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What changed in National Bank Holdings Corp's 10-K — 2022 vs 2023

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

+363 added−325 removedSource: 10-K (2024-02-27) vs 10-K (2023-02-28)

Top changes in National Bank Holdings Corp's 2023 10-K

363 paragraphs added · 325 removed · 256 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

67 edited+19 added−8 removed132 unchanged
Biggest changeOur primary focus has been on markets that we believe are characterized by some or all of the following: (i) attractive demographics with household income and population growth above the national average; (ii) concentration of business activity; (iii) high quality deposit bases; (iv) an advantageous competitive landscape that provides opportunity to achieve meaningful market presence; (v) consolidation opportunities as well as potential for add-on transactions; and (vi) markets sizeable enough to support our long-term organic growth objectives. ​ 6 Table of Contents The table below describes certain key demographic statistics regarding our markets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Top 3 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ competitor ​ ​ ​ ​ ​ # of ​ ​ ​ ​ ​ ​ ​ Median ​ combined ​ ​ Deposits ​ businesses ​ Population ​ Unemployment ​ Population ​ household ​ deposit ​ ​ (billions) ​ (thousands) ​ (millions) ​ rate (1) growth (2) income ​ market share Denver, CO ​ $ 126.8 160.5 3.0 3.3% ​ 16.7% ​ $ 95,551 52% Front Range, CO (3) ​ 170.6 > 250.0 4.8 3.3% ​ 17.2% ​ 92,157 51% Kansas City, MO-KS MSA ​ 85.8 101.4 2.2 2.7% ​ 8.0% ​ 76,169 45% Austin, TX ​ ​ 71.0 ​ 96.2 ​ 2.4 ​ 2.9% ​ 31.7% ​ ​ 91,096 ​ 50% Dallas, TX ​ ​ 430.5 ​ > 250.0 ​ 7.8 ​ 3.4% ​ 17.9% ​ ​ 81,205 ​ 62% Salt Lake City, UT ​ ​ 65.8 ​ 55.1 ​ 1.3 ​ 2.2% ​ 13.9% ​ ​ 88,921 ​ 78% Jackson, WY-ID ​ ​ 4.4 ​ 3.0 ​ 0.0 ​ - ​ 12.0% ​ ​ 93,322 ​ 74% Boise City, ID ​ ​ 18.4 ​ 113.2 ​ 0.8 ​ 2.6% ​ 25.7% ​ ​ 73,973 ​ 53% U.S.
Biggest changeOur primary focus has been on markets that we believe are characterized by some or all of the following: (i) attractive demographics with household income and population growth above the national average; (ii) concentration of business activity; (iii) high quality deposit bases; (iv) an advantageous competitive landscape that provides opportunity to achieve meaningful market presence; (v) consolidation opportunities as well as potential for add-on transactions; and (vi) markets sizeable enough to support our long-term organic growth objectives. ​ The table below describes certain key demographic statistics regarding our markets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Top 3 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ competitor ​ ​ ​ ​ ​ # of ​ ​ ​ ​ ​ ​ ​ Median ​ combined ​ ​ Deposits ​ businesses ​ Population ​ Unemployment ​ Population ​ household ​ deposit ​ ​ (billions) ​ (thousands) ​ (millions) ​ rate (1) growth (2) income ​ market share Denver, CO ​ $ 114.5 > 250.0 3.0 3.4% ​ 13.5% ​ $ 96,990 50% Front Range, CO (3) ​ 154.5 > 250.0 4.9 3.4% ​ 15.2% ​ 93,267 50% Kansas City, MO-KS MSA ​ 87.3 > 250.0 2.2 3.0% ​ 8.5% ​ 77,502 48% Austin, TX ​ ​ 66.4 ​ > 250.0 ​ 2.4 ​ 3.4% ​ 30.6% ​ ​ 90,939 ​ 48% Dallas, TX ​ ​ 405.9 ​ > 250.0 ​ 7.9 ​ 3.7% ​ 17.3% ​ ​ 81,625 ​ 59% Salt Lake City, UT (4) ​ ​ 98.5 ​ > 250.0 ​ 2.7 ​ 2.8% ​ 18.4% ​ ​ 91,550 ​ 65% Jackson, WY-ID ​ ​ 3.4 ​ 9.0 ​ 0.0 ​ - ​ 13.6% ​ ​ 93,975 ​ 72% Boise City, ID ​ ​ 16.9 ​ 115.3 ​ 0.8 ​ 3.2% ​ 27.6% ​ ​ 75,384 ​ 55% U.S.
The transaction was valued at $213.4 million in the aggregate, based on the Company’s closing price of $36.99 on September 30, 2022. Immediately following the closing of the acquisition, BOJH sold substantially of all its assets and liabilities to NBH Bank, with the exception of assets and liabilities related to its trust business.
The transaction was valued at $213.4 million in the aggregate, based on the Company’s closing price of $36.99 on September 30, 2022. Immediately following the closing of the acquisition, BOJH sold substantially all of its assets and liabilities to NBH Bank, with the exception of assets and liabilities related to its trust business.
Our teams also continue to pursue opportunities to deepen client relationships, which we believe will further increase our organic loan origination volumes and attract new transaction accounts that offer lower cost of funds and higher fee generating activity. ​ ● Expansion through our digital solution 2UniFi SM .
Our teams also continue to pursue opportunities to deepen client relationships, which we believe will further increase our organic loan origination volumes and attract new transaction accounts that offer lower cost of funds and higher fee generating activity. ​ ● Expansion through our digital solution 2UniFi.
In the case of the Company and NBH Bank, applicable capital guidelines can be found in the Federal Reserve’s Regulations H and Q. ​ The capital rules require banks and bank holding companies to maintain a minimum common equity tier 1 capital ratio of 4.5%, a total tier 1 capital ratio of 6%, a total capital ratio of 8%, and a leverage ratio of 4%.
In the case of the Company, NBH Bank and BOJHT, applicable capital guidelines can be found in the Federal Reserve’s Regulations H and Q. ​ The capital rules require banks and bank holding companies to maintain a minimum common equity tier 1 capital ratio of 4.5%, a total tier 1 capital ratio of 6%, a total capital ratio of 8%, and a leverage ratio of 4%.
Our management team also plays an integral part in championing women in business by hosting networking events, serving on panels and sponsoring relevant events that foster understanding and engagement. ​ Associate Development and Training ​ We believe that building the best team requires investing in our associates’ professional development.
Our management team also plays an integral part in championing women and minorities in business by hosting networking events, serving on panels and sponsoring relevant events that foster understanding and engagement. ​ Associate Development and Training ​ We believe that building the best team requires investing in our associates’ professional development.
Our trust and wealth team rounds out the full-service offerings to provide the full spectrum of tools and support required for all our clients’ financial needs. ​ Lending Activities ​ Our loan portfolio includes commercial and industrial loans, commercial real estate loans, residential real estate loans, business loans and consumer loans.
Our trust and wealth team rounds out the full-service offerings to provide the complete spectrum of tools and support required for all our clients’ financial needs. ​ Lending Activities ​ Our loan portfolio includes commercial and industrial loans, commercial real estate loans, residential real estate loans, business loans and consumer loans.
Top 20 MSAs (determined by population). ​ Source: S&P Global as of December 31, 2022, except Deposits and Top 3 Competitor Combined Deposit Market Shares, which reflects data as of June 30, 2022. ​ Our Business Strategy ​ As part of our goal of becoming a leading regional community financial services company, we seek to continue to generate strong organic growth, as well as pursue selective acquisitions of financial institutions and other complementary businesses.
Top 20 MSAs (determined by population). ​ Source: S&P Global as of December 31, 2023, except Deposits and Top 3 Competitor Combined Deposit Market Shares, which reflects data as of June 30, 2023. ​ Our Business Strategy ​ As part of our goal of becoming a leading regional community financial services company, we seek to continue to generate strong organic growth, as well as pursue selective acquisitions of financial institutions and other complementary businesses.
The bank regulators have the power to, among other things: enjoin “unsafe or unsound” practices, require affirmative actions to correct any violation or practice, issue administrative orders that can be judicially enforced, direct increases in capital, direct the sale of subsidiaries or other assets, limit dividends and distributions, restrict growth, assess civil monetary penalties, remove officers and directors, terminate deposit insurance, and appoint a conservator or receiver. ​ Engaging in unsafe or unsound practices or failing to comply with applicable laws, regulations and supervisory agreements could subject the Company, its subsidiaries and their respective officers, directors and institution-affiliated parties to the remedies described above and other sanctions.
The bank regulators have the power to, among other things: enjoin “unsafe or unsound” practices, require affirmative actions to correct any violation or practice, issue administrative orders that can be judicially enforced, direct increases in capital, direct the sale of subsidiaries or other assets, limit dividends and distributions, restrict growth, assess civil monetary penalties, remove officers and directors, terminate deposit insurance, and appoint a conservator or receiver. ​ 15 Table of Contents Engaging in unsafe or unsound practices or failing to comply with applicable laws, regulations and supervisory agreements could subject the Company, its subsidiaries and their respective officers, directors and institution-affiliated parties to the remedies described above and other sanctions.
Under the final rule, investors can hold up to 24.9% of the voting securities and up to 33% of the total equity of a company without necessarily having a controlling influence. ​ Anti-Money Laundering Requirements ​ Under federal law, including the Bank Secrecy Act and the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the “USA PATRIOT Act”), certain types of financial institutions, including insured depository institutions, must maintain anti-money laundering programs that include established internal policies, procedures and controls; a designated compliance officer; an ongoing associate training program; and testing of the program by an independent audit function.
Under the final rule, investors can hold up to 24.9% of the voting securities and up to 33% of the total equity of a company without necessarily having a controlling influence. ​ Anti-Money Laundering Requirements ​ Under federal law, including the Bank Secrecy Act and the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the “USA PATRIOT Act”), certain types of financial institutions, including insured depository institutions, must maintain anti-money laundering programs that include established internal policies, procedures and controls; a designated compliance officer; an ongoing associate training program; and 18 Table of Contents testing of the program by an independent audit function.
For more detail on our credit policies, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Financial Condition-Asset Quality.” ​ 11 Table of Contents Competition ​ The banking landscape in our primary markets of Colorado, the greater Kansas City region, Utah, Texas, Wyoming, New Mexico and Idaho is highly competitive and quite fragmented, with many small banks having limited market share while the large out-of-state national and super-regional banks control the majority of deposits and profitable banking relationships.
For more detail on our credit policies, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Financial Condition-Asset Quality.” ​ Competition ​ The banking landscape in our primary markets of Colorado, the greater Kansas City region, Utah, Texas, Wyoming, New Mexico and Idaho is highly competitive and quite fragmented, with many small banks having limited market share while the large out-of-state national and super-regional banks control the majority of deposits and profitable banking relationships.
We expect that acquisitions or other expansionary opportunities can be complimentary to our growth strategy. We intend to carefully select opportunities that we believe have stable core franchises, have significant growth potential or will add asset generation capabilities or fee income streams while structuring the opportunities to limit risk.
We expect that acquisitions or other expansionary opportunities can be complementary to our growth strategy. We intend to carefully select opportunities that we believe have stable core franchises, have significant growth potential or will add asset generation capabilities or fee income streams while structuring the opportunities to limit risk.
If our insured depository institution fails, insured and uninsured depositors, along with the FDIC, will have priority in payment ahead of unsecured, nondeposit creditors, including us, with respect to any extensions of credit they have made to such insured depository institution. ​ Limits on Transactions with Affiliates ​ Federal law restricts the amount and the terms of both credit and non-credit transactions (generally referred to as “Covered Transactions”) between a bank and its non-bank affiliates.
If our insured depository institution fails, insured and uninsured depositors, along with the FDIC, will have priority in payment ahead of unsecured, nondeposit creditors, including us, with respect to any extensions of credit they have made to such insured depository institution. ​ 17 Table of Contents Limits on Transactions with Affiliates ​ Federal law restricts the amount and the terms of both credit and non-credit transactions (generally referred to as “Covered Transactions”) between a bank and its non-bank affiliates.
Although non-owner occupied CRE is not a primary focus of our lending strategy, we have developed teams of dedicated 9 Table of Contents CRE bankers in each of our markets who possess the depth and breadth of both market knowledge and industry expertise, which serves to further mitigate risk of this product type. ​ Small Business Administration Loans —We offer a range of U.S.
Although non-owner occupied CRE is not a primary focus of our lending strategy, we have developed teams of dedicated CRE bankers in each of our markets who possess the depth and breadth of both market knowledge and industry expertise, which serves to further mitigate risk of this product type. ​ Small Business Administration Loans — We offer a range of U.S.
As an insured bank, NBH Bank is subject to the provisions of the Federal Deposit Insurance Act, as amended (the “FDI Act”), and the FDIC’s implementing regulations thereunder, and may also be subject to supervision and examination by the FDIC under certain circumstances. ​ Under the FDIC Improvement Act of 1991 (“FDICIA”), NBH Bank must submit financial statements prepared in accordance with GAAP and management reports signed by the Company’s and NBH Bank’s chief executive officer and chief accounting or financial officer concerning management’s responsibility for the financial statements, an assessment of internal controls, and an assessment of NBH Bank’s compliance with various banking laws and FDIC and other banking regulations.
As insured banks, NBH Bank and BOJHT are subject to the provisions of the Federal Deposit Insurance Act, as amended (the “FDI Act”), and the FDIC’s implementing regulations thereunder, and may also be subject to supervision and examination by the FDIC under certain circumstances. ​ Under the FDIC Improvement Act of 1991 (“FDICIA”), the Banks must submit financial statements prepared in accordance with GAAP and management reports signed by the Company’s and NBH Bank’s chief executive officer and chief accounting or financial officer concerning management’s responsibility for the financial statements, an assessment of internal controls, and an assessment of NBH Bank’s compliance with various banking laws and FDIC and other banking regulations.
As of December 31, 2022, the Company did not have any outstanding Covered Transactions. ​ Regulatory Notice and Approval Requirements for Acquisitions of Control ​ We must generally receive federal bank regulatory approval before we can acquire a financial institution.
As of December 31, 2023, the Company did not have any outstanding Covered Transactions. ​ Regulatory Notice and Approval Requirements for Acquisitions of Control ​ We must generally receive federal bank regulatory approval before we can acquire a financial institution.
Our regulatory capital ratios and those of NBH Bank are in excess of the levels established for “well-capitalized” institutions. ​ Bank Holding Companies as a Source of Strength ​ The Federal Reserve requires that a bank holding company serve as a source of financial and managerial strength to each bank that it controls and, under appropriate circumstances, commit resources to support each such controlled bank.
Our regulatory capital ratios and those of NBH Bank are in excess of the levels established for “well-capitalized” institutions. ​ 16 Table of Contents Bank Holding Companies as a Source of Strength ​ The Federal Reserve requires that a bank holding company serve as a source of financial and managerial strength to each bank that it controls and, under appropriate circumstances, commit resources to support each such controlled bank.
Securities and Exchange Commission (“SEC”). The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov. ​ 20 Table of Contents
Securities and Exchange Commission (“SEC”). The SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov. ​ 21 Table of Contents
The Dodd-Frank Act generally enhances the restrictions on transactions with affiliates, including an expansion of what types of transactions are Covered Transactions to include credit exposures related to derivatives, repurchase agreements and securities 17 Table of Contents lending arrangements and an increase in the amount of time for which collateral requirements regarding Covered Transactions must be satisfied.
The Dodd-Frank Act generally enhances the restrictions on transactions with affiliates, including an expansion of what types of transactions are Covered Transactions to include credit exposures related to derivatives, repurchase agreements and securities lending arrangements and an increase in the amount of time for which collateral requirements regarding Covered Transactions must be satisfied.
All bank associates are granted up to eight paid hours each year to donate their time to non-profit organizations that align with our Community Reinvestment Act (“CRA”) initiatives, which include financial literacy, affordable housing and workforce development. ​ Safety and Respect in the Workplace ​ We are committed to providing a safe and secure work environment in accordance with applicable labor, safety, health, anti-discrimination and other workplace laws.
All bank associates are granted up to eight paid 13 Table of Contents hours each year to donate their time to non-profit organizations that align with our Community Reinvestment Act (“CRA”) initiatives, which include financial literacy, affordable housing and workforce development. ​ Safety and Respect in the Workplace ​ We are committed to providing a safe and secure work environment in accordance with applicable labor, safety, health, anti-discrimination and other workplace laws.
Examples of our consumer loans include home improvement loans not secured by real estate, new and used automobile loans and personal lines of credit. ​ Deposit Products (including online and mobile banking) —We offer a variety of deposit products to our clients, including checking accounts, savings accounts, money market accounts, health savings accounts and other deposit accounts, including fixed-rate, fixed maturity time deposits ranging in terms from 30 days to five years, and individual retirement accounts.
Examples of our consumer loans include home improvement loans not secured by real estate, new and used automobile loans and personal lines of credit. ​ Deposit Products (including online and mobile banking) —We offer a variety of deposit products to our clients, including checking accounts, savings accounts, money market accounts, health savings accounts and other deposit accounts, including fixed-rate, fixed maturity time deposits ranging in terms from three months to five years, and individual retirement accounts.
As of December 31, 2022, we had $9.6 billion in assets, $7.2 billion in loans, $7.9 billion in deposits, $1.1 billion in shareholders’ equity and $0.8 billion of trust and wealth management assets under management. ​ NBH Bank is a Colorado state-chartered bank and a member of the Federal Reserve Bank (“FRB”) of Kansas City.
As of December 31, 2023, we had $9.9 billion in assets, $7.7 billion in loans, $8.2 billion in deposits, $1.2 billion in shareholders’ equity and $0.9 billion of trust and wealth management assets under management. ​ NBH Bank is a Colorado state-chartered bank and a member of the Federal Reserve Bank (“FRB”) of Kansas City.
Some of these loans will be placed in the Bank’s loan portfolio; however, a majority are sold in the secondary market and provide a significant source of fee income. The majority of loans sold are sold with servicing released. We have residential banking products, servicing capabilities and residential loan origination channels.
Some of these loans will be placed in the Bank’s loan portfolio; however, a majority are sold in the secondary market and provide a significant source of fee income. The majority of loans sold are sold with servicing 10 Table of Contents released. We have residential banking products, servicing capabilities and residential loan origination channels.
We are committed to building and contributing to a healthy workplace environment for our associates by investing in competitive compensation and benefit packages, promoting inclusion of diverse viewpoints and backgrounds, providing training and career development opportunities and promoting qualified associates within our organization. ​ Associate Statistics ​ We are committed to attracting, developing, and retaining associates who reflect the communities in which we serve.
We are committed to building and contributing to a healthy workplace environment for our associates by investing in competitive compensation and benefit packages, promoting inclusion of diverse viewpoints and backgrounds, providing training and career development opportunities and promoting qualified associates within our organization. ​ 12 Table of Contents Associate Statistics ​ We are committed to attracting, developing, and retaining associates who reflect the communities we serve.
In addition, if the Federal Reserve believes that a bank holding company’s activities, assets or affiliates represent a significant risk to the financial safety, soundness or stability of a controlled bank, then the Federal Reserve could require the bank holding company to terminate the activities, liquidate the 16 Table of Contents assets or divest the affiliates.
In addition, if the Federal Reserve believes that a bank holding company’s activities, assets or affiliates represent a significant risk to the financial safety, soundness or stability of a controlled bank, then the Federal Reserve could require the bank holding company to terminate the activities, liquidate the assets or divest the affiliates.
We believe that our focus on serving consumers and small- to medium-sized businesses, coupled with our competitive product offerings, trust and wealth 7 Table of Contents management services offered through Bank of Jackson Hole Trust and our digital solution 2UniFi SM , will provide an expanded revenue base and new sources of fee income.
We believe that our focus on serving consumers and small- to medium-sized businesses, coupled with our competitive product offerings, trust and wealth management services offered through Bank of Jackson Hole Trust and our digital solution 2UniFi, will provide an expanded revenue base and new sources of fee income.
Our main focus is on our primary markets of Colorado, the greater Kansas City region, Texas, Utah, Wyoming, New Mexico and Idaho, including teams, asset portfolios, specialty commercial finance businesses, and whole banks.
Our main focus is on our primary markets of Colorado, the greater Kansas City region, Texas, Utah, Wyoming, New Mexico and Idaho, 8 Table of Contents including teams, asset portfolios, specialty commercial finance businesses, and whole banks.
In addition, the FDIC could terminate NBH Bank’s or Bank of Jackson Hole Trust’s deposit insurance if it determined that the Banks’ financial condition was unsafe or unsound or that the banks engaged in unsafe or unsound practices or violated an applicable rule, regulation, order or condition enacted or imposed by the banks’ regulators. ​ Regulatory Capital Requirements ​ In General ​ As a bank holding company, we are subject to regulatory capital adequacy requirements implemented by the Federal Reserve.
In addition, the FDIC could terminate NBH Bank’s or BOJHT’s deposit insurance if it determined that the Banks’ financial condition was unsafe or unsound or that the Banks engaged in unsafe or unsound practices or violated an applicable rule, regulation, order or condition enacted or imposed by the Banks’ regulators. ​ Regulatory Capital Requirements ​ In General ​ As a bank holding company, we are subject to regulatory capital adequacy requirements implemented by the Federal Reserve.
These state and local laws regulate the manner in which financial institutions deal with clients when taking deposits, making loans or conducting other types of transactions. ​ The Consumer Financial Protection Bureau (the “CFPB”) has broad rulemaking authority for a wide range of consumer financial laws that apply to all banks.
These state and local laws regulate the manner in which financial institutions deal with clients when taking deposits, making loans or conducting other types of transactions. ​ The CFPB has broad rulemaking authority for a wide range of consumer financial laws that apply to all banks.
The Company provides a variety of banking products and services to both commercial and consumer clients through a network of over 95 banking centers, as of December 31, 2022, located primarily in Colorado and the greater Kansas City region, Utah, Wyoming, Texas, New Mexico and Idaho, as well as through online and mobile banking products and services.
The Company provides a variety of banking products and services to both commercial and consumer clients through a network of over 90 banking centers, as of December 31, 2023, located primarily in Colorado and the greater Kansas City region, Utah, Wyoming, Texas, New Mexico and Idaho, as well as through online and mobile banking products and services.
We are the third largest banking center network among Colorado-based banks and the sixth largest banking center network in the greater Kansas City metropolitan statistical area (“MSA”) among Missouri- and Kansas-based banks ranked by deposits as of June 30, 2022 (the last date as of which data are available), according to S&P Global.
We are the fourth largest banking center network among Colorado-based banks and the sixth largest banking center network in the greater Kansas City metropolitan statistical area (“MSA”) among Missouri- and Kansas-based banks ranked by deposits as of June 30, 2023 (the last date as of which data are available), according to S&P Global.
The regulatory authorities have imposed “cease and desist” orders and civil money penalty sanctions against institutions found to be violating these obligations. ​ 18 Table of Contents Consumer Laws and Regulations ​ Banks and other financial institutions are subject to numerous laws and regulations intended to protect consumers in their transactions with banks.
The regulatory authorities have imposed “cease and desist” orders and civil money penalty sanctions against institutions found to be violating these obligations. ​ Consumer Laws and Regulations ​ Banks and other financial institutions are subject to numerous laws and regulations intended to protect consumers in their transactions with banks.
We have made significant investments in our commercial relationship managers, as well as developed significant capabilities across our business banking and several specialty commercial banking offerings. Our strategy is to originate a high-quality loan portfolio that is diversified across industries and granular in loan size.
We have made significant investments in our commercial relationship managers, as well as developed significant capabilities across our 7 Table of Contents business banking and several specialty commercial banking offerings. Our strategy is to originate a high-quality loan portfolio that is diversified across industries and granular in loan size.
While the current 8 Table of Contents inflationary environment has created operating stress for many businesses, our teams continually monitor the financial health of our clients in order to manage risk.
While the current inflationary environment has created operating stress for many businesses, our teams continually monitor the financial health of our clients in order to manage risk.
Partnerships with professional associations, schools and universities imbedded within our local footprint, and the use of various technology solutions assist us in connecting and building relationships with a diverse pool of candidates. As of December 31, 2022, we employed 1,255 full-time and 67 part-time associates throughout our business footprint. ​ The market for top talent is highly competitive.
Partnerships with professional associations, schools and universities imbedded within our local footprint, and the use of various technology solutions assist us in connecting and building relationships with a diverse pool of candidates. As of December 31, 2023, we employed 1,226 full-time and 48 part-time associates throughout our business footprint. ​ The market for top talent is highly competitive.
The CFPB has relied upon “unfair, deceptive, or abusive acts” prohibitions as its primary enforcement tool. However, the CFPB and DOJ continue to be focused on fair lending in taking enforcement actions against banks with renewed emphasis on alleged redlining practices.
The CFPB has relied upon “unfair, deceptive, or abusive acts” prohibitions as its primary enforcement tool. However, the CFPB and the Department of Justice (“DOJ”) continue to be focused on fair lending in taking enforcement actions against banks with renewed emphasis on alleged redlining practices.
Through the Bank of Jackson Hole Trust, our primary business is to provide trust and wealth management services to our clients. We conduct our banking business with over 95 banking centers across our footprint as of December 31, 2022. Our distribution network also includes 129 ATMs as well as fully integrated online banking and mobile banking services.
Through the Bank of Jackson Hole Trust, our primary business is to provide trust and wealth management services to our clients. We conduct our banking business with over 90 banking centers across our footprint as of December 31, 2023. Our distribution network also includes 126 ATMs as well as fully integrated online banking and mobile banking services.
As part of our credit underwriting process, we also review the borrower’s total debt obligations on a global basis.
As part of our 11 Table of Contents credit underwriting process, we also review the borrower’s total debt obligations on a global basis.
Other major MSAs in which we operate include Salt Lake City, Utah; Jackson, Wyoming; Dallas-Fort Worth-Arlington, Texas; Boise City, ID and Austin-Round Rock, Texas. ​ We believe that our established presence in our markets positions us well for growth opportunities.
Other major MSAs in which we operate include Salt Lake City, Utah; Jackson, Wyoming; Dallas-Fort Worth-Arlington, Texas; Boise City, Idaho and Austin-Round Rock, Texas. ​ 6 Table of Contents We believe that our established presence in our markets positions us well for growth opportunities.
Consumer loans are both secured (for example by deposit accounts, brokerage accounts or automobiles) and unsecured and carry either a fixed rate or variable 10 Table of Contents rate.
Consumer loans are both secured (for example by deposit accounts, brokerage accounts or automobiles) and unsecured and carry either a fixed rate or variable rate.
Financial holding companies may also engage in activities that are determined by the Federal Reserve to be complementary to financial activities. ​ Maintaining our financial holding company status requires that the Company and our bank subsidiaries, remain “well-capitalized” and “well-managed” as defined by regulation and that our bank subsidiaries maintain at least a “satisfactory” rating under the CRA.
Financial 14 Table of Contents holding companies may also engage in activities that are determined by the Federal Reserve to be complementary to financial activities, subject to certain notice requirements. ​ Maintaining our financial holding company status requires that the Company and our bank subsidiaries, remain “well-capitalized” and “well-managed” as defined by regulation and that our bank subsidiaries maintain at least a “satisfactory” rating under the CRA.
As of December 31, 2022, substantially all of our commercial and industrial loans were secured. ​ Non-Owner Occupied Commercial Real Estate Loans —Non-owner occupied commercial real estate loans (“CRE”) consist of loans to finance the purchase of commercial real estate and development loans.
As of December 31, 2023, substantially all of our commercial and industrial loans were secured. 9 Table of Contents ​ Non-Owner Occupied Commercial Real Estate Loans —Non-owner occupied commercial real estate loans (“CRE”) consist of loans to finance the purchase of commercial real estate and development loans.
The Company oversees its Equity, Diversity and Inclusion efforts through our broader Environmental, Social and Governance (“ESG”) Committee that is comprised of a multi-disciplinary group of associates throughout NBH Bank with oversight by the executive management team.
The Company oversees its Environmental, Social and Governance (“ESG”) matters, including equity, diversity and inclusion efforts through its Doing Good Committee. The Doing Good Committee is comprised of a multi-disciplinary group of associates throughout NBH Bank with oversight by the executive management team.
Additionally, we offer a stock purchase plan (ESPP) to our associates which allows those who work 20 hours or more per week to purchase shares in our Company at a 10% discount. ​ Community Engagement ​ We strive to make a positive impact in the communities we serve through consistent engagement, as well as maintaining strong partnerships with a wide range of charitable organizations and causes.
Additionally, we offer a stock purchase plan (ESPP) to our associates which allows eligible associates to purchase shares in our Company at a 10% discount. ​ Community Engagement ​ We strive to make a positive impact in the communities we serve through consistent engagement, as well as maintaining strong partnerships with a wide range of charitable organizations and causes.
The FDIC has adopted a risk-based assessment system whereby FDIC-insured depository institutions pay insurance premiums at rates based on their risk classification.
FDIC-insured banks are required to pay deposit insurance premiums to the FDIC. The FDIC has adopted a risk-based assessment system whereby FDIC-insured depository institutions pay insurance premiums at rates based on their risk classification.
If we or our bank subsidiaries fail to continue to meet these requirements, we could be subject to restrictions on new activities and acquisitions, and/or be required to cease and possibly divest operations that conduct activities that are not permissible for a bank holding company that does not also qualify as a financial holding company. ​ Subsidiaries as State-Chartered Banks ​ NBH Bank as a Colorado State-Chartered Bank ​ Our bank subsidiary, NBH Bank, is a Colorado state-chartered bank and also a member of the Federal Reserve Bank of Kansas City.
If we or our bank subsidiaries fail to continue to meet these requirements, we could be subject to restrictions on new activities and acquisitions, and/or be required to cease and possibly divest operations that conduct activities that are not permissible for a bank holding company that does not also qualify as a financial holding company. ​ Subsidiaries as State-Chartered Banks ​ Our bank subsidiaries are NBH Bank and BOJHT.
Our other bank subsidiary, BOJHT, is a Wyoming state-chartered bank and a member of the Federal Reserve Bank of Kansas City. As such, BOJHT is subject to examination, supervision and regulation by both the Wyoming Division of Banking and the Federal Reserve.
Bank of Jackson Hole Trust, is a Wyoming state-chartered bank and also a member of the Federal Reserve Bank of Kansas City. As such, BOJHT is subject to examination, supervision and regulation by both the Wyoming Division of Banking and the Federal Reserve.
These reserves must be maintained in the form of vault cash or in an account at a FRB. ​ Deposit Insurance Assessments ​ All of a depositor’s accounts at an insured bank, including all non-interest bearing transaction accounts, are insured by the FDIC up to $250,000. FDIC-insured banks are required to pay deposit insurance premiums to the FDIC.
In addition, reserves must be maintained on certain non-personal time deposits. These reserves must be maintained in the form of vault cash or in an account at a FRB. ​ Deposit Insurance Assessments ​ All of a depositor’s accounts at an insured bank, including all non-interest bearing transaction accounts, are insured by the FDIC up to $250,000.
Our trust and wealth business currently operates under the Wyoming charter as Bank of Jackson Hole Trust and Bank of Jackson Hole Trust and Wealth Partners. ​ The Company continues to develop our digital solution 2UniFi SM , a national platform for providing banking services to small and medium-sized businesses, digital payment tools and financial services information management.
Our trust and wealth business currently operates under the Wyoming charter as Bank of Jackson Hole Trust and Bank of Jackson Hole Trust and Wealth Partners. ​ The Company continues to develop our digital solution 2UniFi, a national platform for providing banking services to small and medium-sized businesses, digital payment tools and financial services information management. 2Unifi, LLC is a wholly-owned subsidiary of NBHC with bank offerings provided through NBH Bank.
We continue to focus on growing our core business while also innovating and building partnerships that will help us deliver a comprehensive digital financial ecosystem. ​ Our Acquisitions ​ We began banking operations in October 2010 and, as of December 31, 2022, we have completed eight bank acquisitions.
We continue to focus on growing our core business while also innovating and building partnerships that will help us deliver a comprehensive digital financial ecosystem. ​ 5 Table of Contents Our Acquisitions ​ We began banking operations in October 2010 and, as of December 31, 2023, we have completed eight bank acquisitions and one non-bank acquisition of a deposit processing technology company.
(4) ​ ​ ​ ​ ​ ​ ​ 3.5% ​ 6.8% ​ 72,465 57% ​ ​ ​ (1) Unemployment data is as of December 31, 2022. (2) For the period 2012 through 2022. (3) Colorado Front Range is a population weighted average of the following Colorado MSAs: Denver, Boulder, Colorado Springs, Fort Collins and Greeley.
(5) ​ ​ ​ ​ ​ ​ ​ 3.7% ​ 6.2% ​ 73,503 58% ​ ​ ​ (1) Unemployment data is as of December 31, 2023. (2) For the period 2013 through 2023. (3) Colorado Front Range is a population weighted average of the following Colorado MSAs: Denver, Boulder, Colorado Springs, Fort Collins and Greeley.
The Bank of Jackson Hole Trust also operates under the brand Jackson Hole Trust. ​ All of our acquisitions were accounted for under the acquisition method of accounting, and accordingly, all assets acquired and liabilities assumed were recorded at their respective acquisition date fair values and the fair value discounts/premiums on loans are being accreted over the lives of the loans. ​ Our Market Area ​ Our core markets are broadly defined as Colorado, the greater Kansas City region, Utah, Wyoming, Texas, New Mexico and Idaho.
At the time of acquisition, Cambr administered approximately $1.7 billion of deposits comprising more than 500,000 FDIC-insured deposit accounts. ​ All of our acquisitions were accounted for under the acquisition method of accounting, and accordingly, all assets acquired and liabilities assumed were recorded at their respective acquisition date fair values and the fair value discounts/premiums on loans are being accreted over the lives of the loans. ​ Our Market Area ​ Our core markets are broadly defined as Colorado, the greater Kansas City region, Utah, Wyoming, Texas, New Mexico and Idaho.
The federal banking agencies have risk-based capital adequacy guidelines intended to provide a measure of capital adequacy that reflects the degree of risk associated with a banking organization’s operations.
The federal banking agencies have risk-based capital adequacy guidelines intended to provide a measure of capital adequacy that reflects the degree of risk associated with a banking organization’s operations. NBH Bank and BOJHT are subject to capital adequacy guidelines as implemented by the relevant federal banking agency.
National Bank Holdings Corporation holds two subsidiaries, NBH Bank and Bank of Jackson Hole Trust. NBH Bank, is a Colorado state-chartered bank and a member of the Federal Reserve Bank of Kansas City. As such, NBH Bank is subject to examination, supervision and regulation by both the Colorado 13 Table of Contents Division of Banking and the Federal Reserve.
NBH Bank is a Colorado state-chartered bank and also a member of the Federal Reserve Bank of Kansas City. As such, NBH Bank is subject to examination, supervision and regulation by both the Colorado Division of Banking and the Federal Reserve.
As a result of our efforts: ​ ● 64% of the Company’s workforce is female and 54% of the Company’s managerial roles are female, as of December 31, 2022. ● Minorities represent 23% of the Company’s workforce and 21% of the Company’s managerial roles, as of December 31, 2022. 12 Table of Contents ● In 2022, we hired 426 associates, and 66% of those new associates were female and 34% were minorities.
As a result of our efforts: ​ ● 63% of the Company’s workforce is female and 54% of the Company’s managerial roles are female, as of December 31, 2023. ● Minorities represent 25% of the Company’s workforce and 21% of the Company’s managerial roles, as of December 31, 2023. ● In 2023, we hired 371 associates, and 62% of those new associates were female and 35% were minorities.
In order to attract and retain deposits, we rely on providing competitively priced high-quality service and introducing new products and services that meet our clients' needs. ​ We also offer comprehensive, user-friendly mobile and online banking platforms allowing our clients to pay bills, check statements, deposit checks and transfer funds, amongst other features, online or on-the-go. ​ Trust and Wealth Management Services ​ With the acquisition of Bank of Jackson Hole Trust, the Company expanded the offerings available to clients with the addition of trust, estate and wealth management services.
In order to attract and retain deposits, we rely on providing competitively priced high-quality service and introducing new products and services that meet our clients' needs. ​ We also offer comprehensive, user-friendly mobile and online banking platforms allowing our clients to pay bills, check statements, deposit checks and transfer funds, amongst other features, online or on-the-go. ​ Cambr Deposit Services ​ Cambr is a digital deposit acquisition and processing platform that is designed to gather deposits from accounts offered by fintech and embedded finance companies.
The assessment rate schedules under this final rule will remain in effect unless and until the reserve ratio of the Deposit Insurance Fund meets or exceeds two percent.
The assessment rate schedules under this final rule will remain in effect unless and until the reserve ratio of the Deposit Insurance Fund meets or exceeds two percent. Additionally, on November 29, 2023, the FDIC implemented a special assessment to recover the loss to the Deposit Insurance Fund associated with the 2023 bank failures.
We have transformed these banks into one collective banking operation with a strong capital position, organic growth, prudent underwriting, a granular and well-diversified loan portfolio and meaningful market share with continued opportunity for expansion. ​ 5 Table of Contents Rock Canyon Bank Acquisition ​ On September 1, 2022, the Company completed its acquisition of Community Bancorporation, the bank holding company of Utah-based Rock Canyon Bank (“RCB”).
We have transformed these acquisitions into one collective banking operation with a strong capital position, organic growth, prudent underwriting, a granular and well-diversified loan portfolio and meaningful market share with continued opportunity for expansion. Our historical growth coincides with the Company’s initial strategic goals of becoming a leading regional bank holding company through selective acquisitions and strong organic growth.
NBH Bank may be able to pass part or all of this cost on to its clients, including in the form of lower interest rates on deposits, or fees to some depositors, depending on market conditions. ​ The FDIC may terminate a depository institution’s deposit insurance upon a finding that the institution’s financial condition is unsafe or unsound or that the institution has engaged in unsafe or unsound practices or has violated any applicable rule, regulation, order or condition enacted or imposed by the institution’s regulatory agency.
As of December 31, 2023, the Company was not subject to the special assessment. ​ The FDIC may terminate a depository institution’s deposit insurance upon a finding that the institution’s financial condition is unsafe or unsound or that the institution has engaged in unsafe or unsound practices or has violated any applicable rule, regulation, order or condition enacted or imposed by the institution’s regulatory agency.
As a Preferred Lender Provider of the SBA, we are able to expedite SBA loan approval, closing, and servicing functions through delegated authority to underwrite and approve loans on behalf of the SBA. We utilize the SBA 7(a) loan, SBA 504 loan, SBA Express loan, and CAP Line loan programs. In addition to the SBA program, we also originate U.S.
Small Business Administration, or SBA, loans to support small businesses and entrepreneurs seeking growth capital, working capital, or other capital investments. As a Preferred Lender Provider of the SBA, we are able to expedite SBA loan approval, closing, and servicing functions through delegated authority to underwrite and approve loans on behalf of the SBA.
We cannot predict whether potential legislation will be enacted and, if enacted, the effect that it or any implementing regulations would have on our business, results of operations, liquidity or financial condition. ​ On October 17, 2022, the FDIC issued a final rule to increase initial base deposit insurance assessment rates for insured depository institutions by two basis points, beginning with the first quarterly assessment period of 2023.
We cannot predict whether potential legislation will be enacted and, if enacted, the effect that it or any implementing regulations would have on our business, results of operations, liquidity or financial condition. ​ More Information ​ Our website is www.nationalbankholdings.com.
Failure to comply with these laws and regulations could give rise to regulatory sanctions, client rescission rights, actions by state and local attorneys general and civil or criminal liability. ​ The Community Reinvestment Act ​ The CRA is intended to encourage banks to help meet the credit needs of their entire communities, including low- and moderate-income neighborhoods, consistent with safe and sound operations.
We are in the process of evaluating this proposed rulemaking and assessing its potential impact on the Company and the Banks if adopted as proposed. ​ The Community Reinvestment Act ​ The CRA is intended to encourage banks to help meet the credit needs of their entire communities, including low- and moderate-income neighborhoods, consistent with safe and sound operations.
As such, BOJHT is subject to examination, supervision and regulation by both the Wyoming Division of Banking and the Federal Reserve. BOJHT’s deposits are insured by the Federal Deposit Insurance Corporation (“FDIC”) through the DIF, in the manner and to the extent provided by law.
NBH Bank’s and BOJHT’s deposits are insured by the FDIC through the DIF, in the manner and to the extent provided by law.
(4) Top 3 competitor combined deposit market share based on U.S.
(4) ​ Salt Lake City is a population weighted average of the following Utah MSAs: Salt Lake City, Ogden and Provo-Orem. (5) Top 3 competitor combined deposit market share based on U.S.
In addition, we expect that any additional businesses that we may invest in or acquire will be regulated by various state and/or federal banking regulators. ​ Banking statutes and regulations are subject to continual review and revision by Congress, state legislatures and federal and state regulatory agencies.
National Bank Holdings Corporation holds two banking subsidiaries, NBH Bank and Bank of Jackson Hole Trust. ​ Banking statutes and regulations are subject to continual review and revision by Congress, state legislatures and federal and state regulatory agencies.
As of January 1, 2023, BOJHT is included in the FDICIA assessment. ​ Broad Supervision, Examination and Enforcement Powers ​ The Federal Reserve, the FDIC and state bank regulators have broad regulatory, examination and enforcement authority over bank holding companies and banks, as applicable. Bank regulators regularly examine the operations of banks and bank holding companies.
In addition, institutions with more than $10 billion in total assets are examined by the Consumer Financial Protection Bureau (“CFPB”), rather than its primary federal bank regulator, as to compliance with certain federal consumer protection and fair lending laws and regulations. ​ Broad Supervision, Examination and Enforcement Powers ​ The Federal Reserve, the FDIC and state bank regulators have broad regulatory, examination and enforcement authority over bank holding companies and banks, as applicable.
Effective October 1, 2022, BOJH was renamed as Bank of Jackson Hole Trust.
Effective October 1, 2022, BOJH was renamed as Bank of Jackson Hole Trust. The Bank of Jackson Hole Trust also operates under the brand Jackson Hole Trust. ​ Cambr Solutions, LLC ​ On April 3, 2023, NBH Bank completed the acquisition of Cambr Solutions, LLC (“Cambr”). Upon closing, Cambr ® became a stand-alone subsidiary of NBH Bank.
The auditors must also attest to and report on the statements of management relating to the internal controls.
The auditors must also attest to and report on the statements of management relating to the internal controls. FDICIA also requires that the Banks form an independent audit committee consisting of outside directors only, or that the Company’s audit committee be entirely independent. ​ As of December 31, 2023, we had total assets of $9.9 billion.
Removed
Small Business Administration, or SBA loans, to support manufacturers, distributors and service providers targeted to small businesses and entrepreneurs seeking growth capital, working capital, or other capital investments.
Added
Thus, we have had a framework in place since inception to support crossing $10 billion in assets and continue to invest in our risk management and operational infrastructure to meet escalating regulatory standards and expectations. ​ Recent acquisitions ​ Rock Canyon Bank Acquisition ​ On September 1, 2022, the Company completed its acquisition of Community Bancorporation, the bank holding company of Utah-based Rock Canyon Bank (“RCB”).
Removed
As such, NBH Bank is subject to examination, supervision and regulation by both the Colorado Division of Banking and the Federal Reserve. NBH Bank’s deposits are insured by the Federal Deposit Insurance Corporation (“FDIC”) 14 Table of Contents through the DIF, in the manner and to the extent provided by law.
Added
The transaction was valued at $46.5 million in the aggregate. Cambr is a deposit acquisition and processing platform that generates core deposits from accounts offered through embedded finance companies.
Removed
FDICIA also requires that NBH Bank form an independent audit committee consisting of outside directors only, or that the Company’s audit committee be entirely independent. ​ Bank of Jackson Hole Trust as a Wyoming State-Chartered Bank ​ Our bank subsidiary, Bank of Jackson Hole Trust, is a Wyoming state-chartered bank and also a member of the Federal Reserve Bank of Kansas City.
Added
We utilize the SBA 7(a), SBA 504, SBA Express, and SBA CAPLine loan programs. In addition to the SBA programs, we also originate U.S.
Removed
As an insured bank, BOJHT is subject to the provisions of the Federal Deposit Insurance Act, as amended (the “FDI Act”), and the FDIC’s implementing regulations thereunder, and may also be subject to supervision and examination by the FDIC under certain circumstances.
Added
The deposits offer an alternative to traditional wholesale funding sources and provide liquidity to banks within the Cambr network.
Removed
BOJHT is subject to the FDICIA requirements discussed above, however, during the year of acquisition the Company has elected to exclude them from the assessment.
Added
The platform provides clients with an opportunity to generate increased returns on deposits placed into the network while ensuring the safety of Federal Deposit Insurance Corporation (“FDIC”) insurance. ​ Trust and Wealth Management Services ​ Through the Bank of Jackson Hole Trust, the Company provides trust, estate and wealth management services.
Removed
NBH Bank is, and other depository 15 Table of Contents institution subsidiaries that we may acquire or control in the future will be, subject to capital adequacy guidelines as implemented by the relevant federal banking agency.
Added
Acting as a trust fiduciary, our trust team provides tailored professional services in the best interest of each trust beneficiary while avoiding conflicts of interest. Through our wealth management services, we offer a customized strategy for each of our clients that supports their long-term financial goals. We manage investment portfolios for individuals, trusts, endowments, charities and entities, and retirement accounts.
Removed
An unsatisfactory CRA record could substantially delay approval or result in denial of an application. ​ 19 Table of Contents Reserve Requirements ​ Pursuant to regulations of the Federal Reserve, all banks are required to maintain average daily reserves at mandated ratios against their transaction accounts. In addition, reserves must be maintained on certain non-personal time deposits.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeDeclines in real estate values and home sales volumes, and financial stress on borrowers as a result of job losses or other factors, could have further adverse effects on borrowers that result in higher delinquencies and greater charge-offs in future periods, which could materially and adversely affect us. ​ We depend on our executive officers and key personnel to implement our strategy and could be harmed by the loss of their services. ​ The execution of our strategy depends in large part on the skills of our executive management team and our ability to motivate and retain these and other key personnel, including key personnel added through mergers and acquisitions.
Biggest changeDeclines in real estate values and home sales volumes, and financial stress on borrowers as a result of job losses or other factors, could have further adverse effects on borrowers that result in higher delinquencies and greater charge-offs in future periods, which could materially and adversely affect us.
In addition, the effects of disintermediation can also impact the banking business because of the fast growing body of fintech companies that use software to deliver mortgage lending, payment services and other financial services. ​ Our ability to compete successfully depends on a number of factors, including, among others: ​ ​ ​ ​ ● the ability to develop, maintain and build upon long-term client relationships based on quality service, effective and efficient products and services, high ethical standards and safe and sound assets; ● the scope, relevance and pricing of products and services offered to meet client needs and demands; ● the rate at which we introduce new products and services, including internet-based or other digital services, relative to our competitors; ● the ability to attract and retain highly qualified associates to operate our business; ● the ability to expand our market position; ● client satisfaction with our level of service; 24 Table of Contents ● ​ the ability to invest in new technologies, including relative to our digital banking platform; ● the ability to operate our business effectively and efficiently; and ● industry and general economic trends. ​ Failure to perform in any of these areas could significantly weaken our competitive position, which could materially and adversely affect us. ​ We may not be able to meet the cash flow requirements of deposit withdrawals and other business needs unless we maintain sufficient liquidity. ​ We require liquidity to make loans and to repay deposit and other liabilities as they become due or are demanded by clients.
In addition, the effects of disintermediation can also impact the banking business because of the fast growing body of fintech companies that use software to deliver mortgage lending, payment services and other financial services. ​ Our ability to compete successfully depends on a number of factors, including, among others: ​ ​ ​ ​ ● the ability to develop, maintain and build upon long-term client relationships based on quality service, effective and efficient products and services, high ethical standards and safe and sound assets; ● the scope, relevance and pricing of products and services offered to meet client needs and demands; 25 Table of Contents ● the rate at which we introduce new products and services, including internet-based or other digital services, relative to our competitors; ● the ability to attract and retain highly qualified associates to operate our business; ● the ability to expand our market position; ● client satisfaction with our level of service; ● ​ the ability to invest in new technologies, including relative to our digital banking platform; ● the ability to operate our business effectively and efficiently; and ● industry and general economic trends. ​ Failure to perform in any of these areas could significantly weaken our competitive position, which could materially and adversely affect us. ​ We may not be able to meet the cash flow requirements of deposit withdrawals and other business needs unless we maintain sufficient liquidity. ​ We require liquidity to make loans and to repay deposit and other liabilities as they become due or are demanded by clients.
Additionally, any adverse regulatory treatment of the companies and technologies we have invested in, may impact our digital growth and our ability to satisfy our clients’ demands for digital offerings in the 2UniFi SM ecosystem. ​ Our acquisitions generally will require regulatory approvals, and failure to obtain them would restrict our growth. ​ We intend to complement and expand our business by pursuing strategic acquisitions of financial services franchises.
Additionally, any adverse regulatory treatment of the companies and technologies we have invested in, may impact our digital growth and our ability to satisfy our clients’ demands for digital offerings in the 2UniFi ecosystem. ​ Our acquisitions generally will require regulatory approvals, and failure to obtain them would restrict our growth. ​ We intend to complement and expand our business by pursuing strategic acquisitions of financial services franchises.
We employ detection and response mechanisms designed to contain and mitigate security incidents, but early detection may be thwarted by sophisticated attacks and malware designed to avoid detection. ​ We also face risks related to cyber-attacks and other security breaches in connection with credit or debit card, including ATM-related, transactions that typically involve the transmission of sensitive information regarding our clients through various third parties, including merchant acquiring banks, payment processors, payment card networks (e.g., Visa, MasterCard) and our third-party processors.
We employ detection and response mechanisms designed to contain and mitigate security incidents, but early detection may be thwarted by sophisticated attacks and malware designed to avoid detection. ​ We also face risks related to cyberattacks and other security breaches in connection with credit or debit card, including ATM-related, transactions that typically involve the transmission of sensitive information regarding our clients through various third parties, including merchant acquiring banks, payment processors, payment card networks (e.g., Visa, MasterCard) and our third-party processors.
A decline in commercial real estate values would likewise adversely affect the value of collateral securing certain commercial loans and result in greater charge-offs in future periods.
In addition, a decline in commercial real estate values would likewise adversely affect the value of collateral securing certain commercial loans and result in greater charge-offs in future periods.
Some of these parties have in the past been the target of security breaches and cyber-attacks, and because the transactions involve third parties and environments such as the point of sale that we do not control or secure, future security breaches or cyber-attacks affecting any of these third parties could impact us through no fault of our own, and in some cases we may have exposure and suffer losses for breaches or attacks relating to them.
Some of these parties have in the past been the target of security breaches and cyberattacks, and because the transactions involve third parties and environments such as the point of sale that we do not control or secure, future security breaches or cyberattacks affecting any of these third parties could impact us through no fault of our own, and in some cases we may have exposure and suffer losses for breaches or attacks relating to them.
We have made and will continue to make investments in and also partner with third party fintech companies in connection with our digital growth strategy and the digital solution, 2UniFi SM .
We have made and will continue to make investments in and also partner with third party fintech companies in connection with our digital growth strategy and the digital solution, 2UniFi.
In addition to cyber-attacks or other security breaches involving the theft of sensitive and confidential information, hackers have engaged in attacks against large financial institutions, particularly denial of service or ransomware attacks are designed to disrupt key business services, such as client-facing web sites.
In addition to cyberattacks or other security breaches involving the theft of sensitive and confidential information, hackers have engaged in attacks against large financial institutions, particularly denial of service or ransomware attacks are designed to disrupt key business services, such as client-facing web sites.
A decline in residential real estate market prices and reduced levels of home sales, could adversely affect the value of collateral securing mortgage loans resulting in greater charge-offs in future periods, as well as adversely impact mortgage loan originations and gains on sale of mortgage loans.
For instance, a decline in residential real estate market prices and reduced levels of home sales, could adversely affect the value of collateral securing mortgage loans resulting in greater charge-offs in future periods, as well as adversely impact mortgage loan originations and gains on sale of mortgage loans.
There can be no assurance that our historical tax positions will not be challenged by relevant tax authorities or that we would be successful in defending our positions in connection with any such challenge. ​ 33 Table of Contents Item 1B. UNRESOLVED STAFF COMMENTS . ​ None ​
There can be no assurance that our historical tax positions will not be challenged by relevant tax authorities or that we would be successful in defending our positions in connection with any such challenge. ​ 36 Table of Contents Item 1B. UNRESOLVED STAFF COMMENTS . ​ None ​
They increase our cost of doing business and, ultimately, may prevent us from making certain loans or cause us to reduce the average percentage rate or the points and fees on loans that we do make. ​ Our ability to pay dividends is subject to regulatory limitations and our bank subsidiary’s ability to pay dividends to us is also subject to regulatory limitations. ​ Our ability to declare and pay dividends depends both on the ability of our bank subsidiary to pay dividends to us and on certain federal regulatory considerations, including the guidelines of the Federal Reserve regarding capital adequacy and dividends.
They increase our cost of doing business and, ultimately, may prevent us from making certain loans or cause us to reduce the average percentage rate or the points and fees on loans that we do make. ​ Our ability to pay dividends is subject to regulatory limitations and our bank subsidiary’s ability to pay dividends to us is also subject to regulatory limitations. ​ 35 Table of Contents Our ability to declare and pay dividends depends both on the ability of our bank subsidiary to pay dividends to us and on certain federal regulatory considerations, including the guidelines of the Federal Reserve regarding capital adequacy and dividends.
Weak economic conditions may be characterized by inflation, fluctuations in debt and equity capital markets, including a lack of liquidity and/or depressed prices in the secondary market for mortgage loans, increased delinquencies on loans, residential and commercial real estate price declines, lower home sales and commercial activity, further or prolonged pressure on energy prices, high unemployment, and the economic effects of natural disasters, severe weather conditions, health emergencies or pandemics (such as COVID-19), cyberattacks, outbreaks of hostilities, terrorism or other geopolitical instabilities.
Weak economic conditions may be characterized by inflation, fluctuations in debt and equity capital markets, including a lack of liquidity and/or depressed prices in the secondary market for mortgage loans, increased delinquencies on loans, residential and commercial real estate price declines, lower home sales and commercial activity, further or prolonged pressure on energy prices, high unemployment, and the economic effects of natural disasters, severe weather conditions, health emergencies or pandemics, cyberattacks, outbreaks of hostilities, terrorism or other geopolitical instabilities.
If any of these items prove defective or insufficient, we may be required to repurchase mortgage loans, indemnify the investor or insurer, or reimburse the investor or 27 Table of Contents insurer for credit losses incurred on loans in the event of a breach of contractual representations or warranties that is not remedied within a period (usually 90 days or less) after we receive notice of the breach.
If any of these items prove defective or insufficient, we may be required to repurchase mortgage loans, indemnify the investor or insurer, or reimburse the investor or insurer for credit losses incurred on loans in the event of a breach of contractual representations or warranties that is not remedied within a period (usually 90 days or less) after we receive notice of the breach.
Department of Housing and Urban Development (“HUD”) lending requirements or if the federal government shuts down or otherwise fails to fully fund the federal budget, our commercial FHA origination business could be adversely affected. ​ 23 Table of Contents We originate, sell and service loans under FHA insurance programs, and make certifications regarding compliance with applicable requirements and guidelines.
Department of Housing and Urban Development (“HUD”) lending requirements or if the federal government shuts down or otherwise fails to fully fund the federal budget, our commercial FHA origination business could be adversely affected. ​ We originate, sell and service loans under FHA insurance programs, and make certifications regarding compliance with applicable requirements and guidelines.
Similarly, when interest earning assets mature or reprice more quickly, and because the magnitude of repricing of interest earning assets is often greater than interest bearing liabilities, falling interest rates would reduce net interest income. ​ Accordingly, changes in the level of market interest rates affect our net yield on interest earning assets and liabilities, loan and investment securities portfolios and our overall results.
Similarly, when interest earning assets mature or reprice more quickly, and because the magnitude of repricing of interest earning assets is often greater than interest bearing liabilities, falling interest rates would reduce net interest income. ​ 26 Table of Contents Accordingly, changes in the level of market interest rates affect our net yield on interest earning assets and liabilities, loan and investment securities portfolios and our overall results.
In general, projected operating results will be based on the judgment of our management team. In all cases, projections are only estimates of future results that are based upon assumptions made at the time that the projections are developed and the projected results may vary significantly from 30 Table of Contents actual results.
In general, projected operating results will be based on the judgment of our management team. In all cases, projections are only estimates of future results that are based upon assumptions made at the time that the projections are developed and the projected results may vary significantly from actual results.
Although management has established disaster recovery policies and procedures, there can be no guarantee of the effectiveness of such policies and procedures, and the occurrence of any such event could have a material adverse effect on our business, financial condition and results of operations.
Although management has established disaster recovery policies and 23 Table of Contents procedures, there can be no guarantee of the effectiveness of such policies and procedures, and the occurrence of any such event could have a material adverse effect on our business, financial condition and results of operations.
Mortgage interest rates are influenced by many elements including inflation, monetary policy set by the Federal Reserve and macro-economic factors. A prolonged period of rising interest rates may result in changes in consumer spending, borrowing and savings habits.
Mortgage interest rates are influenced by many elements including inflation, monetary policy set by the Federal Reserve and macro-economic factors. A prolonged period of rising interest rates may result in changes in consumer spending, borrowing and 29 Table of Contents savings habits.
We are not able to anticipate or implement preventive measures against all security breaches of these types, especially because the techniques used change frequently and can originate from a wide variety of sources.
We are not able to anticipate or implement preventive measures against all security breaches of these types, especially because the techniques used change frequently 27 Table of Contents and can originate from a wide variety of sources.
Generally, any acquisition of target financial institutions, banking centers or other banking assets by us will require approval by, and cooperation from, a number of governmental regulatory agencies, including the Federal Reserve, the Colorado Division of Banking and the Wyoming Division of Banking.
Generally, any acquisition of target financial institutions, banking centers or other banking assets by us will require approval by, and cooperation from, a number of governmental regulatory agencies, including the Federal Reserve, the Colorado 31 Table of Contents Division of Banking and the Wyoming Division of Banking.
In addition, any default by the U.S. government on its obligations or any prolonged government shutdown could, among other things, impede our ability to originate SBA loans or collect on guarantees in the event a borrower defaults on its obligations, and could materially adversely affect our SBA lending business. ​ If we violate U.S.
In addition, any default by the U.S. government on its obligations or any prolonged government shutdown could, among other things, impede our ability to originate SBA loans or collect on guarantees in the event a borrower defaults on its obligations, and could materially adversely affect our SBA lending business. ​ 24 Table of Contents If we violate U.S.
The success of our expansionary activity is dependent upon our ability to: ​ ​ ​ ​ ● continue to implement and improve our operational, credit, financial, legal, management and other internal risk controls and processes and our reporting systems and procedures in order to manage a growing number of client relationships; ● implement and scale our 2UniFi SM platform and other new technologies; ● integrate our acquisitions and develop consistent policies throughout the various lines of businesses; ● ​ attract and retain the client base; and ● attract and retain management talent. ​ ​ ​ ​ We may not successfully implement improvements to, or integrate, our management information and control systems, procedures and processes in an efficient or timely manner and may discover deficiencies in existing systems and controls.
The success of our expansionary activity is dependent upon our ability to: ​ ​ ​ ​ ● continue to implement and improve our operational, credit, financial, legal, management and other internal risk controls and processes and our reporting systems and procedures in order to manage a growing number of client relationships; ● implement and scale our 2UniFi platform, Cambr deposit gathering platform and other new technologies; ● integrate our acquisitions and develop consistent policies throughout the various lines of businesses; ● ​ attract and retain the client base; and ● attract and retain management talent. 30 Table of Contents ​ ​ ​ ​ We may not successfully implement improvements to, or integrate, our management information and control systems, procedures and processes in an efficient or timely manner and may discover deficiencies in existing systems and controls.
Given the increasingly high volume of our transactions, certain errors may be repeated or compounded before they can be discovered and rectified. ​ 26 Table of Contents To the extent that our activities or the activities of our clients involve the storage and transmission of confidential information, security breaches and viruses could cause serious negative consequences, including reputational damage, litigation exposure and, regulatory scrutiny, and could result in a violation of applicable privacy and data protection laws.
Given the increasingly high volume of our transactions, certain errors may be repeated or compounded before they can be discovered and rectified. ​ To the extent that our activities or the activities of our clients involve the storage and transmission of confidential information, security breaches and viruses could cause serious negative consequences, including reputational damage, litigation exposure and, regulatory scrutiny, and could result in a violation of applicable privacy and data protection laws or other breach reporting obligations.
Similarly, the agreements under which we sell mortgage loans require us to deliver various documents to the investor, and we may be obligated to repurchase any mortgage loan as to which the required documents are not delivered or are defective.
Similarly, the agreements under which we sell mortgage loans require us to deliver various documents to the 28 Table of Contents investor, and we may be obligated to repurchase any mortgage loan as to which the required documents are not delivered or are defective.
Additionally, 22 Table of Contents concerns over the long term impacts of climate change have led and will continue to lead to governmental efforts to mitigate those impacts.
Additionally, concerns over the long term impacts of climate change have led and will continue to lead to governmental efforts to mitigate those impacts.
In addition, there may be limited liquidity for certain asset classes we hold, including commercial real estate and construction and development loans.
In addition, there may be limited liquidity for certain asset classes we hold, including 32 Table of Contents commercial real estate and construction and development loans.
Treasury Department to administer the Bank Secrecy Act, is authorized to impose significant civil money penalties for violations of 32 Table of Contents those requirements, and engages in coordinated enforcement efforts with the individual federal banking regulators, as well as the Department of Justice, Drug Enforcement Administration, and Internal Revenue Service.
The Federal Financial Crimes Enforcement Network, established by the U.S. Treasury Department to administer the Bank Secrecy Act, is authorized to impose significant civil money penalties for violations of those requirements, and engages in coordinated enforcement efforts with the individual federal banking regulators, as well as the Department of Justice, Drug Enforcement Administration, and Internal Revenue Service.
We establish a mortgage repurchase liability related to the various representations and warranties that reflect management's estimate of losses for loans which we have a repurchase obligation. Our mortgage repurchase liability represents management's best estimate of the probable loss that we may expect to incur for the representations and warranties in the contractual provisions of our sales of mortgage loans.
Our mortgage repurchase liability represents management's best estimate of the probable loss that we may expect to incur for the representations and warranties in the contractual provisions of our sales of mortgage loans.
The Department of Justice and other federal agencies are responsible for enforcing these laws and regulations. A successful challenge to an institution’s performance under the CRA or fair lending laws and regulations could result in a wide variety of sanctions, including damages and civil money penalties, injunctive relief, restrictions on mergers and acquisitions activity, and restrictions on expansion activity.
A successful challenge to an institution’s performance under the CRA or fair lending laws and regulations could result in a wide variety of sanctions, including damages and civil money penalties, 34 Table of Contents injunctive relief, restrictions on mergers and acquisitions activity, and restrictions on expansion activity.
Our investments may include companies that may be unseasoned, unprofitable or have no established operating histories or earnings and may lack technical, marketing, financial and other resources and are therefore more vulnerable to financial failure.
Our investments may include companies that may be unseasoned, unprofitable or have no established operating histories or earnings and may lack technical, marketing, financial and other resources and are therefore more vulnerable to financial failure. The innovations these companies develop for utilization by 2UniFi, may prove more difficult to successfully integrate into our existing operations.
Surges in illnesses, including but not limited to COVID-19 cases, may increase the risk of maintaining adequate staffing in our banking centers and other key areas. ​ Our allowance for credit losses and fair value adjustments may prove to be insufficient to absorb losses inherent in our loan or other real estate owned (“OREO”) portfolio. ​ On January 1, 2020, the Company adopted ASU 2016-13, Measurement of Credit Losses on Financial Instruments , the new accounting standard promulgated by the Financial Accounting Standards Board (“FASB”), regarding the recognition of credit losses.
Surges in illnesses, or outbreaks, may increase the risk of maintaining adequate staffing in our banking centers and other key areas. ​ Our allowance for credit losses and fair value adjustments may prove to be insufficient to absorb losses inherent in our loan or other real estate owned (“OREO”) portfolio. ​ The Company measures its allowance for credit losses using ASU 2016-13, Measurement of Credit Losses on Financial Instruments .
Additionally, a change in our accounting estimates, such as our ability to realize deferred tax assets, the need for a valuation allowance or the recoverability of the goodwill recorded at the time of our acquisitions, could have a material adverse effect on our financial results. ​ Our business is highly susceptible to credit risk and fluctuations in the value of real estate and other collateral securing such credit. ​ As a lender, we are exposed to the risk that our clients will be unable to repay their loans according to their terms and that the collateral securing the payment of their loans (if any) may not be sufficient to assure repayment.
Additionally, a change in our accounting estimates, such as our ability to realize deferred tax assets, the need for a valuation allowance or the recoverability of the goodwill recorded at the time of our acquisitions, could have a material adverse effect on our financial results. ​ Our business is highly susceptible to credit risk and fluctuations in the value of real estate and other collateral securing such credit. ​ We are focused on growing our loan portfolio while adhering to our established underwriting standards and self-imposed concentration limits.
Changes in interest rates also have a significant impact on the carrying value of a significant percentage of the assets, both loans and investment securities, on our balance sheet.
Changes in interest rates also have a significant impact on the carrying value of a significant percentage of the assets, both loans and investment securities, on our balance sheet. We may incur debt in the future and that debt may also be sensitive to interest rates and any increase in interest rates could materially and adversely affect us.
Accordingly, the loss of service of one or more of our executive officers or key personnel could reduce our ability to 21 Table of Contents successfully implement our growth strategy and materially and adversely affect us.
Accordingly, the loss of service of one or more of our executive officers or key personnel could reduce our ability to successfully implement our growth strategy and materially and adversely affect us. Our success also depends on the experience of our banking center managers and relationship managers and on their relationships with the clients and communities they serve.
Further, any new laws, rules and regulations could make compliance more difficult or expensive and also materially and adversely affect us. ​ The FDIC’s restoration plan for the DIF and any related increased assessment rates could materially and adversely affect us. ​ The FDIC insures deposits at FDIC-insured depository institutions, such as our subsidiary bank, up to applicable limits.
While the effect of any presently contemplated or future changes in the laws or regulations or their interpretations may have is unpredictable, these changes could be materially adverse to the Company’s investors. ​ The FDIC’s restoration plan for the DIF and any related increased assessment rates could materially and adversely affect us. ​ The FDIC insures deposits at FDIC-insured depository institutions, such as our subsidiary bank, up to applicable limits.
Our failure to comply with these laws and regulations, even if the failure follows good faith effort or reflects a difference in interpretation, could subject us to restrictions on our business activities, fines and other penalties, any of which could materially and adversely affect us.
Our failure to comply with these laws and regulations, even if the failure follows good faith effort or reflects a difference in interpretation, could subject us to restrictions on our business activities, fines and other penalties, any of which could materially and adversely affect us. ​ We also anticipate increased regulatory scrutiny – in the course of routine examinations and otherwise – and any new regulations directed towards banks of similar size to the Banks, designed to address the recent negative developments in the banking industry, all of which may increase our costs of doing business and reduce our profitability.
Any future additional assessments, increases or required prepayments in FDIC insurance premiums may materially and adversely affect us, including by reducing our profitability or limiting our ability to pursue certain business opportunities. 31 Table of Contents ​ Federal and state banking agencies periodically conduct examinations of our business, including compliance with laws and regulations, and our failure to comply with any supervisory actions to which we become subject as a result of such examinations could materially and adversely affect us. ​ Federal and state banking agencies periodically conduct examinations of our business, including compliance with laws and regulations.
While we are not subject to this assessment, in the event the FDIC does not completely recover the losses suffered by the Deposit Insurance Fund, the FDIC may impose additional special assessments in the future that may increase our costs. ​ Federal and state banking agencies periodically conduct examinations of our business, including compliance with laws and regulations, and our failure to comply with any supervisory actions to which we become subject as a result of such examinations could materially and adversely affect us. ​ Federal and state banking agencies periodically conduct examinations of our business, including compliance with laws and regulations.
Compliance with laws and regulations, including the effects of the Dodd Frank Act Wall Street Reform and Consumer Protection Act of 2010, can be difficult and costly, and changes to laws and regulations often impose additional compliance costs.
Compliance with laws and regulations, including the effects of the Dodd Frank Act Wall Street Reform and Consumer Protection Act of 2010, can be difficult and costly, and changes to laws and regulations often impose additional compliance costs. ​ We may face various risks related to the extensive government regulation and supervision of our business, including by our current federal and state regulators, as well as other government entities that may become our regulators in the future.
Such fraudulent activity may take many forms, including check fraud, electronic fraud, wire fraud, phishing, unauthorized intrusion into or use of our systems, ATM skimming or jackpotting, and other dishonest acts. We provide our clients with the ability to bank remotely, including via online, mobile and phone.
Such fraudulent activity may take many forms, including check fraud, electronic fraud, wire fraud, phishing, unauthorized intrusion into or use of our systems, ATM skimming or jackpotting, and other dishonest acts. Nationally, reported incidents of fraud and other financial crimes have increased. In addition, the widespread use of artificial intelligence also has increased potential for fraud and misuse.
While many of our agreements with third parties contain indemnification provisions, we may not be able to recover sufficiently, or at all, under the provisions to offset any losses we may incur from third-party cyber incidents. ​ The value of our mortgage and Small Business Administration servicing rights can decline during periods of falling interest rates, and we may be required to take a charge against earnings for the decreased value. ​ A mortgage servicing right (“MSR”) is the right to service a mortgage loan for a fee.
Although we have implemented and maintained several robust policies, procedures, and trainings to prevent such losses, there can be no assurance that such losses will not occur. ​ The value of our mortgage and Small Business Administration servicing rights can decline during periods of falling interest rates, and we may be required to take a charge against earnings for the decreased value. ​ A mortgage servicing right (“MSR”) is the right to service a mortgage loan for a fee.
Similarly, we have credit risk embedded in our securities portfolio. Our credit standards, procedures and policies may not prevent us from incurring substantial credit losses.
Similarly, we have credit risk embedded in our securities portfolio.
Such conditions could have adverse effects on our ability to originate mortgage loans due to reduced 28 Table of Contents consumer demand, increased pressure from competing lenders and increased costs, which could impact earnings in the form of reduced interest from fewer mortgages, reduced fees from loan sales and tighter net interest margins. ​ Risks Relating to our Growth Strategy ​ We may not be able to effectively manage our growth or other expansionary activity. ​ Our expansionary activity, whether through de novo branching, acquisitions, organic growth or the implementation of our digital banking strategy has placed, and it may continue to place, significant demands on our operations and management.
Such conditions could have adverse effects on our ability to originate mortgage loans due to reduced consumer demand, increased pressure from competing lenders and increased costs, which could impact earnings in the form of reduced interest from fewer mortgages, reduced fees from loan sales and tighter net interest margins. ​ Our investments in financial technology companies and initiatives subject us to material financial, reputational and strategic risks. ​ Our investments in various financial technology companies, included within non-marketable securities on our balance sheet, may have a significant impact on our results of operations.
Our success also depends on the experience of our banking center managers and relationship managers and on their relationships with the clients and communities they serve. The loss of these key personnel could negatively impact our banking operations.
The loss of these key personnel could negatively impact our banking operations.
These events could have a material adverse effect on the Company. ​ As a financial institution, we may be the target of fraudulent activity that may result in financial losses to us or our clients, privacy breaches against our clients or damage to our reputation and regulatory relationships.
While many of our agreements with third parties contain indemnification provisions, we may not be able to recover sufficiently, or at all, under the provisions to offset any losses we may incur from third-party cyber incidents. ​ Our Business may be adversely affected by an increasing prevalence of fraud and other financial crimes. ​ As a financial institution, we may be the target of fraudulent activity that may result in financial losses to us or our clients, privacy breaches against our clients or damage to our reputation and regulatory relationships.
Interest rates are highly sensitive to many factors beyond our control, including general economic conditions and policies of various governmental and regulatory agencies, particularly the Federal Reserve. ​ Reforms to and uncertainty regarding LIBOR and certain other indices may adversely affect our business. ​ The London Interbank Offered Rate (“LIBOR”) is a short-term interest rate used as a pricing reference for certain loans, derivatives and other financial instruments.
Interest rates are highly sensitive to many factors beyond our control, including general economic conditions and policies of various governmental and regulatory agencies, particularly the Federal Reserve. ​ We are highly dependent on the internet, cloud technologies and third-party providers.
Removed
This standard made significant changes to the accounting and disclosures for credit losses on financial instruments recorded on an amortized cost basis, including our loans held for investment.
Added
However, as a lender, we are exposed to the risk that our clients will be unable to repay their loans according to their terms and that the collateral securing the payment of their loans (if any) may not be sufficient to assure repayment.
Removed
We may 25 Table of Contents incur debt in the future and that debt may also be sensitive to interest rates and any increase in interest rates could materially and adversely affect us.
Added
Our credit standards, procedures and policies may not prevent us from incurring substantial credit losses. ​ A significant portion of our loan portfolio is secured by real estate and any deterioration in real estate values or credit quality or elevated levels of non-performing assets would ultimately have a negative impact on the quality of our loan portfolio.
Removed
On June 30, 2023, LIBOR will cease to be published. Our internal working group began indexing new retail adjustable rate mortgages to Secured Overnight Financing Rate (“SOFR”) in the third quarter of 2020 and are addressing LIBOR-based commercial loans, including adhering to the ISDA IBOR Fallbacks Protocol as needed.
Added
In addition, with heightened interest rates and inflationary pressures, our clients could be impacted by the rising costs of goods and services in their households and businesses, which may have a negative impact on their ability to repay their loans with us. 22 Table of Contents ​ We depend on our executive officers and key personnel to implement our strategy and could be harmed by the loss of their services. ​ The execution of our strategy depends in large part on the skills of our executive management team and our ability to motivate and retain these and other key personnel, including key personnel added through mergers and acquisitions.
Removed
We stopped originating LIBOR-based products in the fourth quarter of 2021 and are using substitute interest rates such as Prime and SOFR. While many of our client relationships still involve products based on LIBOR, we are working to correctly transition these products to substitute interest rates with as little impact to our clients as possible.
Added
These events could have a material adverse effect on the Company. ​ We provide our clients with the ability to bank remotely, including via online, mobile and phone.
Removed
While we believe we have prepared as much as possible for the transition from LIBOR, there can be no assurances that we and other market participants will be adequately prepared for an actual discontinuation of benchmarks, including LIBOR, that may have an unpredictable impact on contractual mechanics (including, but not limited to, interest rates to be paid to or by us), which may also result in adversely affecting our financial condition or results of operations.
Added
While we have also experienced losses due to apparent fraud or other crimes, thus far such losses have been relatively insignificant.
Removed
In addition, such transition may result in litigation with counterparties impacted by the transition as well as increased regulatory scrutiny and other adverse consequences. ​ We are highly dependent on the internet, cloud technologies and third-party providers.
Added
We may see increased rates of repurchase or indemnification demands or indemnification as a result of self-reporting of identified errors in our mortgage loan portfolio. For instance, as part of our normal review process, we discovered irregularities in mortgage loan applications in one of our offices that prompted an internal investigation.
Removed
The innovations these companies develop for utilization by 2UniFi SM , may prove more difficult to successfully integrate into our existing 29 Table of Contents operations.
Added
While certain loan files may still be under review by outside investors, we do not expect the matter to materially or adversely affect our business or financial condition or results. ​ We establish a mortgage repurchase liability related to the various representations and warranties that reflect management's estimate of losses for loans which we have a repurchase obligation.
Removed
The Federal Financial Crimes Enforcement Network, established by the U.S.
Added
Investments where we have the ability to exercise significant influence but not control over the operating and financial policies of the investee are accounted for using the equity method of accounting. For investments accounted for under the equity method, we increase or decrease our investment by our proportionate share of the investee’s net income or loss.
Added
Non-marketable securities also include direct investments in convertible preferred stock. As the convertible preferred stock does not have a readily determinable fair value, it is carried at cost. We periodically evaluate our non-marketable securities investments for impairment.
Added
The results of testing our investments for potential impairment may be adversely affected by a variety of factors, including market conditions, general economic conditions and unfavorable changes in the businesses underlying the investments, which may lead to a partial or full impairment of our fintech investments.
Added
Impairments or write-downs of these assets may result in charges that adversely affect our results of operations. ​ The financial technology companies in which we invest often have the need for substantial additional capital to support expansion or to achieve or maintain a competitive position.
Added
Less established companies tend to have lower capitalization and fewer resources and, therefore, are often more vulnerable to financial failure. These companies may be dependent upon the success of one product or service, a unique distribution channel, or the effectiveness of a manager or management team.
Added
The failure of this one product, service or distribution channel, or the loss or ineffectiveness of a key executive or executives within the management team may have a materially adverse impact on such companies. ​ The possibility that the companies in which we invest will not be able to commercialize their technology or product concept presents a risk that our investment may become impaired.
Added
These companies tend to lack management depth, to have limited or no history of operations and to not have attained profitability. Additionally, although some of these companies may already have a commercially successful product or product line at the time of investment, technology products and services often have a more limited market or life span than products in other industries.
Added
Thus, the ultimate success of these companies may depend on their ability to continually innovate in increasingly competitive markets. Most of the companies in which we invest will require substantial additional equity financing to satisfy their continuing growth and working capital requirements.
Added
Each round of venture financing is typically intended to provide a company with enough capital to reach the next stage of development. The circumstances or market conditions under which such companies will seek additional capital is unpredictable.
Added
It is possible that one or more of such companies will not be able to raise additional financing or may be able to do so only at a price or on terms which are unfavorable. ​ Risks Relating to our Growth Strategy ​ We may not be able to effectively manage our growth or other expansionary activity. ​ Our expansionary activity, whether through de novo branching, acquisitions (including Cambr), organic growth or the implementation of our digital banking strategy has placed, and may continue to place, significant demands on our operations and management.
Added
These risks include pending and future laws and regulations that may adversely impact our business, as well as supervisory and other actions that may be taken against us by our regulators.
Added
Among other things, there may be an increased focus by both regulators and investors on deposit composition and classification, the level of uninsured deposits, losses embedded in the held-to-maturity portion of our securities portfolio (if any), contingent liquidity, CRE composition and concentration, capital position and our general oversight and internal control structures regarding the foregoing.
Added
As a result, the Banks could face increased scrutiny or be viewed as higher risk by regulators and the investor community. ​ We will be subject to increased regulation once our total consolidated assets exceed $10 billion. ​ Federal law imposes heightened requirements on bank holding companies and depository institutions that exceed $10 billion in total consolidated assets.
Added
An insured depository institution with $10 billion or more in total assets is subject to supervision, examination, and enforcement with respect to consumer protection laws by the CFPB. Additionally, other regulatory requirements apply to insured depository institution holding companies and insured depository institutions with $10 billion or more in total consolidated assets, please refer to Item 1: Supervision and Regulation.
Added
Further, deposit insurance assessment rates are calculated differently, and may be higher, for insured depository institutions with $10 billion or more in total consolidated assets. ​ 33 Table of Contents Debit card interchange fee restrictions set forth in section 1075 of the Dodd-Frank Act, known as the Durbin Amendment, as implemented by regulations of the Federal Reserve, cap the maximum debit interchange fee that an issuer may receive per transaction.
Added
Debit card issuers with less than $10 billion in total consolidated assets are exempt from these interchange fee restrictions.
Added
The exemption for small issuers ceases to apply as of July 1 of the year following the calendar year in which the issuer’s total consolidated assets exceed $10 billion. ​ As of December 31, 2023, we had total assets of $9.9 billion.
Added
In 2024, our assets may exceed $10 billion at which time we will be subject to the heightened regulatory and financial impacts. We have incurred and will continue to incur additional costs to implement processes, procedures, and monitoring of compliance with these increased regulatory requirements.
Added
Any future additional assessments, increases or required prepayments in FDIC insurance premiums may materially and adversely affect us, including by reducing our profitability or limiting our ability to pursue certain business opportunities.
Added
The significant losses incurred by the Deposit Insurance Fund managed by the FDIC, in connection with recent developments are required by law to be recovered through one or more special assessments on depository institutions and, potentially, their holding companies.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeAt December 31, 2022, we operated 38 banking centers in Colorado, 34 in Kansas and Missouri, nine in Wyoming, eight in Utah, two in Texas, four in New Mexico and three in Idaho. Of these banking centers, 69 were owned and 29 locations were leased. ​
Biggest changeAt December 31, 2023, we operated 37 banking centers in Colorado, 32 in Kansas and Missouri, nine in Wyoming, eight in Utah, two in Texas, four in New Mexico and two in Idaho. Of these banking centers, 65 were owned and 29 locations were leased. ​

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeWe do not believe that any of our pending legal proceedings, individually or in the aggregate, will have a material adverse effect on our business, prospects, financial condition, results of operations or liquidity. ​ Item 4. MINE SAFETY DISCLOSURES . ​ None. ​ PART I I ​
Biggest changeWe do not believe that any of our pending legal proceedings, individually or in the aggregate, will have a material adverse effect on our business, prospects, financial condition, results of operations or liquidity. ​ Item 4. MINE SAFETY DISCLOSURES . ​ None. ​ ​ 38 Table of Contents PART I I ​

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeIt assumes $100 invested on December 31, 2017, with dividends invested on a total return basis. ​ ​ ​ ​ ​ ​ ​ ​ ​ Period Ending Index 12/31/17 12/31/18 12/31/19 12/31/20 12/31/21 12/31/22 NBHC 100.00 96.57 112.55 107.53 147.37 144.19 KBW Regional Banking Index 100.00 82.51 102.20 93.33 127.53 118.71 Russell 2000 Index 100.00 88.97 111.65 133.90 153.70 122.25 ​ 35 Table of Contents The following table sets forth information about our repurchases of our common stock during the fourth quarter of 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Maximum ​ ​ ​ ​ ​ ​ ​ Total number of ​ approximate dollar ​ ​ ​ ​ ​ ​ ​ shares purchased ​ value of shares ​ ​ ​ ​ ​ ​ as part of publicly ​ that may yet be ​ ​ Total number ​ Average price ​ announced plans ​ purchased under the Period ​ of shares purchased ​ paid per share ​ or programs ​ plans or programs (2) October 1 - October 31, 2022 (1) ​ 5,484 ​ $ 40.79 ​ — ​ $ 38,618,179 November 1 - November 30, 2022 (1) ​ 1,481 ​ ​ 48.65 ​ — ​ ​ 38,618,179 December 1 - December 31, 2022 (1) ​ 2,373 ​ ​ 43.48 ​ — ​ $ 38,618,179 Total 9,338 ​ ​ 42.72 — ​ ​ ​ ​ ​ ​ (1) ​ Represents shares purchased other than through publicly announced plans purchased pursuant to the Company’s stock incentive plans at the then current market value in satisfaction of stock option exercise prices, settlements of restricted stock and tax withholdings.
Biggest changeIt assumes $100 invested on December 31, 2018, with dividends invested on a total return basis. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Period Ending Index 12/31/18 12/31/19 12/31/20 12/31/21 12/31/22 12/31/23 NBHC 100.00 116.55 111.35 152.61 149.32 136.14 KBW Regional Banking Index 100.00 123.87 113.11 154.57 143.87 143.30 Russell 2000 Index 100.00 125.49 150.50 172.75 137.40 160.60 ​ 39 Table of Contents The following table sets forth information about our repurchases of our common stock during the fourth quarter of 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Maximum ​ ​ ​ ​ ​ ​ ​ Total number of ​ approximate dollar ​ ​ ​ ​ ​ ​ ​ shares purchased ​ value of shares ​ ​ ​ ​ ​ ​ as part of publicly ​ that may yet be ​ ​ Total number ​ Average price ​ announced plans ​ purchased under the Period ​ of shares purchased ​ paid per share ​ or programs ​ plans or programs (2) October 1 - October 31, 2023 (1) ​ 1,921 ​ $ 29.76 ​ — ​ $ 50,000,000 November 1 - November 30, 2023 (1) ​ 5,219 ​ ​ 32.28 ​ — ​ ​ 50,000,000 December 1 - December 31, 2023 (1) ​ 21,969 ​ ​ 37.95 ​ — ​ ​ 50,000,000 Total 29,109 ​ ​ 36.39 — ​ ​ ​ ​ ​ ​ (1) ​ Represents shares purchased other than through publicly announced plans purchased pursuant to the Company’s stock incentive plans at the then current market value in satisfaction of stock option exercise prices, settlements of restricted stock and tax withholdings.
Under the 2014 Plan, the Compensation Committee of the Board of Directors has the authority to grant, from time to time, awards of options, stock appreciation rights, restricted stock, restricted stock units, performance units, other stock-based awards, or any combination thereof to eligible persons.
Under the 2023 Plan, the Compensation Committee of the Board of Directors has the authority to grant, from time to time, awards of options, stock appreciation rights, restricted stock, restricted stock units, performance units, other stock-based awards, or any combination thereof to eligible persons.
Management estimates that the number of beneficial owners is significantly greater. ​ 34 Table of Contents Performance Graph ​ The following graph presents a comparison of the Company’s performance to the indices named below.
Management estimates that the number of beneficial owners is significantly greater. ​ Performance Graph ​ The following graph presents a comparison of the Company’s performance to the indices named below.
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTER S AND ISSUER PURCHASES OF EQUITY SECURITIES. ​ Market for Registrant’s Common Equity ​ Shares of the Company’s common stock are traded on the New York Stock Exchange (“NYSE”) under the symbol “NBHC”. The Company had 231 shareholders of record as of February 24, 2023.
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTER S AND ISSUER PURCHASES OF EQUITY SECURITIES. ​ Market for Registrant’s Common Equity ​ Shares of the Company’s common stock are traded on the New York Stock Exchange (“NYSE”) under the symbol “NBHC”. The Company had 226 shareholders of record as of February 23, 2024.
(2) On February 24, 2021, the Company’s Board of Directors authorized a new program to repurchase up to $75.0 million of the Company’s stock from time to time in either the open market or through privately negotiated transactions.
(2) On May 9, 2023, the Company’s Board of Directors authorized a new program to repurchase up to $50.0 million of the Company’s stock from time to time in either the open market or through privately negotiated transactions.
As of December 31, 2022, the aggregate number of Company common stock available for issuance under the 2014 Plan was 3,608,461 shares. ​ During the second quarter of 2015, shareholders approved the Company’s 2014 Employee Stock Purchase Plan (“ESPP”).
As of December 31, 2023, the aggregate number of Company common stock available for issuance under the 2023 Plan was 1,163,729 shares. ​ During the second quarter of 2015, shareholders approved the Company’s 2014 Employee Stock Purchase Plan (“ESPP”).
The remaining authorization under the program as of December 31, 2022 was $38.6 million. ​ Securities Authorized for Issuance under Equity Compensation Plans ​ During the second quarter of 2014, shareholders approved the 2014 Omnibus Incentive Plan (the “2014 Plan”).
The remaining authorization under the program as of December 31, 2023 was $50.0 million. ​ Securities Authorized for Issuance under Equity Compensation Plans ​ During the second quarter of 2023, shareholders approved the 2023 Omnibus Incentive Plan (the “2023 Plan”).
As of December 31, 2022, the aggregate number of Company common stock available for issuance under the ESPP was 262,482 shares. ​ See note 17 to the consolidated financial statements for further detail related to these equity compensation plans. ​ ​ ​ ​ ​ ​ ​ ​ ​ Plan Category Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted-average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance under equity compensation plans Equity plans approved by security holders ​ 717,088 ​ $ 29.79 ​ 3,870,943 Equity plans not approved by security holders ​ — ​ ​ — ​ — Total ​ 717,088 ​ $ 29.79 ​ 3,870,943 ​ ​
As of December 31, 2023, the aggregate number of Company common stock available for issuance under the ESPP was 235,919 shares. ​ See note 16 to the consolidated financial statements for further detail related to these equity compensation plans. ​ ​ ​ ​ ​ ​ ​ ​ ​ Plan Category Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted-average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance under equity compensation plans Equity plans approved by security holders ​ 755,546 ​ $ 30.95 ​ 1,426,211 Equity plans not approved by security holders ​ — ​ ​ — ​ — Total ​ 755,546 ​ $ 30.95 ​ 1,426,211 ​ ​ Item 6. [RESERVED] ​ ​ ​ ​ ​ 40 Table of Contents ​ ​ ​ ​
Added
The 2023 Plan replaces the 2014 Omnibus Incentive Plan (“the Prior Plan”), pursuant to which the Company granted equity awards prior to the approval of the 2023 Plan.

Item 7. Management's Discussion & Analysis

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

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Biggest changeManagement utilizes this more conservative definition of fundings to better approximate the impact of fundings on loans outstanding and ultimately net interest income. ​ The following tables represent new loan fundings during 2022 and 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fourth quarter Third quarter Second quarter First quarter Total ​ 2022 ​ 2022 ​ 2022 ​ 2022 ​ 2022 Commercial: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial and industrial $ 177,693 ​ $ 201,106 ​ $ 152,550 ​ $ 169,168 ​ $ 700,517 Municipal and non-profit ​ 20,393 ​ ​ 20,845 ​ ​ 81,428 ​ ​ 49,906 ​ ​ 172,572 Owner occupied commercial real estate 40,912 ​ 65,125 ​ 78,905 ​ 67,597 ​ 252,539 Food and agribusiness 28,518 ​ 76,293 ​ (4,186) ​ 18,620 ​ 119,245 Total commercial ​ 267,516 ​ ​ 363,369 ​ ​ 308,697 ​ ​ 305,291 ​ ​ 1,244,873 Commercial real estate non-owner occupied 133,271 ​ 166,739 ​ 88,612 ​ 63,416 ​ 452,038 Residential real estate 95,067 ​ 99,951 ​ 93,220 ​ 49,040 ​ 337,278 Consumer 1,396 ​ 1,505 ​ 1,989 ​ 1,904 ​ 6,794 Total $ 497,250 ​ $ 631,564 ​ $ 492,518 ​ $ 419,651 ​ $ 2,040,983 ​ Included in the table above are net fundings under revolving lines of credit of $96,903, $124,834, $21,762 and $66,430 for the dates noted in the table above, respectively. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fourth quarter Third quarter Second quarter First quarter Total ​ 2021 ​ 2021 ​ 2021 ​ 2021 ​ 2021 Commercial: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial and industrial $ 229,529 ​ $ 196,289 ​ $ 147,030 ​ $ 144,531 ​ $ 717,379 Municipal and non-profit ​ 101,450 ​ ​ 43,516 ​ ​ 25,131 ​ ​ 7,999 ​ ​ 178,096 Owner occupied commercial real estate 28,914 ​ 53,445 ​ 48,225 ​ 27,093 ​ 157,677 Food and agribusiness 11,016 ​ 8,442 ​ 26,956 ​ (10,104) ​ 36,310 Total Commercial ​ 370,909 ​ ​ 301,692 ​ ​ 247,342 ​ ​ 169,519 ​ ​ 1,089,462 Commercial real estate non-owner occupied 46,128 ​ 55,392 ​ 58,532 ​ 49,195 ​ 209,247 Residential real estate 55,873 ​ 54,442 ​ 53,962 ​ 74,145 ​ 238,422 Consumer 2,524 ​ 1,810 ​ 2,267 ​ 1,353 ​ 7,954 Total $ 475,434 ​ $ 413,336 ​ $ 362,103 ​ $ 294,212 ​ $ 1,545,085 ​ Included in the table above are net fundings (paydowns) under revolving lines of credit of $138,777, $29,154, $59,520 and ($26,395) for the dates noted in the table above, respectively. ​ 52 Table of Contents The tables below show the contractual maturities of our loans for the dates indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 ​ Due within Due after 1 but Due after 5 but Due after ​ ​ ​ ​ 1 year ​ within 5 years ​ within 15 years ​ 15 Years ​ Total Commercial: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial and industrial ​ $ 234,028 ​ $ 1,421,752 ​ $ 353,909 ​ $ 15,146 ​ $ 2,024,835 Municipal and non-profit ​ ​ 1,184 ​ ​ 134,012 ​ ​ 513,872 ​ ​ 310,558 ​ ​ 959,626 Owner occupied commercial real estate ​ 61,598 ​ 261,305 ​ 478,104 ​ 112,333 ​ 913,340 Food and agribusiness ​ 83,254 ​ 203,910 ​ 46,624 ​ 20,191 ​ 353,979 Total commercial ​ ​ 380,064 ​ ​ 2,020,979 ​ ​ 1,392,509 ​ ​ 458,228 ​ ​ 4,251,780 Commercial real estate non-owner occupied ​ 234,962 ​ 863,842 ​ 579,843 ​ 17,403 ​ 1,696,050 Residential real estate ​ 72,035 ​ 169,024 ​ 372,638 ​ 637,584 ​ 1,251,281 Consumer ​ 6,142 ​ 12,494 ​ 2,721 ​ 1 ​ 21,358 Total loans ​ $ 693,203 ​ $ 3,066,339 ​ $ 2,347,711 ​ $ 1,113,216 ​ $ 7,220,469 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 ​ Due within Due after 1 but Due after 5 but Due after ​ ​ ​ ​ 1 year ​ within 5 years ​ within 15 years ​ 15 Years ​ Total Commercial: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial and industrial ​ $ 143,152 ​ $ 1,119,195 ​ $ 226,793 ​ $ 7,007 ​ $ 1,496,147 Municipal and non-profit ​ ​ 23,827 ​ ​ 112,022 ​ ​ 559,493 ​ ​ 233,703 ​ ​ 929,045 Owner occupied commercial real estate ​ 40,510 ​ 160,853 ​ 266,664 ​ 65,609 ​ 533,636 Food and agribusiness ​ 79,507 ​ 107,799 ​ 11,193 ​ 5,090 ​ 203,589 Total commercial ​ ​ 286,996 ​ ​ 1,499,869 ​ ​ 1,064,143 ​ ​ 311,409 ​ ​ 3,162,417 Commercial real estate non-owner occupied ​ 200,042 ​ 316,473 ​ 147,783 ​ 431 ​ 664,729 Residential real estate ​ 12,605 ​ 30,233 ​ 201,918 ​ 423,900 ​ 668,656 Consumer ​ 3,504 ​ 11,507 ​ 2,570 ​ — ​ 17,581 Total loans ​ $ 503,147 ​ $ 1,858,082 ​ $ 1,416,414 ​ $ 735,740 ​ $ 4,513,383 ​ The stated interest rate (which excludes the effects of non-refundable loan origination and commitment fees, net of costs and the accretion of fair value marks) of total loans with maturities over one year is as follows at the dates indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 ​ ​ Fixed ​ Variable ​ Total ​ ​ ​ Weighted ​ ​ Weighted ​ ​ Weighted ​ ​ Balance ​ average rate ​ Balance ​ average rate ​ Balance ​ average rate Commercial ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial and industrial ​ $ 726,568 4.62% ​ $ 1,064,239 7.00% ​ $ 1,790,807 6.04% Municipal and non-profit (1) ​ ​ 965,635 ​ 3.50% ​ ​ 22,483 ​ 4.77% ​ ​ 988,118 ​ 3.63% Owner occupied commercial real estate ​ 417,675 4.51% ​ 434,066 6.00% ​ 851,741 5.33% Food and agribusiness ​ 49,961 5.26% ​ 220,764 7.19% ​ 270,725 6.83% Total commercial ​ ​ 2,159,839 ​ 4.14% ​ ​ 1,741,552 ​ 6.75% ​ ​ 3,901,391 ​ 5.35% Commercial real estate non-owner occupied ​ 569,788 4.28% ​ 891,299 5.88% ​ 1,461,087 5.25% Residential real estate ​ 500,170 3.75% ​ 679,075 4.88% ​ 1,179,245 4.40% Consumer ​ 11,480 4.98% ​ 3,736 7.21% ​ 15,216 5.52% Total loans with > 1 year maturity ​ $ 3,241,277 4.11% ​ $ 3,315,662 6.13% ​ $ 6,556,939 5.15% ​ 53 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 ​ ​ Fixed ​ Variable ​ Total ​ ​ ​ Weighted ​ ​ Weighted ​ ​ Weighted ​ ​ Balance ​ average rate ​ Balance ​ average rate ​ Balance ​ average rate Commercial ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial and industrial ​ $ 480,034 4.05% ​ $ 872,961 3.41% ​ $ 1,352,995 3.63% Municipal and non-profit (1) ​ ​ 881,339 ​ 3.37% ​ ​ 23,879 ​ 2.76% ​ ​ 905,218 ​ 3.35% Owner occupied commercial real estate ​ 293,190 4.70% ​ 199,936 3.75% ​ 493,126 4.45% Food and agribusiness ​ 49,303 5.21% ​ 74,779 3.95% ​ 124,082 4.45% Total commercial ​ ​ 1,703,866 ​ 3.88% ​ ​ 1,171,555 ​ 3.49% ​ ​ 2,875,421 ​ 3.72% Commercial real estate non-owner occupied ​ 214,463 4.28% ​ 250,224 3.51% ​ 464,687 3.86% Residential real estate ​ 360,648 3.45% ​ 295,403 4.00% ​ 656,051 3.70% Consumer ​ 11,567 4.37% ​ 2,510 3.52% ​ 14,077 4.21% Total loans with > 1 year maturity ​ $ 2,290,544 3.85% ​ $ 1,719,692 3.58% ​ $ 4,010,236 3.74% ​ ​ ​ (1) Included in municipal and non-profit fixed rate loans are loans totaling $340,081 and $343,089 that have been swapped to variable rates at current market pricing at December 31, 2022 and 2021, respectively.
Biggest changeManagement utilizes this more conservative definition of fundings to better approximate the impact of fundings on loans outstanding and ultimately net interest income. ​ The following tables represent new loan fundings during 2023 and 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fourth quarter Third quarter Second quarter First quarter Total ​ ​ 2023 ​ 2023 ​ 2023 ​ 2023 ​ 2023 Commercial: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial and industrial ​ $ 135,954 ​ $ 89,297 ​ $ 111,717 ​ $ 107,013 ​ $ 443,981 Municipal and non-profit ​ ​ 79,650 ​ ​ 18,657 ​ ​ 39,331 ​ ​ 22,526 ​ ​ 160,164 Owner occupied commercial real estate ​ 75,631 ​ 67,322 ​ 62,649 ​ 33,912 ​ 239,514 Food and agribusiness ​ 10,646 ​ 16,191 ​ 6,017 ​ (6,564) ​ 26,290 Total commercial ​ ​ 301,881 ​ ​ 191,467 ​ ​ 219,714 ​ ​ 156,887 ​ ​ 869,949 Commercial real estate non-owner occupied ​ 107,738 ​ 88,434 ​ 99,984 ​ 185,875 ​ 482,031 Residential real estate ​ 48,925 ​ 42,514 ​ 40,814 ​ 49,406 ​ 181,659 Consumer ​ 1,849 ​ 1,689 ​ 1,777 ​ 1,717 ​ 7,032 Total ​ $ 460,393 ​ $ 324,104 ​ $ 362,289 ​ $ 393,885 ​ $ 1,540,671 ​ Included in the table above are quarterly net fundings (paydowns) under revolving lines of credit totaling $16,954, ($12,877), $13,766 and ($7,096) for the dates noted, respectively. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fourth quarter Third quarter Second quarter First quarter Total ​ ​ 2022 ​ 2022 ​ 2022 ​ 2022 ​ 2022 Commercial: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial and industrial ​ $ 177,693 ​ $ 201,106 ​ $ 152,550 ​ $ 169,168 ​ $ 700,517 Municipal and non-profit ​ ​ 20,393 ​ ​ 20,845 ​ ​ 81,428 ​ ​ 49,906 ​ ​ 172,572 Owner occupied commercial real estate ​ 40,912 ​ 65,125 ​ 78,905 ​ 67,597 ​ 252,539 Food and agribusiness ​ 28,518 ​ 76,293 ​ (4,186) ​ 18,620 ​ 119,245 Total commercial ​ ​ 267,516 ​ ​ 363,369 ​ ​ 308,697 ​ ​ 305,291 ​ ​ 1,244,873 Commercial real estate non-owner occupied ​ 133,271 ​ 166,739 ​ 88,612 ​ 63,416 ​ 452,038 Residential real estate ​ 95,067 ​ 99,951 ​ 93,220 ​ 49,040 ​ 337,278 Consumer ​ 1,396 ​ 1,505 ​ 1,989 ​ 1,904 ​ 6,794 Total ​ $ 497,250 ​ $ 631,564 ​ $ 492,518 ​ $ 419,651 ​ $ 2,040,983 ​ Included in the table above are quarterly net fundings under revolving lines of credit totaling $96,903, $124,834, $21,762 and $66,430 for the dates noted, respectively. ​ The tables below show the contractual maturities of our total loans for the dates indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2023 ​ Due within Due after 1 but Due after 5 but Due after ​ ​ ​ ​ 1 year ​ within 5 years ​ within 15 years ​ 15 Years ​ Total Commercial: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial and industrial ​ $ 282,560 ​ $ 1,377,991 ​ $ 295,659 ​ $ 10,699 ​ $ 1,966,909 Municipal and non-profit ​ ​ 36,505 ​ ​ 158,561 ​ ​ 561,112 ​ ​ 327,578 ​ ​ 1,083,756 Owner occupied commercial real estate ​ 86,299 ​ 413,032 ​ 518,950 ​ 105,492 ​ 1,123,773 Food and agribusiness ​ 121,595 ​ 93,227 ​ 94,591 ​ 15,184 ​ 324,597 Total commercial ​ ​ 526,959 ​ ​ 2,042,811 ​ ​ 1,470,312 ​ ​ 458,953 ​ ​ 4,499,035 Commercial real estate non-owner occupied ​ 395,426 ​ 921,056 ​ 527,645 ​ 12,623 ​ 1,856,750 Residential real estate ​ 58,323 ​ 188,452 ​ 350,519 ​ 726,493 ​ 1,323,787 Consumer ​ 6,459 ​ 10,871 ​ 1,851 ​ 5 ​ 19,186 Total loans ​ $ 987,167 ​ $ 3,163,190 ​ $ 2,350,327 ​ $ 1,198,074 ​ $ 7,698,758 56 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 ​ Due within Due after 1 but Due after 5 but Due after ​ ​ ​ ​ 1 year ​ within 5 years ​ within 15 years ​ 15 Years ​ Total Commercial: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial and industrial ​ $ 234,028 ​ $ 1,421,752 ​ $ 353,909 ​ $ 15,146 ​ $ 2,024,835 Municipal and non-profit ​ ​ 1,184 ​ ​ 134,012 ​ ​ 513,872 ​ ​ 310,558 ​ ​ 959,626 Owner occupied commercial real estate ​ 61,598 ​ 261,305 ​ 478,104 ​ 112,333 ​ 913,340 Food and agribusiness ​ 83,254 ​ 203,910 ​ 46,624 ​ 20,191 ​ 353,979 Total commercial ​ ​ 380,064 ​ ​ 2,020,979 ​ ​ 1,392,509 ​ ​ 458,228 ​ ​ 4,251,780 Commercial real estate non-owner occupied ​ 234,962 ​ 863,842 ​ 579,843 ​ 17,403 ​ 1,696,050 Residential real estate ​ 72,035 ​ 169,024 ​ 372,638 ​ 637,584 ​ 1,251,281 Consumer ​ 6,142 ​ 12,494 ​ 2,721 ​ 1 ​ 21,358 Total loans ​ $ 693,203 ​ $ 3,066,339 ​ $ 2,347,711 ​ $ 1,113,216 ​ $ 7,220,469 ​ The stated interest rate (which excludes the effects of non-refundable loan origination and commitment fees, net of costs and the accretion of fair value marks) of total loans with maturities over one year is as follows at the dates indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2023 ​ ​ Fixed ​ Variable ​ Total ​ ​ ​ Weighted ​ ​ Weighted ​ ​ Weighted ​ ​ Balance ​ average rate ​ Balance ​ average rate ​ Balance ​ average rate Commercial ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial and industrial ​ $ 644,128 5.37% ​ $ 1,040,219 8.30% ​ $ 1,684,347 7.18% Municipal and non-profit (1) ​ ​ 1,048,816 ​ 3.81% ​ ​ 21,029 ​ 5.46% ​ ​ 1,069,845 ​ 3.93% Owner occupied commercial real estate ​ 401,464 4.67% ​ 636,010 7.12% ​ 1,037,474 6.27% Food and agribusiness ​ 33,539 5.73% ​ 169,464 8.07% ​ 203,003 7.68% Total commercial ​ ​ 2,127,947 ​ 4.52% ​ ​ 1,866,722 ​ 7.84% ​ ​ 3,994,669 ​ 6.11% Commercial real estate non-owner occupied ​ 533,105 4.54% ​ 928,219 6.55% ​ 1,461,324 5.82% Residential real estate ​ 550,974 4.16% ​ 714,490 5.29% ​ 1,265,464 4.80% Consumer ​ 8,931 5.88% ​ 3,796 8.32% ​ 12,727 6.60% Total loans with > 1 year maturity ​ $ 3,220,957 4.47% ​ $ 3,513,227 6.98% ​ $ 6,734,184 5.80% ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 ​ ​ Fixed ​ Variable ​ Total ​ ​ ​ Weighted ​ ​ Weighted ​ ​ Weighted ​ ​ Balance ​ average rate ​ Balance ​ average rate ​ Balance ​ average rate Commercial ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial and industrial ​ $ 726,568 4.62% ​ $ 1,064,239 7.00% ​ $ 1,790,807 6.04% Municipal and non-profit (1) ​ ​ 965,635 ​ 3.50% ​ ​ 22,483 ​ 4.77% ​ ​ 988,118 ​ 3.63% Owner occupied commercial real estate ​ 417,675 4.51% ​ 434,066 6.00% ​ 851,741 5.33% Food and agribusiness ​ 49,961 5.26% ​ 220,764 7.19% ​ 270,725 6.83% Total commercial ​ ​ 2,159,839 ​ 4.14% ​ ​ 1,741,552 ​ 6.75% ​ ​ 3,901,391 ​ 5.35% Commercial real estate non-owner occupied ​ 569,788 4.28% ​ 891,299 5.88% ​ 1,461,087 5.25% Residential real estate ​ 500,170 3.75% ​ 679,075 4.88% ​ 1,179,245 4.40% Consumer ​ 11,480 4.98% ​ 3,736 7.21% ​ 15,216 5.52% Total loans with > 1 year maturity ​ $ 3,241,277 4.11% ​ $ 3,315,662 6.13% ​ $ 6,556,939 5.15% ​ ​ ​ (1) Included in municipal and non-profit fixed rate loans are loans totaling $351,015 and $340,081 that have been swapped to variable rates at current market pricing at December 31, 2023 and 2022, respectively.
For more information on regulatory capital, see note 15 in our consolidated financial statements. ​ Our shareholders' equity is impacted by earnings, changes in unrealized gains and losses on securities, net of tax, stock-based compensation activity, share repurchases, shares issued in connection with acquisitions and the payment of dividends. ​ The Board of Directors has from time to time authorized multiple programs to repurchase shares of the Company’s common stock either in open market or in privately negotiated transactions in accordance with applicable regulations of the SEC.
For more information on regulatory capital, see note 14 in our consolidated financial statements. ​ Our shareholders' equity is impacted by earnings, changes in unrealized gains and losses on securities, net of tax, stock-based compensation activity, share repurchases, shares issued in connection with acquisitions and the payment of dividends. ​ The Board of Directors has from time to time authorized multiple programs to repurchase shares of the Company’s common stock either in open market or in privately negotiated transactions in accordance with applicable regulations of the SEC.
Following are the loan classes within each of the four primary loan segments: ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-owner occupied ​ ​ ​ ​ Commercial ​ commercial real estate ​ Residential real estate ​ Consumer Commercial and industrial ​ Construction ​ Senior lien ​ Consumer Owner occupied commercial real estate ​ Acquisition and development ​ Junior lien ​ ​ Food and agribusiness ​ Multifamily ​ ​ ​ ​ Municipal and non-profit ​ Non-owner occupied ​ ​ ​ ​ ​ Loans on non-accrual, in bankruptcy and TDRs with a balance greater than $250,000 are excluded from the pooled analysis and are evaluated individually.
Following are the loan classes within each of the four primary loan segments: ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-owner occupied ​ ​ ​ ​ Commercial ​ commercial real estate ​ Residential real estate ​ Consumer Commercial and industrial ​ Construction ​ Senior lien ​ Consumer Owner occupied commercial real estate ​ Acquisition and development ​ Junior lien ​ ​ Food and agribusiness ​ Multifamily ​ ​ ​ ​ Municipal and non-profit ​ Non-owner occupied ​ ​ ​ ​ ​ Loans on non-accrual, in bankruptcy and TDMs with a balance greater than $250,000 are excluded from the pooled analysis and are evaluated individually.
This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions that may cause actual results to differ materially from management's expectations. Factors that could cause such differences are discussed in the section entitled “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” and should be read herewith. ​ Management’s discussion focuses on 2022 results compared to 2021.
This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions that may cause actual results to differ materially from management's expectations. Factors that could cause such differences are discussed in the section entitled “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” and should be read herewith. ​ Management’s discussion focuses on 2023 results compared to 2022.
For a discussion of 2021 results compared to 2020, refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. ​ All amounts are in thousands, except share and per share data, or as otherwise noted. ​ Overview ​ Our focus is on building relationships by creating a win-win scenario for our clients and our Company.
For a discussion of 2022 results compared to 2021, refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. ​ All amounts are in thousands, except share and per share data, or as otherwise noted. ​ Overview ​ Our focus is on building relationships by creating a win-win scenario for our clients and our Company.
We believe in providing solutions and services to our clients that are based on fairness and simplicity. We have established a solid financial services franchise with a sizable presence for deposit gathering and building client relationships necessary for growth. We are executing on strategic acquisition opportunities to expand our presence in attractive markets and to diversify our revenue streams.
We believe in providing solutions and services to our clients that are based on fairness and simplicity. We have established a solid financial services franchise with a sizable presence for deposit gathering and building client relationships necessary for growth. We have executed on strategic acquisition opportunities to expand our presence in attractive markets and to diversify our revenue streams.
While we plan to continue our disciplined approach to expense management, an inflationary environment may cause wage pressures and general increases in our cost of doing business, which may increase our non-interest expense. ​ Off-Balance Sheet Activities ​ In the normal course of business, we are a party to various contractual obligations, commitments and other off-balance sheet activities that contain credit, market, and operational risk that are not required to be reflected in our consolidated financial statements.
While we plan to continue our disciplined approach to expense management, an inflationary environment may cause wage pressures and general increases in our cost of doing business, which may increase our non-interest expense. ​ 72 Table of Contents Off-Balance Sheet Activities ​ In the normal course of business, we are a party to various contractual obligations, commitments and other off-balance sheet activities that contain credit, market, and operational risk that are not required to be reflected in our consolidated financial statements.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. ​ The following management's discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes as of and for the years ended December 31, 2022, 2021, and 2020, and with the other financial and statistical data presented in this annual report.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. ​ The following management's discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes as of and for the years ended December 31, 2023, 2022, and 2021, and with the other financial and statistical data presented in this annual report.
The estimated weighted average life of the available-for-sale mortgage-backed securities portfolio was 5.4 years and 4.2 years at December 31, 2022 and December 31, 2021, respectively. This estimate is based on assumptions and actual results may differ.
The estimated weighted average life of the available-for-sale mortgage-backed securities portfolio was 5.2 years and 5.4 years at December 31, 2023 and December 31, 2022, respectively. This estimate is based on assumptions and actual results may differ.
These scenarios, known as rate shocks, simulate an instantaneous change in interest rates and utilize various assumptions, including, but not limited to, prepayments on loans and securities, deposit decay rates, pricing decisions on loans and deposits, reinvestment and replacement of asset and liability cash flows. ​ We also analyze the economic value of equity as a secondary measure of interest rate risk.
These scenarios, known as rate shocks, simulate an instantaneous change in interest 71 Table of Contents rates and utilize various assumptions, including, but not limited to, prepayments on loans and securities, deposit decay rates, pricing decisions on loans and deposits, reinvestment and replacement of asset and liability cash flows. ​ We also analyze the economic value of equity as a secondary measure of interest rate risk.
The anticipated repayments and marketability of these securities offer substantial resources and flexibility to meet new loan demand, reinvest in the investment securities portfolio, or provide optionality for reductions in our deposit funding base. ​ We enter into contractual obligations that require a future cash settlement.
The anticipated repayments and marketability of these securities offer substantial resources and flexibility to meet new loan demand, reinvest in the investment securities portfolio, or provide optionality for reductions in our deposit funding base. ​ 70 Table of Contents We enter into contractual obligations that require a future cash settlement.
At December 31, 2022 and 2021, our subsidiary banks and the consolidated holding company exceeded all capital ratio requirements under prompt corrective action and other regulatory requirements, as further detailed in note 15 of our consolidated financial statements. ​ Results of Operations ​ Our net income depends largely on net interest income, which is the difference between interest income from interest earning assets and interest expense on interest bearing liabilities.
At December 31, 2023 and 2022, our subsidiary banks and the consolidated holding company exceeded all capital ratio requirements under prompt corrective action and other regulatory requirements, as further detailed in note 14 of our consolidated financial statements. ​ Results of Operations ​ Our net income depends largely on net interest income, which is the difference between interest income from interest earning assets and interest expense on interest bearing liabilities.
The balance on the note at December 31, 2022, net of long-term debt issuance costs totaling $0.5 million, totaled $39.5 million. Interest expense totaling $1.3 million and $0.2 million was recorded in the consolidated statements of operations during the years ended December 31, 2022 and 2021, respectively. ​ The note is subordinated, unsecured and matures on November 15, 2031.
The balance on the note at December 31, 2023, net of long-term debt issuance costs totaling $0.3 million, totaled $39.7 million. Interest expense totaling $1.2 million and $1.3 million was recorded in the consolidated statements of operations during the years ended December 31, 2023 and 2022, respectively. ​ The note is subordinated, unsecured and matures on November 15, 2031.
Additionally, the collective ACL calculation includes subjective adjustments for qualitative risk factors that are likely to cause estimated credit losses to differ from historical experience. Changes in these assumptions, estimates or the conditions 46 Table of Contents surrounding them may have a material impact on our financial condition.
Additionally, the collective ACL calculation includes subjective adjustments for qualitative risk factors that are likely to cause estimated credit losses to differ from historical experience. Changes in these assumptions, estimates or the conditions surrounding them may have a material impact on our financial condition.
Our food and agribusiness portfolio is only 4.9% of total loans and is well-diversified across food production, crop and livestock types. Crop and livestock loans represent 1.4% of total loans.
Our food and agribusiness portfolio is only 4.2% of total loans and is well-diversified across food production, crop and livestock types. Crop and livestock loans represent 1.2% of total loans.
At December 31, 2022, the Company had $385.0 million of outstanding borrowings with the FHLB. At December 31, 2021, the Company had no outstanding borrowings with the FHLB. The Company may pledge investment securities and loans as collateral for FHLB advances. There were no investment securities pledged at December 31, 2022 or 2021.
At December 31, 2023, the Company had $340.0 million of outstanding borrowings with the FHLB. At December 31, 2022, the Company had $385.0 million of outstanding borrowings with the FHLB. The Company may pledge investment securities and loans as collateral for FHLB advances. There were no investment securities pledged at December 31, 2023 or 2022.
See additional discussion of our ACL policy in note 2 – Summary of Significant Accounting Policies in the notes to our consolidated financial statements for the year ended December 31, 2022. ​ Allowance for credit losses ​ The determination of the ACL, which represents management’s estimate of lifetime credit losses inherent in our loan portfolio at the balance sheet date, involves a high degree of judgment and complexity.
See additional discussion of our ACL policy in note 2 – Summary of Significant Accounting Policies in the notes to our consolidated financial statements for the year ended December 31, 2023. ​ 50 Table of Contents Allowance for credit losses ​ The determination of the ACL, which represents management’s estimate of lifetime credit losses inherent in our loan portfolio at the balance sheet date, involves a high degree of judgment and complexity.
Interest income that would have been recorded had non-accrual loans performed in accordance with their original contract terms during 2022 and 2021 was $0.7 million and $0.8 million, respectively. ​ Past due status is monitored as an indicator of credit deterioration.
Interest income that would have been recorded had non-accrual loans performed in accordance with their original contract terms during 2023 and 2022 was $0.6 million and $0.7 million, respectively. ​ Past due status is monitored as an indicator of credit deterioration.
As of December 31, 2022, our marginal tax rate (the rate we pay on each incremental dollar of earnings) was approximately 23%.
As of December 31, 2023, our marginal tax rate (the rate we pay on each incremental dollar of earnings) was approximately 23%.
For further discussion of the Company’s derivative contracts refer to note 21. The strategy with respect to liabilities has been to continue to emphasize transaction deposit growth, particularly non-interest or low interest bearing non-maturing deposit accounts while building long-term client relationships. Non-maturing deposit accounts totaled 88.9% of total deposits at December 31, 2022, compared to 86.5% at December 31, 2021.
For further discussion of the Company’s derivative contracts refer to note 21. The strategy with respect to liabilities has been to continue to emphasize transaction deposit growth, particularly non-interest or low interest bearing non-maturing deposit accounts while building long-term client relationships. Non-maturing deposit accounts totaled 88.0% of total deposits at December 31, 2023, compared to 88.9% at December 31, 2022.
Our results of operations are also affected by provisions for credit losses and non-interest income, such as service charges, bank card income, swap fee income, and gain on sale of mortgages. Our primary operating expenses, aside from interest expense, consist of salaries and benefits, occupancy costs, telecommunications data processing expense, and intangible asset amortization.
Our results of operations are also affected by provisions for credit losses and non-interest income, such as service charges, bank card income, swap fee income, and gain on sale of mortgages. Our primary operating expenses, aside from interest expense, consist of salaries and benefits, occupancy costs, telecommunications data processing expense, FDIC deposit insurance and intangible assets amortization.
In addition, as a member of the FHLB, the Company has access to a line of credit and term financing from the FHLB with total available credit of $1.1 billion at December 31, 2022. The Company may utilize its FHLB line of credit as a funding mechanism for originated loans and loans held for sale.
In addition, as a member of the FHLB, the Company has access to a line of credit and term financing from the FHLB with total available credit of $1.7 billion at December 31, 2023. The Company may utilize the FHLB line of credit as a funding mechanism for originated loans and loans held for sale.
For periods beyond the reasonable and supportable forecast period, we revert to historical long-term average loss rates on a straight-line basis. ​ We measure expected credit losses for loans on a pooled basis when similar risk characteristics exist.
For periods beyond the reasonable and supportable forecast period, we revert to historical long-term average loss rates on a straight-line basis. ​ 59 Table of Contents We measure expected credit losses for loans on a pooled basis when similar risk characteristics exist.
Loans are considered past due or delinquent when the contractual principal or interest due in accordance with the terms of the loan agreement remains unpaid after the due date of the scheduled payment.
Loans are considered past due or delinquent when the contractual principal or interest due in accordance with the terms of the loan agreement remains unpaid after the due date of 58 Table of Contents the scheduled payment.
Interest expense related to the notes totaling $0.2 million was recorded in the consolidated statements of operations during the year ended December 31, 2022. ​ The three notes, containing similar terms, are subordinated, unsecured and mature on June 15, 2031. Payments consist of interest only.
Interest expense related to the notes totaling $0.6 million and $0.2 million was recorded in the consolidated statements of operations during the years ended December 31, 2023 and 2022, respectively. ​ The three notes, containing similar terms, are subordinated, unsecured and mature on June 15, 2031. Payments consist of interest only.
At December 31, 2021, the held-to-maturity investment portfolio included $2.2 million of unrealized gains and $11.9 million of unrealized losses. ​ The Company does not measure expected credit losses on a financial asset, or groups of financial assets, in which historical credit loss information adjusted for current conditions and reasonable and supportable forecasts results in an expectation that nonpayment of the amortized cost basis is zero.
At December 31, 2022, the held-to-maturity investment portfolio included $91.8 million of unrealized losses and $0.2 million of unrealized gains. ​ The Company does not measure expected credit losses on a financial asset, or groups of financial assets, in which historical credit loss information adjusted for current conditions and reasonable and supportable forecasts results in an expectation that nonpayment of the amortized cost basis is zero.
When a loan is placed on non-accrual, any recorded AIR is reversed against interest income. ​ Total ACL ​ After considering the above mentioned factors, we believe that the ACL of $89.6 million is adequate to cover estimated lifetime losses inherent in the loan portfolio at December 31, 2022.
When a loan is placed on non-accrual, any recorded AIR is reversed against interest income. ​ Total ACL ​ After considering the above mentioned factors, we believe that the ACL of $97.9 million is adequate to cover estimated lifetime losses inherent in the loan portfolio at December 31, 2023.
The Company incurred $1.7 million of interest expense related to FHLB advances or other short-term borrowings for the year ended December 31, 2022. ​ Regulatory Capital ​ Our subsidiary banks and the holding company are subject to the regulatory capital adequacy requirements of the Federal Reserve Board and the FDIC, as applicable.
The Company incurred $22.0 million and $1.7 million of interest expense related to FHLB advances or other short-term borrowings for the years ended December 31, 2023 and 2022, respectively. ​ Regulatory Capital ​ Our subsidiary banks and the holding company are subject to the regulatory capital adequacy requirements of the Federal Reserve Board and the FDIC, as applicable.
Adjusting for acquisition-related provision expense and non-recurring acquisition-related expenses of $36.8 million during 2022, adjusted net income totaled $99.6 million or $3.05 per diluted share, during the year ended December 31, 2022.
Adjusting for acquisition-related provision expense and non-recurring acquisition-related expenses of $36.8 million during 2022, net income increased $42.5 million, or 42.7%, during 2023. For the year ended December 31, 2022, adjusted net income totaled $99.6 million or $3.05 per diluted share.
Additionally, our held-to-maturity securities portfolio had $91.6 million of pre-tax net unrealized losses at December 31, 2022. The gross unrealized gains and losses are detailed in note 5 of our consolidated financial statements. As of December 31, 2022, our investment securities portfolio consisted primarily of MBS, all of which were issued or guaranteed by U.S. Government agencies or sponsored enterprises.
Additionally, our held-to-maturity securities portfolio had $80.7 million of pre-tax net unrealized losses at December 31, 2023. The gross unrealized gains and losses are detailed in note 4 of our consolidated financial statements. As of December 31, 2023, our investment securities portfolio consisted primarily of MBS, all of which were issued or guaranteed by U.S. Government agencies or sponsored enterprises.
As of December 31, 2022 and 2021, we had loan commitments totaling $2.0 billion and $1.0 billion, respectively, and standby letters of credit that totaled $13.9 million and $7.3 million, respectively. Unused commitments do not necessarily represent future credit exposure or cash requirements, as commitments often expire without being drawn upon. ​ ​
As of December 31, 2023 and 2022, we had loan commitments totaling $1.6 billion and $2.0 billion, respectively, and standby letters of credit that totaled $13.0 million and $13.9 million, respectively. Unused commitments do not necessarily represent future credit exposure or cash requirements, as commitments often expire without being drawn upon. ​ ​ Item 7A.
The estimated weighted average expected life of the held-to-maturity mortgage-backed securities portfolio as of December 31, 2022 and December 31, 2021 was 6.0 years and 4.1 years, respectively. This estimate is based on assumptions and actual results may differ.
The estimated weighted average expected life of the held-to-maturity mortgage-backed securities portfolio as of December 31, 2023 and December 31, 2022 was 5.7 years and 6.0 years, respectively. This estimate is based on assumptions and actual results may differ.
Included in the municipal and non-profit segment are tax exempt loans totaling $772,908 and $746,508 with an FTE weighted average rate of 4.08% and 3.97% at December 31, 2022 and 2021, respectively. ​ ​ ​ ​ Asset quality ​ Asset quality is fundamental to our success and remains a strong point, driven by our disciplined adherence to our self-imposed concentration limits across industry sector and real estate property type.
Included in the municipal and non-profit segment are tax exempt loans totaling $868,842 and $772,908 with an FTE weighted average rate of 4.31% and 4.08% at December 31, 2023 and 2022, respectively. ​ ​ ​ 57 Table of Contents Asset quality ​ Asset quality is fundamental to our success and remains a strong point, driven by our disciplined adherence to our self-imposed concentration limits across industry sector and real estate property type.
At December 31, 2022, pledgeable investment securities represented a significant source of liquidity. Our available-for-sale investment securities are carried at fair value and our held-to-maturity securities are carried at amortized cost. Our collective investment securities portfolio totaled $1.4 billion at December 31, 2022, inclusive of pre-tax net unrealized losses of $113.5 million on the available-for-sale securities portfolio.
At December 31, 2023, pledgeable investment securities represented a significant source of liquidity. Our available-for-sale investment securities are carried at fair value and our held-to-maturity securities are carried at amortized cost. Our collective investment securities portfolio totaled $1.2 billion at December 31, 2023, inclusive of pre-tax net unrealized losses of $99.0 million on the available-for-sale securities portfolio.
At December 31, 2021, the available-for-sale investment portfolio included $3.4 million of unrealized gains and $13.3 million of unrealized losses. We believe any unrealized losses are a result of prevailing interest rates, and as such, we do not believe that any of the securities with unrealized losses were impaired. Management believes that default of the available-for-sale securities is highly unlikely.
At December 31, 2022, the available-for-sale investment portfolio included $113.5 million of unrealized losses. We believe any unrealized losses are a result of prevailing interest rates, and as such, we do not believe that any of the securities with unrealized losses were impaired. Management believes that default of the available-for-sale securities is highly unlikely.
Loan fundings totaled a record $2.0 billion over the past 12 months, led by commercial loan fundings of $1.2 billion. Fundings are defined as closed end funded loans and revolving lines 51 Table of Contents of credit advances net of any current period paydowns.
Loan fundings totaled $1.5 billion over the past 12 months, led by commercial loan fundings of $0.9 billion. Fundings are defined as closed end funded loans and revolving lines of credit 55 Table of Contents advances net of any current period paydowns.
Any changes to the underlying assumptions, circumstances or estimates, including but not limited to changes in the underlying macro-economic forecast, used in determining the ACL, could negatively or positively affect the Company's results of operations, liquidity or financial condition. ​ The following schedule presents, by class stratification, the changes in the ACL during the years listed: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of and for the years ended ​ ​ ​ ​ December 31, 2022 ​ December 31, 2021 ​ December 31, 2020 ​ December 31, 2019 ​ December 31, 2018 ​ ​ Total loans ​ % NCOs (1) ​ Total loans ​ % NCOs (1) ​ Total loans ​ % NCOs (1) ​ Total loans ​ % NCOs (1) ​ Total loans ​ % NCOs (1) Beginning balance ​ $ 49,694 ​ ​ ​ $ 59,777 ​ ​ ​ $ 39,064 ​ ​ ​ $ 35,692 ​ ​ ​ $ 31,264 ​ ​ Cumulative effect adjustment (2) ​ ​ — ​ ​ ​ ​ — ​ ​ ​ ​ 5,836 ​ ​ ​ ​ — ​ ​ ​ ​ — ​ ​ Day 1 CECL provision expense ​ 21,228 ​ ​ ​ — ​ ​ ​ ​ — ​ ​ ​ ​ — ​ ​ ​ ​ — ​ ​ PCD allowance for credit loss at acquisition ​ ​ 6,238 ​ ​ ​ ​ — ​ ​ ​ ​ — ​ ​ ​ ​ — ​ ​ ​ ​ — ​ ​ Charge-offs: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial ​ (1,340) ​ 0.02% ​ ​ (1,171) ​ 0.02% ​ ​ (2,023) ​ 0.04% ​ ​ (7,422) ​ 0.17% ​ ​ (895) ​ 0.00% Commercial real estate non-owner occupied ​ — ​ 0.00% ​ ​ — ​ 0.00% ​ ​ (412) ​ 0.01% ​ ​ (116) ​ 0.00% ​ ​ (11) ​ 0.00% Residential real estate ​ (2) ​ 0.00% ​ ​ (24) ​ 0.00% ​ ​ (67) ​ 0.00% ​ ​ (124) ​ 0.00% ​ ​ (118) ​ 0.00% Consumer ​ (845) ​ 0.01% ​ ​ (621) ​ 0.01% ​ ​ (726) ​ 0.01% ​ ​ (937) ​ 0.02% ​ ​ (1,134) ​ 0.02% Total charge-offs ​ (2,187) ​ ​ ​ ​ (1,816) ​ ​ ​ ​ (3,228) ​ ​ ​ ​ (8,599) ​ ​ ​ ​ (2,158) ​ ​ Recoveries ​ 385 ​ ​ ​ ​ 552 ​ ​ ​ ​ 571 ​ ​ ​ ​ 328 ​ ​ ​ ​ 1,389 ​ ​ Net charge-offs ​ (1,802) ​ 0.03% ​ ​ (1,264) ​ 0.03% ​ ​ (2,657) ​ 0.06% ​ ​ (8,271) ​ 0.19% ​ ​ (769) ​ 0.02% Provision expense (release) for credit losses ​ 14,195 ​ ​ ​ ​ (8,819) ​ ​ ​ ​ 17,534 ​ ​ ​ ​ 11,643 ​ ​ ​ ​ 5,197 ​ ​ Ending allowance for credit losses ​ $ 89,553 ​ ​ ​ $ 49,694 ​ ​ ​ $ 59,777 ​ ​ ​ $ 39,064 ​ ​ ​ $ 35,692 ​ ​ Ratio of ACL to total loans outstanding at period end ​ 1.24% ​ ​ ​ ​ 1.10% ​ ​ ​ ​ 1.37% ​ ​ ​ ​ 0.88% ​ ​ ​ ​ 0.87% ​ ​ Ratio of ACL to total non-performing loans at period end ​ 542.35% ​ ​ ​ ​ 458.77% ​ ​ ​ ​ 293.21% ​ ​ ​ ​ 179.62% ​ ​ ​ ​ 145.94% ​ ​ Total loans ​ $ 7,220,469 ​ ​ ​ $ 4,513,383 ​ ​ ​ $ 4,353,726 ​ ​ ​ $ 4,415,406 ​ ​ ​ $ 4,092,308 ​ ​ Average total loans outstanding during the period ​ ​ 5,349,916 ​ ​ ​ ​ 4,358,707 ​ ​ ​ ​ 4,578,894 ​ ​ ​ ​ 4,288,226 ​ ​ ​ ​ 3,819,603 ​ ​ Non-performing loans ​ ​ 16,512 ​ ​ ​ ​ 10,832 ​ ​ ​ ​ 20,387 ​ ​ ​ ​ 21,748 ​ ​ ​ ​ 24,456 ​ ​ ​ ​ ​ (1) ​ Ratio of net charge-offs to average total loans.
Any changes to the underlying assumptions, circumstances or estimates, including but not limited to changes in the underlying macro-economic forecast, used in determining the ACL, could negatively or positively affect the Company's results of operations, liquidity or financial condition. 60 Table of Contents ​ The following schedule presents, by class stratification, the changes in the ACL during the years listed: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of and for the years ended ​ ​ ​ ​ December 31, 2023 ​ December 31, 2022 ​ December 31, 2021 ​ December 31, 2020 ​ December 31, 2019 ​ ​ Total loans ​ % NCOs (1) ​ Total loans ​ % NCOs (1) ​ Total loans ​ % NCOs (1) ​ Total loans ​ % NCOs (1) ​ Total loans ​ % NCOs (1) Beginning balance ​ $ 89,553 ​ ​ ​ $ 49,694 ​ ​ ​ $ 59,777 ​ ​ ​ $ 39,064 ​ ​ ​ $ 35,692 ​ ​ Cumulative effect adjustment (2) ​ ​ — ​ ​ ​ ​ — ​ ​ ​ ​ — ​ ​ ​ ​ 5,836 ​ ​ ​ ​ — ​ ​ Day 1 CECL provision expense ​ — ​ ​ ​ ​ 21,228 ​ ​ ​ ​ — ​ ​ ​ ​ — ​ ​ ​ ​ — ​ ​ PCD allowance for credit loss at acquisition ​ ​ — ​ ​ ​ ​ 6,238 ​ ​ ​ ​ — ​ ​ ​ ​ — ​ ​ ​ ​ — ​ ​ Charge-offs: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial ​ (277) ​ 0.00% ​ ​ (1,340) ​ 0.02% ​ ​ (1,171) ​ 0.02% ​ ​ (2,023) ​ 0.04% ​ ​ (7,422) ​ 0.17% Commercial real estate non-owner occupied ​ — ​ 0.00% ​ ​ — ​ 0.00% ​ ​ — ​ 0.00% ​ ​ (412) ​ 0.01% ​ ​ (116) ​ 0.00% Residential real estate ​ (48) ​ 0.00% ​ ​ (2) ​ 0.00% ​ ​ (24) ​ 0.00% ​ ​ (67) ​ 0.00% ​ ​ (124) ​ 0.00% Consumer ​ (1,250) ​ 0.02% ​ ​ (845) ​ 0.01% ​ ​ (621) ​ 0.01% ​ ​ (726) ​ 0.01% ​ ​ (937) ​ 0.02% Total charge-offs ​ (1,575) ​ ​ ​ ​ (2,187) ​ ​ ​ ​ (1,816) ​ ​ ​ ​ (3,228) ​ ​ ​ ​ (8,599) ​ ​ Recoveries ​ 444 ​ ​ ​ ​ 385 ​ ​ ​ ​ 552 ​ ​ ​ ​ 571 ​ ​ ​ ​ 328 ​ ​ Net charge-offs ​ (1,131) ​ 0.02% ​ ​ (1,802) ​ 0.03% ​ ​ (1,264) ​ 0.03% ​ ​ (2,657) ​ 0.06% ​ ​ (8,271) ​ 0.19% Provision expense for credit losses ​ 9,525 ​ ​ ​ ​ 14,195 ​ ​ ​ ​ (8,819) ​ ​ ​ ​ 17,534 ​ ​ ​ ​ 11,643 ​ ​ Ending allowance for credit losses ​ $ 97,947 ​ ​ ​ $ 89,553 ​ ​ ​ $ 49,694 ​ ​ ​ $ 59,777 ​ ​ ​ $ 39,064 ​ ​ Ratio of ACL to total loans outstanding at period end ​ 1.27% ​ ​ ​ ​ 1.24% ​ ​ ​ ​ 1.10% ​ ​ ​ ​ 1.37% ​ ​ ​ ​ 0.88% ​ ​ Ratio of ACL to total non-performing loans at period end ​ 346.99% ​ ​ ​ ​ 542.35% ​ ​ ​ ​ 458.77% ​ ​ ​ ​ 293.21% ​ ​ ​ ​ 179.62% ​ ​ Total loans ​ $ 7,698,758 ​ ​ ​ $ 7,220,469 ​ ​ ​ $ 4,513,383 ​ ​ ​ $ 4,353,726 ​ ​ ​ $ 4,415,406 ​ ​ Average total loans outstanding during the period ​ ​ 7,409,724 ​ ​ ​ ​ 5,349,916 ​ ​ ​ ​ 4,358,707 ​ ​ ​ ​ 4,578,894 ​ ​ ​ ​ 4,288,226 ​ ​ Non-performing loans ​ ​ 28,228 ​ ​ ​ ​ 16,512 ​ ​ ​ ​ 10,832 ​ ​ ​ ​ 20,387 ​ ​ ​ ​ 21,748 ​ ​ ​ ​ ​ (1) ​ Ratio of net charge-offs to average total loans.
The 2022 and 2021 effective tax rates were 17.3% and 18.6%, respectively. ​ Strong capital position ​ ​ ​ ​ ● Capital ratios continue to be strong and in excess of federal bank regulatory agency “well capitalized” thresholds.
The 2023 and 2022 effective tax rates were 19.1% and 17.3%, respectively. ​ Strong capital position ​ ​ ​ ​ ● Capital ratios continue to be strong and in excess of federal bank regulatory agency “well capitalized” thresholds.
(2) Presented on an FTE basis using the statutory tax rate of 21% for all periods presented. The taxable equivalent adjustments included above are $5,512, $5,161 and $5,103 for the years ended 2022, 2021 and 2020, respectively.
(2) Presented on an FTE basis using the statutory tax rate of 21% for all periods presented. The taxable equivalent adjustments included above are $6,099, $5,512 and $5,161 for the years ended December 31, 2023, 2022 and 2021, respectively.
(2) Presented on a fully taxable equivalent basis using the statutory tax rate of 21% for all periods presented. The taxable equivalent adjustments included above are $5,512, $5,161 and $5,103 for the years ended 2022, 2021 and 2020, respectively.
(2) Presented on a fully taxable equivalent basis using the statutory tax rate of 21% for all periods presented. The taxable equivalent adjustments included above are $6,099, $5,512 and $5,161 for the years ended December 31, 2023, 2022 and 2021, respectively.
Changes in these assumptions, estimates or the conditions surrounding them may have a material impact on our financial condition, liquidity or results of operations. ​ Net charge-offs on loans during the year ended December 31, 2022 totaled $1.8 million, or 0.03% of total loans.
Changes in these assumptions, estimates or the conditions surrounding them may have a material impact on our financial condition, liquidity or results of operations. ​ Net charge-offs on loans during the year ended December 31, 2023 totaled $1.1 million, and the ratio of net charge-offs to average total loans totaled 0.02%.
At December 31, 2022 and December 31, 2021, the duration of the total available-for-sale investment portfolio was 4.4 years and 3.8 years, respectively. ​ At December 31, 2022 and 2021, adjustable rate securities comprised 11.5% and 1.7%, respectively, of the available-for-sale mortgage-backed security portfolio.
At December 31, 2023 and December 31, 2022, the duration of the total available-for-sale investment portfolio was 4.3 years and 4.4 years, respectively. ​ At December 31, 2023 and 2022, adjustable rate securities comprised 13.0% and 11.5%, respectively, of the available-for-sale mortgage-backed security portfolio.
The table below illustrates the impact of an immediate and sustained 200 and 100 basis point increase and a 100 and 200 basis point decrease in interest rates on net interest income based on the interest rate risk model at December 31, 2022 and 2021: ​ ​ ​ ​ ​ ​ Hypothetical ​ ​ ​ shift in interest ​ % change in projected net interest income rates (in bps) ​ December 31, 2022 December 31, 2021 200 ​ 2.60% ​ 11.12% 100 ​ 1.31% ​ 5.37% (100) ​ (2.93)% ​ — (200) ​ (8.24)% ​ — ​ Many assumptions are used to calculate the impact of interest rate fluctuations.
The table below illustrates the impact of an immediate and sustained 200 and 100 basis point increase and a 100 and 200 basis point decrease in interest rates on net interest income based on the interest rate risk model at the respective dates: ​ ​ ​ ​ ​ ​ Hypothetical ​ ​ ​ shift in interest ​ % change in projected net interest income rates (in bps) ​ December 31, 2023 December 31, 2022 200 ​ (0.18)% ​ 2.60% 100 ​ (0.06)% ​ 1.31% (100) ​ (0.09)% ​ (2.93)% (200) ​ (0.33)% ​ (8.24)% ​ Many assumptions are used to calculate the impact of interest rate fluctuations.
The remainder of the portfolio was comprised of fixed rate amortizing securities with 10 to 30 year contractual maturities, with a weighted average coupon of 1.75% per annum and 1.70% per annum at December 31, 2022 and 2021, respectively. ​ The available-for-sale investment portfolio included $113.5 million of unrealized losses at December 31, 2022.
The remainder of the portfolio was comprised of fixed rate amortizing securities with 10 to 30 year contractual maturities, with a weighted average coupon of 1.73% per annum and 1.75% per annum at December 31, 2023 and 2022, respectively. ​ The available-for-sale investment portfolio included $99.0 million of unrealized losses and $57 thousand of unrealized gains at December 31, 2023.
Key segments included government/non-profit loans of $559.9 million, or 7.8% of total loans, and health care/hospital loans of $402.8 million, or 5.6% of total loans. ​ Non-owner occupied CRE loans were 169.5% of the Company’s risk based capital, or 23.5% of total loans, and no specific property type comprised more than 5.0% of total loans.
Key segments included government/non-profit loans of $787.1 million, or 10.2% of total loans, and health care/hospital loans of $430.5 million, or 5.6% of total loans. ​ Non-owner occupied CRE loans were 169.9% of the Company’s risk based capital, or 24.1% of total loans, and no specific property type comprised more than 5.0% of total loans.
The notes are not subject to redemption at the option of the holder. ​ Other borrowings ​ As of December 31, 2022 and 2021, the Company sold securities under agreements to repurchase totaling $20.2 million and $22.8 million, respectively.
The notes are not subject to redemption at the option of the holder. ​ 63 Table of Contents Other borrowings ​ As of December 31, 2023 and 2022, the Company sold securities under agreements to repurchase totaling $19.6 million and $20.2 million, respectively.
The impact of changes in interest rates on this calculation is analyzed for the risk to our future earnings and is used in conjunction with the analyses on net interest income. ​ 68 Table of Contents Our interest rate risk model indicated that the Company was asset sensitive in terms of interest rate sensitivity at December 31, 2022 and 2021.
The impact of changes in interest rates on this calculation is analyzed for the risk to our future earnings and is used in conjunction with the analyses on net interest income. ​ Our interest rate risk model indicated that the Company was in a fairly neutral position in terms of interest rate sensitivity at December 31, 2023.
These may include operating lease obligations, purchase obligations, time deposits and issuance of long-term debt. For the year ended December 31, 2022, contractual obligations totaled $967.5 million with $495.4 million estimated to be paid within one year.
These may include operating lease obligations, purchase obligations, time deposits and issuance of long-term debt. For the year ended December 31, 2023, contractual obligations totaled $1.0 billion with $705.9 million estimated to be paid within one year.
Adjusting for non-recurring acquisition-related expenses, the return on average tangible assets for the year ended December 31, 2022 was 1.32%. 43 Table of Contents ​ ● The return on average tangible common equity was 9.91% for 2022, compared to 12.87% for 2021.
Adjusting for non-recurring acquisition-related expenses, the return on average tangible assets for the year ended December 31, 2022 was 1.32%. ● The return on average tangible common equity was 18.23% for 2023, compared to 9.91% for 2022.
Specific reserves on loans totaled $1.6 million at December 31, 2021. ​ The Company has elected to exclude accrued interest receivable (“AIR”) from the ACL calculation. As of December 31, 2022 and December 31, 2021, AIR totaled $31.8 million and $15.7 million, respectively, from total loans.
Specific reserves on loans totaled $5.3 million at December 31, 2022. ​ The Company has elected to exclude accrued interest receivable (“AIR”) from the ACL calculation. As of December 31, 2023 and December 31, 2022, AIR from loans totaled $42.4 million and $31.8 million, respectively.
The balance on the notes at December 31, 2022, net of a fair 59 Table of Contents value adjustment related to the acquisition totaling $0.6 million, totaled $14.4 million.
The balance on the notes at December 31, 2023, net of a fair value adjustment related to the acquisition totaling $0.5 million, totaled $14.5 million.
Specific reserves on loans totaled $5.3 million at December 31, 2022. ​ 56 Table of Contents Net charge-offs on loans during the year ended December 31, 2021 totaled $1.3 million, or 0.03% of total loans.
Specific reserves on loans totaled $8.6 million at December 31, 2023. ​ Net charge-offs on loans during the year ended December 31, 2022 totaled $1.8 million, or 0.03% of total loans.
Such amounts were fully reserved for, charged off on the acquisition date and excluded from the table above. ​ The following tables present the allocation of the ACL and the percentage of the total amount of loans in each loan category listed as of the dates presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ACL as a % ​ Total loans % of total loans Related ACL of total ACL Commercial ​ $ 4,251,780 58.9% ​ $ 37,608 42.0% Commercial real estate non-owner occupied ​ 1,696,050 23.5% ​ 32,050 35.8% Residential real estate ​ 1,251,281 17.3% ​ 19,306 21.5% Consumer ​ 21,358 0.3% ​ 589 0.7% Total ​ $ 7,220,469 100.0% ​ $ 89,553 100.0% ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ACL as a % ​ Total loans % of total loans Related ACL of total ACL Commercial ​ $ 3,162,417 70.1% ​ $ 31,256 62.9% Commercial real estate non-owner occupied ​ 664,729 14.7% ​ 10,033 20.2% Residential real estate ​ 668,656 14.8% ​ 8,056 16.2% Consumer ​ 17,581 0.4% ​ 349 0.7% Total ​ $ 4,513,383 100.0% ​ $ 49,694 100.0% ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ACL as a % ​ Total loans % of total loans Related ACL of total ACL Commercial ​ $ 3,044,065 70.0% ​ $ 30,376 50.8% Commercial real estate non-owner occupied ​ 631,996 14.5% ​ 17,448 29.2% Residential real estate ​ 658,659 15.1% ​ 11,492 19.2% Consumer ​ 19,006 0.4% ​ 461 0.8% Total ​ $ 4,353,726 100.0% ​ $ 59,777 100.0% ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2019 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ACL as a % ​ Total loans % of total loans Related ACL of total ACL Commercial ​ $ 2,992,307 67.8% ​ $ 30,442 77.9% Commercial real estate non-owner occupied ​ 630,906 14.3% ​ 4,850 12.4% Residential real estate ​ 770,417 17.4% ​ 3,468 8.9% Consumer ​ 21,776 0.5% ​ 304 0.8% Total ​ $ 4,415,406 100.0% ​ $ 39,064 100.0% ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2018 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ACL as a % ​ Total loans % of total loans Related ACL of total ACL Commercial ​ $ 2,644,571 64.6% ​ $ 27,137 76.1% Commercial real estate non-owner occupied ​ 592,212 14.5% ​ 4,406 12.3% Residential real estate ​ 830,815 20.3% ​ 3,800 10.6% Consumer ​ 24,710 0.6% ​ 349 1.0% Total ​ $ 4,092,308 100.0% ​ $ 35,692 100.0% ​ ​ ​ 58 Table of Contents Deposits ​ Deposits from banking clients serve as a primary funding source for our banking operations and our ability to gather and manage deposit levels is critical to our success.
(2) ​ Related to the adoption of Accounting Standards Update No. 2016-13, Measurement of Credit Losses on Financial Instruments . ​ The following tables present the allocation of the ACL and the percentage of the total amount of loans in each loan category listed as of the dates presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ACL as a % ​ Total loans % of total loans Related ACL of total ACL Commercial ​ $ 4,499,035 58.4% ​ $ 45,304 46.3% Commercial real estate non-owner occupied ​ 1,856,750 24.1% ​ 32,665 33.3% Residential real estate ​ 1,323,787 17.2% ​ 19,550 20.0% Consumer ​ 19,186 0.3% ​ 428 0.4% Total ​ $ 7,698,758 100.0% ​ $ 97,947 100.0% ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ACL as a % ​ Total loans % of total loans Related ACL of total ACL Commercial ​ $ 4,251,780 58.9% ​ $ 37,608 42.0% Commercial real estate non-owner occupied ​ 1,696,050 23.5% ​ 32,050 35.8% Residential real estate ​ 1,251,281 17.3% ​ 19,306 21.5% Consumer ​ 21,358 0.3% ​ 589 0.7% Total ​ $ 7,220,469 100.0% ​ $ 89,553 100.0% ​ 61 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ACL as a % ​ Total loans % of total loans Related ACL of total ACL Commercial ​ $ 3,162,417 70.1% ​ $ 31,256 62.9% Commercial real estate non-owner occupied ​ 664,729 14.7% ​ 10,033 20.2% Residential real estate ​ 668,656 14.8% ​ 8,056 16.2% Consumer ​ 17,581 0.4% ​ 349 0.7% Total ​ $ 4,513,383 100.0% ​ $ 49,694 100.0% ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ACL as a % ​ Total loans % of total loans Related ACL of total ACL Commercial ​ $ 3,044,065 70.0% ​ $ 30,376 50.8% Commercial real estate non-owner occupied ​ 631,996 14.5% ​ 17,448 29.2% Residential real estate ​ 658,659 15.1% ​ 11,492 19.2% Consumer ​ 19,006 0.4% ​ 461 0.8% Total ​ $ 4,353,726 100.0% ​ $ 59,777 100.0% ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2019 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ACL as a % ​ Total loans % of total loans Related ACL of total ACL Commercial ​ $ 2,992,307 67.8% ​ $ 30,442 77.9% Commercial real estate non-owner occupied ​ 630,906 14.3% ​ 4,850 12.4% Residential real estate ​ 770,417 17.4% ​ 3,468 8.9% Consumer ​ 21,776 0.5% ​ 304 0.8% Total ​ $ 4,415,406 100.0% ​ $ 39,064 100.0% ​ ​ ​ Deposits ​ Deposits from banking clients serve as a primary funding source for our banking operations and our ability to gather and manage deposit levels is critical to our success.
Net interest income on an FTE basis totaled $272.3 million, $192.3 million and $198.0 million during the years ended 2022, 2021 and 2020, respectively. During the year ended December 31, 2022, the FTE net interest margin widened 78 62 Table of Contents basis points to 3.73%, compared to the year ended December 31, 2021.
Net interest income on an FTE basis totaled $368.1 million, $272.3 million and $192.3 million during the years ended December 31, 2023, 2022 and 2021, respectively. During the year ended December 31, 2023, the FTE 65 Table of Contents net interest margin widened 35 basis points to 4.08%, compared to the year ended December 31, 2022.
(3) Loan fees included in interest income totaled $9,453, $18,207 and $15,713 during 2022, 2021 and 2020, respectively. ​ Net interest income totaled $266.8 million, $187.1 million and $192.9 million during the years ended 2022, 2021 and 2020, respectively.
(3) Loan fees included in interest income totaled $13,905, $9,453 and $18,207 during 2023, 2022 and 2021, respectively. ​ Net interest income totaled $362.0 million, $266.8 million and $187.1 million during the years ended December 31, 2023, 2022 and 2021, respectively.
The cost of funds increased three basis points to 0.26% during the year ended December 31, 2022, compared to the year ended December 31, 2021. ​ Average loans comprised $5.4 billion, or 73.4%, of total average interest earning assets during 2022, compared to $4.3 billion, or 66.4%, during 2021.
The cost of funds increased 132 basis points to 1.58% during the year ended December 31, 2023, compared to the year ended December 31, 2022. ​ Average loans comprised $7.4 billion, or 82.5%, of total average interest earning assets during 2023, compared to $5.4 billion, or 73.4%, during 2022.
Loans pledged were $2.0 billion at December 31, 2022 and $1.3 billion at December 31, 2021.
Loans pledged were $2.6 billion at December 31, 2023 and $2.0 billion at December 31, 2022.
We regularly review: (i) our loan mix and the yield on loans; (ii) the investment portfolio and the related yields; (iii) our deposit mix and the cost of deposits; and (iv) net interest income simulations for various forecast periods. ​ The effects of trade-date accounting of investment securities for which the cash had not settled are not considered interest earning assets and are excluded from this presentation for time frames prior to their cash settlement, as are the market value adjustments on the investment securities available-for-sale and loans. ​ 61 Table of Contents The table below presents the components of net interest income on a FTE basis for the years ended December 31, 2022, 2021 and 2020. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended ​ For the year ended ​ For the year ended ​ ​ December 31, 2022 ​ December 31, 2021 ​ December 31, 2020 ​ ​ Average balance ​ Interest ​ Average rate ​ Average balance ​ Interest ​ Average rate ​ Average balance ​ Interest ​ Average rate Interest earning assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Originated loans FTE (1)(2)(3) ​ $ 4,767,713 ​ $ 218,561 ​ 4.58% ​ $ 4,129,684 ​ $ 164,527 ​ 3.98% ​ $ 4,237,091 ​ $ 171,592 ​ 4.05% Acquired loans ​ ​ 594,222 ​ ​ 40,060 ​ 6.74% ​ ​ 202,174 ​ ​ 17,340 ​ 8.58% ​ ​ 299,901 ​ ​ 27,909 ​ 9.31% Loans held for sale ​ ​ 58,788 ​ ​ 2,563 ​ 4.36% ​ ​ 178,373 ​ ​ 5,110 ​ 2.86% ​ ​ 185,182 ​ ​ 5,628 ​ 3.04% Investment securities available-for-sale ​ 839,872 ​ 15,091 ​ 1.80% ​ 667,859 ​ ​ 10,014 ​ 1.50% ​ 591,870 ​ 11,406 ​ 1.93% Investment securities held-to-maturity ​ 604,423 ​ 9,109 ​ 1.51% ​ 576,343 ​ ​ 7,311 ​ 1.27% ​ 248,006 ​ 5,099 ​ 2.06% Other securities ​ 17,598 ​ 1,034 ​ 5.88% ​ 15,032 ​ ​ 838 ​ 5.57% ​ 26,903 ​ 1,157 ​ 4.30% Interest earning deposits ​ 426,137 ​ 3,782 ​ 0.89% ​ 751,835 ​ 986 ​ 0.13% ​ 206,911 ​ 314 ​ 0.15% Total interest earning assets FTE (2) ​ $ 7,308,753 ​ $ 290,200 ​ 3.97% ​ $ 6,521,300 ​ $ 206,126 ​ 3.16% ​ $ 5,795,864 ​ $ 223,105 ​ 3.85% Cash and due from banks ​ 90,657 ​ ​ ​ ​ ​ ​ 78,979 ​ ​ ​ ​ ​ ​ 74,461 ​ ​ ​ ​ ​ Other assets ​ 490,206 ​ ​ ​ ​ ​ ​ 472,775 ​ ​ ​ ​ ​ ​ 511,721 ​ ​ ​ ​ ​ Allowance for credit losses ​ (59,824) ​ ​ ​ ​ ​ ​ (52,943) ​ ​ ​ ​ ​ ​ (55,778) ​ ​ ​ ​ ​ Total assets ​ $ 7,829,792 ​ ​ ​ ​ ​ ​ $ 7,020,111 ​ ​ ​ ​ ​ ​ $ 6,326,268 ​ ​ ​ ​ ​ Interest bearing liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest bearing demand, savings and money market deposits ​ $ 3,235,834 ​ $ 9,347 ​ 0.29% ​ $ 2,772,091 ​ $ 6,240 ​ 0.23% ​ $ 2,730,857 ​ $ 8,605 ​ 0.32% Time deposits ​ 826,293 ​ 5,249 ​ 0.64% ​ 914,837 ​ ​ 7,362 ​ 0.80% ​ 1,038,107 ​ 15,024 ​ 1.45% Securities sold under agreements to repurchase ​ 21,298 ​ 43 ​ 0.20% ​ 20,338 ​ ​ 23 ​ 0.11% ​ 28,585 ​ 132 ​ 0.46% Long-term debt, net ​ 43,048 ​ 1,519 ​ 3.53% ​ ​ 6,200 ​ ​ 196 ​ 3.16% ​ ​ — ​ ​ — ​ 0.00% Federal Home Loan Bank advances ​ 40,870 ​ 1,695 ​ 4.15% ​ — ​ ​ — ​ 0.00% ​ 95,418 ​ 1,295 ​ 1.36% Total interest bearing liabilities ​ $ 4,167,343 ​ $ 17,853 ​ 0.43% ​ $ 3,713,466 ​ $ 13,821 ​ 0.37% ​ $ 3,892,967 ​ $ 25,056 ​ 0.64% Demand deposits ​ 2,652,561 ​ ​ ​ ​ ​ ​ 2,355,171 ​ ​ ​ ​ ​ ​ 1,497,940 ​ ​ ​ ​ ​ Other liabilities ​ 105,507 ​ ​ ​ ​ ​ ​ 104,935 ​ ​ ​ ​ ​ ​ 147,075 ​ ​ ​ ​ ​ Total liabilities ​ 6,925,411 ​ ​ ​ ​ ​ ​ 6,173,572 ​ ​ ​ ​ ​ ​ 5,537,982 ​ ​ ​ ​ ​ Shareholders' equity ​ 904,381 ​ ​ ​ ​ ​ ​ 846,539 ​ ​ ​ ​ ​ ​ 788,286 ​ ​ ​ ​ ​ Total liabilities and shareholders' equity ​ $ 7,829,792 ​ ​ ​ ​ ​ ​ $ 7,020,111 ​ ​ ​ ​ ​ ​ $ 6,326,268 ​ ​ ​ ​ ​ Net interest income FTE (2) ​ ​ ​ ​ $ 272,347 ​ ​ ​ ​ ​ ​ $ 192,305 ​ ​ ​ ​ ​ ​ $ 198,049 ​ ​ Interest rate spread FTE (2) ​ ​ ​ ​ ​ ​ ​ 3.54% ​ ​ ​ ​ ​ ​ ​ 2.79% ​ ​ ​ ​ ​ ​ ​ 3.21% Net interest earning assets ​ $ 3,141,410 ​ ​ ​ ​ ​ ​ $ 2,807,834 ​ ​ ​ ​ ​ ​ $ 1,902,897 ​ ​ ​ ​ ​ Net interest margin FTE (2) ​ ​ ​ ​ ​ ​ ​ 3.73% ​ ​ ​ ​ ​ ​ ​ 2.95% ​ ​ ​ ​ ​ ​ ​ 3.42% Average transaction deposits ​ $ 5,888,395 ​ ​ ​ ​ ​ ​ $ 5,127,262 ​ ​ ​ ​ ​ ​ $ 4,228,797 ​ ​ ​ ​ ​ Average total deposits ​ ​ 6,714,688 ​ ​ ​ ​ ​ ​ ​ 6,042,099 ​ ​ ​ ​ ​ ​ ​ 5,266,904 ​ ​ ​ ​ ​ Ratio of average interest earning assets to average interest bearing liabilities ​ ​ 175.38% ​ ​ ​ ​ ​ ​ ​ 175.61% ​ ​ ​ ​ ​ ​ ​ 148.88% ​ ​ ​ ​ ​ ​ ​ ​ (1) Originated loans are net of deferred loan fees, less costs, which are included in interest income over the life of the loan.
We regularly review: (i) our loan mix and the yield on loans; (ii) the investment portfolio and the related yields; (iii) our deposit mix and the cost of deposits; and (iv) net interest income simulations for various forecast periods. ​ The effects of trade-date accounting of investment securities for which the cash had not settled are not considered interest earning assets and are excluded from this presentation for time frames prior to their cash settlement, as are the market value adjustments on the investment securities available-for-sale and loans. ​ 64 Table of Contents The table below presents the components of net interest income on a FTE basis for the years ended December 31, 2023, 2022 and 2021. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended ​ For the year ended ​ For the year ended ​ ​ December 31, 2023 ​ December 31, 2022 ​ December 31, 2021 ​ ​ Average balance ​ Interest ​ Average rate ​ Average balance ​ Interest ​ Average rate ​ Average balance ​ Interest ​ Average rate Interest earning assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Originated loans FTE (1)(2)(3) ​ $ 5,739,310 ​ $ 361,032 ​ 6.29% ​ $ 4,767,713 ​ $ 218,561 ​ 4.58% ​ $ 4,129,684 ​ $ 164,527 ​ 3.98% Acquired loans ​ ​ 1,700,419 ​ ​ 104,933 ​ 6.17% ​ ​ 594,222 ​ ​ 40,060 ​ 6.74% ​ ​ 202,174 ​ ​ 17,340 ​ 8.58% Loans held for sale ​ ​ 21,756 ​ ​ 1,510 ​ 6.94% ​ ​ 58,788 ​ ​ 2,563 ​ 4.36% ​ ​ 178,373 ​ ​ 5,110 ​ 2.86% Investment securities available-for-sale ​ 774,337 ​ 15,370 ​ 1.98% ​ 839,872 ​ ​ 15,091 ​ 1.80% ​ 667,859 ​ 10,014 ​ 1.50% Investment securities held-to-maturity ​ 620,595 ​ 10,960 ​ 1.77% ​ 604,423 ​ ​ 9,109 ​ 1.51% ​ 576,343 ​ 7,311 ​ 1.27% Other securities ​ 44,936 ​ 3,254 ​ 7.24% ​ 17,598 ​ ​ 1,034 ​ 5.88% ​ 15,032 ​ 838 ​ 5.57% Interest earning deposits ​ 121,758 ​ 4,455 ​ 3.66% ​ 426,137 ​ 3,782 ​ 0.89% ​ 751,835 ​ 986 ​ 0.13% Total interest earning assets FTE (2) ​ $ 9,023,111 ​ $ 501,514 ​ 5.56% ​ $ 7,308,753 ​ $ 290,200 ​ 3.97% ​ $ 6,521,300 ​ $ 206,126 ​ 3.16% Cash and due from banks ​ 109,496 ​ ​ ​ ​ ​ ​ 90,657 ​ ​ ​ ​ ​ ​ 78,979 ​ ​ ​ ​ ​ Other assets ​ 725,797 ​ ​ ​ ​ ​ ​ 490,206 ​ ​ ​ ​ ​ ​ 472,775 ​ ​ ​ ​ ​ Allowance for credit losses ​ (91,956) ​ ​ ​ ​ ​ ​ (59,824) ​ ​ ​ ​ ​ ​ (52,943) ​ ​ ​ ​ ​ Total assets ​ $ 9,766,448 ​ ​ ​ ​ ​ ​ $ 7,829,792 ​ ​ ​ ​ ​ ​ $ 7,020,111 ​ ​ ​ ​ ​ Interest bearing liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest bearing demand, savings and money market deposits ​ $ 4,337,231 ​ $ 87,957 ​ 2.03% ​ $ 3,235,834 ​ $ 9,347 ​ 0.29% ​ $ 2,772,091 ​ $ 6,240 ​ 0.23% Time deposits ​ 970,983 ​ 21,421 ​ 2.21% ​ 826,293 ​ ​ 5,249 ​ 0.64% ​ 914,837 ​ 7,362 ​ 0.80% Securities sold under agreements to repurchase ​ 19,346 ​ 22 ​ 0.11% ​ 21,298 ​ ​ 43 ​ 0.20% ​ 20,338 ​ 23 ​ 0.11% Long-term debt, net ​ 54,036 ​ 2,073 ​ 3.84% ​ ​ 43,048 ​ ​ 1,519 ​ 3.53% ​ ​ 6,200 ​ ​ 196 ​ 3.16% Federal Home Loan Bank advances ​ 423,783 ​ 21,991 ​ 5.19% ​ 40,870 ​ ​ 1,695 ​ 4.15% ​ — ​ — ​ 0.00% Total interest bearing liabilities ​ $ 5,805,379 ​ $ 133,464 ​ 2.30% ​ $ 4,167,343 ​ $ 17,853 ​ 0.43% ​ $ 3,713,466 ​ $ 13,821 ​ 0.37% Demand deposits ​ 2,660,525 ​ ​ ​ ​ ​ ​ 2,652,561 ​ ​ ​ ​ ​ ​ 2,355,171 ​ ​ ​ ​ ​ Other liabilities ​ 144,767 ​ ​ ​ ​ ​ ​ 105,507 ​ ​ ​ ​ ​ ​ 104,935 ​ ​ ​ ​ ​ Total liabilities ​ 8,610,671 ​ ​ ​ ​ ​ ​ 6,925,411 ​ ​ ​ ​ ​ ​ 6,173,572 ​ ​ ​ ​ ​ Shareholders' equity ​ 1,155,777 ​ ​ ​ ​ ​ ​ 904,381 ​ ​ ​ ​ ​ ​ 846,539 ​ ​ ​ ​ ​ Total liabilities and shareholders' equity ​ $ 9,766,448 ​ ​ ​ ​ ​ ​ $ 7,829,792 ​ ​ ​ ​ ​ ​ $ 7,020,111 ​ ​ ​ ​ ​ Net interest income FTE (2) ​ ​ ​ ​ $ 368,050 ​ ​ ​ ​ ​ ​ $ 272,347 ​ ​ ​ ​ ​ ​ $ 192,305 ​ ​ Interest rate spread FTE (2) ​ ​ ​ ​ ​ ​ ​ 3.26% ​ ​ ​ ​ ​ ​ ​ 3.54% ​ ​ ​ ​ ​ ​ ​ 2.79% Net interest earning assets ​ $ 3,217,732 ​ ​ ​ ​ ​ ​ $ 3,141,410 ​ ​ ​ ​ ​ ​ $ 2,807,834 ​ ​ ​ ​ ​ Net interest margin FTE (2) ​ ​ ​ ​ ​ ​ ​ 4.08% ​ ​ ​ ​ ​ ​ ​ 3.73% ​ ​ ​ ​ ​ ​ ​ 2.95% Average transaction deposits ​ $ 6,997,756 ​ ​ ​ ​ ​ ​ $ 5,888,395 ​ ​ ​ ​ ​ ​ $ 5,127,262 ​ ​ ​ ​ ​ Average total deposits ​ ​ 7,968,739 ​ ​ ​ ​ ​ ​ ​ 6,714,688 ​ ​ ​ ​ ​ ​ ​ 6,042,099 ​ ​ ​ ​ ​ Ratio of average interest earning assets to average interest bearing liabilities ​ ​ 155.43% ​ ​ ​ ​ ​ ​ ​ 175.38% ​ ​ ​ ​ ​ ​ ​ 175.61% ​ ​ ​ ​ ​ ​ ​ ​ (1) Originated loans are net of deferred loan fees, less costs, which are included in interest income over the life of the loan.
Government agencies or sponsored enterprises ​ 262,667 ​ 213,479 ​ 40.3% ​ 1.60% ​ 296,096 ​ 289,646 ​ 48.6% ​ 1.25% Total investment securities held-to-maturity ​ $ 651,527 ​ $ 559,924 ​ 100.0% ​ 2.07% ​ $ 609,012 ​ $ 599,260 ​ 100.0% ​ 1.41% ​ The residential mortgage pass-through and other residential MBS held-to-maturity investment portfolios are comprised of fixed rate FHLMC, FNMA and GNMA securities. ​ The fair value of the held-to-maturity investment portfolio included $0.2 million of unrealized gains and $91.8 million of unrealized losses at December 31, 2022.
Government agencies or sponsored enterprises ​ 236,377 ​ 190,983 ​ 40.4% ​ 1.60% ​ 262,667 ​ 213,479 ​ 40.3% ​ 1.60% Total investment securities held-to-maturity ​ $ 585,052 ​ $ 504,328 ​ 100.0% ​ 2.04% ​ $ 651,527 ​ $ 559,924 ​ 100.0% ​ 2.07% ​ The residential mortgage pass-through and other residential MBS held-to-maturity investment portfolios are comprised of fixed rate FHLMC, FNMA and GNMA securities. ​ The fair value of the held-to-maturity investment portfolio included $81.0 million of unrealized losses and $0.2 million of unrealized gains at December 31, 2023.
Loans that are 90 days or more past due are put on non-accrual status unless the loan is well secured and in the process of collection. ​ The following table sets forth the non-performing assets and past due loans as of the dates presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 December 31, 2021 December 31, 2020 December 31, 2019 December 31, 2018 Non-accrual loans: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-accrual loans, excluding restructured loans $ 14,034 ​ $ 8,466 ​ $ 12,190 ​ $ 16,894 ​ $ 21,017 Restructured loans on non-accrual 2,478 ​ 2,366 ​ ​ 8,197 ​ 4,854 ​ 3,439 Non-performing loans 16,512 ​ 10,832 ​ 20,387 ​ 21,748 ​ 24,456 OREO 3,731 ​ 7,005 ​ 4,730 ​ 7,300 ​ 10,596 Other repossessed assets — ​ — ​ 17 ​ — ​ — Total non-performing assets $ 20,243 ​ $ 17,837 ​ $ 25,134 ​ $ 29,048 ​ $ 35,052 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans 30-89 days past due and still accruing interest $ 2,986 ​ $ 1,687 ​ $ 968 ​ $ 6,349 ​ $ 5,066 Loans 90 days or more past due and still accruing interest 95 ​ 420 ​ 162 ​ 1,662 ​ 1,047 Non-accrual loans ​ 16,512 ​ ​ 10,832 ​ ​ 20,387 ​ ​ 21,748 ​ ​ 24,456 Total past due and non-accrual loans $ 19,593 ​ $ 12,939 ​ $ 21,517 ​ $ 29,759 ​ $ 30,569 Accruing restructured loans $ 4,654 ​ $ 7,186 ​ $ 13,945 ​ $ 6,885 ​ $ 5,944 Allowance for credit losses ​ 89,553 ​ ​ 49,694 ​ ​ 59,777 ​ ​ 39,064 ​ ​ 35,692 Non-performing loans to total loans 0.23% ​ 0.24% ​ 0.47% ​ 0.49% ​ 0.60% Total 90 days past due and still accruing interest and non-accrual loans to total loans 0.23% ​ 0.25% ​ ​ 0.47% ​ ​ 0.53% ​ ​ 0.62% Total non-performing assets to total loans and OREO 0.28% ​ 0.39% ​ 0.58% ​ 0.66% ​ 0.85% ACL to non-performing loans 542.35% ​ 458.77% ​ 293.21% ​ 179.62% ​ 145.94% ​ During 2022, total non-performing loans increased $5.7 million, from December 31, 2021, primarily driven by the inclusion of the RCB and BOJH portfolios.
Loans that are 90 days or more past due are put on non-accrual status unless the loan is well secured and in the process of collection. ​ The following table sets forth the non-performing assets and past due loans as of the dates presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2023 December 31, 2022 December 31, 2021 December 31, 2020 December 31, 2019 Non-accrual loans: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-accrual loans, excluding modified loans $ 14,756 ​ $ 14,034 ​ $ 8,466 ​ $ 12,190 ​ $ 16,894 Modified loans on non-accrual (1) 13,472 ​ 2,478 ​ ​ 2,366 ​ 8,197 ​ 4,854 Non-performing loans 28,228 ​ 16,512 ​ 10,832 ​ 20,387 ​ 21,748 OREO 4,088 ​ 3,731 ​ 7,005 ​ 4,730 ​ 7,300 Other repossessed assets — ​ — ​ — ​ 17 ​ — Total non-performing assets $ 32,316 ​ $ 20,243 ​ $ 17,837 ​ $ 25,134 ​ $ 29,048 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans 30-89 days past due and still accruing interest $ 12,232 ​ $ 2,986 ​ $ 1,687 ​ $ 968 ​ $ 6,349 Loans 90 days or more past due and still accruing interest 591 ​ 95 ​ 420 ​ 162 ​ 1,662 Non-accrual loans ​ 28,228 ​ ​ 16,512 ​ ​ 10,832 ​ ​ 20,387 ​ ​ 21,748 Total past due and non-accrual loans $ 41,051 ​ $ 19,593 ​ $ 12,939 ​ $ 21,517 ​ $ 29,759 Accruing modified loans (1) $ 15,148 ​ $ 4,654 ​ $ 7,186 ​ $ 13,945 ​ $ 6,885 Allowance for credit losses ​ 97,947 ​ ​ 89,553 ​ ​ 49,694 ​ ​ 59,777 ​ ​ 39,064 Non-performing loans to total loans 0.37% ​ 0.23% ​ 0.24% ​ 0.47% ​ 0.49% Total 90 days past due and still accruing interest and non-accrual loans to total loans 0.37% ​ 0.23% ​ ​ 0.25% ​ ​ 0.47% ​ ​ 0.53% Total non-performing assets to total loans and OREO 0.42% ​ 0.28% ​ 0.39% ​ 0.58% ​ 0.66% ACL to non-performing loans 346.99% ​ 542.35% ​ 458.77% ​ 293.21% ​ 179.62% ​ ​ ​ (1) ​ Reflects loan modifications as defined under ASU 2022-02, Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures adopted in the first quarter of 2023.
Government agencies or sponsored enterprises ​ ​ 263,939 ​ ​ 226,131 ​ 32.0% ​ 1.72% ​ ​ 231,523 ​ ​ 227,696 ​ 32.9% ​ 1.38% Other residential MBS issued or guaranteed by U.S.
Government agencies or sponsored enterprises ​ ​ 233,264 ​ ​ 201,809 ​ 32.1% ​ 1.71% ​ ​ 263,939 ​ ​ 226,131 ​ 32.0% ​ 1.72% Other residential MBS issued or guaranteed by U.S.
Government agencies or sponsored enterprises ​ 478,866 ​ 405,926 ​ 57.5% ​ 1.69% ​ 467,490 ​ 461,334 ​ 66.7% ​ 1.47% Municipal securities ​ ​ 155 ​ ​ 153 ​ 0.0% ​ 3.17% ​ ​ 230 ​ ​ 237 ​ 0.0% ​ 3.17% Corporate debt ​ ​ 2,000 ​ ​ 1,920 ​ 0.3% ​ 5.87% ​ ​ 2,000 ​ ​ 2,111 ​ 0.3% ​ 5.80% Other securities ​ 771 ​ 771 ​ 0.1% ​ 0.00% ​ 469 ​ 469 ​ 0.1% ​ 0.00% Total investment securities available-for-sale ​ $ 819,762 ​ $ 706,289 ​ 100.0% ​ 1.79% ​ $ 701,712 ​ $ 691,847 ​ 100.0% ​ 1.46% ​ As of December 31, 2022 and 2021, nearly all the available-for-sale investment portfolio was primarily backed by mortgages.
Government agencies or sponsored enterprises ​ 417,155 ​ 351,242 ​ 55.9% ​ 1.69% ​ 478,866 ​ 405,926 ​ 57.5% ​ 1.69% Municipal securities ​ ​ 80 ​ ​ 79 ​ 0.0% ​ 3.17% ​ ​ 155 ​ ​ 153 ​ 0.0% ​ 3.17% Corporate debt ​ ​ 2,000 ​ ​ 1,843 ​ 0.3% ​ 5.87% ​ ​ 2,000 ​ ​ 1,920 ​ 0.3% ​ 5.87% Other securities ​ 812 ​ 812 ​ 0.1% ​ 0.00% ​ 771 ​ 771 ​ 0.1% ​ 0.00% Total investment securities available-for-sale ​ $ 727,819 ​ $ 628,829 ​ 100.0% ​ 1.80% ​ $ 819,762 ​ $ 706,289 ​ 100.0% ​ 1.79% ​ As of December 31, 2023 and 2022, nearly all the available-for-sale investment portfolio was backed by mortgages.
We believe that it is more likely than not that the results of future operations will generate sufficient taxable income to realize the deferred tax assets. ​ Income tax expense totaled $14.9 million during 2022, compared to $21.4 million during 2021. The decrease in income tax expense was driven by the lower taxable income due to 2022’s acquisition-related expenses.
We believe that it is more likely than not that the results of future operations will generate sufficient taxable income to realize the deferred tax assets. ​ Income tax expense totaled $33.6 million during 2023, compared to $14.9 million during 2022.
At December 31, 2022, our consolidated tier 1 leverage ratio was 9.29%, and our common equity tier 1 and consolidated tier 1 risk based capital ratios were 10.54%. ● At December 31, 2022, common book value per share was $29.04.
At December 31, 2023, our consolidated tier 1 leverage ratio was 9.74%, and our common equity tier 1 and consolidated tier 1 risk based capital ratios were 11.89%. ● Common book value per share increased $3.06 to $32.10 at December 31, 2023.
Total non-performing assets to total loans and OREO decreased 11 basis points to 0.28% at December 31, 2022. ​ ​ Loans 30-89 days past due and still accruing interest increased $1.3 million from December 31, 2021 to December 31, 2022, and loans 90 days or more past due and still accruing interest decreased $0.3 million from December 31, 2021 to December 31, 2022. ​ 55 Table of Contents Allowance for credit losses ​ The ACL represents the amount that we believe is necessary to absorb estimated lifetime credit losses inherent in the loan portfolio at the balance sheet date and involves a high degree of judgment and complexity.
Loans 90 days or more past due and still accruing interest were 0.01% and zero percent of total loans for December 31, 2023 and 2022, respectively. ​ Allowance for credit losses ​ The ACL represents the amount that we believe is necessary to absorb estimated lifetime credit losses inherent in the loan portfolio at the balance sheet date and involves a high degree of judgment and complexity.
The Company transferred the remaining $75.3 million of available-for-sale securities acquired through the BOJH acquisition to held-to-maturity. ​ Held-to-maturity investment securities are summarized as follows as of the dates indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 ​ December 31, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ Amortized Fair Percent of average Amortized Fair Percent of average ​ ​ cost ​ value ​ portfolio ​ yield ​ cost ​ value ​ portfolio ​ yield Treasury securities ​ $ 49,045 ​ $ 47,629 ​ 7.5% ​ 3.14% ​ $ — ​ $ — ​ — ​ — Mortgage-backed securities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential mortgage pass-through securities issued or guaranteed by U.S.
Maturities and paydowns of held-to-maturity securities totaled $69.6 million and $133.4 million during 2023 and 2022, respectively. ​ Held-to-maturity investment securities are summarized as follows as of the dates indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2023 ​ December 31, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ Amortized Fair Percent of average Amortized Fair Percent of average ​ ​ cost ​ value ​ portfolio ​ yield ​ cost ​ value ​ portfolio ​ yield Treasury securities ​ $ 49,338 ​ $ 48,334 ​ 8.4% ​ 3.14% ​ $ 49,045 ​ $ 47,629 ​ 7.5% ​ 3.14% Mortgage-backed securities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential mortgage pass-through securities issued or guaranteed by U.S.
Government agencies or sponsored enterprises ​ ​ 339,815 ​ ​ 298,816 ​ 52.2% ​ 2.29% ​ ​ 312,916 ​ ​ 309,614 ​ 51.4% ​ 1.56% Other residential MBS issued or guaranteed by U.S.
Government agencies or sponsored enterprises ​ ​ 299,337 ​ ​ 265,011 ​ 51.2% ​ 2.20% ​ ​ 339,815 ​ ​ 298,816 ​ 52.2% ​ 2.29% Other residential MBS issued or guaranteed by U.S.
During the year ended December 31, 2022, the Company recorded an increase in the allowance for credit losses of $39.9 million, which included a $21.2 million provision expense as a Day 1 allowance reserve for the RCB and BOJH portfolios and a $6.2 million credit allowance for Day 1 PCD loans.
Included in the provision for credit losses was $1.2 million of provision release for unfunded loan commitments. During the year ended December 31, 2022, the Company recorded a provision expense for credit losses of $36.7 million, which included $21.7 million of Day 1 reserve funding for the RCB and BOJH loan portfolios.
Deposits not only provide a lower-cost funding source for our loans, but also provide a foundation for the client relationships that are critical to future loan growth.
Deposits not only provide a lower-cost funding source for our loans, but also provide a foundation for the client relationships that are critical to future loan growth. We maintain a granular and well diversified deposit base with no exposure to venture capital or crypto deposits.
On February 24, 2021, the Company’s Board of Directors authorized a program to repurchase up to $75.0 million of the Company’s stock.
On May 19, 2023, the Company’s Board of Directors authorized a new program to repurchase up to $50.0 million of the Company’s stock.
(3) ​ Loan fees included in interest income totaled $9,453, $18,207 and $15,713 for the years ended December 31, 2022, 2021 and 2020, respectively. ​ Below is a breakdown of average deposits and the average rates paid during the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the three months ended ​ For the years ended ​ December 31, 2022 ​ December 31, 2021 ​ December 31, 2022 ​ December 31, 2021 ​ ​ ​ ​ Average ​ ​ ​ ​ Average ​ ​ ​ ​ Average ​ ​ ​ ​ Average ​ Average ​ rate ​ Average ​ rate ​ Average ​ rate ​ Average ​ rate ​ balance paid balance paid balance paid balance paid Non-interest bearing demand $ 3,142,296 ​ 0.00% ​ $ 2,459,063 0.00% ​ $ 2,652,561 0.00% ​ $ 2,355,171 ​ 0.00% Interest bearing demand 939,973 ​ 0.53% ​ 547,740 ​ 0.17% ​ 678,151 ​ 0.32% ​ 548,612 ​ 0.20% Money market accounts 2,115,876 ​ 0.53% ​ 1,549,844 ​ 0.25% ​ 1,744,797 ​ 0.33% ​ 1,506,274 ​ 0.27% Savings accounts 890,724 ​ 0.21% ​ 749,978 ​ 0.16% ​ 812,886 ​ 0.17% ​ 717,205 ​ 0.16% Time deposits 892,122 ​ 0.91% ​ 851,779 ​ 0.61% ​ 826,293 ​ 0.64% ​ 914,837 ​ 0.80% Total average deposits $ 7,980,991 ​ 0.33% ​ $ 6,158,404 ​ 0.18% ​ $ 6,714,688 ​ 0.22% ​ $ 6,042,099 ​ 0.23% ​ ​ Provision for credit losses ​ The provision for loan losses represents the amount of expense that is necessary to bring the ACL to a level that we deem appropriate to absorb estimated lifetime losses inherent in the loan portfolio as of the balance sheet date.
(3) ​ Loan fees included in interest income totaled $13,905, $9,453 and $18,207 for the years ended December 31, 2023, 2022 and 2021, respectively. ​ Below is a breakdown of average deposits and the average rates paid during the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the three months ended ​ For the years ended ​ December 31, 2023 ​ December 31, 2022 ​ December 31, 2023 ​ December 31, 2022 ​ ​ ​ ​ Average ​ ​ ​ ​ Average ​ ​ ​ ​ Average ​ ​ ​ ​ Average ​ Average ​ rate ​ Average ​ rate ​ Average ​ rate ​ Average ​ rate ​ balance paid balance paid balance paid balance paid Non-interest bearing demand $ 2,390,457 ​ 0.00% ​ $ 3,142,296 0.00% ​ $ 2,660,525 0.00% ​ $ 2,652,561 ​ 0.00% Interest bearing demand 1,392,118 ​ 2.85% ​ 939,973 ​ 0.53% ​ 1,238,101 ​ 2.18% ​ 678,151 ​ 0.32% Money market accounts 2,693,925 ​ 3.19% ​ 2,115,876 ​ 0.53% ​ 2,359,247 ​ 2.42% ​ 1,744,797 ​ 0.33% Savings accounts 665,520 ​ 0.74% ​ 890,724 ​ 0.21% ​ 739,883 ​ 0.53% ​ 812,886 ​ 0.17% Time deposits 986,513 ​ 2.76% ​ 892,122 ​ 0.91% ​ 970,983 ​ 2.21% ​ 826,293 ​ 0.64% Total average deposits $ 8,128,533 ​ 1.94% ​ $ 7,980,991 ​ 0.33% ​ $ 7,968,739 ​ 1.37% ​ $ 6,714,688 ​ 0.22% ​ ​ Provision for credit losses ​ The provision for credit losses represents the amount of expense that is necessary to bring the ACL to a level that we deem appropriate to absorb estimated lifetime losses inherent in the loan portfolio and estimated losses inherent in unfunded loans as of the balance sheet date.
Any expenses related to the resolution of problem assets are also included in non-interest expense. ​ Overview of results of operations ​ Net income totaled $71.3 million, or $2.18 per diluted share, during 2022, compared to net income of $93.6 million, or $3.01 per diluted share, during 2021.
Any expenses related to the resolution of problem assets are also included in non-interest expense. ​ Overview of results of operations ​ During the year ended December 31, 2023, net income increased $70.8 million, or 99.3%, to a record $142.0 million, or $3.72 per diluted share, compared to net income of $71.3 million, or $2.18 per diluted share in the prior year.
The increase was driven by interest bearing demand, savings and money market deposits totaling $463.7 million, FHLB advances totaling $40.9 million, long-term debt totaling $36.8 million and securities sold under agreements to repurchase totaling $1.0 million.
The increase was driven by higher interest bearing demand, savings and money market deposits totaling $1.1 billion, FHLB advances totaling $382.9 million, time deposits totaling $144.7 million and long-term debt totaling $11.0 million.
Included within those contractual obligations were time deposits totaling $873.4 million, with $469.8 million of that estimated to be paid within one year. ​ 67 Table of Contents Capital ​ Under the Basel III requirements, at December 31, 2022, the Company and the Banks met all capital adequacy requirements, and the Banks had regulatory capital ratios in excess of the levels established for well-capitalized institutions.
Included within those contractual obligations were time deposits totaling $982.0 million, with $689.0 million of that estimated to be paid within one year. ​ For additional information regarding our operating, investing and financing cash flows, see our consolidated statements of cash flows in the accompanying consolidated financial statements. ​ Capital ​ Under the Basel III requirements, at December 31, 2023, the Company, NBH Bank and Bank of Jackson Hole Trust met all capital adequacy requirements, and the Banks had regulatory capital ratios in excess of the levels established for well-capitalized institutions.
Doubtful loans are deemed impaired and put on non-accrual status. ​ In the event of borrower default, we may seek recovery in compliance with state lending laws, the respective loan agreements, and credit monitoring and remediation procedures that may include modifying or restructuring a loan from its 54 Table of Contents original terms, for economic or legal reasons, to provide a concession to the borrower from their original terms due to borrower financial difficulties in order to facilitate repayment.
In the event of borrower default, the Company seeks recovery in compliance with lending laws, the respective loan agreements, and credit monitoring and remediation procedures that may include modifying a loan to provide a concession by the Company to the borrower from their original terms due to borrower financial difficulties in order to facilitate repayment.
The Company does not expect the adoption of that pronouncement to have a material impact on its financial statements. ​ Financial Condition ​ Total assets were $9.6 billion at December 31, 2022, compared to $7.2 billion at December 31, 2021, an increase of $2.4 billion, or 32.7% primarily due to the acquisitions of RCB and BOJH.
The Company is evaluating the impact from ASU 2023-09, and does not expect the adoption of this pronouncement to have a material impact on its financial statements apart from the inclusion of additional disclosures. ​ Financial Condition ​ Total assets were $9.9 billion at December 31, 2023, compared to $9.6 billion at December 31, 2022, an increase of $0.3 billion, or 3.9%.
Additionally, as part of the acquisition of BOJH on October 1, 2022, the Company assumed three subordinated note purchase agreements to issue and sell fixed-to-floating rate notes. ​ Through our relationship with the FHLB, the Company may pledge qualifying loans and investment securities allowing us to obtain additional liquidity through FHLB advances and lines of credit.
Additionally, as part of the acquisition of BOJH on October 1, 2022, the Company assumed three subordinated note purchase agreements to issue and sell fixed-to-floating rate notes.
Additionally, the cost of deposits decreased one basis point to 0.22% during 2022, compared to 2021. ​ 63 Table of Contents The following table summarizes the changes in net interest income on an FTE basis by major category of interest earning assets and interest bearing liabilities, identifying changes related to volume and changes related to rates for 2022, 2021 and 2020: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ The year ended December 31, 2022 ​ The year ended December 31, 2021 ​ ​ compared to ​ compared to ​ ​ the year ended December 31, 2021 ​ the year ended December 31, 2020 ​ ​ Increase (decrease) due to ​ Increase (decrease) due to ​ Volume Rate Net Volume Rate Net Interest income: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Originated loans FTE (1)(2)(3) ​ $ 29,248 ​ $ 24,786 ​ $ 54,034 ​ $ (4,279) ​ $ (2,786) ​ $ (7,065) Acquired loans ​ ​ 26,430 ​ ​ (3,710) ​ ​ 22,720 ​ ​ (8,382) ​ ​ (2,187) ​ ​ (10,569) Loans held for sale ​ (5,214) ​ ​ 2,667 ​ ​ (2,547) ​ ​ (195) ​ ​ (323) ​ ​ (518) Investment securities available-for-sale ​ 3,091 ​ 1,986 ​ 5,077 ​ 1,139 ​ (2,531) ​ (1,392) Investment securities held-to-maturity ​ 423 ​ 1,375 ​ 1,798 ​ 4,165 ​ (1,953) ​ 2,212 Other securities ​ 151 ​ 45 ​ 196 ​ (662) ​ 343 ​ (319) Interest earning deposits ​ (2,891) ​ 5,687 ​ 2,796 ​ 715 ​ (43) ​ 672 Total interest income ​ $ 51,238 ​ $ 32,836 ​ $ 84,074 ​ $ (7,499) ​ $ (9,480) ​ $ (16,979) Interest expense: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest bearing demand, savings and money market deposits ​ $ 1,340 ​ $ 1,767 ​ $ 3,107 ​ $ 93 ​ $ (2,458) ​ $ (2,365) Time deposits ​ (562) ​ (1,551) ​ (2,113) ​ (992) ​ (6,670) ​ (7,662) Securities sold under agreements to repurchase ​ 2 ​ 18 ​ 20 ​ (9) ​ (100) ​ (109) Long-term debt, net ​ ​ 1,300 ​ 23 ​ ​ 1,323 ​ ​ 196 ​ ​ — ​ ​ 196 Federal Home Loan Bank advances ​ 1,695 ​ — ​ 1,695 ​ — ​ (1,295) ​ (1,295) Total interest expense ​ 3,775 ​ 257 ​ 4,032 ​ (712) ​ (10,523) ​ (11,235) Net change in net interest income ​ $ 47,463 ​ $ 32,579 ​ $ 80,042 ​ $ (6,787) ​ $ 1,043 ​ $ (5,744) ​ ​ ​ (1) Originated loans are net of deferred loan fees, less costs, which are included in interest income over the life of the loan.
Additionally, the cost of deposits increased 115 basis points to 1.37% during 2023, compared to 2022. ​ 66 Table of Contents The following table summarizes the changes in net interest income on an FTE basis by major category of interest earning assets and interest bearing liabilities, identifying changes related to volume and changes related to rates for 2023, 2022 and 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ The year ended December 31, 2023 ​ The year ended December 31, 2022 ​ ​ compared to ​ compared to ​ ​ the year ended December 31, 2022 ​ the year ended December 31, 2021 ​ ​ Increase (decrease) due to ​ Increase (decrease) due to ​ Volume Rate Net Volume Rate Net Interest income: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Originated loans FTE (1)(2)(3) ​ $ 61,119 ​ $ 81,352 ​ $ 142,471 ​ $ 29,248 ​ $ 24,786 ​ $ 54,034 Acquired loans ​ ​ 68,264 ​ ​ (3,391) ​ ​ 64,873 ​ ​ 26,430 ​ ​ (3,710) ​ ​ 22,720 Loans held for sale ​ (2,570) ​ ​ 1,517 ​ ​ (1,053) ​ ​ (5,214) ​ ​ 2,667 ​ ​ (2,547) Investment securities available-for-sale ​ (1,301) ​ 1,580 ​ 279 ​ 3,091 ​ 1,986 ​ 5,077 Investment securities held-to-maturity ​ 286 ​ 1,565 ​ 1,851 ​ 423 ​ 1,375 ​ 1,798 Other securities ​ 1,980 ​ 240 ​ 2,220 ​ 151 ​ 45 ​ 196 Interest earning deposits ​ (11,137) ​ 11,810 ​ 673 ​ (2,891) ​ 5,687 ​ 2,796 Total interest income ​ $ 116,641 ​ $ 94,673 ​ $ 211,314 ​ $ 51,238 ​ $ 32,836 ​ $ 84,074 Interest expense: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest bearing demand, savings and money market deposits ​ $ 22,336 ​ $ 56,274 ​ $ 78,610 ​ $ 1,340 ​ $ 1,767 ​ $ 3,107 Time deposits ​ 3,192 ​ 12,980 ​ 16,172 ​ (562) ​ (1,551) ​ (2,113) Securities sold under agreements to repurchase ​ (2) ​ (19) ​ (21) ​ 2 ​ 18 ​ 20 Long-term debt, net ​ ​ 422 ​ 132 ​ ​ 554 ​ ​ 1,300 ​ ​ 23 ​ ​ 1,323 Federal Home Loan Bank advances ​ 19,870 ​ 426 ​ 20,296 ​ 1,695 ​ — ​ 1,695 Total interest expense ​ 45,818 ​ 69,793 ​ 115,611 ​ 3,775 ​ 257 ​ 4,032 Net change in net interest income ​ $ 70,823 ​ $ 24,880 ​ $ 95,703 ​ $ 47,463 ​ $ 32,579 ​ $ 80,042 ​ ​ ​ (1) Originated loans are net of deferred loan fees, less costs, which are included in interest income over the life of the loan.
During the year ended December 31, 2021, the Company recorded a provision release of $9.3 million, which included a provision release of $8.8 million for funded loans and a provision release of $0.5 million for unfunded loan commitments, driven by strong asset quality and an improved outlook in the CECL model’s underlying economic forecast. ​ Non-interest income ​ The table below details the components of non-interest income for the years presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the years ended December 31, ​ 2022 vs 2021 ​ 2021 vs 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Increase (decrease) ​ Increase (decrease) ​ 2022 2021 2020 ​ Amount ​ % Change ​ Amount ​ % Change Service charges ​ $ 16,357 ​ $ 14,894 ​ $ 14,962 ​ $ 1,463 ​ 9.8 % ​ $ (68) ​ (0.5)% Bank card fees ​ 18,299 ​ 17,693 ​ 15,446 ​ ​ 606 ​ 3.4 % ​ ​ 2,247 ​ 14.5 % Mortgage banking income ​ 23,774 ​ 63,360 ​ 102,384 ​ ​ (39,586) ​ (62.5)% ​ ​ (39,024) ​ (38.1)% Bank-owned life insurance income ​ ​ 2,272 ​ ​ 2,208 ​ ​ 2,360 ​ ​ 64 ​ 2.9 % ​ ​ (152) ​ (6.4)% Other non-interest income ​ 6,603 ​ 12,174 ​ 4,719 ​ ​ (5,571) ​ (45.8)% ​ ​ 7,455 ​ >100.0% OREO-related income ​ 7 ​ 35 ​ 387 ​ ​ (28) ​ (80.0)% ​ ​ (352) ​ (91.0)% Total non-interest income ​ $ 67,312 ​ $ 110,364 ​ $ 140,258 ​ $ (43,052) ​ (39.0)% ​ $ (29,894) ​ (21.3)% ​ Non-interest income totaled $67.3 million for the year ended December 31, 2022, compared to $110.4 million for the year ended December 31, 2021.
The remainder of the provision expense was driven by loan growth and higher reserve requirements from changes in the CECL model’s underlying macro-economic forecast. ​ Non-interest income ​ The table below details the components of non-interest income for the years presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the years ended December 31, ​ 2023 vs 2022 ​ 2022 vs 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Increase (decrease) ​ Increase (decrease) ​ ​ 2023 2022 2021 ​ Amount ​ % Change ​ Amount ​ % Change Service charges ​ $ 18,225 ​ $ 16,357 ​ $ 14,894 ​ $ 1,868 ​ 11.4% ​ $ 1,463 ​ 9.8% Bank card fees ​ 19,636 ​ 18,299 ​ 17,693 ​ ​ 1,337 ​ 7.3% ​ ​ 606 ​ 3.4% Mortgage banking income ​ 13,634 ​ 23,774 ​ 63,360 ​ ​ (10,140) ​ (42.7)% ​ ​ (39,586) ​ (62.5)% Bank-owned life insurance income ​ ​ 3,269 ​ ​ 2,272 ​ ​ 2,208 ​ ​ 997 ​ 43.9% ​ ​ 64 ​ 2.9% Other non-interest income ​ 9,153 ​ 6,610 ​ 12,209 ​ ​ 2,543 ​ 38.5% ​ ​ (5,599) ​ (45.9)% Total non-interest income ​ $ 63,917 ​ $ 67,312 ​ $ 110,364 ​ $ (3,395) ​ (5.0)% ​ $ (43,052) ​ (39.0)% ​ Non-interest income totaled $63.9 million for the year ended December 31, 2023, compared to $67.3 million for the year ended December 31, 2022.
Treasury securities have a long history of zero credit losses, an explicit guarantee by the U.S. government (although limited for FNMA and FHLMC securities) and yields that generally trade based on market views of prepayment and liquidity risk rather than credit risk. ​ 48 Table of Contents Held-to-maturity ​ ​ ​ At December 31, 2022, we held $651.5 million of held-to-maturity investment securities, compared to $609.0 million at December 31, 2021, an increase of $42.5 million, or 7.0%.
Treasury securities have a long history of zero credit losses, an explicit guarantee by the U.S. government (although limited for FNMA and FHLMC securities) and yields that generally trade based on market views of prepayment and liquidity risk rather than credit risk. ​ 52 Table of Contents Our investment security portfolio consists of high-quality securities, which are largely backed by either U.S. government agencies or U.S. government sponsored entities.

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