensitive to market-based economics and other key assumptions. Variability in market conditions or in key assumptions could result in impairment of goodwill, which is recorded as a non-cash adjustment to income. An impairment of goodwill could have a material adverse effect on our business, financial condition, and results of operations.
Variability in market conditions or in key assumptions could result in impairment of goodwill, which is recorded as a non-cash adjustment to income. An impairment of goodwill could have a material adverse effect on our financial condition and results of operations. As of December 31, 2024, we had goodwill of $1,100.9 million, or 33.3% of our total stockholders’ equity.
The Company may experience significant competition from new or existing competitors, which may reduce its client base or cause it to adjust prices for its products and services in order to maintain market share. There is intense competition among banks in the Company’s market areas.
It could also disrupt existing business relationships, make it harder to develop new business relationships, or otherwise negatively impact the way that we operate our business. The Company may experience significant competition from new or existing competitors, which may reduce its client base or cause it to adjust prices for its products and services in order to maintain market share.
Changes include, among other things: • Changes to risk-weights under the standardized approach • Restrictions on the use of models under the advanced approaches • Revisions to the credit valuation adjustment risk framework • An overhaul of the operational risk framework, including a more explicit operational risk capital charge under the standardized approach • Refinements to the leverage ratio framework • Creation of an output floor on the regulatory capital benefits that a banking organization using the advanced approaches can derive relative to the standardized approach 16 Table of Conten ts In September 2022, the federal banking regulators announced their intent to revise U.S. regulatory capital requirements to align with Basel IV requirements, more recently referred to as the Basel III “Endgame,” and in July 2023 issued a notice of proposed rulemaking for comment that would substantially revise the regulatory capital framework for banking organizations with total assets of $100 billion or more and their depository institutions subsidiaries and banking organizations with significant trading activity.
For example, in September 2022, the federal banking regulators announced their intent to revise U.S. regulatory capital requirements to align with Basel IV requirements, more recently referred to as the Basel III “Endgame,” and in July 2023 issued a notice of proposed rulemaking for comment that would substantially revise the regulatory capital framework for banking organizations with total assets of $100 billion or more and their depository institutions subsidiaries and banking organizations with significant trading activity.
If management’s assumptions and judgments prove to be incorrect and the allowance for credit losses is inadequate, or if banking authorities or regulations require us to increase the allowance for credit losses, our net income may be adversely affected.
These assumptions and judgments are complex and difficult to determine given the significant uncertainty surrounding future conditions in the general economy and banking industry. If management’s assumptions and judgments prove to be incorrect and the ACL is inadequate, or if banking authorities or regulations require us to increase the ACL, our net income may be adversely affected.
Also, these and other capital investments in our business may not produce expected growth in earnings anticipated at the time of the expenditure. The Company may not be successful in introducing new products and services, achieving market acceptance of its products and services, anticipating or reacting to consumers’ changing technological preferences, or developing and maintaining loyal clients.
The Company may not be successful in introducing new products and services, achieving market acceptance of its products and services, anticipating or reacting to consumers’ changing technological preferences, or developing and maintaining loyal clients. In addition, we could lose market share to the shadow banking system or other non-traditional banking organizations.
The recent negative developments in the banking industry are expected to result in modifications to or additional laws and regulations governing banks and bank holding companies.
These developments can have and resulted in modifications to or additional laws and regulations governing banks and bank holding companies.
Our business is subject to the risks of certain global conditions, earthquakes, volcanoes, tsunamis, tornados, floods, fires, drought, and other natural catastrophic events.
In the future, we may make additional offerings of debt or equity securities, or we may issue additional debt or equity securities as consideration for future mergers and acquisitions. General Risk Factors Our business is subject to the risks of certain global conditions, earthquakes, volcanoes, tsunamis, tornados, floods, fires, drought, and other natural catastrophic events.
A successful security breach could result in violations of applicable privacy and other laws, financial loss to us or to our clients, loss of confidence in our security measures, significant litigation exposure, and harm to our reputation, all of which could have a material adverse effect on our business, financial condition, results of operations, and prospects. 22 Table of Conten ts Privacy, information security, and data protection laws, rules, and regulations could affect or limit how we collect and use personal information, increase our costs, and adversely affect our business opportunities.
A successful security breach or other cybersecurity incident involving our computer systems and network infrastructure, or those of the third-party service providers upon which we rely, could result in violations of applicable data privacy and data security/data breach and other laws and contractual requirements, financial loss to us or to our clients, loss of confidence in our security measures, significant litigation exposure, and harm to our reputation, all of which could have a material adverse effect on our business, financial condition, and results of operations.
It also may prove impossible to achieve them at all or in their entirety as a result of unexpected factors or events. As a result, any acquisition could ultimately prove dilutive to our equity and shareholders’ earnings per share, thereby adversely affecting our financial condition and results of operations.
It also may prove impossible to achieve them at all or in their entirety as a result of unexpected factors or events.
General Risk Factors We recently identified combined deficiencies resulting in a material weakness in our internal control over financial reporting, which, if we are unable to remediate appropriately or timely, could result in a loss of investor confidence and adversely impact our stock price, and could impair our ability to accurately and timely report our financial results and harm our business.
If we fail to maintain effective operational processes, policies and procedures, and internal control over financial reporting, our ability to accurately and timely report our financial results may be impacted, which could result in a loss of investor confidence and adversely impact our stock price and our business.
The amount of any dividend declaration is subject to our evaluation of our strategic plans, growth initiatives, capital availability, projected liquidity needs, and other factors. An investment in our common stock is not an insured deposit.
Holders of our common stock are only entitled to receive such cash dividends as our Board may declare out of funds legally available for such payments. The amount of any dividend declaration is subject to our evaluation of our strategic plans, growth initiatives, capital availability, projected liquidity needs, and other factors.
Lower prices can reduce our net interest margin and revenues from our fee-based products and services. 26 Table of Conten ts In addition, the adoption of new technologies by competitors, including internet banking services, mobile applications, and advanced ATM functionality, could require us to make substantial expenditures to modify or adapt our existing products and services.
In addition, the adoption of new technologies by competitors, including internet banking services, mobile applications, and advanced ATM functionality, could require us to make substantial expenditures to modify or adapt our existing products and services. Also, these and other capital investments in our business may not produce expected growth in earnings anticipated at the time of the expenditure.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeGovernance While all employees, including members of our information technology (“IT”) team, are required to report any known or suspected security event, pursuant to our policies and procedures, the following members of Company management and the Board of Directors are tasked specifically with the responsibilities described below: • Cybersecurity Incident Response Team (“CIRT”) – The CIRT was established to provide quick, effective, and orderly responses to serious successful cybersecurity related incidents such as system and application outages, virus infections, hacker attempts, system compromises, improper disclosure of confidential information, system service interruptions, breach of personal identifiable information, or other technology related events with serious security implications or business disruptions.
Biggest changeThe following members of Company management are tasked specifically with the responsibilities described below: • Cybersecurity Incident Response Team (“CIRT”) – The CIRT was established to provide quick, effective, and orderly responses to serious successful cybersecurity related incidents such as system and application outages, virus infections, hacker attempts, system compromises, improper disclosure of confidential information, system service interruptions, breach of personal identifiable information, or other technology related events with serious security implications or business disruptions. 32 Table of Contents The CIRT consists of various IT groups with the knowledge and expertise needed to execute the technical aspect of the Company’s cybersecurity policies and procedures, including our Chief Information Officer (“CIO”) and Chief Information Security Officer (“CISO”).
Risk Management and Strategy We have developed policies and procedures to provide processes and guidelines for managing cybersecurity incidents with the goal of minimizing disruption, damage, protecting data, and helping recover from a cybersecurity incident as quickly as possible. 30 Table of Conten ts In addition, in furtherance of our fiduciary responsibility to protect and account for information and information systems that are recognized as critical bank assets, we have established policies that require, among other things, that we perform an information security risk and vulnerability assessment at least annually, and implement corresponding risk management controls; implement a defense-in-depth security architecture, which may include firewalled network segmentation, malicious software protection, and data loss prevention; leverage data loss prevention technology to assist in preventing unauthorized disclosure of non-public information; and engage independent third parties to review, audit, and test the information security control structure and program to ensure processes and controls are functioning properly.
In addition, in furtherance of our fiduciary responsibility to protect and account for information and information systems that are recognized as critical bank assets, we have established policies that require, among other things, that we perform an information security risk and vulnerability assessment at least annually, and implement corresponding risk management controls; implement a defense-in-depth security architecture, which may include firewalled network segmentation, malicious software protection, and data loss prevention; leverage data loss prevention technology to assist in preventing unauthorized disclosure of non-public information; and engage independent third parties to review, audit, and test the information security control structure and program to ensure processes and controls are functioning properly.
Turitto is responsible for appropriate administration of the Company’s cybersecurity policies with respect to employee-related cybersecurity incidents. Ms. Turitto joined us with over 15 years of diverse experience across multiple human resource disciplines, including human resource information systems.
Turitto is responsible for appropriate administration of the Company’s cybersecurity policies with respect to employee-related cybersecurity incidents. Ms. Turitto joined us with over 15 years of diverse experience across multiple human resource disciplines, including human resource information systems. • Risk Committee – The Risk Committee reviews periodic updates on cybersecurity matters from the CISO, CIO and the CRO.
When an incident is reported, the CIRT determines the scope, scale and severity of the event and determines if the event is an incident.
As further described below, these officers are responsible for facilitating communications with the Risk Committee. When an incident is reported, the CIRT determines the scope, scale and severity of the event and determines if the event is an incident.
Knieriem has over 25 years of experience in financial services across a variety of roles including finance, treasury, retail, credit, and risk management. • Chief Information Officer (“CIO”) – Lori Meyer has served as our CIO since June 30, 2023, after serving in several leadership roles in the Company, including Director of Enterprise Program Management, Director of IT Business Management, Director of IT Business Relations, and Business Process Improvement Lead.
Schoolitz is responsible for reporting serious incidents to external authorities pursuant to advice from internal or external legal counsel, unless otherwise delegated. • Chief Information Officer (“CIO”) – Lori Meyer has served as our CIO since June 30, 2023, after serving in several leadership roles in the Company, including Director of Enterprise Program Management, Director of IT Business Management, Director of IT Business Relations, and Business Process Improvement Lead.
In general, the CIRT reports such findings to the CISO, the CISO reports the information to the Chief Risk Officer (“CRO”), and the CRO ultimately reports those findings to the Risk Committee. • Risk Committee – The Risk Committee of our Board of Directors is responsible for overseeing our enterprise-wide risk management program and corporate risk function, including cyber risk.
In general, the CIRT reports such findings to the CISO, the CISO reports the information to the Chief Risk Officer (“CRO”), and the CRO ultimately reports those findings to the Risk Committee. • Enterprise Risk Management Committee (“ERMC”) – The ERMC is a management committee of the Bank and has primary oversight responsibility of the Company’s cybersecurity programs. • Chief Risk Officer (“CRO”) – Tawnya Schoolitz is serving as our interim CRO, after serving in several leadership roles in the Company, including Chief Compliance Officer.
Removed
The CIRT consists of various IT groups with the knowledge and expertise needed to execute the technical aspect of the Company’s cybersecurity policies and procedures, including our Chief Information Officer (“CIO”) and Chief Information Security Officer (“CISO”). As further described below, these officers are responsible for facilitating communications with the Risk Committee.
Added
Risk Management and Strategy We have developed policies and procedures to provide processes and guidelines for managing cybersecurity incidents with the goal of minimizing disruption, damage, protecting data, and helping recover from a cybersecurity incident as quickly as possible.
Removed
The Risk Committee assesses whether the risk-management programs are capable of managing our significant risks and monitors whether our most significant enterprise-wide risk exposures are in alignment with our appetite for risk. • Enterprise Risk Management Committee (“ERMC”) – The ERMC is a management committee of the Bank.
Added
Governance The Board oversees the Company’s risk associated with cybersecurity matters with the support of the Risk Committee of the Board (the “Risk Committee”). Management is responsible for identifying, assessing, monitoring, and managing risk, including cybersecurity risk, in a rapidly changing environment.
Removed
The Risk Committee delegates oversight responsibility of the Company’s cybersecurity programs to the ERMC. The ERMC presents summary reporting to the Risk Committee pertaining to the status of such programs. 31 Table of Conten ts • Chief Risk Officer (“CRO”) – Karlyn M. Knieriem has served as our Executive Vice President and CRO since 2022. As CRO, Ms.
Added
All employees, including members of our information technology (“IT”) team, are also required to report any known or suspected security event, pursuant to our policies and procedures.
Removed
Knieriem is responsible for reporting serious incidents to external authorities pursuant to advice from internal or external legal counsel, unless otherwise delegated. Ms.
Added
These updates include the information security risk and vulnerability assessment, the overall status of the information security program, and compliance with regulatory guidelines. In addition, reporting includes periodic assessments of business resiliency including oversight and management of incidents.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeAs of December 31, 2023, we provided banking services at 304 locations in Arizona, Colorado, Idaho, Iowa, Kansas, Minnesota, Missouri, Montana, Nebraska, North Dakota, Oregon, South Dakota, Washington, and Wyoming, of which 74 properties are leased from independent third parties, one property was leased from a related entity, and 229 physical properties are owned by us.
Biggest changeAs of December 31, 2024, we provided banking services at 300 locations in Arizona, Colorado, Idaho, Iowa, Kansas, Minnesota, Missouri, Montana, Nebraska, North Dakota, Oregon, South Dakota, Washington, and Wyoming, of which 72 properties are leased from independent third parties, one property was leased from a related entity, and 227 physical properties are owned by us.
We believe each of our facilities is suitable and adequate to meet our current operational needs.
We believe each of our facilities is suitable and adequate to meet our current operational needs. 33 Table of Contents

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

7 edited+1 added−1 removed3 unchanged
Biggest changeTotal Number of Maximum Number Shares Purchased as Part of Shares That May Total Number of Average Price of Publicly Announced Yet Be Purchased Under Period Shares Purchased (1) Paid Per Share Plans or Programs the Plans or Programs October 1, 2023 to October 31, 2023 103 $ 23.31 — — November 1, 2023 to November 30, 2023 28 23.15 — — December 1, 2023 to December 31, 2023 1,000,138 32.14 — — Total 1,000,269 $ 32.14 — — (1) Stock repurchases were redemptions of vested restricted shares tendered in lieu of cash for payment of income tax withholding amounts by participants of the Company’s 2015 Equity Compensation Plan and the repurchase of one million shares of common stock from the estate of a stockholder on December 14, 2023 . 33 Table of Conten ts Performance Graph The performance graph below compares the cumulative total shareholder return on our common stock with the cumulative total return on equity securities of companies included in the NASDAQ Composite Index, KBW NASDAQ Bank Index, and the KBW NASDAQ Regional Banking Index, measured on the last trading day of each year shown.
Biggest changeTotal Number of Maximum Number Shares Purchased as Part of Shares That May Total Number of Average Price of Publicly Announced Yet Be Purchased Under Period Shares Purchased (1) Paid Per Share Plans or Programs the Plans or Programs October 1, 2024 to October 31, 2024 — $ — — — November 1, 2024 to November 30, 2024 — — — — December 1, 2024 to December 31, 2024 148 34.07 — — Total 148 $ 34.07 — — (1) Stock repurchases were redemptions of vested restricted shares tendered in lieu of cash for payment of income tax withholding amounts by participants of the Company’s 2015 Equity Compensation Plan. 34 Table of Contents Performance Graph The performance graph below compares the cumulative total shareholder return on our common stock with the cumulative total return on equity securities of companies included in the NASDAQ Composite Index, KBW NASDAQ Bank Index, and the KBW NASDAQ Regional Banking Index, measured on the last trading day of each year shown.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers The following table provides information with respect to purchases made by or on behalf of us or any “affiliated purchasers” (as defined in Rule 10b-18(a)(3) under the Exchange Act), of our common stock during the three months ended December 31, 2023.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers The following table provides information with respect to purchases made by or on behalf of us or any “affiliated purchasers” (as defined in Rule 10b-18(a)(3) under the Exchange Act), of our common stock during the three months ended December 31, 2024.
The KBW NASDAQ Regional Banking Index seeks to reflect the performance of U.S. companies that do business as publicly traded regional banks or thrifts in the U.S. This graph assumes a $100 investment in our common stock on December 31, 2018, and reinvestment of dividends on the date of payment without commissions.
The KBW NASDAQ Regional Banking Index seeks to reflect the performance of U.S. companies that do business as publicly traded regional banks or thrifts in the U.S. This graph assumes a $100 investment in our common stock on December 31, 2019, and reinvestment of dividends on the date of payment without commissions.
Dividend Restrictions For a description of restrictions on the payment of dividends, see Part I, Item 1, “Business — Government Regulation and Supervision — Dividends and Restrictions on Transfers of Funds,” and Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Capital Resources and Liquidity Management” included herein.
Dividend Restrictions For a description of restrictions on the payment of dividends, see Part I, Item 1, “Business — Government Regulation and Supervision — Dividends and Restrictions on Transfers of Funds,” and Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Capital Resources and Liquidity” included herein.
On January 26, 2024, the Company declared a quarterly cash dividend amount of $0.47 per share of common stock. While we currently intend to continue paying quarterly dividends, the Board may change or eliminate the payment of future dividends.
Dividends It is our policy to pay a quarterly dividend to all common shareholders. On January 28, 2025, the Company declared a quarterly cash dividend amount of $0.47 per share of common stock. While we currently intend to continue paying quarterly dividends, the Board may change or eliminate the payment of future dividends.
Sales of Unregistered Securities There were no sales of equity securities by us during the years ended December 31, 2023, 2022, or 2021 that were not registered under the Securities Act of 1933.
Sales of Unregistered Securities There were no sales of equity securities by us during the year ended December 31, 2024 that were not registered under the Securities Act.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The Company’s common stock is listed on the NASDAQ Stock Market under the symbol “FIBK.” As of December 31, 2023, we had 1,761 record shareholders, including the Wealth Management division of FIB as trustee for 306,734 shares of common stock held on behalf of 447 individual participants in the Savings and Profit Sharing Plan for Employees of First Interstate BancSystem, Inc., or the Savings Plan. 32 Table of Conten ts Dividends It is our policy to pay a quarterly dividend to all common shareholders.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The Company’s common stock is listed on the NASDAQ Global Select Market under the symbol “FIBK.” As of December 31, 2024, we had 1,654 record shareholders, including the Wealth Management division of FIB as trustee for 252,520 shares of common stock held on behalf of 390 individual participants in the Savings and Profit Sharing Plan for Employees of First Interstate BancSystem, Inc., or the Savings Plan.
Removed
Index 12/31/18 12/31/19 12/31/20 12/31/21 12/31/22 12/31/23 First Interstate BancSystem, Inc. $ 100.00 $ 118.20 $ 121.98 $ 126.35 $ 125.36 $ 106.82 NASDAQ Composite 100.00 136.69 198.10 242.03 163.28 236.17 KBW NASDAQ Bank Index 100.00 136.13 122.09 168.88 132.75 131.57 KBW NASDAQ Regional Banking Index 100.00 123.81 113.03 154.45 143.75 143.17
Added
Index 12/31/19 12/31/20 12/31/21 12/31/22 12/31/23 12/31/24 First Interstate BancSystem, Inc. $ 100.00 $ 103.20 $ 106.90 $ 106.06 $ 90.37 $ 102.07 NASDAQ Composite 100.00 144.92 177.06 119.45 172.77 223.87 KBW NASDAQ Bank Index 100.00 89.69 124.06 97.52 96.65 132.60 KBW NASDAQ Regional Banking Index 100.00 91.29 124.74 116.10 115.64 130.90

Item 7. Management's Discussion & Analysis

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

159 edited+48 added−61 removed65 unchanged
Biggest changeTreasury securities Maturing within one year $ — $ 299.7 3.31 % 2.17 % Maturing in one to five years 871.2 349.5 3.86 2.00 Maturing in five to ten years 200.6 — — — Mark-to-market adjustments on securities available-for-sale (32.4) (25.5) (0.28) NA Total 1,039.4 623.7 6.89 2.08 U.S. government agency securities Maturing within one year 0.6 0.6 0.01 3.17 Maturing in one to five years 163.5 176.2 1.95 2.12 Maturing in five to ten years 400.2 353.8 3.91 2.27 Maturing after ten years 3.6 3.3 0.04 5.57 Mark-to-market adjustments on securities available-for-sale (17.3) (10.9) (0.12) NA Total 550.6 523.0 5.79 2.25 Mortgage-backed securities Maturing within one year 24.4 44.9 0.50 2.98 Maturing in one to five years 908.1 684.3 7.55 2.62 Maturing in five to ten years 1,312.6 1,115.7 12.33 2.16 Maturing after ten years 5,149.4 4,613.0 50.98 2.30 Mark-to-market adjustments on securities available-for-sale (462.7) (366.4) (4.05) NA Total 6,931.8 6,091.5 67.31 2.31 Collateralized loan obligation securities Maturing in five to ten years 204.0 180.6 2.00 5.81 Maturing after ten years 941.2 941.2 10.40 6.01 Mark-to-market adjustments on securities available-for-sale (33.6) (2.2) (0.02) NA Total 1,111.6 1,119.6 12.38 5.98 Municipal securities Maturing within one year 10.5 4.0 0.04 2.75 Maturing in one to five years 56.5 41.5 0.46 3.02 Maturing in five to ten years 116.0 159.5 1.76 1.68 Maturing after ten years 312.4 230.9 2.55 1.88 Mark-to-market adjustments on securities available-for-sale (50.7) (36.9) (0.41) NA Total 444.7 399.0 4.40 1.92 Corporate securities Maturing within one year 15.8 — — — Maturing in one to five years 87.2 99.6 1.10 2.62 Maturing in five to ten years 249.4 218.2 2.41 3.04 Mark-to-market adjustments on securities available-for-sale (32.6) (25.2) (0.28) NA Total 319.8 292.6 3.23 2.91 Total $ 10,397.9 $ 9,049.4 100.00 % 2.73 % Maturities of the 2023 securities noted above reflect $1,603.3 million of investment securities at their final maturities, which have call provisions within the next year.
Biggest changeTreasury securities Maturing within one year $ 299.7 $ 99.8 1.29 % 3.54 % Maturing in one to five years 349.5 245.0 3.16 1.40 Mark-to-market adjustments on securities available-for-sale (25.5) (18.1) (0.23) NA Total 623.7 326.7 4.22 2.02 U.S. government agency securities Maturing within one year 0.6 5.9 0.08 2.42 Maturing in one to five years 176.2 303.0 3.91 2.37 Maturing in five to ten years 353.8 233.1 3.01 2.05 Maturing after ten years 3.3 152.3 1.97 2.70 Mark-to-market adjustments on securities available-for-sale (10.9) (10.8) (0.14) NA Total 523.0 683.5 8.83 2.23 Mortgage-backed securities Maturing within one year 44.9 53.3 0.69 2.49 Maturing in one to five years 684.3 1,023.8 13.22 2.65 Maturing in five to ten years 1,115.7 627.4 8.10 1.97 Maturing after ten years 4,613.0 3,914.0 50.54 2.30 Mark-to-market adjustments on securities available-for-sale (366.4) (333.4) (4.30) NA Total 6,091.5 5,285.1 68.25 2.34 Collateralized loan obligation securities Maturing in five to ten years 180.6 376.4 4.86 5.97 Maturing after ten years 941.2 394.3 5.09 5.96 Mark-to-market adjustments on securities available-for-sale (2.2) 1.3 0.02 NA Total 1,119.6 772.0 9.97 5.97 Municipal securities Maturing within one year 4.0 1.9 0.02 2.59 Maturing in one to five years 41.5 45.6 0.59 2.86 Maturing in five to ten years 159.5 221.4 2.86 1.71 Maturing after ten years 230.9 159.4 2.06 1.94 Mark-to-market adjustments on securities available-for-sale (36.9) (40.0) (0.52) NA Total 399.0 388.3 5.01 1.92 Corporate securities Maturing within one year — 5.0 0.06 2.93 Maturing in one to five years 99.6 157.2 2.03 3.06 Maturing in five to ten years 218.2 144.4 1.86 3.00 Mark-to-market adjustments on securities available-for-sale (25.2) (17.6) (0.23) NA Total 292.6 289.0 3.72 3.03 Total $ 9,049.4 $ 7,744.6 100.00 % 2.67 % Maturities of the 2024 securities noted above reflect $1,292.9 million of investment securities at their final maturities, which have call provisions within the next year.
We analyze these ratios and financial trends against both our own historical levels as well as and the financial condition and performance of comparable banking institutions in our region and nationally.
We analyze these ratios and financial trends against both our own historical levels as well as the financial condition and performance of comparable banking institutions in our region and nationally.
Changes in interest rate spread, which is the difference between interest earned on assets and interest paid on liabilities, has the most significant impact on net interest income.
Changes in interest rate spread, which is the difference between interest earned on assets and interest paid on liabilities, has the most significant impact on net interest income.
For additional information regarding modifications to borrowers experiencing financial difficulty, see “Notes to Consolidated Financial Statements—Loans Held For Investment” included in financial statements included Part IV, Item 15 of this report. Allowance for Credit Losses The Company performs a quarterly assessment of the appropriateness of its allowance for credit losses in accordance with GAAP.
For additional information regarding modifications to borrowers experiencing financial difficulty, see “Notes to Consolidated Financial Statements—Loans Held For Investment” included in financial statements included Part IV, Item 15 of this report. Allowance for Credit Losses The Company performs a quarterly assessment of the appropriateness of its ACL in accordance with GAAP.
Management continuously monitors our liquidity position and adjustments are made to the balance between sources and uses of funds as deemed appropriate. Our management is not aware of any events that are reasonably likely to have a material adverse effect on our liquidity, capital resources, or operations.
Company management continuously monitors our liquidity position and adjustments are made to the balance between sources and uses of funds as deemed appropriate. Our management is not aware of any events that are reasonably likely to have a material adverse effect on our liquidity, capital resources, or operations.
Other sources of liquidity include the sale of loans, the ability to acquire additional national market funds through non-core deposits, the issuance of additional collateralized borrowings such as FHLB advances, the issuance of debt securities, additional borrowings through the Federal Reserve’s discount window or BTFP, and the issuance of preferred or common securities.
Other sources of liquidity include the sale of loans, the ability to acquire additional national market funds through non-core deposits, the issuance of additional collateralized borrowings such as FHLB advances, the issuance of debt securities, additional borrowings through the Federal Reserve’s discount window, and the issuance of preferred or common securities.
Our portfolio principally comprises U.S treasury notes, U.S. government agency, U.S. government agency commercial mortgage-backed securities, U.S. government residential mortgage-backed securities, collateralized mortgage obligations, corporate securities, and tax-exempt securities. Debt securities rated in the highest category by nationally recognized rating agencies and debt securities backed by the U.S.
Our portfolio principally comprises U.S. treasury notes, U.S. government agency, U.S. government agency commercial mortgage-backed securities, U.S. government residential mortgage-backed securities, U.S. government agency collateralized mortgage obligations, corporate securities, and tax-exempt municipal securities. Debt securities rated in the highest category by nationally recognized rating agencies and debt securities backed by the U.S.
Fluctuations in effective federal income tax rates are primarily due to an increase in pre-tax income, a decrease in net tax exempt interest income, a decrease in tax credits, and an increase in the non-deductible portion of FDIC premium expense, which was partially offset by an increase in the cash surrender value of company owned life insurance, and a decrease in non-deductible acquisition costs.
Fluctuations in effective federal income tax rates are primarily due to a decrease in pre-tax income, a decrease in net tax exempt interest income, and an increase in tax credits and the non-deductible portion of FDIC premium expense, which was partially offset by an increase in the cash surrender value of company owned life insurance.
As of December 31, 2023, the Company had subordinated debentures held by subsidiary trusts of $163.1 million due in more than one year. For additional information concerning the subordinated debentures, see “Notes to Consolidated Financial Statements—Subordinated Debentures Held by Subsidiary Trusts” included in Part IV, Item 15 of this report.
As of December 31, 2024, the Company had subordinated debentures held by subsidiary trusts of $163.1 million due in more than one year. For additional information concerning the subordinated debentures, see “Notes to Consolidated Financial Statements—Subordinated Debentures Held by Subsidiary Trusts” included in Part IV, Item 15 of this report.
State income tax applies primarily to pretax earnings generated within Arizona, Colorado, Idaho, Iowa, Kansas, Minnesota, Missouri, Montana, Nebraska, North Dakota, Oregon, and South Dakota. Our effective state tax rate was 5.1% for the year ended December 31, 2023 compared to 5.2% for the year ended December 31, 2022.
State income tax applies primarily to pretax earnings generated within Arizona, Colorado, Idaho, Iowa, Kansas, Minnesota, Missouri, Montana, Nebraska, North Dakota, Oregon, and South Dakota. Our effective state tax rate was 5.2% for the year ended December 31, 2024 compared to 5.1% for the year ended December 31, 2023.
Management monitors trends in the loan portfolio, including changes in the levels of past due, internally classified, and non-performing loans. Changes in the estimates and assumptions are possible and may have a material impact on our allowance, and as a result, on our consolidated financial statements or results of operations.
Management monitors trends in the loan portfolio, including changes in the levels of past due, internally classified, and non-performing loans. Changes in the estimates and assumptions are possible and may have a material impact on our ACL, and as a result, on our consolidated financial statements or results of operations.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K for the year ended December 31, 2023.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K for the year ended December 31, 2024.
The Company adjusts interest income and average rates for tax exempt loans and securities to a FTE basis utilizing a 21.00%, 26.25%, and 21.00% tax rate for 2023, 2022, and 2021, respectively. (3) Non-GAAP financial measure - see Non-GAAP Financial Measures included herein for a reconciliation to GAAP measures.
The Company adjusts interest income and average rates for tax exempt loans and securities to a FTE basis utilizing a 21.00%, 21.00%, and 26.25% tax rate for 2024, 2023, and 2022, respectively. (3) Non-GAAP financial measure - see Non-GAAP Financial Measures included herein for a reconciliation to GAAP measures.
Federal Reserve Bank (FRB) and Federal Home Loan Bank (FHLB) Stock The Bank is a member of the FHLB of Minneapolis and the FRB system. Members are required to own a certain amount of stock based on the level of borrowings and other factors, and may invest in additional amounts.
Federal Reserve Bank (FRB) and Federal Home Loan Bank (FHLB) Stock The Bank is a member of the FHLB of Des Moines and the Minneapolis FRB system. Members are required to own a certain amount of stock based on the level of borrowings and other factors, and may invest in additional amounts.
See the discussion under “Critical Accounting Estimates and Significant Accounting Policies — Allowance for Credit Losses” above. The allowance for credit losses is increased by provisions charged against earnings and net recoveries of charged-off loans and is reduced by negative provisions credited to earnings and net loan charge-offs.
See the discussion under “Critical Accounting Estimates and Significant Accounting Policies — Allowance for Credit Losses” above. The ACL is increased by provisions charged against earnings and net recoveries of charged-off loans and is reduced by negative provisions credited to earnings and net loan charge-offs.
Recent Trends and Developments Acquisitions During the past few years, we have increased our community banking footprint across the Rocky Mountain and Pacific Northwest regions and have expanded into the Midwest and Southwest regions, in large part due to our acquisition activity.
Recent Trends and Developments Acquisition Strategy During the past few years, we have increased our community banking footprint across the Rocky Mountain and Pacific Northwest regions and have expanded into the Midwest and Southwest regions, in large part due to our acquisition activity.
(2) Collective valuation allowances based on loan loss experience and future expectations for similar loans with similar characteristics and trends. The Company applies open pool methodologies for all portfolio segments. The open pool methodology averages quarterly loss rates by modeling segment, calculated as quarter-to-date net charge off balance divided by the end of period balance.
(2) A collective valuation allowance based on loan loss experience and future expectations for similar loans with similar characteristics and trends. The Company applies open pool methodologies for all portfolio segments. The open pool methodology averages quarterly loss rates by modeling segment, calculated as quarter-to-date net charge off balance divided by the end of period balance.
Differences between the established amortized cost basis, and the unpaid principal balance of the asset, is considered to be a non-credit discount/premium and is accreted/amortized into interest income using the level yield interest method. Subsequent changes to the allowance for credit losses are recorded through provision expense using the same methodology as other loans held for investment.
Differences between the established amortized cost basis, and the unpaid principal balance of the asset, is considered to be a non-credit discount/premium and is accreted/amortized into interest income using the level yield interest method. Subsequent changes to the ACL are recorded through provision expense using the same methodology as other loans held for investment.
As of December 31, 2023, there were no significant concentrations of investments (greater than 10% of stockholders’ equity) in any individual security issuer, except for U.S. government or agency-backed securities.
As of December 31, 2024, there were no significant concentrations of investments (greater than 10% of stockholders’ equity) in any individual security issuer, except for U.S. government or agency-backed securities.
Additionally, the Company expects the timing of charge-offs will vary between quarters and will not necessarily correspond proportionally to changes in the allowance for credit losses or changes in non-performing or collateral-dependent loans due to timing differences among the initial identification of a collateral-dependent loan, recording of a specific valuation allowance for collateral-dependent loans, and any resulting charge-off of uncollectible principal.
Additionally, the Company expects the timing of charge-offs will vary between quarters and will not necessarily correspond proportionally to changes in the ACL or changes in non-performing or collateral-dependent loans due to timing differences among the initial identification of a collateral-dependent loan, recording of a specific valuation allowance for collateral-dependent loans, and any resulting charge-off of uncollectible principal.
The allowance for credit losses is measured on a collective (pool) basis when similar risk characteristics exist. For loans acquired in a business combination with no significant evidence of credit deterioration since origination, the Company estimates an allowance for credit losses of the loans determined using the same methodology as other loans held for investment.
The ACL is measured on a collective (pool) basis when similar risk characteristics exist. For loans acquired in a business combination with no significant evidence of credit deterioration since origination, the Company estimates an ACL of the acquired loans determined using the same methodology as other loans held for investment.
We seek to increase our non-interest income over time, and we evaluate our non-interest income relative to the trends of the individual types of non-interest income in view of changes in the regulatory environment and prevailing market conditions. We manage our non-interest expenses in consideration of growth opportunities and our community banking model that emphasizes client service and responsiveness.
We seek to increase our noninterest income over time, and we evaluate our noninterest income relative to the trends of the individual types of noninterest income in view of changes in the regulatory environment and prevailing market conditions. We manage our noninterest expenses in consideration of growth opportunities and our community banking model that emphasizes client service and responsiveness.
The allowance for credit losses is maintained at an amount we believe to be sufficient to provide for estimated losses expected over the life of the loans at each balance sheet date resulting from management’s assessment of the quantitative and qualitative factors utilized to determine the allowance for credit losses.
The ACL is maintained at an amount we believe to be sufficient to provide for estimated losses expected over the life of the loans at each balance sheet date resulting from management’s assessment of the quantitative and qualitative factors utilized to determine the ACL.
The unadjusted loss rates then apply for the remaining life of the loan. Estimated losses are totaled and aggregated to the segment level. (3) General valuation allowances determined based on asset quality trends, industry concentrations, environmental risks, changes in portfolio composition, and other qualitative risk factors, both internal and external to the Company.
The unadjusted loss rates then apply for the remaining life of the loan. Estimated losses are totaled and aggregated to the segment level. (3) A qualitative valuation allowance determined based on asset quality trends, industry concentrations, environmental risks, changes in portfolio composition, and other qualitative risk factors, both internal and external to the Company.
These securities are carried at cost. 48 Table of Conten ts Loans Held for Sale Loans held for sale consist of residential mortgage loans pending sale to investors in the secondary market and loans reclassified from loans held for investment due to management’s intent and decision to sell the loans.
These securities are carried at cost. 48 Table of Contents Loans Held for Sale Loans held for sale consist of residential mortgage loans pending sale to investors in the secondary market and loans reclassified from loans held for investment due to management’s intent and decision to sell the loans.
Results of Operations The following discussion and analysis is intended to provide detail about the results of operations by comparing the years ended December 31, 2023 to December 31, 2022.
Results of Operations The following discussion and analysis is intended to provide detail about the results of operations by comparing the years ended December 31, 2024 to December 31, 2023.
The following table sets forth the carrying value as of December 31, 2023 and 2022, and the percentage of total investment securities and weighted average yields on investment securities as of December 31, 2023.
The following table sets forth the carrying value as of December 31, 2024 and 2023, and the percentage of total investment securities and weighted average yields on investment securities as of December 31, 2024.
Analysis of Interest Changes Due To Volume and Rates Year Ended December 31, 2023 compared with December 31, 2022 Year Ended December 31, 2022 compared with December 31, 2021 Year Ended December 31, 2021 compared with December 31, 2020 (Dollars in millions) Volume Rate Net Volume Rate Net Volume Rate Net Interest earning assets: Loans (1) $ 71.0 $ 117.8 $ 188.8 $ 308.6 $ 57.4 $ 366.0 $ (1.7) $ (21.8) $ (23.5) Investment Securities (1) (13.2) 67.3 54.1 61.9 83.1 145.0 42.8 (35.7) 7.1 Investment in FHLB and FRB Stock 3.7 3.9 7.6 1.2 2.6 3.8 — 0.2 0.2 Interest bearing deposits in banks (6.9) 13.9 7.0 (0.7) 6.8 6.1 2.3 (3.8) (1.5) Total change 54.6 202.9 257.5 371.0 149.9 520.9 43.4 (61.1) (17.7) Interest bearing liabilities: Demand deposits (2.1) 33.6 31.5 1.2 12.7 13.9 0.5 (0.9) (0.4) Savings deposits (2.1) 99.8 97.7 1.2 21.8 23.0 0.5 (1.4) (0.9) Time deposits 5.6 59.5 65.1 2.7 0.6 3.3 (2.4) (6.3) (8.7) Repurchase agreements (0.4) 4.3 3.9 — 2.1 2.1 0.3 (0.8) (0.5) Other borrowed funds 78.3 40.2 118.5 — 15.3 15.3 — — — Long-term debt (0.1) (0.1) (0.2) 0.5 (0.5) — 2.2 (0.8) 1.4 Subordinated debentures held by subsidiary trusts 0.3 5.6 5.9 2.2 1.8 4.0 — (0.2) (0.2) Total change 79.5 242.9 322.4 7.8 53.8 61.6 1.1 (10.4) (9.3) Increase in FTE net interest income (1) $ (24.9) $ (40.0) $ (64.9) $ 363.2 $ 96.1 $ 459.3 $ 42.3 $ (50.7) $ (8.4) (1) Interest income and average rates for tax exempt loans and securities are presented on a FTE basis.
Analysis of Interest Changes Due To Volume and Rates Year Ended December 31, 2024 compared with December 31, 2023 Year Ended December 31, 2023 compared with December 31, 2022 Year Ended December 31, 2022 compared with December 31, 2021 (Dollars in millions) Volume Rate Net Volume Rate Net Volume Rate Net Interest earning assets: Loans (1) $ (6.3) $ 48.5 $ 42.2 $ 71.0 $ 117.8 $ 188.8 $ 308.6 $ 57.4 $ 366.0 Investment Securities (1) (26.9) 0.8 (26.1) (13.2) 67.3 54.1 61.9 83.1 145.0 Investment in FHLB and FRB Stock (1.7) 1.1 (0.6) 3.7 3.9 7.6 1.2 2.6 3.8 Interest bearing deposits in banks 6.2 0.3 6.5 (6.9) 13.9 7.0 (0.7) 6.8 6.1 Total change (28.7) 50.7 22.0 54.6 202.9 257.5 371.0 149.9 520.9 Interest bearing liabilities: Demand deposits (2.4) 13.0 10.6 (2.1) 33.6 31.5 1.2 12.7 13.9 Savings deposits (3.1) 42.1 39.0 (2.1) 99.8 97.7 1.2 21.8 23.0 Time deposits 6.0 27.7 33.7 5.6 59.5 65.1 2.7 0.6 3.3 Repurchase agreements (1.7) 2.0 0.3 (0.4) 4.3 3.9 — 2.1 2.1 Other borrowed funds (4.3) (6.1) (10.4) 78.3 40.2 118.5 — 15.3 15.3 Long-term debt 6.4 (0.4) 6.0 (0.1) (0.1) (0.2) 0.5 (0.5) — Subordinated debentures held by subsidiary trusts — 0.4 0.4 0.3 5.6 5.9 2.2 1.8 4.0 Total change 0.9 78.7 79.6 79.5 242.9 322.4 7.8 53.8 61.6 Increase in FTE net interest income (1) $ (29.6) $ (28.0) $ (57.6) $ (24.9) $ (40.0) $ (64.9) $ 363.2 $ 96.1 $ 459.3 (1) Interest income and average rates for tax exempt loans and securities are presented on a FTE basis.
Results of Operations Principal tools we use to manage and evaluate the results of our operations include tracking performance through metrics such as return on average equity, return on average assets, efficiency ratio, non-interest expense as a percent of total average assets, earnings per share, total shareholder return, net interest income, non-interest income, non-interest expense, and net income.
Results of Operations Principal tools we use to manage and evaluate the results of our operations include tracking performance through metrics such as return on average equity, return on average assets, efficiency ratio, noninterest expense as a percent of total average assets, earnings per share, credit quality metrics, total shareholder return, net interest income, noninterest income, noninterest expense, and net income.
Commercial real estate loans include loans for property and improvements used commercially by the borrower or for lease to others for the production of goods or services. Approximately 34.4% and 37.0% of our commercial real estate loans were owner occupied as of December 31, 2023 and 2022, respectively. Construction loans .
Commercial real estate loans include loans for property and improvements used commercially by the borrower or for lease to others for the production of goods or services. Approximately 33.0% and 34.4% of our commercial real estate loans were owner occupied as of December 31, 2024 and 2023, respectively. Construction loans .
An allowance for credit loss is recorded for the expected credit losses over the life of the loan. Subsequent changes to the allowance for credit losses are recorded through provision expense using the same methodology as other loans held for investment.
An ACL is recorded for the expected credit losses over the life of the loan. Subsequent changes to the ACL are recorded through provision expense using the same methodology as other loans held for investment.
As of December 31, 2023, we had 304 banking offices in operation, including branches and detached drive-up facilities, in communities across Arizona, Colorado, Idaho, Iowa, Kansas, Minnesota, Missouri, Montana, Nebraska, North Dakota, Oregon, South Dakota, Washington, and Wyoming.
As of December 31, 2024, we had 300 banking offices in operation, including branches and detached drive-up facilities, in communities across Arizona, Colorado, Idaho, Iowa, Kansas, Minnesota, Missouri, Montana, Nebraska, North Dakota, Oregon, South Dakota, Washington, and Wyoming.
An allowance for credit losses is recognized by estimating the expected credit losses of the purchased asset and recording an adjustment to the acquisition date fair value to establish the initial amortized cost basis of the asset.
An ACL is recognized by estimating the expected credit losses of the purchased asset and recording an adjustment to the acquisition date fair value to establish the initial amortized cost basis of the asset.
See “Notes to Consolidated Financial Statements—Summary of Significant Accounting Policies” for a description of the methodology used to determine the allowance for credit losses and our policy pertaining to acquired loans. See “Notes to Consolidated Financial Statements—Loans” for a discussion on the factors driving changes in the amount of the allowance for credit losses.
See “Notes to Consolidated Financial Statements—Summary of Significant Accounting Policies” for a description of the methodology used to determine the ACL and our policy pertaining to acquired loans. See “Notes to Consolidated Financial Statements—Loans” for a discussion on the factors driving changes in the amount of the ACL.
For additional details in regard to the Company’s deposits see “Notes to Consolidated Financial Statements—Deposits” included in Part IV, Item 15 of this report. As of December 31, 2023, the Company had securities sold under repurchase agreements of $782.7 million due in one year or less as the agreements with our client counterparties mature on the next banking day.
For additional details in regard to the Company’s deposits see “Notes to Consolidated Financial Statements—Deposits” included in Part IV, Item 15 of this report. As of December 31, 2024, the Company had securities sold under repurchase agreements of $523.9 million due in one year or less as the agreements with our client counterparties mature on the next banking day.
(4) Calculated by dividing total interest on interest-bearing liabilities by the sum of total interest-bearing liabilities plus non-interest-bearing deposits. 42 Table of Conten ts The table below sets forth, for the periods indicated, a summary of the changes in interest income and interest expense resulting from estimated changes in average asset and liability balances (volume) and estimated changes in average interest rates (rate).
(4) Calculated by dividing total interest on interest-bearing liabilities by the sum of total interest-bearing liabilities plus noninterest-bearing deposits. 42 Table of Contents The table below sets forth, for the periods indicated, a summary of the changes in interest income and interest expense resulting from estimated changes in average asset and liability balances (volume) and estimated changes in average interest rates (rate).
For additional information concerning securities sold under repurchase agreements, see “—Securities Sold Under Repurchase Agreements” included herein. 46 Table of Conten ts Mortgage-backed securities and, to a limited extent other securities, have uncertain cash flow characteristics that present additional interest rate risk in the form of prepayment or extension risk primarily caused by changes in market interest rates.
For additional information concerning securities sold under repurchase agreements, see “Securities Sold Under Repurchase Agreements” included herein. Mortgage-backed securities and, to a limited extent other securities, have uncertain cash flow characteristics that present additional interest rate risk in the form of prepayment or extension risk primarily caused by changes in market interest rates.
Weighted-average yields have been computed on a fully taxable-equivalent basis using a tax rate of 21%. 47 Table of Conten ts December 31, 2022 December 31, 2023 Securities Maturities and Yield (Dollars in millions) Carrying Value Carrying Value % of Total Investment Securities Weighted Average FTE Yield U.S.
Weighted-average yields have been computed on a fully taxable-equivalent basis using a tax rate of 21%. 47 Table of Contents December 31, 2023 December 31, 2024 Securities Maturities and Yield (Dollars in millions) Carrying Value Carrying Value % of Total Investment Securities Weighted Average FTE Yield U.S.
Loan charge-offs do not directly correspond with the receipt of independent appraisals or the use of observable market data if the collateral value is determined to be sufficient to repay the principal balance of the loan. If a collateral-dependent loan is adequately collateralized, a specific valuation allowance for credit losses is not recorded.
Loan charge-offs do not directly correspond with the receipt of independent appraisals or the use of observable market data if the collateral value is determined to be sufficient to repay the principal balance of the loan. If a collateral-dependent loan is adequately collateralized, a specific valuation ACL is not recorded.
We seek to maintain a diverse and high-quality loan portfolio and evaluate our asset quality on factors that include the allocation of our loans among loan types, credit exposure to any single borrower or industry type, non-performing assets as a percentage of loans held for investment and OREO, and loan charge-offs as a percentage of average loans.
We seek to maintain a diverse and high-quality loan portfolio and evaluate our asset quality on factors that include the allocation of our loans among loan types, credit exposure to any single borrower or industry type, non-performing assets as a percentage of loans held for investment and other real estate owned (“OREO”), and loan charge-offs as a percentage of average loans.
Approximately 74.2% and 77.9% of our tax-exempt securities were general obligation securities as of December 31, 2023 and 2022, respectively, of which 31.1% and 38.0%, respectively, were issued by political subdivisions or agencies within the states we operate, including Arizona, Colorado, Idaho, Iowa, Kansas, Minnesota, Missouri, Montana, Nebraska, North Dakota, Oregon, South Dakota, Washington, and Wyoming.
Approximately 74.0% and 74.2% of our tax-exempt securities were general obligation securities as of December 31, 2024 and 2023, respectively, of which 29.8% and 31.1%, respectively, were issued by political subdivisions or agencies within the states we operate, including Arizona, Colorado, Idaho, Iowa, Kansas, Minnesota, Missouri, Montana, Nebraska, North Dakota, Oregon, South Dakota, Washington, and Wyoming.
Financial Condition We manage and evaluate our financial condition by focusing on liquidity, the diversification and quality of our loans, the adequacy of our allowance for credit losses, the diversification and terms of our deposits, short-term borrowings and other funding sources, the re-pricing characteristics and maturities of our assets and liabilities, including potential interest rate exposure, and the adequacy of our capital levels.
Financial Condition We manage and evaluate our financial condition by focusing on liquidity, the diversification and quality of our loans, the adequacy of our ACL, the diversification and terms of our deposits, the level of our short-term borrowings and other funding sources, the re-pricing characteristics and maturities of our assets and liabilities, including potential interest rate exposure, and the adequacy of our capital levels.
As of December 31, 2023, the Company did not have a repurchase program in effect. 56 Table of Conten ts For additional information regarding the repurchases, see “Notes to Consolidated Financial Statements—Capital Stock and Dividend Restrictions” included in Part IV, Item 15 of this report.
As of December 31, 2024, the Company did not have a repurchase program in effect. For additional information regarding the repurchases, see “Notes to Consolidated Financial Statements—Capital Stock and Dividend Restrictions” included in Part IV, Item 15 of this report.
The following table sets forth information regarding non-performing assets as of the dates indicated: Non-Performing Assets (Dollars in millions) As of December 31, 2023 2022 2021 Non-performing loans: Non-accrual loans $ 106.4 $ 59.2 $ 24.9 Accruing loans past due 90 days or more 4.9 6.4 2.8 Total non-performing loans 111.3 65.6 27.7 OREO 16.5 12.7 2.0 Total non-performing assets $ 127.8 $ 78.3 $ 29.7 Non-accrual loans to loans held for investment 0.58 % 0.33 % 0.27 % Non-performing assets to loans held for investment and OREO 0.70 0.43 0.32 Non-performing assets to total assets 0.42 0.24 0.15 Allowance for credit losses to non-performing loans 204.58 335.52 441.52 For additional information regarding non-performing loans, see “Notes to Consolidated Financial Statements—Loans Held For Investment” included in financial statements included Part IV, Item 15 of this report.
The following table sets forth information regarding non-performing assets as of the dates indicated: Non-Performing Assets (Dollars in millions) As of December 31, 2024 2023 2022 Non-performing loans: Non-accrual loans $ 138.3 $ 106.4 $ 59.2 Accruing loans past due 90 days or more 3.0 4.9 6.4 Total non-performing loans 141.3 111.3 65.6 OREO 4.3 16.5 12.7 Total non-performing assets $ 145.6 $ 127.8 $ 78.3 Non-accrual loans to loans held for investment 0.78 % 0.58 % 0.33 % Non-performing assets to loans held for investment and OREO 0.82 0.70 0.43 Non-performing assets to total assets 0.50 0.42 0.24 Allowance for credit losses to non-performing loans 144.44 204.58 335.52 For additional information regarding non-performing loans, see “Notes to Consolidated Financial Statements—Loans Held For Investment” included in financial statements included Part IV, Item 15 of this report.
For additional information concerning long-term debt, see “Notes to Consolidated Financial Statements—Long Term Debt and Other Borrowed Funds” included in Part IV, Item 15 of this report. 57 Table of Conten ts The Company guarantees the distribution and payment for redemption or liquidation of capital trust preferred securities issued by our wholly owned subsidiary business trusts to the extent of funds held by the trusts.
For more information regarding the Notes, see “Notes to Consolidated Financial Statements—Long Term Debt and Other Borrowed Funds” included in Part IV, Item 15 of this report. 57 Table of Contents The Company guarantees the distribution and payment for redemption or liquidation of capital trust preferred securities issued by our wholly owned subsidiary business trusts to the extent of funds held by the trusts.
The Company also has an unused line of credit with the FRB for borrowings up to $3,039.5 million secured by government and agency backed securities and a blanket pledge of agricultural and commercial loans and has an unused $50.0 million revolving line of credit with another third party.
The Company also has an unused line of credit with the FRB for borrowings up to $1,813.6 million secured by government and agency backed securities and a blanket pledge of agricultural and commercial loans and has an unused $50.0 million revolving line of credit with another third party.
Based on current market interest rates, management expects approximately $1.0 million of these securities will be called in 2024. For additional information concerning investment securities, see “Notes to Consolidated Financial Statements — Investment Securities” included in Part IV, Item 15.
Based on current market interest rates, management expects approximately $12.5 million of these securities will be called in 2025. For additional information concerning investment securities, see “Notes to Consolidated Financial Statements — Investment Securities” included in Part IV, Item 15.
Loans, or portions thereof, are charged-off against the allowance for credit losses when management believes the collectability of the principal is unlikely, or, with respect to consumer installment loans, according to an established delinquency schedule.
Loans, or portions thereof, are charged-off against the ACL when management believes the collectability of the principal is unlikely, or, with respect to consumer installment loans, according to an established delinquency schedule.
Generally, loans are charged-off when (1) there has been no material principal reduction within the previous 90 days and there is no pending sale of collateral or other assets, (2) there is no significant or pending event which will result in principal reduction within the upcoming 90 days, (3) it is clear that we will not be able to collect all or a portion of the loan, (4) payments on the loan are sporadic, will result in an excessive amortization, or are not consistent with the collateral held, or (5) foreclosure or repossession actions are pending.
Generally, loans are charged-off when (1) there has been no material principal reduction within the previous 90 days and there is no pending sale of collateral or other assets, (2) there is no significant or pending event which will result in principal reduction within the upcoming 90 days, (3) it is clear that we will not be able to collect all or a portion of the loan, or (4) foreclosure or repossession actions are pending.
The special assessment will be collected on a quarterly basis for eight quarters beginning with the first quarter of 2024, although the FDIC retained the flexibility to extend the special assessment period as well as impose a one-time shortfall assessment to collect any remaining amount to fully recover the losses to the DIF.
The special assessment is being collected on a quarterly basis for eight quarters which began with the first quarter of 2024, although the FDIC retained the flexibility to extend the special assessment period as well as impose a one-time shortfall assessment to collect any remaining amount to fully recover the losses to the DIF.
OREO properties are appraised every 18-24 months unless deterioration in local market conditions indicates the need to obtain new appraisals sooner. OREO properties are evaluated by management quarterly to determine if additional write-downs are appropriate or necessary based on current market conditions.
The fair values of OREO properties are estimated using appraisals and management estimates of current market conditions. OREO properties are appraised every 18-24 months unless deterioration in local market conditions indicates the need to obtain new appraisals sooner. OREO properties are evaluated by management quarterly to determine if additional write-downs are appropriate or necessary based on current market conditions.
As of December 31, 2023, the carrying value of our investments in non-agency mortgage-backed securities totaled $241.3 million. All other mortgage-backed securities included in the table below were issued by U.S. government entities and sponsored entities.
As of December 31, 2024, the carrying value of our investments in non-agency mortgage-backed securities totaled $218.1 million. All other mortgage-backed securities included in the table below were issued by U.S. government entities and sponsored entities.
For information regarding our allowance for credit losses, see “Financial Condition—Allowance for Credit Losses” included herein. Non-interest Income Non-interest income also contributes to our operating results with fee-based revenues such as payment services, mortgage banking and wealth management revenues, service charges on deposit accounts, and other service charges, commissions, and fees.
For information regarding our non-performing loans, see “Non-Performing Assets” included herein. For information regarding our ACL, see “Financial Condition—Allowance for Credit Losses” included herein. Noninterest Income Noninterest income also contributes to our operating results with fee-based revenues such as payment services, mortgage banking and wealth management revenues, service charges on deposit accounts, and other service charges, commissions, and fees.
As of December 31, 2023 and December 31, 2022, the Company held $223.2 million and $198.6 million, respectively, in equity securities in a combination of FRB and FHLB stocks, which are restricted nonmarketable securities acquired to meet regulatory requirements.
As of December 31, 2024 and December 31, 2023, the Company held $177.4 million and $223.2 million, respectively, in equity securities in a combination of FRB and FHLB stocks, which are restricted nonmarketable securities acquired to meet regulatory requirements.
A similar discussion and analysis comparing fiscal year 2022 to fiscal year ended December 31, 2021 may be found in Part II, Item 7, “Financial Condition” in our Annual Report on Form 10-K for the year ended December 31, 2022, which is incorporated herein by reference.
A similar discussion and analysis comparing fiscal year 2023 to fiscal year ended December 31, 2022 may be found in Part II, Item 7, “Financial Condition” in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 29, 2024, which is incorporated herein by reference.
The Company has future minimum rental commitments, exclusive of maintenance and operating costs, required under operating leases that have initial or remaining noncancelable lease terms in excess of one year at December 31, 2023 with $11.6 million due in one year or less and $39.0 million due in more than one year.
The Company has future minimum rental commitments, exclusive of maintenance and operating costs, required under operating leases that have initial or remaining noncancelable lease terms in excess of one year at December 31, 2024 with $11.5 million due in one year or less and $34.2 million due in more than one year.
Interest income on loans includes amortization of deferred loan fees net of deferred loan costs of $1.3 million, $7.5 million, and $40.6 million during 2023, 2022, and 2021, respectively.
Interest income on loans includes amortization of deferred loan fees net of deferred loan costs of $3.4 million, $1.3 million, and $7.5 million during 2024, 2023, and 2022, respectively.
As such, significant changes in collateral-dependent and non-performing loans do not necessarily correspond proportionally with changes in the specific valuation component of the allowance for credit losses.
As such, significant changes in collateral-dependent and non-performing loans do not necessarily correspond proportionally with changes in the specific valuation component of the ACL.
Performance Ratios As of or for the year ended December 31, 2023 2022 2021 Return on average assets 0.83 % 0.65 % 1.02 % Return on average common stockholders’ equity 8.17 6.34 9.73 Efficiency ratio (1) 62.50 67.83 61.94 Common stock dividend payout ratio (2) 75.81 86.73 52.56 (1) Our efficiency ratio definition conforms with the FDIC definition for all periods presented as non-interest expense less amortization of intangible assets divided by net interest income plus non-interest income.
Performance Ratios As of or for the year ended December 31, 2024 2023 2022 Return on average assets 0.75 % 0.83 % 0.65 % Return on average common stockholders’ equity 6.92 8.17 6.34 Efficiency ratio (1) 62.30 62.50 67.83 Common stock dividend payout ratio (2) 85.84 75.81 86.73 (1) Our efficiency ratio definition conforms with the FDIC definition for all periods presented as noninterest expense less amortization of intangible assets divided by net interest income plus noninterest income.
At December 31, 2023 and December 31, 2022, the Company had no allowance for credit losses on available-for-sale securities and an allowance for credit losses on held-to maturity securities classified as corporate and municipal securities of $0.8 million and $1.9 million, respectively.
At December 31, 2024 and December 31, 2023, the Company had no ACL on available-for-sale securities and an ACL on held-to maturity securities classified as corporate and municipal securities of $0.9 million and $0.8 million, respectively.
Regular cash dividends paid to common shareholders during 2023 amounted to approximately $195.1 million. On January 26, 2024, we declared a quarterly dividend to common stockholders of $0.47 per share, which was paid on February 19, 2024 to shareholders of record as of February 9, 2024.
Regular cash dividends paid to common shareholders during 2024 amounted to approximately $195.9 million. On January 28, 2025, we declared a quarterly dividend to common stockholders of $0.47 per share, which was paid on February 20, 2025 to shareholders of record as of February 10, 2025.
During 2023, the Company issued 54,414 shares of its common stock to directors for their annual service on the Company’s board of directors. The aggregate value of the shares issued to directors of $1.2 million is amortized into stock-based compensation expense in the accompanying consolidated statements of changes in stockholders’ equity over a one-year service-based period.
During 2024, the Company granted 43,514 restricted stock units of its common stock to directors for their annual service on the Company’s Board. The aggregate value of the units issued to directors of $1.2 million is amortized into stock-based compensation expense in the accompanying consolidated statements of changes in stockholders’ equity over a one-year service-based period.
The following table provides a summary of the allocation of the allowance for credit losses for specific loan categories as of the dates indicated.
The following table provides a summary of the allocation of the ACL for specific loan categories as of the dates indicated.
Finally, we seek to increase our net income and provide favorable shareholder returns over time, and we evaluate our net income relative to the performance of similar bank holding companies on factors that include return on average assets, return on average equity, total shareholder return, and growth in earnings.
We evaluate our noninterest expense on factors that include our noninterest expense relative to our average assets, our efficiency ratio, and the trends of the individual categories of noninterest expense. 38 Table of Contents Finally, we seek to increase our net income and provide favorable shareholder returns over time, and we evaluate our net income relative to the performance of similar bank holding companies on factors that include return on average assets, return on average equity, total shareholder return, and growth in earnings.
Investment Securities We manage our investment portfolio to obtain the highest yield possible while meeting our risk tolerance and liquidity guidelines and satisfying the pledging requirements for deposits of state and political subdivisions and securities sold under repurchase agreements.
Significant fluctuations in balance sheet accounts are discussed below. Investment Securities We manage our investment portfolio to obtain the highest yield possible while meeting our risk tolerance and liquidity guidelines and satisfying the pledging requirements for deposits of state and political subdivisions and securities sold under repurchase agreements.
As of December 31, 2023, investment securities with amortized costs and fair values of $3,858.6 million and $3,462.2 million, respectively, were pledged to secure public deposits and securities sold under repurchase agreements, as compared to $4,998.9 million and $4,432.0 million, respectively, as of December 31, 2022.
As of December 31, 2024, investment securities with amortized costs and fair values of $3,460.2 million and $3,092.6 million, respectively, were pledged to secure public deposits, derivatives, and securities sold under repurchase agreements, as compared to $3,858.6 million and $3,462.2 million, respectively, as of December 31, 2023.
The balance of the allowance for credit losses is based on internally assigned risk classifications of loans, historical loan loss rates, changes in the nature or tenure of the loan portfolio, overall portfolio quality, industry concentrations, delinquency trends, current environmental and economic factors, and the estimated impact of forecasted economic conditions on historical loan loss rates.
The balance of the ACL is based on historical loan loss rates, changes in the nature or tenure of the loan portfolio, overall portfolio quality, industry concentrations, delinquency trends, current environmental and economic factors, and the estimated impact of forecasted economic conditions on historical loan loss rates.
As of December 31, 2023, we had investment securities with fair values aggregating $8,284.5 million that had been in a continuous loss position more than 12 months. Gross unrealized losses on these securities totaled $803.4 million as of December 31, 2023, and were attributable to changes in interest rates.
As of December 31, 2024, we had investment securities with fair values aggregating $6,296.7 million that had been in a continuous loss position more than 12 months. Gross unrealized losses on these securities totaled $746.2 million as of December 31, 2024, and were attributable to changes in interest rates.
Stockholders’ equity increased $153.7 million, or 5.0%, to $3,227.5 million as of December 31, 2023 from $3,073.8 million as of December 31, 2022, due to changes in accumulated other comprehensive loss related to unrealized gains on available-for-sale securities and retention of earnings, which are partially offset by stock repurchases of vested restricted shares tendered in lieu of cash for payment of income tax withholding amounts by participants, a stock purchase pursuant to an agreement, and cash dividends paid.
Stockholders’ equity increased $76.5 million, or 2.4%, to $3,304.0 million as of December 31, 2024 from $3,227.5 million as of December 31, 2023, due to changes in accumulated other comprehensive loss related to unrealized gains on available-for-sale securities, stock-based compensation expense, and retention of earnings, which are partially offset by stock repurchases of vested restricted shares tendered in lieu of cash for payment of income tax withholding amounts by participants, and cash dividends paid.
Allowance for Credit Losses (Dollars in millions) As of and for the year ended December 31, 2023 2022 2021 Allowance for credit losses on loans: Beginning balance $ 220.1 $ 122.3 $ 144.3 ACL recorded on PCD loans — 59.5 — Provision for (reduction of) operating expense 31.1 68.4 (14.7) Charge-offs: Real estate Commercial 7.6 11.7 2.3 Construction 10.3 9.2 1.4 Residential 0.6 0.3 0.1 Agricultural — 0.2 0.7 Consumer 14.0 10.1 8.2 Commercial 3.4 8.1 3.7 Agricultural — 5.4 0.2 Total charge-offs 35.9 45.0 16.6 Recoveries: Real estate Commercial 4.2 3.0 0.1 Construction 0.1 0.5 0.6 Residential 0.1 0.8 0.3 Agricultural 0.3 0.4 — Consumer 4.7 5.0 4.5 Commercial 2.6 2.3 3.8 Agricultural 0.4 2.9 — Total recoveries 12.4 14.9 9.3 Net charge-offs 23.5 30.1 7.3 Ending balance $ 227.7 $ 220.1 $ 122.3 Allowance for off-balance sheet credit losses: Beginning balance $ 16.2 $ 3.8 $ 3.7 Provision for off-balance sheet credit losses 2.2 12.4 0.1 Ending balance $ 18.4 $ 16.2 $ 3.8 Allowance for credit losses on investment securities: Beginning balance $ 1.9 $ — $ — Provision for credit losses (1.1) 1.9 — Ending balance $ 0.8 $ 1.9 $ — Total allowance for credit losses $ 246.9 $ 238.2 $ 126.1 Total provision for (reduction of) credit losses 32.2 82.7 (14.6) Loans held for investment, net of deferred fees and costs 18,279.6 18,099.2 9,331.7 Average loans 18,299.6 16,802.2 9,788.9 Net charge-offs to average loans 0.13 % 0.18 % 0.07 % Allowance to non-accrual loans 214.00 371.79 491.16 Allowance to loans held for investment 1.25 1.22 1.31 54 Table of Conten ts The allowance for credit losses is allocated to loan categories based on the relative risk characteristics, asset classifications, and expected losses of the loan portfolio.
The following table sets forth information regarding our ACL as of the dates and for the periods indicated. 53 Table of Contents Allowance for Credit Losses (Dollars in millions) As of and for the year ended December 31, 2024 2023 2022 Allowance for credit losses on loans: Beginning balance $ 227.7 $ 220.1 $ 122.3 ACL recorded on PCD loans — — 59.5 Provision for (reduction of) operating expense 80.9 31.1 68.4 Charge-offs: Real estate Commercial 25.4 7.6 11.7 Construction 13.2 10.3 9.2 Residential 1.0 0.6 0.3 Agricultural — — 0.2 Consumer 15.4 14.0 10.1 Commercial 59.4 3.4 8.1 Agricultural 0.3 — 5.4 Total charge-offs 114.7 35.9 45.0 Recoveries: Real estate Commercial 0.8 4.2 3.0 Construction 0.1 0.1 0.5 Residential 0.2 0.1 0.8 Agricultural 0.1 0.3 0.4 Consumer 4.9 4.7 5.0 Commercial 3.8 2.6 2.3 Agricultural 0.3 0.4 2.9 Total recoveries 10.2 12.4 14.9 Net charge-offs 104.5 23.5 30.1 Ending balance $ 204.1 $ 227.7 $ 220.1 Allowance for off-balance sheet credit losses: Beginning balance $ 18.4 $ 16.2 $ 3.8 (Reduction of) provision for off-balance sheet credit losses (13.2) 2.2 12.4 Ending balance $ 5.2 $ 18.4 $ 16.2 Allowance for credit losses on investment securities: Beginning balance $ 0.8 $ 1.9 $ — Provision for (reduction of) credit losses 0.1 (1.1) 1.9 Ending balance $ 0.9 $ 0.8 $ 1.9 Total allowance for credit losses $ 210.2 $ 246.9 $ 238.2 Total provision for credit losses 67.8 32.2 82.7 Loans held for investment, net of deferred fees and costs 17,844.9 18,279.6 18,099.2 Average loans 18,182.0 18,299.6 16,802.2 Net charge-offs to average loans 0.57 % 0.13 % 0.18 % Allowance to non-accrual loans 147.58 214.00 371.79 Allowance to loans held for investment 1.14 1.25 1.22 The ACL is allocated to loan categories based on the relative risk characteristics, asset classifications, and expected losses of the loan portfolio.
Other factors like volume of loans, investment securities, and other interest earning assets, compared to the volume of interest-bearing deposits, short-term borrowings, and other indebtedness, also cause changes in our net interest income between periods.
Other factors like volume of loans, investment securities, and other interest earning assets, compared to the volume of interest-bearing deposits, short-term borrowings, and other indebtedness, also cause changes in our net interest income between periods. Noninterest-bearing sources of funds, such as demand deposits and stockholders’ equity, help support earning assets.
Other factors like volume of loans, investment securities, and other interest earning assets compared to the volume of interest-bearing deposits, short-term borrowings, and other indebtedness also cause changes in our net interest income between periods.
Other factors like volume of loans, investment securities, and other interest earning assets compared to the volume of interest-bearing deposits, short-term borrowings, and other indebtedness also cause changes in our net interest income between periods. Noninterest-bearing sources of funds, such as demand deposits and stockholders’ equity, help to support earning assets.
Loans are returned to accrual status when all principal and interest amounts contractually due are brought current and when, in the opinion of management, the loans are estimated to be fully collectible as to both principal and interest. 50 Table of Conten ts Other Real Estate Owned (OREO) .
Loans are returned to accrual status when all principal and interest amounts contractually due are brought current and when, in the opinion of management, the loans are estimated to be fully collectible as to both principal and interest.
For the Year Ended (In millions, except % and per share data) Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Net interest income (A) $ 878.8 $ 942.6 $ 489.2 FTE interest income 7.0 8.1 2.2 Net FTE interest income (B) 885.8 950.7 491.4 Average interest-earning assets (C) $ 28,183.4 $ 28,325.5 $ 17,212.4 Net interest margin (GAAP) (A) / (C) 3.12 3.33 2.84 Net interest margin (FTE) (Non-GAAP) (B) / (C) 3.14 3.36 2.85 Provision for (reduction of) Credit Losses Fluctuations in the provision for credit losses reflect management’s estimate of possible credit losses based upon the composition of our loan portfolio, evaluation of the borrowers’ ability to repay, collateral value underlying loans, loan loss trends, and estimated effects of current and forecasted economic conditions on our loans held for investment and investment securities portfolios.
For the Year Ended (In millions, except % and per share data) Dec 31, 2024 Dec 31, 2023 Dec 31, 2022 Net interest income (A) $ 821.6 $ 878.8 $ 942.6 FTE interest income 6.6 7.0 8.1 Net FTE interest income (B) 828.2 885.8 950.7 Average interest-earning assets (C) $ 27,231.4 $ 28,183.4 $ 28,325.5 Net interest margin (GAAP) (A) / (C) 3.02 3.12 3.33 Net interest margin (FTE) (Non-GAAP) (B) / (C) 3.04 3.14 3.36 Provision for (reduction of) Credit Losses Fluctuations in the provision for credit losses reflect charge-offs and recoveries as well as management’s estimate of possible credit losses based upon the composition of our loan portfolio, evaluation of the borrowers’ ability to repay, collateral value underlying loans, loan loss trends, and estimated effects of current and forecasted economic conditions on our loans held for investment and investment securities portfolios. 43 Table of Contents During 2024, the Company recorded a provision for credit losses of $67.8 million, as compared to a $32.2 million provision for credit losses in 2023.
The following table presents the composition of our non-interest income as of the dates indicated: Non-interest Income Year Ended December 31, $ Change % Change (Dollars in millions) 2023 2022 2021 2023 vs 2022 2022 vs 2021 2023 vs 2022 2022 vs 2021 Payment services revenues $ 76.4 $ 74.1 $ 45.1 $ 2.3 $ 29.0 3.1 % 64.3 % Mortgage banking revenues 8.4 18.7 40.8 (10.3) (22.1) (55.1) (54.2) Wealth management revenues 35.3 34.3 26.3 1.0 8.0 2.9 30.4 Service charges on deposit accounts 23.0 24.6 16.5 (1.6) 8.1 (6.5) 49.1 Other service charges, commissions, and fees 9.5 15.5 7.9 (6.0) 7.6 (38.7) 96.2 Investment securities (losses) gains, net (23.5) (24.4) 1.1 0.9 (25.5) (3.7) NM Other income 17.9 20.4 11.8 (2.5) 8.6 (12.3) 72.9 Total non-interest income $ 147.0 $ 163.2 $ 149.5 $ (16.2) $ 13.7 (9.9) 9.2 Non-interest income decreased $16.2 million in 2023 as compared to the same period in 2022.
The following table presents the composition of our noninterest income as of the dates indicated: Noninterest Income Year Ended December 31, $ Change % Change (Dollars in millions) 2024 2023 2022 2024 vs 2023 2023 vs 2022 2024 vs 2023 2023 vs 2022 Payment services revenues $ 73.6 $ 76.4 $ 74.1 $ (2.8) $ 2.3 (3.7) % 3.1 % Mortgage banking revenues 6.6 8.4 18.7 (1.8) (10.3) (21.4) (55.1) Wealth management revenues 38.8 35.3 34.3 3.5 1.0 9.9 2.9 Service charges on deposit accounts 25.7 23.0 24.6 2.7 (1.6) 11.7 (6.5) Other service charges, commissions and fees 9.0 9.5 15.5 (0.5) (6.0) (5.3) (38.7) Investment securities losses, net — (23.5) (24.4) 23.5 0.9 (100.0) (3.7) Other income 24.4 17.9 20.4 6.5 (2.5) 36.3 (12.3) Total noninterest income $ 178.1 $ 147.0 $ 163.2 $ 31.1 $ (16.2) 21.2 (9.9) Noninterest income increased $31.1 million in 2024 as compared to the same period in 2023.
The following table presents, for the periods indicated, condensed average balance sheet information using daily average balances, together with interest income and yields earned on average interest earning assets and interest expense and rates paid on average interest-bearing liabilities. 41 Table of Conten ts Average Balance Sheets, Yields, and Rates Year Ended December 31, 2023 2022 2021 (Dollars in millions) Average Balance Interest (2) Average Rate Average Balance Interest (2) Average Rate Average Balance Interest (2) Average Rate Interest earning assets: Loans (1) $ 18,299.6 $ 986.0 5.39 % $ 16,802.2 $ 797.2 4.74 % $ 9,788.9 $ 431.2 4.40 % Investment securities Taxable 9,173.1 269.1 2.93 9,729.8 213.9 2.20 5,180.5 68.6 1.32 Tax-exempt 199.7 3.9 1.95 243.6 5.0 2.05 242.8 5.3 2.18 Investment in FHLB and FRB stock 207.5 12.4 5.98 116.6 4.8 4.12 53.4 1.0 1.87 Interest-bearing deposits in banks 303.0 15.7 5.18 1,432.8 8.7 0.61 1,946.7 2.6 0.13 Federal funds sold 0.5 — — 0.5 — — 0.1 — — Total interest-earning assets 28,183.4 1,287.1 4.57 28,325.5 1,029.6 3.63 17,212.4 508.7 2.96 Non-interest-earning assets 2,951.1 2,804.2 1,631.8 Total assets $ 31,134.5 $ 31,129.7 $ 18,844.2 Interest-bearing liabilities: Demand deposits $ 6,553.3 $ 47.2 0.72 % $ 7,549.8 $ 15.7 0.21 % $ 4,459.6 $ 1.8 0.04 % Savings deposits 7,989.3 122.2 1.53 8,732.7 24.5 0.28 4,770.8 1.5 0.03 Time deposits 2,676.3 73.2 2.74 1,577.0 8.1 0.51 1,009.3 4.8 0.48 Repurchase agreements 940.4 6.4 0.68 1,114.5 2.5 0.22 1,025.2 0.4 0.04 Other borrowed funds 2,514.6 133.8 5.32 411.1 15.3 3.72 — — — Long-term debt 120.8 5.8 4.80 122.2 6.0 4.91 112.4 6.0 5.34 Subordinated debentures held by subsidiary trusts 163.1 12.7 7.79 156.6 6.8 4.34 87.0 2.8 3.22 Total interest-bearing liabilities 20,957.8 401.3 1.91 19,663.9 78.9 0.40 11,464.3 17.3 0.15 Non-interest-bearing deposits 6,549.9 7,911.6 5,227.9 Other non-interest-bearing liabilities 475.9 364.7 177.9 Stockholders’ equity 3,150.9 3,189.5 1,974.1 Total liabilities and stockholders’ equity $ 31,134.5 $ 31,129.7 $ 18,844.2 Net FTE interest income (non-GAAP) (3) $ 885.8 $ 950.7 $ 491.4 Less FTE adjustments (2) (7.0) (8.1) (2.2) Net interest income from consolidated statements of income $ 878.8 $ 942.6 $ 489.2 Interest rate spread 2.66 % 3.23 % 2.81 % Net interest margin 3.12 3.33 2.84 Net FTE interest margin (non-GAAP) (3) 3.14 3.36 2.85 Cost of funds, including non-interest-bearing demand deposits (4) 1.46 0.29 0.10 (1) Average loan balances include mortgage loans held for sale and non-accrual loans.
The following table presents, for the periods indicated, condensed average balance sheet information using daily average balances, together with interest income and yields earned on average interest earning assets and interest expense and rates paid on average interest-bearing liabilities. 41 Table of Contents Average Balance Sheets, Yields, and Rates Year Ended December 31, 2024 2023 2022 (Dollars in millions) Average Balance Interest (2) Average Rate Average Balance Interest (2) Average Rate Average Balance Interest (2) Average Rate Interest earning assets: Loans (1) $ 18,182.0 $ 1,028.2 5.66 % $ 18,299.6 $ 986.0 5.39 % $ 16,802.2 $ 797.2 4.74 % Investment securities Taxable 8,261.5 243.5 2.95 9,173.1 269.1 2.93 9,729.8 213.9 2.20 Tax-exempt 186.5 3.4 1.82 199.7 3.9 1.95 243.6 5.0 2.05 Investment in FHLB and FRB stock 178.8 11.8 6.60 207.5 12.4 5.98 116.6 4.8 4.12 Interest-bearing deposits in banks 422.5 22.2 5.25 303.0 15.7 5.18 1,432.8 8.7 0.61 Federal funds sold 0.1 — — 0.5 — — 0.5 — — Total interest-earning assets 27,231.4 1,309.1 4.81 28,183.4 1,287.1 4.57 28,325.5 1,029.6 3.63 Noninterest-earning assets 2,825.0 2,951.1 2,804.2 Total assets $ 30,056.4 $ 31,134.5 $ 31,129.7 Interest-bearing liabilities: Demand deposits $ 6,224.9 $ 57.8 0.93 % $ 6,553.3 $ 47.2 0.72 % $ 7,549.8 $ 15.7 0.21 % Savings deposits 7,784.8 161.2 2.07 7,989.3 122.2 1.53 8,732.7 24.5 0.28 Time deposits 2,894.1 106.9 3.69 2,676.3 73.2 2.74 1,577.0 8.1 0.51 Repurchase agreements 687.2 6.7 0.97 940.4 6.4 0.68 1,114.5 2.5 0.22 Other borrowed funds 2,434.7 123.4 5.07 2,514.6 133.8 5.32 411.1 15.3 3.72 Long-term debt 253.4 11.8 4.66 120.8 5.8 4.80 122.2 6.0 4.91 Subordinated debentures held by subsidiary trusts 163.1 13.1 8.03 163.1 12.7 7.79 156.6 6.8 4.34 Total interest-bearing liabilities 20,442.2 480.9 2.35 20,957.8 401.3 1.91 19,663.9 78.9 0.40 Noninterest-bearing deposits 5,879.4 6,549.9 7,911.6 Other noninterest-bearing liabilities 468.8 475.9 364.7 Stockholders’ equity 3,266.0 3,150.9 3,189.5 Total liabilities and stockholders’ equity $ 30,056.4 $ 31,134.5 $ 31,129.7 Net FTE interest income (non-GAAP) (3) $ 828.2 $ 885.8 $ 950.7 Less FTE adjustments (2) (6.6) (7.0) (8.1) Net interest income from consolidated statements of income $ 821.6 $ 878.8 $ 942.6 Interest rate spread 2.46 % 2.66 % 3.23 % Net interest margin 3.02 3.12 3.33 Net FTE interest margin (non-GAAP) (3) 3.04 3.14 3.36 Cost of funds, including noninterest-bearing demand deposits (4) 1.83 1.46 0.29 (1) Average loan balances include mortgage loans held for sale and non-accrual loans.
Included in residential real estate loans were home equity loans and lines of credit of $541.8 million, or 24.1%, and $548.9 million, or 25.1%, as of December 31, 2023 and 2022, respectively. 49 Table of Conten ts Agricultural real estate loans .
Included in residential real estate loans were home equity loans and lines of credit of $557.0 million, or 25.4%, and $541.8 million, or 24.1%, as of December 31, 2024 and 2023, respectively. 49 Table of Contents Agricultural real estate loans .
The provision during 2023 includes a provision for credit losses of $31.1 million related to loans held for investment, provision for credit losses of $2.2 million related to unfunded commitments, and a reduction of credit losses of $1.1 million related to held-to-maturity securities.
The 2024 provision includes a provision for credit losses of $80.9 million related to loans held for investment, reduction of credit losses of $13.2 million related to unfunded commitments, and a provision for credit losses of $0.1 million related to held-to-maturity securities.
Government and government sponsored agencies, both on a direct and indirect basis, represented approximately 94.8% of the investment portfolio’s HTM segment at December 31, 2023. All other held-to-maturity debt securities rated below AAA, not backed by the U.S. Government or government sponsored agencies, or which are not rated represented approximately 5.2% of total HTM debt securities at December 31, 2023.
Government and government sponsored agencies, both on a direct and indirect basis, represented approximately 92.9% and 94.5% of the investment portfolio’s AFS and HTM segments, respectively, at December 31, 2024. All other held-to-maturity debt securities rated below AAA, not backed by the U.S.
Non-GAAP Financial Measures In addition to financial measures presented in accordance with GAAP, this document contains GAAP financial measures and non-GAAP financial measures where management believes it to be helpful in understanding our results of operations or financial position.
Non-GAAP Financial Measures In addition to financial measures presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”), this document contains non-GAAP financial measures where management believes it to be helpful in understanding our results of operations or financial position.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

9 edited+1 added−2 removed12 unchanged
Biggest changeI n August 2022, the Company entered into two interest rate collars related to variable-rate loans that were designated as cash flow hedges with a total notional amount of $300.0 million.
Biggest changeAs part of the Company’s overall asset and liability management strategy, the Company previously entered into two interest rate collars related to variable-rate loans that were designated as cash flow hedges with a total notional amount of $300.0 million and entered into four swaps, two of which were related to variable-rate loans and two that were related to variable-rate securities that were designated as cash flow hedges with a total notional amount of $850.0 million.
Asset liability management is governed by policies, goals, and objectives adopted and reviewed by the Bank’s board of directors. Development of asset liability management strategies and monitoring of interest rate risk are the responsibility of the Asset Liability Committee, or ALCO, which is composed of members of senior management.
Asset liability management is governed by policies, goals, and objectives adopted and reviewed by the Bank’s Board. Development of asset liability management strategies and monitoring of interest rate risk are the responsibility of the Asset Liability Committee, or ALCO, which is composed of members of senior management.
The collars designated as cash flow hedges synthetically fix the interest income received by the Company when the collar index falls below a floor rate on a rate reset during the term of the collar and when the collar index exceeds the cap rate on a rate reset during the term of the collar without exchange of the underlying notional amount.
The collars designated as cash flow hedges synthetically fix the interest income received by the Company when the interest index falls below a floor rate on a rate reset and when the interest index exceeds the cap rate on a rate reset. Each of the swaps designated as cash flow hedges synthetically fixes the interest income received by the Company.
See “Notes to Consolidated Financial Statements—Summary of Significant Accounting Policies” included in Part IV, Item 15 of this report. 58 Table of Conten ts Asset Liability Management The goal of asset liability management is the prudent control of market risk, liquidity, and capital.
We do not have any trading instruments nor do we classify any portion of the investment portfolio as trading. See “Notes to Consolidated Financial Statements—Summary of Significant Accounting Policies” included in Part IV, Item 15 of this report. Asset Liability Management The goal of asset liability management is the prudent control of market risk, liquidity, and capital.
In down-rate scenarios, the deposit beta assumption is 50% with the pricing change occurring in the first month of the net interest income simulation horizon. Actual changes to deposit pricing may vary significantly from this assumption due to management actions, customer behavior, and market forces, which may have significant impacts to our net interest income.
Based on the December 31, 2024 deposit balance composition, the deposit beta assumption is 31% for up- and down- rate scenarios. Actual changes to deposit pricing may vary significantly from this assumption due to management actions, customer behavior, and market forces, which may have significant impacts to our net interest income.
As of December 31, 2023, $900.0 million of the cash flow hedges were effective with the remaining $250.0 million becoming effective in April 2024. 59 Table of Conten ts Recent Accounting Pronouncements The expected impact of accounting standards recently issued but not yet adopted are discussed in “Notes to Consolidated Financial Statements—Authoritative Accounting Guidance” included in Part IV, Item 15 of this report.
The active two interest rate collars and one remaining swap designated as cash flow hedges were effective with a total notional amount of $600.0 million. Recent Accounting Pronouncements The expected impact of accounting standards recently issued but not yet adopted are discussed in “Notes to Consolidated Financial Statements—Authoritative Accounting Guidance” included in Part IV, Item 15 of this report.
The net interest income simulation also uses a “deposit beta” modeling assumption which is an estimate of the change in interest-bearing deposit pricing for a given change in market interest rates. In up-rate scenarios, the deposit beta assumption is 30% with the pricing change occurring in the first month of the net interest income simulation horizon.
The net interest income simulation also uses a deposit beta modeling assumption which is an estimate of the change in interest-bearing deposit pricing for a given change in market interest rates. The deposit beta assumption is derived from empirical analysis and may vary over time depending on the composition of deposit balances.
Change in Interest Rate Percent Change in Net Interest Income (basis points) December 31, 2023 +200 (8.13)% +100 (4.01)% -100 6.42% -200 10.94% The preceding interest rate sensitivity analysis does not represent a forecast and should not be relied upon as being indicative of expected operating results. The Company uses financial derivative instruments for management of interest rate sensitivity.
The net interest income simulations at December 31, 2024 project that interest-bearing liabilities reprice faster than our interest earning assets. 59 Table of Contents Change in Interest Rate Percent Change in Net Interest Income (basis points) December 31, 2024 +200 (4.24)% +100 (2.04)% -100 1.65% -200 3.05% The preceding interest rate sensitivity analysis does not represent a forecast and should not be relied upon as being indicative of expected operating results.
In October 2022, the Company entered into four forward starting receive-fixed hedges related to pools of variable-rate loans and securities that were designated as cash flow hedges with a total notional amount of $850.0 million. The swaps designated as cash flow hedges synthetically fix the interest income received by the Company when they become effective.
During 2024, the Company voluntarily terminated three swaps, two of which were related to variable-rate loans and one related to variable-rate securities that were designated as cash flow hedges with a total notional amount of $550.0 million.
Removed
We do not have any trading instruments nor do we classify any portion of the investment portfolio as trading.
Added
The termination of the cash flow hedges resulted in a net loss of $0.2 million being captured in accumulated other comprehensive income, net of tax, and reclassified to interest income over the period the forecasted transactions affect earnings.
Removed
The net interest income simulations at December 31, 2023 project that interest-bearing liabilities reprice faster than our interest earning assets.

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