SMARTFINANCIAL INC

Previous wording

The Company may from time to time make written or oral statements, including statements contained in this report and information incorporated by reference herein (including, without limitation, certain statements in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 2), that constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements are based on assumptions and estimates and are not guarantees of future performance. Any statements that do not relate to historical or current facts or matters are forward-looking statements. You can identify some of the forward-looking statements by the use of forward-looking words (and their derivatives), such as “may,” “will,” “could,” “project,” “believe,” “anticipate,” “expect,” “estimate,” “continue,” “potential,” “plan,” “forecast,” and the like, the negatives of such expressions, or the use of the future tense. Statements concerning current conditions may also be forward-looking if they imply a continuation of a current condition. These forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause our actual results, levels of activity, performance, financial condition, or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by such forward-looking statements. Such factors include, but are not limited to:

Current wording

The Company may from time to time make written or oral statements, including statements contained in this Quarterly Report on Form 10-Q (this “report”) and information incorporated by reference herein (including, without limitation, certain statements in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 2), that constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements are based on assumptions and estimates and are not guarantees of future performance. Any statements that do not relate to historical or current facts or matters are forward-looking statements. You can identify some of the forward-looking statements by the use of forward-looking words (and their derivatives), such as “may,” “will,” “could,” “project,” “believe,” “anticipate,” “expect,” “estimate,” “continue,” “potential,” “plan,” “forecast,” and the like, the negatives of such expressions, or the use of the future tense. Statements concerning current conditions may also be forward-looking if they imply a continuation of a current condition. These forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause our actual results, levels of activity, performance, financial condition, or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by such forward-looking statements. Such factors include, but are not limited to:

Previous wording

The following is a summary of the Company’s financial highlights and significant events during the second quarter and first six months of 2024:

Current wording

The following is a summary of the Company’s financial highlights and significant events during the third quarter and first nine months of 2024:

Previous wording

The following is a summary of certain financial information for the three and six month periods ended June 30, 2024 and 2023 and as of June 30, 2024 and December 31, 2023*(dollars in thousands, except per share data)*:

Current wording

The following is a summary of certain financial information for the three and nine month periods ended September 30, 2024 and 2023 and as of September 30, 2024 and December 31, 2023*(dollars in thousands, except per share data)*:

Previous wording

Net income was $8.0 million, or $0.48 per diluted common share, for the second quarter of 2024, compared to $8.8 million, or $0.52 per diluted common share, for the second quarter of 2023. For the three months ended June 30, 2024, when compared to the comparable period in 2023, the decrease in net income of $833 thousand was due to an increase in noninterest expense of $1.8 million, offset by an increase in net interest income after provision for loan and lease losses of $469 thousand and noninterest income of $474 thousand and a decrease in income tax expense of $15 thousand. The tax equivalent net interest margin was 2.97% for the second quarter of 2024, compared to 2.93% for the second quarter of 2023. Noninterest income to average assets was 0.63% for the second quarter of 2024, increasing from 0.61% for the second quarter of 2023. Noninterest expense to average assets increased to 2.41% in the second quarter of 2024, from 2.34% in the second quarter of 2023.

Current wording

Net income was $9.1 million, or $0.54 per diluted common share, for the third quarter of 2024, compared to $2.1 million, or $0.12 per diluted common share, for the third quarter of 2023. For the three months ended September 30, 2024, when compared to the comparable period in 2023, the increase in net income of $7.1 million was due to an increase in noninterest income of $8.4 million and net interest income after provision for loan and lease losses of $2.2 million, offset by an increase in noninterest expense of $2.3 million and income tax expense of $1.3 million. The increase in noninterest income was associated with a $6.8 million pre-tax loss on the sale of available-for-sale securities, as a result of a balance sheet optimization transaction in September 2023. The tax equivalent net interest margin was 3.11% for the third quarter of 2024, compared to 2.81% for the third quarter of 2023. Noninterest income to average assets was 0.74% for the third quarter of 2024, increasing from 0.06% for the third quarter of 2023. Noninterest expense to average assets increased to 2.50% in the third quarter of 2024, from 2.37% in the third quarter of 2023.

Previous wording

Net income totaled $17.4 million, or $1.03 per diluted common share, for the six months ended 2024, compared to $20.3 million, or $1.20 per diluted common share, for the six months ended 2023. The decrease in net income of $3.0 million for this period was primarily from the decrease of $2.8 million in net interest income after provision for credit losses and an increase of $2.8 million in noninterest expense, offset by an increase in noninterest income of $1.9 million and a decrease of $712 thousand in income tax expense. The tax equivalent net interest margin was 2.91% for the first six months of 2024, compared to 3.12% for the first six months of 2023. Noninterest income to average assets was 0.66% for the first six months of 2024, increasing from 0.60% for the first six months of 2023. Noninterest expense to average assets increased to 2.38% in the first six months of 2024, from 2.34% in the first six months of 2023.

Current wording

Net income totaled $26.5 million, or $1.57 per diluted common share, for the nine months ended 2024, compared to $22.4 million, or $1.33 per diluted common share, for the nine months ended 2023. The increase in net income of $4.1 million for this period was primarily from the increase of $10.4 million in noninterest income, offset by an increase of $5.1 million in noninterest expense and $579 thousand in income tax expense. The increase in noninterest income was associated with a $6.8 million pre-tax loss on the sale of available-for-sale securities, as a result of a balance sheet optimization transaction in September 2023. The tax equivalent net interest margin was 2.97% for the first nine months of 2024, compared to 3.01% for the first nine months of 2023. Noninterest income to average assets was 0.69% for the first nine months of 2024,

Previous wording

Net interest income, taxable equivalent, increased to $33.2 million for the second quarter of 2024, up from $31.7 million for the second quarter of 2023. Net interest income was positively impacted by the increase in balances of loans and leases and the increase in yield/rate on these interest-earning assets, offset by the increase in the cost of interest-bearing liabilities. Average interest-earning assets increased from $4.34 billion for the second quarter of 2023, to $4.49 billion for the second quarter of 2024, primarily from the increase in our average loan and lease balances and average cash balances, which was offset by decreases in average securities. Over this period, average loan and lease balances increased by $195.7 million, average federal funds sold and other interest earning assets increased by $151.2 million, and average interest-bearing deposits increased by $229.7 million. Average securities decreased by $191.3 million, average borrowings decreased by $12.2 million and noninterest-bearing deposits decreased by $62.7 million. The tax equivalent net interest margin increased to 2.97% for the second quarter of 2024, compared to 2.93% for the second quarter of 2023. The yield on earning assets increased from 4.82% for the second quarter of 2023, to 5.52% for the second quarter of 2024, primarily due to the deployment of excess cash and cash equivalents into loans and leases and the increase in rates by the Federal Reserve. The cost of average interest-bearing deposits increased from 2.46% for the second quarter of 2023, to 3.23% for the second quarter of 2024, primarily due to the increase in rates by the Federal Reserve and increased pricing competition.

Current wording

Net interest income, taxable equivalent, increased to $35.4 million for the third quarter of 2024, up from $31.1 million for the third quarter of 2023. Net interest income was positively impacted by the increase in balances of loans and leases and the increase in yield/rate on these interest-earning assets, offset by the increase in the cost of interest-bearing liabilities. Average interest-earning assets increased from $4.40 billion for the third quarter of 2023, to $4.53 billion for the third quarter of 2024, primarily from the increase in our average loan and lease balances and average cash balances, which was offset by decreases in average securities. Over this period, average loan and lease balances increased by $274.1 million, average federal funds sold and other interest-earning assets increased by $37.8 million, average interest-bearing deposits increased by $129.3 million, and average borrowing increased by $37.4 million. Average securities decreased by $179.2 million and noninterest-bearing deposits decreased by $66.2 million. The tax equivalent net interest margin increased to 3.11% for the third quarter of 2024, compared to 2.81% for the third quarter of 2023. The yield on earning assets increased from 4.99% for the third quarter of 2023, to 5.65% for the third quarter of 2024, primarily due to the deployment of excess cash and cash equivalents into loans and leases and the increase in rates by the Federal Reserve. The cost of average interest-bearing deposits increased from 2.84% for the third quarter of 2023, to 3.20% for the third quarter of 2024, primarily due to the increase in rates by the Federal Reserve and increased pricing competition.

Previous wording

The following table summarizes the major components of net interest income and the related yields and costs for the period presented*(dollars in thousands)*:

Current wording

The following tables summarizes the major components of net interest income and the related yields and costs for the periods presented*(dollars in thousands)*:

Previous wording

1 Yields related to tax-exempt loans exempt from income taxes are stated on a taxable-equivalent basis assuming a federal income tax rate of 21.0%. The taxable-equivalent adjustment was $257 thousand for the three months ended June 30, 2024, and $0 thousand for the three months ended June 30, 2023.

Current wording

1 Yields related to tax-exempt loans exempt from income taxes are stated on a taxable-equivalent basis assuming a federal income tax rate of 21.0%. The taxable-equivalent adjustment was $255 thousand for the three months ended September 30, 2024, and $0 thousand for the three months ended September 30, 2023.

Previous wording

2 Yields related to investment securities exempt from income taxes are stated on a taxable-equivalent basis assuming a federal income tax rate of 21.0%. The taxable-equivalent adjustment was $94 thousand and $95 thousand for the three months ended June 30, 2024, and 2023, respectively.

Current wording

2 Yields related to investment securities exempt from income taxes are stated on a taxable-equivalent basis assuming a federal income tax rate of 21.0%. The taxable-equivalent adjustment was $93 thousand and $95 thousand for the three months ended September 30, 2024, and 2023, respectively.

Previous wording

Net interest income, taxable equivalent, decreased to $65.0 million for the first six months of 2024, down from $67.7 million for the first six months of 2023. Net interest income was positively impacted, compared to the prior year, primarily by the increase in balances of loans and leases and the increase in yield/rate on interest-earning assets, offset by the increase in the cost of interest-bearing liabilities. Average interest-earning assets increased from $4.38 billion for the first six months of 2023, to $4.50 billion for the first six months of 2024, primarily because of the Company’s continued organic loan and lease growth and the increase in our average cash balances, offset by a decrease in our securities. Over this period, average loan and lease balances increased by $197.5 million, federal funds sold and other interest earning assets increased by $63.9 million and average interest-bearing deposits increased by $219.4 million. Average securities decreased by $147.9 million, average borrowings decreased $8.9 million and noninterest-bearing deposits decreased by $102.6 million. The tax equivalent net interest margin decreased to 2.91% for the first six months of 2024, compared to 3.12% for the first six months of 2023. The yield on earning assets increased from 4.85% for the first six months of 2023, to 5.44% for the first six months of 2024, primarily due the deployment of excess cash and cash equivalents into loans and leases and the increase in rates by the Federal Reserve. The cost of average interest-bearing deposits increased from 2.25% for the first six months of 2023 to 3.19% for the first six months of 2024, primarily due to the increase in rates by the Federal Reserve and increased pricing competition.

Current wording

Net interest income, taxable equivalent, increased to $100.4 million for the first nine months of 2024, up from $98.9 million for the first nine months of 2023. Net interest income was positively impacted, compared to the prior year, primarily by the increase in balances of loans and leases and the increase in yield/rate on interest-earning assets, offset by the increase in the cost of interest-bearing liabilities. Average interest-earning assets increased from $4.39 billion for the first nine months of 2023 to $4.51 billion for the first nine months of 2024, primarily because of the Company’s continued organic loan and lease growth and the increase in our average cash balances, offset by a decrease in our securities. Over this period, average loan and lease balances increased by $223.2 million, federal funds sold and other interest earning assets increased by $120.0 million, average interest-bearing deposits increased by $189.1 million and average borrowings increased by $6.6 million. Average securities decreased by $158.4 million and noninterest-bearing deposits decreased by $90.3 million. The tax equivalent net interest margin decreased to 2.97% for the first nine months of 2024, compared to 3.01% for the first nine months of 2023. The yield on earning assets increased from 4.90% for the first nine months of 2023, to 5.51% for the first nine months of 2024, primarily due to the deployment of excess cash and cash equivalents into loans and leases and the increase in rates by the Federal Reserve. The cost of average interest-bearing deposits increased from 2.45% for the first nine months of 2023 to 3.19% for the first nine months of 2024, primarily due to the increase in rates by the Federal Reserve and increased pricing competition.

Previous wording

1 Yields related to tax-exempt loans exempt from income taxes are stated on a taxable-equivalent basis assuming a federal income tax rate of 21.0%. The taxable-equivalent adjustment was $257 thousand for the six months ended June 30, 2024, and $0 thousand for the six months ended June 30, 2023.

Current wording

1 Yields related to tax-exempt loans exempt from income taxes are stated on a taxable-equivalent basis assuming a federal income tax rate of 21.0%. The taxable-equivalent adjustment was $512 thousand for the nine months ended September 30, 2024, and $0 thousand for the nine months ended September 30, 2023.

Previous wording

2 Yields related to investment securities exempt from income taxes are stated on a taxable-equivalent basis assuming a federal income tax rate of 21.0%. The taxable-equivalent adjustment was $187 thousand for the six months ended June 30, 2024, and $188 thousand for the six months ended June 30, 2023.

Current wording

2 Yields related to investment securities exempt from income taxes are stated on a taxable-equivalent basis assuming a federal income tax rate of 21.0%. The taxable-equivalent adjustment was $280 thousand for the nine months ended September 30, 2024, and $283 thousand for the nine months ended September 30, 2023.

Previous wording

Noninterest income increased by $474 thousand during the second quarter of 2024 compared to the same period in 2023. This quarterly change in total noninterest income primarily resulted from the following:

Current wording

Noninterest income increased by $8.4 million during the third quarter of 2024 compared to the same period in 2023. This quarterly change in total noninterest income primarily resulted from the following:

Previous wording

Noninterest income increased by $1.9 million during the first six months of 2024 compared to the same period in 2023. This change in total noninterest income primarily resulted from the following:

Current wording

Noninterest income increased by $10.4 million during the first nine months of 2024 compared to the same period in 2023. This change in total noninterest income primarily resulted from the following:

Previous wording

Noninterest expense increased by $1.8 million in the second quarter of 2024 as compared to the same period in 2023. The quarterly increase in total noninterest expense primarily resulted from the following:

Current wording

Noninterest expense increased by $2.3 million in the third quarter of 2024 as compared to the same period in 2023. The quarterly increase in total noninterest expense primarily resulted from the following:

Previous wording

Noninterest expense increased by $2.8 million in the first six months of 2024 as compared to the same period in 2023. The change in total noninterest expense primarily resulted from the following:

Current wording

Noninterest expense increased by $5.1 million in the first nine months of 2024 as compared to the same period in 2023. The change in total noninterest expense primarily resulted from the following:

Previous wording

In the first six months of 2024 income tax expense totaled $5.0 million compared to $5.7 million in the first six months of 2023. The effective tax rate was approximately 22.2% for first six months of 2024 compared to 21.8% for the six months ended 2023.

Current wording

In the first nine months of 2024 income tax expense totaled $6.6 million compared to $6.0 million in the first nine months of 2023. The effective tax rate was approximately 19.9% for first nine months of 2024 compared to 21.1% for the nine months ended 2023.

Previous wording

The Company had total net loans and leases outstanding of approximately $3.54 billion at June 30, 2024, compared to $3.41 billion at December 31, 2023. Loans secured by real estate, consisting of commercial and residential property, are the principal component of our loan and lease portfolio.

Current wording

The Company had total net loans and leases outstanding of approximately $3.68 billion at September 30, 2024, compared to $3.41 billion at December 31, 2023. Loans secured by real estate, consisting of commercial and residential property, are the principal component of our loan and lease portfolio.

Previous wording

The following tables summarizes the composition of our loan and lease portfolio for the periods presented*(dollars in thousands)*:

Current wording

The following table summarizes the composition of our loan and lease portfolio for the periods presented*(dollars in thousands)*:

Previous wording

Nonperforming loans and leases as a percentage of total gross loans and leases, net of deferred fees, was 0.19% as of June 30, 2024, and 0.24% December 31, 2023, respectively. Total nonperforming assets as a percentage of total assets was 0.20% as of June 30, 2024, and December 31, 2023, respectively.

Current wording

Nonperforming loans and leases, as a percentage of total gross loans and leases, net of deferred fees, was 0.26% as of September 30, 2024, and 0.24% December 31, 2023, respectively. Total nonperforming assets, as a percentage of total assets, was 0.26% as of September 30, 2024, and 0.20% as of December 31, 2023, respectively.

Previous wording

We maintain the allowance at a level that we deem appropriate to adequately cover change in the loan and lease portfolio. Our provision for credit losses for loans and leases for the six months ended June 30, 2024, is $818 thousand compared to $970 thousand in the same period of 2023, a decrease of $152 thousand. As of June 30, 2024, and December 31, 2023, our allowance for credit losses was $34.7 million and $35.1 million, respectively, which we deemed to be adequate at each of the respective dates. Our allowance for credit loss as a percentage of total loans and leases was 0.97% at June 30, 2024 and 1.02% at December 31, 2023, respectively.

Current wording

We maintain the allowance at a level that we deem appropriate to adequately cover change in the loan and lease portfolio. Our provision for credit losses for loans and leases for the nine months ended September 30, 2024, is $3.1 million compared to $2.3 million in the same period of 2023, an increase of $837 thousand. As of September 30, 2024, and December 31, 2023, our allowance for credit losses was $35.6 million and $35.1 million, respectively, which we deemed to be adequate at each of the respective dates. Our allowance for credit loss as a percentage of total loans and leases was 0.96% at September 30, 2024 and 1.02% at December 31, 2023, respectively.

Previous wording

The allowance associated with the individually evaluated loans and leases were approximately $3.1 million at June 30, 2024, compared to $3.5 million at December 31, 2023.

Current wording

The allowance associated with the individually evaluated loans and leases were approximately $3.2 million at September 30, 2024, compared to $3.5 million at December 31, 2023.

Previous wording

Our available-for-sale securities portfolio is carried at fair market value and our held-to-maturity securities portfolio is carried at amortized cost, and consists primarily of Federal agency bonds, mortgage-backed securities, state and municipal securities and other debt securities. Our securities portfolio decreased from $689.6 million at December 31, 2023, to $629.8 million at June 30, 2024, primarily as a result of Treasury securities maturities. Our securities to asset ratio has decreased from 14.3% at December 31, 2023, to 12.9% at June 30, 2024.

Current wording

Our available-for-sale securities portfolio is carried at fair market value and our held-to-maturity securities portfolio is carried at amortized cost, and consists primarily of Federal agency bonds, mortgage-backed securities, state and municipal securities and other debt securities. Our securities portfolio decreased from $689.6 million at December 31, 2023, to $629.1 million at September 30, 2024, primarily as a result of Treasury securities maturities. Our securities to asset ratio has decreased from 14.3% at December 31, 2023, to 12.8% at September 30, 2024.

Previous wording

The following table presents the contractual maturity of the Company’s securities by contractual maturity date and average yields based on amortized cost (for all obligations on a fully taxable basis) at June 30, 2024*(dollars in thousands)*. The

Current wording

The following table presents the contractual maturity of the Company’s securities by contractual maturity date and average yields based on amortized cost (for all obligations on a fully taxable basis) at September 30, 2024*(dollars in thousands)*.

Previous wording

composition and maturity/repricing distribution of the securities portfolio is subject to change depending on rate sensitivity, capital and liquidity needs.

Current wording

The composition and maturity/repricing distribution of the securities portfolio is subject to change depending on rate sensitivity, capital and liquidity needs.

Previous wording

Deposits are the primary source of funds for the Company’s lending and investing activities. The Company provides a range of deposit services to businesses and individuals, including noninterest-bearing checking accounts, interest-bearing checking accounts, savings accounts, money market accounts, IRAs and CDs. These accounts generally earn interest at rates the Company establishes based on market factors and the anticipated amount and timing of funding needs. The establishment or continuity of a core deposit relationship can be a factor in loan pricing decisions. While the Company’s primary focus is on establishing customer relationships to attract core deposits, at times, the Company uses brokered deposits and other wholesale deposits to supplement its funding sources. As of June 30, 2024, brokered deposits represented approximately 0.05% of total deposits.

Current wording

Deposits are the primary source of funds for the Company’s lending and investing activities. The Company provides a range of deposit services to businesses and individuals, including noninterest-bearing checking accounts, interest-bearing checking accounts, savings accounts, money market accounts, IRAs and CDs. These accounts generally earn interest at rates the Company establishes based on market factors and the anticipated amount and timing of funding needs. The establishment or continuity of a core deposit relationship can be a factor in loan pricing decisions. While the Company’s primary focus is on establishing customer relationships to attract core deposits, at times, the Company uses brokered deposits and other wholesale deposits to supplement its funding sources. As of September 30, 2024, brokered deposits represented approximately 4.55% of total deposits.

Previous wording

The following tables summarize the average balances outstanding and average interest rates for each major category of deposits for the three and six month periods ending June 30, 2024, and 2023, respectively (dollars in thousands):

Current wording

The following tables summarize the average balances outstanding and average interest rates for each major category of deposits for the three and nine month periods ending September 30, 2024, and 2023, respectively (dollars in thousands):

Previous wording

The Company believes its deposit product offerings are properly structured to attract and retain core deposit relationships. The average cost of interest-bearing deposits for the three months ended June 30, 2024, and 2023, was 3.23% and 2.46%, respectively. The cost increase was primarily attributable to the rate increases. The average cost of interest-bearing deposits for the six months ended June 30, 2024, and 2023, was 3.19% and 2.25%, respectively. The cost increase was primarily attributable to the increases in rates.

Current wording

The Company believes its deposit product offerings are properly structured to attract and retain core deposit relationships. The average cost of interest-bearing deposits for the three months ended September 30, 2024, and 2023, was 3.20% and 2.84%, respectively. The cost increase was primarily attributable to the rate increases. The average cost of interest-bearing deposits for the nine months ended September 30, 2024, and 2023, was 3.19% and 2.45%, respectively. The cost increase was primarily attributable to the increases in rates and increased pricing competition.

Previous wording

Total deposits as of June 30, 2024, were $4.32 billion, which was an increase of $48.8 million from December 31, 2023. This increase was primarily from organic deposit growth. As of June 30, 2024, the Company had outstanding time deposits under $250,000 with balances of $315.3 million and time deposits over $250,000 with balances of $208.7 million.

Current wording

Total deposits as of September 30, 2024, were $4.32 billion, which was an increase of $54.6 million from December 31, 2023. This overall increase was driven primarily by the issuance of brokered deposits of $174.8 million, increase in other time deposits of $44.3 million and savings deposits of $42.4 million, offset by a decline in interest-bearing demand deposits of $172.7 million and noninterest bearing deposits of $34 million. During the quarter, the Bank elected not to pursue a higher cost public funds depository relationship and utilized Federal Home Loan Advances temporarily, which was replaced with brokered deposits. As of September 30, 2024, the Company had outstanding time deposits under $250,000 with balances of $516.9 million and time deposits over $250,000 with balances of $252.7 million.

Previous wording

The Company's estimated uninsured deposits totaled $1.86 billion at June 30, 2024, compared to $1.76 billion at December 31, 2023, representing 43.1% and 41.3% of total deposits at June 30, 2024, and December 31, 2023, respectively. These estimates were derived using the same methodologies and assumptions used for the Bank's regulatory reporting.

Current wording

The Company's estimated uninsured deposits totaled $1.86 billion at September 30, 2024, compared to $1.76 billion at December 31, 2023, representing 43.0% and 41.3% of total deposits at September 30, 2024, and December 31, 2023, respectively. These estimates were derived using the same methodologies and assumptions used for the Bank's regulatory reporting.

Previous wording

The Company uses short-term borrowings and long-term debt to provide both funding and, to a lesser extent, regulatory capital using debt at the Company level which can be down-streamed as Tier 1 capital to the Bank. Borrowings totaled $12.7 million at June 30, 2024, and consisted of short-term borrowings of $8.0 million, and $4.7 million of securities sold under repurchase agreements. Long-term debt totaled $42.1 million at June 30, 2024, and December 31, 2023, respectively, and consisted entirely of subordinated debt. For more information regarding our borrowings, see "Part I - Item 1. Consolidated Financial Statements – Note 6 –Borrowings, Line of Credit and Subordinated Debt.”

Current wording

The Company uses short-term borrowings and long-term debt to provide both funding and, to a lesser extent, regulatory capital using debt at the Company level which can be down-streamed as Tier 1 capital to the Bank. Borrowings totaled $9.0 million at September 30, 2024, and consisted of short-term borrowings of $5.0 million, and $4.0 million of securities sold under repurchase agreements. Long-term debt totaled $39.7 million and $42.1 million at September 30, 2024, and December 31, 2023, respectively, and consisted entirely of subordinated debt. For more information regarding our borrowings, see “Part I - Item 1. Consolidated Financial Statements – Note 6 –Borrowings, Line of Credit and Subordinated Debt” of this report.

Previous wording

The Company uses leverage analysis to examine the potential of the institution to increase assets and liabilities using the current capital base. The key measurements included in this analysis are the Bank’s Common Equity Tier 1 capital, Tier 1 capital, leverage and total capital ratios. At June 30, 2024 and December 31, 2023, our capital ratios, including our Bank’s capital ratios, exceeded regulatory minimum capital requirements. From time to time we may be required to support the capital needs of our bank subsidiary. We believe we have various capital raising techniques available to us to provide for the capital needs of our bank, if necessary. For more information regarding our capital, leverage and total capital ratios, see “Part I - Item 1. Consolidated Financial Statements – Note 12 –Regulatory Matters.”

Current wording

The Company uses leverage analysis to examine the potential of the institution to increase assets and liabilities using the current capital base. The key measurements included in this analysis are the Bank’s Common Equity Tier 1 capital, Tier 1 capital, leverage and total capital ratios. At September 30, 2024 and December 31, 2023, our capital ratios, including our Bank’s capital ratios, exceeded regulatory minimum capital requirements. From time to time, we may be required to support the capital needs of our bank subsidiary. We believe we have various capital raising techniques available to us to provide for the capital needs of our bank, if necessary. For more information regarding our capital, leverage and total capital ratios, see “Part I - Item 1. Consolidated Financial Statements – Note 12 –Regulatory Matters” of this report.

Previous wording

The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing and depository needs of its customers. At June 30, 2024, we had $720.0 million of pre-approved but unused lines of credit and $18.4 million of standby letters of credit. These commitments generally have fixed expiration dates and many will expire without being drawn upon. The total commitment level does not necessarily represent future cash requirements. If needed to fund these outstanding commitments, the Bank has the ability to liquidate Federal funds sold or securities available-for-sale, or on a short-term basis to borrow and purchase Federal funds from other financial institutions. For more information regarding our off-balance sheet arrangements, see “Part I - Item 1. Consolidated Financial Statements – Note 8 –Commitments and Contingent Liabilities.”

Current wording

dates, and many will expire without being drawn upon. The total commitment level does not necessarily represent future cash requirements. If needed to fund these outstanding commitments, the Bank has the ability to liquidate federal funds sold or securities available-for-sale, or on a short-term basis to borrow and purchase federal funds from other financial institutions. For more information regarding our off-balance sheet arrangements, see “Part I - Item 1. Consolidated Financial Statements – Note 8 –Commitments and Contingent Liabilities” of this report.

Previous wording

The Company has $2.8 million in securities that mature throughout the next 12 months. The Company also has unused borrowing capacity in the amount of $933.8 million available with the Federal Reserve, Federal Home Loan Bank, several correspondent banks and a line of credit. With these sources of funds, the Company currently anticipates adequate liquidity to meet the expected obligations of its customers.

Current wording

The Company has $1.5 million in securities that mature throughout the next 12 months. The Company also has unused borrowing capacity in the amount of $917.7 million available with the Federal Reserve, Federal Home Loan Bank, several correspondent banks and a line of credit. With these sources of funds, the Company currently anticipates adequate liquidity to meet the expected obligations of its customers.