HILLS BANCORPORATION
For the period ended Dec 31, 2024. Filed Mar 14, 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 Mar 14, 2025
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What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-03-05.
0000732417-24-000009
Item 7. Management's Discussion and Analysis of Financial Condition and Results of OperationCurrent report: 10-K
Period ended 2024-12-31; filed 2025-03-14.
0000732417-25-000015
Item 7. Management's Discussion and Analysis of Financial Condition and Results of OperationThe 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 155 previous paragraphs and 159 current paragraphs.
96 unchanged; 53 reworded; 9 added; 6 removed; 0 previous and 1 current paragraphs rearranged.
Tables are not compared: 28 previous and 28 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 (9)
Current report
Through the end of 2024, incoming economic data per the Beige Book for the Company's region continue to show slight growth in the labor market and consumer spending while construction and real estate activity was flat. Also, prices were up modestly and wages rose moderately. Farm incomes in 2024 were below those of 2023. GDP growth for the fourth quarter of 2.3% was slower than expected with underlying demand from consumers increasing slightly and businesses spending decreasing slighlty, with the national unemployment rate continuing to remain low. Inflation, however, has been slower to come down than expected after the rapid decline observed in 2023, and the cumulative effect of elevated prices compared with the pre-pandemic era may be weighing on consumer sentiment. While many economists continue to expect U.S. economic conditions consistent with a soft-landing as the economy decelerated over the remainder of 2024, persistent inflation may yet force additional Fed rate hikes, further raising the odds of a mild recession.
Current report
•Deposits increased $63.35 million in 2024 to $3.346 billion primarily due to increases in time deposits of approximately $49.58 million and increases in savings accounts of $27.35 million offset by a decrease of $19.36 million in noninterest-bearing deposits.
Current report
Such factors are used to adjust the historical probabilities of default and severity of loss so that they reflect management expectation of future conditions based on a reasonable and supportable forecast. Management utilizes a qualitative factor framework to provide a qualitative estimate of the expected credit losses inherent in the loan portfolio in relation to potential limitations of the quantitative model. The framework provides for a level of risk approach to measure risk in each loan segment that may not be captured in the quantitative methodology, including improved risk environment, no additional risk, minimal additional risk, moderate risk and major or significant additional risk. The framework also includes a weighting component for management to consider which qualitative factors would have the highest impact on potential loan losses within each loan segment. Management uses the qualitative factor framework within the allowance for credit losses calculation to assess the risk level environment for each qualitative factor and weightings for each loan segment which is supported by various information including publicly available information, internal information specifically developed by management, or other relevant and reliable information.
Current report
The fourth factor affecting the Company’s net income is noninterest expenses, primarily the increase in other noninterest expenses. See the Noninterest Expenses section later in Item 7.
Current report
For the overview discussion of the comparison of the Company’s results of operations for the fiscal year ended December 31, 2023 to the year ended December 31, 2022, please refer to Part II, Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on March 5, 2024.
Current report
The net gain on the sale of loans was $2.34 million and $1.54 million for the years ended December 31, 2024 and 2023, respectively, an increase of 51.98% for the year ended December 31, 2024 compared to the same period in 2023. The amount of the net gain on sale of secondary market mortgage loans in each year can vary significantly. The volume of activity in these types of loans is directly related to the level of interest rates as well as the current origination and refinancing activity. The servicing of the loans sold into the secondary market is not retained by the Company so these loans do not provide an ongoing stream of income.
Current report
Other noninterest income increased $0.97 million in 2024 primarily due to the recognition of approximately $1.1 million of incentive and marketing bonuses from the VISA payment network growth agreement.
Current report
The Company completed a balance sheet repositioning related to its investment securities portfolio in December 2024. This consisted of the sale of lower-yielding AFS debt securities with an amortized cost of $135.05 million, resulting in a pre-tax realized loss on the sale of $5.22 million, which was recorded in December of 2024. All of the proceeds from the sale of these securities were used to purchase AFS debt securities at higher yields to improve income going forward, while maintaining the liquidity provided by the investment portfolio.
Current report
Other noninterest expenses increased $1.78 million or 92.12% in 2024. The primary reasons for the increase are increased deferred compensation expense of $0.62 million from the increased stock price valuation, increased operating losses from fraudulent ATM and debit card activities of $0.41 million, and the loss on disposal of property of $0.62 million.
Removed paragraphs (6)
Previous report
•Deposits decreased $74.59 million in 2023 to $3.283 billion primarily due to decreases in investment checking and savings accounts of approximately $324.82 million, decreases in brokered deposits and insured cash sweep (ICS) deposits of approximately $15.73 million, decrease of $47.05 million in non-interest bearing deposits, offset by an increase of $313.01 million in time deposits.
Previous report
The fourth factor affecting the Company’s net income is noninterest expenses, primarily the increase in salaries and related employee benefits due to annual compensation increases and increased FDIC insurance assessment expense from rate increases.
Previous report
The framework requires that management's estimate reflects credit losses over the full remaining expected life of each credit and considers expected future changes in macroeconomic conditions. The adoption resulted in the recognition on January 1, 2021 of cumulative effect adjustments of $2.75 million related to the ACL for loans and $3.58 million related to the ACL on off-balance sheet credit exposures.
Previous report
Other noninterest income decreased $0.79 million in 2023 primarily due to the decrease in tax credit real estate investments based on the investments year-end audited financial statements.
Previous report
Salaries and employee benefits increased $1.43 million in 2023 primarily due to annual salary adjustments.
Previous report
The FDIC insurance assessment expense increased $0.72 million compared to 2022 due to rate increases enacted for 2023.
Reworded paragraphs (53)
Previous wording
•The ability of the Company to develop and maintain secure and reliable technology systems.
Current wording
•The ability of the Company to develop and maintain secure and reliable technology systems, including to detect and prevent the occurrence of fraudulent activity, breaches, or failures of our information security controls or cyber-security related incidents, including as a result of sophisticated attacks using artificial intelligence and similar tools.
Previous wording
The global economy continues to shrug off elevated inflation and rising interest rates, though economic growth is likely to moderate into 2024. Global inflation may also continue to moderate slowly, with some supply constraints a key risk. After a strong first half, higher interest rates are likely to begin dampening U.S. consumer spending going in 2024 and temper inflation somewhat in the process. Many economists continue to expect U.S. economic conditions consistent with a soft-landing as the economy decelerates into early next year. However, persistent inflation may force additional Fed rate hikes, raising the odds of a mild recession in 2024. The tight labor market is likely to ease in coming months, and the restart of student loan payments and tougher lending standards should further decelerate economic activity. Higher borrowing costs continue to present a risk to the economy, with consumer and business budgets accounting for higher interest costs. In addition, federal debt service costs totaled 17% of federal spending as of January 2024. Nonetheless, interest rate levels and energy prices, in combination with global economic conditions, fiscal and monetary policy and the level of regulatory and government scrutiny of financial institutions will likely continue to impact our results into 2024.
Current wording
Higher borrowing costs continue to present a risk to the economy, with consumer and business budgets accounting for higher interest costs. Interest rate levels and energy prices, in combination with global economic conditions, fiscal and monetary policy and the level of regulatory and government scrutiny of financial institutions will likely continue to impact our results in 2024 and beyond.
Previous wording
Our credit administration continues to closely monitor and analyze the higher risk segments within the loan portfolio, tracking loan payment deferrals, customer liquidity and providing timely reports to senior management and the board of directors. Based on the Company’s capital levels, prudent underwriting policies, loan concentration diversification and our geographic footprint, senior management is cautiously optimistic that the Company is positioned to continue managing the impact of the varied set of risks and uncertainties currently impacting the economy and remain adequately capitalized. However, the Company may be required to make additional credit loss provisions as warranted by the extremely fluid economic condition.
Current wording
Our credit administration continues to closely monitor and analyze the higher risk segments within the loan portfolio, tracking loan payment deferrals, customer liquidity and providing timely reports to senior management and the board of directors. Based on the Company’s capital levels, prudent underwriting policies, loan concentration diversification and our geographic footprint, senior management is cautiously optimistic that the Company is positioned to continue managing the impact of the varied set of risks and uncertainties currently impacting the economy and remain adequately capitalized. However, the Company may be required to make additional credit loss provisions as warranted by the extremely fluid economic conditions and continued migration in the loan portfolio towards the special mention risk rating category.
Previous wording
The Company is a bank holding company engaged, through its wholly-owned subsidiary bank, in the business of commercial banking. The Company’s subsidiary is Hills Bank and Trust Company, Hills, Iowa. The Bank was formed in Hills, Iowa in 1904. The Bank is a full-service commercial bank extending its services to individuals, businesses, governmental units and institutional customers primarily in the communities of Hills, Iowa City, Coralville, North Liberty, Lisbon, Mount Vernon, Kalona, Wellman, Cedar Rapids, Marion and Washington, Iowa.
Current wording
The Company is a bank holding company engaged, through its wholly-owned subsidiary bank, in the business of commercial banking. The Company’s subsidiary is Hills Bank and Trust Company, Hills, Iowa. The Bank was formed in Hills, Iowa in 1904. The Bank is a full-service commercial bank extending its services to individuals, businesses, governmental units and institutional customers primarily in the communities of Hills, Iowa City, Coralville, North Liberty, Lisbon, Mount Vernon, Kalona, Wellman, Cedar Rapids, Marion, Washington, and Williamsburg, Iowa.
Previous wording
The Company’s net income for 2023 was $38.18 million compared to $47.75 million in 2022 and $48.09 million in 2021. Diluted earnings per share were $4.16, $5.15, and $5.16 for the years ended December 31, 2023, 2022 and 2021, respectively.
Current wording
The Company’s net income for 2024 was $47.60 million compared to $38.18 million in 2023 and $47.75 million in 2022. Diluted earnings per share were $5.26, $4.16, and $5.15 for the years ended December 31, 2024, 2023 and 2022, respectively.
Previous wording
The Bank’s net interest income is the largest component of the Bank’s revenue, and is a function of the average earning assets and the net interest margin percentage. Net interest margin is the ratio of net interest income to average earning assets. For the years ended December 31, 2023 and 2022, the Bank achieved a net interest margin of 2.86% and 3.00%, respectively. For the year ended December 31, 2023, net interest income on a tax equivalent basis decreased by $0.86 million. In 2023, interest income increased $16.00 million due to growth of $151.91 million in the Bank's average earning assets and increased $24.09 million due to increased interest rates. This was offset by increased interest expense of $24.22 million due to interest rate increases and $16.73 million due to increased volume of certificates of deposit and borrowings.
Current wording
The Bank’s net interest income is the largest component of the Bank’s revenue, and is a function of the average earning assets and the net interest margin percentage. Net interest margin is the ratio of net interest income to average earning assets. For the years ended December 31, 2024 and 2023, the Bank achieved a net interest margin of 2.78% and 2.86%, respectively. For the year ended December 31, 2024, net interest income on a tax equivalent basis increased by $3.08 million. In 2024, interest income increased $10.72 million due to growth of $225.10 million in the Bank's average earning assets and increased $22.94 million due to higher interest rates. This was offset by increased interest expense of $15.16 million due to higher interest rates and $15.42 million due to increased volume of certificates of deposit and borrowings.
Previous wording
•Total assets were $4.342 billion, an increase of $361.19 million since December 31, 2022, primarily due to loan growth as described further below.
Current wording
•Total assets were $4.588 billion, an increase of $246.58 million since December 31, 2023, primarily due to increased investment securities as described further below.
Previous wording
•Cash and cash equivalents were $59.48 million, an increase of $22.84 million since December 31, 2022.
Current wording
•Cash and cash equivalents were $123.40 million, an increase of $63.92 million since December 31, 2023.
Previous wording
•Loans, net of allowance for credit losses and unamortized fees and costs, totaling $3.389 billion, an increase of $322.39 million since December 31, 2022. The increase is primarily attributable to growth of approximately $105.49 million in construction loans, $90.31 million in 1 to 4 family first mortgages, $19.57 million in junior mortgages, $34.06 million in multi-family mortgages, $37.62 million in commercial and financial loans and $24.59 million in farmland mortgages. Loans held for sale increased $.36 million since December 31, 2022.
Current wording
•Loans, net of allowance for credit losses and unamortized fees and costs, totaling $3.388 billion, a decrease of $1.85 million since December 31, 2023. The decrease is primarily attributable to declines of approximately $35.09 million in construction loans, $47.21 million in 1 to 4 family first mortgages, $2.97 million in junior mortgages, $8.27 million in commercial and financial loans and $5.40 million in farmland mortgages. These decreases were offset by increases of $21.75 million in multi-family mortgages and $81.41 million in commercial mortgages. Increases in multi-family and commercial real estate were primarily due to the completion of large construction projects that were put on permanent financing during 2024. Loans held for sale increased $1.95 million since December 31, 2023.
Previous wording
•Deferred income tax assets were $21.27 million, a decrease of $2.79 million since December 31, 2022. The decrease is primarily attributable to lower unrealized losses on available for sale investments of $35.42 million as of December 31, 2023.
Current wording
•Deferred income tax assets were $21.13 million, a decrease of $0.14 million since December 31, 2023.
Previous wording
•Short-term borrowings increased $136.94 million as of December 31, 2023, consisting of $219.00 million of borrowings from the Bank Term Funding Program, compared to short-term borrowings of $82.06 million as of December 31, 2022, consisting of Federal Funds Purchased. FHLB borrowings increased $256.65 million as of December 31, 2023, compared to $40.00 million as of December 31, 2022. Borrowings were primarily used to fund strong loan growth and increased customer deposit usage.
Current wording
•Short-term borrowings increased $327.64 million as of December 31, 2024, consisting of $109.00 million of borrowings from the Bank Term Funding Program and $437.64 million of federal funds purchased, compared to the Bank Term Funding Program borrowings of $219 million as of December 31, 2023. FHLB borrowings decreased $169.60 million as of December 31, 2024.
Previous wording
•Stockholders’ equity increased $42.03 million to $470.29 million in 2023, with dividends having been paid in 2023 of $9.69 million.
Current wording
•Stockholders’ equity increased $22.40 million to $492.69 million in 2024, with dividends having been paid in 2024 of $10.05 million.
Previous wording
The return on average equity was 8.63% in 2023 compared to 11.32% in 2022. The Company remains well-capitalized as of December 31, 2023 with a CBLR of 12.77%. The minimum regulatory guideline is 9%. The Company paid a dividend per share of $1.05 in 2023, $1.00 per share in 2022 and $0.94 in 2021.
Current wording
The return on average equity was 10.00% in 2024 compared to 8.63% in 2023. The Company remains well-capitalized as of December 31, 2024 with a CBLR of 12.69%. The minimum regulatory guideline is 9%. The Company paid a dividend per share of $1.10 in 2024, $1.05 per share in 2023 and $1.00 in 2022.
Previous wording
Based upon this methodology, management establishes an asset-specific allowance for loans that do not share risk characteristics with other loans based on the amount of expected credit losses calculated on those loans and charges off amounts determined to be uncollectible. Factors we consider in measuring the extent of expected credit loss include payment status, collateral value, borrower financial condition, guarantor support and the probability of collecting scheduled principal and interest payments when due.
Current wording
Based upon this methodology, management establishes an asset-specific allowance for loans that do not share risk characteristics with other loans based on the amount of expected credit losses calculated on those loans and charges off amounts determined to be uncollectible. Factors we consider in determining if loans share similar risk characteristics include payment status, collateral value, borrower financial condition, guarantor support and the probability of collecting scheduled principal and interest payments when due.
Previous wording
Such factors are used to adjust the historical probabilities of default and severity of loss so that they reflect management expectation of future conditions based on a reasonable and supportable forecast. To the extent the lives of the loans in the portfolio extend beyond the period for which a reasonable and supportable forecast can be made, the bank reduces, on a straight-line basis over the remaining life of the loans, the adjustments so that model reverts back to the historical rates of default and severity of loss.
Current wording
To the extent the lives of the loans in the portfolio extend beyond the period for which a reasonable and supportable forecast can be made which management has determined to be four quarters, the bank reduces, on a straight-line basis over the remaining life of the loans, the adjustments so that model reverts back to the historical rates of default and severity of loss.
Previous wording
Total assets at December 31, 2023 increased $361.19 million, or 9.07%, from the prior year-end. The largest growth in assets in 2023 occurred in net loans which increased $322.39 million for the year ended December 31, 2023. Loans held for sale to the secondary market increased $0.36 million for the year ended December 31, 2023. Loans held for investment represent the largest component of the Bank’s earning assets. Loans held for investment were $3.439 billion and $3.108 billion at December 31, 2023 and 2022, respectively.
Current wording
Total assets at December 31, 2024 increased $246.58 million, or 5.68%, from the prior year-end. The largest growth in assets in 2024 occurred in investment securities which increased $176.99 million for the year ended December 31, 2024 compared to the prior year. Loans held for sale to the secondary market increased $1.95 million for the year ended December 31, 2024. Loans held for investment represent the largest component of the Bank’s earning assets. Loans held for investment were $3.438 billion and $3.439 billion at December 31, 2024 and 2023, respectively.
Previous wording
The local economy that generated consistent demand for loans was a significant factor in the increase in net loans. Significant loan growth was noted in the following areas: approximately $105.49 million in construction loans, $90.31 million in 1 to 4 family first mortgages, $34.06 million in multi-family mortgages, $37.62 million in commercial financial loans, $24.59 million in farmland mortgages, and $19.57 million in junior mortgages. Given the current economic environment and the potential for a recession in 2024, the increase in net loans in 2023 may not continue into 2024, and as a result, may not be indicative of future performance.
Current wording
Loans held for investment was down slightly for 2024 compared to 2023, with significant changes as follows: declines of approximately $35.09 million in construction loans, $47.21 million in 1 to 4 family first mortgages, $2.97 million in junior mortgages, $8.27 million in commercial and financial loans and $5.40 million in farmland mortgages. These decreases were offset by increases of $21.75 million in multi-family mortgages and $81.41 million in commercial mortgages. Increases in multi-family and commercial real estate were primarily due to the completion of large construction projects that were put on permanent financing during 2024. Given the current economic environment and the potential for lower interest rates, the decrease in net loans in 2024 may not continue into 2025, and as a result, may not be indicative of future performance.
Previous wording
On a net basis, the Company originated $337.69 million in loans to customers for the year ended December 31, 2023 compared to loans originated of $447.84 million for the year ended December 31, 2022. The Company has not historically engaged in significant participation activity and does not purchase participations from outside its established trade area. The Company’s policy allows for the purchase or sale of participations related to existing customers or to participate in community development activity. The Company held participations purchased of $17.04, $16.20 and $17.18 million as of December 31, 2023, 2022 and 2021, respectively. The participations purchased were less than one percent of loans held for investment for each of the three years.
Current wording
On a net basis, the Company originated $3.66 million in loans to customers for the year ended December 31, 2024 compared to loans originated of $337.69 million for the year ended December 31, 2023, a significant slowdown in the local economy. The Company has not historically engaged in significant participation activity and does not purchase participations from outside its established trade area. The Company’s policy allows for the purchase or sale of participations related to existing customers or to participate in community development activity. The Company held participations purchased of $16.52, $17.04 and $16.20 million as of December 31, 2024, 2023 and 2022, respectively. The participations purchased were less than one percent of loans held for investment for each of the three years.
Previous wording
The Company did experience significant overall increases in its loans held for investment in 2023 compared to 2022 though the loan composition in 2023 remained comparable to 2022. Residential real estate loans, including first and junior liens, were $1,365.82 million and $1,255.94 million as of December 31, 2023 and 2022, respectively. The dollar total of residential real estate loans increased 8.75% in 2023 and increased 22.66% in 2022. Residential real estate loans were 39.72% of the loan portfolio at December 31, 2023 and 40.41% at December 31, 2022. Agricultural loans, including production and mortgages, were $396.95 million and $369.28 million as of December 31, 2023 and 2022, respectively, an increase of 7.49% in 2023 compared to 2022. Agricultural loans represented 11.54% and 11.88% of the Company's loan portfolio as of December 31, 2023 and 2022, respectively. Construction loans were $394.13 million and $288.65 million as of December 31, 2023 and 2022, respectively, an increase of 36.54% in 2023 compared to 2022. Construction loans represented 11.46% and 9.29% of the Company's loan portfolio as of December 31, 2023 and 2022, respectively. Commercial and financial loans were $307.19 million and $269.57 million as of December 31, 2023 and 2022, respectively, an increase of 13.96% in 2023 compared to 2022. Commercial and financial loans represented 8.93% and 8.67% of the Company's loan portfolio as of December 31, 2023 and 2022, respectively. Multi-family real estate loans were $471.01 million and $436.95 million as of December 31, 2023 and 2022, respectively, an increase of 7.79% in 2023 compared to 2022. Multi-family real estate loans represented 13.70% and 14.06% of the Company's loan portfolio as of December 31, 2023 and 2022, respectively. Commercial real estate loans totaled $416.67 million at December 31, 2023, a 3.43% increase over the December 31, 2022 total of $402.84 million. Commercial real estate loans increased 0.36% in 2022. Commercial real estate loans represented 12.12% and 12.96% of the Company’s loan portfolio as of December 31, 2023 and 2022, respectively. The Company monitors its commercial real estate level so that it does not have a concentration in that category that exceeds 300% of its capital. Commercial real estate loan concentration was 186.24% of capital as of December 31, 2023.
Current wording
The Company did experience minimal change in its loans held for investment in 2024 compared to 2023 though the loan composition in 2024 changed compared to 2023 as follows. Residential real estate loans, including first and junior liens, were $1,316.63 million and $1,365.82 million as of December 31, 2024 and 2023, respectively. The dollar total of residential real estate loans decreased 3.60% in 2024 and increased 8.75% in 2023. Residential real estate loans were 38.27% of the loan portfolio at December 31, 2024 and 39.72% at December 31, 2023. Agricultural loans, including production and mortgages, were $394.45 million and $396.95 million as of December 31, 2024 and 2023, respectively, a decrease of 0.63% in 2024 compared to 2023. Agricultural loans represented 11.47% and 11.54% of the Company's loan portfolio as of December 31, 2024 and 2023, respectively. Construction loans were $359.04 million and $394.13 million as of December 31, 2024 and 2023, respectively, an decrease of 8.90% in 2024 compared to 2023. Construction loans represented 10.44% and 11.46% of the Company's loan portfolio as of December 31, 2024 and 2023, respectively. Commercial and financial loans were $298.92 million and $307.19 million as of December 31, 2024 and 2023, respectively, a decrease of 2.69% in 2024 compared to 2023. Commercial and financial loans represented 8.69% and 8.93% of the Company's loan portfolio as of December 31, 2024 and 2023, respectively. Multi-family real estate loans were $492.76 million and $471.01 million as of December 31, 2024 and 2023, respectively, an increase of 4.62% in 2024 compared to 2023. Multi-family real estate loans represented 14.33% and 13.70% of the Company's loan portfolio as of December 31, 2024 and 2023, respectively. Commercial real estate loans totaled $498.08 million at December 31, 2024, a 19.54% increase over the December 31, 2023 total of $416.67 million. Commercial real estate loans represented 14.49% and 12.12% of the Company’s loan portfolio as of December 31, 2024 and 2023, respectively. The Company monitors its commercial real estate level so that it does not have a concentration in that category that exceeds 300% of its capital. Commercial real estate loan concentration was 180.49% of capital as of December 31, 2024.
Previous wording
Total deposits decreased by $74.59 million in 2023. Deposits decreased by $176.63 million in 2022. As of June 30, 2023 (latest data available from the FDIC), Johnson County total deposits were $13.862 billion and the Company’s deposits were $2.213 billion, which represent a 15.96% market share. The Company had eight office locations in Johnson County as of June 30, 2023. The total banking locations in Johnson County were 48 as of June 30, 2023. At June 30, 2022, the Company’s deposits were $2.317 billion or a 17.80% market share. As of June 30, 2023, Linn County total deposits were $8.522 billion and there were 102 total banking locations in the county. The seven Linn County offices of the Company had deposits of $747 million or a 8.8% share of the market. The Company’s Linn County deposits at June 30, 2022 were $813 million and represented a 9.6% market share. As of June 30, 2023, the Company’s three Washington County offices had deposits of $324 million which was 33.9% of the County’s total deposits of $955 million. Washington County had a total of 13 banking locations as of June 30, 2023. In 2022, the Company’s Washington County deposits were $317 million or a 33.5% market share.
Current wording
Total deposits increased by $63.35 million in 2024. Deposits decreased by $74.59 million in 2023. As of June 30, 2024 (latest data available from the FDIC), Johnson County total deposits were $13.546 billion and the Company’s deposits were $2.196 billion, which represent a 16.21% market share. The Company had eight office locations in Johnson County as of June 30, 2024. The total banking locations in Johnson County were 47 as of June 30, 2024. At June 30, 2023, the Company’s deposits were $2.213 billion or a 15.96% market share. As of June 30, 2024, Linn County total deposits were $8.605 billion and there were 99 total banking locations in the county. The seven Linn County offices of the Company had deposits of $704 million or a 8.18% share of the market. The Company’s Linn County deposits at June 30, 2023 were $747 million and represented a 8.8% market share. As of June 30, 2024, the Company’s three Washington County offices had deposits of $335 million which was 34.25% of the County’s total deposits of $978 million. Washington County had a total of 13 banking locations as of June 30, 2024. In 2023, the Company’s Washington County deposits were $324 million or a 33.9% market share.
Previous wording
Investment securities increased $12.60 million in 2023. In 2022, investment securities increased by $226.67 million. The investment portfolio consists of $779.42 million of securities that are stated at fair value, with any unrealized gain or loss, net of income taxes, reported as a separate component of stockholders’ equity. The securities portfolio is used for liquidity and pledging purposes and to provide a rate of return that is acceptable to management.
Current wording
Investment securities increased $176.99 million in 2024. In 2023, investment securities increased by $12.60 million. The investment portfolio consists of $944.14 million of securities that are stated at fair value, with any unrealized gain or loss, net of income taxes, reported as a separate component of stockholders’ equity. The securities portfolio is used for liquidity and pledging purposes and to provide a rate of return that is acceptable to management. The Company completed a balance sheet repositioning related to its investment securities portfolio in December 2024. This consisted of the sale of lower-yielding AFS debt securities with an amortized cost of $135.05 million, resulting in a pre-tax realized loss on the sale of $5.22 million, which was recorded in December of 2024. All of the proceeds from the sale of these securities were used to purchase AFS debt securities at higher yields to improve income going forward, while maintaining the liquidity provided by the investment portfolio.
Previous wording
During 2023, the major funding source for the growth in loans and other assets was from short-term borrowings in addition to FHLB borrowings. In 2022, the major source of funding for the growth in loans was cash and cash equivalents in addition to federal funds purchased and FHLB borrowings. Brokered deposits totaled $24.22 million and $31.74 million as of December 31, 2023 and 2022, respectively. Total advances from the FHLB were $296.65 million at December 31, 2023 and $40 million in 2022. Total federal funds purchased were none as of December 31, 2023 and $82.06 million as of December 31, 2022. Total funds purchased from the Bank Term Funding program was $219.00 million as December 31, 2023, and none in 2022. The federal funds purchased, Bank Term Funding Program, and FHLB funding sources are considered when loan growth exceeds core deposit increases and the interest rates on funds borrowed from the FHLB or other sources are favorable compared to other funding alternatives.
Current wording
During 2024, the major funding source for loans and other assets was from short-term borrowings, primarily federal funds purchased, in addition to FHLB borrowings. In 2023, the major funding source of the growth in loans and other assets was from short-term borrowings in addition to FHLB borrowings. Brokered deposits totaled $34.75 million and $24.22 million as of December 31, 2024 and 2023, respectively. Total advances from the FHLB were $127.05 million at December 31, 2024 and $296,648 million in 2023. Total federal funds purchased were $437.64 million as of December 31, 2024 and none as of December 31, 2023. Total funds purchased from the Bank Term Funding program was $109.00 million as of December 31, 2024 and $219.00 million as December 31, 2023. The federal funds purchased and FHLB funding sources are considered when loan growth exceeds core deposit increases and the interest rates on funds borrowed from the FHLB or other sources are favorable compared to other funding alternatives.
Previous wording
Stockholders’ equity was $470.29 million at December 31, 2023 compared to $428.26 million at December 31, 2022. The Company’s capital resources are discussed in detail in the Liquidity and Capital Resources section. Over the last five years, the Company has realized cumulative earnings of $217.98 million and paid shareholders dividends of $43.75 million, or 20.07% of earnings, while maintaining capital ratios in excess of regulatory requirements.
Current wording
Stockholders’ equity was $492.69 million at December 31, 2024 compared to $470.29 million at December 31, 2023. The Company’s capital resources are discussed in detail in the Liquidity and Capital Resources section. Over the last five years, the Company has realized cumulative earnings of $220.27 million and paid shareholders dividends of $46.14 million, or 20.95% of earnings, while maintaining capital ratios in excess of regulatory requirements.
Previous wording
Net income for 2023 decreased by $9.58 million or 20.06% and diluted earnings per share decreased by 19.22%. In 2023, net interest income, before credit loss expense, decreased by $1.12 million due to the following reasons: 1) increase in interest income of $39.83 million primarily due to higher loan growth and higher interest rates; and 2) increase in interest expense of $40.95 million primarily due to increased interest rates on deposits, an increase in short term borrowings of $136.94 million, and an increase in Federal Home Loan Bank borrowings of $256.65 million. Noninterest income increased by $0.83 million primarily due to an increase in trust fees, the credit loss expense increased by $9.28 million and total noninterest expenses increased by $2.82 million primarily due to an increase in salaries and employee benefits and an increase in FDIC assessments.
Current wording
Net income for 2024 increased by $9.43 million or 24.70% and diluted earnings per share increased by 26.44%. In 2024, net interest income, before credit loss expense, increased by $1.94 million due to the following reasons: 1) increase in interest income of $32.52 million primarily due to higher loan and investment balances and higher interest rates; and 2) increase in interest expense of $30.58 million primarily due to increased interest rates on deposits and higher borrowings balances throughout 2024 compared to 2023. Noninterest income, excluding loss on sale of investment securities, increased by $3.43 million primarily due to increased trust fees and net gain on sale of loans. The credit loss expense decreased by $13.41 million and total noninterest expenses increased by $1.84 million primarily due to an increase in other noninterest expenses.
Previous wording
Annual fluctuations in the Company's net income are driven primarily by four factors. The first factor is credit loss expense. The majority of the Company's interest earning assets are in loans outstanding, which amounted to more than $3.438 billion at December 31, 2023. Credit loss expense was $15.62 million in 2023 compared to $6.34 million in 2022. The increase in expense when compared to 2022 is primarily attributable to the decreased credit quality in specific relationships leading to an increased allowance for credit losses for individually analyzed loans, increases in loan volume during 2023, and an increase in loss rates resulting from increased charge-off activity. The Company believes that credit loss expense is expected to be dependent on the Company's loan growth, local economic conditions, and asset quality.
Current wording
Annual fluctuations in the Company's net income are driven primarily by four factors. The first factor is credit loss expense. The majority of the Company's interest earning assets are in loans outstanding, which amounted to more than $3.438 billion at December 31, 2024. Credit loss expense was $2.21 million in 2024 compared to $15.62 million in 2023. The decrease in expense when compared to 2023 is primarily attributable to not having significant specific relationships with decreasing credit quality resulting in chargeoffs in 2024 when compared to 2023. Another factor leading to lower credit loss expense was decreased outstanding commitments which resulted in a lower allowance for credit losses on off-balance sheet credit exposures. The Company believes that credit loss expense is expected to be dependent on the Company's loan growth, local economic conditions, and asset quality.
Previous wording
The second factor affecting the Company’s net income is the interaction between changes in net interest margin and changes in average volumes of the Company's earnings assets. Net interest income of $113.89 million for 2023 was derived from the Company’s $4.056 billion of average earning assets and its tax-equivalent net interest margin of 2.86%. Average earning assets in 2022 were $3.904 billion and the tax-equivalent net interest margin was 3.00%. Net interest income for the Company decreased primarily as a result of interest income on increased loan volume and rates offset by increased interest expense from increased interest rates, including on borrowings, certificates of deposit, and interest-bearing deposits. The Company expects net interest compression to impact earnings for the foreseeable future due to competition for loans and deposits. The Company believes growth in net interest income will be contingent on the growth of the Company’s earning assets, increasing yield on loans and the ongoing interest rate stance of the Federal Reserve Board.
Current wording
The second factor affecting the Company’s net income is the interaction between changes in net interest margin and changes in average volumes of the Company's earnings assets. Net interest income of $115.82 million for 2024 was derived from the Company’s $4.281 billion of average earning assets and its tax-equivalent net interest margin of 2.78%. Average earning assets in 2023 were $4.056 billion and the tax-equivalent net interest margin was 2.86%. Net interest income for the Company increased primarily as a result of interest income on higher loan and investment balances and rates offset by increased interest expense from increased interest rates, including on borrowings, certificates of deposit, and interest-bearing deposits as well as higher balances of certificates of deposit and borrowings. The Company expects net interest compression to impact earnings for the foreseeable future due to competition for loans and deposits. The Company believes growth in net interest income will be contingent on the growth of the Company’s earning assets, increasing yield on loans and the ongoing interest rate stance of the Federal Reserve Board.
Previous wording
The third factor affecting the Company’s net income is noninterest income, primarily the increase in trust fees and service charges and fees income. Trust fees were $13.58 million and $12.28 million for the twelve months ended December 31, 2023 and 2022, respectively, an increase of 10.53%. This is primarily driven by the increase in assets under management of $0.383 billion from $2.262 billion as of December 31, 2022 to $2.645 billion as of December 31, 2023.
Current wording
The third factor affecting the Company’s net income is noninterest income, primarily the increase in trust fees. Trust fees were $15.26 million and $13.58 million for the years ended December 31, 2024 and 2023, respectively, an increase of 12.40%. This is primarily driven by the increase in assets under management of $0.267 billion from $2.645 billion as of December 31, 2023 to $2.912 billion as of December 31, 2024, an increase of 10.09%. See the Noninterest Income section later in Item 7.
Previous wording
Net interest income is the excess of the interest and fees received on interest-earning assets over the interest paid on the interest-bearing liabilities. The factors that have the greatest impact on net interest income are the volume of average earning assets and interest-bearing liabilities and the net interest margin. The volume of average earning assets has continued to grow each year, primarily due to increased loan growth in 2023. The volume of interest-bearing liabilities increased in 2023 primarily due to increased volume in certificates of deposit and borrowings. Increased interest rates led to increases in interest income as well as interest expense on interest-bearing deposits, certificates of deposit and borrowings. The net interest margin was 2.86% in 2023, 3.00% in 2022 and 2.75% in 2021. The measure is shown on a tax-equivalent basis using a rate of 21% for 2023, 2022 and 2021 to make the interest earned on taxable and nontaxable assets more comparable. Interest income and expense for 2023, 2022 and 2021 are indicated on the following table:
Current wording
Net interest income is the excess of the interest and fees received on interest-earning assets over the interest paid on the interest-bearing liabilities. The factors that have the greatest impact on net interest income are the volume of average earning assets and interest-bearing liabilities and the net interest margin. The volume of average earning assets has continued to grow each year, primarily due to higher loan and investment balances in 2024. The volume of interest-bearing liabilities increased in 2024 primarily due to increased volume in certificates of deposit and borrowings. Increased interest rates led to increases in interest income as well as interest expense on interest-bearing deposits, certificates of deposit and borrowings. The net interest margin was 2.78% in 2024, 2.86% in 2023 and 3.00% in 2022. The measure is shown on a tax-equivalent basis using a rate of 21% for 2024, 2023 and 2022 to make the interest earned on taxable and nontaxable assets more comparable. Interest income and expense for 2024, 2023 and 2022 are indicated on the following table:
Previous wording
(1) Presented on a tax equivalent basis using a rate of 21% for 2023, 2022 and 2021. Interest income includes certain loan origination and document preparation fees, which comprise approximately 1.5% of the amounts indicated.
Current wording
(1) Presented on a tax equivalent basis using a rate of 21% for 2024, 2023 and 2022. Interest income includes certain loan origination and document preparation fees, which comprise approximately 1.4% of the amounts indicated.
Previous wording
(2)Net interest spread is the difference between the yield on average interest-earning assets and the yield on average interest-paying liabilities stated on a tax equivalent basis using a federal rate of 21% for 2023, 2022 and 2021. The net interest spread decreased 47 basis points in 2023 compared to 2022 and the net interest spread increased 25 basis points compared to 2021.
Current wording
(2)Net interest spread is the difference between the yield on average interest-earning assets and the yield on average interest-paying liabilities stated on a tax equivalent basis using a federal rate of 21% for 2024, 2023 and 2022. The net interest spread decreased 23 basis points in 2024 compared to 2023 and the net interest spread decreased 47 basis points compared to 2022.
Previous wording
(3)Net interest margin is net interest income, on a tax equivalent basis, divided by average interest-earning assets. The net interest margin decreased 14 basis points in 2023. The net interest margin increased 25 basis points in 2022 compared to 2021.
Current wording
(3)Net interest margin is net interest income, on a tax equivalent basis, divided by average interest-earning assets. The net interest margin decreased 8 basis points in 2024. The net interest margin decreased 14 basis points in 2023 compared to 2022.
Previous wording
The Federal Open Market Committee met eight times during 2023. The federal funds target rate increased to 5.50% as of December 31, 2023 from 4.50% as of December 31, 2022. Interest rates on loans are generally affected by the target rate since interest rates for the U.S. Treasury market normally correlate to the Federal Reserve Board federal funds rate. In pricing of loans and deposits, the Bank considers the U.S. Treasury indexes as benchmarks in determining interest rates. As of December 31, 2023, the average rate indexes for the one, three and five year indexes were 4.79%, 4.01% and 3.84%, respectively. The one year index increased 1.27% from December 31, 2022, the three year index decreased 4.98% and the five year index decreased 3.76%.
Current wording
The Federal Open Market Committee met eight times during 2024. The federal funds target rate decreased to 4.50% as of December 31, 2024 from 5.50% as of December 31, 2023. Interest rates on loans are generally affected by the target rate since interest rates for the U.S. Treasury market normally correlate to the Federal Reserve Board federal funds rate. In pricing of loans and deposits, the Bank considers the U.S. Treasury indexes as benchmarks in determining interest rates. As of December 31, 2024, the average rate indexes for the one, three and five year indexes were 4.16%, 4.27% and 4.38%, respectively. The one year index decreased 13.15% from December 31, 2023, the three year index increased 6.48% and the five year index increased 14.06%.
Previous wording
Credit loss expense was $15.62 million for the year ended December 31, 2023 compared to expense of $6.34 million in 2022, an increase of expense of $9.28 million. The credit loss expense includes expense of $0.68 million related to the ACL on off-balance sheet credit exposures for the year ended December 31, 2023 compared to $0.58 million expense for 2022. Credit loss expense is the amount necessary to adjust the allowance for credit losses to the level considered by management to appropriately account for the estimated current expected credit losses within the Bank's loan portfolio. Also, under CECL, a significant component in estimating expected credit losses are economic forecasts such as Iowa unemployment, all-transactions house price index for Iowa and Iowa real gross domestic product. The Company believes that credit loss expense is expected to be dependent on the Company’s loan growth, local economic conditions and asset quality. The percentage of the allowance to outstanding loans was 1.44% and 1.33% at December 31, 2023 and 2022, respectively. The credit loss expense was $15.62 million in 2023, $6.34 million in 2022 and a reduction to expense of $5.51 million in 2021. Loan charge-offs net of recoveries were $6.97 million in 2023, loan recoveries net of charge-offs were $0.21 million in 2022 and loan charge-offs net of recoveries were $1.43 million in 2021. Management has determined that the allowance for credit losses was appropriate at December 31, 2023, and that the loan portfolio is diversified and secured, without undue concentration in any specific risk area. This process involves a high degree of management judgment; however, the allowance for credit losses is based on a comprehensive and well-documented applied analysis of the Company’s loan portfolio. This analysis takes into consideration all available information existing as of the financial statement date, including environmental factors such as economic, industry, geographical and political factors. The relative level of allowance for credit losses is reviewed and compared to industry peers. This review encompasses levels of total nonperforming loans, portfolio mix, portfolio concentrations, current geographic risks and overall levels of net charge-offs. However, there is no assurance losses will not exceed the allowance, and any growth in the loan portfolio or uncertainty in the general economy will require that management continue to evaluate the adequacy of the ACL and make additional provisions in future periods as deemed necessary.
Current wording
Credit loss expense was $2.21 million for the year ended December 31, 2024 compared to expense of $15.62 million in 2023, a decrease of expense of $13.41 million. The credit loss expense includes a reduction of expense of $2.21 million related to the ACL on off-balance sheet credit exposures for the year ended December 31, 2024 compared to $0.68 million expense for 2023. Credit loss expense is the amount necessary to adjust the allowance for credit losses to the level considered by management to appropriately account for the estimated current expected credit losses within the Bank's loan portfolio. Also, under CECL, a significant component in estimating expected credit losses are economic forecasts such as Iowa unemployment and National real gross domestic product (GDP). The Company believes that credit loss expense is expected to be dependent on the Company’s loan growth, local economic conditions and asset quality. The percentage of the allowance to outstanding loans was 1.48% and 1.44% at December 31, 2024 and 2023, respectively. The credit loss expense was $2.21 million in 2024, $15.62 million in 2023 and $6.34 million in 2022. Loan charge-offs net of recoveries were $2.89 million in 2024, loan charge-offs net of recoveries were $6.97 million in 2023 and loan recoveries net of charge-offs were $0.21 million in 2022. Management has determined that the allowance for credit losses was appropriate at December 31, 2024, and that the loan portfolio is diversified and secured, without undue concentration in any specific risk area. This process involves a high degree of management judgment; however, the allowance for credit losses is based on a comprehensive and well-documented applied analysis of the Company’s loan portfolio. This analysis takes into consideration all available information existing as of the financial statement date, including environmental factors such as economic, industry, geographical and political factors. The relative level of allowance for credit losses is reviewed and compared to industry peers. This review encompasses levels of total nonperforming loans and overall levels of net charge-offs. However, there is no assurance losses will not exceed the allowance, and any growth in the loan portfolio or uncertainty in the general economy will require that management continue to evaluate the adequacy of the ACL and make additional provisions in future periods as deemed necessary.
Previous wording
In certain circumstances, the Bank may modify the terms of a loan to maximize the collection of amounts due. In most cases, the modification is either a reduction in interest rate, conversion to interest only payments, deferral of payments or extension of the maturity date. Generally, the borrower is experiencing financial difficulties, so concessionary modification is granted to the borrower that otherwise would not be considered. Prior to January 1, 2023, these loans were accounted for as troubled debt restructure ("TDR") loans.
Current wording
In certain circumstances, the Bank may modify the terms of a loan to maximize the collection of amounts due. In most cases, the modification is either a reduction in interest rate, conversion to interest only payments, deferral of payments or extension of the maturity date. Generally, the borrower is experiencing financial difficulties, so concessionary modification is granted to the borrower that otherwise would not be considered.
Previous wording
The Bank regularly reviews loans in the portfolio and assesses whether the loans are nonperforming. If the loans are nonperforming, the Bank determines if a specific reserve is appropriate. In addition, the Bank's management also reviews and, where determined necessary, provides allowances for particular loans based upon (1) reviews of specific borrowers and (2) management’s assessment of areas that management considers are of higher credit risk, including loans that have been restructured.
Current wording
The Bank regularly reviews loans in the portfolio and assesses whether the loans are nonperforming. If the loans are nonperforming, the Bank determines if a specific reserve is appropriate. In addition, the Bank's management also reviews and, where determined necessary, provides allowances for particular loans based upon (1) reviews of specific borrowers and (2) management’s assessment of areas that management considers are of higher credit risk, including loans that have been modified.
Previous wording
The extent to which collateral secures collateral-dependent loans and changes in the extent to which collateral secures its collateral-dependent loans are described below. Collateral-dependent loans increased $26.77 million from December 31, 2022 to December 31, 2023. Collateral-dependent loans include any loan that has been placed on nonaccrual status, accruing loans past due 90 days or more and loans to borrowers with financial difficulties. Collateral-dependent loans also include loans that, based on management’s evaluation of current information and events, the Company expects to be unable to collect in full according to the contractual terms of the original loan agreement. Collateral-dependent loans were 1.17% of loans held for investment as of December 31, 2023 and 0.44% as of December 31, 2022. The increase in collateral-dependent loans is due to an increase in loans modified due to financial difficulties of $4.09 million, an increase in nonaccrual loans of $24.07 million, an increase of $1.36 million in loans with a specific reserve and is offset by a decrease in 90 days or more accruing loans of $0.01 million and former individually analyzed loans totaling $2.44 million being classified as pooled loans as of December 31, 2023 for purposes of the ACL calculation due to having similar risk characteristics as pooled loans. There were no significant changes noted in the extent to which collateral secures collateral-dependent loans. See Note 1 Adoption of New Financial Accounting Standard for further discussion of the allowance for credit losses for loans held for investment. A description of the Bank's credit quality indicators are discussed in Note 3 to the Company's Consolidated Financial Statements.
Current wording
The extent to which collateral secures collateral-dependent loans is provided in the previous individually analyzed loans table and changes in the extent to which collateral secures its collateral-dependent loans are described below. Collateral-dependent loans decreased $6.85 million from December 31, 2023 to December 31, 2024. Collateral-dependent loans include any loan that has been placed on nonaccrual status, accruing loans past due 90 days or more and loans made to borrowers with financial difficulties. Collateral-dependent loans also include loans that, based on management’s evaluation of current information and events, the Company expects to be unable to collect in full according to the contractual terms of the original loan agreement. Collateral-dependent loans were 0.97% of loans held for investment as of December 31, 2024 and 1.17% as of December 31, 2023. The decrease in collateral-dependent loans is primarily due to a decrease in nonaccrual loans of $6.96 million. There were no significant changes noted in the extent to which collateral secures collateral-dependent loans. A description of the Bank's credit quality indicators are discussed in Note 3 to the Company's Consolidated Financial Statements.
Previous wording
The following table summarizes the Company's impaired loans and non-performing assets as of December 31 for each of the years presented:
Current wording
The following table summarizes the Company's collateral dependent loans and non-performing assets as of December 31 for each of the years presented:
Previous wording
(2)Total TDR loans were $7.66, $10.20, $13.22 and $13.71 million as of December 31, 2022, 2021, 2020, and 2019, respectively. Included in the total nonaccrual loans were $1.75, $2.28, $2.97, and $4.34 million of TDR loans as of December 31, 2022, 2021, 2020, and 2019, respectively.
Current wording
(2)Total TDR loans were $7.66, $10.20, and $13.22 million as of December 31, 2022, 2021, and 2020, respectively. Included in the total nonaccrual loans were $1.75, $2.28, and $2.97 million of TDR loans as of December 31, 2022, 2021, and 2020, respectively.
Previous wording
The ratio of allowance for credit losses to non-performing loans decreased to 122.47% as of December 31, 2023 compared to 305.15% as of December 31, 2022. The decrease in 2023 is primarily due to the large increase in nonaccrual loans and loan modifications to borrowers experiencing financial difficulties compared to 2022. The ratio of non-performing loans to total gross loans was 1.17% and 0.44% at December 31, 2023 and 2022, respectively. The increase in the 2023 ratio is primarily due to the increase in nonaccrual loans and loan modifications to borrowers experiencing financial difficulties.
Current wording
The ratio of allowance for credit losses to non-performing loans increased to 152.08% as of December 31, 2024 compared to 122.47% as of December 31, 2023. The increase in 2024 is primarily due to the slight increase in the allowance for credit losses and the decrease in nonaccrual loans compared to 2023. The ratio of non-performing loans to total gross loans was 0.97% and 1.17% at December 31, 2024 and 2023, respectively. The decrease in the 2024 ratio is primarily due to the decrease in nonaccrual loans.
Previous wording
Other factors that are considered in determining the credit quality of the Company’s loan portfolio are the vacancy rates for both residential and commercial space, current equity the borrower has in the property and overall financial strength of the customer including cash flow to continue to fund loan payments. The Company also considers the state of the total economy including unemployment levels. In most instances, the borrowers have used in their rental projections of income at least a 10% vacancy rate. As of December 31, 2023, the unemployment levels in Johnson County and Linn County were 2.0% and 3.0%, respectively, compared to 2.3% and 3.5% in December of 2022. These levels compare favorably to the State of Iowa at 3.2% and the national unemployment level at 3.7% in December 2023 compared to 3.1% and 3.5%, respectively in December 2022.
Current wording
Other factors that are considered in determining the credit quality of the Company’s loan portfolio are the vacancy rates for both residential and commercial space, current equity the borrower has in the property and overall financial strength of the customer including cash flow to continue to fund loan payments. The Company also considers the state of the total economy including unemployment levels. In most instances, the borrowers have used in their rental projections of income at least a 10% vacancy rate. As of December 31, 2024, the unemployment levels in Johnson County and Linn County were 2.2% and 3.2%, respectively, compared to 2.0% and 3.0% in December of 2023. These levels compare favorably to the State of Iowa at 3.2% and the national unemployment level at 4.1% in December 2024 compared to 3.2% and 3.7%, respectively in December 2023.
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Current report — wording carried from elsewhere
Other noninterest income categories experienced marginal period-to-period fluctuations for the year ended December 31, 2024.