HANCOCK WHITNEY CORP
For the period ended Dec 31, 2024. Filed Feb 27, 2025.
View on SEC.govAbout this filing
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 27, 2025
HWC$71.48+0.1%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 2024-02-28.
0000950170-24-022252
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-K
Period ended 2024-12-31; filed 2025-02-27.
0000950170-25-028009
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 306 previous paragraphs and 300 current paragraphs.
163 unchanged; 99 reworded; 36 added; 43 removed; 1 previous and 2 current paragraphs rearranged.
Tables are not compared: 34 previous and 34 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 (36)
Current report
While the presidential and congressional elections came to the forefront of the economic and social landscape later in the year, progress in the fight against inflation, continued robust economic activity, softening in the labor market and the eventual shift in policy of the Federal Reserve drove much of the economic headlines during the year ended December 31, 2024. Economic activity remained resilient in 2024, with real gross domestic product (GDP) displaying healthy growth of 2.8% for the year, relatively consistent with the prior year and in excess of expectations. While the labor market remained strong overall, employment statistics began to migrate during the year. By mid-year, it seemed that the Federal Reserve’s stated inflation target of 2% was in range, and, in September, the Federal Reserve issued a 50 basis point (bp) rate cut, indicating its shift in focus to preserving a healthy labor market. Two additional 25 bp rate cuts followed in November and December. However, the upward trend in inflation markers in December coupled with concerns over the potential fiscal impacts of the current administration’s policy actions, particularly around tariffs and immigration, have somewhat clouded the picture surrounding monetary policy expectations. Longer-term interest rates experienced some volatility as the market responded to mixed data on both inflation and employment throughout the year. The 10-year U.S. Treasury yield ranged from below 4% to 4.7% ending the year at 4.6%, affecting bond indices and mortgage rates and other capital market indicators.
Current report
Within the financial services industry, some of the headwinds experienced in much of the previous year began to ease. While interest rates remain elevated and continue to influence loan demand and deposit behavior, negative sentiment from recent high profile bank failures has receded, and funding costs that had begun to stabilize in late 2023 further benefited from rate cuts in the latter half of 2024. Within our markets, loan growth remains tempered due in part to loan demand, the credit health of borrowers, and a strategic reduction of exposure to syndicated credits as we focus on full-service relationships. However, interest rates on new, renewed and repricing variable rate loans and investment securities continue to result in higher yields on earning assets that, coupled with stabilization in funding costs, contributed to net interest margin expansion throughout the year.
Current report
The baseline scenario continues to maintain an overall optimistic tenor with respect to economic outcomes. The forecast reflects new assumptions about fiscal policy, monetary policy and immigration and population growth given the Republican sweep of the White House and Congress. Key assumptions within the December 2024 baseline forecast include the following: (1) With the Republican majority, spending will decrease, personal income tax provisions of the Tax Cuts and Jobs Act will be extended and the corporate income tax rate will decrease to 15%; (2) The Federal Reserve will issue two rate cuts of 25 basis points each in 2025, with further gradual reductions in 2026 until the benchmark rate reaches 3%; (3) Though the labor market has softened, the economy remains near full-employment with the current unemployment rate of 4%, and is forecasted to remain relatively stable at 4.1% over the succeeding three years; (4) GDP will display modest annual below-trend growth in the coming years of 2.2% in 2025, 1.6% in 2026, and 1.8% in 2027; and, (5) the 10-year U.S. Treasury yield will remain elevated near its current rate, and is forecasted to average 4.3% for 2025 through 2027 and only gradually decline through the end of the decade.
Current report
Net income of $460.8 million, or $5.28 per diluted common share
Current report
Loans of $23.3 billion, down $622.5 million; reflects a $307.6 million strategic reduction of the shared national credit portfolio
Current report
Deposits of $29.5 billion, down $197.2 million; reflects organic growth offset by a decline of $582.9 million in brokered deposits
Current report
Net interest margin expanded 3 bps to 3.37%
Current report
Efficiency ratio (a non-GAAP measure) of 55.36%, relatively consistent with 2023
Current report
Our results for the year ended December 31, 2024 represent a solid year of performance. Our net interest margin expanded, reflecting higher earning asset yields and stabilization in the cost of funds. Fee income grew and adjusted noninterest expense increased only modestly. Strong earnings facilitated substantial growth in our capital ratios. Though credit metrics normalized compared to the recent benign credit environment, we have not seen signs of significant weakening in any particular industry, sector or geographic segment, and we continue to maintain a robust allowance for credit loss coverage of 1.47% in light of the current credit and economic environment. We remain focused on balance sheet optimization and effective expense control, and we believe we are well positioned to continue to enhance shareholder value. As we close out our celebration of our 125th year, we are ready for the opportunities ahead, including our pending second quarter 2025 acquisition of Sabal Trust Company and the recently announced multi-year organic growth plan.
Current report
The $72.5 million increase in interest income (te) is largely attributable to the sustained elevated interest rate environment, partially offset by a $738 million decrease in average earning assets. The yield on earning assets (te) was 5.26% in 2024, up 34 bps from 2023. Loan yield was up 30 bps to 6.17%, reflecting the impact of the new and repricing loans in the current interest rate environment. The yield on investment securities increased 24 bps in 2024 to 2.63% as new investments were made at higher yields. The decline in average earning assets included decreases of $680 million in investment securities and $91 million in short-term investments, while average total loans remained relatively flat, but experienced a shift in mix from commercial and consumer loans into residential mortgage.
Current report
The $88.2 million increase in interest expense was largely driven by the interest rate environment, as higher prevailing interest rates drove an increase in the cost of deposits and continued to foster shifts in deposit composition from noninterest-bearing and within the mix of interest-bearing deposits to higher-cost products, partially offset by a decrease in short-term borrowings expense, mostly attributable to a decline in average Federal Home Loan Bank (FHLB) advances. Compared to the prior year, average noninterest-bearing deposits were down $1.4 billion, while higher-cost time deposits were up $857.8 million. Average short-term borrowings in 2024 were down $802.0 million from 2023, as the incremental FHLB borrowings drawn as a cautionary measure in early 2023 were repaid. Our total cost of funds increased 30 bps to 1.88% in 2024 from 1.58% in 2023, largely driven by higher interest-bearing deposit costs, up 55 bps in 2024 to 3.08% from 2.53% in 2023, and other short-term borrowing costs, which consist largely of FHLB advances, increasing 43 bps to 5.49% in 2024 from 5.06% in 2023.
Current report
Though interest rates remain elevated, the Federal Reserve cut its benchmark rate three times during 2024, beginning in September. Our loan and interest-bearing deposits betas for the down rate cycle in the second half of the 2024 were 33% and 38%, respectively. We expect deposit costs to decline in the near term as promotional pricing has been reduced. We expect our net interest income (te) for 2025 to increase in the range of 3.5% to 4.5%. We expect modest and consistent expansion of net interest margin throughout 2025, with an emphasis on balance sheet growth and by proactively managing deposit costs as interest rates continue to decline. Our forecast assumes three 25 bp rate cuts occurring in July, September and December 2025. Modeling one and zero rate cut scenarios yielded modestly better results for the year.
Current report
We expect noninterest income for the year ended December 31, 2025 to increase 3.5% to 4.5% from the 2024 level of $364.1 million. Our forecast has not yet been updated to include any impact from the pending Sabal Trust Company transaction.
Current report
Professional services expense totaling $41.9 million in 2024 increased $3.6 million, or 9%, from 2023, primarily driven by expenses incurred for certain outsourcing initiatives that commenced in the current year.
Current report
Deposit insurance and regulatory fees totaled $24.2 million for the year ended December 31, 2024, a decrease of $25.8 million from 2023. Included in the years ended December 31, 2024 and 2023 are previously mentioned $3.8 million and $26.1 million, respectively, of expense attributable to a special assessment made by the FDIC. Excluding the special assessment charges in the respective periods, deposit insurance and regulatory fees were down $3.4 million, or 14%, mostly reflective of changes in our risk-based assessment calculation.
Current report
The FDIC special assessment expense recorded to date is management’s estimate of our portion of the cost attributable to the systemic risk exception based on information from the FDIC. However, the loss estimates resulting from the failures of Silicon Valley Bank and Signature Bank may be subject to further change pending the projected and actual outcome of loss share agreements, joint ventures, and outstanding litigation. The exact amount of losses incurred will not be determined until the FDIC terminates the receiverships of these banks; therefore, the exact exposure to the Company remains unknown.
Current report
All other expenses totaled $52.5 million in 2024, up $0.3 million, or 1%, from 2023.
Current report
The purpose of the securities portfolio is to increase profitability, mitigate interest rate risk, provide liquidity and comply with regulatory pledging requirements. Our securities portfolio includes securities categorized as available for sale and held to maturity. Available for sale securities are carried at fair value and may be sold prior to maturity. Unrealized gains or losses on available for sale securities, net of deferred taxes, are recorded as accumulated other comprehensive income or loss in stockholders' equity.
Current report
Total loans at December 31, 2024 were $23.3 billion, compared to $23.9 billion at December 31, 2023, down $622.5 million, or 3%. The decrease is reflective of the strategic reduction of the shared national credit portfolio as we focus on originating more granular loans, down $307.6 million, and includes declines across all portfolios except for residential mortgage, discussed in more detail below.
Current report
Our loan portfolio is well diversified by product, client, and geography throughout our footprint. Nevertheless, we may be exposed to certain concentrations of credit risk which exist in relation to different borrowers or groups of borrowers, specific types of collateral and industries.
Current report
Nonaccrual loans plus ORE and foreclosed assets totaled $125.1 million at December 31, 2024, up $62.5 million compared to December 31, 2023. Nonaccrual loans totaled $97.3 million, an increase of $38.3 million compared to December 31, 2023. Nonaccrual loans as a percentage of the loan portfolio increased to 0.42% in 2024, compared to 0.25% in 2023, which we believe represents a return to a more typical level following the recent benign credit environment. ORE and foreclosed assets were $27.8 million at December 31, 2024, up $24.2 million from December 31, 2023, largely attributable to foreclosed property from one commercial borrower.
Current report
Our allowance for credit losses coverage to total loans increased to 1.47% at December 31, 2024, compared to 1.41% at December 31, 2023. The allowance for credit losses on the commercial portfolio totaled $272.5 million, or 1.52% of that portfolio, at December 31, 2024, up from $270.7 million, or 1.46%, at December 31, 2023. The allowance for credit losses on the residential mortgage portfolio totaled $42.4 million, or 1.07% of that portfolio, at December 31, 2024, up from $39.0 million, or 1.00%, at December 31, 2023. The allowance for credit losses on the consumer portfolio totaled $28.0 million, or 2.04% of that portfolio, at December 31, 2024, up from $27.1 million, or 1.87%, at December 31, 2023. We believe the increased coverage to total loans is prudent given the uncertainty in economic conditions.
Current report
Total deposits were $29.5 billion at December 31, 2024, down $197.2 million or 1%, from December 31, 2023. Deposit levels and composition in 2024 were influenced by the decline in brokered deposits and the elevated interest rate environment fostering a continued shift toward and growth in interest-bearing products. Average deposits of $29.2 billion for 2024 were down $309.6 million, or 1%, from 2023.
Current report
At December 31, 2024, noninterest-bearing demand deposits were $10.6 billion, down $433.1 million, or 4%, from December 31, 2023. Noninterest-bearing demand deposits comprised 36% of total deposits at December 31, 2024 and 37% at December 31, 2023. Noninterest-bearing deposit levels continued to trend downward as customers shift to interest-bearing products amid the elevated interest rate environment and as consumer and business spending remains strong. The current level of noninterest-bearing deposits to total deposits of 36% represents what we consider to be a more typical, pre-pandemic mix of noninterest-bearing and interest-bearing deposits.
Current report
Interest-bearing transaction and savings accounts of $11.3 billion at December 31, 2024 increased $647.0 million, or 6%, from December 31, 2023. Retail time deposits totaled $4.3 billion at December 31, 2024, up $102.2 million, or 2%, from December 31, 2023, with 6% of the increase in time deposits greater than $250,000. The year over year growth in these products is largely reflective of attractive rate offerings in the elevated interest rate environment.
Current report
At December 31, 2024, our tangible common equity ratio was 9.47%, compared to 8.37% at December 31, 2023. The 110 bp increase from December 31, 2023 is comprised of net income (+136 bps), tangible asset contraction (+13 bps), stock-based compensation and other activity (+6 bps), and other comprehensive income (+4 bps), partially offset by dividends (-38 bps) and share repurchases (-11 bps).
Current report
Net income of $122.1 million, up $6.5 million
Current report
Pre-provision net revenue (a non-GAAP measure) of $165.2 million, compared to $166.5 million in the prior quarter
Current report
Loans declined $156.1 million, or 1%
Current report
Criticized commercial loans and nonaccrual loans continued to normalize, annualized net charge-off percentage improved to 0.20%, compared to 0.30%
Current report
Deposits increased $509.9 million, or 2%
Current report
Net interest margin 3.41%, up 2 bp
Current report
Efficiency ratio (a non-GAAP measure) of 54.46%, up 4 bps
Current report
Total loans at December 31, 2024 were $23.3 billion, a decrease of $156.1 million, or 1%, from September 30, 2024. The linked-quarter decline reflects increased payoffs of commercial real estate loans, partially offset by a seasonal increase in line utilization and higher activity in commercial non-real estate loans.
Current report
Total deposits at December 31, 2024 were $29.5 billion, up $509.9 million, or 2%, from September 30, 2024. The increase is largely the result of seasonal inflows in interest-bearing public funds, an increase in interest-bearing transaction and savings due to seasonality, competitive products and pricing, and an increase in noninterest-bearing deposits. These increases were partially offset by a decrease in retail time deposits driven by maturity concentration repricing at lower rates and promotional rate reductions during the fourth quarter, and a decrease in brokered deposits that matured and were not replaced.
Current report
Net interest income (te) for the fourth quarter of 2024 was $276.3 million, up $1.8 million, or 1%, from the third quarter of 2024. The net interest margin for the fourth quarter of 2024 was 3.41%, up 2 bps from the third quarter of 2024, as lower deposit costs (+16 bps) and a favorable borrowing mix (+5 bps), and higher securities yields (+1 bp) was partially offset by lower loan yields (-20 bps).
Removed paragraphs (43)
Previous report
U.S. economic activity remains resilient nearly two years into the Federal Reserve's aggressive campaign to tame inflation. Thus far, the Federal Reserve has seen some success in slowing economic growth without precipitating a recession. The December 31, 2023 headline and core (less food and energy) inflation have receded considerably from 40-year highs in 2022, though at 3.4% and 3.9%, respectively, both remain well above the Federal Reserve's target rate of 2%. Real Gross domestic product (GDP) increased 2.5% for the full year 2023, reflecting growth in each of the four fiscal quarters. Despite some softening, the labor market remains strong at near full-employment, with the unemployment rate at 3.7% in December 2023. The Federal Reserve issued four 25-basis point interest rate increases between February and July 2023, but has held the rate steady since, indicating the possibility that the target rate has reached its terminal value in the rate hiking cycle. While the continued strong pace of consumer spending and the strength of the labor market may help prevent or reduce the severity of a potential recession, the possibility that rates will remain higher for longer may result in below-trend economic growth. Economic trends may be further influenced by factors outside of inflation, such as a potential shutdown of the U.S. government and expanding geopolitical conflict.
Previous report
Within the financial services industry, particularly in the regional bank space, institutions continue to deal with macroeconomic and industry-specific headwinds. The heightened interest rate environment has fostered a continued shift within deposit composition toward higher cost products, although the pace of movement slowed somewhat towards the end of 2023. High-profile bank failures in the first half of 2023 have prompted increased regulatory scrutiny of banks' liquidity and the stability of their deposit bases, which has intensified competition for deposits and, in turn, placed further pressure on borrowing costs. The interest rate environment has also steadily affected the affordability of credit to consumers and businesses that has tempered loan demand. At the same time, economic uncertainty and industry turmoil has prompted many institutions to tighten credit standards.
Previous report
We experienced loan growth of 3% during the year ended December 31, 2023, though the majority of the growth occurred in the first half of the year. In the fourth quarter, we experienced a $61.8 million net decline in loans as demand continued to slow in response to heightened interest rates and, in many of the markets we serve, increased insurance costs. Further, we are continuing to narrow our credit appetite in certain sectors and shift our focus toward full-service relationships. Our core client deposits, defined as total deposits excluding public funds and brokered deposits, were up slightly year-over-year. We were able to maintain our diversified deposit base through competitive pricing, as much of our client base remains interest rate sensitive. Despite the increased pressure on funding costs, interest rates on new, renewed and repricing variable rate loans drove an expanded net interest margin in 2023.
Previous report
The December 2023 baseline forecast continues to incorporate the belief that the Federal Reserve will accomplish its goal of bringing inflation to or below its target without precipitating a recession. Key assumptions within the December 2023 baseline forecast include the following: (1) the Federal Funds rate has reached its terminal value in the rate hiking cycle, with rate cuts of 25 basis points per quarter to begin in June 2024 until reaching 3% in late 2026, and 2.5% by 2030; (2) the U.S. government will avoid the recently-feared shutdown; (3) while the labor market remains strong, there are indications of softening, and the unemployment rate will rise from its current rate of 3.7% to 4.0% in 2024 and 4.1% in 2025, then improve slightly to 4.0% for 2026; (4) GDP will display modest annual growth of 1.7% in both 2024 and 2025 and 2.2% in 2026; and, (5) the 10-year U.S. Treasury yield reached its recent high at nearly 5% in the third quarter of 2023, but will remain above 4% through the end of the decade.
Previous report
At December 31, 2023, the credit loss outlook for our portfolio as a whole has not changed significantly from that of a year ago, however, we remain cautious given headwinds from elevated interest rates, increased insurance costs and market concerns surrounding commercial real estate. Aside from a single sizable charge-off in 2023 attributable to borrower-specific circumstances, our asset quality metrics have remained stable over the preceding two years, with nonaccrual loans, commercial criticized loans and all other net charge-offs at relatively low levels. We continue to closely monitor our portfolio for customers that are sensitive to prolonged inflation and the elevated interest rate environment.
Previous report
Loan growth of $807.9 million, or 3%, to $23.9 billion
Previous report
Deposits of $29.7 billion at December 31, 2023, up $619.7 million, or 2%
Previous report
Criticized commercial loans and nonperforming loans remained relatively stable at low levels throughout 2023
Previous report
Net interest margin increased 8 bps to 3.34%
Previous report
Efficiency ratio (a non-GAAP measure) of 55.25%, up from 52.93% in 2022
Previous report
The year ended December 31, 2023 brought many challenges on both a macroeconomic level and within the financial services industry. Our results reflect navigating these headwinds while demonstrating our ability to preserve liquidity and manage operating expenses. The Federal Reserve continued its efforts to combat inflation through interest rate increases, but the benefits of our general asset sensitivity were largely offset by continued increases in funding costs, including a significant shift and deposit mix from noninterest-bearing to interest-bearing products. Disruption in the financial services industry created additional pressure on funding costs and net interest margin, and required incremental noninterest expense through a special assessment to restore the deposit insurance fund. As expected, loan growth has tempered in response to the current interest rate environment and with our continued focus on full service relationships and lending to resilient borrowers in light of current economic pressures. Aside from a single sizable borrower-specific charge-off, our credit metrics remained stable at relatively low levels, with no significant weakening in any portfolio sectors in 2023. A strategic decision to restructure our available for sale securities portfolio and pay down debt is expected to benefit future yield on earning assets, net interest margin and capital. Our capital levels increased year over year, and we believe we have positioned ourselves to effectively navigate the operating environment for this coming year.
Previous report
The increase in interest income (te) is largely attributable to the impact of the series of Federal Reserve interest rate increases, a favorable change in the mix of earning assets, and, to a lesser extent, a $19.0 million decrease in net premium amortization on the securities portfolio. The yield on earning assets (te) was 4.92% in 2023, up 139 bps from 2022. The yield increase was mainly attributable to the impact of the rising interest rate environment on the loan and, to a lesser extent, investment portfolios, and the favorable change in the mix of average earning assets, with loans up $1.7 billion, investment securities down $112 million, and short-term investments down $888 million. The loan yield was up 155 bps to 5.87%, reflecting the impact of the rise in interest rates on new and repricing loans. The yield on investment securities increased 28 bps in 2023 to 2.39% as new investments were made at higher yields amid the rising interest rate environment, along with yield enhancements from the termination of certain fair value hedges on available for sale securities.
Previous report
The increase in interest expense is largely attributable to a significant unfavorable change in the average funding mix that is the result of both the interest rate environment and response to the disruption created by the bank failures in early 2023. The rise in interest rates fostered a natural shift from noninterest-bearing to more attractive interest-bearing products. Following the bank failures, scrutiny over deposit composition and overall liquidity intensified competition for deposits; in response, promotional pricing on retail deposits and the addition of brokered time deposits drove a further shift in deposit mix toward higher-cost products. At December 31, 2023, noninterest-bearing deposits comprised 37% of total deposits compared to 47% at December 31, 2022. In addition, average short-term borrowings in 2023 were up $334.7 million from 2022, mostly reflective of incremental FHLB borrowings held for a period of time as a cautionary measure subsequent to the bank failures. As such, the cost of funds increased 131 bps to 1.58% in 2023 from 0.27% in 2022, with average interest-bearing deposit costs increasing 215 bps to 2.53% from 0.38% and other short-term borrowing costs, which consist largely of Federal Home Loan Bank advances, increasing 323 bps to 5.06% in 2023 from 1.83% in 2022.
Previous report
Our cycle-to-date loan and deposit betas were 46% and 36%, respectively, at December 31, 2023, compared to 40% and 13%, respectively, at December 31, 2022, reflecting the previously mentioned competitive pricing utilized to attract and retain deposits in 2023. Though interest rates remain elevated, we expect deposit costs to be more stable in the near term. Further, in November 2023, we executed a restructuring of the available for sale securities portfolio whereby we sold $1.04 billion of lower-yielding instruments, reinvested approximately half of the $977 million of proceeds in higher-yielding securities and utilized the remainder to repay short-term borrowings as a means to enhance net interest margin. We anticipate an approximate 30 month payback period to cover the loss associated with the sale, with expected benefits in 2024 of $26.2 million in net interest income and 13 bps to net interest margin. We expect further modest expansion of net interest margin in 2024, with an emphasis on improving loan yields and by proactively managing deposit costs as interest rates begin to decline. Our forecast assumes three 25 bp rate cuts beginning in June 2024.
Previous report
We expect noninterest income in 2024 to increase 3% to 4% from the adjusted 2023 level of $337.7 million.
Previous report
Professional services expense totaling $38.3 million in 2023 increased $2.3 million, or 6%, from 2022, primarily due to increases of $2.9 million in consulting and other professional services, partially offset by lower legal expense.
Previous report
Deposit insurance and regulatory fees totaled $50.0 million for the year ended December 31, 2023, an increase of $35.1 million from 2022. The increase includes the $26.1 million special assessment made by the FDIC to recover losses to the Deposit Insurance Fund arising from the protection of uninsured depositors under the systemic risk determination following the closures of Silicon Valley Bank and Signature Bank. The assessment base for the special assessment is equal to the institution's estimated uninsured deposits as of December 31, 2022, adjusted to exclude the first $5 billion, multiplied by an annual rate of approximately 13.4 basis points, to be collected for an estimated eight quarters. Because the liability has been incurred and the loss is reasonably estimable, the full amount of the assessment was recorded in the current period. Excluding the special assessment, deposit insurance and regulatory fees were up $9.0 million, or 60%, which includes $6.6 million of incremental expense attributable to a two-basis point increase in the deposit insurance fund assessment effective January 1, 2023. The additional two-basis points of assessment cost will remain in effect until the Deposit Insurance Fund reserve ratio to insured deposits meets the FDIC’s long-term goal for the fund, which is not expected to occur for some time given the recent bank failures. The remaining increase reflects $1.0 million of higher deposit insurance expense that reflects changes in our assessment base and rates, and $1.4 million in state regulatory fees and special assessments. Under the final rule, however, the FDIC retains the ability to cease collection early, extend the special assessment collection period one or more quarters beyond the initial eight-quarter collection period, or impose a final shortfall special assessment on a one-time basis after the receiverships for the two banks are terminated. The collection period may change due to updates to the estimated loss pursuant to the systemic risk determination or if assessments collected change due to corrective amendments to the amount of uninsured deposits reported for the December 31, 2022 reporting period.
Previous report
All other expenses totaling $52.2 million in 2023 increased $9.5 million, or 22%, from 2022, as a result of various miscellaneous items, including $4.7 million of insurance and other property related gains and various smaller gains recorded in 2022, with no such gains in 2023.
Previous report
In August 2022, the Inflation Reduction Act of 2022 (the IRA of 2022) was signed into law to address inflation, healthcare costs, climate change and renewal energy incentives, among other things. Included in the IRA of 2022 are provisions for the creation of a 15% corporate alternative minimum tax (CAMT) that is effective for tax years beginning January 1, 2023 for corporations with an average annual adjusted financial statement income in excess of $1 billion. Based on information available to date, our consolidated corporate group does not meet the criteria of an applicable corporation and, as such, are not subject to the 15% CAMT, absent any further changes in law.
Previous report
Total loans at December 31, 2023 were $23.9 billion, compared to $23.1 billion at December 31, 2022. The $0.8 billion, or 3%, increase is primarily attributable to growth in the residential mortgage and commercial real estate - income producing portfolios.
Previous report
Commercial real estate – income producing loans totaled $4.0 billion at December 31, 2023, an increase of $426 million, or 12%, from December 31, 2022. The net increase is mostly reflective of construction loans converting to permanent financing, as well as organic growth.
Previous report
(a) Loans presented in the December 31, 2023 column represent reportable modified loans to borrowers experiencing financial difficulties, and those presented in the December 31, 2022 column represent loans modified in a troubled debt restructuring. The definition of reportable modifications/restructured loans changed for modifications made on or after January 1, 2023 with the adoption of ASU 2022-02. Refer to Note 1 included in Part II, Item 8 of this document for a discussion of the standard.
Previous report
Nonaccrual loans plus ORE and foreclosed assets totaled $62.7 million at December 31, 2023, up $21.7 million compared to December 31, 2022. Nonaccrual loans totaled $59.0 million, an increase of $20.0 million compared to December 31, 2022. Despite the increase, the level remains relatively low at 0.25% of the total portfolio and compares favorably to those in our peer group. ORE and foreclosed assets were $3.6 million at December 31, 2023, up $1.6 million from December 31, 2022.
Previous report
Total deposits were $29.7 billion at December 31, 2023, up $619.7 million, or 2%, from December 31, 2022. Deposit levels and composition in 2023 were influenced by increased spending, interest rate movement, and our offering of promotional rates in response to increased competition for deposits, all of which contributed to a significant shift between noninterest-bearing to higher cost interest-bearing products. The change in deposit mix also reflects an increase in brokered time deposits, a funding source utilized to hold excess liquidity on our balance sheet as a cautionary measure in the period following the 2023 bank failures. Average deposits of $29.5 billion for 2023 were virtually unchanged from 2022.
Previous report
At December 31, 2023, noninterest-bearing demand deposits were $11.0 billion, down $2.6 billion, or 19%, from December 31, 2022. Noninterest-bearing demand deposits comprised 37% of total deposits at December 31, 2023 and 47% at December 31, 2022. The current mix of 37% is more in-line with pre-pandemic levels.
Previous report
The $700 million of FHLB short-term borrowings at December 31, 2023 consists of one short-term fixed rate advance purchased on December 29, 2023 that matured on January 2, 2024.
Previous report
In 2017, the United Kingdom’s Financial Conduct Authority announced that after 2021 it would no longer compel banks to submit the rates required to calculate the London Interbank Offered Rate (LIBOR). Publication of the one week and two month LIBOR offered rates ceased on December 31, 2021 and the publication of the remaining LIBOR offered rates ceased to be representative on June 30, 2023. The Company discontinued the use of LIBOR for new contracts after December 31, 2021, with limited exceptions as permitted by regulatory guidance and internal policy.
Previous report
Regulators, industry groups and certain committees (e.g., the Alternative Reference Rates Committee (ARRC)) have, among other things, published recommended fallback language for LIBOR-linked financial instruments, identified recommended alternatives for certain LIBOR rates (e.g., AMERIBOR or the Secured Overnight Financing Rate (SOFR)), and proposed implementations of the recommended alternatives in floating rate instruments. Further, the Adjustable Interest Rate (LIBOR) Act, enacted in March 2022, provides a statutory framework to replace U.S. dollar LIBOR with a benchmark rate based on the SOFR for contracts governed by U.S. law that have no or ineffective fallbacks, and in December 2022, the Federal Reserve Board adopted related implementing rules. In addition, where fallback language allows the Bank to select a benchmark rate, the statutory framework grants the authority to select the Board-selected benchmark replacement as the benchmark replacement, including the safe harbor provisions that, among other things, generally provide that such selection or use will not discharge or excuse performance under, give any person the right to unilaterally terminate or suspend performance under, or constitute a breach, of the contract.
Previous report
The Bank has adopted several replacement benchmarks to use in place of LIBOR benchmark rates, including Chicago Mercantile Exchange Inc. (CME) Term SOFR, FRB-NY SOFR and AMERIBOR as the primary rates. The replacement benchmark rates adopted by the Bank have been affirmed to comply with the 19 principles set forth by the International Organization of Securities Commissions (IOSCO) for Financial Benchmarks, and it further provides the Bank confidence these replacement benchmarks are based on transparent, market-based transactions. The Bank began using these replacement benchmarks towards the end of the third quarter of 2021. In the first half of 2023, the Company converted all of its LIBOR based cash flow hedges to SOFR and replaced the variable rate loan pools with SOFR based instruments, with limited financial impact or cost.
Previous report
Effective July 3, 2023, approximately $3.1 billion of variable rate loans tied to LIBOR were transitioned in accordance with the statutory framework established by the Federal Reserve, with the transition rate to be utilized upon the next reset period, in a manner that is consistent with industry practice. In addition, all of our remaining derivative instruments with LIBOR based indexes were transitioned to the Fallback Rate SOFR benchmark as recommended by the International Swap and Derivatives Association, including interest rate swaps and risk participation agreements with notional amounts totaling $3.5 billion and $163.5 million. There was no material financial impact from this transition in our operating results and we do not expect there will be any significant future impact.
Previous report
At December 31, 2023, our tangible common equity ratio was 8.37%, compared to 7.09% at December 31, 2022. The 128 bp increase from December 31, 2022 is comprised of net income (+118 bps), other comprehensive income (+44 bps), and stock-based compensation and other activity (+6 bps), partially offset by dividends (-31 bps) and tangible asset growth (-9 bps). Other comprehensive income was favorably impacted by the improvement in long-term rates and the impact of the late 2023 restructuring of the available for sale securities portfolio whereby we sold $1.04 billion of securities and reclassified $52.7 million of accumulated comprehensive loss, net of tax, to earnings. The restructuring was a strategic decision made to provide net interest margin enhancement. The Company has adequate liquidity and, therefore, does not plan to sell additional available for sale securities in the near term and, more likely than not, will not be required to do so before the recovery of the losses reflected in accumulated other comprehensive loss.
Previous report
The Inflation Reduction Act of 2022, signed into law in August 2022, includes a provision for an excise tax equal to 1% of the fair market value of any stock repurchased by covered corporations after December 31, 2022. Subject to certain limits and provisions, the excise tax is computed on the value of stock repurchased, net of stock issuances during the year, including shares issues under compensatory arrangements. Additionally, stock repurchases excludes repurchases where the value of the stock repurchased is contributed to an employer-sponsored retirement plan, employee stock ownership plan or a similar plan, among other exclusions. To date, the Company has not executed any transactions subject to this excise tax. While we may complete transactions subject to the excise tax in the future, we do not expect a material impact to our statement of condition or results of operations.
Previous report
Net income of $50.6 million, down $47.1 million, reflecting supplemental disclosure items noted above
Previous report
Adjusted pre-provision net revenue (a non-GAAP measure) of $157.5 million was up $4.1 million, or 3%
Previous report
Loans declined $61.8 million, or 1%, linked-quarter annualized
Previous report
Deposits decreased $630.3 million, or 8% linked-quarter annualized, largely due to the maturity of $567.5 million in brokered deposits
Previous report
Net interest margin unchanged at 3.27%
Previous report
Efficiency ratio (a non-GAAP measure) improved 80 bps to 55.58%
Previous report
Total loans at December 31, 2023 were $23.9 billion, a decrease of $61.8 million, or less than 1%, from September 30, 2023. The linked-quarter decline reflects decreases in most of the portfolio segments, as demand has softened as a result of the interest rate environment and as we focus on full service client relationships. These declines were partially offset by growth in the residential mortgage portfolio that was driven in part by the completion of one-time close residential mortgage construction products converting to permanent financing.
Previous report
Total deposits at December 31, 2023 were $29.7 billion, down $630.3 million, or 2%, from September 30, 2023. The decline is largely the result of the maturity of $567.5 million of brokered time deposits.
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Previous wording
We present certain additional non-GAAP financial measures to assist the reader with a better understanding of the Company’s performance period over period, as well as to provide investors with assistance in understanding the success management has experienced in executing its strategic initiatives. The Company highlights certain significant items that are outside of our principal business and/or are not indicative of forward-looking trends in supplemental disclosure items below our GAAP financial data and presents certain “Adjusted” ratios that exclude these disclosed items. These adjusted ratios provide management and the reader with a measure that may be more indicative of forward-looking trends in our business, as well as demonstrates the effects of significant gains or losses and changes.
Current wording
We present certain additional non-GAAP financial measures to assist the reader with a better understanding of the Company’s performance period over period, as well as to provide investors with assistance in understanding the success management has experienced in executing its strategic initiatives. The Company highlights certain items that are outside of our principal business and/or are not indicative of forward-looking trends in supplemental disclosure items below our GAAP financial data and presents certain “Adjusted” ratios that exclude these disclosed items. These adjusted ratios provide management and the reader with a measure that may be more indicative of forward-looking trends in our business, as well as demonstrates the effects of significant gains or losses and changes.
Previous wording
We utilize economic forecasts produced by Moody’s Analytics (Moody’s) that provide various scenarios to assist in the development of our economic outlook. This outlook discussion utilizes the December 2023 Moody’s forecast, the most current available at December 31, 2023. The forecasts are anchored on a baseline forecast scenario, which Moody’s defines as the “most likely outcome” of where the economy is headed based on current conditions. Several upside and downside scenarios are produced that are derived from the baseline scenario and incorporate varying degrees of favorable and unfavorable adjustments to economic indicators and circumstances as compared to the baseline. The macroeconomic variables underlying the December 2023 economic scenarios differ in certain respects from the comparable forecasts available at December 31, 2022, given the shift in economic circumstances and risks.
Current wording
We utilize economic forecasts produced by Moody’s Analytics (Moody’s) that provide various scenarios to assist in the development of our economic outlook. This outlook discussion utilizes the December 2024 Moody’s forecast, the most current available at December 31, 2024. The forecasts are anchored on a baseline forecast scenario, which Moody’s defines as the “most likely outcome” of where the economy is headed based on current conditions. Several upside and downside scenarios are produced that are derived from the baseline scenario and incorporate varying degrees of favorable and unfavorable adjustments to economic indicators and circumstances as compared to the baseline. The macroeconomic variables underlying the December 2024 economic scenarios differ in many respects from the comparable forecasts available at December 31, 2023, given the shift in economic circumstances and risks, particularly as a result of the outcome of the 2024 presidential and congressional elections.
Previous wording
The S-2 scenario presents a downside alternative to the baseline. The S-2 scenario assumes an increased likelihood of a U.S. government shutdown, longer and farther-reaching disturbance from geopolitical conflict, and continued disruption in the financial services industry leading to further tightening of credit standards. Further, the scenario assumes the unemployment rate will increase considerably to 5.7% in 2024 before improving to 5.3% in 2025 and 4.0% in 2026. Despite the weakening economy, the Federal Reserve does not begin rate cuts sooner than what is assumed in the baseline. As a result of these pressures, the U.S. falls into a mild recession beginning in the first quarter of 2024 that lasts for three quarters, with the stock market contracting 20% and a peak-to-trough decline in GDP of 1%.
Current wording
The S-2 scenario presents a downside alternative to the baseline. The S-2 scenario assumes the impacts of current administration tariffs and deportations on the economy are worse than expected, elevated interest rates weaken credit-sensitive spending more than anticipated and there is longer and farther-reaching disturbance from geopolitical conflict. Further, the scenario assumes the unemployment rate will increase considerably to 6.3% in 2025 (peaking at 7.1% in the fourth quarter) before improving to 5.6% in 2026 and 4.1% in 2027. As a result of these pressures, the U.S. falls into a mild recession beginning in the first quarter of 2025 that lasts for three quarters, with the stock market contracting 22% and a peak-to-trough decline in GDP of 1.1%. Despite the onset of the recession, rising inflation prompts the Federal Reserve to raise its benchmark rate in the first quarter of 2025 before resuming easement in the second quarter of 2025.
Previous wording
The effects of inflation and the Federal Reserve's actions to counter those effects in the form of interest rate increases and quantitative tightening have in the past and could in the near term reduce economic growth. The full extent of the impact of the Federal Reserve’s actions to reduce inflation and the timing and scope of further Federal Reserve actions are uncertain and may have a significant negative impact on the U.S. economy, including the possibility of an economic recession in the near or midterm.
Current wording
Recent and expected changes in fiscal and other policies with the current administration creates significant uncertainty as to the impact on the U.S and global economies. The effects of continued elevated inflation, and the Federal Reserve’s actions to counter those effects, as well as to respond to other economic concerns, could reduce economic growth in the near term. The full extent of the impact of these and other influential factors are uncertain and may have an adverse effect on the U.S. economy, including the possibility of an economic recession or slower growth in the near or midterm.
Previous wording
Net income for the year ended December 31, 2023 was $392.6 million, or $4.50 per diluted common share, compared to $524.1 million, or $5.98 per diluted common share in 2022. The results for 2023 include a net charge of $75.4 million (pre-tax), or $0.68 per share after tax, comprised of the following supplemental disclosure items: a $65.4 million loss on restructuring of the securities portfolio, a $26.1 million FDIC special assessment charge and a $16.1 million gain on the sale of a parking facility. There were no supplemental disclosure items in 2022. The following is an overview of financial results for the year ended December 31, 2023 compared to December 31, 2022:
Current wording
Net income for the year ended December 31, 2024 was $460.8 million, or $5.28 per diluted common share, compared to $392.6 million, or $4.50 per diluted common share in 2023. Included in the results of the year ended December 31, 2024 is a charge of $3.8 million, or $0.03 per diluted share after-tax, supplemental disclosure item attributable to a revision of the FDIC special assessment. Included in the results of the year ended December 31, 2023 is a net charge of $75.4 million (pre-tax), or $0.68 per share after tax, comprised of the following supplemental disclosure items: a $65.4 million loss on restructuring of the securities portfolio, a $26.1 million FDIC special assessment charge and a $16.1 million gain on the sale of a parking facility. The following is an overview of financial results for the year ended December 31, 2024 compared to December 31, 2023:
Previous wording
Adjusted pre-provision net revenue (a non-GAAP measure) totaled $635.7 million, down $5.4 million
Current wording
Adjusted pre-provision net revenue (a non-GAAP measure) totaled $641.0 million, up $5.3 million
Previous wording
Provision for credit losses of $59.1 million in 2023, compared to a negative provision of $28.4 million in 2022; allowance for credit loss to total loans at 1.41% at December 31, 2023
Current wording
Provision for credit losses of $52.2 million in 2024, compared to $59.1 million in 2023; allowance for credit losses to total loans remains strong at 1.47% at December 31, 2024, up 6 basis points
Previous wording
Common equity tier 1 capital ratio of 12.33%, up 92 basis points (bps) from December 31, 2022; tangible common equity ratio of 8.37%, up 128 bps
Current wording
Common equity tier 1 capital ratio of 14.14%, up 181 bps from December 31, 2023; tangible common equity ratio of 9.47%, up 110 bps
Previous wording
Criticized commercial loans and nonaccrual loans remain at low levels
Current wording
Criticized commercial loans and nonaccrual loans continued to normalize following the recent benign credit environment but remain comparable to peers; net charge-off ratio improved to 0.19% from 0.27%
Previous wording
(a) Interest income includes the net impact of discount accretion and premium amortization arising from business combinations totaling $2.4 million, $4.7 million, and $8.6 million for the years ended December 31, 2023, 2022 and 2021, respectively.
Current wording
(a) Interest income includes the net impact of discount accretion and premium amortization arising from business combinations totaling $2.1 million, $2.4 million, and $4.7 million for the years ended December 31, 2024, 2023 and 2022, respectively.
Previous wording
(b) The efficiency ratio is noninterest expense to total net interest (te) and noninterest income, excluding amortization of purchased intangibles and supplemental disclosure items.
Current wording
(d) The efficiency ratio (a non-GAAP measure) is noninterest expense to total net interest (te) and noninterest income, excluding amortization of purchased intangibles and supplemental disclosure items.
Previous wording
Net interest income was $1.1 billion, up $47.6 million from 2022. Net interest income is the primary component of our earnings and represents the difference, or spread, between revenue generated from interest-earning assets and the interest expense related to funding those assets. For analytical purposes, net interest income is adjusted to a taxable equivalent basis (te) using the statutory federal tax rate of 21% on tax exempt items (primarily interest on municipal securities and loans). Net interest income (te) was $1.1 billion in 2023, up $48.4 million, or 5%, from 2022, and included an increase in interest income (te) of $484.2 million largely offset by an increase of $435.8 million in interest expense. Net interest margin, the ratio of net interest income (te) to average earning assets, increased 8 bps to 3.34% in 2023 from 3.26% in 2022.
Current wording
Net interest income was $1.1 billion in 2024, down $15.7 million, or 1%, from 2023. Net interest income is the primary component of our earnings and represents the difference, or spread, between revenue generated from interest-earning assets and the interest expense related to funding those assets. For analytical purposes, net interest income is adjusted to a taxable equivalent basis (te) using the statutory federal tax rate of 21% on tax exempt items (primarily interest on municipal securities and loans). Net interest income (te) was $1.1 billion in 2024, also down $15.7 million, or 1%, from 2023, and included an increase in interest income (te) of $72.5 million more than offset by an increase of $88.2 million in interest expense. Net interest margin, the ratio of net interest income (te) to average earning assets, increased 3 bps to 3.37% in 2024 from 3.34% in 2023.
Previous wording
Included in interest income is net purchase accounting accretion of $2.4 million, $4.7 million and $8.6 million for the years December 31, 2023, 2022, and 2021, respectively.
Current wording
Included in interest income is net purchase accounting accretion of $2.1 million, $2.4 million and $4.7 million for the years December 31, 2024, 2023, and 2022 respectively.
Previous wording
During the year ended December 31, 2023, we recorded a provision for credit losses of $59.1 million compared to a negative provision for credit losses of $28.4 million for the year ended December 31, 2022. The provision for credit losses recorded in 2023 included net charge-offs of $63.4 million, partially offset by a $4.3 million reserve release. The negative provision for credit losses recorded in 2022 included a $30.3 million reserve release, partially offset by net charge-offs of $1.9 million. The provision for credit losses for the year ended December 31, 2023 includes a $29.7 million charge-off attributable to a single participation in a shared national credit, which stemmed from borrower-specific circumstances that we do not believe to be indicative of an industry or portfolio trend. The modest reserve release reflects relatively stable macroeconomic assumptions and credit quality metrics. The negative provision for credit losses for the same period in 2022 reflects the gradual release of certain reserves built in 2020 in response to the economic disruption brought on by the pandemic, as overall credit performance and economic conditions in our markets continued to improve.
Current wording
During the year ended December 31, 2024, we recorded a provision for credit losses of $52.2 million compared to $59.1 million for the year ended December 31, 2023. The provision for credit losses recorded in 2024 included net charge-offs of $46.0 million and a $6.1 million reserve build. The provision for credit losses recorded in 2023 included net charge-offs of $63.4 million and a reserve release of $4.3 million. The provision for credit losses for the year ended December 31, 2023 included a $29.7 million charge-off attributable to a single participation in a shared national credit. The modest reserve build in 2024 is the result of a higher allowance for credit loss coverage to total loans, reflecting the impact of prolonged elevated interest rates and inflation and other market conditions.
Previous wording
Net charge-offs for the year ended December 31, 2023 totaled $63.4 million, or 0.27% of average loans outstanding, comprised of net charge-offs of $52.8 million in the commercial portfolio (inclusive of the $29.7 million single borrower charge-off described above) and $11.8 million in the consumer portfolio, partially offset by net recoveries of $1.2 million in the residential mortgage portfolio. The single customer charge-off comprised 13 bps of the net charge-off ratio, with the remainder representing a more normalized level of losses and lower recoveries. Net charge-offs for the year ended December 31, 2022 totaled $1.9 million, or 0.01% of average loans outstanding, comprised of net charge-offs of $7.4 million in the consumer portfolio, partially offset by net recoveries of $3.9 million in the commercial portfolio and $1.6 million in the residential mortgage portfolio.
Current wording
Net charge-offs for the year ended December 31, 2024 totaled $46.0 million, or 0.19% of average loans outstanding, comprised of net charge-offs of $31.3 million in the commercial portfolio and $14.9 million in the consumer portfolio, partially offset by net recoveries of $0.2 million in the residential mortgage portfolio. Net charge-offs for the year ended December 31, 2023 totaled $63.4 million, or 0.27% of average loans outstanding, comprised of net charge-offs of $52.8 million in the commercial portfolio (inclusive of the $29.7 million single borrower charge-off described above) and $11.8 million in the consumer portfolio, partially offset by net recoveries of $1.2 million in the residential mortgage portfolio.
Previous wording
We currently expect only modest charge-offs and provision expense in 2024; however, loan growth, portfolio composition, asset quality metrics and future assumptions in economic forecasts will drive the level of credit loss reserves in future periods.
Current wording
We currently expect modest charge-offs and provision in 2025; however, loan growth, portfolio composition, asset quality metrics and future assumptions in economic forecasts will drive the level of credit loss reserves in future periods.
Previous wording
Noninterest income for the year ended December 31, 2023 totaled $288.5 million, a $43.0 million, or 13%, decrease from 2022. Noninterest income for 2023 includes two supplemental disclosure items totaling $49.3 million, comprised of a $65.4 million loss on restructuring of the available for sale securities portfolio and a $16.1 million gain on the sale of a parking facility. There were no supplemental disclosure items included in noninterest income in 2022. Excluding the supplemental disclosure items, adjusted noninterest income in 2023 was up $6.2 million, or 2%, largely driven by an increase in investment and annuity fees, trust fees, credit-related fees and other miscellaneous income, partially offset by decreases in income from derivatives, secondary mortgage market operations, service charges and bank card and ATM fees, discussed in more detail below.
Current wording
Noninterest income for the year ended December 31, 2024 totaled $364.1 million, a $75.6 million, or 26%, increase from 2023. For the year ended December 31, 2023, noninterest income included two supplemental disclosure items totaling $49.3 million, comprised of a $65.4 million loss on restructuring of the available for sale securities portfolio and a $16.1 million gain on the sale of a parking facility. Excluding these supplemental disclosure items, noninterest income was up $26.4 million, or 8%, driven by increases in most fee categories. Noninterest income variances are discussed in more detail below.
Previous wording
Service charges on deposit accounts include consumer, business, and corporate deposit account servicing fees, as well as overdraft and nonsufficient funds fees, overdraft protection fees, and other customer transaction-related fees. Service charges on deposit accounts were $86.0 million, down $1.6 million, or 2%, from 2022. The decrease from 2022 was largely driven by a $4.2 million decline in retail nonsufficient funds and overdraft fees, as certain of these fees were eliminated in late 2022, and a $1.2 million decline in consumer service charges as a result of a product suite redesign. These decreases were partially offset by an increase of $3.3 million in commercial analysis fees and nonsufficient funds and overdraft fees, driven by deposit balance activity, pricing changes, strong sales activity and higher instances of overdrafts.
Current wording
Service charges on deposit accounts include consumer, business, and corporate deposit account servicing fees, as well as nonsufficient funds fees on non-consumer accounts, overdraft and overdraft protection fees, and other customer transaction-related fees. Service charges on deposit accounts were $91.1 million, up $5.1 million, or 6%, from 2023. The increase from 2023 was largely attributable to a $4.4 million increase in service charges on business accounts, including commercial analysis fees, nonsufficient funds and overdraft fees, driven by deposit balance activity, strong sales activity, and higher instances of overdrafts. Consumer service charges increased $0.7 million compared to the prior year.
Previous wording
Trust fee income represents revenue generated from asset management services provided to individuals, businesses and institutions. Trust fees totaled $67.6 million in 2023, a $2.4 million, or 4%, increase from 2022, primarily attributable to an increase of $3.7 million in corporate and institutional trust fees and a decrease of $1.3 million in personal trust, retirement services, and other trust fees. Trust assets under management increased to $9.7 billion at December 31, 2023, compared to $9.1 billion at December 31, 2022.
Current wording
Trust fee income represents revenue generated from asset management services provided to individuals, businesses and institutions. Trust fees totaled $71.7 million in 2024, a $4.2 million, or 6%, increase from 2023, primarily attributable to an increase of $2.5 million in personal trust income, $1.4 million in institutional trust fees, and $0.4 million in corporate trust and retirement services fees. Trust assets under management increased to $10.2 billion at December 31, 2024, compared to $9.7 billion at December 31, 2023.
Previous wording
Bank card and ATM fees include income from credit and debit card transactions, fees earned from processing card transactions for merchants, and fees earned from ATM transactions. Bank card and ATM fees totaled $83.0 million in 2023, down $1.6 million, or 2%, compared to 2022. The decline from 2022 is the result of a decrease in merchant and ATM fees, partially offset by an increase in credit card activity during the year as spending remained strong.
Current wording
Bank card and ATM fees include income from credit and debit card transactions, fees earned from processing card transactions for merchants, and fees earned from ATM transactions. Bank card and ATM fees totaled $85.5 million in 2024, up $2.5 million, or 3%, compared to 2023. The increase from 2023 is the result of increases of $1.7 million in merchant fees and $1.1 million in debit and credit card fees, as spending was strong in 2024, partially offset by a $0.3 million decrease in ATM fees.
Previous wording
Investment and annuity fees and insurance commissions, which include both fees earned from sales of annuity and insurance products as well as managed account fees, totaled $36.7 million in 2023, an $8.0 million, or 28%, increase from 2022. The increase is largely attributable to an increase in annuity fees and investment fees as sales activity increased amid the favorable interest rate environment, and increases in corporate underwriting and insurance fees. Our 2023 results were also favorably impacted by a full year of operations on an enhanced outsourced service platform with an expanded product suite, while 2022 results were negatively impacted by a temporary business disruption as a result of conversion to that platform.
Current wording
Investment and annuity fees and insurance commissions, which include both fees earned from sales of annuity and insurance products as well as managed account fees, totaled $43.4 million in 2024, a $6.7 million, or 18%, increase from 2023. The increase is largely attributable to a $7.4 million increase in annuity fees and investment fees as sales activity increased amid the favorable interest rate environment, partially offset by a $0.7 million decline in corporate underwriting and insurance fees.
Previous wording
Income from secondary mortgage market operations is comprised of income produced from the origination and sales of residential mortgage loans in the secondary market. We offer a full range of mortgage products to our customers and typically sell longer-term fixed rate loans, while retaining the majority of adjustable rate loans and mortgage loans generated through programs to support customer relationships. Income from secondary mortgage market operations totaled $9.2 million in 2023, a decrease of $2.4 million, or 21%, from 2022. The decline is largely attributable to decreased demand for mortgage loans and refinancing as a result of the elevated interest rate environment and, to a lesser extent, a larger percentage of mortgage loans retained in the held for investment portfolio. The number and dollar amount of mortgage loan applications that closed in 2023 were down 31% and 56%, respectively, from 2022, and the number and dollar amount of closed mortgage loans that were sold in 2023 were down 12% and 14%, respectively, from 2022. Secondary mortgage market operations income will vary based on application volume and the percentage of loans closed and ultimately sold.
Current wording
Income from secondary mortgage market operations is comprised of income produced from the origination and sales of residential mortgage loans in the secondary market. We offer a full range of mortgage products to our customers and typically sell longer-term fixed rate loans, while retaining the majority of adjustable-rate loans and mortgage loans generated through programs to support customer relationships. Income from secondary mortgage market operations totaled $12.4 million in 2024, an increase of $3.2 million, or 35%, from 2023. Although there continued to be a dampened demand for mortgage loans and refinancing as a result of the elevated interest rate environment, the dollar amount of mortgage loan originations that were sold in the secondary market versus retained in our portfolio in 2024 was up 30%, driving higher income in this business line. Secondary mortgage market operations income will vary based on application volume and the percentage of loans closed and ultimately sold.
Previous wording
Net loss on sales of securities totaled $65.4 million for the year ended December 31, 2023 and resulted from the sale of $1.04 billion of available for sale securities. The loss reflects a strategic decision to restructure the portfolio to enhance net interest margin through deployment of the proceeds into higher-yielding earning assets and repayment of short-term borrowings.
Current wording
There were no gains or losses on sales of securities during the year ended December 31, 2024. There was a $65.4 million loss on sales of securities for the year ended December 31, 2023 as a result of the strategic restructuring of the available for sale portfolio to enhance net interest margin through deployment of the proceeds into higher-yielding earning assets and repayment of short-term borrowings.
Previous wording
Income from bank-owned life insurance (“BOLI”) is generated through insurance benefit proceeds as well as the growth of the cash surrender value of insurance contracts held. BOLI income totaled $15.5 million, a decrease of $0.4 million, or 3%, from 2022. The decline is largely attributable to a lower level of growth in cash surrender value.
Current wording
Income from bank-owned life insurance (BOLI) is generated through insurance benefit proceeds as well as the growth of the cash surrender value of insurance contracts held. BOLI income totaled $16.9 million, an increase of $1.5 million, or 10%, from 2023. The increase was primarily driven by an increase in income from changes in cash surrender value.
Previous wording
Credit-related fees include fees assessed on letters of credit and unused portions of loan commitments. Credit-related fees were $12.6 million for 2023, up $2.1 million, or 20% compared to 2022. The increase includes $1.3 million of higher letter of credit fees and $0.8 million of higher unused commitment fees. Income from these products will vary based on letters of credit issued, credit line utilization and prevailing assessment rates.
Current wording
Credit-related fees include fees assessed on letters of credit and unused portions of loan commitments. Credit-related fees were $12.0 million for 2024, down $0.5 million, or 4% compared to 2023, attributable to decreases of $0.4 million in letter of credit fees and $0.1 million in unused commitment fees. Income from these products will vary based on letters of credit issued, credit line utilization and prevailing assessment rates.
Previous wording
Income from derivatives, largely derived from our customer interest rate derivative program, totaled $0.4 million in 2023, compared to $5.8 million in 2022. Derivative income can be volatile and is dependent upon the composition of the portfolio, volume and mix of sales activity and market value adjustments due to market interest rate movement. The substantial year-over-year decline in derivative income is largely tied to the significant change in the interest rate environment present in each of the comparative periods, which affects demand for variable rate loans and related derivative products, valuation adjustments, and related collateral income/expense for the program as a whole. The decline in derivative income also reflects a $1.8 million increase in losses associated with our Visa B derivative.
Current wording
Income or loss from derivatives, largely resulting from our customer interest rate derivative program, was a loss of $3.8 million in 2024, compared to income of $0.4 million in 2023. Derivative income or loss can be volatile and is dependent upon the composition of the portfolio, volume and mix of sales activity and market value adjustments due to market interest rate movement. The year-over-year decline is primarily due to a $3.8 million decrease in customer derivative income largely tied to the elevated interest rate environment, which affects demand for variable rate loans and related derivative products, valuation adjustments, and related collateral income/expense for the program as a whole. The decline in derivative income also reflects a $1.4 million increase in losses associated with our Visa Class B derivative contract.
Previous wording
The net gains on sales of premises, equipment and other assets consists primarily of net revenue earned from sales of excess-bank owned facilities and equipment no longer in use, gains on sales of Small Business Administration and other non-residential mortgage loans, and leases and other assets associated with the equipment finance line of business. Net gains on sales of premises, equipment and other assets totaled $19.4 million in 2023, compared to $3.1 million in 2023, up $16.3 million. The increase was primarily related to previously mentioned gain on the sale of a stand alone parking facility totaling, $16.1 million, that was identified as a supplemental disclosure item. The sale of the property took advantage of favorable market conditions while exiting a service that was not a part of our core business.
Current wording
Net gains on sales of premises, equipment and other assets consists primarily of net revenue earned from sales of excess bank owned facilities and equipment no longer in use, gains on sales of Small Business Administration and other non-residential mortgage loans, and leases and other assets associated with the equipment finance line of business. Net gains on sales of premises, equipment and other assets totaled $7.8 million in 2024, compared to $19.4 million in 2023, down $11.6 million. The decrease was primarily related to previously mentioned gain on the sale of a stand-alone parking facility of $16.1 million in 2023 that was identified as a supplemental disclosure item. Excluding the supplemental disclosure item, net gains on sales of premises, equipment and other assets were up $4.6 million, and largely related to gains on sales of SBA loans and other premises sales.
Previous wording
Other miscellaneous income is comprised of various items, including dividends on FHLB stock, income from small business investment companies (SBICs), and syndication fees, among others. Other miscellaneous income for the year ended December 31, 2023 was $23.6 million, up $5.0 million from the previous year, or 27%, largely due to a $4.8 million increase in FHLB stock dividends as a result of both an increase in prevailing rates and an increase in volume of FHLB stock.
Current wording
Other miscellaneous income is comprised of various items, including dividends on FHLB stock, income from small business investment companies (SBICs), and syndication fees, among others. Other miscellaneous income for the year ended December 31, 2024 was $27.0 million, up $3.4 million, or 14%, from 2023, largely due to a $2.2 million increase in dividends on FHLB stock as a result of both an increase in prevailing rates and an increase in volume of stock owned and a $1.0 million increase in income from SBICs.
Previous wording
Noninterest expense for the year ended December 31, 2023 totaled $836.8 million, an $86.2 million, or 11%, increase from 2022. Noninterest expense for the year ended December 31, 2023 includes a supplemental disclosure item of $26.1 million attributable to an FDIC special assessment in connection with the protection of uninsured depositors under the systemic risk exception for two bank failures in 2023. Excluding the supplemental disclosure item, adjusted noninterest expense totaled $810.7 million, up $60.0 million, or 8%, from 2022. The largest individual components of the increase in noninterest expense excluding supplemental items were other retirement expense, data processing, deposit insurance and regulatory fees, and other miscellaneous expense. Explanations of the variances are discussed below in more detail.
Current wording
Noninterest expense for the year ended December 31, 2024 totaled $819.9 million, a $16.9 million, or 2%, decrease from 2023. Noninterest expense for both years includes supplemental disclosure items attributable to a special assessment by the FDIC in connection with the protection of uninsured depositors under the systemic risk exception for two bank failures in 2023, totaling $26.1 million in 2023, with an additional adjustment to the assessment of $3.8 million in 2024. Excluding the supplemental disclosure items for both periods, noninterest expense totaled $816.1 million, up $5.4 million, or 1%, from 2023. Noninterest expense variances are discussed in more detail below.
Previous wording
Personnel expense consists of salaries, incentive compensation, long-term incentives, payroll taxes, and other employee benefits such as 401(k), pension, and medical, life and disability insurance. Personnel expense totaled $460.8 million in 2023, virtually flat compared to 2022, as merit-based increases in salaries and insurance benefits were largely offset by decreases in incentive-based compensation and retirement benefits.
Current wording
Personnel expense consists of salaries, incentive compensation, long-term incentives, payroll taxes, and other employee benefits such as 401(k), pension, and medical, life and disability insurance. Personnel expense totaled $469.4 million in 2024, up $8.6 million or 2%, compared to 2023. The increase in personnel expense was largely driven by higher incentive-based compensation, bonus, merit-based increases in salaries, related payroll tax expense and health insurance benefit cost. These increases were partially offset by the impact of a decrease in headcount and a favorable impact from salary deferrals associated with lending activities.
Previous wording
Occupancy and equipment expenses are primarily composed of lease expenses, depreciation, maintenance and repairs, rent, taxes, and other equipment expenses. Total occupancy and equipment expenses of $70.4 million in 2023, increased $3.1 million, or 5%, from 2022. The increase was largely related to higher insurance cost and equipment depreciation expense.
Current wording
Occupancy and equipment expenses are primarily composed of lease expenses, depreciation, maintenance and repairs, rent, taxes, and other equipment expenses. Total occupancy and equipment expenses of $71.1 million in 2024, increased $0.7 million, or 1%, from 2023. The increase was largely driven by the elimination of revenue from the parking facility sold in late 2023 and an increase in leased facility expense, partially offset by decreases in depreciation and maintenance on furniture, fixtures and equipment.
Previous wording
Data processing expense includes expenses related to third party technology processing and servicing costs, technology project costs and fees associated with bank card and ATM transactions. Data processing expense totaling $117.7 million in 2023 was up $13.8 million, or 13%, from 2022. The increase was largely attributable to higher costs associated with ongoing data processing arrangements and the implementation of technology enhancement projects, including maintenance and amortization of bank-owned software of $4.1 million, and new data processing arrangements of $2.4 million.
Current wording
Data processing expense includes expenses related to third party technology processing and servicing costs, technology project costs and fees associated with bank card and ATM transactions. Data processing expense totaling $121.9 million in 2024 was up $4.2 million, or 4%, from 2023. The increase was largely attributable to higher costs associated with ongoing data processing arrangements of $3.7 million and net card, ATM and merchant fee expense of $1.4 million. These increases were partially offset by a decrease in software amortization $1.1 million.
Previous wording
Amortization of intangibles in 2023 totaled $11.6 million, a $2.5 million, or 18%, decrease from 2022 as a result of the accelerated amortization methods used.
Current wording
Amortization of intangibles in 2024 totaled $9.4 million, a $2.1 million, or 19% decrease from 2023 as a result of the accelerated amortization methods used.
Previous wording
Net gains on sales of other real estate and foreclosed assets exceeded expense by $0.6 million in 2023, compared to $4.4 million in 2022. The net gain recorded in the year ended December 31, 2022 includes a $1.8 million gain on the sale of stock in a former borrower received in satisfaction of debt. Gains or losses on the sale of other real estate and foreclosed assets may occur periodically and are dependent on the number and type of assets for sale and current market conditions.
Current wording
Net gains on sales of other real estate and foreclosed assets exceeded expense by $2.5 million in 2024, compared to $0.6 million in 2023. Gains or losses on the sale of other real estate and foreclosed assets may occur periodically and are dependent on the number and type of assets for sale and current market conditions.
Previous wording
Corporate value, franchise taxes, and other non-income taxes totaled $20.4 million in 2023, an increase of $3.6 million, or 22%, from 2022, largely attributable to bank share tax. The calculation of bank share tax is based on multiple variables, including average quarterly assets, earnings and stockholders’ equity to determine the taxable assessment value.
Current wording
Corporate value, franchise taxes, and other non-income taxes totaled $19.0 million in 2024, a decrease of $1.4 million, or 7%, from 2023, largely attributable to a decrease in bank share tax, partially offset by an increase in franchise tax. The calculation of bank share tax is based on multiple variables, including average quarterly assets, earnings and stockholders’ equity to determine the taxable assessment value.
Previous wording
Business development-related expenses (including advertising, travel, entertainment and contributions), totaling $29.6 million in 2023, were up $1.1 million, or 4%, from 2022 and is reflective of an increase in travel expense.
Current wording
Business development-related expenses (including advertising, travel, entertainment and contributions), totaling $31.1 million in 2024, were up $1.5 million, or 5%, from 2023. The increase was largely driven by increases in marketing and business development expense, including certain costs associated bank sponsored functions, natural disaster response and relief, travel expense and customer incentives.
Previous wording
Noninterest expense in each of the years ended December 31, 2023 and 2022 was reduced by a net credit in other retirement expense. The net credit of $13.5 million recorded in 2023 was $16.2 million, or 55%, lower than the net credit recorded in 2022, largely driven by an increase in the discount rate and changes in other actuarial assumptions for the current plan year.
Current wording
Other retirement expense includes costs associated with pension on other post-retirement plan expense. Noninterest expense in each of the years ended December 31, 2024 and 2023 was reduced by a net credit in other retirement expense totaling $18.1 million and $13.5 million, respectively. The higher net credit in 2024 was largely driven by changes in actuarial assumptions for the current plan year.
Previous wording
We expect noninterest expense to increase 3% to 4% in 2024, from the adjusted 2023 level of $810.7 million.
Current wording
We expect noninterest expense to increase 4% to 5% for the year ended December 31, 2025 from the adjusted 2024 level of $816.1 million. Our forecast has not yet been updated to include any impact from the pending Sabal Trust Company transaction.
Previous wording
We recorded income tax expense at an effective rate of 19.9% in 2023, compared to 20.5% in 2022. The comparability of the effective tax rate between 2023 and 2022 is affected by lower pre-tax book income in 2023 that increased the relative impact of net tax benefits related to tax credit investments, tax-exempt interest income and bank-owned life insurance. Based on the current forecast, management expects the effective tax rate to be approximately 20% to 21% in 2024.
Current wording
We recorded income tax expense at an effective rate of 19.7% in 2024, relatively consistent with 19.9% in 2023. Based on the current forecast, management expects the effective tax rate to be approximately 20% to 21% in 2025, absent any changes in tax law.
Previous wording
Based only on tax credit investments that have been made through 2023, we expect to realize benefits from federal and state tax credits over the next three years totaling $12.4 million, $9.8 million and $8.2 million for 2024, 2025 and 2026, respectively. We intend to continue making investments in tax credit projects. However, our ability to access new credits will depend upon, among other factors, federal and state tax policies and the level of competition for such credits.
Current wording
Based only on tax credit investments that have been made through 2024, we expect to realize benefits from federal and state tax credits over the next three years totaling $9.8 million, $8.2 million and $8.0 million for 2025, 2026 and 2027, respectively. We intend to continue making investments in tax credit projects. However, our ability to access new credits will depend upon, among other factors, federal and state tax policies and the level of competition for such credits.
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Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
Committee is chaired by an independent director. The Board has designated Ms. Joan Teofilo and Mr. H. Merritt Lane, III, independent directors who serve on the Board Risk Committee, as risk management experts. Other committees of the Board of Directors oversee certain risks that overlap with the Board Risk Committee’s enterprise risk management oversight, including the Compensation Committee, which evaluates and manages any risk posed by compensation and benefits programs and oversees inclusion and belonging efforts, and the Corporate Governance and Nominating Committee, which provides oversight on a broad range of issues surrounding the composition and operation of the Board of Directors.
Current report — wording carried from elsewhere
Brokered deposits totaled $6.9 million as of December 31, 2024, down from $583 million at December 31, 2023 as the result of the maturity of brokered certificates of deposit that were not replaced. The use of brokered deposits as a funding source is subject to certain policies regarding the amount, term and interest rate.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
Net income of $392.6 million, or $4.50 per diluted common share