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What changed in QCR HOLDINGS INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of QCR HOLDINGS 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.

+336 added−332 removedSource: 10-K (2025-02-28) vs 10-K (2024-02-29)

Top changes in QCR HOLDINGS INC's 2024 10-K

336 paragraphs added · 332 removed · 287 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

42 edited+1 added−7 removed54 unchanged
Biggest changeFollowing is a breakdown of non-owner-occupied income-producing CRE by property type as of December 31, 2023 and 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 2022 ​ Amount % Amount % ​ ​ (dollars in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Multi-family ​ $ 1,743,020 58 % $ 1,613,440 58 % Industrial/warehouse ​ 205,904 7 % 177,921 6 % Retail ​ 185,394 6 % 194,122 7 % Office ​ 181,541 6 % 166,357 6 % Hotel/motel ​ 131,138 4 % 146,172 5 % Other ​ 574,736 19 % 514,639 18 % Total income-producing CRE ​ $ 3,021,733 100 % $ 2,812,651 100 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Included in Multi-family non-owner occupied income-producing CRE is $1.4 billion of LIHTC loans which are financing for low-income housing tax credit real estate projects.
Biggest changeThe following table reflects credit quality indicators and performance of the Company’s CRE loan portfolio: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, ​ ​ ​ ​ 2024 ​ ​ ​ ​ Delinquency Status* ​ ​ ​ ​ % of ​ ​ ​ ​ Performing ​ Nonperforming ​ Total ​ CRE ​ ​ ​ ​ (dollars in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ $ 4,248,186 ​ $ — ​ $ 4,248,186 ​ 98 % ​ Special Mention ​ ​ 34,835 ​ ​ — ​ ​ 34,835 ​ 1 % ​ Substandard ​ ​ 41,955 ​ ​ 16,758 ​ ​ 58,713 ​ 1 % ​ Doubtful ​ — ​ — ​ — ​ 0 % ​ ​ ​ $ 4,324,976 ​ $ 16,758 ​ $ 4,341,734 ​ 100 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As a percentage of total CRE portfolio ​ ​ 99.61 % ​ 0.39 % ​ 100 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, ​ ​ ​ ​ 2023 ​ ​ ​ ​ Delinquency Status* ​ ​ ​ ​ % of ​ ​ ​ ​ ​ Performing ​ ​ Nonperforming ​ ​ Total ​ CRE ​ ​ ​ ​ (dollars in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ $ 4,104,394 ​ $ — ​ $ 4,104,394 ​ 97 % ​ Special Mention ​ ​ 72,517 ​ ​ — ​ ​ 72,517 ​ 2 % ​ Substandard ​ ​ 37,488 ​ ​ 18,476 ​ ​ 55,964 ​ 1 % ​ Doubtful ​ — ​ — ​ — ​ 0 % ​ ​ ​ $ 4,214,399 ​ $ 18,476 ​ $ 4,232,875 ​ 100 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As a percentage of total CRE portfolio ​ ​ 99.56 % ​ 0.44 % ​ 100 % ​ ​ ​ 11 Table of Contents ​ The Company’s construction and land development loan portfolio included the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of ​ ​ December 31, 2024 ​ ​ December 31, 2023 ​ ​ Amount ​ % ​ ​ Amount ​ % ​ ​ (dollars in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ LIHTC construction $ 917,986 70 % ​ $ 943,101 66 % Construction (commercial) ​ 312,288 ​ 23 % ​ ​ 384,875 ​ 27 % Land development ​ 72,644 ​ 6 % ​ ​ 80,443 ​ 6 % Construction (non-commercial residential) ​ 10,625 ​ 1 % ​ ​ 12,106 ​ 1 % Total construction and land development $ 1,313,543 ​ 100 % ​ $ 1,420,525 ​ 100 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Following is a breakdown of non-owner-occupied income-producing CRE by property type as of December 31, 2024 and 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2024 2023 ​ Amount % Amount % ​ ​ (dollars in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Multi-family ​ $ 1,877,467 58 % $ 1,743,020 58 % Retail ​ 242,144 7 % 185,394 6 % Industrial/warehouse ​ 207,476 6 % 205,904 7 % Office ​ 183,066 6 % 181,541 6 % Hotel/motel ​ 138,112 4 % 131,138 4 % Other ​ 609,963 19 % 574,736 19 % Total income-producing CRE ​ $ 3,258,228 100 % $ 3,021,732 100 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Included in multi-family non-owner-occupied income-producing CRE is $1.5 billion of LIHTC loans which are financing for low-income housing tax credit real estate projects.
The Company actively monitors concentrations within the loan/lease portfolio to ensure appropriate diversification and concentration risk is maintained. 6 Table of Contents Specifically, each subsidiary bank’s total loans as a percentage of average assets may not exceed 85%.
The Company actively monitors concentrations within the loan/lease portfolio to ensure appropriate diversification and concentration risk is maintained. ​ ​ ​ ​ 6 Table of Contents Specifically, each subsidiary bank’s total loans as a percentage of total assets may not exceed 85%.
Competitors include not only other commercial banks, credit unions, thrift institutions, and mutual funds, but also insurance companies, FinTech companies, finance companies, brokerage firms, investment banking companies, and a variety of other financial services and advisory companies. Many of these competitors are not subject to the same regulatory restrictions as the Company.
Competitors include not only other commercial banks, credit unions, thrift institutions, and mutual funds, but also insurance companies, financial technology, or fintech companies, finance companies, brokerage firms, investment banking companies, and a variety of other financial services and advisory companies. Many of these competitors are not subject to the same regulatory restrictions as the Company.
In addition to competitive base 13 Table of Contents wages, additional programs include annual bonus opportunities, an employee stock purchase plan, Company matched 401(k) Plan, healthcare and insurance benefits, health savings and flexible spending accounts, paid time off, family leave, sabbaticals, flexible work schedules, an employee assistance program, and various wellness programs. ​ The Company is committed to fostering and preserving a culture of inclusion, and believes its differences, of every kind, make the company and its communities better.
In addition to competitive base wages, additional programs include annual bonus opportunities, an employee stock purchase plan, Company matched 401(k) Plan, healthcare and insurance benefits, health savings and flexible spending accounts, paid time off, family leave, sabbaticals, flexible work schedules, an employee assistance program, and various wellness programs. ​ The Company is committed to fostering and preserving a culture of inclusion, and believes its differences, of every kind, make the company and its communities better.
The Company’s Commercial Banking business is geographically divided by markets into the operating segments corresponding to the four subsidiary banks wholly owned by the Company: QCBT, CRBT, CSB and GB. See the Consolidated Financial Statements incorporated herein generally, and Note 23 to the Consolidated Financial Statements specifically, for additional business segment information.
The Company’s Commercial Banking business is geographically divided by markets into the operating segments corresponding to the four subsidiary banks wholly-owned by the Company: QCBT, CRBT, CSB and GB. See the Consolidated Financial Statements incorporated herein generally, and Note 22 to the Consolidated Financial Statements specifically, for additional business segment information.
In accordance with Missouri regulation, the legal lending limit to one borrower for GB, calculated as 15% of aggregate capital, totaled $40.2 million as of December 31, 2023. The Company recognizes the need to prevent excessive concentrations of credit exposure to any one borrower or group of related borrowers.
In accordance with Missouri regulation, the legal lending limit to one borrower for GB, calculated as 15% of aggregate capital, totaled $40.2 million as of December 31, 2024. The Company recognizes the need to prevent excessive concentrations of credit exposure to any one borrower or group of related borrowers.
These filings are available at http://www.snl.com/IRW/Docs/1024092. Also available are many of the Company’s corporate governance documents, including its Business Code of Conduct and Ethics Policy (https://qcrh.q4ir.com/governance/documents/default.aspx). 14 Table of Contents
These filings are available at http://www.snl.com/IRW/Docs/1024092. Also available are many of the Company’s corporate governance documents, including its Business Code of Conduct and Ethics Policy (https://qcrh.q4ir.com/governance/documents/default.aspx). 15 Table of Contents
In accordance with Iowa regulation, the legal lending limit to one borrower for QCBT, CRBT and CSB, calculated as 15% of aggregate capital, was $43.0 million, $55.9 million, and $26.6 million, respectively, as of December 31, 2023.
In accordance with Iowa regulation, the legal lending limit to one borrower for QCBT, CRBT and CSB, calculated as 15% of aggregate capital, was $43.0 million, $55.9 million, and $26.6 million, respectively, as of December 31, 2024.
Educational reimbursement is available to employees enrolled in degree or certification programs and for seminars, conferences, and other training events employees attend in connection with their job duties. ​ As part of its compensation philosophy, the Company believes that it must offer and maintain market competitive total rewards programs for its employees in order to attract and retain exceptional talent.
Educational reimbursement is available to employees enrolled in degree or certification programs and for seminars, conferences, and other training events employees attend in connection with their job duties. ​ 14 Table of Contents As part of its compensation philosophy, the Company believes that it must offer and maintain market competitive total rewards programs for its employees in order to attract and retain exceptional talent.
The 9 Table of Contents Company’s lending policy specifies maximum loan-to-value limits based on the category of CRE (commercial real estate loans on improved property, raw land, land development, and commercial construction). These limits are the same limits as, or in some situations, more conservative than, those established by regulatory authorities.
The Company’s lending policy specifies maximum loan-to-value limits based on the category of CRE (commercial real estate loans on improved property, raw land, land development, and commercial construction). These limits are the same limits as, or in some situations, more conservative than, those established by regulatory authorities.
See Appendix A “Supervision and Regulation” for more information on the federal and state statutes and regulations that are applicable to the Company and its subsidiaries. Lending/Leasing. The Company and its subsidiaries provide a broad range of commercial and retail lending/leasing and investment services to corporations, partnerships, individuals, and government agencies.
See Appendix A “Supervision and Regulation” for more information on the federal and state statutes and regulations that are applicable to the Company and its subsidiaries. 5 Table of Contents Lending/Leasing. The Company and its subsidiaries provide a broad range of commercial and retail lending/leasing and investment services to corporations, partnerships, individuals, and government agencies.
The Federal Reserve is the primary federal regulator of the Company, QCBT, CRBT, CSB and GB. QCBT, CRBT and CSB are also regulated by the Iowa Division of Banking and GB is regulated by the Missouri Division of Finance. 5 Table of Contents The FDIC, as administrator of the DIF, also has regulatory authority over the subsidiary banks.
The Federal Reserve is the primary federal regulator of the Company, QCBT, CRBT, CSB and GB. QCBT, CRBT and CSB are also regulated by the Iowa Division of Banking and GB is regulated by the Missouri Division of Finance. The FDIC, as administrator of the DIF, also has regulatory authority over the subsidiary banks.
The following private and public sector business assets are generally acceptable to consider for lease funding: ● Computer systems; ● Photocopy systems; ● Fire trucks; ● Specialized road maintenance equipment; ● Medical equipment; ● Commercial business furnishings; ● Vehicles classified as heavy equipment; ● Trucks and trailers; ● Equipment classified as plant or office equipment; and ● Marine boat lifts. m2 will generally refrain from funding leases of the following type: ● Leases collateralized by non-marketable items; ● Leases collateralized by consumer items, such as vehicles, household goods, recreational vehicles, boats, etc.; ● Leases collateralized by used equipment, unless its remaining useful life can be readily determined; and 12 Table of Contents ● Leases with a repayment schedule exceeding seven years.
The following private and public sector business assets were generally acceptable to consider for lease funding: ● Computer systems; ● Photocopy systems; ● Fire trucks; ● Specialized road maintenance equipment; ● Medical equipment; ● Commercial business furnishings; ● Vehicles classified as heavy equipment; ● Trucks and trailers; ● Equipment classified as plant or office equipment; and ● Marine boat lifts. m2 generally refrained from funding leases of the following type: ● Leases collateralized by non-marketable items; ● Leases collateralized by consumer items, such as vehicles, household goods, recreational vehicles, boats, etc.; 13 Table of Contents ● Leases collateralized by used equipment, unless its remaining useful life can be readily determined; and ● Leases with a repayment schedule exceeding seven years.
GB provides full-service commercial and consumer banking to the Springfield and Joplin, Missouri area and adjacent communities through its headquarters located in Springfield, Missouri and its 13 other branch facilities throughout the greater Springfield and Joplin area. GB had total segment assets of $2.28 billion and $2.15 billion as of December 31, 2023 and 2022, respectively.
GB provides full-service commercial and consumer banking to the Springfield and Joplin, Missouri area and adjacent communities through its headquarters located in Springfield, Missouri and its 13 other branch facilities throughout the greater Springfield and Joplin area. GB had total segment assets of $2.34 billion and $2.28 billion as of December 31, 2024 and 2023, respectively.
Additionally, the Company has completed two securitizations of LIHTC loans to manage the Company’s CRE exposure. See Note 5 of the consolidated financial statements for more information on these securitizations. In addition, management tracks the level of owner-occupied CRE loans versus non-owner occupied CRE loans. Owner-occupied CRE loans are generally considered to have less risk.
Additionally, the Company has completed four securitizations of LIHTC loans to manage the Company’s CRE exposure. See Note 4 to the Consolidated Financial Statements for more information on these securitizations. In addition, management tracks the level of owner-occupied CRE loans versus non-owner occupied CRE loans. Owner-occupied CRE loans are generally considered to have less risk.
Operating expenses include employee compensation and benefits, occupancy and equipment expense, professional and data processing fees, advertising and marketing expenses, bank service charges, FDIC and other insurance, loan/lease expenses and other administrative expenses. The Company and its subsidiaries collectively employed 996 and 973 FTEs at December 31, 2023 and 2022, respectively.
Operating expenses include employee compensation and benefits, occupancy and equipment expense, professional and data processing fees, advertising and marketing expenses, bank service charges, FDIC and other insurance, loan/lease expenses and other administrative expenses. The Company and its subsidiaries collectively employed 980 and 996 FTEs at December 31, 2024 and 2023, respectively.
Following is a listing of the Company’s non-consolidated subsidiaries formed for the issuance of trust preferred securities, including pertinent information as of December 31, 2023 and 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Amount Outstanding Amount Outstanding ​ Interest ​ ​ Interest ​ ​ ​ ​ as of ​ as of ​ ​ ​ Rate as of ​ ​ Rate as of Name ​ Date Issued ​ December 31, 2023 ​ December 31, 2022 ​ Interest Rate ​ December 31, 2023 ​ ​ December 31, 2022 ​ ​ ​ ​ (dollars in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ QCR Holdings Statutory Trust II February 2004 ​ $ 10,310 ​ $ 10,310 2.85% over 3-month SOFR 8.44 % ​ ​ 6.52 % QCR Holdings Statutory Trust III February 2004 ​ 8,248 ​ 8,248 2.85% over 3-month SOFR 8.44 % ​ ​ 6.52 % QCR Holdings Statutory Trust V February 2006 ​ 10,310 ​ 10,310 1.55% over 3-month SOFR 7.21 % ​ ​ 5.63 % Community National Statutory Trust II September 2004 ​ 3,093 ​ 3,093 2.17% over 3-month SOFR 7.80 % ​ ​ 6.92 % Community National Statutory Trust III March 2007 ​ 3,609 ​ 3,609 1.75% over 3-month SOFR 7.40 % ​ ​ 6.52 % Guaranty Bankshares Statutory Trust I ​ May 2005 ​ ​ 4,640 ​ ​ 4,640 ​ 1.75% over 3-month SOFR ​ 7.40 % ​ ​ 6.52 % Guaranty Statutory Trust II* December 2005 ​ 10,310 ​ 10,310 1.45% over 3-month SOFR 7.09 % ​ ​ 6.14 % ​ ​ ​ $ 50,520 ​ $ 50,520 Weighted Average Rate 7.70 % ​ ​ 6.29 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ * Assumed in acquisition of GFED. ​ Securities issued by all of the trusts listed above mature 30 years from the date of issuance, but are all currently callable at par at any time.
Following is a listing of the Company’s non-consolidated subsidiaries formed for the issuance of trust preferred securities, including pertinent information as of December 31, 2024 and 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Amount Outstanding Amount Outstanding ​ Interest ​ ​ Interest ​ ​ ​ ​ as of ​ as of ​ ​ ​ Rate as of ​ ​ Rate as of Name ​ Date Issued ​ December 31, 2024 ​ December 31, 2023 ​ Interest Rate ​ December 31, 2024 ​ ​ December 31, 2023 ​ ​ ​ ​ (dollars in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ QCR Holdings Statutory Trust II February 2004 ​ $ 10,310 ​ $ 10,310 2.85% over 3-month SOFR 7.72 % ​ ​ 8.44 % QCR Holdings Statutory Trust III February 2004 ​ 8,248 ​ 8,248 2.85% over 3-month SOFR 7.72 % ​ ​ 8.44 % QCR Holdings Statutory Trust V February 2006 ​ 10,310 ​ 10,310 1.55% over 3-month SOFR 6.47 % ​ ​ 7.21 % Community National Statutory Trust II September 2004 ​ 3,093 ​ 3,093 2.17% over 3-month SOFR 6.79 % ​ ​ 7.80 % Community National Statutory Trust III March 2007 ​ 3,609 ​ 3,609 1.75% over 3-month SOFR 6.37 % ​ ​ 7.40 % Guaranty Bankshares Statutory Trust I ​ May 2005 ​ ​ 4,640 ​ ​ 4,640 ​ 1.75% over 3-month SOFR ​ 6.37 % ​ ​ 7.40 % Guaranty Statutory Trust II* December 2005 ​ 10,310 ​ 10,310 1.45% over 3-month SOFR 6.23 % ​ ​ 7.09 % ​ ​ ​ $ 50,520 ​ $ 50,520 Weighted Average Rate 6.88 % ​ ​ 7.70 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ * Assumed in acquisition of GFED. ​ Securities issued by all of the trusts listed above mature 30 years from the date of issuance, but are all currently callable at par at any time.
In 2023, 92% of employees participated in the annual employee engagement survey, exceeding the Company goal of 80%, and the Company received a strong employee engagement score of 78%, above the national benchmark of 75%. ​ The primary regions in which the subsidiary banks operate – the Quad Cities, Cedar Rapids, Marion, Waterloo/Cedar Falls, Des Moines, Iowa and Springfield/Joplin, Missouri – generally have strong labor markets, with unemployment rates of 3.3% and 3.3% in Iowa and Missouri, respectively as of December 2023. ​ ESG Commitment.
In 2024, 95% of employees participated in the annual employee engagement survey, exceeding the Company goal of 80%, and the Company received a strong employee engagement score of 78%, above the national benchmark of 73%. ​ The primary regions in which the subsidiary banks operate – the Quad Cities, Cedar Rapids, Marion, Waterloo/Cedar Falls, Des Moines, Iowa and Springfield/Joplin, Missouri – generally have strong labor markets, with unemployment rates of 3.2% and 3.7% in Iowa and Missouri, respectively as of December 2024. ​ ESG Commitment.
Most of these will convert to LIHTC permanent loans upon completion of construction. Additionally, the Company had approximately $82.7 million and $119.7 million of residential construction loans outstanding as of December 31, 2023 and 2022, respectively.
Most of these will convert to LIHTC permanent loans upon completion of construction. Additionally, the Company had approximately $101.0 million and $82.7 million of residential construction loans outstanding as of December 31, 2024 and 2023, respectively.
Government Securities 90% of market value Securities of Federal Agencies 90% of market value Municipal Bonds rated by Moody’s As “A” or better 80% of market value Listed Stocks 75% of market value Mutual Funds 75% of market value Cash Value Life Insurance 95%, less policy loans Savings/Time Deposits (Bank) 100% of current value Penny Stocks 0% ​ ​ ​ General Business Accounts Receivable 80% of eligible accounts Inventory 50% of value Crop and Grain Inventories 80% of current market value Livestock 80% of purchase price, or current market value; or higher if cross-collateralized with other assets Fixed Assets (Existing) 50% of net book value, or 75% of orderly liquidation appraised value Fixed Assets (New) 80% of cost, or higher if cross-collateralized with other assets Leasehold Improvements 0% ​ Generally, if the above collateral is part of a cross-collateralization with other approved assets, then the maximum advance percentage may be higher.
Government Securities 90% of market value Securities of Federal Agencies 90% of market value Municipal Bonds rated by Moody’s As “A” or better 80% of market value Listed Stocks 75% of market value Mutual Funds 75% of market value Cash Value Life Insurance 95%, less policy loans Savings/Time Deposits (Bank) 100% of current value Penny Stocks 0% ​ ​ ​ General Business Accounts Receivable 80% of eligible accounts Inventory 50% of value Crop and Grain Inventories 80% of current market value Livestock 80% of purchase price, or current market value; or higher if cross-collateralized with other assets Fixed Assets (Existing) 50% of net book value, or 75% of orderly liquidation appraised value Fixed Assets (New) 80% of cost, or higher if cross-collateralized with other assets Titled Vehicles (New-two years old) ​ 100% of invoice, plus tax, title and licensing fees Titled Vehicles (Three years and older) ​ 100% of third-party valuation Leasehold Improvements 0% ​ Generally, if the above collateral is part of a cross-collateralization with other approved assets, then the maximum advance percentage may be higher.
Included in originations is activity related to the refinancing of previously held in-house mortgages. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended December 31, ​ ​ 2023 2022 2021 ​ ​ (dollars in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Originations of residential real estate loans ​ $ 105,785 ​ $ 148,845 ​ $ 249,892 ​ Sales of residential real estate loans ​ $ 68,271 ​ $ 103,705 ​ $ 201,638 ​ Percentage of sales to originations ​ 65 % 70 % 81 % ​ Installment and Other Consumer Lending The consumer lending department of each subsidiary bank provides many types of consumer loans, including home improvement, home equity, motor vehicle, signature loans and small personal credit lines.
Included in originations is activity related to the refinancing of previously held in-house mortgages. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended December 31, ​ ​ 2024 2023 2022 ​ ​ (dollars in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Originations of residential real estate loans ​ $ 113,223 ​ $ 105,785 ​ $ 148,845 ​ Sales of residential real estate loans ​ $ 86,133 ​ $ 68,271 ​ $ 103,705 ​ Percentage of sales to originations ​ 76 % 65 % 70 % ​ Installment and Other Consumer Lending The consumer lending department of each subsidiary bank provides many types of consumer loans, including home improvement, home equity, motor vehicle, signature loans and small personal credit lines.
Of this amount, approximately 60% was considered speculative, while 40% was pre-sold at December 31, 2023, and approximately 61% was considered speculative, while 39% was pre-sold at December 31, 2022. Direct Financing Leasing m2 leases machinery and equipment to C&I customers under direct financing leases.
Of this amount, approximately 72% was considered speculative, while 28% was pre-sold at December 31, 2024, and approximately 60% was considered speculative, while 40% was pre-sold at December 31, 2023. Direct Financing Leasing m2 leases machinery and equipment to C&I customers under direct financing leases.
The Company is a relationship driven company and its ability to attract and retain exceptional employees is key to its success. As of December 31, 2023, the Company employed 953 full-time employees and 77 part-time employees across all locations.
The Company is a relationship driven company and its ability to attract and retain exceptional employees is key to its success. As of December 31, 2024, the Company employed 941 full-time employees and 72 part-time employees across all locations.
QCBT, on a consolidated basis with m2, had total segment assets of $2.45 billion and $2.31 billion as of December 31, 2023 and 2022, respectively. CRBT is an Iowa-chartered commercial bank that is a member of the Federal Reserve System. The Company commenced operations in Cedar Rapids in June 2001, operating as a branch of QCBT.
QCBT, on a consolidated basis with m2, had total segment assets of $2.59 billion and $2.45 billion as of December 31, 2024 and 2023, respectively. CRBT is an Iowa-chartered commercial bank that is a member of the Federal Reserve System. CRBT originally commenced operations in Cedar Rapids in June 2001, as a branch of QCBT under QCBT’s banking charter.
The Company serves the Quad Cities, Cedar Rapids, Waterloo/Cedar Falls, Des Moines/Ankeny and Springfield communities through the following four wholly-owned banking subsidiaries (collectively, the “Banks”), which provide full-service commercial and consumer banking and trust and asset management services: ● Quad City Bank & Trust (QCBT), which is based in Bettendorf, Iowa, and commenced operations in 1994; ● Cedar Rapids Bank & Trust (CRBT), which is based in Cedar Rapids, Iowa, and commenced operations in 2001; ● Community State Bank (CSB), which is based in Ankeny, Iowa, and was acquired in 2016; and ● Guaranty Bank (GB), which is based in Springfield, Missouri, and was acquired in 2018.
The Company serves the Quad Cities, Cedar Rapids, Waterloo/Cedar Falls, Des Moines/Ankeny and Springfield communities through the following four wholly-owned banking subsidiaries (collectively, the “Banks”), which provide full-service commercial and consumer banking and trust and asset management services: ● Quad City Bank & Trust (QCBT), which is based in Bettendorf, Iowa, and commenced operations in 1994; ● Cedar Rapids Bank & Trust (CRBT), which is based in Cedar Rapids, Iowa, and commenced operations in 2001; ● Community State Bank (CSB), which is based in Ankeny, Iowa, and was acquired in 2016; and ● Guaranty Bank (GB), which is based in Springfield, Missouri, and was acquired in 2018. ​ On April 1, 2022, the Company completed its acquisition of GFED and, on April 2, 2022, merged Guaranty Bank into SFCB, the Company’s Springfield-based charter.
In addition, the subsidiary banks often take personal guarantees to help assure repayment. Approximately 39% of the CRE portfolio is LIHTC loans. The Company has experienced no historical losses on the LIHTC portfolio and as of December 31, 2023, all LIHTC loans were performing and had a pass risk rating.
In addition, the subsidiary banks often take personal guarantees to help assure repayment. Approximately 41% of the CRE portfolio is comprised of LIHTC loans. The Company has experienced no historical losses on the LIHTC portfolio and as of December 31, 2024, all LIHTC loans were performing.
The Company engages in direct financing lease contracts and equipment financing agreements through m2, a wholly owned subsidiary of QCBT based in Waukesha, Wisconsin. Subsidiary Banks.
The combined bank changed its name to Guaranty Bank. The Company engages in direct financing lease contracts and equipment financing agreements through m2, a wholly-owned subsidiary of QCBT based in Waukesha, Wisconsin. Subsidiary Banks.
The following is a summary of the five largest industry concentrations within the C&I portfolio as of December 31, 2023 and 2022: ​ ​ ​ ​ ​ ​ ​ ​ 2023 2022 ​ ​ Amount ​ Amount ​ ​ (dollars in thousands) ​ ​ ​ ​ ​ ​ ​ Lessors of residential buildings and dwellings ​ $ 235,883 ​ $ 309,784 Solar electric power generation ​ ​ 115,862 ​ ​ 35,947 Bank holding companies ​ 109,966 ​ 74,980 Administration of urban planning and rural development ​ ​ 109,696 ​ ​ 102,918 Construction and mining (except oil well) machinery and equipment merchant wholesalers ​ ​ 60,413 ​ ​ 21,931 ​ These loan categories are defined by industry-standard NAICS codes – refer to NAICS.com for a description of each category. ​ CRE Lending The subsidiary banks also make CRE loans.
The following is a summary of the five largest industry concentrations within the C&I portfolio as of December 31, 2024 and 2023: ​ ​ ​ ​ ​ ​ ​ ​ 2024 2023 ​ ​ Amount ​ Amount ​ ​ (dollars in thousands) ​ ​ ​ ​ ​ ​ ​ Lessors of Residential Buildings and Dwellings ​ $ 334,182 ​ $ 235,883 Administration of Urban Planning and Community and Rural Development ​ ​ 108,117 ​ ​ 109,696 Solar Electric Power Generation ​ 108,083 ​ 115,862 Offices of Bank Holding Companies ​ ​ 107,449 ​ ​ 109,966 Construction and Mining (except Oil Well) Machinery and Equipment Merchant Wholesalers ​ ​ 68,179 ​ ​ 60,413 ​ These loan categories are defined by industry-standard NAICS codes – refer to NAICS.com for a description of each category. ​ 9 Table of Contents CRE Lending The subsidiary banks also make CRE loans.
As of December 31, 2023 and 2022, approximately 14% and 16%, respectively, of the CRE loan portfolio was owner-occupied.
As of both December 31, 2024 and 2023, approximately 14% of the CRE loan portfolio was owner-occupied.
None of these had concentrations greater than $62.2 million, or 1.5%, of total CRE loans as of December 31, 2023.
None of these had concentrations greater than $61.5 million, or 1.4%, of total CRE loans as of December 31, 2024.
Other Operating Subsidiaries. m2, which is based in Waukesha, Wisconsin, is engaged in the business of lending and leasing machinery and equipment to C&I businesses under direct financing lease contracts and equipment financing agreements. Trust Preferred Subsidiaries.
Other Operating Subsidiaries. m2, which is based in Waukesha, Wisconsin, is engaged in the business of lending and leasing machinery and equipment to C&I businesses under direct financing lease contracts and equipment financing agreements. In September 2024, the Company announced the decision to discontinue offering new loans and leases through m2. Trust Preferred Subsidiaries.
In addition, the banks have established policy limits around non-owner occupied CRE and total construction, land development and other land loans. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-owner CRE Loans/TRBC ​ Total Construction, Land Development and Other Land Loans/TRBC QCBT 300% 100% CRBT 400% 100% CSB 400% 200% GB 450% 100% 10 Table of Contents Although CSB’s loan portfolio has historically been real estate dominated and its total construction, land development and other land loans levels exceed these policy limits, it has established a Credit Risk Committee to routinely monitor its real estate loan portfolio.
In accordance with regulatory guidelines, the Company exercises heightened risk management practices when non-owner occupied CRE lending exceeds 300% of total risk-based capital and outstanding balances have increased 50% or more during the prior 36 months or construction, land development and other land loans exceed 100% of total risk-based capital. 10 Table of Contents In addition, the banks have established policy limits around non-owner occupied CRE and total construction, land development and other land loans. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-owner CRE Loans/TRBC ​ Total Construction, Land Development and Other Land Loans/TRBC QCBT 300% 100% CRBT 400% 100% CSB 400% 200% GB 450% 100% ​ ​ ​ ​ ​ Although CSB’s loan portfolio has historically been real estate dominated and its total construction, land development and other land loans levels exceed these policy limits, it has established a Credit Risk Committee to routinely monitor its real estate loan portfolio.
All lease requests are subject to the credit requirements and criteria as set forth in the lending/leasing policy. In all cases, a formal independent credit analysis of the lessee is performed.
In September 2024, the Company announced the decision to discontinue offering new loans and leases through m2. All lease requests were subject to the credit requirements and criteria as set forth in the lending/leasing policy. In all cases, a formal independent credit analysis of the lessee was performed.
The headquarters for CRBT is located in downtown Cedar Rapids with three other branches located in Cedar Rapids, one branch in Marion, two branches located in Waterloo and one branch located in Cedar Falls.
The headquarters for CRBT is located in downtown Cedar Rapids with three other branches located in Cedar Rapids, one branch in Marion, two branches located in Waterloo and one branch located in Cedar Falls. CRBT had total segment assets of $2.61 billion and $2.42 billion as of December 31, 2024 and 2023, respectively.
GB is a Missouri-chartered commercial bank that is a member of the Federal Reserve System. GB, formerly known as Springfield First Community Bank, was acquired by the Company in 2018 through a merger with Springfield Bancshares.
CSB had total segment assets of $1.53 billion and $1.43 billion as of December 31, 2024 and 2023, respectively. GB is a Missouri-chartered commercial bank that is a member of the Federal Reserve System. GB, formerly known as Springfield First Community Bank, was acquired by the Company in 2018.
Residential real estate loans held for sale are included in residential real estate loans below. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Consolidated ​ ​ QCBT ​ CRBT ​ CSB ​ GB ​ Total ​ $ % $ % $ % $ % $ ​ % ​ ​ (dollars in thousands) As of December 31, 2023 ​ ​ ​ ​ ​ ​ C&I - revolving ​ $ 87,872 4 % $ 97,521 6 % $ 66,266 6 % $ 73,584 4 % $ 325,243 5 % C&I - other ​ 642,722 32 % 435,543 25 % 173,912 16 % 229,601 13 % 1,481,778 23 % CRE - owner occupied ​ ​ 150,153 ​ 8 % ​ 147,138 ​ 9 % ​ 81,241 ​ 7 % ​ 228,833 ​ 13 % ​ 607,365 9 % CRE - non-owner occupied ​ ​ 180,415 ​ 9 % ​ 221,333 ​ 13 % ​ 179,411 ​ 16 % ​ 427,733 ​ 24 % ​ 1,008,892 16 % Construction and land development ​ ​ 395,851 ​ 20 % ​ 334,479 ​ 20 % ​ 327,720 ​ 31 % ​ 362,475 ​ 21 % ​ 1,420,525 22 % Multi-family ​ ​ 244,910 ​ 12 % ​ 354,259 ​ 21 % ​ 166,978 ​ 15 % ​ 229,996 ​ 13 % ​ 996,143 15 % Direct financing leases ​ 31,164 2 % — — % — — % — — % 31,164 — % 1-4 family real estate ​ 212,408 11 % 89,980 5 % 87,741 8 % 154,842 9 % 544,971 8 % Consumer ​ 38,184 2 % 18,194 1 % 15,993 1 % 54,964 3 % 127,335 2 % ​ ​ $ 1,983,679 100 % $ 1,698,447 100 % $ 1,099,262 100 % $ 1,762,028 % 100 % $ 6,543,416 100 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, 2022 ​ ​ ​ ​ ​ ​ C&I - revolving ​ $ 63,071 3 % $ 111,319 7 % $ 54,323 5 % $ 68,156 4 % $ 296,869 5 % C&I - other ​ ​ 640,472 ​ 35 % ​ 453,829 ​ 28 % ​ 168,816 ​ 17 % ​ 188,576 ​ 11 % ​ 1,451,693 ​ 24 % CRE - owner occupied ​ ​ 145,528 ​ 8 % ​ 144,399 ​ 9 % ​ 66,890 ​ 7 % ​ 272,550 ​ 16 % ​ 629,367 ​ 10 % CRE - non-owner occupied ​ 166,349 10 % 216,756 12 % 163,960 17 % 416,174 25 % 963,239 16 % Construction and land development ​ ​ 283,088 ​ 15 % ​ 290,282 ​ 18 % ​ 326,811 ​ 33 % ​ 291,880 ​ 17 % ​ 1,192,061 ​ 18 % Multi-family ​ ​ 274,991 ​ 15 % ​ 334,408 ​ 20 % ​ 127,184 ​ 13 % ​ 227,220 ​ 14 % ​ 963,803 ​ 16 % Direct financing leases ​ 31,889 2 % — — % — — % — — % 31,889 1 % 1-4 family real estate ​ 191,753 10 % 76,842 5 % 66,145 7 % 164,789 10 % 499,529 8 % Consumer ​ 31,126 2 % 17,154 1 % 14,241 1 % 47,900 3 % 110,421 2 % ​ ​ $ 1,828,267 100 % $ 1,644,989 100 % $ 988,370 100 % $ 1,677,245 100 % $ 6,138,871 100 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Proper pricing of loans is necessary to provide adequate return to the Company’s stockholders.
Residential real estate loans held for sale are included in residential real estate loans below. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Consolidated ​ ​ QCBT ​ CRBT ​ CSB ​ GB ​ Total ​ $ % $ % $ % $ % $ ​ % ​ ​ (dollars in thousands) As of December 31, 2024 ​ ​ ​ ​ ​ ​ C&I - revolving ​ $ 100,344 5 % $ 136,542 8 % $ 68,628 6 % $ 82,477 5 % $ 387,991 6 % C&I - other ​ 651,306 32 % 436,966 24 % 188,185 16 % 238,475 13 % 1,514,932 22 % CRE - owner occupied ​ ​ 161,474 ​ 8 % ​ 135,643 ​ 8 % ​ 91,352 ​ 8 % ​ 217,524 ​ 12 % ​ 605,993 9 % CRE - non-owner occupied ​ ​ 180,253 ​ 9 % ​ 216,188 ​ 12 % ​ 205,531 ​ 18 % ​ 475,880 ​ 26 % ​ 1,077,852 16 % Construction and land development ​ ​ 360,593 ​ 17 % ​ 311,149 ​ 18 % ​ 307,607 ​ 27 % ​ 334,194 ​ 18 % ​ 1,313,543 19 % Multi-family ​ ​ 289,091 ​ 14 % ​ 404,800 ​ 23 % ​ 189,093 ​ 16 % ​ 249,126 ​ 14 % ​ 1,132,110 17 % Direct financing leases ​ 17,076 1 % — — % — — % — — % 17,076 — % 1-4 family real estate ​ 244,783 12 % 100,334 6 % 91,849 8 % 151,213 8 % 588,179 9 % Consumer ​ 44,006 2 % 19,845 1 % 17,144 1 % 65,733 4 % 146,728 2 % ​ ​ $ 2,048,926 100 % $ 1,761,467 100 % $ 1,159,389 100 % $ 1,814,622 % 100 % $ 6,784,404 100 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, 2023 ​ ​ ​ ​ ​ ​ C&I - revolving ​ $ 87,872 4 % $ 97,521 6 % $ 66,266 6 % $ 73,584 4 % $ 325,243 5 % C&I - other ​ ​ 642,722 32 % 435,543 25 % 173,912 16 % 229,601 13 % 1,481,778 23 % CRE - owner occupied ​ ​ 150,153 ​ 8 % ​ 147,138 ​ 9 % ​ 81,241 ​ 7 % ​ 228,833 ​ 13 % ​ 607,365 9 % CRE - non-owner occupied ​ 180,415 ​ 9 % ​ 221,333 ​ 13 % ​ 179,411 ​ 16 % ​ 427,733 ​ 24 % ​ 1,008,892 16 % Construction and land development ​ ​ 395,851 ​ 20 % ​ 334,479 ​ 20 % ​ 327,720 ​ 31 % ​ 362,475 ​ 21 % ​ 1,420,525 22 % Multi-family ​ ​ 244,910 ​ 12 % ​ 354,259 ​ 21 % ​ 166,978 ​ 15 % ​ 229,996 ​ 13 % ​ 996,143 15 % Direct financing leases ​ 31,164 2 % — — % — — % — — % 31,164 — % 1-4 family real estate ​ 212,408 11 % 89,980 5 % 87,741 8 % 154,842 9 % 544,971 8 % Consumer ​ 38,184 2 % 18,194 1 % 15,993 1 % 54,964 3 % 127,335 2 % ​ ​ $ 1,983,679 100 % $ 1,698,447 100 % $ 1,099,262 100 % $ 1,762,028 % 100 % $ 6,543,416 100 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Proper pricing of loans is necessary to provide adequate return to the Company’s stockholders.
The Cedar Rapids branch operation then began functioning under the CRBT charter in September of 2001.
In September of 2001, the Cedar Rapids branch obtained its own banking charter and began operating as CRBT.
Following is a summary of industry concentrations within that category as of December 31, 2023 and 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 2022 ​ Amount % Amount % ​ ​ (dollars in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Multi-family ​ $ 1,013,908 81 % $ 821,442 82 % Industrial/warehouse ​ 36,676 3 % 38,882 4 % Office ​ 26,414 2 % 17,800 2 % Hotel/motel ​ 23,965 2 % 14,802 1 % Retail ​ 8,990 1 % 4,863 1 % Other ​ 139,144 11 % 99,852 10 % Total non-residential construction loans ​ $ 1,249,097 100 % $ 997,641 100 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Included in Multi-family non-residential construction is $911.4 million of LIHTC construction loans which provide financing for the construction of both new LIHTC real estate projects and the rehabilitation of existing LIHTC real estate projects.
Lastly, the Company has policy limits on maximum exposure amounts to single developers. ​ 12 Table of Contents As of December 31, 2024 and 2023, the portion of the Company’s construction portfolio that is considered non-residential construction is summarized by property types as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2024 2023 ​ Amount % Amount % ​ ​ (dollars in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Multi-family ​ $ 1,006,094 87 % $ 1,013,908 81 % Industrial/warehouse ​ 24,940 2 % 36,676 3 % Office ​ 23,714 2 % 26,414 2 % Hotel/motel ​ 14,387 1 % 23,965 2 % Retail ​ 6,844 1 % 8,990 1 % Other ​ 81,337 7 % 139,144 11 % Total non-residential construction loans ​ $ 1,157,316 100 % $ 1,249,097 100 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Included in multi-family non-residential construction is $946.5 million of LIHTC construction loans which provide financing for the construction of both new LIHTC real estate projects and the rehabilitation of existing LIHTC real estate projects.
Following is a listing of the significant industries within the Company’s CRE loan portfolio as of December 31, 2023 and 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 ​ 2022 ​ ​ Amount % Amount % ​ ​ (dollars in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Lessors of residential buildings ​ $ 2,093,253 50 % $ 1,861,197 47 % Lessors of nonresidential buildings ​ ​ 633,098 15 % ​ 537,940 13 % Hotels ​ 135,915 3 % 145,662 4 % New housing for-sale builders ​ ​ 84,451 ​ 2 % ​ 71,991 ​ 2 % New multifamily housing construction ​ ​ 83,310 ​ 2 % ​ 82,905 ​ 2 % Other * ​ 1,202,848 28 % 1,216,679 31 % Total CRE loans ​ $ 4,232,875 ​ 100 % $ 3,916,374 ​ 100 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ * “Other” consists of all other industries.
Following is a listing of the significant industries within the Company’s CRE loan portfolio as of December 31, 2024 and 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2024 ​ 2023 ​ Amount % Amount % ​ ​ (dollars in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Lessors of residential buildings - LIHTC ​ $ 1,778,488 41 % $ 1,650,340 39 % Lessors of nonresidential buildings ​ ​ 679,480 16 % ​ 633,098 15 % Lessors of residential buildings - non LIHTC ​ ​ 535,671 ​ 12 % ​ 442,913 ​ 11 % Hotels ​ 141,005 3 % 135,915 3 % New housing for-sale builders ​ ​ 71,437 ​ 2 % ​ 84,451 ​ 2 % Other * ​ ​ 1,134,201 ​ 26 % ​ 1,268,207 ​ 30 % Other - LIHTC ​ 1,452 - % 17,951 - % Total CRE loans ​ $ 4,341,734 ​ 100 % $ 4,232,875 ​ 100 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ * “Other” consists of all other industries.
CSB provides full-service commercial and consumer banking to Des Moines, Iowa and adjacent communities through its headquarters located in Ankeny, Iowa and its eight other branch facilities throughout the greater Des Moines area. CSB had total segment assets of $1.43 billion and $1.30 billion as of December 31, 2023 and 2022, respectively.
CSB is an Iowa-chartered commercial bank that is a member of the Federal Reserve System. CSB was acquired by the Company in 2016. CSB provides full-service commercial and consumer banking to Des Moines, Iowa and adjacent communities through its headquarters located in Ankeny, Iowa and its eight other branch facilities throughout the 4 Table of Contents greater Des Moines area.
A few specific actions included rolling out a diversity survey for the fourth year to gather feedback from all employees, several inclusion sessions and workshops across our different entities facilitated by our Diversity Officer as well as the formation of Inclusion Committees across our different entities.
During recent years, the Company focused on several initiatives to promote inclusion across its organization. A few specific actions included our annual employee survey that included a section specifically on the topic of inclusion, as well as several inclusion sessions and events across our different entities, facilitated by our Inclusion Committee.
At December 31, 2023, QCBT’s bank stock loans totaled 36% of risk-based capital. *** Policy limits are compared to average loan balances rather than the current balance for monitoring purposes. ​ The following table presents total loans/leases by major loan/lease type and subsidiary as of December 31, 2023 and 2022.
Industries are based on NAICS codes. If a subsidiary bank does not consider an industry a top industry at their charter, it is represented by “n/a.” ​ The following table presents total loans/leases by major loan/lease type and subsidiary as of December 31, 2024 and 2023.
Removed
On April 1, 2022, the Company completed its acquisition of GFED and on April 2, 2022 merged Guaranty Bank into SFCB, the Company’s Springfield-based charter. The combined bank changed its name to Guaranty Bank. See Note 2 to the Consolidated Financial Statements for further discussion on mergers, acquisitions and sales.
Added
In addition, following are established policy limits and the actual allocations for the subsidiary banks as of December 31, 2024 for the loan portfolio organized by top industries, reflected as a percentage of the subsidiary bank’s risk based capital: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ QCBT ​ CRBT ​ CSB ​ GB ​ ​ Maximum ​ Maximum ​ Maximum ​ Maximum ​ ​ ​ Percentage ​ As of ​ Percentage ​ As of ​ Percentage ​ As of ​ Percentage ​ As of ​ ​ per Loan ​ December 31, ​ per Loan ​ December 31, ​ per Loan ​ December 31, ​ per Loan ​ December 31, ​ Industry * Policy ​ 2024 ​ Policy ​ 2024 ​ Policy ​ 2024 ​ Policy ​ 2024 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accommodation and Food Service 25 % 3 % n/a ​ — % n/a ​ — % n/a ​ — % ​ Agriculture, Forestry, Fishing and Hunting n/a ​ n/a ​ n/a ​ n/a ​ n/a ​ n/a ​ 50 % 15 % ​ Construction 50 % 21 % 50 % 25 % 50 % 25 % 50 % 12 % ​ Educational Services 25 % 5 % n/a ​ n/a ​ n/a ​ n/a ​ n/a ​ n/a ​ ​ Finance and Insurance 25 % 12 % 50 % 12 % 50 % 7 % n/a ​ n/a ​ ​ Health Care and Social Assistance 50 % 39 % 50 % 5 % 50 % 20 % 50 % 3 % ​ Management of Companies and Enterprises (includes Bank Stock Loans) 100 % 48 % n/a ​ n/a ​ n/a ​ n/a ​ n/a ​ n/a ​ ​ Manufacturing 50 % 17 % 100 % 32 % 100 % 27 % 100 % 9 % ​ Other Services (Except Public Administration) n/a ​ n/a ​ 50 % 12 % 25 % 13 % 50 % 11 % ​ Professional, Scientific, and Technical Services n/a ​ n/a ​ 50 % 9 % 25 % 19 % 50 % 5 % ​ Public Administration 50 % 12 % 50 % 11 % 50 % 16 % n/a ​ n/a ​ ​ Real Estate and Rental Leasing n/a ​ n/a ​ n/a ​ n/a ​ n/a ​ n/a ​ 25 % 8 % ​ Retail Trade 50 % 12 % 25 % 10 % n/a ​ n/a ​ 25 % 14 % ​ Transportation and Warehousing n/a ​ n/a ​ 50 % 10 % 25 % 6 % 40 % 6 % ​ Wholesale Trade 50 % 21 % 100 % 36 % 50 % 40 % 100 % 12 % ​ National Syndicated Loans 25 % — % 25 % — % 25 % 3 % n/a ​ n/a ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total loans as a percent of total assets 85 % 79 % 85 % 67 % 85 % 76 % 85 % 77 % ​ * Each subsidiary bank defines its top loan industries.
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CRBT had total segment assets of $2.42 billion and $2.19 billion as of December 31, 2023 and 2022, respectively. 4 Table of Contents CSB is an Iowa-chartered commercial bank that is a member of the Federal Reserve System. CSB was acquired by the Company in 2016.
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On April 2, 2022, GFED was merged into the Company and GFED’s wholly-owned bank subsidiary was merged into GB, expanding GB’s footprint in southwest Missouri.
Removed
In addition, following are established policy limits and the actual allocations for the subsidiary banks as of December 31, 2023 for the loan portfolio organized by loan type, reflected as a percentage of the subsidiary bank’s gross loans: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ QCBT ​ CRBT ​ CSB ​ GB ​ ​ Maximum ​ Maximum ​ Maximum ​ Maximum ​ ​ ​ Percentage ​ As of ​ Percentage ​ As of ​ Percentage ​ As of ​ Percentage ​ As of ​ ​ per Loan ​ December 31, ​ per Loan ​ December 31, ​ per Loan ​ December 31, ​ per Loan ​ December 31, ​ Type of Loan * Policy*** ​ 2023 ​ Policy*** ​ 2023 ​ Policy*** ​ 2023 ​ Policy*** ​ 2023 ​ One-to-four family residential 30 % 12 % 25 % 6 % 25 % 9 % 30 % 11 % ​ Multi-family 15 % 12 % 15 % 21 % 25 % 15 % 20 % 13 % ​ Farmland 5 % 1 % 5 % — % 10 % 1 % 5 % 4 % ​ Non-farm, nonresidential 50 % 15 % 50 % 22 % 50 % 23 % 50 % 34 % ​ Construction and land development 20 % 20 % 15 % 20 % 35 % 30 % 15 % 21 % ​ C&I 60 % 27 % 60 % 26 % 50 % 16 % 25 % 13 % ​ Loans to individuals 10 % 1 % 10 % — % 10 % — % 5 % 1 % ​ Lease financing 30 % 2 % 5 % — % 5 % — % 5 % — % ​ Bank stock loans ** ​ — ​ 10 % — % 10 % — % 20 % — % ​ All other loans 15 % 10 % 10 % 5 % 15 % 6 % 15 % 3 % ​ ​ 100 % 100 % 100 % 100 % ​ * The loan types above are as defined and reported in the subsidiary banks’ quarterly Reports of Condition and Income (also known as Call Reports). ** QCBT’s maximum percentage for bank stock loans is 150% of risk-based capital (bank stock loan commitments are limited to 200% of risk-based capital).
Removed
In accordance with regulatory guidelines, the Company exercises heightened risk management practices when non-owner occupied CRE lending exceeds 300% of total risk-based capital and outstanding balances have increased 50% or more during the prior 36 months or construction, land development and other land loans exceed 100% of total risk-based capital.
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Lastly, the Company has policy limits on maximum exposure amounts to single developers. ​ 11 Table of Contents A portion of the Company’s construction portfolio is considered non-residential construction.
Removed
During recent years, the Company focused on several initiatives to promote inclusion across its organization.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

75 edited+27 added−3 removed134 unchanged
Biggest changeUncertainty surrounding future changes may adversely affect our operating environment and therefore our business, financial condition, results of operations and growth prospects. ​ Evolving law impacting cannabis-related businesses in Illinois, Missouri and other states may have an impact on the Company's operations and risk profile. ​ The Controlled Substances Act makes it illegal under federal law to manufacture, distribute, or dispense marijuana.
Biggest changeGiven the complex factors affecting the strength of the U.S. economy, including uncertainties regarding the persistence of inflation, geopolitical developments such as ongoing conflicts in the Middle East and the Russian invasion of Ukraine, and resulting disruptions in the global energy market, tight labor market conditions domestically, supply chain issues both domestically and internationally and the potential effects of a new presidential administration, including its response to the foregoing, potential imposition of new tariffs, mass deportations and changes to tax or other financial regulations, uncertainty surrounding future changes may adversely affect our operating environment and therefore our business, financial condition, results of operations and growth prospects. ​ Evolving law impacting cannabis-related businesses in Illinois, Missouri and other states may have an impact on the Company's operations and risk profile. ​ The Controlled Substances Act makes it illegal under federal law to manufacture, distribute, or dispense marijuana.
Risk Factors In addition to the other information in this Annual Report on Form 10-K, stockholders or prospective investors should carefully consider the following risk factors: Economic, Market and Interest Rate Risks ​ Conditions in the financial market and economic conditions, including conditions in the markets in which we operate, generally may adversely affect our business. ​ We operate primarily in the Quad Cities, Cedar Rapids, Waterloo/Cedar Falls, Des Moines/Ankeny, Iowa and Springfield, Missouri markets.
In addition to the other information in this Annual Report on Form 10-K, stockholders or prospective investors should carefully consider the following risk factors: Economic, Market and Interest Rate Risks ​ Conditions in the financial market and economic conditions, including conditions in the markets in which we operate, generally may adversely affect our business. ​ We operate primarily in the Quad Cities, Cedar Rapids, Waterloo/Cedar Falls, Des Moines/Ankeny, Iowa and Springfield, Missouri markets.
As a result, political and social attention to the issue of climate change has increased. In recent years, governments across the world have entered into international agreements to attempt to reduce global temperatures, in part by limiting greenhouse gas emissions. The U.S.
As a result, political and social attention to the issue of climate change has increased. In recent years, governments across the world have entered into international agreements to attempt to reduce global temperatures, in part by limiting greenhouse gas emissions. In recent years, the U.S.
Additionally, many of our competitors are much larger in total assets and capitalization, have greater access to capital markets, have larger lending limits and offer a broader range of financial services than we can offer. ​ Potential future acquisitions could be difficult to integrate, divert the attention of key personnel, disrupt our business, dilute stockholder value and adversely affect our financial results. ​ As part of our business strategy, we may consider acquisitions of other banks or financial institutions or the branches, assets or deposits of such organizations.
Additionally, many of our competitors are much larger in total assets and capitalization, have greater access to capital markets, have larger lending limits and may offer a broader range of financial services than we can offer. ​ Potential future acquisitions could be difficult to integrate, divert the attention of key personnel, disrupt our business, dilute stockholder value and adversely affect our financial results. ​ As part of our business strategy, we may consider acquisitions of other banks or financial institutions or the branches, assets or deposits of such organizations.
It is the Banks' current policy to avoid knowingly providing banking products or services to entities or individuals that: (i) directly or indirectly manufacture, distribute, or dispense marijuana or hemp products, or those with a significant financial interest in such entities; or (ii) derive a significant percentage of revenue from providing products or services to, or other involvement with, such entities.
It is the Banks’ current policy to avoid knowingly providing banking products or services to entities or individuals that: (i) directly or indirectly manufacture, distribute, or dispense marijuana products, or those with a significant financial interest in such entities; or (ii) derive a significant percentage of revenue from providing products or services to, or other involvement with, such entities.
The occurrence of any such event could have a material adverse effect on the Company's business, which in turn, could have a material adverse effect on the financial condition and results of operation. ​ The Company is or may become involved from time to time in suits, legal proceedings, information-gathering requests, investigations and proceedings by governmental and self-regulatory agencies that may lead to adverse consequences. ​ Many aspects of our business and operations involve the risk of legal liability, and in some cases we or our subsidiaries have been named or threatened to be named as defendants in various lawsuits arising from our business activities.
The occurrence of any such event could have a material adverse effect on the Company’s business, which in turn, could have a material adverse effect on its financial condition and results of operation. ​ The Company is or may become involved from time to time in suits, legal proceedings, information-gathering requests, investigations, and proceedings by governmental and self-regulatory agencies that may lead to adverse consequences. ​ Many aspects of our business and operations involve the risk of legal liability, and in some cases we or our subsidiaries may be named or threatened to be named as defendants in various lawsuits arising from our business activities.
Further, we may have to record provision expense to establish an allowance for credit losses on our carried at fair value debt securities, and we must periodically test our investment securities for other-than-temporary impairment in value.
Further, we may have to record a provision expense to establish an allowance for credit losses on our carried at fair value debt securities, and we must periodically test our investment securities for other-than-temporary impairment in value.
When we sell the guaranteed portion of our SBA loans, we incur credit risk on the retained, non-guaranteed portion of the loans. ​ In the event of a loss resulting from default and the SBA determines there is a deficiency in the manner in which the loan was originated, funded or serviced by the us, the SBA may require us to repurchase the loan, deny its liability under the guaranty, reduce the amount of the guaranty, or, if it has already paid under the guaranty, seek recovery of the principal loss related to the deficiency from us, any of which could adversely affect our business, results of operations and financial condition. ​ Our community banking strategy relies heavily on our subsidiaries' independent management teams, and the unexpected loss of key managers may adversely affect our operations. ​ We rely heavily on the success of our bank subsidiaries' independent management teams.
When we sell the guaranteed portion of our SBA loans, we incur credit risk on the retained, non-guaranteed portion of the loans. ​ In the event of a loss resulting from default and the SBA determines there is a deficiency in the manner in which the loan was originated, funded or serviced by the us, the SBA may require us to repurchase the loan, deny its liability under the guaranty, reduce the amount of the guaranty, or, if it has already paid under the guaranty, seek recovery of 31 Table of Contents the principal loss related to the deficiency from us, any of which could adversely affect our business, results of operations and financial condition. ​ Our community banking strategy relies heavily on our subsidiaries’ independent management teams, and the unexpected loss of key managers may adversely affect our operations. ​ We rely heavily on the success of our bank subsidiaries' independent management teams.
In addition, increased competition with the largest banks and Fintechs for retail deposits may impact our ability to raise funds through deposits and could have a negative effect on our liquidity. ​ Any decline in available funding could adversely impact our ability to originate loans/leases, invest in securities, meet our expenses, pay dividends to our stockholders, or fulfill our obligations, including repaying our borrowings or meeting deposit withdrawal demands, any of which could have a material adverse impact on our liquidity, business, results of operations and financial condition. ​ As a bank holding company, our sources of funds are limited. ​ We are a bank holding company, and our operations are primarily conducted by the subsidiary Banks, which are subject to significant federal and state regulation.
In addition, increased competition with the largest banks and fintech companies for retail deposits may impact our ability to raise funds through deposits and could have a negative effect on our liquidity. ​ Any decline in available funding could adversely impact our ability to originate loans/leases, invest in securities, meet our expenses, pay dividends to our stockholders, or fulfill our obligations, including repaying our borrowings or meeting deposit withdrawal demands, any of which could have a material adverse impact on our liquidity, business, results of operations and financial condition. ​ As a bank holding company, our sources of funds are limited. ​ We are a bank holding company, and our operations are primarily conducted by the subsidiary Banks, which are subject to significant federal and state regulation.
Computer break-ins, phishing and other disruptions could also jeopardize the security of information stored in and transmitted through computer systems and network infrastructure, as well as that of our customers engaging in internet banking activities, which may result in significant liability to us and may cause existing and potential customers to refrain from doing business with us. ​ Although we, with the help of third-party service providers, intend to continue to implement security technology and establish operational procedures to prevent such damage, there can be no assurance that these security measures will be successful.
Computer break-ins, phishing and other disruptions could also jeopardize the security of information stored in and transmitted through computer systems and network infrastructure, as well as that of our customers engaging in internet banking activities, which may result in significant liability to us and may cause existing and potential customers to refrain from doing business with us. 30 Table of Contents ​ Although we, with the help of third-party service providers, intend to continue to implement security technology and establish operational procedures to prevent such damage, there can be no assurance that these security measures will be successful.
As is the case with many financial institutions, our emphasis on increasing the development of core deposits, those with no stated maturity date, has resulted in our interest-bearing liabilities having a shorter duration than our interest-earning assets. This imbalance can create significant earnings volatility because interest rates change over time.
As is the case with many financial institutions, our emphasis on increasing the level of core deposits, those with no stated maturity date, has resulted in our interest-bearing liabilities having a shorter duration than our interest-earning assets. This imbalance can create significant earnings volatility because interest rates change over time.
Initial timetables for the introduction and development of new lines of business and/or new products or services may not be achieved 25 Table of Contents and price and profitability targets may not prove feasible, which could in turn have a material negative effect on our operating results. ​ If securities or industry analysts do not publish or cease publishing research reports about us, if they adversely change their recommendations regarding our stock or if our operating results do not meet their expectations, the price of our stock could decline. ​ The trading market for our common stock can be influenced by the research and reports that industry or securities analysts may publish about us, our business, our market or our competitors.
Initial timetables for the introduction and development of new lines of business and/or new products or services may not be achieved and price and profitability targets may not prove feasible, which could in turn have a material negative effect on our operating results. ​ If securities or industry analysts do not publish or cease publishing research reports about us, if they adversely change their recommendations regarding our stock or if our operating results do not meet their expectations, the price of our stock could decline. ​ The trading market for our common stock can be influenced by the research and reports that industry or securities analysts may publish about us, our business, our market or our competitors.
Our failure to meet these capital and other regulatory requirements could affect customer confidence, our ability to grow, our costs of funds and FDIC insurance costs, our ability to pay dividends on 20 Table of Contents common and preferred stock and to make distributions on our trust preferred securities, our ability to make acquisitions, and our business, results of operations and financial condition. ​ Climate change and related legislative and regulatory initiatives may result in operational changes and expenditures that could significantly impact our business. ​ The current and anticipated effects of climate change are creating an increasing level of concern for the state of the global environment.
Our failure to meet these capital and other regulatory requirements could affect customer confidence, our ability to grow, our costs of funds and FDIC insurance costs, our ability to pay dividends on common and preferred stock and to make distributions on our trust preferred securities, our ability to make acquisitions, and our business, results of operations and financial condition. ​ Climate change and related legislative and regulatory initiatives may result in operational changes and expenditures that could significantly impact our business. ​ The current and anticipated effects of climate change are creating an increasing level of concern for the state of the global environment.
There can be no guarantee, however, that these policies and procedures are effective. ​ Failure to comply with applicable laws, regulations or policies could result in sanctions by regulatory agencies, civil monetary penalties, and/or damage to our reputation, which could have a material adverse effect on us.
There can be no guarantee, however, that these policies and procedures are effective. ​ Failure to comply with applicable laws, regulations or policies could result in sanctions by banking agencies, civil monetary penalties, and/or damage to our reputation, which could have a material adverse effect on us.
Acquisitions involve numerous risks, any of which could harm our business, including: ​ ● difficulties in integrating the operations, technologies, products, existing contracts, accounting processes and personnel of the target company and realizing the anticipated synergies of the combined businesses; ● difficulties in supporting and transitioning customers of the target company; ● diversion of financial and management resources from existing operations; ● the price we pay or other resources that we devote may exceed the value we realize, or the value we could have realized if we had allocated the purchase price or other resources to another opportunity; ● risks of entering new markets or areas in which we have limited or no experience or are outside our core competencies; ● potential loss of key employees, customers and strategic alliances from either our current business or the business of the target company; ● risks of acquiring loans with deteriorated credit quality; ● assumption of unanticipated problems or latent liabilities; and ● inability to generate sufficient revenue to offset acquisition costs.
Acquisitions involve numerous risks, any of which could harm our business, including: ​ ● difficulties in integrating the operations, technologies, products, existing contracts, accounting processes and personnel of the target company and realizing the anticipated synergies of the combined businesses; ● difficulties in supporting and transitioning customers of the target company; 27 Table of Contents ● diversion of financial and management resources from existing operations; ● potential goodwill impairment; ● the price we pay or other resources that we devote may exceed the value we realize, or the value we could have realized if we had allocated the purchase price or other resources to another opportunity; ● risks of entering new markets or areas in which we have limited or no experience or are outside our core competencies; ● potential loss of key employees, customers and strategic alliances from either our current business or the business of the target company; ● risks of acquiring loans with deteriorated credit quality; ● assumption of unanticipated problems or latent liabilities; and ● inability to generate sufficient revenue to offset acquisition costs.
Accordingly, a risk exists that we will not be able to effectively implement new technology-driven products and services or be successful in marketing such products and services to our customers. ​ 29 Table of Contents Issues with the use of artificial intelligence in our marketplace may result in reputational harm or liability, or could otherwise adversely affect our business. ​ Artificial intelligence, including generative artificial intelligence, is or may be enabled by or integrated into our products or those developed by our third-party partners.
Accordingly, a risk exists that we will not be able to effectively implement new technology-driven products and services or be successful in marketing such products and services to our customers. ​ Issues with the use of artificial intelligence in our marketplace may result in reputational harm or liability, or could otherwise adversely affect our business. ​ Artificial intelligence, including generative artificial intelligence, is or may be enabled by or integrated into our products or those developed by our third-party partners.
For additional information, see Item 7A. Quantitative and Qualitative Disclosures About Market Risk and Note 8 to the Consolidated Financial Statements. Interest rate swaps expose the Company to certain risks, and may not be effective in mitigating exposure to changes in interest rates.
For additional information, see Item 7A. Quantitative and Qualitative Disclosures About Market Risk and Note 7 to the Consolidated Financial Statements. Interest rate swaps expose the Company to certain risks, and may not be effective in mitigating exposure to changes in interest rates.
In addition, advances in computer capabilities, new discoveries in the field of cryptography or other developments could result in a compromise or breach of the algorithms we and our third-party service providers use to encrypt and protect customer transaction data.
In addition, advances in computer capabilities, new discoveries in the field of cryptography and artificial intelligence or other developments could result in a compromise or breach of the algorithms we and our third-party service providers use to encrypt and protect customer transaction data.
Our stock price could fluctuate significantly in response to our quarterly or annual results and the impact of these risk factors on our operating results or financial position. ​ Secondary mortgage, government guaranteed loan and interest rate swap market conditions could have a material impact on our financial condition and results of operations. ​ Currently, we sell a portion of the residential real estate and government guaranteed loans we originate.
Our stock price could fluctuate significantly in response to our quarterly or annual results and the impact of these risk factors on our operating results or financial position. ​ 19 Table of Contents Secondary mortgage, government guaranteed loan and interest rate swap market conditions could have a material impact on our financial condition and results of operations. ​ Currently, we sell a portion of the residential real estate and government guaranteed loans we originate.
Such interactions could create additional legal, regulatory, strategic, and reputational risk to the Banks and the Company. ​ 21 Table of Contents Credit and Lending Risks ​ We must effectively manage our credit risk. ​ There are risks inherent in making any loan, including risks inherent in dealing with specific borrowers, risks of nonpayment, risks resulting from uncertainties as to the future value of collateral and risks resulting from changes in economic and industry conditions.
Such interactions could create additional legal, regulatory, strategic, and reputational risk to the Banks and the Company. ​ Credit and Lending Risks ​ We must effectively manage our credit risk. ​ There are risks inherent in making any loan, including risks inherent in dealing with specific borrowers, risks of nonpayment, risks resulting from uncertainties as to the future value of collateral and risks resulting from changes in economic and industry conditions.
If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, demand for our stock could decrease, which could cause our stock price and trading volume to decline. ​ Our reputation could be damaged by negative publicity. ​ Reputational risk, or the risk to our business, financial condition or results of operations from negative publicity, is inherent in our business.
If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, demand for our stock could decrease, which could cause our stock price and trading volume to decline. ​ 28 Table of Contents Our reputation could be damaged by negative publicity. ​ Reputational risk, or the risk to our business, financial condition or results of operations from negative publicity, is inherent in our business.
Although we have policies and procedures designed to mitigate the risk of any such violations, there can be no assurance that such violations will not occur. ​ Future legislation, regulation, and government policy could affect the banking industry as a whole, including our business and results of operations, in ways that are difficult to predict.
Although we 22 Table of Contents have policies and procedures designed to mitigate the risk of any such violations, there can be no assurance that such violations will not occur. ​ Future legislation, regulation, and government policy could affect the banking industry as a whole, including our business and results of operations, in ways that are difficult to predict.
The market value of real estate securing our CRE loans can fluctuate significantly in a short period of time as a result of interest rates and market conditions in the geographic area in which the real estate is located.
The market value of real estate securing our CRE loans can fluctuate significantly in a short period of time as a result of factors including interest rates and market conditions in the geographic area in which the real estate is located.
Any determination that the hedge 18 Table of Contents created by the swaps was ineffective could have a material adverse effect on our results of operations and cash flows and result in volatility in our operating results. In addition, any changes in relevant accounting standards relating to the swaps, especially ASC 815, Derivatives and Hedging, could materially increase earnings volatility.
Any determination that the hedge created by the swaps was ineffective could have a material adverse effect on our results of operations and cash flows and result in volatility in our operating results. In addition, any changes in relevant accounting standards relating to the swaps, especially ASC 815, Derivatives and Hedging, could materially increase earnings volatility.
As a result of the recent increase in interest rates and other factors, we have observed a corresponding decline in the value of commercial real estate securing these loans. ​ 22 Table of Contents Our loan/lease portfolio has a significant concentration of CRE loans, which involve risks specific to real estate values. ​ CRE lending comprises a significant portion of our lending business.
As a result of the recent increase in interest rates and other factors, we have observed a corresponding decline in the value of commercial real estate securing these loans. ​ Our loan/lease portfolio has a significant concentration of CRE loans, which involve risks specific to real estate values. ​ CRE lending comprises a significant portion of our lending business.
Compliance with current or future privacy, data protection and information security laws could result in higher compliance and technology costs and could restrict our ability to provide certain products and services, which could adversely affect our business. ​ 27 Table of Contents System failure or breaches of our network security could subject us to increased operating costs as well as litigation and other liabilities. ​ The computer systems and network infrastructure we or our third-party partners use could be vulnerable to unforeseen problems.
Compliance with current or future privacy, data protection and information security laws could result in higher compliance and technology costs and could restrict our ability to provide certain products and services, which could adversely affect our business. ​ System failure or breaches of our or our third-party partners’ network security could subject us to increased operating costs as well as litigation and other liabilities. ​ The computer systems and network infrastructure we or our third-party partners use could be vulnerable to unforeseen problems.
Our borrowers may experience financial difficulties, and the level of nonperforming loans, charge-offs and delinquencies could rise, which could negatively impact our business through increased provision expense, reduced interest income on loans/leases, and increased expenses incurred to carry and resolve problem loans/leases. ​ C&I loans make up a large portion of our loan/lease portfolio. ​ C&I loans were $1.8 billion, or approximately 28% of our total loan/lease portfolio, as of December 31, 2023.
Our borrowers may experience financial difficulties, and the level of nonperforming loans, charge-offs and delinquencies could rise, which could negatively impact our business through increased provision expense, reduced interest income on loans/leases, and increased expenses incurred to carry and resolve problem loans/leases. ​ C&I loans make up a large portion of our loan/lease portfolio. ​ C&I loans were $1.9 billion, or approximately 28% of our total loan/lease portfolio, as of December 31, 2024.
Any changes to the SBA program, including changes to the level of guaranty provided by the federal government on SBA loans or changes to the level of funds appropriated 28 Table of Contents by the federal government to the various SBA programs, may also have an adverse effect on our business, results of operations and financial condition. ​ Historically we have sold the guaranteed portion of our SBA loans in the secondary market.
Any changes to the SBA program, including changes to the level of guaranty provided by the federal government on SBA loans or changes to the level of funds appropriated by the federal government to the various SBA programs, may also have an adverse effect on our business, results of operations and financial condition. ​ Historically we have sold the guaranteed portion of our SBA loans in the secondary market.
Any of these results could have a material adverse effect on our ability to grow and remain profitable. If increased competition causes us 24 Table of Contents to significantly discount the interest rates we offer on loans or increase the amount we pay on deposits, our net interest income could be adversely impacted.
Any of these results could have a material adverse effect on our ability to grow and remain profitable. If increased competition causes us to significantly discount the interest rates we offer on loans or increase the amount we pay on deposits, our net interest income could be adversely impacted.
An important function of the Federal Reserve is to regulate the money supply and credit conditions of the nation. Among the instruments used by the Federal Reserve to implement these objectives are open market operations in U.S. government securities, adjustments of the discount rate and changes in reserve requirements 15 Table of Contents against bank deposits.
An important function of the Federal Reserve is to regulate the money supply and credit conditions of the nation. Among the instruments used by the Federal Reserve to implement these objectives are open market operations in U.S. government securities, adjustments of the discount rate and changes in reserve requirements against bank deposits.
Further, as a structural matter, our right to participate in the assets of the Banks in the event of a liquidation or reorganization of any of the Banks would be subject to the claims of the creditors of such Bank, including depositors, which would take 23 Table of Contents priority except to the extent we may be a creditor with a recognized claim.
Further, as a structural matter, our right to participate in the assets of the Banks in the event of a liquidation or reorganization of any of the Banks would be subject to the claims of the creditors of such Bank, including depositors, which would take priority except to the extent we may be a creditor with a recognized claim.
These changes are beyond our control, can be difficult to predict and could materially impact how we report our financial condition and results of operations. ​ Operational Risks ​ The Company's information systems may experience an interruption or breach in security and cyber-attacks, all of which could have a material adverse effect on the Company's business. ​ The Company relies heavily on internal and outsourced technologies, communications, and information systems to conduct its business, particularly with respect to our core processing provider and our mobile banking provider.
These changes are beyond our control, can be difficult to predict and could materially impact how we report our financial condition and results of operations. ​ Operational Risks ​ The Company's information systems or those of its third-party partners may experience an interruption, failure or breach in security and cyber-attacks, all of which could have a material adverse effect on the Company's business. ​ The Company relies heavily on internal and outsourced technologies, communications, and information systems to conduct its business, particularly with respect to our core processing provider and our mobile banking provider.
Changes to the LIHTC programs, including changes to the level of tax credits provided by the federal government on low-income housing, may have an adverse effect on our business, results of operations and financial condition. ​ Capital and Liquidity Risks ​ Liquidity risks could affect operations and jeopardize our business, results of operations and financial condition. ​ Liquidity is essential to our business.
Changes to the LIHTC programs, including 25 Table of Contents changes to the level of tax credits provided by the federal government on low-income housing, may have an adverse effect on our business, results of operations, and financial condition. ​ Capital and Liquidity Risks ​ Liquidity risks could affect operations and jeopardize our business, results of operations and financial condition. ​ Liquidity is essential to our business.
For example, the cumulative effects of decreased economic activity, changes in the economy and overall business environment, labor availability shortages and supply chain constraints as a result of the COVID-19 pandemic have adversely affected C&I loans, and we expect this trend to continue for certain portions of our loan portfolio, depending on the strength and speed of economic recovery and other factors, particularly if general economic conditions worsen. ​ Most often, the collateral for C&I loans is accounts receivable, inventory, equipment and real estate.
For example, during the COVID-19 pandemic, the cumulative effects of decreased economic activity, changes in the economy and overall business environment, labor availability shortages and supply chain constraints adversely affected C&I loans, and we expect this trend to continue for certain portions of our loan portfolio, depending on the strength and speed of economic recovery and other factors, particularly if general economic conditions worsen. ​ Most often, the collateral for C&I loans is accounts receivable, inventory, equipment and real estate.
Additionally, we may be negatively affected by brand or reputational harm to other community banks or to the community banking industry. ​ Accounting and Tax Risks ​ The preparation of our Consolidated Financial Statements requires us to make estimates and judgments, which are subject to an inherent degree of uncertainty and which may differ from actual results. ​ Our Consolidated Financial Statements are prepared in accordance with U.S.
Additionally, we may be negatively affected by brand or reputational harm to other community banks or to the community banking industry, including due to failures of other financial institutions. ​ Accounting and Tax Risks ​ The preparation of our Consolidated Financial Statements requires us to make estimates and judgments, which are subject to an inherent degree of uncertainty and which may differ from actual results. ​ Our Consolidated Financial Statements are prepared in accordance with U.S.
Such conditions could adversely affect the credit quality of our loans, financial condition and results of operations. ​ Interest rates and other conditions impact our results of operations. ​ Our profitability is in large part a function of the spread between the interest rates earned on investments and loans/leases and the interest rates paid on deposits and other interest-bearing liabilities.
Such conditions could adversely affect the credit quality of our loans, financial condition and results of operations. ​ 17 Table of Contents Interest rates and other conditions impact our results of operations. ​ Our profitability is in large part a function of the spread between the interest rates earned on investments and loans/leases and the interest rates paid on deposits and other interest-bearing liabilities.
Future levels of swap fee income are dependent upon the needs of our traditional commercial and LIHTC borrowers, and the size of the related nonrefundable swap fee may fluctuate on the interest rate environment. ​ 17 Table of Contents Our hedging strategies may not be successful in mitigating our exposure to interest rate risk.
Future levels of swap fee income are dependent upon the needs of our traditional commercial and LIHTC borrowers, and the size of the related nonrefundable swap fee may fluctuate on the interest rate environment. ​ Our hedging strategies may not be successful in mitigating our exposure to interest rate risk.
In addition, such events could affect the stability of the Company's deposit base, impair the ability of borrowers to repay outstanding loans, impair the value of collateral securing loans, cause significant property damage, result in loss of revenue and/or cause the Company to 30 Table of Contents incur additional expenses.
In addition, such events could affect the stability of the Company’s deposit base, impair the ability of borrowers to repay outstanding loans, impair the value of collateral securing loans, cause significant property damage, result in loss of revenue and/or cause the Company to incur additional expenses.
Additional provisions and loan/lease losses in excess of our allowance may adversely affect our business, financial condition and results of operations. ​ Competitive and Strategic Risks ​ We face intense competition in all phases of our business from other banks, financial institutions and non-bank financial services providers. ​ The banking and financial services businesses in our markets are highly competitive.
Additional provisions and loan/lease losses in excess of our allowance may adversely affect our business, financial condition and results of operations. ​ Competitive and Strategic Risks ​ We face intense competition in all phases of our business from other banks, financial institutions and non-bank financial services providers, including digital asset service providers. ​ The banking and financial services businesses in our markets are highly competitive.
Although management believes that the allowance as of December 31, 2023 was adequate to absorb losses on any existing loans/leases that may become uncollectible, we cannot predict loan/lease losses with certainty, and we cannot assure you that our allowance will prove sufficient to cover actual loan/lease losses in the future, particularly if economic conditions are more difficult than what management currently expects.
Although management believes that the allowance as of December 31, 2024 was adequate to absorb losses on any existing loans/leases that may become uncollectible, we cannot predict loan/lease losses with certainty, and we cannot assure you that our allowance will prove sufficient to cover actual 26 Table of Contents loan/lease losses in the future, particularly if economic conditions are more difficult than what management currently expects.
Industry trends in ransomware, phishing, and other intrusion methods have increased significantly and will continue to pose increased risk while the Company’s operations remain partially remote. ​ In addition to cyber-attacks or other security breaches involving the theft of sensitive and confidential information, hackers have engaged in attacks against financial institutions, retailers and government agencies, particularly denial of service attacks that are designed to disrupt key business or government services, such as customer-facing web sites.
Industry trends in ransomware, phishing, and other intrusion methods have increased significantly and will continue to pose increased risk while the Company’s operations remain partially remote. ​ In addition to cyber-attacks or other security breaches involving the theft of sensitive and confidential information, hackers have engaged in attacks against financial institutions, retailers and government agencies, as well as the third-party partners that serve them, particularly denial of service attacks that are designed to disrupt key business or government services, such as customer-facing web sites.
As of December 31, 2023, the Banks had deposits, borrowings and other liabilities in the aggregate of approximately $7.7 billion. ​ Our allowance for credit losses may prove to be insufficient to absorb losses in our loan/lease portfolio. ​ We establish our allowance for credit losses in consultation with management of our subsidiaries and maintain it at a level considered adequate by management to absorb loan/lease losses that are inherent in the portfolio.
As of December 31, 2024, the Banks had deposits, borrowings and other liabilities in the aggregate of approximately $8.0 billion. ​ Our allowance for credit losses may prove to be insufficient to absorb losses in our loan/lease portfolio. ​ We establish our allowance for credit losses in consultation with management of our subsidiaries and maintain it at a level considered adequate by management to absorb loan/lease losses that are inherent in the portfolio.
If we are forced to liquidate any of those investments prior to maturity, including because of a lack of liquidity, we would recognize as a charge to earnings the losses attributable to those securities.
If we are forced to liquidate any of those investments 18 Table of Contents prior to maturity, including because of a lack of liquidity, we would recognize as a charge to earnings the losses attributable to those securities.
A summary of this process, along with the results of our net interest income simulations is presented at "Quantitative and Qualitative Disclosures about Market Risk" included under Item 7A of Part II of this Annual Report on Form 10-K.
A summary of this process, along with the results of our net interest income simulations is presented at “Quantitative and Qualitative Disclosures about Market Risk” included under Item 7A of Part II of this Annual Report on Form 10-K.
Based on management's evaluation, it was determined that 16 Table of Contents the gross unrealized losses at December 31, 2023 were primarily a function of the changes in certain market interest rates. ​ A large percentage of our investment securities has fixed interest rates and are classified as available for sale.
Based on management’s evaluation, it was determined that the gross unrealized losses at December 31, 2024 were primarily a function of the changes in certain market interest rates. ​ A large percentage of our investment securities has fixed interest rates and are classified as available for sale.
In addition, due to the inherent subjectivity of the assessments and unpredictability of the outcome of legal proceedings, amounts accrued may not represent the ultimate loss to us from the legal proceedings in question.
In addition, due to the inherent subjectivity of the assessments and unpredictability of the outcome of legal proceedings, amounts accrued may not represent the 34 Table of Contents ultimate loss to us from the legal proceedings in question.
Our securities portfolio has an average duration of 6.2 years, so we expect an increase in realized losses if interest rates continue to increase in 2024. ​ The market value of investments may be affected by factors other than the underlying performance of the servicer of the securities or the mortgages underlying the securities, such as changes in the interest rate environment, negative trends in the residential and commercial real estate markets, ratings downgrades, adverse changes in the business climate and a lack of liquidity in the secondary market for certain investment securities.
Our securities portfolio has an average duration of 5.8 years, so we expect an increase in realized losses if interest rates increase in 2025. ​ The market value of investments may be affected by factors other than the underlying performance of the servicer of the securities or the mortgages underlying the securities, such as changes in the interest rate environment, negative trends in the residential and commercial real estate markets, ratings downgrades, adverse changes in the business climate and a lack of liquidity in the secondary market for certain investment securities.
Smaller companies tend to be at a competitive disadvantage and generally have limited operating histories, less sophisticated internal record keeping and financial planning capabilities and fewer financial resources than larger companies.
Smaller companies tend to be at a competitive disadvantage and 24 Table of Contents generally have limited operating histories, less sophisticated internal record keeping and financial planning capabilities and fewer financial resources than larger companies.
In addition, we expect that governments will continue to assess and implement new laws and regulations concerning the use of artificial intelligence, which may affect or impair the usability or efficiency of our products and services and those developed by our third-party partners. ​ We have a substantial amount of debt outstanding and may incur additional indebtedness in the future, which could restrict our operations. ​ As of December 31, 2023, we had $281.8 million of total indebtedness outstanding at the holding company level.
In addition, we expect that governments will continue to assess and implement new laws and regulations concerning the use of artificial intelligence, which may affect or impair the usability or efficiency of our products and services and those developed by our third-party partners. ​ 33 Table of Contents We have a substantial amount of debt outstanding and may incur additional indebtedness in the future, which could restrict our operations. ​ As of December 31, 2024, we had $282.3 million of total indebtedness outstanding at the holding company level.
Economic events, including decreases in office occupancy following the COVID-19 pandemic, or governmental regulations outside of the control of the borrower or lender could negatively impact the future cash flow and market values of the affected properties. ​ Included in our CRE lending portfolio are our LIHTC construction and permanent loans, which have the same inherent risks as our other non-owner occupied CRE loans.
Economic events, including decreases in office occupancy following the COVID-19 pandemic as a result of the shift to remote and hybrid work environments, or governmental regulations outside of the control of the borrower or lender could negatively impact the future cash flow and market values of the affected properties. ​ Included in our CRE lending portfolio are our LIHTC construction, and permanent loans, which have the same inherent risks as our other non-owner occupied CRE loans.
On a quarterly basis, we formally evaluate investments and other assets for impairment indicators. Reduction in the value, or impairment of our investment securities, can impact our earnings and common stockholders' equity. We maintained a balance of $1.0 billion, or 12% of our assets, in investment securities at December 31, 2023.
On a quarterly basis, we formally evaluate investments and other assets for impairment indicators. Reduction in the value, or impairment of our investment securities, can impact our earnings and common stockholders’ equity. We maintained a balance of $1.2 billion, or 13% of our assets, in investment securities at December 31, 2024.
Nonetheless, the shift in Illinois law legalizing cannabis use has increased the number of direct and indirect cannabis-related businesses in Illinois, and therefore has increased the likelihood that the Banks could interact with such businesses, as well as their owners and employees.
Nonetheless, the shift in Illinois and Missouri laws legalizing cannabis use has increased the number of direct and indirect cannabis-related businesses in these states, and therefore has increased the likelihood that the Banks could interact with such businesses, as well as their owners and employees.
Congress, state legislatures and federal and state regulatory agencies have continued to propose and advance numerous legislative and regulatory initiatives seeking to mitigate the effects of climate change. Consumers and businesses may also change their behavior on their own as a result of these concerns.
Congress, state legislatures and federal and state banking agencies have proposed and advanced numerous legislative and regulatory initiatives seeking to mitigate the effects of climate change. Consumers and businesses may also change their behavior on their own as a result of these concerns.
In addition, trends in financial and 26 Table of Contents business reporting, including environmental, social and governance (ESG) related disclosures, could require us to incur additional reporting expense.
In addition, trends in financial and business reporting, including environmental, social and governance (ESG) related disclosures, could require us to incur additional reporting expense.
This could decrease loan demand, harm the credit characteristics of our existing loan portfolio and decrease the value of collateral securing loans in the portfolio. ​ Declines in asset values may result in impairment charges and adversely affect the value of our investments, financial performance and capital. ​ The market value of investments in our securities portfolio has become increasingly volatile in recent years, and as of December 31, 2023, we had gross unrealized losses of $84.8 million, or 8.2% of amortized cost, in our investment portfolio (offset by gross unrealized gains of $33.6 million).
This could decrease loan demand, harm the credit characteristics of our existing loan portfolio and decrease the value of collateral securing loans in the portfolio. ​ Declines in asset values may result in impairment charges and adversely affect the value of our investments, financial performance and capital. ​ The market value of investments in our securities portfolio has become increasingly volatile in recent years, and as of December 31, 2024, we had gross unrealized losses of $113.6 million, or 9.7% of amortized cost, in our investment portfolio (offset by gross unrealized gains of $28.1 million).
Quantitative and Qualitative Disclosures About Market Risk and Note 8 to the Consolidated Financial Statements. Continued elevated levels of inflation could adversely impact our business and results of operations. ​ The U.S. has recently experienced elevated levels of inflation, with the consumer price index at 3.4% at the end of 2023.
Quantitative and Qualitative Disclosures About Market Risk and Note 7 to the Consolidated Financial Statements. Continued elevated levels of inflation could adversely impact our business and results of operations. ​ The U.S. has recently experienced elevated levels of inflation, with the consumer price index at 2.9% at the end of 2024.
As the Company's reliance on technology has increased, so have the potential risks of a technology-related operation interruption (such as disruptions in the Company's customer relationship management, general ledger, deposit, loan, or other systems) or the occurrence of a cyber-attacks (such as unauthorized access to the Company's systems or those of our third-party partners, including as a result of increasingly sophisticated methods of conducting cyber-attacks, including those employing artificial intelligence).
As the Company’s reliance on technology has increased, so have the potential risks of a technology-related operation interruption (such as disruptions in the Company’s customer relationship 29 Table of Contents management, general ledger, deposit, loan, or other systems), intentional or unintentional acts by those having authorized access to the Company’s systems and confidential information, or the occurrence of a cyber-attack (such as unauthorized access to the Company's systems or those of our third-party partners, including as a result of increasingly sophisticated methods of conducting cyber-attacks, including those employing artificial intelligence).
Adverse developments affecting real estate values in one or more of our markets could increase the credit risk associated with our loan portfolio.
Adverse developments affecting real estate values in one or more of our markets, or which disproportionately affect a class of borrower, could increase the credit risk associated with our loan portfolio.
Their use also affects interest rates charged on loans or paid on deposits. ​ It is currently expected that during 2024, and perhaps beyond, the Federal Open Market Committee of the Federal Reserve, or FOMC, may continue to increase interest rates to reduce the rate of inflation.
Their use also affects interest rates charged on loans or paid on deposits. ​ It is currently expected that during 2025, and perhaps beyond, the Federal Open Market Committee of the Federal Reserve, or FOMC, may decrease interest rates.
Our operations are dependent upon our ability to protect our computer equipment against damage from physical theft, fire, power loss, telecommunications failure or a similar catastrophic event, as well as from security breaches, denial of service attacks, viruses, worms and other disruptive problems caused by hackers.
Our operations are dependent upon our ability to protect our and our third-party partners’ computer equipment against damage from physical theft, fire, power loss, telecommunications failures, or similar catastrophic events, as well as from security breaches, denial of service attacks, viruses, worms, and other disruptive problems.
At December 31, 2023, our allowance as a percentage of gross loans/leases held for investment was 1.33%, and as a percentage of total NPLs was 265.54%. ​ In addition, we had net charge-offs as a percentage of gross average loans/leases of 0.13% for the year ended December 31, 2023.
At December 31, 2024, our allowance as a percentage of gross loans/leases held for investment was 1.32%, and as a percentage of total NPLs was 202.6%. ​ In addition, we had net charge-offs as a percentage of gross average loans/leases of 0.05% for the year ended December 31, 2024.
Severe weather, natural disasters, pandemics, acts of terrorism or war or other adverse external events could significantly impact the Company's business. ​ As the Company's operating and market footprint continues to grow, severe weather, natural disasters, pandemics (including the COVID-19 pandemic in the U.S.), acts of terrorism or war (including the Russian invasion of Ukraine and the Israeli-Palestinian conflict) and other adverse external events could have a significant impact on the Company's ability to conduct business.
Severe weather, natural disasters, pandemics, acts of terrorism or war or other adverse external events could significantly impact the Company's business. ​ As the Company's operating and market footprint continues to grow, severe weather, natural disasters, pandemics, acts of terrorism or war (including the Russian invasion of Ukraine and ongoing conflicts in the Middle East) and other adverse external events, including the response of the U.S. government to such events, could have a significant impact on the Company’s ability to conduct business.
These effects from interest rate changes or from other sustained economic stress or a recession, among other matters, could have a material adverse effect on our business, financial condition, liquidity, and results of operations. ​ Given the complex factors affecting the strength of the U.S. economy, including uncertainties regarding the persistence of inflation, geopolitical developments and the wars between Russia and Ukraine and between Israel and Palestine, and resulting disruptions in political systems and the global energy market, and tight labor market conditions and supply chain issues, there is a meaningful risk that the Federal Reserve and other central banks may raise interest rates more than expected, thereby limiting economic growth and potentially causing an economic recession.
These effects from interest rate changes or from other sustained economic stress or a recession, among other matters, could have a material adverse effect on our business, financial condition, liquidity, and results of operations. ​ Given the complex factors affecting the strength of the U.S. economy, including uncertainties regarding the persistence of inflation, geopolitical developments and including conflicts in the Middle East and the Russian invasion of Ukraine, and their resulting disruptions in political systems and the global energy market, and tight labor market conditions and supply chain issues, there is a meaningful risk that the Federal Reserve and other central banks may maintain interest rates at elevated levels, which may limit economic growth and potentially cause an economic recession.
Specifically, CRE loans were $4.2 billion, or approximately 65% of our total loan/lease portfolio, as of December 31, 2023. Of this amount, $607.4 million, or approximately 14%, was owner-occupied.
Specifically, CRE loans were $4.3 billion, or approximately 64% of our total loan/lease portfolio, as of December 31, 2024. Of this amount, $606.0 million, or approximately 14%, was owner-occupied.
Starting January 1, 2020, however, the Illinois Cannabis Regulation and Tax Act began permitting adults to legally purchase marijuana for recreational use from licensed dispensaries in Illinois. Moreover, effective December 8, 2022, Missouri also began permitting adults to possess marijuana for recreational use.
Starting January 1, 2020, however, the Illinois Cannabis Regulation and Tax Act began permitting adults 21 years and older to legally purchase marijuana for recreational use from licensed dispensaries in Illinois.
In addition, if interest rates continue to rise in response to elevated levels of inflation, the value of our securities portfolio could be negatively impacted. Continued elevated levels of inflation could also cause increased volatility and uncertainty in the business environment, which could adversely affect loan demand and our clients’ ability to repay indebtedness.
Continued elevated levels of inflation could also cause increased volatility and uncertainty in the business environment, which could adversely affect loan demand and our clients’ ability to repay indebtedness.
Our interest rate contracts expose us to: ● basis or spread risk, which is the risk of loss associated with variations in the spread between the interest rate contract and the hedged item; ● credit or counter-party risk, which is the risk of the insolvency or other inability of another party to the transaction to perform its obligations; ● interest rate risk; ● volatility risk, which is the risk that the expected uncertainty relating to the price of the underlying asset differs from what is anticipated; and ● liquidity risk.
To limit the impact of interest rate changes on earnings, prepayment penalties and cash flows and to lower overall borrowing costs while taking into account variable interest rate risk, we may borrow at fixed rates or variable rates depending upon prevailing market conditions. 20 Table of Contents Our interest rate contracts expose us to: ● basis or spread risk, which is the risk of loss associated with variations in the spread between the interest rate contract and the hedged item; ● credit or counter-party risk, which is the risk of the insolvency or other inability of another party to the transaction to perform its obligations; ● interest rate risk; ● volatility risk, which is the risk that the expected uncertainty relating to the price of the underlying asset differs from what is anticipated; and ● liquidity risk.
We and our banks undergo periodic examinations by these regulators, who have extensive discretion and authority to prevent or remedy unsafe or unsound practices or violations of law by banks and bank holding companies. The primary federal and state banking laws and regulations that affect us are described in Appendix A “Supervision and Regulation” to this report.
We and our banks undergo periodic examinations by these regulators, who have extensive discretion and authority to prevent or remedy unsafe or unsound practices or violations of law by banks and bank holding companies.
Continued elevated levels of inflation could have complex effects on our business and results of operations, some of which could be materially adverse. For example, elevated inflation harms consumer purchasing power, which could negatively affect our retail customers and the economic environment and, ultimately, many of our business customers, and could also negatively affect our levels of non-interest expense.
For example, elevated inflation harms consumer purchasing power, which could negatively affect our retail customers and the economic environment and, ultimately, many of our business customers, and could also negatively affect our levels of non-interest expense. In addition, if interest rates rise in response to elevated levels of inflation, the value of our securities portfolio could be negatively impacted.
Misconduct by our employees could include hiding unauthorized activities from us, improper or unauthorized activities on behalf of our customers or improper use of confidential information. It is not always possible to prevent employee errors and misconduct, and the precautions we take to prevent and detect this activity may not be effective in all cases.
It is not always possible to prevent employee errors and misconduct, and the precautions we take to prevent and detect this activity may not be effective in all cases.
An overall labor shortage, lack of skilled labor, increased turnover or labor inflation could have a material adverse impact on our operations, results of operations, liquidity or cash flows. 19 Table of Contents Regulatory and Legal Risks ​ We may be materially and adversely affected by the highly regulated environment in which we operate. ​ The Company and its bank subsidiaries are subject to extensive federal and state regulation, supervision and examination.
Regulatory and Legal Risks ​ We may be materially and adversely affected by the highly regulated environment in which we operate. ​ The Company and its bank subsidiaries are subject to extensive federal and state regulation, supervision and examination.
Such events may also cause reductions in regional and local economic activity that may have an adverse effect on our customers, which could limit our ability to raise and invest capital in these areas and communities. ​ There is uncertainty surrounding potential legal, regulatory and policy changes by new presidential administrations in the U.S. that may directly affect financial institutions and the global economy. ​ 2024 is a presidential election year.
Such events may also cause reductions in regional and local economic activity that may have an adverse effect on our customers, which could limit our ability to raise and invest capital in these areas and communities. ​ 23 Table of Contents Legal, regulatory and policy changes may directly affect financial institutions and the global economy. ​ Changes in policy and at banking agencies, including changes in interpretation and prioritization, occur over time through policy and personnel changes following federal- and state-level elections, which lead to changes involving the level of oversight and focus on the financial services industry.
Changes in federal policy and at regulatory agencies occur over time through policy and personnel changes following elections, which lead to changes involving the level of oversight and focus on the financial services industry. The nature, timing and economic and political effects of potential changes to the current legal and regulatory framework affecting financial institutions remain highly uncertain.
The nature, timing and economic and political effects of potential changes to the current legal and regulatory framework affecting financial institutions remain highly uncertain in connection with a change in presidential administration.
In 2023, the FOMC increased at various dates throughout the year the target range for the federal funds rate from 4.25% to 4.50% to a range of 5.25% to 5.50%. All of these increases were expressly made in response to inflationary pressures, which may continue in 2024.
In 2024, the FOMC decreased the target range for the federal funds rate from 5.25% to 5.50% to a range of 4.25% to 4.50%. The decrease was expressly made in response to inflation moderating and the labor market weakening.
Failure to ensure effective transfer of knowledge and smooth transitions involving key employees could hinder our strategic planning and execution. ​ We have a continuing need for technological change, and we may not have the resources to effectively implement new technology. ​ The financial services industry continues to undergo rapid technological changes with frequent introductions of new technology-driven products and services.
If our enterprise risk practices are ineffective, either because they fail to keep pace with changes in the financial markets, regulatory requirements, our businesses, our counterparties, clients or service providers or for other reasons, we could incur losses, suffer reputational damage or find ourselves out of compliance with applicable regulatory or contractual mandates. ​ We have a continuing need for technological change, and we may not have the resources to effectively implement new technology. ​ The financial services industry continues to undergo rapid technological changes with frequent introductions of new technology-driven products and services.
Removed
If the FOMC further increases the targeted federal funds rates in response to inflationary pressures, overall interest rates will likely rise, which may negatively impact the entire national economy.
Added
Item 1A. Risk Factors Investing in the Company’s common stock involves a high degree of risk. The material risks and uncertainties that management believes affect the Company are described below.
Removed
In addition, our net interest income could be adversely affected if the rates we pay on deposits and borrowings increase more rapidly than the rates we earn on loans and other assets. Rising interest rates also may reduce the demand for loans and the value of fixed-rate investment securities.
Added
Before you decide to invest, you should carefully review and consider the risks described below, together with all other information included in this report and other documents the Company files with the SEC.
Removed
To limit the impact of interest rate changes on earnings, prepayment penalties and cash flows and to lower overall borrowing costs while taking into account variable interest rate risk, we may borrow at fixed rates or variable rates depending upon prevailing market conditions.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur management team is responsible for the day-to-day management of risks we face, including our current Chief Operating Officer and Chief Security Officer. These officers are both experienced Certified Information Systems Security Professionals (CISSPs) who have more than 10 years of relevant experience in technology, security, and risk management across multiple industries, including finance and banking.
Biggest changeThe Chief Operating Officer is an experienced Certified Information Systems Security Professional (CISSP) with more than 10 years of relevant experience in technology, security, and risk management across multiple industries, including finance and banking. 35 Table of Contents In addition, our board of directors, as a whole and through its Risk Oversight Committee (the “Risk Committee”), is responsible for the oversight of risk management.
Accordingly, we have devoted significant resources to assessing, identifying and managing risks associated with cybersecurity threats, including: ● an internal cybersecurity team that is responsible for establishing security standards and conducting regular assessments of our information systems, controls, vulnerabilities and potential improvements; ● continuous monitoring tools to detect and respond to cybersecurity threats in real-time; ● performing due diligence with respect to our third-party service providers, including their cybersecurity practices, and requiring contractual commitments from our service providers to take certain cybersecurity measures; ● third-party cybersecurity consultants, who conduct periodic penetration testing and vulnerability assessments to identify potential weaknesses in our systems and processes; and 31 Table of Contents ● periodic cybersecurity training for our workforce.
Accordingly, we have devoted significant resources to assessing, identifying and managing risks associated with cybersecurity threats, including: ● an internal cybersecurity team that is responsible for establishing security standards and conducting regular assessments of our information systems, controls, vulnerabilities and potential improvements; ● continuous monitoring tools to detect and respond to cybersecurity threats in real-time; ● performing due diligence with respect to our third-party service providers , including their cybersecurity practices, and requiring contractual commitments from our service providers to take certain cybersecurity measures; ● third-party cybersecurity consultants, who conduct periodic penetration testing and vulnerability assessments to identify potential weaknesses in our systems and processes; and ● periodic cybersecurity training for our workforce.
Removed
In addition, our board of directors, as a whole and through its Risk Oversight Committee (the “Risk Committee”), is responsible for the oversight of risk management.
Added
Our management team is responsible for the day-to-day management of risks we face, including our current Chief Operating Officer and Chief Security Officer.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings There are no material pending legal proceedings to which the Company or any of its subsidiaries is a party other than ordinary routine litigation incidental to their respective businesses. Item 4. Mine Safety Disclosures Not applicable. 32 Table of Contents Part II ​
Biggest changeItem 3. Legal Proceedings There are no material pending legal proceedings to which the Company or any of its subsidiaries is a party other than ordinary routine litigation incidental to their respective businesses. Item 4. Mine Safety Disclosures Not applicable. Part II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeAll shares that were repurchased under the share repurchase program were retired. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total number of shares ​ Maximum number ​ ​ ​ ​ ​ ​ purchased as part of ​ of shares that may yet ​ ​ Total number of ​ Average price ​ publicly announced ​ be purchased under Period ​ shares purchased paid per share plans or programs the plans or programs ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ January 1-31, 2023 ​ — ​ — ​ 1,364,085 ​ 935,915 ​ February 1-28, 2023 ​ 60,000 ​ $ 53.61 ​ 1,424,085 ​ 875,915 ​ March 1-31, 2023 ​ 92,500 ​ 48.62 ​ 1,516,585 ​ 783,415 ​ April 1-30, 2023 ​ 22,500 ​ 42.97 ​ 1,539,085 ​ 760,915 ​ May 1-31, 2023 ​ — ​ — ​ 1,539,085 ​ 760,915 ​ June 1-30, 2023 ​ — ​ — ​ 1,539,085 ​ 760,915 ​ July 1-31, 2023 ​ — ​ — ​ 1,539,085 ​ 760,915 ​ August 1-31, 2023 ​ — ​ — ​ 1,539,085 ​ 760,915 ​ September 1-30, 2023 ​ — ​ — ​ 1,539,085 ​ 760,915 ​ October 1-31, 2023 ​ — ​ — ​ 1,539,085 ​ 760,915 ​ November 1-30, 2023 ​ — ​ — ​ 1,539,085 ​ 760,915 ​ December 1-31, 2023 ​ — ​ — ​ 1,539,085 ​ 760,915 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 34 Table of Contents Stockholder Return Performance Graph.
Biggest changeThere were 175,000 and 970,000 shares of common stock purchased by the Company during the years ending December 31, 2023 and 2022, respectively. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total number of shares ​ Maximum number ​ ​ ​ ​ ​ ​ purchased as part of ​ of shares that may yet ​ ​ Total number of ​ Average price ​ publicly announced ​ be purchased under Period ​ shares purchased paid per share plans or programs the plans or programs ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ January 1-31, 2022 ​ — ​ — ​ 394,085 ​ 405,915 ​ February 1-28, 2022 ​ — ​ — ​ 394,085 ​ 405,915 ​ March 1-31, 2022 ​ 77,500 ​ $ 56.98 ​ 471,585 ​ 328,415 ​ April 1-30, 2022 ​ 200,000 ​ 56.55 ​ 671,585 ​ 128,415 ​ May 1-31, 2022 ​ 192,500 ​ 53.29 ​ 864,085 ​ 1,435,915 ​ June 1-30, 2022 ​ 210,000 ​ 54.40 ​ 1,074,085 ​ 1,225,915 ​ July 1-31, 2022 ​ 190,000 ​ 55.18 ​ 1,264,085 ​ 1,035,915 ​ August 1-31, 2022 ​ — ​ — ​ 1,264,085 ​ 1,035,915 ​ September 1-30, 2022 ​ — ​ — ​ 1,264,085 ​ 1,035,915 ​ October 1-31, 2022 ​ — ​ — ​ 1,264,085 ​ 1,035,915 ​ November 1-30, 2022 ​ 34,506 ​ 51.63 ​ 1,298,591 ​ 1,001,409 ​ December 1-31, 2022 ​ 65,494 ​ 50.20 ​ 1,364,085 ​ 935,915 ​ January 1-31, 2023 ​ — ​ — ​ 1,364,085 ​ 935,915 ​ February 1-28, 2023 ​ 60,000 ​ 53.61 ​ 1,424,085 ​ 875,915 ​ March 1-31, 2023 ​ 92,500 ​ 48.62 ​ 1,516,585 ​ 783,415 ​ April 1-30, 2023 ​ 22,500 ​ 42.97 ​ 1,539,085 ​ 760,915 ​ May 1-31, 2023 ​ — ​ — ​ 1,539,085 ​ 760,915 ​ June 1-30, 2023 ​ — ​ — ​ 1,539,085 ​ 760,915 ​ July 1-31, 2023 ​ — ​ — ​ 1,539,085 ​ 760,915 ​ August 1-31, 2023 ​ — ​ — ​ 1,539,085 ​ 760,915 ​ September 1-30, 2023 ​ — ​ — ​ 1,539,085 ​ 760,915 ​ October 1-31, 2023 ​ — ​ — ​ 1,539,085 ​ 760,915 ​ November 1-30, 2023 ​ — ​ — ​ 1,539,085 ​ 760,915 ​ December 1-31, 2023 ​ — ​ — ​ 1,539,085 ​ 760,915 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 37 Table of Contents ​ Stockholder Return Performance Graph.
Under the terms of the securities, the Company may be prohibited, under certain circumstances, from paying dividends on shares of its common stock. None of these circumstances existed through the date of filing of this Annual Report on Form 10-K. See Note 18 to the Consolidated Financial Statements for additional information regarding dividend restrictions.
Under the terms of the securities, the Company may be prohibited, under certain circumstances, from paying dividends on shares of its common stock. None of these circumstances existed through the date of filing of this Annual Report on Form 10-K. See Note 17 to the Consolidated Financial Statements for additional information regarding dividend restrictions.
On May 19, 2022, the Board of Directors of the Company approved a share repurchase program under which the Company is authorized to repurchase, from time to time as the Company deems appropriate, up to an additional 1,500,000 shares 33 Table of Contents of its outstanding common stock, or approximately 10% of the outstanding shares as of December 31, 2021.
On May 19, 2022, the board of directors of the Company approved a share repurchase program under which the Company is authorized to repurchase, from time to time as the Company deems appropriate, up to an additional 1,500,000 shares of its outstanding common stock, or approximately 10% of the outstanding shares as of December 31, 2021.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information. The common stock, par value $1.00 per share, of the Company is listed on The Nasdaq Global Market under the symbol “QCRH”. The stock began trading on Nasdaq on October 6, 1993.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information. The common stock, par value $1.00 per share, of the Company is listed on The Nasdaq Global Market under the symbol “QCRH.” The stock began trading on Nasdaq on October 6, 1993.
See Appendix A “Supervision and Regulation” for additional information regarding regulatory restrictions on the payment of dividends. The Company also has certain contractual restrictions on its ability to pay dividends. The Company has issued debt securities in public offerings and in private placements.
See Appendix A 36 Table of Contents “Supervision and Regulation” for additional information regarding regulatory restrictions on the payment of dividends. The Company also has certain contractual restrictions on its ability to pay dividends. The Company has issued debt securities in public offerings and in private placements.
The following graph indicates, for the period commencing December 31, 2018 and ending December 31, 2023, a comparison of cumulative total returns for the Company, the Nasdaq Composite Index, and the SNL Bank Nasdaq Index prepared by S&P Global, Charlottesville, Virginia. The graph was prepared at the Company’s request by S&P Global.
The following graph indicates, for the period commencing December 31, 2019 and ending December 31, 2024, a comparison of cumulative total returns for the Company, the Nasdaq Composite Index, and the SNL Bank Nasdaq Index prepared by S&P Global, Charlottesville, Virginia. The graph was prepared at the Company’s request by S&P Global.
As of February 15, 2024, there were 16,792,880 shares of common stock outstanding held by 644 holders of record. Additionally, there are an estimated 3,700 beneficial holders whose stock was held in the street name by brokerage houses and other nominees as of that date. Dividends on Common Stock.
As of February 12, 2025, there were 16,901,169 shares of common stock outstanding held by 596 holders of record. Additionally, there are an estimated 7,140 beneficial holders whose stock was held in the street name by brokerage houses and other nominees as of that date. Dividends on Common Stock.
The information assumes that $100 was invested at the closing price on December 31, 2018 in the common stock of the Company and in each index, and that all dividends were reinvested. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Index 12/31/18 12/31/19 12/31/20 12/31/21 12/31/22 12/31/23 QCR Holdings, Inc. 100.00 137.56 125.15 177.87 158.39 187.23 Nasdaq Composite Index 100.00 136.69 198.10 242.03 163.28 236.17 SNL Bank Nasdaq Index 100.00 136.13 122.09 168.88 132.75 131.57 ​
The information assumes that $100 was invested at the closing price on December 31, 2019 in the common stock of the Company and in each index, and that all dividends were reinvested. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Index 12/31/19 12/31/20 12/31/21 12/31/22 12/31/23 12/31/24 QCR Holdings, Inc. 100.00 90.98 129.30 115.15 136.11 188.66 Nasdaq Composite Index 100.00 144.92 177.06 119.45 172.77 223.87 SNL Bank Nasdaq Index 100.00 89.69 124.06 97.52 96.65 132.60 ​ ​ ​
Purchase of Equity Securities by the Company. There were 175,000, 970,000 and 293,153 shares of common stock purchased by the Company during the years ending December 31, 2023, 2022 and 2021, respectively.
All shares that were repurchased under the share repurchase program were retired. There were no shares of common stock purchased by the Company during the year ending December 31, 2024.

Item 6. [Reserved]

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

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Biggest changeThese additional factors include, but are not limited to, the following: ● The strength of the local, state, national and international economies (including effects of inflationary pressures and supply chain constraints). ​ ● The economic impact of any future terrorist threats and attacks, widespread disease or pandemics (including the COVID-19 pandemic in the United States), acts of war or threats thereof (including the Russian invasion of Ukraine and the Israeli-Palestinian conflict), or other adverse events that could cause economic deterioration or instability in credit markets, and the response of the local, state and national governments to any such adverse external events. ​ ● Changes in accounting policies and practices, as may be adopted by state and federal regulatory agencies, the FASB, the SEC or the PCAOB. ​ ● Changes in local, state and federal laws, regulations and governmental policies concerning the Company’s general business and any other changes in response to the recent failures of other banks. ​ ● Changes in the interest rates and prepayment rates of the Company’s assets (including the impact of LIBOR phase-out and the recent potential additional rate increases by the Federal Reserve). ​ ● Increased competition in the financial services sector, including from non-bank competitors such as credit unions and “fintech” companies, and the inability to attract new customers. ​ ● Changes in technology and the ability to develop and maintain secure and reliable electronic systems. ​ ● Unexpected results of acquisitions which may include failure to realize the anticipated benefits of the acquisitions and the possibility that transaction costs may be greater than anticipated. ​ ● The loss of key executives and employees. ​ ● Changes in consumer spending. ​ ● Unexpected outcomes of existing or new litigation involving the Company. ​ ● The economic impact of exceptional weather occurrences such as tornadoes, floods and blizzards. ​ ● Fluctuations in the value of securities held in our securities portfolio. 64 Table of Contents ● Concentrations within our securities portfolio, large loans to certain borrowers, and large deposits from certain clients. ● The concentration of large deposits from certain clients who have balances above current FDIC insurance limits and who may withdraw deposits to diversify their exposure. ● The level of non-performing assets on our balance sheets. ● Interruptions involving our information technology and communications systems or third-party servicers. ● Breaches or failures of our information security controls or cybersecurity-related incidents. ● The ability of the Company to manage the risks associated with the foregoing as well as anticipated. ​ These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.
Biggest changeThese additional factors include, but are not limited to, the following: ● The strength of the local, state, national and international economies and financial markets (including effects of inflationary pressures and supply chain constraints). ​ ● Effects on the U.S. economy resulting from the implementation of policies proposed by the new presidential administration, including tariffs, mass deportations and tax regulations. ​ ● The economic impact of any future terrorist threats and attacks, widespread disease or pandemics, acts of war or threats thereof (including the Russian invasion of Ukraine and ongoing conflicts in the Middle East), or other adverse events that could cause economic deterioration or instability in credit markets, and the response of the local, state and national governments to any such adverse external events. ​ ● New or revised accounting policies and practices, as may be adopted by state and federal banking agencies, the FASB, the SEC or the PCAOB. ​ ● Changes in local, state and federal laws, regulations and governmental policies concerning the Company’s general business and any changes in response to the bank failures in 2023. ​ ● The imposition of tariffs or other governmental policies impacting the value of products produced by the Company’s commercial borrowers. ​ 67 Table of Contents ● Increased competition in the financial services sector, including from non-bank competitors such as credit unions and fintech companies, and the inability to attract new customers. ​ ● Changes in technology and the ability to develop and maintain secure and reliable electronic systems. ​ ● Unexpected results of acquisitions which may include failure to realize the anticipated benefits of the acquisitions and the possibility that transaction costs may be greater than anticipated. ​ ● The loss of key executives and employees, talent shortages and employee turnover. ​ ● Changes in consumer spending. ​ ● Unexpected outcomes and costs of existing or new litigation or other legal proceedings and regulatory actions involving the Company. ​ ● The economic impact on the Company and its customers of climate change, natural disasters and exceptional weather occurrences such as tornadoes, floods and blizzards. ​ ● Fluctuations in the value of securities held in our securities portfolio, including as a result of changes in interest rates. ● Credit risk and risks from concentrations (by type of borrower, geographic area, collateral and industry) within our loan portfolio and large loans to certain borrowers (including CRE loans). ● The overall health of the local and national real estate market. ● The ability to maintain an adequate level of allowance for credit losses on loans. ● The concentration of large deposits from certain clients who have balances above current FDIC insurance limits and who may withdraw deposits to diversify their exposure. ● The ability to successfully manage liquidity risk, which may increase dependence on non-core funding sources such as brokered deposits, and may negatively impact the Company’s cost of funds. ● The level of non-performing assets on our balance sheets. ● Interruptions involving our information technology and communications systems or third-party servicers. ● The occurrence of fraudulent activity, breaches or failures of our third-party vendors’ information security controls or cybersecurity-related incidents, including as a result of sophisticated attacks using artificial intelligence and similar tools or as a result of insider fraud. ● Changes in the interest rates and repayment rates of the Company’s assets. ● The effectiveness of our risk management framework. ● The ability of the Company to manage the risks associated with the foregoing as well as anticipated. ​ These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. 68 Table of Contents
In compliance with applicable rules of the SEC, all non-GAAP measures are reconciled to the most directly comparable GAAP measure, as follows: ● TCE/TA ratio (non-GAAP) is reconciled to stockholders’ equity and total assets; ● Adjusted net income, adjusted EPS and adjusted ROAA (all non-GAAP measures) are reconciled to net income; ● NIM (TEY) (non-GAAP) and adjusted NIM (TEY) (non-GAAP) are reconciled to NIM; and ● Efficiency ratio (non-GAAP) is reconciled to noninterest expense, net interest income and noninterest income.
In compliance with applicable rules of the SEC, all non-GAAP measures are reconciled to the most directly comparable GAAP measure, as follows: ● TCE/TA ratio (non-GAAP) is reconciled to stockholders’ equity and total assets; ● Adjusted net income, adjusted EPS and adjusted ROAA (all non-GAAP measures) are reconciled to net income; ● NIM (TEY) (non-GAAP) and adjusted NIM (TEY) (non-GAAP) are reconciled to NIM; and ● Efficiency ratio (non-GAAP) and adjusted efficiency ratio (non-GAAP) are reconciled to noninterest expense, net interest income and noninterest income.
Future levels of swap fee income are dependent upon the needs of our traditional commercial and LIHTC borrowers, and the size of the related nonrefundable swap fee may fluctuate depending on the interest rate environment. ​ Also included in capital markets revenue are gains on loan securitizations.
Future levels of swap fee income are dependent upon the needs of our traditional commercial and LIHTC borrowers, and the size of the related nonrefundable swap fee may fluctuate depending on the interest rate environment. ​ Also included in capital markets revenue are gains/losses on loan securitizations.
Approximately 39% of the CRE portfolio are LIHTC loans of which all are performing and all are pass rated. ​ Historically, the Company structures most residential real estate loans to conform to the underwriting requirements of Freddie Mac and Fannie Mae to allow the subsidiary banks to resell the loans on the secondary market to avoid the interest rate risk associated with longer term fixed rate loans and recognizing noninterest income from the gain on sale.
Approximately 43% of the CRE portfolio are LIHTC loans of which all are performing and all are pass rated. ​ Historically, the Company structures most residential real estate loans to conform to the underwriting requirements of Freddie Mac and Fannie Mae to allow the subsidiary banks to resell the loans on the secondary market to avoid the interest rate risk associated with longer term fixed rate loans and recognizing noninterest income from the gain on sale.
See discussion regarding policy limits on bank stock loans in the Lending/Leasing section under Item 1 – Business in Part I of this Annual Report on Form 10-K. 58 Table of Contents SHORT-TERM BORROWINGS The subsidiary banks purchase federal funds for short-term funding needs from the FRB or from their correspondent banks.
See discussion 61 Table of Contents regarding policy limits on bank stock loans in the Lending/Leasing section under Item 1. – Business in Part I of this Annual Report on Form 10-K. SHORT-TERM BORROWINGS The subsidiary banks purchase federal funds for short-term funding needs from the FRB or from their correspondent banks.
Additionally, a comprehensive list of the acronyms and abbreviations used throughout this discussion is included in Note 1 to the Consolidated Financial Statements. GENERAL The Company was formed in February 1993 for the purpose of organizing QCBT. Over the past thirty years, the Company has grown to include four banking subsidiaries and a number of nonbanking subsidiaries.
Additionally, a comprehensive list of the acronyms and abbreviations used throughout this discussion is included in Note 1 to the Consolidated Financial Statements. GENERAL The Company was formed in February 1993 for the purpose of organizing QCBT. Over the past 31 years, the Company has grown to include four banking subsidiaries and a number of nonbanking subsidiaries.
Although management believes the level of the ACL as of December 31, 2023 was adequate to absorb losses inherent in the loan/lease portfolio, the HTM portfolio and OBS exposures, a decline in local economic conditions, or other factors, could result in increasing losses that cannot be reasonably predicted at this time.
Although management believes the level of the ACL as of December 31, 2024 was adequate to absorb losses inherent in the loan/lease portfolio, the HTM portfolio and OBS exposures, a decline in local economic conditions, or other factors, could result in increasing losses that cannot be reasonably predicted at this time.
The Company had no deposits by foreign depositors in domestic offices as of December 31, 2023 and 2022. Management will continue to focus on growing its core deposit portfolio, including its correspondent banking business at QCBT, as well as shifting the mix from brokered and other higher cost deposits to lower cost core deposits.
The Company had no deposits by foreign depositors in domestic offices as of December 31, 2024 and 2023. Management will continue to focus on growing its core deposit portfolio, including its correspondent banking business at QCBT, as well as shifting the mix from brokered and other higher cost deposits to lower cost core deposits.
The Company has emphasized growing the number and amount of lines of credit in an effort to strengthen this contingent source of liquidity. Additionally, the Company maintains a $50.0 million secured revolving credit note with a variable interest rate and a maturity of June 30, 2024. At December 31, 2023, the full $50.0 million was available.
The Company has emphasized growing the number and amount of lines of credit in an effort to strengthen this contingent source of liquidity. Additionally, the Company maintains a $50.0 million secured revolving credit note with a variable interest rate and a maturity of June 30, 2025. At December 31, 2024, the full $50.0 million was available.
The ability to grow profitably is in part dependent upon the ability to maintain that quality. The Company continually focuses efforts at its subsidiary banks and its leasing company with the intention to improve the overall quality of the Company’s loan/lease portfolio. See Note 4 to the Consolidated Financial Statements for additional information on the Company’s ACL.
The ability to grow profitably is in part dependent upon the ability to maintain that quality. The Company continually focuses efforts at its subsidiary banks and its leasing company with the intention to improve the overall quality of the Company’s loan/lease portfolio. See Note 3 to the Consolidated Financial Statements for additional information on the Company’s ACL.
Forward-looking statements, which may be based upon 63 Table of Contents beliefs, expectations and assumptions of the Company’s management and on information currently available to management, are generally identifiable by the use of words such as “believe,” “expect,” “anticipate,” “bode,” “predict,” “suggest,” “project,” “appear,” “plan,” “intend,” “estimate,” “annualize,” “may,” “will,” “would,” “could,” “should,” “likely,” “might,” “potential,” “continue,” “annualized,” “target,” “outlook,” as well as the negative forms of those words, or other similar expressions.
Forward-looking statements, which may be based upon beliefs, expectations and assumptions of the Company’s management and on information currently available to management, are generally identifiable by the use of words such as “believe,” “expect,” “anticipate,” “bode,” “predict,” “suggest,” “project,” “appear,” “plan,” “intend,” “estimate,” “annualize,” “may,” “will,” “would,” “could,” “should,” “likely,” “might,” “potential,” “continue,” “annualized,” “target,” “outlook,” as well as the negative forms of those words, or other similar expressions.
See Note 18 to the Consolidated Financial Statements for detail of the capital amounts and ratios for the Company and its subsidiary banks. COMMITMENTS, CONTINGENCIES, CONTRACTUAL OBLIGATIONS, AND OFF-BALANCE SHEET ARRANGEMENTS In the normal course of business, the subsidiary banks make various commitments and incur certain contingent liabilities that are not presented in the accompanying Consolidated Financial Statements.
See Note 17 to the Consolidated Financial Statements for detail of the capital amounts and ratios for the Company and its subsidiary banks. COMMITMENTS, CONTINGENCIES, CONTRACTUAL OBLIGATIONS AND OFF-BALANCE SHEET ARRANGEMENTS In the normal course of business, the subsidiary banks make various commitments and incur certain contingent liabilities that are not presented in the accompanying Consolidated Financial Statements.
See Note 10 to the Consolidated Financial Statements for additional information on the Company’s short-term borrowings. FHLB ADVANCES AND OTHER BORROWINGS As a result of their membership in the FHLB of Des Moines, the subsidiary banks have the ability to borrow funds for short-term or long-term purposes under a variety of programs.
See Note 9 to the Consolidated Financial Statements for additional information on the Company’s short-term borrowings. FHLB ADVANCES AND OTHER BORROWINGS As a result of their membership in the FHLB of Des Moines, the subsidiary banks have the ability to borrow funds for short-term or long-term purposes under a variety of programs.
At renewal, the available line amount remained unchanged at $50.0 million for which there was no outstanding balance as of December 31, 2023. Interest on the revolving line of credit is calculated at the greater of: (a) the effective Prime Rate less 0.50% or (b) 3.00% per annum.
At renewal, the available line amount remained unchanged at $50.0 million for which there was no outstanding balance as of December 31, 2024. Interest on the revolving line of credit is calculated at the greater of: (a) the effective Prime Rate less 0.50% or (b) 3.00% per annum.
However, the Company may choose to utilize advances and/or brokered deposits to supplement funding needs, as this is a way for the Company to effectively and efficiently manage interest rate risk. ​ The Company renewed its revolving credit note in the second quarter of 2023.
However, the Company may choose to utilize advances and/or brokered deposits to supplement funding needs, as this is a way for the Company to effectively and efficiently manage interest rate risk. ​ The Company renewed its revolving credit note in the second quarter of 2024.
If a loan is determined to no longer share similar risk characteristics with other assets in the segmented pool, it is evaluated on an individual basis. ​ The Company also estimates expected credit losses over the contractual term of the loan for the unfunded portion of the loan commitment that is not unconditionally cancellable by the Company.
If a loan is determined 39 Table of Contents to no longer share similar risk characteristics with other assets in the segmented pool, it is evaluated on an individual basis. ​ The Company also estimates expected credit losses over the contractual term of the loan for the unfunded portion of the loan commitment that is not unconditionally cancellable by the Company.
See section titled “GAAP to Non-GAAP Reconciliations” for additional information. Adjusted net income for the year excludes a number of non-recurring items, after-tax, as set forth in the “GAAP to Non-GAAP Reconciliation” section.
See section titled “GAAP to Non-GAAP Reconciliations” for additional information. Adjusted net income for the year excludes a number of non-core or non-recurring items, after-tax, as set forth in the “GAAP to Non-GAAP Reconciliation” section.
Deposits in the ICS/CDARS program (which are included in interest bearing demand deposits and time deposits in the preceding table) totaled $2.1 billion, or 31.8% of all deposits, as of December 31, 2023. ​ The Company’s correspondent bank deposit portfolio and funds managed consists of the following: ​ ● Noninterest-bearing deposits which represent the correspondent banks’ operating cash used for processing transactions with the FRB, ● Money market deposits which represent some excess liquidity, and ● EBA balances of the correspondent banks held at the FRB.
Deposits in the ICS/CDARS program (which are included in interest bearing demand deposits and time deposits in the preceding table) totaled $2.4 billion, or 33.8% of all deposits, as of December 31, 2024. ​ The Company’s correspondent bank deposit portfolio and funds managed consists of the following: ​ ● Noninterest-bearing deposits which represent the correspondent banks’ operating cash used for processing transactions with the FRB; ● Money market deposits which represent some excess liquidity; and ● EBA balances of the correspondent banks held at the FRB.
The Company has various financial obligations, including contractual obligations and commitments, which may require future cash payments. The significant fixed and determinable contractual obligations to third parties are deposits without a stated maturity, certificates of deposit, short-term borrowings, subordinated notes, and junior subordinated debentures and totaled $7.2 billion as of December 31, 2023.
The Company has various financial obligations, including contractual obligations and commitments, which may require future cash payments. The significant fixed and determinable contractual obligations to third parties are deposits without a stated maturity, certificates of deposit, short-term borrowings, subordinated notes, and junior subordinated debentures and totaled $7.9 billion as of December 31, 2024.
Refer to the reconciliation of the expected income tax rate to the effective tax rate that is included in Note 15 to the Consolidated Financial Statements for additional details.
Refer to the reconciliation of the expected income tax rate to the effective tax rate that is included in Note 14 to the Consolidated Financial Statements for additional details.
The table below represents the time deposits in FDIC uninsured accounts by maturity: ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, ​ ​ 2023 ​ 2022 ​ (dollars in thousands) ​ ​ ​ ​ ​ ​ ​ U.S.
The table below represents the time deposits in FDIC uninsured accounts by maturity: ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, ​ ​ 2024 ​ 2023 ​ (dollars in thousands) ​ ​ ​ ​ ​ ​ ​ U.S.
In addition, the Company has not originated any subprime, Alt-A, no documentation, or stated income residential real estate loans throughout its history. 53 Table of Contents The following tables set forth the remaining maturities by loan/lease type as of December 31, 2023 and 2022.
In addition, the Company has not originated any subprime, Alt-A, no documentation, or stated income residential real estate loans throughout its history. 56 Table of Contents The following tables set forth the remaining maturities by loan/lease type as of December 31, 2024 and 2023.
Unpredictable future events could 56 Table of Contents adversely affect cash flows for both commercial and individual borrowers, which could cause the Company to experience increases in problem assets, delinquencies and losses on loans/leases, and may require additional increases in the provision for credit losses. Asset quality is a priority for the Company and its subsidiaries.
Unpredictable future events could adversely affect cash flows for both commercial and individual borrowers, which could cause the Company to experience increases in problem assets, delinquencies and losses on loans/leases, and may require additional increases in the provision for credit losses. Asset quality is a priority for the Company and its subsidiaries.
In evaluating net interest income and NIM, it's important to understand the impact of acquisition accounting net accretion when comparing periods. The above table reports NIM with and without the acquisition accounting net accretion to allow for additional comparisons.
In evaluating net interest income and NIM, it is important to understand the impact of acquisition accounting net accretion when comparing periods. The above table reports NIM with and without the acquisition accounting net accretion to allow for additional comparisons.
The subsidiary banks can utilize FHLB advances for loan matching as a hedge against the possibility of changing interest rates or when these advances provide a less costly or more readily available source of funds than customer deposits. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, ​ 2023 ​ 2022 ​ ​ (dollars in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ FHLB Advances ​ $ 435,000 ​ ​ $ 415,000 ​ Weighted Average Interest Rate at Year-End ​ 5.39 % ​ 4.58 % ​ It is management’s intention to reduce its reliance on wholesale funding, including FHLB advances and brokered deposits.
The subsidiary banks can utilize FHLB advances for loan matching as a hedge against the possibility of changing interest rates or when these advances provide a less costly or more readily available source of funds than customer deposits. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, ​ 2024 ​ 2023 ​ ​ (dollars in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ FHLB Advances ​ $ 285,383 ​ ​ $ 435,000 ​ Weighted Average Interest Rate at Year-End ​ 4.55 % ​ 5.39 % ​ It is management’s intention to reduce its reliance on wholesale funding, including FHLB advances and brokered deposits.
The Company retained beneficial interests from these securitizations in the amount of $22.4 million which are designated as trading securities on the consolidated balance sheet, and carried at fair value. In conjunction with the securitizations, variable interest entities were formed.
The Company retained beneficial interests from these securitizations in the amount of $60.3 million which are designated as trading securities on the consolidated balance sheet and carried at fair value. In conjunction with the securitizations, variable interest entities were formed.
The Company’s strategic financial metrics are as follows: 39 Table of Contents ● Grow loans/leases by 9% per year, funded by core deposits; ● Grow fee-based income by at least 6% per year; and ● Limit our annual operating expense growth to 5% per year.
The Company’s strategic financial metrics are as follows: ● Grow loans/leases by 9% per year, funded by core deposits; ● Grow fee-based income by at least 6% per year; and ● Limit our annual operating expense growth to 5% per year.
A detailed review of our fiscal 2022 performance compared to our fiscal 2021 performance can be found in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, under the caption “Management’s Discussion and Analysis of Financial Condition and Results 35 Table of Contents of Operations.” This discussion should be read in conjunction with our Consolidated Financial Statements and the accompanying notes thereto included or incorporated by reference elsewhere in this document.
A detailed review of our fiscal 2023 performance compared to our fiscal 2022 performance can be found in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” This discussion should be read together with our Consolidated Financial Statements and the accompanying notes thereto included or incorporated by reference elsewhere in this document.
The ACL for loans and leases is established based on a number of factors, including the Company’s historical loss experience, delinquencies and charge-off trends, economic and other forecasts, the local, state and national economies and the risk associated with the loans/leases and securities in the portfolio as described in more detail in the “Critical Accounting Policies and Critical Accounting Estimates” section.
The ACL for loans and leases is established based on a number of factors, including the Company’s historical loss experience, delinquencies and charge-off trends, economic and other forecasts, the local, state and national economies and the risk associated with the loans/leases and securities in the portfolio as described in more detail in the “Critical Accounting Policies and Critical Accounting Estimates” section of this Annual Report on Form 10-K.
If the commitment is funded, the banks would be entitled to seek recovery from the customer. At December 31, 2023 and 2022, no amounts had been recorded as liabilities for the banks’ potential obligations under these guarantees. 62 Table of Contents As of December 31, 2023 and 2022, commitments to extend credit aggregated $2.0 billion and $1.7 billion, respectively.
If the commitment is funded, the banks would be entitled to seek recovery from the customer. At 65 Table of Contents December 31, 2024 and 2023, no amounts had been recorded as liabilities for the banks’ potential obligations under these guarantees. As of December 31, 2024 and 2023, commitments to extend credit aggregated $1.9 billion and $2.0 billion, respectively.
See Note 5 to the Consolidated Financial Statements for details on these securitization transactions as well as the related variable interest entities. IMPACT OF INFLATION AND CHANGING PRICES The Consolidated Financial Statements of the Company and the accompanying notes have been prepared in accordance with U.S.
See Note 4 to the Consolidated Financial Statements for details on these securitization transactions as well as the related variable interest entities. 66 Table of Contents IMPACT OF INFLATION AND CHANGING PRICES The Consolidated Financial Statements of the Company and the accompanying notes have been prepared in accordance with U.S.
As of December 31, 2023 and 2022, standby letters of credit aggregated $23.7 million and $25.8 million, respectively. Management does not expect that all of these commitments will be funded. Additional information regarding commitments, contingencies, and off-balance sheet arrangements is described in Note 20 to the Consolidated Financial Statements.
As of December 31, 2024 and 2023, standby letters of credit aggregated $28.8 million and $23.7 million, respectively. Management does not expect that all of these commitments will be funded. Additional information regarding commitments, contingencies, and off-balance sheet arrangements is described in Note 19 to the Consolidated Financial Statements.
Capital markets revenue from swap fees averaged $23.0 million per quarter for the year 2023 and $10.3 million per quarter for the year 2022. ​ ● Over many years, the Company has been successful in expanding its wealth management client base. Trust and investment advisory and management fees continue to be a significant contributor to noninterest income.
Capital markets revenue from swap fees averaged $17.8 million per quarter for the year 2024 and $23.0 million per quarter for the year 2023. ​ ● Over many years, the Company has been successful in expanding its wealth management client base. Trust and investment advisory and management fees continue to be a significant contributor to noninterest income.
One source of liquidity is cash and short-term assets, such as interest-bearing deposits in other banks, cash and due from banks and federal funds sold, which averaged $180.4 million and $153.9 million during 2023 and 2022, respectively. The Company’s on balance sheet liquidity position can fluctuate based on short-term activity in deposits and loans.
One source of liquidity is cash and short-term assets, such as interest-bearing deposits in other banks, cash and due from banks and federal funds sold, which averaged $210.7 million and $180.4 million during 2024 and 2023, respectively. The Company’s on balance sheet liquidity position can fluctuate based on short-term activity in deposits and loans.
The Company also manages off-balance sheet liquidity held at the Federal Reserve on behalf of the downstream banks, which totaled $214.9 million as of December 31, 2023 as compared to $339.5 million as of December 31, 2022. ​ ● The Company is focused on executing interest rate swaps on select commercial loans, including LIHTC permanent loans.
The Company also manages off-balance sheet liquidity held at the Federal Reserve on behalf of the downstream banks, which totaled $439.0 million as of December 31, 2024 as compared to $214.9 million as of December 31, 2023. ​ ● The Company is focused on executing interest rate swaps on select commercial loans, including LIHTC permanent loans.
The Company’s operating contract obligations represent short and long-term contractual payments for data processing equipment and services, software, and other equipment and professional services and totaled $28.1 million as of December 31, 2023. LOAN SECURITIZATIONS The Company completed two LIHTC loan securitizations in the fourth quarter of 2023, through arrangements with Freddie Mac.
The Company’s operating contract obligations represent short and long-term contractual payments for data processing equipment and services, software, and other equipment and professional services and totaled $28.9 million as of December 31, 2024. LOAN SECURITIZATIONS The Company completed two LIHTC loan securitizations in 2024, through arrangements with Freddie Mac.
Item 6. [Reserved ] ​ I tem 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations This section generally discusses 2023 and 2022 items and annual comparison between our fiscal 2023 performance compared to our fiscal 2022 performance.
Item 6. [Reserved ] ​ 38 Table of Contents ​ ​ ​ I tem 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations This section generally discusses 2024 and 2023 items and annual comparison between our fiscal 2024 performance compared to our fiscal 2023 performance.
The table below presents the composition of the Company’s short-term borrowings. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, ​ 2023 2022 ​ ​ ​ (dollars in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ Federal funds purchased ​ ​ $ 1,500 ​ $ 129,630 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ The Company’s federal funds purchased fluctuates based on the short-term funding needs of the Company’s subsidiary banks.
The table below presents the composition of the Company’s short-term borrowings. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, ​ 2024 2023 ​ ​ ​ (dollars in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ Federal funds purchased ​ ​ $ 1,800 ​ $ 1,500 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ The Company’s federal funds purchased fluctuates based on the short-term funding needs of the Company’s subsidiary banks.
Similar to trust fees, fees from these services are largely determined based on the value of the investments managed. As a result, fee income from this line of business fluctuates with market valuations. Deposit service fees remained stable in 2023 as compared to 2022.
Similar to trust fees, fees from these services are largely determined based on the market value of the investments managed. As a result, fee income from this line of business fluctuates with market valuations. Deposit service fees increased 4% in 2024 as compared to 2023.
Seasonality and the liquidity needs of these correspondent banks can impact balances. Management closely monitors these fluctuations and runs stress scenarios to measure the impact on liquidity and interest rate risk with various levels of correspondent deposit run-off. 61 Table of Contents Investing activities used cash of $749.3 million during 2023 compared to $634.7 million during 2022.
Seasonality and the liquidity needs of these correspondent banks can impact balances. Management closely monitors these fluctuations and runs stress scenarios to measure the impact on liquidity and interest rate risk with various levels of correspondent deposit run-off. 64 Table of Contents Investing activities used cash of $845.2 million during 2024 compared to $749.3 million during 2023.
The Company had an ACL on loans/leases of 1.33% of gross loans/leases held for investment at December 31, 2023, compared to 1.43% of gross loans/leases held for investment at December 31, 2022.
The Company had an ACL on loans/leases of 1.32% of gross loans/leases held for investment at December 31, 2024, compared to 1.33% of gross loans/leases held for investment at December 31, 2023.
Leases represent 1% of to total loans/leases. Although management believes that the ACL for loans/leases at December 31, 2023 is at a level adequate to absorb losses on existing loans/leases, there can be no assurance that such losses will not exceed the estimated amounts or that the Company will not be required to make additional provisions in the future.
Although management believes that the ACL for loans/leases at December 31, 2024 is at a level adequate to absorb losses on existing loans/leases, there can be no assurance that such losses will not exceed the estimated amounts or 59 Table of Contents that the Company will not be required to make additional provisions in the future.
See Note 12 to the Consolidated Financial Statements for additional information. As of December 31, 2023, the Company had $536.1 million in correspondent banking deposits spread over 182 relationships. While the Company believes that these funds are relatively stable, there is the potential for large fluctuations that can impact liquidity.
See Note 11 to the Consolidated Financial Statements for additional information. As of December 31, 2024, the Company had $688.1 million in correspondent banking deposits spread over 189 relationships. While the Company believes that these funds are relatively stable, there is the potential for large fluctuations that can impact liquidity.
A comparison of acquisition accounting net accretion included in NIM is as follows: ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended ​ ​ December 31, ​ December 31, ​ 2023 ​ 2022 ​ ​ (dollars in thousands) ​ ​ ​ ​ ​ ​ Acquisition Accounting Net Accretion in NIM $ 2,173 ​ $ 8,581 ​ The Company's management closely monitors and manages NIM.
A comparison of acquisition accounting net accretion included in NIM is as follows: ​ ​ ​ ​ ​ ​ ​ For the Year Ended ​ December 31, ​ December 31, ​ 2024 ​ 2023 ​ ​ (dollars in thousands) ​ ​ ​ ​ ​ ​ Acquisition Accounting Net Accretion in NIM $ 1,565 ​ $ 2,173 ​ The Company's management closely monitors and manages NIM.
The increase in provision for credit losses on loans and leases was driven by the loan growth and higher criticized loan balances. For the year ended December 31, 2023, the provision for credit losses related to OBS was $4.0 million, compared to a negative $1.3 million provision for the year ended December 31, 2022.
The increase in provision for credit losses on loans and leases was driven by the loan growth, increased net charge-offs, and higher criticized loan balances. For the year ended December 31, 2024, the provision for credit losses related to OBS was a negative provision of $1.3 million, compared to a $4.0 million provision for the year ended December 31, 2023.
Management evaluates the allowance needed on the loans acquired in previous acquisitions factoring in the remaining discount, which was $3.9 million and $6.1 million at December 31, 2023 and 2022, respectively.
Management evaluates the allowance needed on the loans acquired in previous acquisitions factoring in the remaining discount, which was $2.3 million and $3.9 million at December 31, 2024 and 2023, respectively.
The Company assigns internal risk ratings of Pass (Rating 2) for the government guaranteed portion. ** Criticized loans are defined as C&I and CRE loans with internally assigned risk ratings of 6, 7, or 8, regardless of performance. *** Classified loans are defined as C&I and CRE loans with internally assigned risk ratings of 7 or 8, regardless of performance.
The Company assigns internal risk ratings of Pass (Rating 2) for the government guaranteed portion. ** Criticized loans are defined as C&I and CRE loans with internally assigned risk ratings of 9, 10, or 11, regardless of performance. *** Classified loans are defined as C&I and CRE loans with internally assigned risk ratings of 10 or 11, regardless of performance.
The Company’s operating results are also affected by economic and competitive conditions, particularly changes in interest rates, income tax rates, government policies and actions of regulatory authorities. RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2023 and 2022 INTEREST INCOME For 2023, interest income increased $120.8 million, or 41%, compared to 2022.
The Company’s operating results are also affected by economic and competitive conditions, particularly changes in interest rates, income tax rates, government policies and actions of regulatory authorities. RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2024 and 2023 INTEREST INCOME For 2024, interest income increased $68.4 million, or 17%, compared to 2023.
In addition, the Company calculates NIM without the impact of acquisition accounting net accretion (adjusted NIM), as accretion amounts can fluctuate a great deal, making comparisons difficult. The efficiency ratio is a ratio that management utilizes to compare the Company to peers.
In addition, the Company calculates NIM without the impact of acquisition accounting net accretion (adjusted NIM), as accretion amounts can fluctuate a great deal, making comparisons difficult. The adjusted efficiency ratio and efficiency ratio are utilized by management to compare the Company to peers.
The Company is competitively positioned with experienced staff, software systems and processes to continue growing in the four states it currently serves – Iowa, Wisconsin, Missouri and Illinois. The Company acts as the correspondent bank for 182 downstream banks with total noninterest bearing deposits of $88.5 million and total interest-bearing deposits of $242.3 million as of December 31, 2023.
The Company is competitively positioned with experienced staff, software systems and processes to continue growing in the four states it currently serves – Iowa, Wisconsin, Missouri and Illinois. The Company acts as the correspondent bank for 189 downstream banks with total noninterest bearing deposits of $76.6 million and total interest-bearing deposits of $611.5 million as of December 31, 2024.
Further information related to acquired/merged entities has been presented in the Annual Reports previously filed with the SEC corresponding to the year of each acquisition/merger. CRITICAL ACCOUNTING POLICIES AND CRITICAL ACCOUNTING ESTIMATES The Company’s financial statements are prepared in accordance with GAAP.
Further information related to acquired entities has been presented in the Annual Reports on Form 10-K previously filed with the SEC corresponding to the period of each acquisition. CRITICAL ACCOUNTING POLICIES AND CRITICAL ACCOUNTING ESTIMATES The Company’s financial statements are prepared in accordance with GAAP.
We may also utilize other information to validate the reasonableness of our valuations, including public market comparables and multiples of recent mergers and acquisitions of similar businesses. Valuation multiples may be based on tangible capital ratios of comparable companies and business segments.
We may also utilize other information to validate the reasonableness of our valuations, including public market comparables and multiples of recent mergers and acquisitions of similar businesses. Valuation multiples may be based on tangible capital ratios of comparable companies and business segments. These multiples may be adjusted to consider competitive differences, including size, operating leverage and other factors.
The Company intends to continue to grow quality loans and leases as well as its private placement tax-exempt securities portfolio to maximize yield while minimizing credit and interest rate risk. 45 Table of Contents INTEREST EXPENSE Comparing 2023 to 2022, interest expense increased $131.0 million, or 213%, year-over-year.
The Company intends to continue to grow quality loans and leases as well as its private placement tax-exempt securities portfolio to maximize yield while minimizing credit and interest rate risk. 48 Table of Contents INTEREST EXPENSE Comparing 2024 to 2023, interest expense increased $57.7 million, or 30%, year-over-year.
There were no securities gains or losses in 2022. The Company sold $30 million of securities during the first quarter of 2023. The securities sold were part of a strategy to partially deleverage the balance sheet and reduce higher cost borrowings and the related negative arbitrage. The losses were successfully earned back within the calendar year.
The Company sold $30 million of securities during the first quarter of 2023. The securities sold were part of a strategy to partially deleverage the balance sheet and reduce higher cost borrowings and the related negative arbitrage. The losses were successfully earned back within the calendar year. Earnings on BOLI increased 30% in 2024.
There have been no major changes within the tax-exempt portfolio. 52 Table of Contents See Note 3 to the Consolidated Financial Statements for additional information regarding the Company’s investment securities. LOANS/LEASES During 2023, total loans/leases grew 6.6% or 10.9% when excluding the $264.7 million in loan securitizations completed in the fourth quarter.
There have been no major changes within the tax-exempt portfolio. 55 Table of Contents See Note 2 to the Consolidated Financial Statements for additional information regarding the Company’s investment securities. LOANS/LEASES During 2024, total loans/leases grew 3.7%, or 10.9%, when excluding the $386.5 million in loan securitizations during the year.
Also included in other noninterest expense are other items such as meals and entertainment, subscriptions, sales and use tax and expenses related to wealth management. 50 Table of Contents INCOME TAX EXPENSE The provision for income taxes was $13.1 million for 2023, or an effective tax rate of 10.3%, compared to $14.5 million for 2022, or an effective tax rate of 12.7%.
Also included in other noninterest expense are other items such as meals and entertainment, subscriptions and sales and use tax. 53 Table of Contents INCOME TAX EXPENSE The provision for income taxes was $8.7 million for 2024, or an effective tax rate of 7.1%, compared to $13.1 million for 2023, or an effective tax rate of 10.3%.
For nonaccrual loans/leases, management thoroughly reviewed these loans/leases and provided specific allowances as appropriate. OREO is carried at the lower of carrying amount or fair value less costs to sell.
The majority of the Company’s NPAs consists of nonaccrual loans/leases. For nonaccrual loans/leases, management thoroughly reviewed these loans/leases and provided specific allowances as appropriate. OREO and other repossessed assets are carried at the lower of carrying amount or fair value less costs to sell.
The Company had total uninsured deposits of $1.8 billion and $1.9 billion as of December 31, 2023 and 2022 respectively.
The Company had total uninsured deposits of $2.0 billion and $1.8 billion as of December 31, 2024 and 2023 respectively.
Proceeds from calls, maturities, pay downs, and sales of securities were $141.9 million for 2023 compared to $186.8 million for 2022. Purchases of securities used cash of $187.6 million for 2023 compared to $230.5 million for 2022. The net increase in loans/leases used cash of $676.7 million for 2023 compared to $654.9 million for 2022.
Proceeds from calls, maturities, pay downs and sales of securities were $78.4 million for 2024 compared to $141.9 million for 2023. Purchases of securities used cash of $213.5 million for 2024 compared to $187.6 million for 2023. The net increase in loans/leases used cash of $642.9 million for 2024 compared to $676.7 million for 2023.
The Company expects trust fees to be negatively impacted during periods of significantly lower market valuations and positively impacted during periods of significantly higher market valuation. During 2023, the Company expanded its wealth management customer base into the Springfield, Missouri market. Investment advisory and management fees remained stable in 2023 as compared to 2022.
The Company expects trust fees to be negatively impacted during periods of significantly lower market valuations and positively impacted during periods of significantly higher market valuation. During 2024 and 2023, the Company expanded its wealth management customer base into the southwest Missouri and central Iowa markets. Investment advisory and management fees increased 26% in 2024 as compared to 2023.
It should be noted that these initiatives are long-term targets. STRATEGIC DEVELOPMENTS The Company took the following actions in 2023 to support our corporate strategy and further the strategic financial metrics shown above: ● The Company grew loans and leases in 2023 by 6.6%, or 10.9% when excluding the $264.7 million in loan securitizations completed in the fourth quarter.
It should be noted that these initiatives are long-term targets. 42 Table of Contents STRATEGIC DEVELOPMENTS The Company took the following actions in 2024 to support our corporate strategy and further the strategic financial metrics shown above: ● The Company grew loans and leases in 2024 by 3.7%, or 9.6% when excluding the $386.5 million in loan securitizations completed during the year.
The following table shows the components for the provision for credit losses for the years ended December 31, 2023 and 2022. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ ​ December 31, ​ December 31, ​ ​ 2023 2022 ​ ​ ​ (dollars in thousands) ​ ​ ​ ​ ​ ​ ​ ​ Provision for credit losses - loans and leases ​ ​ $ 11,550 ​ $ 9,636 Provision for credit losses - off-balance sheet exposures ​ ​ ​ 3,977 ​ ​ (1,334) Provision for credit losses - held to maturity securities ​ ​ ​ 23 ​ ​ (18) Provision for credit losses - available for sale securities ​ ​ 989 ​ — Total provision for credit losses ​ ​ $ 16,539 ​ $ 8,284 ​ ​ ​ ​ ​ ​ ​ ​ ​ The Company’s total provision for credit losses was $16.5 million for 2023, an increase of $8.2 million from 2022.
The following table shows the components for the provision for credit losses for the years ended December 31, 2024 and 2023. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ ​ ​ December 31, ​ December 31, ​ ​ ​ 2024 2023 ​ ​ ​ ​ (dollars in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ Provision for credit losses - loans and leases ​ ​ ​ $ 18,739 ​ $ 11,550 Provision for credit losses - off-balance sheet exposures ​ ​ ​ ​ (1,256) ​ ​ 3,977 Provision for credit losses - held to maturity securities ​ ​ ​ ​ 60 ​ ​ 23 Provision for credit losses - available for sale securities ​ ​ ​ (445) ​ 989 Total provision for credit losses ​ ​ ​ $ 17,098 ​ $ 16,539 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ The Company’s total provision for credit losses was $17.1 million for 2024, an increase of $559 thousand from 2023.
The Company also generates liquidity from the regular principal payments and prepayments made on its loan/lease portfolio, and on the regular monthly payments on its securities portfolio. At December 31, 2023, the subsidiary banks had 25 lines of credit totaling $699.3 million, of which $248.5 million was secured and $450.8 million was unsecured.
The Company also generates liquidity from the regular principal payments and prepayments made on its loan/lease portfolio, and on the regular monthly payments on its securities portfolio. At December 31, 2024, the subsidiary banks had 27 lines of credit totaling $1.2 billion, of which $746.7 million was secured and $450.8 million was unsecured.
Management continually addresses this issue with pricing and other balance sheet management strategies which included better loan pricing, reducing reliance on rate-sensitive funding, closely managing deposit rate increases and finding additional ways to manage cost of funds through derivatives. 43 Table of Contents The Company’s average balances, interest income/expense, and rates earned/paid on major balance sheet categories are presented in the following table: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2023 ​ ​ 2022 ​ ​ 2021 ​ ​ ​ ​ ​ ​ Interest ​ Average ​ ​ ​ ​ ​ Interest ​ Average ​ ​ ​ ​ ​ Interest ​ Average ​ ​ ​ Average ​ Earned ​ Yield or ​ ​ Average ​ Earned ​ Yield or ​ ​ Average ​ Earned ​ Yield or ​ ​ ​ Balance or Paid Cost ​ Balance or Paid Cost ​ Balance or Paid Cost ​ ​ (dollars in thousands) ASSETS ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest earning assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Federal funds sold ​ $ 19,110 ​ $ 998 ​ 5.22 % ​ $ 14,436 ​ $ 410 2.84 % ​ $ 1,964 ​ $ 2 0.10 % Interest-bearing deposits at financial institutions ​ 80,924 ​ 4,137 ​ 5.11 ​ ​ 63,448 ​ 1,089 1.72 ​ ​ 116,421 ​ 173 0.15 ​ Investment securities - taxable ​ 346,579 ​ 14,927 ​ 4.30 ​ ​ 335,255 ​ 12,078 3.59 ​ ​ 304,787 ​ 8,923 2.92 ​ Investment securities - nontaxable (1) ​ ​ 611,924 ​ ​ 28,272 ​ ​ 4.62 ​ ​ ​ 575,457 ​ ​ 24,281 ​ 4.22 ​ ​ ​ 499,849 ​ ​ 20,581 ​ 4.12 ​ Restricted investment securities ​ 39,273 ​ 2,346 ​ 5.89 ​ ​ 35,554 ​ 2,068 5.73 ​ ​ 19,386 ​ 950 4.83 ​ Gross loans/leases receivable (1) (2) (3) ​ 6,337,551 ​ 390,967 ​ 6.17 ​ ​ 5,604,074 ​ 268,985 4.80 ​ ​ 4,456,461 ​ 179,738 4.03 ​ Total interest earning assets ​ $ 7,435,361 ​ 441,647 ​ 5.94 ​ ​ $ 6,628,224 ​ 308,911 4.66 ​ ​ $ 5,398,868 ​ 210,367 3.90 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Noninterest-earning assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash and due from banks ​ $ 80,386 ​ ​ ​ ​ ​ ​ ​ ​ $ 75,975 ​ ​ ​ ​ ​ ​ ​ $ 60,298 ​ ​ ​ ​ ​ ​ Premises and equipment ​ 119,177 ​ ​ ​ ​ ​ ​ ​ ​ 106,591 ​ ​ ​ ​ ​ ​ ​ 75,015 ​ ​ ​ ​ ​ ​ Less allowance ​ (86,983) ​ ​ ​ ​ ​ ​ ​ ​ (85,745) ​ ​ ​ ​ ​ ​ ​ (81,633) ​ ​ ​ ​ ​ ​ Other ​ 617,684 ​ ​ ​ ​ ​ ​ ​ ​ 481,135 ​ ​ ​ ​ ​ ​ ​ 420,809 ​ ​ ​ ​ ​ ​ Total assets ​ $ 8,165,625 ​ ​ ​ ​ ​ ​ ​ ​ $ 7,206,180 ​ ​ ​ ​ ​ ​ ​ $ 5,873,357 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ LIABILITIES AND STOCKHOLDERS' EQUITY ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing deposits ​ $ 4,191,913 ​ 121,662 ​ 2.90 % ​ $ 3,715,017 ​ 35,359 ​ 0.95 % ​ $ 3,058,917 ​ 8,621 ​ 0.28 % Time deposits ​ 1,010,827 ​ 37,784 ​ 3.74 ​ ​ 568,245 ​ 7,003 ​ 1.23 ​ ​ 448,191 ​ 4,679 ​ 1.04 ​ Short-term borrowings ​ 2,781 ​ 152 ​ 6.44 ​ ​ 8,637 ​ 299 ​ 3.46 ​ ​ 6,281 ​ 5 ​ 0.08 ​ FHLB advances ​ 323,904 ​ 16,740 ​ 5.10 ​ ​ 286,474 ​ 6,954 ​ 2.39 ​ ​ 23,389 ​ 70 ​ 0.30 ​ Other borrowings ​ — ​ — ​ — ​ ​ 1,068 ​ 53 ​ 4.96 ​ ​ — ​ — ​ — ​ Subordinated notes ​ ​ 232,837 ​ ​ 13,230 ​ ​ 5.68 ​ ​ ​ 165,685 ​ ​ 9,200 ​ 5.55 ​ ​ ​ 115,398 ​ ​ 6,272 ​ 5.44 ​ Junior subordinated debentures ​ 48,662 ​ 2,836 ​ 5.75 ​ ​ 45,497 ​ 2,583 ​ 5.60 ​ ​ 38,067 ​ 2,276 ​ 5.90 ​ Total interest-bearing liabilities ​ $ 5,810,924 ​ 192,404 ​ 3.31 ​ ​ $ 4,790,623 ​ 61,451 ​ 1.28 ​ ​ $ 3,690,243 ​ 21,923 ​ 0.59 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Noninterest-bearing demand deposits ​ $ 1,123,050 ​ ​ ​ ​ ​ ​ ​ ​ $ 1,393,284 ​ ​ ​ ​ ​ ​ ​ $ 1,269,467 ​ ​ ​ ​ ​ ​ Other noninterest-bearing liabilities ​ 406,274 ​ ​ ​ ​ ​ ​ ​ ​ 274,241 ​ ​ ​ ​ ​ ​ ​ 276,457 ​ ​ ​ ​ ​ ​ Total liabilities ​ $ 7,340,248 ​ ​ ​ ​ ​ ​ ​ ​ $ 6,458,148 ​ ​ ​ ​ ​ ​ ​ $ 5,236,167 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Stockholders' equity ​ 825,557 ​ ​ ​ ​ ​ ​ ​ ​ 748,032 ​ ​ ​ ​ ​ ​ ​ 637,190 ​ ​ ​ ​ ​ ​ Total liabilities and stockholders' equity ​ $ 8,165,805 ​ ​ ​ ​ ​ ​ ​ ​ $ 7,206,180 ​ ​ ​ ​ ​ ​ ​ $ 5,873,357 ​ ​ ​ ​ ​ ​ Net interest income ​ ​ ​ ​ $ 249,243 ​ ​ ​ ​ ​ ​ ​ $ 247,460 ​ ​ ​ ​ ​ ​ $ 188,444 ​ ​ ​ Net interest spread ​ ​ ​ ​ ​ 2.63 % ​ ​ ​ ​ ​ 3.38 % ​ ​ ​ ​ ​ 3.31 % Net interest margin ​ ​ ​ ​ ​ 2.97 % ​ ​ ​ ​ ​ 3.49 % ​ ​ ​ ​ ​ 3.30 % Net interest margin (TEY)(Non-GAAP) ​ ​ ​ ​ ​ 3.35 % ​ ​ ​ ​ ​ 3.73 % ​ ​ ​ ​ ​ 3.49 % Adjusted net interest margin (TEY)(Non-GAAP) ​ ​ ​ ​ ​ ​ ​ ​ 3.32 % ​ ​ ​ ​ ​ ​ ​ 3.60 % ​ ​ ​ ​ ​ ​ ​ 3.47 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Ratio of average interest-earning assets to average interest-bearing liabilities ​ 127.95 % ​ ​ ​ ​ ​ 138.36 % ​ ​ ​ ​ ​ 146.30 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (1) Interest earned and yields on nontaxable investment securities and loans are determined on a tax equivalent basis using a 21% tax rate.
Management continually addresses this issue with pricing and other balance sheet management strategies which included better loan pricing, reducing reliance on rate-sensitive funding, closely managing deposit rates and finding additional ways to manage cost of funds through derivatives. 46 Table of Contents The Company’s average balances, interest income/expense, and rates earned/paid on major balance sheet categories are presented in the following table: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2024 ​ ​ 2023 ​ ​ 2022 ​ ​ ​ ​ ​ ​ Interest ​ Average ​ ​ ​ ​ ​ Interest ​ Average ​ ​ ​ ​ ​ Interest ​ Average ​ ​ ​ Average ​ Earned ​ Yield or ​ ​ Average ​ Earned ​ Yield or ​ ​ Average ​ Earned ​ Yield or ​ ​ ​ Balance or Paid Cost ​ Balance or Paid Cost ​ Balance or Paid Cost ​ ​ (dollars in thousands) ASSETS ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest earning assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Federal funds sold ​ $ 12,788 ​ $ 692 ​ 5.33 % ​ $ 19,110 ​ $ 998 5.22 % ​ $ 14,436 ​ $ 410 2.84 % Interest-bearing deposits at financial institutions ​ 119,255 ​ 6,077 ​ 5.10 ​ ​ 80,924 ​ 4,137 5.11 ​ ​ 63,448 ​ 1,089 1.72 ​ Investment securities - taxable ​ 377,039 ​ 17,216 ​ 4.55 ​ ​ 346,579 ​ 14,927 4.30 ​ ​ 335,255 ​ 12,078 3.59 ​ Investment securities - nontaxable (1) ​ ​ 745,502 ​ ​ 41,843 ​ ​ 5.61 ​ ​ ​ 611,924 ​ ​ 28,272 ​ 4.62 ​ ​ ​ 575,457 ​ ​ 24,281 ​ 4.22 ​ Restricted investment securities ​ 39,293 ​ 2,991 ​ 7.49 ​ ​ 39,273 ​ 2,346 5.89 ​ ​ 35,554 ​ 2,068 5.73 ​ Gross loans/leases receivable (1) (2) (3) ​ 6,764,754 ​ 449,570 ​ 6.65 ​ ​ 6,337,551 ​ 390,967 6.17 ​ ​ 5,604,074 ​ 268,985 4.80 ​ Total interest earning assets ​ $ 8,058,631 ​ 518,389 ​ 6.43 ​ ​ $ 7,435,361 ​ 441,647 5.94 ​ ​ $ 6,628,224 ​ 308,911 4.66 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Noninterest-earning assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash and due from banks ​ $ 78,683 ​ ​ ​ ​ ​ ​ ​ ​ $ 80,386 ​ ​ ​ ​ ​ ​ ​ $ 75,975 ​ ​ ​ ​ ​ ​ Premises and equipment ​ 140,727 ​ ​ ​ ​ ​ ​ ​ ​ 119,177 ​ ​ ​ ​ ​ ​ ​ 106,591 ​ ​ ​ ​ ​ ​ Less allowance ​ (86,265) ​ ​ ​ ​ ​ ​ ​ ​ (86,983) ​ ​ ​ ​ ​ ​ ​ (85,745) ​ ​ ​ ​ ​ ​ Other ​ 645,617 ​ ​ ​ ​ ​ ​ ​ ​ 617,684 ​ ​ ​ ​ ​ ​ ​ 481,135 ​ ​ ​ ​ ​ ​ Total assets ​ $ 8,837,393 ​ ​ ​ ​ ​ ​ ​ ​ $ 8,165,625 ​ ​ ​ ​ ​ ​ ​ $ 7,206,180 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ LIABILITIES AND STOCKHOLDERS' EQUITY ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing deposits ​ $ 4,700,762 ​ 161,584 ​ 3.44 % ​ $ 4,191,913 ​ 121,662 ​ 2.90 % ​ $ 3,715,017 ​ 35,359 ​ 0.95 % Time deposits ​ 1,153,407 ​ 51,547 ​ 4.47 ​ ​ 1,010,827 ​ 37,784 ​ 3.74 ​ ​ 568,245 ​ 7,003 ​ 1.23 ​ Short-term borrowings ​ 1,850 ​ 98 ​ 5.24 ​ ​ 2,781 ​ 152 ​ 6.44 ​ ​ 8,637 ​ 299 ​ 3.46 ​ FHLB advances ​ 375,214 ​ 19,751 ​ 5.18 ​ ​ 323,904 ​ 16,740 ​ 5.10 ​ ​ 286,474 ​ 6,954 ​ 2.39 ​ Other borrowings ​ — ​ — ​ — ​ ​ — ​ — ​ — ​ ​ 1,068 ​ 53 ​ 4.96 ​ Subordinated notes ​ ​ 233,260 ​ ​ 14,314 ​ ​ 6.14 ​ ​ ​ 232,837 ​ ​ 13,230 ​ 5.68 ​ ​ ​ 165,685 ​ ​ 9,200 ​ 5.55 ​ Junior subordinated debentures ​ 48,791 ​ 2,775 ​ 5.59 ​ ​ 48,662 ​ 2,836 ​ 5.75 ​ ​ 45,497 ​ 2,583 ​ 5.60 ​ Total interest-bearing liabilities ​ $ 6,513,284 ​ 250,069 ​ 3.83 ​ ​ $ 5,810,924 ​ 192,404 ​ 3.31 ​ ​ $ 4,790,623 ​ 61,451 ​ 1.28 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Noninterest-bearing demand deposits ​ $ 959,451 ​ ​ ​ ​ ​ ​ ​ ​ $ 1,123,050 ​ ​ ​ ​ ​ ​ ​ $ 1,393,284 ​ ​ ​ ​ ​ ​ Other noninterest-bearing liabilities ​ 418,810 ​ ​ ​ ​ ​ ​ ​ ​ 406,274 ​ ​ ​ ​ ​ ​ ​ 274,241 ​ ​ ​ ​ ​ ​ Total liabilities ​ $ 7,891,545 ​ ​ ​ ​ ​ ​ ​ ​ $ 7,340,248 ​ ​ ​ ​ ​ ​ ​ $ 6,458,148 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Stockholders' equity ​ 945,848 ​ ​ ​ ​ ​ ​ ​ ​ 825,557 ​ ​ ​ ​ ​ ​ ​ 748,032 ​ ​ ​ ​ ​ ​ Total liabilities and stockholders' equity ​ $ 8,837,393 ​ ​ ​ ​ ​ ​ ​ ​ $ 8,165,805 ​ ​ ​ ​ ​ ​ ​ $ 7,206,180 ​ ​ ​ ​ ​ ​ Net interest income ​ ​ ​ ​ $ 268,320 ​ ​ ​ ​ ​ ​ ​ $ 249,243 ​ ​ ​ ​ ​ ​ $ 247,460 ​ ​ ​ Net interest spread ​ ​ ​ ​ ​ 2.60 % ​ ​ ​ ​ ​ 2.63 % ​ ​ ​ ​ ​ 3.38 % Net interest margin ​ ​ ​ ​ ​ 2.88 % ​ ​ ​ ​ ​ 2.97 % ​ ​ ​ ​ ​ 3.49 % Net interest margin (TEY)(Non-GAAP) ​ ​ ​ ​ ​ 3.33 % ​ ​ ​ ​ ​ 3.35 % ​ ​ ​ ​ ​ 3.73 % Adjusted net interest margin (TEY)(Non-GAAP) ​ ​ ​ ​ ​ ​ ​ ​ 3.31 % ​ ​ ​ ​ ​ ​ ​ 3.32 % ​ ​ ​ ​ ​ ​ ​ 3.60 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Ratio of average interest-earning assets to average interest-bearing liabilities ​ 123.73 % ​ ​ ​ ​ ​ 127.95 % ​ ​ ​ ​ ​ 138.36 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (1) Interest earned and yields on nontaxable investment securities and loans are determined on a tax equivalent basis using a 21% tax rate.
Net interest income, on a tax equivalent basis (non-GAAP), increased 1% to $249.2 million for the year ended December 31, 2023, as compared to the prior year.
Net interest income, on a tax equivalent basis (non-GAAP), increased 8% to $268.3 million for the year ended December 31, 2024, as compared to the prior year.
This ratio is a non-GAAP measure. Refer to the GAAP to Non-GAAP Reconciliations section of this report for more information. As of December 31, 2023 and 2022, no preferred stock was outstanding.
This ratio is a non-GAAP measure. Refer to the “GAAP to Non-GAAP Reconciliations” section of this Annual Report on Form 10-K for more information. As of December 31, 2024 and 2023, no preferred stock was outstanding.
Trading securities had a fair value of $22.4 million as of December 31, 2023 and consisted of retained beneficial interests acquired in conjunction with the loan securitizations completed by the Company in 2023. ​ 51 Table of Contents Following is a breakdown of the Company’s securities portfolio by type, the percentage of net unrealized gains (losses) to carrying value on the total portfolio, and the portfolio duration as of December 31, 2023 and 2022. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 ​ ​ 2022 ​ ​ ​ Amount % ​ Amount % ​ ​ ​ (dollars in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. treasuries and govt. sponsored agency securities ​ $ 14,973 1 % ​ $ 16,981 2 % ​ Municipal securities ​ 853,442 85 % ​ 779,270 84 % ​ Residential mortgage-backed and related securities ​ 59,196 6 % ​ 66,215 7 % ​ Asset-backed securities ​ ​ 15,423 ​ 2 % ​ ​ 18,728 ​ 2 % ​ Other securities ​ 40,125 4 % ​ 46,908 5 % ​ Trading securities ​ ​ 22,369 ​ 2 % ​ ​ — ​ - % ​ ​ ​ $ 1,005,528 100 % ​ $ 928,102 100 % ​ ​ ​ ​ ​ ​ ​ Securities as a % of total assets ​ 11.78 % ​ ​ 11.68 % ​ ​ Net unrealized losses as a % of Amortized Cost ​ (4.96) % ​ ​ (11.26) % ​ ​ Duration (in years) ​ 6.2 ​ ​ 7.7 ​ ​ Annual yield on investment securities (tax equivalent) ​ ​ 4.30 % ​ ​ ​ ​ 3.99 % ​ ​ ​ ​ Due to continued increases in intermediate and long-term interest rates during 2023, which directly impact the fair value of the Company’s AFS portfolio, the AFS portfolio declined $41.3 million, or 12.1%, from December 31, 2022 to December 31, 2023.
Trading securities had a fair value of $83.5 million as of December 31, 2024 and consisted of retained beneficial interests acquired in conjunction with the loan securitizations completed by the Company in 2024 and 2023. ​ 54 Table of Contents Following is a breakdown of the Company’s securities portfolio by type, the percentage of net unrealized gains (losses) to carrying value on the total portfolio, and the portfolio duration as of December 31, 2024 and 2023. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2024 ​ ​ 2023 ​ ​ ​ Amount % ​ Amount % ​ ​ ​ (dollars in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. govt. sponsored agency securities ​ $ 20,591 2 % ​ $ 14,973 1 % ​ Municipal securities ​ 971,313 81 % ​ 853,442 85 % ​ Residential mortgage-backed and related securities ​ 50,042 4 % ​ 59,196 6 % ​ Asset-backed securities ​ ​ 9,224 ​ 1 % ​ ​ 15,423 ​ 2 % ​ Other securities ​ 65,736 5 % ​ 40,125 4 % ​ Trading securities ​ 83,529 7 % ​ 22,369 2 % ​ ​ ​ $ 1,200,435 100 % ​ $ 1,005,528 100 % ​ ​ ​ ​ ​ ​ ​ Securities as a % of total assets ​ 13.30 % ​ ​ 11.78 % ​ ​ Net unrealized losses as a % of Amortized Cost ​ (7.32) % ​ ​ (4.96) % ​ ​ Duration (in years) ​ 5.8 ​ ​ 6.2 ​ ​ Annual yield on investment securities (tax equivalent) ​ ​ 4.55 % ​ ​ ​ ​ 4.30 % ​ ​ ​ ​ Due to increases in intermediate and long-term interest rates during 2024, which directly impact the fair value of the Company’s AFS portfolio, the AFS portfolio declined $18.5 million, or 6.2%, from December 31, 2023 to December 31, 2024.
Assets under management increased by $700.7 million in 2023. There were 340 new relationships added in 2023 totaling $762.9 million of new assets under management. Income is generated primarily from fees charged based on assets under administration for corporate and personal trusts and for custodial services.
Assets under management increased by $1.1 billion in 2024. There were 469 new relationships added in 2024 totaling $1.5 billion of new assets under management. Income is generated primarily from fees charged based on assets under administration for corporate and personal trusts and for custodial services.
The Company entered into a construction contract in 2023 for the construction of a new CRBT facility in Cedar Rapids, Iowa. The Company will pay the contractor a contract price of approximately $17.0 million, subject to additions and deductions as provided in the contract documents.
The Company entered into a construction contract in 2024 for the construction of a new CSB facility in Ankeny, Iowa. The Company will pay the contractor a contract price of approximately $41.3 million, subject to additions and deductions as provided in the contract documents.
The adequacy of the allowance is monitored by the credit administration staff and reported to management and the board of directors. 54 Table of Contents Changes in the ACL for loans/leases for the years ended December 31, 2023, 2022 and 2021 are presented as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ December 31, 2023 December 31, 2022 ​ December 31, 2021 ​ ​ (dollars in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance, beginning ​ $ 87,706 ​ $ 78,721 ​ $ 84,376 ​ Impact of adopting ASU 2016-13 ​ ​ — ​ ​ — ​ ​ (8,102) ​ Initial ACL recorded for PCD loans ​ ​ — ​ ​ 5,902 ​ ​ — ​ Change in ACL for writedown of LHFS to fair value ​ ​ (3,545) ​ ​ — ​ ​ — ​ Provision ​ 11,550 ​ 9,636 ​ 5,702 ​ Charge-offs ​ (9,392) ​ (7,525) ​ (4,538) ​ Recoveries ​ 881 ​ 972 ​ 1,283 ​ Balance, ending ​ $ 87,200 ​ $ 87,706 ​ $ 78,721 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ The Company recorded an $11.0 million (pre-tax) provision for credit losses on loans in 2022, for the CECL Day 2 provision as a result of the GFED acquisition. ​ Net charge-offs by segment and their percentage of average loans and leases are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, ​ ​ 2023 ​ 2022 ​ ​ ​ ​ Amount % of Average Loans ​ ​ Amount % of Average Loans ​ ​ ​ (dollars in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Average amount of loans/leases outstanding, before allowance ​ $ 6,337,551 ​ ​ $ 5,604,074 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net charge-offs: ​ ​ ​ ​ ​ ​ ​ ​ ​ C&I - revolving ​ ​ — 0.00 ​ ​ — 0.00 ​ C&I - other ​ ​ (8,137) 0.13 ​ ​ (5,600) 0.10 ​ CRE owner occupied ​ ​ (219) 0.00 ​ ​ 6 0.00 ​ CRE non-owner occupied ​ ​ 31 (0.00) ​ ​ (96) 0.00 ​ Construction and land development ​ ​ (48) 0.00 ​ ​ (829) 0.01 ​ Multi-family ​ ​ — 0.00 ​ ​ 43 (0.00) ​ 1-4 family real estate ​ ​ 5 (0.00) ​ ​ (21) 0.00 ​ Consumer ​ ​ (143) 0.00 ​ ​ (56) 0.00 ​ Total net charge-offs ​ $ (8,511) ​ ​ $ (6,553) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Changes in the ACL for OBS exposures for the years ended December 31, 2023, 2022 and 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended ​ ​ ​ ​ December 31, 2023 ​ December 31, 2022 December 31, 2021 ​ ​ ​ ​ (dollars in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance, beginning ​ ​ $ 5,552 ​ $ 6,886 ​ $ — ​ Impact of adopting ASU 2016-13 ​ ​ ​ — ​ ​ — ​ ​ 9,117 ​ Provisions (credited) to expense ​ ​ 3,977 ​ (1,334) ​ (2,231) ​ Balance, ending ​ ​ $ 9,529 ​ $ 5,552 ​ $ 6,886 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ The ACL for OBS exposures totaled $9.1 million at the adoption of CECL on January 1, 2021.
The adequacy of the allowance is monitored by the credit administration staff and reported to management and the board of directors. ​ ​ 57 Table of Contents Changes in the ACL for loans/leases for the years ended December 31, 2024, 2023 and 2022 are presented as follows. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ December 31, 2024 ​ December 31, 2023 ​ December 31, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance, beginning ​ $ 87,200 ​ $ 87,706 ​ $ 78,721 Initial ACL recorded for PCD loans ​ ​ — ​ ​ — ​ ​ 5,902 Change in ACL for the transfer of loans to LHFS ​ ​ (4,598) ​ ​ (3,545) ​ ​ — Provision ​ 18,739 ​ 11,550 ​ 9,636 Charge-offs ​ (13,969) ​ (9,392) ​ (7,525) Recoveries ​ 2,469 ​ 881 ​ 972 Balance, ending ​ $ 89,841 ​ $ 87,200 ​ $ 87,706 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ The Company recorded an $11.0 million (pre-tax) provision for credit losses on loans in 2022, for the CECL Day 2 provision as a result of the GFED acquisition. ​ Net charge-offs by segment and their percentage of average loans and leases are as follows. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, ​ ​ 2024 ​ 2023 ​ ​ ​ ​ Amount % of Average Loans ​ ​ Amount % of Average Loans ​ ​ ​ (dollars in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Average amount of loans/leases outstanding, before allowance ​ $ 6,764,754 ​ ​ $ 6,337,551 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net charge-offs: ​ ​ ​ ​ ​ ​ ​ ​ ​ C&I - revolving ​ ​ — 0.00 ​ ​ — 0.00 ​ C&I - other ​ ​ (10,227) 0.15 ​ ​ (8,137) 0.13 ​ CRE owner occupied ​ ​ (10) 0.00 ​ ​ (219) 0.00 ​ CRE non-owner occupied ​ ​ — 0.00 ​ ​ 31 (0.00) ​ Construction and land development ​ ​ (1,084) 0.02 ​ ​ (48) 0.00 ​ Multi-family ​ ​ — 0.00 ​ ​ — 0.00 ​ 1-4 family real estate ​ ​ — 0.00 ​ ​ 5 (0.00) ​ Consumer ​ ​ (179) 0.00 ​ ​ (143) 0.00 ​ Total net charge-offs ​ $ (11,500) ​ ​ $ (8,511) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Changes in the ACL for OBS exposures for the years ended December 31, 2024, 2023 and 2022 are as follows. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended ​ ​ ​ ​ December 31, 2024 ​ December 31, 2023 December 31, 2022 ​ ​ ​ ​ (dollars in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance, beginning ​ ​ $ 9,529 ​ $ 5,552 ​ $ 6,886 ​ Provisions (credited) to expense ​ ​ (1,256) ​ 3,977 ​ (1,334) ​ Balance, ending ​ ​ $ 8,273 ​ $ 9,529 ​ $ 5,552 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 58 Table of Contents ​ The Company recorded a negative $1.3 million provision for credit losses related to OBS exposures in 2024.
STOCKHOLDERS’ EQUITY The table below presents the composition of the Company’s stockholders’ equity. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, ​ ​ 2023 2022 ​ ​ (dollars in thousands) ​ ​ ​ ​ ​ ​ ​ ​ Common stock ​ $ 16,749 ​ $ 16,796 ​ Additional paid in capital ​ 370,814 ​ 370,712 ​ Retained earnings ​ 554,992 ​ 450,114 ​ AOCI ​ (55,959) ​ (64,898) ​ Total stockholders' equity ​ $ 886,596 ​ $ 772,724 ​ ​ ​ ​ ​ ​ ​ ​ ​ TCE / TA ratio (non-GAAP) ​ 8.75 % 7.93 % ​ * TCE/TA ratio is defined as total common stockholders’ equity excluding goodwill and other intangibles divided by total assets.
STOCKHOLDERS’ EQUITY The table below presents the composition of the Company’s stockholders’ equity. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, ​ ​ 2024 2023 ​ ​ (dollars in thousands) ​ ​ ​ ​ ​ ​ ​ ​ Common stock ​ $ 16,882 ​ $ 16,749 ​ Additional paid in capital ​ 374,975 ​ 370,814 ​ Retained earnings ​ 665,171 ​ 554,992 ​ AOCI ​ (59,641) ​ (55,959) ​ Total stockholders' equity ​ $ 997,387 ​ $ 886,596 ​ ​ ​ ​ ​ ​ ​ ​ ​ TCE / TA ratio (non-GAAP)* ​ 9.55 % 8.75 % ​ * TCE/TA ratio is defined as total common stockholders’ equity excluding goodwill and other intangibles divided by total assets.
NONPERFORMING ASSETS The table below presents the amounts of NPAs and related ratios. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, ​ ​ 2023 ​ 2022 ​ ​ ​ (dollars in thousands) ​ ​ ​ ​ ​ ​ ​ ​ Nonaccrual loans/leases (1) ​ $ 32,753 ​ $ 8,765 ​ Accruing loans/leases past due 90 days or more ​ ​ 86 ​ ​ 5 ​ Total NPLs ​ 32,839 ​ ​ 8,770 ​ Other repossessed assets ​ ​ — ​ ​ — ​ OREO ​ ​ 1,347 ​ ​ 133 ​ Total NPAs ​ $ 34,186 ​ $ 8,903 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ NPLs to total loans/leases ​ ​ 0.50 % ​ 0.14 % NPAs to total loans/leases plus repossessed property ​ ​ 0.52 % ​ 0.15 % NPAs to total assets ​ ​ 0.40 % ​ 0.11 % Nonaccrual loans/leases to total loans/leases ​ ​ 0.50 % ​ 0.14 % ACL to nonaccrual loans ​ ​ 266.24 % ​ 1000.64 % ​ (1) Includes government guaranteed portions of loans, if applicable.
NONPERFORMING ASSETS The table below presents the amounts of NPAs and related ratios. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, ​ ​ 2024 ​ 2023 ​ ​ ​ (dollars in thousands) ​ ​ ​ ​ ​ ​ ​ ​ Nonaccrual loans/leases (1) ​ $ 40,080 ​ $ 32,753 ​ Accruing loans/leases past due 90 days or more ​ ​ 4,270 ​ ​ 86 ​ Total NPLs ​ 44,350 ​ ​ 32,839 ​ Other repossessed assets ​ ​ 543 ​ ​ — ​ OREO ​ ​ 661 ​ ​ 1,347 ​ Total NPAs ​ $ 45,554 ​ $ 34,186 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ NPLs to total loans/leases ​ ​ 0.65 % ​ 0.50 % NPAs to total loans/leases plus repossessed property ​ ​ 0.67 % ​ 0.52 % NPAs to total assets ​ ​ 0.50 % ​ 0.40 % Nonaccrual loans/leases to total loans/leases ​ ​ 0.59 % ​ 0.50 % ACL to nonaccrual loans ​ ​ 224.15 % ​ 266.24 % ​ (1) Includes government guaranteed portions of loans, if applicable.
Total cash provided by operating activities was $376.3 million for 2023 compared to $118.7 million for 2022.
Total cash provided by operating activities was $444.5 million for 2024 compared to $376.3 million for 2023.
The following table summarizes the trend in allowance as a percentage of gross loans/leases and as a percentage of NPLs as of December 31, 2023 and 2022. ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, ​ ​ 2023 2022 ACL for loans/leases / Total loans/leases held for investment ​ 1.33 % 1.43 % ACL for loans/leases / NPLs ​ 265.54 % 1,000.07 % ​ The following table presents the allowance by type and the percentage of loan/lease type to total loans/leases. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, ​ ​ 2023 ​ ​ 2022 ​ ​ Amount % ​ Amount % ​ ​ (dollars in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ C&I - revolving $ 4,224 5 % ​ $ 4,457 5 % C&I - other* ​ 27,460 23 % ​ ​ 27,753 24 % CRE - owner occupied ​ ​ 8,223 ​ 9 % ​ ​ 9,965 ​ 10 % CRE - non-owner occupied ​ ​ 11,581 ​ 16 % ​ ​ 11,749 ​ 16 % Construction and land development ​ ​ 16,856 ​ 22 % ​ ​ 14,262 ​ 19 % Multi-family ​ ​ 12,463 ​ 15 % ​ ​ 13,186 ​ 16 % 1-4 family real estate ​ 4,917 8 % ​ ​ 4,963 8 % Consumer ​ 1,476 2 % ​ ​ 1,371 2 % ​ ​ $ 87,200 100 % ​ $ 87,706 100 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ * Included within the C&I – Other segment is an ACL on leases of $992 thousand and $970 thousand as of December 31, 2023 and 2022, respectively.
The following table summarizes the trend in allowance as a percentage of gross loans/leases and as a percentage of NPLs as of December 31, 2024 and 2023. ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, ​ ​ 2024 2023 ACL for loans/leases / Total loans/leases held for investment ​ 1.32 % 1.33 % ACL for loans/leases / NPLs ​ 202.57 % 265.54 % ​ The following table presents the allowance by type and the percentage of loan/lease type to total loans/leases. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, ​ ​ 2024 ​ ​ 2023 ​ ​ Amount % ​ Amount % ​ ​ (dollars in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ C&I - revolving $ 3,856 6 % ​ $ 4,224 5 % C&I - other* ​ 34,002 22 % ​ ​ 27,460 23 % CRE - owner occupied ​ ​ 7,147 ​ 9 % ​ ​ 8,223 ​ 9 % CRE - non-owner occupied ​ ​ 11,137 ​ 16 % ​ ​ 11,581 ​ 16 % Construction and land development ​ ​ 15,099 ​ 19 % ​ ​ 16,856 ​ 22 % Multi-family ​ ​ 12,173 ​ 17 % ​ ​ 12,463 ​ 15 % 1-4 family real estate ​ 4,934 9 % ​ ​ 4,917 8 % Consumer ​ 1,493 2 % ​ ​ 1,476 2 % ​ ​ $ 89,841 100 % ​ $ 87,200 100 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ * Included within the C&I – Other segment is an ACL on leases of $580 thousand and $992 thousand as of December 31, 2024 and 2023, respectively.
Following is a table that represents the major income and expense categories. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2023 2022 ​ ​ ​ (dollars are in thousands) ​ ​ ​ ​ ​ ​ ​ ​ Net interest income ​ ​ $ 221,006 ​ $ 231,120 Provision for credit losses ​ ​ 16,539 ​ 8,284 Noninterest income ​ ​ 132,684 ​ 80,729 Noninterest expense ​ ​ 210,531 ​ 190,016 Federal and state income tax expense ​ ​ 13,062 ​ 14,483 Net income ​ ​ $ 113,558 ​ $ 99,066 ​ ​ ​ ​ ​ ​ ​ ​ The following are some noteworthy developments in the Company’s financial results: ● Net interest income decreased $10.1 million, or 4.4%, in 2023 compared to the prior year.
Following is a table that represents the major income and expense categories for the years ended December 31, 2024 and 2023. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2024 2023 ​ ​ ​ (dollars are in thousands) ​ ​ ​ ​ ​ ​ ​ ​ Net interest income ​ ​ $ 231,788 ​ $ 221,006 Provision for credit losses ​ ​ 17,098 ​ 16,539 Noninterest income ​ ​ 115,529 ​ 132,684 Noninterest expense ​ ​ 207,642 ​ 210,531 Federal and state income tax expense ​ ​ 8,727 ​ 13,062 Net income ​ ​ $ 113,850 ​ $ 113,558 ​ ​ ​ ​ ​ ​ ​ ​ The following are some noteworthy developments in the Company’s financial results: ● Net interest income increased $10.8 million, or 4.9%, in 2024 compared to the prior year.
The year ended December 31, 2023 was highlighted by several significant items: ● Record annual net income of $113.6 million, or $6.73 per diluted share; ● Record adjusted net income (non-GAAP) of $115.1 million, or $6.82 per diluted share; ● Record capital markets revenue of $92.1 million, an increase of $50.8 million, or 123%; ● Loan and lease growth of 11% prior to loan securitizations; ● Deposit growth of 9%; ● Tangible book value (non-GAAP) per share increased $6.99, or 19%; and ● Increased TCE/TA ratio (non-GAAP) by 82 basis points to 8.75%. ​ ​ 38 Table of Contents Following is a table that represents the various net income measurements for the years ended December 31, 2023 and 2022. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ ​ 2023 ​ 2022 ​ ​ ​ (dollars in thousands, except per share data) ​ ​ ​ ​ ​ ​ ​ ​ Net income ​ ​ $ 113,558 ​ $ 99,066 ​ ​ ​ ​ ​ ​ ​ ​ Diluted earnings per common share ​ ​ $ 6.73 ​ $ 5.87 ​ ​ ​ ​ ​ ​ ​ ​ Weighted average common and common equivalent shares outstanding ​ ​ 16,866,391 ​ 16,890,007 ​ The Company reported adjusted net income (non-GAAP) of $115.1 million, with adjusted diluted EPS of $6.82.
The year ended December 31, 2024 was highlighted by several significant items: ● Record annual net income of $113.9 million, or $6.71 per diluted share; ● Record adjusted net income (non-GAAP) of $119.3 million, or $7.03 per diluted share (non-GAAP); ● Significant capital markets revenue of $71.1 million; ● Robust loan growth of 10% prior to loan securitizations and strong deposit growth of 8%; ● Tangible book value (non-GAAP) per share increased $6.40, or 15%; and ● Increased TCE/TA ratio (non-GAAP) by 80 basis points to 9.55%. ​ ​ Following is a table that represents the various net income measurements for the years ended December 31, 2024 and 2023. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ ​ 2024 ​ 2023 ​ ​ ​ (dollars in thousands, except per share data) ​ ​ ​ ​ ​ ​ ​ ​ Net income ​ ​ $ 113,850 ​ $ 113,558 ​ ​ ​ ​ ​ ​ ​ ​ Diluted earnings per common share ​ ​ $ 6.71 ​ $ 6.73 ​ ​ ​ ​ ​ ​ ​ ​ Weighted average common and common equivalent shares outstanding ​ ​ 16,959,853 ​ 16,866,391 ​ The Company reported adjusted net income (non-GAAP) of $119.3 million, with adjusted diluted EPS of $7.03.
The interest rate swaps help the commercial borrowers obtain a fixed interest rate while the Company receives a variable interest rate as well as an upfront nonrefundable fee dependent on the pricing. Management believes that these swaps help position the Company more favorably for rising rate 40 Table of Contents environments.
The interest rate swaps help the commercial borrowers obtain a fixed interest rate while the Company receives a variable interest rate as well as an upfront nonrefundable fee dependent on the pricing. Management believes that these swaps help the Company more efficiently manage its interest rate risk.
The loan growth was driven by both LIHTC and our traditional lending and leasing businesses. ​ ● The Company completed two LIHTC loan securitizations in the fourth quarter of 2023, with a total outstanding principal balance of $264.7 million and a total carrying value on these loans of $261.9 million.
The loan growth was driven by both LIHTC and our traditional lending and leasing businesses. ​ ● The Company completed two LIHTC loan securitizations in 2024, with a total outstanding principal balance at the securitization date of $389.8 million and a total carrying value on these loans of $386.5 million.
Net cost of (income from) and gains/losses on operations of other real estate includes gains/losses on the sale of OREO, write-downs of OREO and all income/expenses associated with OREO. Net income from operations totaled $26 thousand for 2023 as compared to $40 thousand for 2022. Advertising and marketing expense increased 22% in 2023 as compared to 2022.
NPLs have increased 35% since December 31, 2023. Net cost of (income from) and gains/losses on operations of other real estate includes gains/losses on the sale of OREO, write-downs of OREO and all income/expenses associated with OREO. Net income from operations totaled $21 thousand for 2024 as compared to $26 thousand for 2023.
The table below presents the composition of the Company’s deposit portfolio. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, ​ ​ 2023 2022 ​ ​ Amount % Amount % ​ ​ (dollars in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Noninterest bearing demand deposits ​ $ 1,038,689 16 % $ 1,262,981 21 % Interest bearing demand deposits ​ 4,338,390 67 % 3,875,497 65 % Time deposits ​ 851,950 13 % 744,593 12 % Brokered deposits ​ 284,976 4 % 101,146 2 % ​ ​ $ 6,514,005 100 % $ 5,984,217 100 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ The Company actively participates in the ICS/CDARS program, which is a trusted resource that provides FDIC insurance coverage for clients of the Company that maintain larger deposit balances.
The table below presents the composition of the Company’s deposit portfolio. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, ​ ​ 2024 2023 ​ ​ Amount % Amount % ​ ​ (dollars in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Noninterest bearing demand deposits ​ $ 921,160 13 % $ 1,038,689 16 % Interest bearing demand deposits ​ 4,828,216 68 % 4,338,390 67 % Time deposits ​ 953,496 14 % 851,950 13 % Brokered deposits ​ 358,315 5 % 284,976 4 % ​ ​ $ 7,061,187 100 % $ 6,514,005 100 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ The Company actively participates in the ICS/CDARS program, which is a trusted resource that provides FDIC insurance coverage for clients of the Company that maintain larger deposit balances.

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Item 7. Management's Discussion & Analysis

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

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Biggest changeConsolidated Financial Statements 67 ​ ​ Consolidated Balance Sheets as of December 31, 2023 and 2022 70 ​ ​ Consolidated Statements of Income for the years ended December 31, 2023, 2022 and 2021 71 2 Table of Contents ​ ​ Consolidated Statements of Comprehensive Income for the years ended December 31, 2023, 2022 and 2021 72 ​ ​ Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2023, 2022 and 2021 73 ​ ​ Consolidated Statements of Cash Flows for the years ended December 31, 2023, 2022 and 2021 74 ​ ​ Notes to Consolidated Financial Statements 76 ​ ​ Note 1 : Nature of Business and Significant Accounting Policies 76 ​ ​ Note 2 : Mergers/Acquisitions/Sales 92 ​ ​ Note 3 : Investment Securities 95 ​ ​ Note 4 : Loans/Leases Receivable 99 ​ ​ Note 5: Securitizations and Variable Interest Entities 109 ​ ​ Note 6: Premises and Equipment 111 ​ ​ Note 7 : Goodwill and Intangibles 112 ​ ​ Note 8 : Derivatives and Hedging Activities 114 ​ ​ Note 9 : Deposits 118 ​ ​ Note 10 : Short-Term Borrowings 119 ​ ​ Note 11 : FHLB Advances 119 ​ ​ Note 12 : Other Borrowings and Unused Lines of Credit 120 ​ ​ Note 13 : Subordinated Notes 120 ​ ​ Note 14 : Junior Subordinated Debentures 122 ​ ​ Note 15 : Federal and State Income Taxes 123 ​ ​ Note 16 : Employee Benefit Plans 125 ​ ​ Note 17 : Stock-Based Compensation 126 ​ ​ Note 18 : Regulatory Requirements and Restrictions on Dividends 129 ​ ​ Note 19 : Earnings Per Share 131 ​ ​ Note 20 : Commitments and Contingencies 131 ​ ​ Note 21: Parent Company Only Financial Statements 133 ​ ​ Note 22 : Fair Value 136 ​ ​ Note 23 : Business Segment Information 139 ​
Biggest changeFinancial Statements and Supplementary Data 71 ​ ​ Consolidated Balance Sheets as of December 31, 2024 and 2023 74 ​ ​ Consolidated Statements of Income for the years ended December 31, 2024, 2023 and 2022 75 2 Table of Contents ​ ​ Consolidated Statements of Comprehensive Income for the years ended December 31, 2024, 2023 and 2022 76 ​ ​ Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2024, 2023 and 2022 77 ​ ​ Consolidated Statements of Cash Flows for the years ended December 31, 2024, 2023 and 2022 78 ​ ​ Notes to Consolidated Financial Statements 80 ​ ​ Note 1 : Nature of Business and Significant Accounting Policies 80 ​ ​ Note 2 : Investment Securities 97 ​ ​ Note 3 : Loans/Leases Receivable 102 ​ ​ Note 4: Securitizations and Variable Interest Entities 112 ​ ​ Note 5: Premises and Equipment 115 ​ ​ Note 6 : Goodwill and Intangibles 117 ​ ​ Note 7 : Derivatives and Hedging Activities 118 ​ ​ Note 8 : Deposits 122 ​ ​ Note 9 : Short-Term Borrowings 123 ​ ​ Note 10 : FHLB Advances 124 ​ ​ Note 11 : Other Borrowings and Unused Lines of Credit 124 ​ ​ Note 12 : Subordinated Notes 125 ​ ​ Note 13 : Junior Subordinated Debentures 127 ​ ​ Note 14 : Federal and State Income Taxes 128 ​ ​ Note 15 : Employee Benefit Plans 130 ​ ​ Note 16 : Stock-Based Compensation 131 ​ ​ Note 17 : Regulatory Requirements and Restrictions on Dividends 135 ​ ​ Note 18 : Earnings Per Share 137 ​ ​ Note 19 : Commitments and Contingencies 137 ​ ​ Note 20: Parent Company Only Financial Statements 139 ​ ​ Note 21 : Fair Value 142 ​ ​ Note 22 : Business Segment Information 145 ​
Management’s Discussion and Analysis of Financial Condition and Results of Operations 35 ​ ​ General 36 ​ ​ Critical Accounting Policies and Critical Accounting Estimates 36 ​ ​ Executive Overview 38 ​ ​ Strategic Financial Metrics 39 ​ ​ Strategic Developments 40 ​ ​ GAAP to Non-GAAP Reconciliations 41 ​ ​ Net Interest Income and Margin (Tax Equivalent Basis)(Non-GAAP) 43 ​ ​ Results of Operations 45 ​ ​ Interest Income 45 ​ ​ Interest Expense 46 ​ ​ Provision for Credit Losses 46 ​ ​ Noninterest Income 47 ​ ​ Noninterest Expenses 49 ​ ​ Income Tax Expense 51 ​ ​ Financial Condition 51 ​ ​ Overview 51 ​ ​ Investment Securities 51 ​ ​ Loans/Leases 53 ​ ​ Allowance for Credit Losses on Loans/Leases and OBS Exposures 54 ​ ​ Nonperforming Assets 57 ​ ​ Deposits 58 ​ ​ Short-Term Borrowings 59 ​ ​ FHLB Advances and Other Borrowings 59 ​ ​ Subordinated Notes 59 ​ ​ Junior Subordinated Debentures 60 ​ ​ Stockholders’ Equity 60 ​ ​ Liquidity and Capital Resources 61 ​ ​ Commitments, Contingencies, Contractual Obligations, and Off-Balance Sheet Arrangements 62 ​ ​ Impact of Inflation and Changing Prices 63 ​ ​ Forward-Looking Statements 63 ​ Item 7A.
Management’s Discussion and Analysis of Financial Condition and Results of Operations 39 ​ ​ General 39 ​ ​ Critical Accounting Policies and Critical Accounting Estimates 39 ​ ​ Executive Overview 41 ​ ​ Strategic Financial Metrics 42 ​ ​ Strategic Developments 43 ​ ​ GAAP to Non-GAAP Reconciliations 44 ​ ​ Net Interest Income and Margin (Tax Equivalent Basis)(Non-GAAP) 45 ​ ​ Results of Operations 48 ​ ​ Interest Income 48 ​ ​ Interest Expense 49 ​ ​ Provision for Credit Losses 49 ​ ​ Noninterest Income 50 ​ ​ Noninterest Expenses 52 ​ ​ Income Tax Expense 54 ​ ​ Financial Condition 54 ​ ​ Overview 54 ​ ​ Investment Securities 54 ​ ​ Loans/Leases 56 ​ ​ Allowance for Credit Losses on Loans/Leases and OBS Exposures 57 ​ ​ Nonperforming Assets 60 ​ ​ Deposits 61 ​ ​ Short-Term Borrowings 62 ​ ​ FHLB Advances and Other Borrowings 62 ​ ​ Subordinated Notes 62 ​ ​ Junior Subordinated Debentures 63 ​ ​ Stockholders’ Equity 63 ​ ​ Liquidity and Capital Resources 64 ​ ​ Commitments, Contingencies, Contractual Obligations, and Off-Balance Sheet Arrangements 65 ​ ​ Impact of Inflation and Changing Prices 67 ​ ​ Forward-Looking Statements 67 ​ Item 7A.
Quantitative and Qualitative Disclosures About Market Risk 65 ​ Item 8.
Quantitative and Qualitative Disclosures About Market Risk 69 ​ Item 8.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeApplication of the simulation model analysis for select interest rate scenarios at December 31, 2023 and 2022 demonstrated the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ NET INTEREST INCOME EXPOSURE in YEAR 1 ​ ​ As of December 31, As of December 31, INTEREST RATE SCENARIO ​ POLICY LIMIT 2023 2022 ​ ​ ​ ​ ​ ​ ​ ​ 300 basis point downward parallel shock ​ (30.0) % 2.1 % (6.1) % 200 basis point downward parallel shift ​ (10.0) % 1.4 % (0.2) % 200 basis point upward parallel shift (10.0) % (2.3) % (1.3) % 300 basis point upward parallel shock (30.0) % (8.0) % (2.3) % ​ With the shift in funding from non-interest bearing and lower beta deposits to higher beta deposits, the Company’s balance sheet is now moderately liability sensitive.
Biggest changeApplication of the simulation model analysis for select interest rate scenarios at December 31, 2024 and 2023 demonstrated the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ NET INTEREST INCOME EXPOSURE in YEAR 1 ​ ​ As of December 31, As of December 31, INTEREST RATE SCENARIO ​ POLICY LIMIT 2024 2023 ​ ​ ​ ​ ​ ​ ​ ​ 300 basis point downward parallel shock ​ (30.0) % 4.8 % 2.1 % 200 basis point downward parallel shift ​ (10.0) % 2.3 % 1.4 % 200 basis point upward parallel shift (10.0) % (3.2) % (2.3) % 300 basis point upward parallel shock (30.0) % (9.2) % (8.0) % ​ With the shift in funding from non-interest bearing and lower beta deposits to higher beta deposits, the Company’s balance sheet is now moderately liability sensitive.
The simulation is within the board-established policy limits for all three scenarios. Additionally, for all of the various interest rate scenarios modeled and measured by management (as described above), the results at December 31, 2023 were well within established risk tolerances as established by policy or by best practice (if the interest rate scenario didn’t have a specific policy limit).
The simulation is within the board-established policy limits for all three scenarios. Additionally, for all of the various interest rate scenarios modeled and measured by management (as described above), the results at December 31, 2024 were well within established risk tolerances as established by policy or by best practice (if the interest rate scenario didn’t have a specific policy limit).
Other types of market risk, such as foreign currency exchange rate risk and commodity price risk, do not arise in the normal course of the Company’s business activities. ​ 66 Table of Contents
Other types of market risk, such as foreign currency exchange rate risk and commodity price risk, do not arise in the normal course of the Company’s business activities. ​ 70 Table of Contents
This simulation model captures the impact of changing interest rates on the interest income received and interest 65 Table of Contents expense paid on all interest sensitive assets and liabilities reflected on the Company’s consolidated balance sheet.
This simulation model captures the impact of changing interest rates on the interest income received and interest expense paid on all interest sensitive assets and liabilities reflected on the Company’s consolidated balance sheet.
The increased policy limit is appropriate as the shock scenario is extreme and unlikely and warrants a higher limit than the more realistic and traditional parallel/pro-rata shift scenarios.
The increased 69 Table of Contents policy limit is appropriate as the shock scenario is extreme and unlikely and warrants a higher limit than the more realistic and traditional parallel/pro-rata shift scenarios.

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