LAKELAND FINANCIAL CORP
For the period ended Dec 31, 2024. Filed Feb 19, 2025.
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A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Feb 19, 2025
LKFN$61.15-0.4%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-02-21.
0000721994-24-000013
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-02-19.
0000721994-25-000087
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 159 previous paragraphs and 154 current paragraphs.
75 unchanged; 62 reworded; 11 added; 21 removed; 1 previous and 6 current paragraphs rearranged.
Tables are not compared: 21 previous and 20 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (11)
Current report
Net income in 2024 as compared to 2023 was positively impacted by a $7.0 million increase in noninterest income and a $5.6 million decrease in noninterest expense. Offsetting these positive contributions to net income were an increase to the provision for credit losses of $10.9 million, an increase to income tax expense of $1.6 million, and a decrease to net interest income of $356,000. Pretax pre-provision earnings, which is a non-GAAP measure, were $128.4 million for the year ended December 31, 2024, an increase of $12.3 million, or 10.5%, compared to $116.2 million for the year ended December 31, 2023.
Current report
In 2024, the Company continued to expand its balance sheet organically, achieving average loan growth of 4.7% and average deposit growth of 4.1% in its geographic footprint of northern Indiana and in central Indiana in the Indianapolis market. The Company had 54 branches as of December 31, 2024. The Company’s net interest income remained stable during the year, declining by less than 1%. However, net interest margin declined from 3.31% in 2023 to 3.18% in 2024. The combined effects of the 2022-2023 monetary policy tightening cycle, increased market competition for deposits and a deposit mix shift from noninterest bearing demand accounts to interest bearing deposit products drove funding costs higher and net interest margin compression in 2023. The rise in deposit costs peaked in the second quarter of 2024 and began to decline in the second half of 2024 as the Federal Reserve Bank started to ease rates. An increase to noninterest income of 14.0% and a decrease in noninterest expense of 4.3% contributed positively to net income.
Current report
An increase in nonperforming loans of $40.7 million drove provision expense higher in 2024. Provision expense increased by $10.9 million, or 186.3%, primarily related to the downgrade of one commercial borrower to nonperforming status in the second quarter of 2024. The allowance coverage ratio increased to 1.68% from 1.46% at December 31, 2024 and 2023, respectively, primarily as a result of the elevated provision. Individually analyzed and watch list loans as a percentage of total loans increased to 4.13% at December 31, 2024 from 3.72% at December 31, 2023, remaining near the historic low of 3.42%.
Current report
Fee based lines of business including wealth advisory fees and brokerage fees anchored growth in adjusted core noninterest income, a non-GAAP financial measure that excludes the impact of certain non-routine operating events, increasing by 7.6% and 4.1%, respectively. The growth in adjusted core noninterest expense, a non-GAAP financial measure that excludes the impact of certain non-routine operating events, reflects the Company's continued investment in its people, technology, and physical infrastructure. The outlook for 2025 includes plans for continued organic balance sheet growth, disciplined credit philosophy with proactive management of loan portfolio challenges, continued investments in human and technological capital, a significant investment in the downtown Warsaw campus headquarters to establish the Lake City Bank Innovation and Technology Center, and continued expansion of our branch network with a new office scheduled to open in the Indianapolis market in 2025.
Current report
(1)In 2023, long-term, incentive-based compensation accruals were reduced as a result of the wire fraud loss and associated insurance and loss recoveries.
Current report
(2)Core operational profitability was $4.1 million lower and $7.8 million higher than reported net income for the years ended December 31, 2024 and 2023, respectively.
Current report
Net income was $93.5 million in 2024, a decrease of $289,000, versus net income of $93.8 million in 2023. The decrease in net income from 2023 to 2024 was driven by an increase in provision expense of $10.9 million, or 186.3%, an increase in income tax expense of $1.6 million, or 9.9%, and a decrease in net interest income of $356,000. Offsetting these items were an increase in noninterest income of $7.0 million, or 14.0%, and a decrease to noninterest expense of $5.6 million, or 4.3%. Pretax pre-provision earnings were $128.4 million for the year ended December 31, 2024, an increase of $12.3 million, or 10.5%, compared to $116.2 million for the year ended December 31, 2023.
Current report
The increase to noninterest income in 2024 was primarily driven by the net gains on the exchange and sale of Visa shares previously held at a cost basis of $0 since 2008. In the second quarter of 2024, Visa Inc. announced the commencement of an exchange offer for Visa Class B-1 common stock. The Company accepted the exchange offer and tendered its Visa Class B-1 common stock in exchange for a combination of Visa Class C and Visa Class B-2 common stock. After entering the exchange, the Company redeemed its Visa Class C common shares and sold its Visa Class B-2 shares in the secondary market. The Company recognized $9.0 million in net gains from these transactions. Other items contributing to the increase in noninterest income were a $1.0 million insurance recovery, a $1.4 million, or 15.3% increase, in wealth advisory fees, a $1.1 million, or 34.4% increase, in bank owned life insurance income, and a $370,000 increase in mortgage banking income. The decrease to noninterest expense in 2024 was driven by lower miscellaneous expenses for losses incurred in 2023 and was partially offset by a $4.5 million legal accrual recorded in the second quarter of 2024 related to resolution of a previously disclosed legal matter.
Current report
Net interest margin decreased 13 basis points to 3.18% in 2024 versus 3.31% in 2023. Net interest margin decreased to 3.31% in 2023 from 3.40% in 2022. The decrease in net interest margin between the periods was primarily driven by the effects of the dramatic tightening of monetary policy by the Federal Reserve during 2022 and 2023. The rate increases quickly bolstered loan yields due to the asset sensitive nature of the balance sheet, which drove net interest margin expansion in 2022. Net interest margin contracted in 2023 and 2024 due to the lag in deposit repricing by the Company and a shift in deposit mix from noninterest bearing demand accounts to interest bearing deposit products, as customers became more rate sensitive during the increased rate environment.
Current report
Noninterest income increased by $7.0 million, or 14.0%, to $56.8 million for the year ended December 31, 2024, compared to $49.9 million for the prior year. The increase in noninterest income for the year ended December 31, 2024 was primarily driven by the net gain on sale of Visa shares of $9.0 million. Contributing further to the increase in noninterest income was an increase to wealth and advisory fees of $1.4 million, or 15.3%, driven by growth in customers and favorable market performance. Bank owned life insurance income increased $1.1 million, or 34.4%, due to favorable market performance of the Company's variable bank owned life insurance policies. Offsetting these increases was a $4.5 million, or 48.9%, decrease to other income. Other income was elevated during the year ended December 31, 2023 from insurance and loss recoveries of $6.3 million that were related to the 2023 wire fraud loss. Offsetting the impact of these recoveries was increased investment income from the Company's limited partnership investments and the receipt of an additional $1.0 million in insurance recoveries. Adjusted core noninterest income was $46.8 million for the year ended December 31, 2024, an increase of $3.3 million, or 7.6%, compared to $43.6 million for year ended December 31, 2023.
Current report
Noninterest expense decreased by $5.6 million, or 4.3%, from $130.7 million to $125.1 million for the year ended December 31, 2023 and 2024, respectively. Noninterest expense during 2023 was elevated as compared to 2024 due to the wire fraud loss, which added a net $16.7 million to noninterest expense. Offsetting this impact on noninterest expense was a $7.6 million, or 12.8%, increase in salaries and employees benefits during 2024. The increase to salaries and benefits expense resulted primarily from increases to salaries and wages of$3.2 million, performance-based incentive compensation of$2.3 million, health insurance expense of$918,000, and variable deferred compensation of $950,000, which relates to the Company's variable bank owned life insurance. Other expense increased $2.6 million, or 24.0%, primarily due toan accrued legal accrual expense of $4.5 million. Data processing fees and supplies increased by $1.2 million, or 8.3%, from the continued investment in customer-facing and operational technology solutions. Adjusted core noninterest expense was $120.5 million for the year ended December 31, 2024, an increase of $6.5 million, or 5.7%, compared to $114.0 million for the year ended December 31, 2023.
Removed paragraphs (21)
Previous report
On June 30, 2023, the Company discovered that it had been the victim of an international wire fraud resulting in a loss of $18.1 million. During the fourth quarter of 2023, the Company recognized $6.3 million in insurance and loss recoveries associated with the wire fraud loss. During 2023, the total impact of the wire fraud loss to income before income tax expense was $10.4 million, net of recoveries and adjustments to salaries and benefits expense, or $7.8 million net of tax, and $0.30 diluted earnings per common share.
Previous report
Net income in 2022 was positively impacted by a $24.8 million increase in net interest income. Offsetting the positive impact of net interest income were an $8.3 million increase in provision for credit losses, a $5.9 million increase in noninterest expense and a $2.9 million decrease in noninterest income.
Previous report
The Company's net income in 2023 decreased $10.1 million, or 9.7%, as a result of an increase in noninterest expense of $20.5 million, or 18.6%, and a decrease in net interest income of $5.9 million, or 2.9%. Noninterest income increased $8.0 million, or 19.1%. Provision for credit losses decreased $3.5 million, or 37.6%.
Previous report
The increases to noninterest expense and noninterest income were primarily driven by the wire fraud loss that occurred during the second quarter of 2023 and related insurance and loss recoveries and adjustments to salaries and benefits expense recorded by the Company as a result of the loss. The wire fraud loss of $18.1 million was the primary driver of the increase to noninterest expense. Insurance and loss recoveries associated with the event of $6.3 million were recorded as noninterest income during the fourth quarter of 2023. Salaries and employee benefits expense was reduced by $1.4 million as a result of adjustments to the Company's long term incentive accrual due to the negative impact of the loss on the Company's net income for the year.
Previous report
Core operational profitability, a non-GAAP financial measure which excludes the impact of the wire fraud loss and related insurance and loss recoveries and adjustments to the Company's salaries and employee benefits expense, was $101.6 million for the twelve months ended December 31, 2023, a decrease of $2.2 million, or 2.2%, from the full year 2022. Core operational diluted earnings per common share, a non-GAAP financial measure, for the twelve months ended December 31, 2023, was $3.95, also a decrease of 2.2%, from the full year 2022.
Previous report
The Company's net interest income was negatively impacted in 2023 by increased funding costs, primarily driven by deposit repricing as deposit rates adjusted to the higher interest rate environment as a result of tightened monetary policy by the Federal Reserve. The rise in deposit costs combined with a shift in deposit mix from noninterest bearing deposits to interest bearing deposits were the primary drivers behind the 2.9% decrease in net interest income during 2023.
Previous report
Asset quality metrics remained stable with watch list loans as a percentage of total loans remaining near historic lows at 3.72% at December 31, 2023, as compared to 3.42% at December 31, 2022. The provision for credit losses decreased $3.5 million, or 37.6%. The near-term outlook includes plans for continued loan growth, disciplined credit philosophy, continued investments in human capital and technological innovations and enhancements, and targeted expansion of our branch network in the Indianapolis market with two new offices planned in the next 24 months.
Previous report
(5)Non-GAAP financial measure. Calculated by subtracting the impact PPP loans had on average earnings assets, loan interest income, average interest bearing liabilities, and interest expense. Management believes this is an important measure because it provides for better comparability to subsequent periods, given the expectation that PPP represented a limited governmental intervention in the lending market, designed to support small businesses through the pandemic, its low fixed interest rate of 1.0% and because the accretion of net loan fee income can be accelerated upon borrower forgiveness and repayment by the SBA. See reconciliation on the following pages.
Previous report
The impact of the Paycheck Protection Program on Net Interest Margin FTE for the years ended December 31, 2022 and 2021 is presented below (dollars in thousands). The impact of the Paycheck Protection Program on Net Interest Margin FTE for the year ended December 31, 2023 is excluded as the Program had an immaterial impact on average earning assets, interest income and cost of funds during the period.
Previous report
The increases to noninterest expense and noninterest income were a result of the wire fraud loss and related insurance and loss recoveries and adjustments to salaries and employee benefits expense recorded by the Company during 2023. The wire fraud loss, which occurred during the second quarter of 2023, was $18.1 million and was the primary driver of the increase to noninterest expense. Insurance and loss recoveries associated with the event of $6.3 million were recorded as noninterest income during the fourth quarter of 2023. Salaries and employee benefits expense was reduced by $1.4 million as a result of adjustments to the Company's long term incentive accrual due to the negative impact of the loss on the Company's net income for the year.
Previous report
Core operational profitability, a non-GAAP financial measure which excludes the impact of the wire fraud loss and related insurance and loss recoveries as well as adjustments to the Company's salaries and employee benefits expense, was $101.6 million for the twelve months ended December 31, 2023, a decrease of $2.2 million, or 2.2%, from the comparable period of 2022. Core operational diluted earnings per common share, a non-GAAP financial measure, for the twelve months ended December 31, 2023, was $3.95, also a decrease of 2.2%, from the comparable period of 2022.
Previous report
Net income was $103.8 million in 2022, an increase of $8.1 million, or 8.4%, versus net income of $95.7 million in 2021. The increase in net income from 2021 to 2022 was primarily due to an increase in net interest income of $24.8 million, or 13.9%, and an increase in the provision for credit losses of $8.3 million, or 770.5%. Noninterest expense increased $5.9 million, or 5.7%, and noninterest income decreased $2.9 million, or 6.4%. Net interest income for 2022 included $772,000 in PPP interest and fee income, compared to $14.9 million for 2021. The increase in provision expense for 2022 was driven primarily by the downgrade of a single commercial relationship, with the remaining increase attributable to loan growth.
Previous report
(1)Loan fees are included as taxable loan interest income. Net loan fees attributable to PPP loans were $10,000, $692,000 and $12.5 millionfor the years ended December 31, 2023, 2022 and 2021, respectively.
Previous report
As a result of these effects, net interest margin decreased 9 basis points to 3.31% in 2023 versus 3.40% in 2022. Net interest margin increased to 3.40% in 2022 from 3.07% in 2021, driven by the dramatic tightening of monetary policy by the Federal Reserve during 2022 and 2023 and deposit repricing to reflect the increased rate environment that lagged into 2023. Additionally, net interest margin during the year ended December 31, 2022 was positively impacted by the recognition of nonaccrual interest resulting from the interest recovery of two nonaccrual commercial borrowers during the fourth quarter of 2022. The interest recovery was from two loans placed on nonaccrual status in 2009 and 2021. The $1.9 million of nonaccrual interest income was recognized into loan interest income and contributed 3 basis points to the Company's net interest margin during 2022.
Previous report
The Company adopted CECL on January 1, 2021. Adoption of the standard resulted in a day one impact to the allowance for credit losses of $9.1 million, with an offset, net of taxes, to stockholders' equity.
Previous report
Other income increased $7.3 million, or 387.8%, due primarily to insurance and loss recoveries of $6.3 million that were recognized during the fourth quarter of 2023. Bank owned life insurance increased $2.7 million, or 625.2%, from improved performance for the Company's variable life insurance policies, which track with the performance of the equity markets. The purchase of traditional bank owned life policies in December 2022 contributed further to the increase in bank owned life insurance income. These increases were offset by decreases to mortgage banking income of $887,000, or 140.1%, and a decrease in investment brokerage fees of $503,000, or 21.7%.
Previous report
Noninterest income was $41.9 million in 2022 versus $44.7 million in 2021, a decrease of $2.9 million, or 6.4%. Market value declines impacted the overall decrease in noninterest income. Bank owned life insurance income for the year ended December 31, 2022 decreased by $2.0 million, primarily due to declines in the market value of variable life insurance policies that are tied to the equity markets. A reduction of market value of $950,000 was recorded during 2022 compared to market value gains of $1.1 million for 2021. The valuation changes to the variable life insurance policies are offset by similar changes to the deferred compensation expense that is recognized in salary and employee benefits. Excluding the impact of the variable life insurance policy market value changes, noninterest income was $42.8 million for the year ended December 31, 2022, compared to $43.7 million for the year ended December 31, 2021, a decline of $840,000, or 2.1%. In addition, other income decreased $851,000, mortgage banking income decreased by $785,000, gains on securities sales decreased by $776,000 and interest rate swap fee income decreased by $456,000. Notably, fee-based noninterest income increased by a cumulative $2.0 million primarily due to volume, including improvements in service charges on deposit accounts of $987,000, or 9.3%, merchant and interchange fee income of $537,000, or 17.8%, investment brokerage fees of $343,000, or 17.4%, and loan and service fees of $292,000, or 2.4%. Wealth advisory fees declined by $114,000, or 1.3%, and were negatively impacted by market value declines of 8.0% in trust assets from $2.5 billion at December 31, 2021 to $2.3 billion at December 31, 2022.
Previous report
Noninterest expense increased by $5.9 million, or 5.7%, for 2022, to $110.2 million compared to $104.3 million for 2021. The increase was due primarily to an increase of $4.2 million in other expense caused by accruals for ongoing legal matters of $3.5 million. See "Note 1 – Summary of Significant Accounting Policies" for additional details regarding loss contingencies. Corporate and business development expense increased $936,000, or 22.0%, driven by increased corporate development spending, advertising expense and charitable and foundation contributions, including contributions associated with the Company's sesquicentennial celebration. Salaries and benefits expense increased $648,000, or 1.1%. Offsetting these increases was a decrease in professional fees of $581,000, or 8.2%, due to a decrease in legal expense incurred during the year. FDIC insurance and other regulatory fee expense decreased by $243,000, or 10.8%, due to declining deposits and reduced total assets of the Company.
Previous report
In 2023, net loan balances increased by $206.8 million to $4.845 billion, and excludes approximately $8.6 million in loans originated for sale. In 2022, net loan balances increased by $417.7 million to $4.638 billion, and excluded approximately $28.7 million in loans originated for sale. In 2021, net loan balances decreased by $367.7 million to $4.220 billion, and excluded approximately $119.4 million in loans originated for sale.
Previous report
Total deposits decreased by $274.8 million to $5.461 billion, at December 31, 2022 compared to December 31, 2021. The decrease in deposits was attributable to a decrease in core deposits. Total deposit contraction was led by a decrease of $243.7 million, or 11.2%, in retail deposits. In addition, commercial deposits decreased $176.3 million, or 7.8%, while public funds deposits increased by $145.2 million, or 11.3%. The decrease in deposits during 2022 reflects the normalization of excess liquidity in our customer's deposit accounts and occurred primarily during the fourth quarter of 2022. Rising inflation is considered a contributor to the decline in deposits during 2022 after the surge in deposits experienced during 2020 and 2021 from PPP funding and COVID-related stimulus programs.
Previous report
During 2022, average total short-term borrowings increased by $6.2 million to $6.6 million, as the Company's excess liquidity position normalized after experiencing a reduction in cash and short-term investments. Ending balances of short-term and miscellaneous borrowings increased to $297.0 million at December 31, 2022, from zero at December 31, 2021. Average total long-term borrowings decreased by $42.9 million to $32.1 million, due to the repayment of an outstanding long-term advance during the second quarter of 2022.
Reworded paragraphs (62)
Previous wording
Net income in 2023 was $93.8 million, down 9.7%, from $103.8 million in 2022. Net income for 2022 was 8.4% higher than $95.7 million in 2021.
Current wording
Net income in 2024 was $93.5 million, a decrease of 0.3%, from $93.8 million in 2023. Net income for 2023 was 9.7% lower than $103.8 million in 2022.
Previous wording
Diluted net income per common share was $3.65 in 2023, $4.04 in 2022 and $3.74 in 2021. Return on average total assets was 1.45% in 2023, versus 1.62% in 2022 and 1.56% in 2021. Return on average total equity was 15.93% in 2023, versus 17.40% in 2022 and 14.19% in 2021. The dividend payout ratio, with respect to diluted earnings per share, was 50.41% in 2023, versus 39.60% in 2022 and 36.36% in 2021. The average equity to average assets ratio was 9.11% in 2023, compared to 9.28% in 2022 and 10.96% in 2021.
Current wording
Diluted net income per common share was $3.63 in 2024, $3.65 in 2023 and $4.04 in 2022. Return on average total assets was 1.40% in 2024, versus 1.45% in 2023 and 1.62% in 2022. Return on average total equity was 14.12% in 2024, versus 15.93% in 2023 and 17.40% in 2022. The dividend payout ratio, with respect to diluted earnings per share, was 52.89% in 2024, versus 50.41% in 2023 and 39.60% in 2022. The average equity to average assets ratio was 9.94% in 2024, compared to 9.11% in 2023 and 9.28% in 2022.
Previous wording
Net income in 2023 was negatively impacted by a $20.5 million increase in noninterest expense and a $5.9 million decrease in net interest income. Offsetting these decreases were an $8.0 million increase in noninterest income and a $3.5 million decrease in provision for credit losses.
Current wording
Net income in 2023 as compared to 2022 was negatively impacted by a $20.5 million increase in noninterest expense and a $5.9 million decrease in net interest income. Offsetting these negative effects on net income were an $8.0 million increase in noninterest income and a $3.5 million decrease in provision for credit losses.
Previous wording
Total assets were $6.524 billion as of December 31, 2023 versus $6.432 billion as of December 31, 2022, an increase of $91.7 million or 1.4%. Balance sheet expansion in 2023 was driven by loan growth of $206.1 million, or 4.4%. Offsetting the increase in loan growth was a decrease in investments securities of $132.1 million, or 10.1%. Balance sheet expansion in 2023 was funded by an increase in deposits of $259.9 million, or 4.8%, and was offset by a decrease in borrowings of $247.0 million.
Current wording
Total assets were $6.678 billion as of December 31, 2024, versus $6.524 billion as of December 31, 2023, an increase of $154.3 million or 2.4%. Balance sheet expansion in 2024 was driven by loan growth of $201.4 million, or 4.1%. Offsetting the loan growth was a decrease in investments securities of $58.7 million, or 5.0%. Deposits increased by $180.4 million, or 3.2%, during 2024 to fund the balance sheet expansion.
Previous wording
The determination of the appropriate allowance is inherently subjective, as it requires significant estimates by management. The Company has an established process to determine the adequacy of the allowance for credit losses that generally includes consideration of changes in the nature and volume of the loan portfolio and overall portfolio quality, along with current and forecasted economic conditions that may affect borrowers’ ability to repay. Consideration is not limited to these factors although they represent the most commonly cited factors. To determine the specific allocation levels for individual credits, management considers the current valuation of collateral and the amounts and timing of expected future cash flows as the primary measures. Management also considers trends in adversely classified loans based upon an ongoing review of those credits. With respect to pools of similar loans, an appropriate level of general allowance is determined by portfolio segment using a probability of default-loss given default (“PD/LGD”) model, subject to a floor. A default can be triggered by one of several different asset quality factors, including past due status, nonaccrual status, material modification to a borrower experiencing financial difficulty or if the loan has had a charge off. This PD is then combined with a LGD derived from historical charge off data to construct a default rate. This loss rate is then supplemented with adjustments for reasonable and supportable forecasts of relevant economic indicators, particularly the unemployment rate forecast from the Federal Open Market Committee’s Summary of Economic Projections, and other environmental factors based on the risks present for each portfolio segment. These environmental factors include consideration of the following: levels of, and trends in, delinquencies and nonperforming loans; trends in volume and terms of loans; changes in collateral strength; effects of any changes in risk selection and underwriting standards; other changes in lending policies, procedure, and practices; experience, ability, and depth of lending management and other relevant staff; national and local economic trends and conditions; industry conditions; and effects of changes in credit concentrations. It is also possible that these factors could include social, political, economic, and terrorist events or activities. All of these factors are subject to change, which may be significant. As a result of this detailed process, the allowance results in two forms of allocations, specific and general. These two components represent the total allowance for credit losses deemed adequate to cover expected losses inherent in the loan portfolio.
Current wording
The determination of the appropriate allowance is inherently subjective, as it requires significant estimates by management. The Company has an established process to determine the adequacy of the allowance for credit losses that generally includes consideration of changes in the nature and volume of the loan portfolio and overall portfolio quality, along with current and forecasted economic conditions that may affect borrowers’ ability to repay. Consideration is not limited to these factors although they represent the most commonly cited factors. To determine the specific allocation levels for individual credits, management considers the current valuation of collateral and the amounts and timing of expected future cash flows as the primary measures. Management also considers trends in adversely classified loans based upon an ongoing review of those credits. With respect to pools of similar loans, an appropriate level of general allowance is determined by portfolio segment using a probability of default-loss given default ("PD/LGD") model, subject to a floor. A default can be triggered by one of several different asset quality factors, including past due status, nonaccrual status, material modification to a borrower experiencing financial difficulty or if the loan has had a charge off. This PD is then combined with a LGD derived from historical charge off data to construct a default rate. This loss rate is then supplemented with adjustments for reasonable and supportable forecasts of relevant economic indicators, particularly the unemployment rate forecast from the Federal Open Market Committee’s Summary of Economic Projections, and other environmental factors based on the risks present for each portfolio segment. These environmental factors include consideration of the following: levels of, and trends in, delinquencies and nonperforming loans; trends in volume and terms of loans; changes in collateral strength; effects of any changes in risk selection and underwriting standards; other changes in lending policies, procedure, and practices; experience, ability, and depth of lending management and other relevant staff; national and local economic trends and conditions; industry conditions; and effects of changes in credit concentrations. It is also possible that these factors could include social, political, economic, and terrorist events or activities. All of these factors are subject to change, which may be significant. As a result of this detailed process, the allowance results in two forms of allocations, specific and general. These two components represent the total allowance for credit losses deemed adequate to cover expected losses inherent in the loan portfolio. The Company's allowance for credit losses balance was comprised of 32% specific reserves and 68% general reserves at December 31, 2024, compared to 11% specific reserves and 89% general reserves at December 31, 2023. The increase in specific reserves was driven by a large commercial…
Excerpt shortened here; the source contains the full paragraph.
Previous wording
Commercial loans are subject to a dual standardized grading process administered by the credit administration function. These grade assignments are performed independent of each other and a consensus is reached by credit administration and the loan officer. Specific allowances are established in cases where management has identified significant conditions or circumstances related to an individual credit that indicate it should be evaluated on an individual basis. Considerations with respect to specific allocations for these individual credits include, but are not limited to, the following: (a) the sufficiency of the customer’s cash flow or net worth to repay the loan; (b) the adequacy of the discounted value of collateral relative to the loan balance; (c) whether the loan has been criticized in a regulatory examination; (d) whether the loan is nonperforming; (e) any other reasons the ultimate collectability of the loan may be in question; or (f) any unique loan characteristics that require special monitoring.
Current wording
Commercial loans are subject to a dual standardized grading process administered by the credit administration function. These grade assignments are performed independently of each other and a consensus is reached by credit administration and the loan officer. Specific allowances are established in cases where management has identified significant conditions or circumstances related to an individual credit that indicate it should be evaluated on an individual basis. Considerations with respect to specific allocations for these individual credits include, but are not limited to, the following: (a) the sufficiency of the customer’s cash flow or net worth to repay the loan; (b) the adequacy of the discounted value of collateral relative to the loan balance; (c) whether the loan has been criticized in a regulatory examination; (d) whether the loan is nonperforming; (e) any other reasons the ultimate collectability of the loan may be in question; or (f) any unique loan characteristics that require special monitoring.
Previous wording
The allowance is inherently uncertain as it represents the Company’s expectation of the future collectability of loans in its portfolio; actual collections may be greater than or less than expectations. Actual collections may be impacted by wider economic conditions such as changes in the competitive environment or in the levels of business investment or consumer spending, or by the quality of borrowers’ management teams and the success of their strategy execution. Borrowers’ ability to repay may also change due to the effects of government monetary or fiscal policy, which could affect the level of demand for borrowers’ products or services.
Current wording
The allowance is inherently uncertain as it represents the Company’s expectation of the future collectability of loans in its portfolio; actual collections may be greater than or less than expectations. Actual collections may be impacted by wider economic conditions such as changes in the competitive environment or in the levels of business investment or consumer spending, or by the quality of borrowers’ management teams and the success of their strategy execution. Borrowers’ ability to repay may also change due to the effects of government monetary or fiscal policy, which could affect the level of demand for borrowers’ products or services or the borrowers' ability to service their debt payments in the future.
Previous wording
The Company’s allowance for credit losses is subject to changes in the inputs to the model, including the following: the number of delinquent loans, nonaccrual loans, material modification due to a borrower experiencing financial difficulty, or charge offs; the levels of charge offs and recoveries; projected unemployment rates and other economic indicators; the Company’s collateral position on adversely classified loans; or management’s qualitative judgment of the implication of trends in its loan portfolio or in the broader economy.
Current wording
The Company’s allowance for credit losses is subject to changes in the inputs to the model, including the following: the number of delinquent loans, nonaccrual loans, material modification due to a borrower experiencing financial difficulty, or charge offs; the levels of charge offs and recoveries; projected unemployment rates and other economic indicators; the
Previous wording
(1)Non-GAAP financial measure. Calculated by excluding the wire fraud loss and related insurance and loss recoveries and adjustments to salary and benefits. Management believes this is an important measure because meaningful to understanding the company’s core business performance for these periods. See reconciliation on the following pages.
Current wording
(1)Non-GAAP financial measure. Calculated by excluding the effects of the 2024 net gain on Visa shares, legal accrual, and additional wire fraud loss recovery and the 2023 wire fraud loss and related recoveries and adjustments to salary and benefits. Management believes this is an important measure that helps management and investors understand the Company’s core business performance for these periods. See reconciliation on the following pages.
Previous wording
(4)Non-GAAP financial measure. Calculated by removing the fair market value adjustment impact of the available-for-sale investment securities portfolio included in accumulated other comprehensive income ("AOCI") from tangible equity and tangible assets. Management believes this is an important measure because it provides better comparability to periods preceding the recent significant rise in prevailing interest rates. See reconciliation on the following pages.
Current wording
(4)Non-GAAP financial measure. Calculated by removing the fair market value adjustment impact of the available-for-sale investment securities portfolio included in accumulated other comprehensive income/loss ("AOCI") from tangible equity and tangible assets. Management believes this is an important measure because it provides better comparability to periods preceding the significant rise in prevailing interest rates. See reconciliation on the following pages.
Previous wording
(6)Non-GAAP financial measure. Pretax pre-provision earnings is calculated by adding net interest income to noninterest income and subtracting noninterest expense. Management believes this is an important measure because it may enable investors to identify the trends in the Company's earnings exclusive of the effects of tax and provision expense, which may vary significantly from period to period. See reconciliation on the following pages.
Current wording
(5)Non-GAAP financial measure. Pretax pre-provision earnings is calculated by adding net interest income to noninterest income and subtracting noninterest expense. Management believes this is an important measure because it may enable investors to identify the trends in the Company's earnings exclusive of the effects of tax and provision expense, which may vary significantly from period to period. See reconciliation on the following pages.
Previous wording
The impact of the wire fraud loss, insurance and loss recoveries and adjustments to salaries and benefits is presented below. Management considers these measures of core financial performance to be meaningful to understanding the Company’s business performance for these periods.
Current wording
The impact of the net gain on Visa shares, legal accrual, wire fraud loss and associated insurance and loss recoveries and adjustments to salaries and benefits is presented below. Management considers these measures of core financial performance to be meaningful to understanding the Company’s business performance for these periods.
Previous wording
Net income was $93.8 million in 2023, a decrease of $10.1 million, or 9.7%, versus net income of $103.8 million in 2022. The decrease in net income from 2022 to 2023 was driven by an increase in noninterest expense of $20.5 million, or 18.6% and a decrease in net interest income of $5.9 million, or 2.9%. Offsetting these decreases was an increase in noninterest expense of $8.0 million, or 19.1%, and a decrease in the provision for credit losses of $3.5 million, or 37.6%.
Current wording
Net income was $93.8 million in 2023, a decrease of $10.1 million, or 9.7%, versus net income of $103.8 million in 2022. The decrease in net income from 2022 to 2023 was driven by an increase in noninterest expense of $20.5 million, or 18.6%, and a decrease in net interest income of $5.9 million, or 2.9%. Offsetting these decreases were an increase in noninterest income of $8.0 million, or 19.1%, and a decrease in the provision for credit losses of $3.5 million, or 37.6%.
Previous wording
Core operational profitability, a non-GAAP financial measure that excludes the impact of the wire fraud loss and related insurance and loss recoveries as well as adjustments to the Company's salaries and employee benefits expense, was $101.6 million for the twelve months ended December 31, 2023, a decrease of $2.2 million, or 2.2%, from the full year 2022. Core operational diluted earnings per common share, a non-GAAP financial measure, for the twelve months ended December 31, 2023, was $3.95, also a decrease of 2.2%, from the full year 2022.
Current wording
Core operational profitability, a non-GAAP financial measure that excludes the impact of certain non-routine operating events, was $89.4 million for the year ended December 31, 2024, a decrease of 12.0%, or $12.2 million, compared to $101.6 million for the year ended December 31, 2023. Core operational diluted earnings per common share, a non-GAAP financial measure, were $3.47 for the year ended December 31, 2024, a decrease of 12.2% from $3.95 for the prior year.
Previous wording
(2)Nonaccrual loans are included in the average balance of taxable loans.
Current wording
(1)Nonaccrual loans are included in the average balance of taxable loans.
Previous wording
(3)Tax exempt income was converted to a fully taxable equivalent basis at a 21 percent tax rate. The tax equivalent rate for tax exempt loans and tax exempt securities acquired after January 1, 1983 included the Tax Equity and Fiscal Responsibility Act of 1982 (“TEFRA”) adjustment applicable to nondeductible interest expenses. Taxable equivalent basis adjustments were $5.3 million, $5.6 million and $3.6 million for the years ended December 31, 2023, 2022 and 2021, respectively.
Current wording
(2)Tax exempt income was converted to a fully taxable equivalent basis at a 21 percent tax rate. The tax equivalent rate for tax exempt loans and tax exempt securities acquired after January 1, 1983 included the Tax Equity and Fiscal Responsibility
Previous wording
Net interest income decreased by $5.9 million to $197.0 million in 2023 compared to $202.9 million in 2022, primarily as a result of increased funding costs. Total interest expense increased $109.6 million, or 298.7%. Of this increase, deposit interest expense increased $101.5 million, or 279.8%, as a result of increased rates paid for customer deposits and a shift in deposit mix from noninterest bearing deposits to interest bearing deposits. Funding costs for deposits increased 183 basis points to 2.46% during 2023, a 290.5% increase compared to 0.63% during 2022. Average noninterest bearing deposits decreased $367.5 million, or 19.9%, to $1.48 billion for 2023 as compared to $1.84 billion for 2022. Average interest bearing deposits increased $254.3 million, or 6.6%, to $4.13 billion for 2023 as compared to $3.87 billion for 2022. Contributing further to the increased funding costs was an increase in borrowings expense of $8.0 million, as a result of increased average short-term borrowings to meet the Company's funding needs. Average wholesale funding reliance remained low at 2.90% as of December 31, 2023 compared to 0.70% at December 31, 2022.
Current wording
Net interest income decreased by $356,000 to $196.7 million in 2024 compared to $197.0 million in 2023, primarily as a result of increased funding costs. Total interest expense increased $30.2 million, or 20.7%. Of this increase, deposit interest expense increased $35.0 million, or 25.4%, from increased rates paid for customer deposits and a shift in deposit mix from noninterest bearing deposits to interest bearing deposits. Funding costs for deposits increased 50 basis points to 2.96% during 2024, compared to 2.46% during 2023. Noninterest bearing deposits to total deposits were 22.0% at 2024 compared to 23.7% at 2023. Average noninterest bearing deposits decreased $217.5 million, or 14.7%, to $1.258 billion for 2024 as compared to $1.475 billion for 2023. Average interest bearing deposits increased $449.3 million, or 10.9%, to $4.578 billion for 2024 as compared, to $4.129 billion for 2023. Wholesale funding reliance remained low at 0.70% as of December 31, 2024 compared to 3.21% at December 31, 2023.
Previous wording
Investment securities interest income decreased $4.1 million, or 12.3%, and contributed to the decline in net interest income during 2023. The decrease in investment securities income was driven by a decrease in average securities balances of $247.6 million, or 17.3%, during 2023 as a result of available-for-sale investment securities sales of $105.2 million, maturities, calls and paydowns of $71.8 million, and offset by purchases of CRA securities of $7.2 million. Realized losses of $25,000 were recognized on the securities sales during 2023. The yield on average investment securities increased 15 basis points to 2.86% for 2023, as compared to 2.71% for 2022, partially offsetting the impact of the decrease in securities average balances.
Current wording
$49.7 million, or 4.2%, during 2024 as a result of available-for-sale investment securities sales of $7.1 million, maturities, calls and paydowns of $59.7 million, and offset by purchases of securities of $27.5 million. Realized losses of $46,000 were recognized on the securities sales during 2024. The yield on average investment securities decreased 5 basis points to 2.81% for 2024, as compared to 2.86% for 2023. Investment securities cash flows were primarily used to fund loan growth during 2024.
Previous wording
An increase in loans interest income offset the negative impacts to net interest income, increasing $104.3 million, or 51.2%, to $308.0 million during 2023 compared to $203.7 million during 2022. The increase in average loans was driven by loan growth during the period as average loan balances increased $386.5 million, or 8.7%, from $4.43 billion during 2022 to $4.81 billion during 2023. An increase in loan yields of 181 basis points, or 39.3%, from 4.61% for 2022 to 6.42% for 2023 as a result of continued Federal Reserve tightening during 2023 and loan repricing opportunities.
Current wording
An increase in loans interest income partially offset the negative impacts to net interest income, increasing $29.8 million, or 9.7%, to $337.8 million during 2024 compared to $308.0 million during 2023. The increase in average loans was driven by loan growth during the period as average loan balances increased $225.7 million, or 4.7%, from $4.814 billion during 2023 to $5.039 billion during 2024. Loan yields increased 29 basis points, or 4.6%, from 6.42% for 2023 to 6.71% for 2024 as a result of the higher rate environment and loan repricing opportunities.
Previous wording
The utilization of commercial and retail lines of credit decreased to 39% at December 31, 2023, down from 42% at December 31, 2022 and 2021. However, available lines of credit have increased by $124.0 million to $4.786 billion at December 31, 2023 compared to $4.662 billion at December 31, 2022, or 2.7% growth. The decrease in line usage is attributable to the conservative approach commercial and industrial borrowers continue to take since the pandemic, due to continued elevated levels of average commercial demand deposits relative to pre-pandemic levels.
Current wording
The utilization of commercial and retail lines of credit increased to 41% at December 31, 2024, as compared to 39% at December 31, 2023, and down from 42% at December 31, 2022. Available lines of credit have decreased by $238.0 million to $4.548 billion at December 31, 2024, compared to $4.786 billion at December 31, 2023, or a 5.0% reduction. The increase in line usage is attributable to more normalized cash balances for our business customers as the elevated levels of commercial demand deposits have been utilized post-pandemic.
Previous wording
The Company recorded a provision for credit losses of $5.9 million in 2023 compared to $9.4 million in 2022 and $1.1 million in 2021. Provision expense during 2023 was driven primarily by increases in the qualitative and environmental risk factors for certain segments of the Company's loan portfolio that could be impacted by higher borrowing costs and potential economic weakness in the Company's markets. The remainder of expense was driven by growth in the loan portfolio during the year. The Company’s allowance for credit losses as of December 31, 2023 was $72.0 million compared to $72.6 million as of December 31, 2022 and $67.8 million as of December 31, 2021. The allowance for credit losses represented 1.46% of total loans as of December 31, 2023 versus 1.54% at December 31, 2022 and 1.58% at December 31, 2021. The company’s credit loss reserve to total loans, excluding PPP loans, which are guaranteed by the United States SBA and have not been allocated for within the allowance for credit losses, was 1.59% at December 31, 2021. The impact of PPP loans had an immaterial impact on the allowance coverage ratio at December 31, 2023 and 2022. Net charge offs of $6.5 million, or 0.13%, and $4.5 million, or 0.10% of average loans, were recorded in 2023 and 2022, respectively. The charge offs for 2023 and 2022 resulted primarily from the deterioration of a single commercial credit. Management believes the charge offs related to this credit were an isolated instance as a result of negative impacts caused by unique circumstances from the pandemic and are not reflective of deteriorating trends in the loan portfolio. The Company’s management continues to monitor the adequacy of the provision based on loan levels, asset quality, economic conditions including the impact of the increased interest rate environment, inflation levels, and other factors that may influence the assessment of the collectability of loans.
Current wording
The Company recorded a provision for credit losses of $16.8 million in 2024 compared to $5.9 million in 2023 and $9.4 million in 2022. Provision expense during 2024 was driven primarily by an increase in specific allocations from the downgrade of a $43.3 million credit to an industrial company in Northern Indiana. The relationship was placed on nonperforming status in conjunction with the downgrade, which occurred during the second quarter of 2024. The remainder of expense was driven by growth in the loan portfolio during the year. The Company’s allowance for credit losses as of December 31, 2024 was $86.0 million compared to $72.0 million as of December 31, 2023 and $72.6 million as of December 31, 2022. The allowance for credit losses represented 1.68% of total loans as of December 31, 2024, versus 1.46% at December 31, 2023 and 1.54% at December 31, 2022. Net charge offs of $2.8 million, or 0.05% of average loans, and $6.5 million, or 0.13% of average loans, were recorded in 2024 and 2023, respectively. Net charge offs for 2023 resulted primarily from the deterioration of a single commercial credit. Management believes the charge off related to this credit was an isolated instance as a result of negative impacts caused by unique circumstances from the pandemic and are not reflective of deteriorating trends in the loan portfolio. The Company’s management continues to monitor the adequacy of the provision based on loan levels, asset quality, economic conditions including the impact of the increased interest rate environment, inflation levels, and other factors that may influence the assessment of the collectability of loans.
Previous wording
Noninterest income was $49.9 million in 2023 versus $41.9 million in 2022, an increase of $8.0 million, or 19.1%. Adjusted core noninterest income, which excludes the net wire fraud loss, was $43.6 million in 2023, an increase of $1.7 million, or 4.1% compared to 2022. Wealth advisory fees increased by 5.1%, or $444,000, during 2023, from $8.6 million to $9.1 million reflecting continued growth in the business and improving equity market valuations. Service charges on deposit accounts decreased by 7.1%, or $822,000, during 2023 from $11.6 million to $10.8 million due primarily to an increase to earnings allowances on business checking accounts and reduced overdraft and other deposit fees. Loan and service fees declined by 3.8%, or $464,000, during 2023 primarily due to a decline in interchange revenue due to reduced volume and spend per debit card as compared to higher trends during the pandemic. Merchant fee income improved by 2.6%, or $91,000, during 2023.
Current wording
Noninterest income was $49.9 million in 2023 versus $41.9 million in 2022, an increase of $8.0 million, or 19.1%. Adjusted core noninterest income was $43.6 million in 2023, an increase of $1.7 million, or 4.1% compared to 2022. Wealth advisory fees increased by 5.1%, or $444,000, during 2023, from $8.6 million to $9.1 million reflecting continued growth in the business and improving equity market valuations. Service charges on deposit accounts decreased by 7.1%, or $822,000, during 2023 from $11.6 million to $10.8 million due primarily to an increase to earnings allowances on business checking accounts and reduced overdraft and other deposit fees. Loan and service fees declined by 3.8%, or $464,000, during 2023 primarily due to a decline in interchange revenue due to reduced volume and spend per debit card as compared to higher trends during the pandemic. Merchant fee income improved by 2.6%, or $91,000, during 2023.
Previous wording
Noninterest expense increased by $20.5 million, or 18.6%, for 2023 from $110.2 million to $130.7 million. The increase to noninterest expense during the year was driven by an $18.1 million wire fraud loss that occurred during the second quarter of 2023. Contributing to the increase in noninterest expense during 2023 was an increase to professional fees expense of $2.1 million, or 32.4%, an increase to FDIC insurance and other regulatory fees of $1.4 million, or 68.2%, from increased assessments due to a blanket increase to the assessment rate used by the FDIC to calculate premiums. Data processing fees and supplies expense increased $1.2 million, or 9.2%. Offsetting these increases was a decrease in other expense of $2.4 million, or 18.0%, driven by reduced accruals related to ongoing litigation matters. Adjusted core noninterest expense, a non-GAAP measure, which excludes the impact of the wire fraud loss and corresponding adjustments to salaries and employee benefits, was $114.0 million during 2023, an increase of $3.8 million, or 3.5%, compared to 2022.
Current wording
Noninterest expense increased by $20.5 million, or 18.6%, for 2023 from $110.2 million to $130.7 million. The increase to noninterest expense during the year was driven by an $18.1 million wire fraud loss that occurred during the second quarter of 2023. Contributing to the increase in noninterest expense during 2023 was an increase to professional fees expense of $2.1 million, or 32.4%, an increase to FDIC insurance and other regulatory fees of $1.4 million, or 68.2%, from increased assessments due to a blanket increase to the assessment rate used by the FDIC to calculate premiums. Data processing fees and supplies expense increased $1.2 million, or 9.2%. Offsetting these increases was a decrease in other expense of $2.4 million, or 18.0%, driven by reduced accruals related to ongoing litigation matters.
Previous wording
The Company recognized income tax expense in 2023 of $16.6 million, compared to $21.3 million in 2022 and $21.7 million in 2021. The effective tax rate was 15.0% in 2023, compared to 17.1% in 2022 and 18.5% in 2021. The effective tax rate declined due to negative impact of the wire fraud loss and related effects on net income, which lowered income tax expense by $2.6 million for 2023. Additionally, changes to the Indiana Financial Institution Tax rate to 4.9% in 2023, 5.0% in 2022 and 5.5% in 2021, as well as tax-free interest income from municipal securities and loans during 2023 contributed to the decreased effective tax rate. For a detailed analysis of the Company’s income taxes see "Note 12 – Income Taxes".
Current wording
The Company recognized income tax expense in 2024 of $18.2 million, compared to $16.6 million in 2023 and $21.3 million in 2022. The effective tax rate was 16.3% in 2024, compared to 15.0% in 2023 and 17.1% in 2022. The effective tax rate increased due to the adoption of ASU 2023-02, which changed how the Company's investment in low-income housing tax credit structures are accounted for by moving the investment write-down impact from operating revenues to income tax expense within the consolidated statements of income, as well as a reduction in the tax benefit recognized from stock-based compensation vesting of shares for plan participants. For a detailed analysis of the Company’s income taxes see "Note 12 – Income Taxes".
Previous wording
We are required to provide certain statistical disclosures as a bank holding company under the SEC's Industry Guide 3. The following table provides certain of those disclosures.
Current wording
We are required to provide certain statistical disclosures as a bank holding company. The following table provides certain of those disclosures.
Previous wording
Dividend payout ratio is computed by dividing dividends declared per common share by earnings per diluted common share for each indicated fiscal year. The dividend payout ratio increased to 50.4% for 2023 as compared to prior periods due to the wire fraud loss and its negative impact to net income.
Current wording
Dividend payout ratio is computed by dividing dividends declared per common share by earnings per diluted common share for each indicated fiscal year.
Previous wording
Total assets of the Company were $6.524 billion as of December 31, 2023, an increase of $91.7 million, or 1.4%, when compared to $6.432 billion as of December 31, 2022. Total loans outstanding increased by $206.1 million, or 4.4%, to $4.917 billion at December 31, 2023 from $4.710 billion at December 31, 2022. Total deposits increased $259.9 million, from $5.461 billion at December 31, 2022, to $5.721 billion at December 31, 2023, driven by increased commercial and public funds deposits and offset by net retail outflows.
Current wording
Total assets of the Company were $6.678 billion as of December 31, 2024, an increase of $154.3 million, or 2.4%, when compared to $6.524 billion as of December 31, 2023. Total loans outstanding increased by $201.4 million, or 4.1%, to $5.118 billion at December 31, 2024, from $4.917 billion at December 31, 2023. Total deposits increased $180.4 million, or 3.2%, from $5.721 billion at December 31, 2023, to $5.901 billion at December 31, 2024, driven by increased public funds deposits due to the addition of new customers and offset by net brokered and retail outflows.
Previous wording
Total cash and equivalents increased $21.5 million, to $151.8 million at December 31, 2023 from $130.3 million at December 31, 2022. Total investment securities decreased by $132.1 million, to $1.182 billion at December 31, 2023 from $1.314 billion at December 31, 2022. The decrease was attributable to a decrease in available-for-sale securities, which decreased by $133.8 million, primarily as a result of investment sales of $105.2 million and maturities, calls and paydowns of $71.8 million, and offset by purchases of $7.2 million and improvement in fair market valuations of $40.7 million. Losses of $25,000 were realized from the sale of available-for-sale securities in 2023. Total borrowings decreased at December 31, 2023, as a result of the liquidity provided by increased levels of deposits at period end and cash inflows from the investment securities portfolio. Total borrowings decreased by $247.0 million to $50.0 million at December 31, 2023 compared to $297.0 million at December 31, 2022.
Current wording
Total cash and equivalents increased $16.4 million, to $168.2 million at December 31, 2024, from $151.8 million at December 31, 2023. Total investment securities decreased by $58.7 million, to $1.123 billion at December 31, 2024, from $1.182 billion at December 31, 2023. The decrease was attributable to a decrease in available-for-sale securities, which decreased by $60.3 million, primarily as a result of calls and paydowns of $59.7 million, a decline in fair market valuations of $16.5 million, and investment securities sales of $7.1 million, and offset by purchases of $27.5 million. Losses of $46,000 were realized from the sale of available-for-sale securities in 2024. The Company was not in a borrowed position at December 31, 2024, compared to borrowings of $50.0 million at December 31, 2023, as a result of the liquidity provided by increased deposits at period end.
Previous wording
Purchases of securities available-for-sale totaled $7.2 million in 2023, $315.3 million in 2022 and $835.0 million in 2021. Growth of the investment portfolio during 2021 and 2022 served to provide an earning asset alternative for excess balance sheet liquidity stemming from increased levels of liquidity provided by government stimulus programs in response to the COVID-19 pandemic. Prior to the recent Federal Reserve monetary tightening cycle starting in March of 2022, the Company deployed $250 million of excess liquidity to the investment securities portfolio during 2022 and $652 million in 2021 to preserve net interest margin. Investment securities represented 18.1% of total assets on December 31, 2023 compared to 20.4% on December 31, 2022 and 21.3% on December 31, 2021. Management expects the investment securities portfolio as a percentage of assets to decrease over time and return to historical levels of approximately 12%-14% during 2014 to 2020 as the proceeds from paydowns and maturities of these investment securities provide liquidity to fund future loan growth.
Current wording
Purchases of securities available-for-sale totaled $27.5 million in 2024, $7.2 million in 2023 and $315.3 million in 2022. Growth of the investment portfolio during 2022 served to provide an earning asset alternative for excess balance sheet liquidity stemming from increased levels of liquidity provided by government stimulus programs in response to the COVID-19 pandemic. Prior to the Federal Reserve monetary tightening cycle starting in March of 2022, the Company deployed $250.0 million of excess liquidity to the investment securities portfolio during 2022 to preserve net interest margin. Investment securities represented 16.8% of total assets on December 31, 2024 compared to 18.1% on December 31, 2023 and 20.4% on December 31, 2022. Management expects the investment securities portfolio as a percentage of assets to decrease over time and return to historical levels of approximately 12%-14% during 2014 to 2020 as the proceeds from paydowns and maturities of these investment securities provide liquidity to fund future loan growth as the balance sheet continues to grow.
Previous wording
Securities sales totaled $105.2 million in 2023, $25.3 million in 2022 and $14.0 million in 2021. Paydowns from prepayments and scheduled payments of $56.2 million, $98.8 million and $113.1 million were received in 2023, 2022 and 2021, and the amortization of premiums, net of the accretion of discounts, was$4.9 million, $6.3 million and $5.0 million, respectively. Maturities and calls of securities totaled$13.6 million, $9.3 million and $24.7 million in 2023, 2022 and 2021, respectively. No provision for allowance for credit loss was recorded in connection with the investment securities portfolio in 2023, 2022 or 2021. The investment portfolio is managed to provide for an appropriate balance between liquidity, credit risk and investment return and to limit the Company’s exposure to risk to an acceptable level. The longer duration of the investment security portfolio serves to balance the shorter duration of the loan portfolio.
Current wording
Securities sales totaled $7.1 million in 2024, $105.2 million in 2023 and $25.3 million in 2022. Paydowns from prepayments and scheduled payments of $59.0 million, $56.2 million and $98.8 million were received in 2024, 2023 and 2022, and the amortization of premiums, net of the accretion of discounts, was$4.8 million, $4.9 million and $6.3 million, respectively. Maturities and calls of securities totaled$695,000, $13.6 million and $9.3 million in 2024, 2023 and 2022, respectively. No provision for allowance for credit loss was recorded in connection with the investment securities portfolio in 2024,2023 or 2022. The investment portfolio is managed to provide for an appropriate balance between liquidity, credit risk and investment return and to limit the Company’s exposure to risk to an acceptable level. The longer duration of the investment security portfolio serves to balance the shorter duration of the loan portfolio.
Previous wording
On April 1, 2022, the Company elected to transfer $151.4 million in net book value of municipal bonds from the available-for-sale securities portfolio to held-to-maturity as an overall balance sheet management strategy. The fair value of these securities transferred was $127.0 million.
Current wording
On April 1, 2022, the Company elected to transfer $151.4 million in net book value of municipal bonds from the available-for-sale securities portfolio to held-to-maturity as an overall balance sheet management strategy. The fair value of these securities transferred was $127.0 million at the time of transfer, and the unrealized loss on securities transferred from available-for-sale to held-to-maturity was $19.0 million at December 31, 2024 and will be amortized over the remaining life of the underlying security as an adjustment to yield on those securities.
Previous wording
Real estate mortgages held-for-sale increased by $801,000 to $1.2 million at December 31, 2023 from $357,000 at December 31, 2022 as a result of fluctuations in secondary market sales activity. This asset category is subject to a high degree of variability depending on, among other things, recent mortgage loan rates and the quantity and timing of loan sales into the secondary market. The Company generally sells almost all of the conforming mortgage loans it originates in the secondary market. Proceeds from sales totaled $8.0 million in 2023, $36.5 million in 2022 and $126.4 million in 2021.
Current wording
Real estate mortgages held-for-sale increased by $542,000 to $1.7 million at December 31, 2024 from $1.2 million at December 31, 2023 as a result of fluctuations in secondary market sales activity. This asset category is subject to a high degree of variability depending on, among other things, recent mortgage loan rates and the quantity and timing of loan sales into the secondary market. The Company generally sells almost all of the conforming mortgage loans it originates in the secondary market. Proceeds from sales totaled $20.8 million in 2024, $8.0 million in 2023 and $36.5 million in 2022.
Previous wording
The mix of The Company's loan portfolio consists primarily of commercial loans, and the Bank's lending focus is on the commercial sector of the Lake City Bank footprint. Owner occupied commercial real estate loans represent in many instances the buildings and factories of our commercial and industrial borrowers. Commercial and industrial loans together with owner occupied commercial real estate loans represented 45.7%and 47.8% of total loans as of December 31, 2023 and 2022, respectively. The Company has limited exposure to commercial office space borrowers, all of which are located in the Bank's Indiana markets. Loans totaling $71.2 million for this sector represented 1.5% of total loans at December 31, 2023. Loans to the agriculture and agri-business sector of our Indiana footprint represent a significant loan segment of the overall loan portfolio. This loan segment is well diversified with loans to corn, soybean, poultry, dairy, swine, beef and egg growers.
Current wording
The mix of the Company's loan portfolio consists primarily of commercial loans, and the Bank's lending focus is on the commercial sector of the Lake City Bank footprint. Owner occupied commercial real estate loans represent in many instances the buildings and factories of our commercial and industrial borrowers. Commercial and industrial loans together with owner occupied commercial real estate loans represented 44.1%and 45.7% of total loans as of December 31, 2024 and 2023, respectively. The Company has limited exposure to commercial office space borrowers, all of which are located in the Bank's Indiana markets. Loans totaling $101.7 million for this sector represented 2.0% of total loans at December 31, 2024. Loans to the agriculture and agri-business sector of our Indiana footprint represent a significant loan segment of the overall loan portfolio. This loan segment is well diversified with loans to corn, soybean, poultry, dairy, swine, beef and egg growers.
Previous wording
The residential construction and land development loans class included construction loans totaling $1.0 million and $12.0 million as of December 31, 2023 and 2022. Increases in consumer loans during 2023 resulted from an increased focus on indirect lending to consumers and the introduction of a new adjustable rate mortgage product. The Bank generally sells conforming mortgage loans, which it originates locally, into the secondary market. These loans generally represent mortgage loans that are made to clients with long-term or substantial relationships with the Bank on terms consistent with secondary market requirements. The loan classifications are based on the nature of the loans as of the loan origination date. There were no foreign loans included in the loan portfolio for the periods presented.
Current wording
The residential construction and land development loans class included construction loans totaling $7.6 million and $1.0 million as of December 31, 2024 and 2023. Increases in consumer loans during 2024 resulted from an increased focus on indirect lending to consumers and adjustable rate mortgages. The Bank generally sells conforming mortgage loans, which it originates locally, into the secondary market. These loans generally represent mortgage loans that are made to clients with long-term or substantial relationships with the Bank on terms consistent with secondary market requirements. The loan classifications are based on the nature of the loans as of the loan origination date. There were no foreign loans included in the loan portfolio for the periods presented.
Previous wording
Based upon the table above, all loans due after one year which have a predetermined interest rate and loans due after one year which have floating or adjustable interest rates as of December 31, 2023 amounted to $2.290 billion and $1.188 billion, respectively.
Current wording
Based upon the table above, all loans due after one year which have a predetermined interest rate and loans due after one year which have floating or adjustable interest rates as of December 31, 2024 amounted to $2.178 billion and $1.205 billion, respectively.
Previous wording
Bank owned life insurance increased by $707,000 to $109.1 million at December 31, 2023 and by $10.8 million to $108.4 million at December 31, 2022 from $97.7 million at December 31, 2021. The increase during 2023 was primarily due to increased income from traditional policies purchased in December 2022 and from improved market performance of the Bank's variable bank owned life insurance policies which track with the performance of the equity markets. The increase during 2022 was primarily due to the purchase of life insurance policies on officers of the Bank. Bank owned life insurance investment income is used as an offset to the cost of life insurance purchased by the Bank as a benefit for bank officers.
Current wording
Bank owned life insurance increased by $4.2 million to $113.3 million at December 31, 2024 and by $707,000 to $109.1 million at December 31, 2023 from $108.4 million at December 31, 2022. The increases during 2023 and 2024 were primarily due to income from traditional policies and from improved market performance of the Bank's variable bank owned life insurance policies, which track with the performance of the equity markets. Bank owned life insurance investment income is used as an offset to the cost of life insurance purchased by the Bank as a benefit for bank officers.
Previous wording
Total deposits increased by $259.9 million to $5.721 billion, at December 31, 2023 compared to $5.461 billion at December 31, 2022. The increase in deposits was attributable to increases in commercial and public fund deposits. Commercial deposits increased $141.2 million, or 6.8% and represented 38.9% and 38.2% of total deposits at December 31, 2023 and 2022, respectively. Public fund deposits increased $133.1 million, or 9.3% and represented 27.3% and 26.1% of total deposits at December 31, 2023 and 2022, respectively. Additionally, brokered deposits increased $125.4 million, and represented 2.4% and 0.3% of total deposits at December 31, 2023 and 2022, respectively. Retail deposits decreased $139.8 million, or 7.2%, and represented 31.4% and 35.4% of deposits at December 31, 2023 and 2022, respectively. The decline in retail deposits represents a continued utilization of retail deposits from peak savings levels during 2021.
Current wording
Total deposits increased by $180.4 million, or 3.2%, to $5.901 billion, at December 31, 2024 compared to $5.721 billion at December 31, 2023. The increase in deposits was attributable to increases in commercial and public fund deposits. Commercial deposits increased $41.9 million, or 1.9% and represented 38.4% and 38.9% of total deposits at December 31, 2024 and 2023, respectively. Public fund deposits increased $246.6 million, or 15.8% and represented 30.7% and 27.3% of total deposits at December 31, 2024 and 2023, respectively. Additionally, brokered deposits decreased $93.8 million, and represented 0.7% and 2.4% of total deposits at December 31, 2024 and 2023, respectively. Retail deposits decreased $14.2 million, or 0.8%, and represented 30.2% and 31.4% of deposits at December 31, 2024 and 2023, respectively. The growth in public funds was positively impacted by the addition of new public funds customers in the Lake City Bank footprint, which included the addition of their operating accounts.
Previous wording
As previously noted, 27.3% of the Company’s deposit base is attributable to public fund entities which consist primarily of customers in the Company’s geographic footprint. A majority of public fund balances represent customers with operating accounts at the Bank. The public fund segment is a stable source of deposit funding and a focus in the treasury management area due to their business needs. A shift in funding away from public fund deposits could require the Company to execute alternative funding plans under the Contingency Funding Plan discussed in further detail under “Liquidity Risk”.
Current wording
As previously noted, 30.7% of the Company’s deposit base is attributable to public fund entities which consist primarily of customers in the Company’s geographic footprint. A majority of public fund balances represent customers with operating accounts at the Bank. The public fund segment is a stable source of deposit funding and a focus in the treasury management area due to their business needs. A shift in funding away from public fund deposits could require the Company to execute alternative funding plans under the Contingency Funding Plan discussed in further detail under "Liquidity Risk".
Previous wording
The Company believes that a strong, appropriately managed capital position is critical to support continued growth of loans and earnings. Capital is used primarily to fund continued organic loan growth and to support dividends to shareholders. The Company had a total risk-based capital ratio of 15.47%, a Tier I risk-based capital ratio of 14.21% and a common Tier 1 risk-based capital ratio of 14.21% as of December 31, 2023. These ratios met or exceeded the Federal Reserve Bank’s “well-capitalized” minimums of 10.0%, 8.0% and 6.5%, respectively. The Company also had a Tier 1 leverage ratio of 11.82% and a tangible equity ratio of 9.91%. When excluding the impact of accumulated other comprehensive income (loss) on tangible common equity, the Company's adjusted tangible common equity to adjusted tangible assets was 11.99%. See "Note 15 – Capital Requirements and Restrictions on Retained Earnings" for more information.
Current wording
The Company believes that a strong, appropriately managed capital position is critical to support continued growth of loans and earnings. Capital is used primarily to fund continued organic loan growth and to support dividends to shareholders. The Company had a total risk-based capital ratio of 15.90%, a Tier I risk-based capital ratio of 14.64% and a common Tier 1 risk-based capital ratio of 14.64% as of December 31, 2024. These ratios met or exceeded the Federal Reserve Bank’s "well-capitalized" minimums of 10.0%, 8.0% and 6.5%, respectively. The Company also had a Tier 1 leverage ratio of 12.15% and a tangible equity ratio of 10.19%. When excluding the impact of accumulated other comprehensive income (loss) on tangible common equity, the Company's adjusted tangible common equity to adjusted tangible assets was 12.37%. See "Note 15 – Capital Requirements and Restrictions on Retained Earnings" for more information.
Previous wording
The ability to maintain these ratios is a function of the balance between net income and a prudent dividend policy. Total stockholders’ equity increased by 14.2% to $649.8 million as of December 31, 2023 from $568.9 million as of December 31, 2022. The Company earned $93.8 million in 2023 and $103.8 million in 2022. The Company declared cash dividends of $1.84 per share in 2023, which decreased equity by $47.1 million. The Company declared cash dividends of $1.60 per share in 2022, which decreased equity by $40.9 million. Total stockholder's equity has been impacted by declines in the market value of the Company's available-for-sale investment securities portfolio. The market value decline, resulting from higher interest rate environment, has generated unrealized losses in the available-for-sale portfolio. Unrealized losses from the available-for-sale investment securities portfolio are recorded, net of tax, in accumulated other comprehensive income (loss) in the statement of stockholders' equity. Improvements in the fair value of available-for-sale securities and net defined pension plan gains positively impacted equity by $33.7 million in 2023 compared to a decrease of $205.0 million in 2022. The impact to equity due to other comprehensive income (loss) is not included in regulatory capital.
Current wording
The ability to maintain these ratios is a function of the balance between net income and a prudent dividend policy. Total stockholders’ equity increased by 5.3% to $683.9 million as of December 31, 2024 from $649.8 million as of December 31, 2023. The Company earned $93.5 million in 2024 and $93.8 million in 2023. The Company declared cash dividends of $1.92 per share in 2024, which decreased equity by $49.3 million. The Company declared cash dividends of $1.84 per share in 2023, which decreased equity by $47.1 million. Total stockholder's equity has been impacted by declines in the market value of the Company's available-for-sale investment securities portfolio. The market value decline, resulting from higher interest rate environment, has generated unrealized losses in the available-for-sale portfolio. Unrealized losses from the available-for-sale investment securities portfolio are recorded, net of tax, in accumulated other comprehensive income (loss) in the statement of stockholders' equity. Changes in the fair value of securities and net defined pension plan gains negatively impacted equity by $11.3 million in 2024 compared to an increase of $33.7 million in 2023. The impact to equity due to other comprehensive income (loss) is not included in regulatory capital.
Showing the first 40 of 62 pairs. Open the source sections for the rest.
Rearranged current paragraphs (6)
Current report — wording carried from elsewhere
Company’s collateral position on adversely classified loans; or management’s qualitative judgment of the implication of trends in its loan portfolio or in the broader economy.
Current report — wording carried from elsewhere
Act of 1982 ("TEFRA") adjustment applicable to nondeductible interest expenses. Taxable equivalent basis adjustments were $4.7 million, $5.3 million and $5.6 million for the years ended December 31, 2024, 2023 and 2022, respectively.
Current report — wording carried from elsewhere
Investment securities interest income decreased $1.8 million, or 6.0%, and contributed to the decline in net interest income during 2024. The decrease in investment securities income was driven by a decrease in average securities balances of
Current report — wording carried from elsewhere
Total deposits increased by $259.9 million, or 4.8%, to $5.721 billion, at December 31, 2023 compared to $5.461 billion December 31, 2022. The increase in deposits was attributable to increases in commercial and public fund deposits. Commercial deposits increased $141.2 million, or 6.8% and represented 38.9% and 38.2% of total deposits at December 31,
Current report — wording carried from elsewhere
2023 and 2022, respectively. Public fund deposits increased by $133.1 million, or 9.3% and represented 27.3% and 26.1% of total deposits at December 31, 2023 and 2022, respectively. Additionally, brokered deposits increased $125.4 million and represented 2.4% and 0.3% of total deposits at December 31, 2023 and 2022, respectively. Retail deposits decreased $139.8 million, or 7.2% and represented 31.4% and 35.4% of total deposits at December 31, 2023 and 2022, respectively.
Current report — wording carried from elsewhere
During 2024, average total short-term borrowings decreased by $100.5 million to $66.3 million. Ending balances of short-term and miscellaneous borrowings decreased to zero at December 31, 2024 compared to $50.0 million at December 31, 2023. There were no long-term borrowings outstanding during 2024 and 2023.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
Cash Sweep One-Way Buy program. As of December 31, 2023, the total amount available to the Bank via this program was $100.0 million, of which $10.0 million was drawn. The Bank is also a member of the American Financial Exchange (AFX) where overnight fed funds purchased can be obtained from other banks on the exchange that have approved the Bank for an unsecured, overnight line. These funds are only available if the approving banks have an ‘offer’ out to sell that day. As of December 31, 2023, the total amount approved for the Bank via AFX banks was $319.0 million and none was outstanding at year end.