HANCOCK WHITNEY CORP (HWC) FY 2024 MD&A

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The objective of this discussion and analysis is to provide material information relevant to the assessment of the financial condition and results of operations of Hancock Whitney Corporation and its subsidiaries during the year ended December 31, 2024 and selected prior periods, including an evaluation of the amounts and certainty of cash flows from operations and outside sources. This discussion and analysis is intended to highlight and supplement financial and operating data and information presented elsewhere in this report, including the consolidated financial statements and related notes. The discussion contains forward-looking statements, which are subject to risks and uncertainties. Should one or more of these risks or uncertainties materialize, our actual results may differ from those expressed or implied by the forward-looking statements. See Forward-Looking Statements in Part I of this Annual Report.

Non-GAAP Financial Measures

Management’s Discussion and Analysis of Financial Condition and Results of Operations include non-GAAP measures used to describe our performance. A reconciliation of those measures to GAAP measures are provided in Table 1 “Consolidated Financial Results” and Table 31 “Quarterly Consolidated Financial Results” of this section. The following is an overview of the non-GAAP measures used and the reasons why management believes they are useful and important in understanding the Company’s financial condition and results of operations included below.

Consistent with the provisions of Subpart 229.1400 of Regulation S-K, “Disclosures by Bank and Savings and Loan Registrants,” we present net interest income, net interest margin and efficiency ratios on a fully taxable equivalent (te) basis. The te basis adjusts for the tax-favored status of interest income from certain loans and investments using the statutory federal tax rate (21% for all periods presented) to increase tax-exempt interest income to a taxable-equivalent basis. This measure is the preferred industry measurement of net interest income and it enhances comparability of net interest income arising from taxable and tax-exempt sources.

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.

We define Adjusted Pre-Provision Net Revenue as net income excluding provision expense and income tax expense, plus the taxable equivalent adjustment (as defined above), less supplemental disclosure items (as defined above). Management believes that adjusted pre-provision net revenue is a useful financial measure because it enables investors and others to assess the Company’s ability to generate capital to cover credit losses through a credit cycle. We define Adjusted Revenue as net interest income (te) and noninterest income less supplemental disclosure items. We define Adjusted Noninterest Expense as noninterest expense less supplemental disclosure items. We define our Efficiency Ratio as noninterest expense to total net interest income (te) and noninterest income, excluding amortization of purchased intangibles and supplemental disclosure items, if applicable. Management believes adjusted revenue, adjusted noninterest expense and the efficiency ratio are useful measures as they provide a greater understanding of ongoing operations and enhance comparability with prior periods.

EXECUTIVE OVERVIEW

The discussions and analyses that follow provide insight into the impact of macroeconomic and industry trends on our performance in the most recent fiscal year, and our outlook for the near term.

Current Economic Environment

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

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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.

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.

Economic Outlook

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.

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.

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.

Management has deemed certain assumptions underlying the S-2 scenario to be somewhat more likely to occur in the near term than those underlying the baseline scenario, and as such, the baseline scenario and the S-2 scenario were given probability weightings of 40% and 60%, respectively, in the calculation of our allowance for credit losses calculation at December 31, 2024.

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.

Highlights of 2024 Financial Results

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

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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:

•
Net income of $460.8 million, or $5.28 per diluted common share

•
Adjusted pre-provision net revenue (a non-GAAP measure) totaled $641.0 million, up $5.3 million

•
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

•
Loans of $23.3 billion, down $622.5 million; reflects a $307.6 million strategic reduction of the shared national credit portfolio

•
Deposits of $29.5 billion, down $197.2 million; reflects organic growth offset by a decline of $582.9 million in brokered deposits

•
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

•
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%

•
Net interest margin expanded 3 bps to 3.37%

•
Efficiency ratio (a non-GAAP measure) of 55.36%, relatively consistent with 2023

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.

The table that follows presents our consolidated financial results. Additional information related to our results and outlook are included in the discussions that follow.

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Table 1. Consolidated Financial Results

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(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.

(b) For analytical purposes, management adjusts interest income and net interest income for tax-exempt items to a taxable equivalent basis using a federal income tax rate of 21%.

(c) The tangible common equity ratio is common stockholders’ equity less intangible assets divided by total assets less intangible assets.

(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.

(e) See non-GAAP financial measures section of this analysis for a discussion of these measures.

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RESULTS OF OPERATIONS

The following is a discussion of results from operations for the year ended December 31, 2024 compared to the year ended December 31, 2023. Refer to previously filed Annual Reports on Form 10-K Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for discussion of prior year variances.

Net Interest Income

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.

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.

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.

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.

Discussions of Asset/Liability Management and Net Interest Income at Risk later in this item provide additional information regarding our management of interest rate risk and the potential impact from changes in interest rates, respectively.

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TABLE 2. Summary of Average Balances, Interest and Rates (te) (a)

(a)
Taxable equivalent (te) amounts are calculated using federal income tax rate of 21%.

(b)
Includes nonaccrual loans.

(c)
Average securities do not include unrealized holding gains or losses on available for sale securities.

(d)
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.

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TABLE 3. Summary of Changes in Net Interest Income (te) (a) (b)

(a)
Taxable equivalent (te) amounts are calculated using a federal income tax rate of 21%.

(b)
Amounts shown as due to changes in either volume or rate includes an allocation of the amount that reflects the interaction of volume and rate changes. This allocation is based on the absolute dollar amounts of change due solely to changes in volume or rate.

(c)
Includes nonaccrual loans.

(d)
Average securities do not include unrealized holding gains or losses on available for sale securities.

Provision for Credit Losses

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.

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.

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.

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Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Balance Sheet Analysis—Allowance for Credit Losses” provides additional information on changes in the allowance for credit losses and general credit quality.

Noninterest Income

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.

Table 4 presents, for each of the three years ended December 31, 2024, 2023 and 2022, the components of noninterest income, along with the percentage changes between years. Table 5 presents supplemental disclosure items included in noninterest income (Table 4) by component for the same periods.

TABLE 4. Noninterest Income

n/m – not meaningful

TABLE 5. Supplemental Disclosure Items Included in Noninterest Income

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.

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.

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.

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

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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.

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.

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.

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.

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.

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.

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.

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.

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.

Noninterest Expense

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.

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Table 6 presents, for each of the three years ended December 31, 2024, 2023 and 2022, noninterest expense, along with the percentage changes between years. Table 7 presents supplemental disclosure items included in noninterest expense (Table 6) by component for the same periods.

TABLE 6. Noninterest Expense

n/m - not meaningful

TABLE 7. Supplemental Disclosure Items Included in Noninterest Expense

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.

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.

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.

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.

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.

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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.

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.

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.

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.

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.

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.

All other expenses totaled $52.5 million in 2024, up $0.3 million, or 1%, from 2023.

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.

Income Taxes

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.

Our effective tax rate has historically varied from the federal statutory rate primarily due to tax-exempt income and tax credits. Interest income on bonds issued by or loans to state and municipal governments and authorities, and earnings from the bank-owned life insurance contract program are the major components of tax-exempt income.

Table 8 reconciles reported income tax expense to that computed at the statutory tax rate of 21% for the years ended December 31, 2024, 2023 and 2022.

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TABLE 8. Income Taxes

The main source of tax credits has been investments in tax-advantage securities and tax credit projects. These investments are made primarily in the markets we serve and directed at tax credits issued under the Federal and State New Market Tax Credit (NMTC), Low-Income Housing Tax Credit (LIHTC) and pre-2018 Qualified Zone Academy Bonds (QZAB) and Qualified School Construction Bonds (QSCB) programs. The investments generate tax credits which reduce current and future taxes and are recognized when earned as a benefit in the provision for income taxes. Additionally, the amortization of the LIHTC investment cost will be recognized as a component of income tax expense in proportion to the tax credits recognized over the 10-year credit period of each project.

We have invested in NMTC projects through investments in our own CDEs, as well as other unrelated CDEs. Federal tax credits from NMTC investments are recognized over a seven-year period, while recognition of the benefits from state tax credits varies from three to five years.

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.

At December 31, 2024, we had a net deferred tax asset of $146.6 million, which is comprised of $297.4 million in deferred tax assets (net of valuation allowance), offset by $150.8 million of deferred tax liabilities. Several factors are considered in determining the recoverability of the deferred tax asset components, such as the history of taxable earnings, reversal of taxable temporary differences, future taxable income and tax planning strategies. Based on our review of these factors, we have established a $2.6 million valuation allowance for state net operating losses and $2.0 million valuation allowance for deferred executive compensation.

BALANCE SHEET ANALYSIS

Short-Term Investments

Short-term liquidity assets are held to ensure funds are available to meet the cash flow needs of both borrowers and depositors. At December 31, 2024, short-term liquidity investments, including interest-bearing bank deposits and federal funds sold, totaled $939.7 million, an increase of $312.6 million from December 31, 2023. Average short-term investments for 2024 totaled $547.8 million, a $90.8 million decrease from $638.6 million in 2023. Typically, these balances will change on a daily basis depending upon movement in customer loan and deposit accounts. The comparative average balance for the year ended December 31, 2023 was impacted by excess liquidity held in response to the disruption in the financial industry caused by bank failures. See further discussion in the “Liquidity” section that follows.

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Investment Securities

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.

Our investment in securities totaled $7.6 billion at both December 31, 2024 and 2023. The investment securities portfolio is managed by ALCO to assist in the management of interest rate risk and liquidity while providing an acceptable rate of return. At December 31, 2024, the amortized cost of securities available for sale totaled $5.8 billion and securities held to maturity totaled $2.4 billion, compared to $5.5 billion and $2.7 billion, respectively, at December 31, 2023. The year over year changes in each of the portfolios is largely reflective of maturities and paydowns from both portfolios reinvested in the available for sale portfolio.

Our securities portfolio consists mainly of residential and commercial mortgage-backed securities that are issued or guaranteed by U.S. government agencies. We invest only in high quality investment grade securities and manage the investment portfolio duration generally between two and five and a half years. At December 31, 2024, the average expected maturity of the portfolio was 5.58 years with an effective duration of 4.12 years and a nominal weighted-average yield of 2.66%. Under an immediate, parallel rate shock of 100 bps and 200 bps, the effective duration would be 4.11 years and 4.07 years, respectively. At December 31, 2023, the average expected maturity of the portfolio was 6.22 years with an effective duration of 4.60 years and a nominal weighted-average yield of 2.48%. The change in expected maturity, effective duration, and nominal weighted-average yield is primarily attributable to portfolio reinvestment activity in 2024.

We have in place fair value hedges on certain fixed-rate commercial mortgage-backed securities. As of December 31, 2024, we had approximately $477.5 million in notional amount of forward-starting fixed payer swaps that convert the latter portion of the term of these available for sale securities to a floating rate. These derivative instruments are designated as fair value hedges of interest rate risk. This strategy provides a fixed-rate coupon during the front-end unhedged tenor of the bonds and results in a floating-rate security during the back-end hedged tenor.

At the end of each reporting period, we evaluate the securities portfolio for credit loss. Based on our assessments, expected credit loss was negligible for all reporting periods in 2024 and 2023, and therefore no allowance for credit loss was recorded.

There were no investments in securities of a single issuer, other than U.S. Treasury and U.S. government agency securities and mortgage-backed securities issued or guaranteed by U.S. government agencies that exceeded 10% of stockholders’ equity. We do not invest in subprime or “Alt A” home mortgage-backed securities. Investments classified as available for sale are carried at fair value, while held to maturity securities are carried at amortized cost. Unrealized holding gains (losses) on available for sale securities are excluded from net income and are recognized, net of tax, in other comprehensive income and in accumulated other comprehensive income, a separate component of stockholders’ equity.

The following table presents the amortized cost of debt securities by type at December 31, 2024 and 2023.

TABLE 9. Debt Securities by Type

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The amortized cost, fair value and yield of debt securities at December 31, 2024, by final contractual maturity, are presented in the following table. Securities are classified according to their final contractual maturities without consideration of scheduled and unscheduled principal amortization, potential prepayments or call options. Accordingly, actual maturities will differ from their reported contractual maturities. The expected average maturity years presented in the table includes scheduled principal payments and assumptions for prepayments. The yield calculation does not include adjustments to amortized cost of available for sale securities for active fair value hedges.

TABLE 10. Debt Securities Maturities by Type

Loan Portfolio

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.

Our commercial customer base is diversified over a range of industries. We lend mainly to middle-market and smaller commercial entities, although we do participate in larger shared-credit loan facilities generally with businesses/sponsors operating in our market areas that are well known to the relationship officers. The funded balance of our shared national credits portfolio at December 31, 2024 totaled approximately $2.3 billion, or 10% of total loans, compared to $2.6 billion, or 11% of total loans at December 31, 2023. Our shared national credit industry concentration at December 31, 2024 includes approximately $339.7 million in both health care-related facilities and finance and insurance, $336.3 million in manufacturing, and $306.4 million in real estate, rental and leasing, with the remaining to various other industries.

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The following table shows the composition of our loan portfolio at December 31, 2024 and 2023.

TABLE 11. Loans Outstanding by Type

The commercial and industrial (“C&I”) loan portfolio includes both commercial non-real estate and commercial real estate – owner occupied loans. C&I loans totaled $12.9 billion, or 55% of the total loan portfolio, at December 31, 2024, a decrease of $162.5 million from December 31, 2023. The year over year decline in this portfolio is reflective of a $286.2 million reduction of shared national credits within this portfolio.

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.

The following table provides detail of the more significant industry concentrations for our commercial and industrial loan portfolio, which is based on NAICS codes for all industries, with the exception of energy, which is based on the borrower’s source of revenue (i.e. manufacturer whose income is derived from energy-related business is reported as energy).

TABLE 12. Commercial & Industrial Loans by Industry Concentration

Commercial real estate – income producing loans totaled $3.8 billion at December 31, 2024, a decrease of $188.3 million, or 5%, from December 31, 2023. Construction and land development loans totaled approximately $1.3 billion at December 31, 2024, a decrease of $270.0 million, or 17%, from December 31, 2023. The decrease reflects loans converting to permanent financing outpacing the funding of new and existing loans. The declines in both the commercial real estate - income producing and construction loan portfolios is reflective of an increase in payoffs and our efforts to limit our growth in income-producing real estate with a focus on resilient projects given the current economic environment.

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The following table details the end of period aggregated commercial real estate – income producing and construction loan balances by property type. Loans reflected in 1-4 Family Residential Construction include both loans to construction builders as well as single-family borrowers.

TABLE 13. Commercial Real Estate– Income Producing and Construction by Property Type Concentration

Residential mortgages totaled $4.0 billion at December 31, 2024, up $75.3 million, or 2%, from December 31, 2023. The growth in mortgage loans includes a combination of completed construction loans converting to permanent financing, as well as new loan growth. Consumer loans totaled $1.4 billion at December 31, 2024, down $76.9 million, or 5%, compared to December 31, 2023. The decline is reflective of both slowing demand and the impact of our exit from the indirect automobile lending market, where the existing portfolio is in run-off.

The following table shows average loans by category, the effective taxable equivalent yield and the percentage of total loans for each of the preceding three years.

TABLE 14. Average Loans

The following table sets forth the contractual maturity by portfolio segment at December 31, 2024.

TABLE 15. Loan Maturities by Type

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The sensitivity to interest rate changes for the portion of our loan portfolio that matures after one year is shown below.

TABLE 16. Loan Sensitivity to Changes in Interest Rates for Loans that Mature After One Year

Management expects end of period loan growth in 2025 to be mid-single digits from the December 31, 2024 balance of $23.3 billion.

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Asset Quality

The following table sets forth, for the periods indicated, nonaccrual loans and reportable loans modified or restructured loans, by type, and foreclosed and surplus ORE and other foreclosed assets. Loans past due 90 days or more and still accruing are also disclosed.

TABLE 17. Nonaccrual loans, loans modified or restructured, and ORE and foreclosed assets

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.

Reportable modified loans to borrowers experiencing financial difficulties totaled $99.5 million in 2024 and includes $20.2 million of nonaccrual loans. Modified loans to borrowers experiencing financial difficulties totaled $24.5 million in 2023 and included $0.1

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million of nonaccrual loans. These reportable modifications are granted as a part of our loss mitigation strategy to maximize expected payments. The increase in reportable modified loans reflects the continued stress on certain borrowers resulting from prolonged elevated interest rates, inflation, insurance costs, and other market conditions.

Criticized commercial loans totaled $623.0 million at December 31, 2024, up from $273.7 million at December 31, 2023. Criticized loans are defined as those having potential or well-defined weaknesses that deserve management’s close attention (risk-rated special mention, substandard and doubtful), including both accruing and nonaccruing loans. Criticized commercial loans comprised 3.47% of that portfolio at December 31, 2024, up from 1.47% at December 31, 2023. Management believes the migration in the level of criticized loans to be mostly indicative of continued normalization compared to the recent benign credit environment, including certain downgrades resulting from the most recent regulatory examination of loans within our shared national credit portfolio. We remain focused on identifying specific and broader risk indicators that may be impacting certain segments in our portfolio, and we have not seen signs of significant weakening in any particular industry, sector or geographic segment beyond what we believe has been experienced by the banking industry as a whole. Our criticized commercial loans at December 31, 2024 are spread across many industries, with the largest concentrations as follows: $95.7 million in manufacturing, $90.9 million in retail trade, $68.8 million in wholesale trade, $68.7 million in hospitality, $62.7 million in transportation and warehousing, $56.7 million in construction, $49.4 million real estate, rental and leasing, $44.6 million healthcare and social assistance, and $27.4 million in professional, scientific and technical services. Commercial loans risk rated pass-watch totaled $521.4 million at December 31, 2024, compared to $433.6 million at December 31, 2023. The pass-watch risk rating includes credits with negative performance trends that reflect sufficient risk to cause concern, but have not risen to the level of criticized.

Allowance for Credit Losses

At December 31, 2024, the allowance for credit losses was $342.9 million, comprised of $318.9 million in allowance for loan losses and $24.1 million in the reserve for unfunded lending commitments. The allowance for credit losses increased $6.1 million from $336.8 million at December 31, 2023, which was comprised of $307.9 million in allowance for loan losses and $28.9 million in the reserve for unfunded lending commitments. The $11.0 million increase in the funded allowance for loan losses at December 31, 2024 compared to December 31, 2023 reflects higher coverage across most portfolios, resulting from stress related to prolonged elevated interest rates and inflation and other market conditions. The decline in the reserve for unfunded lending commitments of $4.8 million was largely volume driven as unfunded commitments are down.

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.

The $6.1 million net increase in the allowance for credit losses from December 31, 2023 includes an increase of $7.9 million in individually evaluated reserves (generally used for nonperforming loans), partially offset by a decline of $1.8 million in collectively evaluated reserves. We utilized the December 2024 Moody’s economic scenarios to inform our allowance for credit losses at December 31, 2024. After considering the variables underlying each of the Moody’s economic scenarios, management probability-weighed the baseline scenario at 40% and the downside S-2 mild recessionary scenario at 60% in the computation of the allowance for credit losses at December 31, 2024, consistent with the weighting used at December 31, 2023. Each of the scenarios considered have varying degrees of severity and duration of inflationary pressure, including volatility in commodities prices and impacts to the labor market, the consequences of the Federal Reserve’s actions with regard to monetary policy, the effect of the recent change in presidential administration on fiscal and other policies, and impacts from geopolitical unrest. Refer to the Economic Outlook section of this discussion and analysis for further information on the Moody’s scenarios and our weighting assumptions.

We currently expect modest charge-offs and provision for credit losses 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.

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The following table sets forth activity in the allowance for loan losses for the periods indicated.

TABLE 18. Summary of Activity in the Allowance for Credit Losses

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An allocation of the loan loss allowance by major loan category is set forth in the following table for the periods indicated.

TABLE 19. Allocation of Allowance for Loan Losses by Category

Deposits

Deposits provide the most significant source of funding for our interest earning assets. Generally, our ability to compete for market share depends on our deposit pricing and our wide range of products and services that are focused on customer needs, among other factors. We offer high-quality banking services with convenient delivery channels, including online and mobile banking. We provide specialized services to our commercial customers to promote commercial deposit growth. These services include treasury management, industry expertise and lockbox services.

Lack of diversity in concentration within a deposit base may increase the risk of events or trends that could prompt a larger-scale demand for deposits outflow. Concerns over a financial institution’s ability to protect deposit balances in excess of the federally insured limit may increase the risk of a deposit run. We consider our deposit base to be seasoned, stable and well-diversified. We also offer our customers an insured cash sweep product (ICS) that allows customers to secure deposits above FDIC insured limits. We continue to see demand for the ICS product, with the balance totaling $359.7 million at December 31, 2024, compared to $303.8 million at December 31, 2023. At December 31, 2024, we have calculated our average deposit account size by dividing period-end deposits by the population of accounts with balances to be approximately $37,900, which includes $199,500 in our commercial and small business lines (excluding public funds), $122,500 in our wealth management business line, and $18,600 in our consumer business line.

Further, at December 31, 2024, our sources of liquidity exceed uninsured deposits. We have estimated the Bank’s amount of uninsured deposits using the methodologies and assumptions required for FDIC regulatory reporting to be approximately $14.6 billion at December 31, 2024, compared to $13.8 billion at December 31, 2023. Our uninsured deposit total at December 31, 2024 includes approximately $3.6 billion of public funds that have pledged securities as collateral, leaving approximately $11.0 billion of noncollateralized, uninsured deposits compared to total liquidity of $19.5 billion. Our ratio of noncollateralized, uninsured deposits to total deposits was approximately 37.3% at December 31, 2024, compared to 34.4% at December 31, 2023.

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.

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The following table shows the composition of our deposits at December 31, 2024 and 2023 is as follows:

TABLE 20. Deposits

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.

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.

Interest-bearing public fund deposits totaled $3.2 billion at December 31, 2024, up $69.5 million, or 2%, from December 31, 2023. Year-end public fund account balances are subject to annual fluctuations dependent upon a number of factors, including the timing of tax collections. Seasonal cash inflows from public entities in the fourth quarter of each year typically results in higher balances than at other times during the year with subsequent reductions in the first quarter of the following year. Brokered deposits totaled $6.9 million at December 31, 2024, down $582.9 million from December 31, 2023 as a result of the maturity of brokered deposits that were not replaced.

Table 21 sets forth average balances and weighted-average rates paid on deposits for each year in the three-year period ended December 31, 2024, as well as the percentage of total deposits for each category. Table 22 sets forth the maturities of time certificates of deposit greater than $250,000 at December 31, 2024.

TABLE 21. Average Deposits

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TABLE 22. Maturity of Time Certificates of Deposit greater than or equal to $250,000*

* Includes public fund time deposits

As noted above, we have estimated the Bank’s amount of uninsured deposits at December 31, 2024 to be approximately $14.6 billion, using the methodologies and assumptions required for FDIC regulatory reporting.

Management expects full year 2025 end of period growth in deposits to be in the low single digit range from $29.5 billion at December 31, 2024.

Short-Term Borrowings

Short-term borrowings totaled $639.0 million at December 31, 2024, down $515.8 million, or 45% from December 31, 2023. Average short-term borrowings for 2024 totaled $672.3 million, down $802.0 million, or 47%, compared to 2023. The declines from December 31, 2023 reflects the net repayment of $700 million of FHLB borrowings. Short-term borrowings are a core portion of the Company’s funding strategy, the balance of which can fluctuate depending on our funding needs and the sources utilized.

Table 23 sets forth balances of short-term borrowings for each of the past three years. Short-term borrowings consist of federal funds purchased, securities sold under agreements to repurchase and borrowings from the FHLB. Customer repurchase agreements are a source of customer funding. These agreements are offered mainly to commercial customers to assist them with their ongoing cash management strategies or to provide a temporary investment vehicle for their excess liquidity pending redeployment for corporate or investment purposes. While customer repurchase agreements provide a recurring source of funds to the Bank, the amounts available over time will vary.

TABLE 23. Short-Term Borrowings

Long-Term Debt

Long-term debt totaled $210.5 million at December 31, 2024, down $25.8 million from December 31, 2023, largely due to activity associated with tax credit fund activity.

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Long-term debt at December 31, 2024 includes subordinated notes payable with an aggregate principal amount of $172.5 million, a fixed rate of 6.25% per annum and a stated maturity of June 15, 2060. Subject to prior approval by the Federal Reserve, the Company may redeem the notes in whole or in part on any interest payment date on or after June 15, 2025. This debt qualifies as tier 2 capital in the calculation of certain regulatory capital ratios.

LOAN COMMITMENTS AND LETTERS OF CREDIT

In the normal course of business, the Bank enters into financial instruments, such as commitments to extend credit and letters of credit, to meet the financing needs of its customers. Such instruments are not reflected in the accompanying consolidated financial statements until they are funded, although they expose the Bank to varying degrees of credit risk and interest rate risk in much the same way as funded loans.

Commitments to extend credit totaled $9.2 billion at December 31, 2024 and include revolving commercial credit lines, non-revolving loan commitments issued mainly to finance the acquisition and development of construction of real property or equipment, and credit card and personal credit lines. The availability of funds under commercial credit lines and loan commitments generally depends on whether the borrower continues to meet credit standards established in the underlying contract, which may include the maintenance of sufficient collateral coverage levels, payment and financial performance, and compliance with other contractual conditions. Loan commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee by the borrower. Credit card and personal credit lines are generally subject to adjustment or cancellation if the borrower’s credit quality deteriorates. A number of commercial and personal credit lines are used only partially or, in some cases, not at all before they expire, and the total commitment amounts do not necessarily represent our future cash requirements.

Letters of credit totaled $420.6 million at December 31, 2024. A substantial majority of the letters of credit are standby agreements that obligate the Bank to fulfill a customer’s financial commitments to a third party if the customer is unable to perform. The Bank issues standby letters of credit primarily to provide credit enhancement to customers’ other commercial or public financing arrangements and to help them demonstrate financial capacity to vendors of essential goods and services.

The contract amounts of these instruments reflect our exposure to credit risk. The Bank undertakes the same credit evaluation in making loan commitments and assuming conditional obligations as it does for on-balance sheet instruments and may require collateral or other credit support. At December 31, 2024, the Company had a reserve for unfunded lending commitments of $24.1 million.

The following table shows the commitments to extend credit and letters of credit at December 31, 2024 and 2023 according to expiration date.

TABLE 24. Loan Commitments and Letters of Credit

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ENTERPRISE RISK MANAGEMENT

We proactively manage risks to capture opportunities and maximize shareholder value. We balance revenue generation and profitability with the inherent risks of our business activities. Enterprise risk management helps protect shareholder value by assessing, monitoring, and managing the risks associated with our businesses. Strong risk management practices enhance decision-making, facilitate successful implementation of new initiatives, and where appropriate, support undertaking greater levels of well-managed risk to drive growth and achieve strategic objectives. Our risk management culture integrates a board-approved risk appetite with senior management direction and governance to facilitate the execution of the Company’s strategic plan. This integration ensures the daily management of risks by product types and continuous corporate monitoring of the levels of risk across the Company. We make changes to our enterprise risk management program and risk governance framework as described here at the direction of senior management and the Board of Directors to capture opportunities and to respond to changes in strategic, business, and operational environments.

Risk Categories and Definitions

Consistent with other participants in the financial services industry, the primary risk exposures of the Company are credit, market, liquidity, operational, legal, reputational, and strategic. We have adopted these seven risk categories as outlined by the Federal Reserve Board and other bank regulators to govern the risk management of banks and bank holding companies. Oversight responsibility for these categories is assigned within our risk committee governance structure:

•
Credit risk arises from the potential that a borrower or counterparty will fail to perform on an obligation.

•
Market risk is a financial institution’s condition resulting from adverse movements in market rates or prices, such as interest rates, foreign exchange rates, or equity prices.

•
Liquidity risk is the potential that an institution will be unable to meet its obligations as they come due because of an inability to liquidate assets or obtain adequate funding (referred to as “funding liquidity risk”) or that it cannot easily unwind or offset specific exposures without significantly lowering market prices because of inadequate market depth or market disruptions ("market liquidity risk").

•
Operational risk is the potential that inadequate information systems, operational problems, breaches in internal controls, breaches in customer data, fraud, or unforeseen catastrophes will result in unexpected losses. Consistently and interchangeably for the Company, Basel II defines this risk as the risk of loss resulting from inadequate or failed internal processes, people and systems, or from external events. The Company assesses compliance risk, the risk to current or anticipated earnings or capital arising from violations of laws, rules or regulations, or from non-conformance with prescribed practices, internal policies and procedures or ethical standards, as a subcategory of operational risk.

•
Legal risk is the potential that unenforceable contracts, lawsuits, or adverse judgments can disrupt or otherwise negatively affect the operations or condition of a banking organization.

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Reputational risk is the potential that negative publicity regarding an institution’s business practices, whether true or not, will cause a decline in the customer base, costly litigation, or revenue reductions. The Company also recognizes its reputation with shareholders and associates is an important factor of reputational risk.

•
Strategic risk is the risk to current or anticipated earnings, capital, or franchise or enterprise value arising from adverse business decisions, poor implementation of business decisions, or lack of responsiveness to changes in the competitive landscape of banking and financial services industries and operating environment.

Risk Committee Governance Structure

Effective risk management governance requires active oversight, participation, and interaction by senior management and the Board of Directors. Our enterprise risk management framework uses a tiered risk/reward committee structure to facilitate the timely discussion of significant risks, issues and risk mitigation strategies to inform management and the Board’s decision making. Additionally, the committee structure provides ongoing oversight and facilitates escalation within assigned risk committees. Following is a summary of our risk governance structure and related responsibilities:

•
Board risk committees. The Company’s Board of Directors has established a Board Risk Committee and Credit Risk Management Subcommittee of the Board Risk Committee to oversee the effective establishment of a risk governance framework, provide for an independent Credit Review assurance function, ensure the overall corporate risk profile is within its risk appetite, and direct changes or make recommendations to the Board of Directors when determined necessary. Additionally, the Board of Directors has established an Audit Committee to provide independent oversight on the effectiveness of these matters and the Company’s internal control and regulatory environment. The Board Risk

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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.

•
Governance committees. The Capital Committee (CAPCO) of the Company serves as the senior level management risk/reward committee and oversees the business strategy, organizational structure, capital planning, and liquidity strategies for the Company. CAPCO directly oversees the strategic and reputation risk categories, which include litigation strategy and the development of capital stress testing within the Company’s risk governance framework. CAPCO drives business strategy development and execution, provides corporate financial oversight, and is responsible for portfolio risk committee oversight. CAPCO provides oversight of the portfolio risk/reward committees to ensure tactics to address business strategy changes are properly vetted and adopted, and protect the Company’s reputation.

•
Portfolio committees. The Company has three portfolio risk/reward committees focusing on credit (CREDCO), market and liquidity through asset/liability management (ALCO), and operational, legal and compliance (OPCO) risk categories. These committees review and monitor the risk categories in a portfolio context ensuring risk assessment and management processes are being effectively executed to identify and manage risk and direct changes and escalate issues to CAPCO and Board Risk Committees when needed. The committees also monitor the risk portfolios for changes to the Company’s risk profile as well as ensure the risk portfolio is performing within the board-approved risk appetite. Portfolio committees report to CAPCO. In addition, the Company has established a Sustainability Committee, which is a management committee that develops, monitors and assesses the strategies related to the environment, social responsibility and sustainable growth.

Risk Leadership and Organization

The risk management function of the Company is led by our Chief Risk Officer. The Chief Risk Officer, who reports directly to the CEO, provides overall vision, direction and leadership regarding our enterprise risk management program. The Chief Risk Officer exercises independent judgment and reporting of risk through a direct working relationship with the Board Risk Committee, and the Chief Credit Officer has the same role with the Credit Risk Management Subcommittee. The functional areas reporting to the Chief Risk Officer are the enterprise risk management, operational risk management, model risk management, information technology risk management, data governance, compliance, credit review (administrative only), corporate insurance, regulatory relations, and financial crimes programs. The Chief Risk Officer also works closely with the Chief Internal Auditor to provide assurance to the Board and senior management regarding risk management controls and their effectiveness. The Chief Internal Auditor reports to the Board’s Audit Committee to assure independence of the internal audit function. Another risk management function reporting to the CEO is the Chief Credit Officer.

Credit Risk

The Bank’s primary lending focus is to provide commercial, consumer, and real estate loans to consumers, to small and middle market businesses, to larger corporate clients in their respective market areas, and to state, county, parish and municipal government entities. Diversification in the loan portfolio is a means to reduce the risks associated with economic fluctuations. The Bank has no significant concentrations of loans to individual borrowers or foreign entities.

Our commercial and industrial portfolio, which includes commercial non-real estate and owner occupied commercial real estate lending is diverse across various industries. We continuously manage our exposure to improve our cross-industry diversification, and proactively manage potential impacts to earnings.

Real estate loan levels are monitored throughout the year and the bank currently does not have a commercial real estate concentration as defined by interagency guidelines.

Monitoring collateral is also an essential component of managing the Bank’s real estate-and non-real estate related credit risk exposure. For real estate-secured loans, third-party valuations are obtained at the time of origination, and updated if it is determined that the collateral value has deteriorated or if the loan is deemed to be a problem loan. Property valuations are ordered through, and reviewed by, the Bank’s appraisal department, which is independent of the loan origination and approval process. When deemed necessary, third-party valuations may also be obtained for non-real estate collateral based on the same criteria as real estate secured loans. Collateral valuations, along with anticipated selling costs, are used to assess the need for an appropriate allowance allocation and/or full or partial charge-off when it is probable that the borrower will be unable to meet payment obligations as they become due.

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The Bank maintains a Credit Review function, that is managed by our Director of Credit Review who reports to the Credit Risk Management Subcommittee, a subcommittee of the Board Risk Committee, so that developing credit concerns are identified and addressed in a timely manner. Further, an active watch list review process is in place as part of the Bank’s problem loan management strategy, and a list of loans 90 days past due and still accruing is reviewed with management (including the Chief Credit Officer) at least monthly. Recommendations flow from all of the above activities with the goal of recognizing nonperforming loans and determining the appropriate accrual status.

Asset/Liability Management

Asset/Liability Management consists of quantifying, analyzing, and controlling interest rate risk (IRR) to maintain stability in net interest income under varying interest rate environments. The principal objective of asset/liability management is to maximize net interest income while operating within acceptable interest rate risk limits and maintaining adequate levels of liquidity. Our net earnings are materially dependent on our net interest income.

IRR inherent in the Company’s balance sheet consists of reprice, option, yield curve, and basis risks. Reprice risk results from differences in the maturity or repricing of asset and liability portfolios. Option risk arises from “embedded options” present in many financial instruments such as loan prepayment options, deposit early withdrawal options, and interest rate options. These options allow customers opportunities to benefit when market interest rates change, which typically results in higher costs or lower revenue for the Company. Yield curve risk refers to the risk resulting from unequal changes in the spread between two or more rates for different maturities for the same instrument. Basis risk refers to the potential for changes in the underlying relationship between market rates and indices, which subsequently results in changes to the profit spread on an earning asset or liability. Basis risk is also present in administered rate liabilities, such as savings accounts, negotiable order of withdrawal accounts, and money market accounts where historical pricing relationships to market rates may change due to the level or directional change in market interest rates.

ALCO manages our IRR exposures through proactive measurement, monitoring, and management actions. ALCO is responsible for maintaining levels of IRR within limits approved by the Board of Directors by adhering to a risk management policy that is designed to promote a stable net interest margin in periods of interest rate fluctuation. Accordingly, the Company’s interest rate sensitivity and liquidity are monitored on an ongoing basis by ALCO, which oversees market risk management and establishes risk measures, limits and policy guidelines for managing the amount of interest rate risk and its effect on net interest income and capital. A variety of measures are used to provide for a comprehensive view of the magnitude of interest rate risk, the distribution of risk, the level of risk over time and the exposure to changes in certain interest rate relationships.

The Company utilizes an asset/liability model as the primary quantitative tool in measuring the amount of IRR associated with changing market rates. The model is used to perform net interest income, economic value of equity (EVE), stochastic, and gap analyses. When performing net interest income at risk analysis, the model is used to quantify the effects of various interest rate scenarios on projected net interest income and projected net income over the next 12-month and 24-month periods. The model measures the impact on net interest income relative to a base case scenario given hypothetical fluctuations in interest rates over the next 24 months. Regarding EVE analysis, the model is used to assess the change in theoretical equity market value that would occur in response to instantaneous and sustained parallel shifts in market interest rates. EVE analysis is primarily used to identify long-term structural mismatches in the balance sheet as market rates move, while net interest income analysis assesses the impact of market rate movements over a short time horizon. Net interest income simulations incorporate assumptions regarding balance sheet growth and mix as well as the pricing, repricing, and maturity characteristics of the existing and projected balance sheet. The impact of interest rate derivatives, such as interest rate swaps, caps and floors, is also included in the model. Other interest rate-related risks such as prepayment, basis, and option risk are also considered.

Net Interest Income at Risk

Our primary market risk is interest rate risk that stems from uncertainty with respect to the absolute and relative levels of future market interest rates that affect our financial products and services. In an attempt to manage our exposure to interest rate risk, management measures the sensitivity of our net interest income and cash flows under various market interest rate scenarios, establishes interest rate risk management policies and implements asset/liability management strategies designed to promote a relatively stable net interest margin under varying rate environments.

The following table presents an analysis of our interest rate risk as measured by the estimated changes in net interest income resulting from an instantaneous and sustained parallel shift in rates at December 31, 2024. Shifts are measured in 100 basis point increments in a range from -500 to +500 basis points from base case, with -300 through +300 basis points presented in Table 25. Our interest rate sensitivity modeling incorporates a number of assumptions including loan and deposit repricing characteristics, the rate of loan prepayments and other factors. The base scenario assumes that balance sheet composition and the current interest rate environment is held constant over a 24-month forecast period and is the scenario to which all others are compared in order to measure the change in

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net interest income. Policy limits on the change in net interest income under a variety of interest rate scenarios are approved by the Board of Directors. All policy scenarios assume a static volume forecast where the balance sheet is held constant, although other scenarios are modeled.

TABLE 25. Net Interest Income (te) at Risk

The results indicate a general asset sensitivity across most scenarios driven primarily by repricing of cash flows in the investment and loan portfolios. As short-term rates have remained elevated, the funding mix has shifted to more rate sensitive deposits and wholesale sources resulting in lower overall net interest income at risk as deposit repricing is expected to offset rate adjustments in the floating rate loan book. Furthermore, due to the funding mix shift, the Bank is currently less sensitive to changes in short-term rate movements with interest rate risk being driven more by changes in the mid to long-term segment of the yield curve. When deemed prudent, management has taken actions to mitigate exposure to interest rate risk with on-or off-balance sheet financial instruments and intends to do so in the future. Possible actions include, but are not limited to, changes in the pricing of loan and deposit products, modifying the composition of earning assets and interest-bearing liabilities, and adding to, modifying or terminating existing interest rate swap agreements or other financial instruments used for interest rate risk management purposes.

Even if interest rates change in the designated amounts, there can be no assurance that our assets and liabilities would perform as anticipated. Additionally, a change in the U.S. Treasury rates in the designated amounts accompanied by a change in the shape of the U.S. Treasury yield curve would cause significantly different changes to net interest income than indicated above. Strategic management of our balance sheet and earnings is fluid and would be adjusted to accommodate these movements. As with any method of measuring interest rate risk, certain shortcomings are inherent in the methods of analysis presented above. For example, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in different degrees to changes in market interest rates. Also, the interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market rates. Certain assets such as adjustable-rate loans have features which restrict changes in interest rates on a short-term basis and over the life of the asset. Also, the ability of many borrowers to service their debt may decrease in the event of an interest rate increase. All of these factors are considered in monitoring exposure to interest rate risk.

Economic Value of Equity (EVE)

EVE simulation involves calculating the present value of all future cash flows from assets and subtracting the present value of all future cash outflows from liabilities including the impact of off-balance sheet items such as interest rate hedges. This analysis results in a theoretical market value of the bank’s equity or EVE. Management’s focus on EVE analysis is not on the resulting calculation of EVE itself, but instead on the sensitivity of EVE to changes in market rates. Policy limits on the change in EVE under a variety of interest rate scenarios are approved by the Board of Directors. The following table presents an analysis of the change in the Bank’s EVE resulting from instantaneous and parallel shifts in rates as of December 31, 2024. Shifts are measured in 100 basis point increments ranging from -500 to +500 basis points from base case, with -300 through +300 basis points presented in Table 26.

TABLE 26. Economic Value of Equity

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The net changes in EVE presented in the preceding table are within the parameters approved by the Board of Directors. Because EVE measures the present value of cash flows over the estimated lives of instruments, the change in EVE does not directly correlate to the degree that earnings would be impacted over a shorter time horizon (i.e., the current year). Further, EVE does not consider factors such as future balance sheet growth, changes in product mix, changes in yield curve relationships, possible hedging activities, or changing product spreads, each of which could mitigate the adverse impact of changes in interest rates.

Operational Risk Management

Operational risk is the risk of loss resulting from inadequate or failed internal controls and processes, people and systems, or from external events, including fraud, litigation and breaches in data security. We depend on the ability of our employees and systems to process, record and monitor a large number of transactions on an on-going basis. As operational risk remains elevated and as customer and regulatory expectations regarding information security have increased, the Company continues to enhance its controls, processes and systems in order to protect the Company’s networks, computers, software and data from attack, damage or unauthorized access.

The Board Risk Committee has primary responsibility for the oversight of operational risk. In this capacity, the Board Risk Committee oversees the Company’s processes for identifying, assessing, monitoring and managing cybersecurity risk. In addition, individual business lines have direct and primary responsibility and accountability for identifying, controlling, and monitoring operational risks embedded in their business activities.

See Item 1A. “Risk Factors” for further discussion of the risks associated with an interruption or breach in our information systems or infrastructure and Item 1C. “Cybersecurity” for additional disclosures on cybersecurity and related risk management strategy and governance.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity

Liquidity management ensures that funds are available to meet the cash flow requirements of our depositors and borrowers, while also meeting the operating, capital and strategic cash flow needs of the Company, the Bank and other subsidiaries. As part of the overall asset and liability management process, liquidity management strategies and measurements have been developed to manage and monitor liquidity risk. The following table summarizes available liquidity at December 31, 2024.

TABLE 27. Net Available Sources of Funds

(a) Amount used includes funded advances and letters of credit.

TABLE 28. Liquidity Metrics

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Liquidity levels of financial institutions have received heightened attention since the failure of several major regional U.S. banks that experienced large-scale deposit runs in the first half of 2023. Dampened depositor confidence over a financial institution’s ability to protect deposit balances in excess of the federally insured limit is thought to pose a higher likelihood of a deposit run, and, in turn, the risk that the institution may have insufficient liquidity to meet the customer demand. At December 31, 2024, our available on and off-balance sheet liquidity of $19.5 billion is well in excess of our estimated uninsured, noncollateralized deposits of approximately $11.0 billion.

The asset portion of the balance sheet provides liquidity primarily through loan principal repayments, maturities and repayments of investment securities and occasional sales of various assets. Short-term investments such as federal funds sold, securities purchased under agreements to resell and interest-bearing deposits with the Federal Reserve Bank or with other commercial banks are additional sources of liquidity to meet cash flow requirements. Free securities represent unpledged securities that can be sold or used as collateral for borrowings, and include unpledged securities assigned to short-term dealer repurchase agreements or to the Federal Reserve Bank discount window. Management has established an internal target for the ratio of free securities to total securities of 20% or greater. As shown in Table 28 above, our ratios of free securities to total securities were 48.65% and 38.80% at December 31, 2024 and 2023, respectively. Securities and FHLB letters of credit are pledged as collateral related to public funds and repurchase agreements. The carry value of total pledged securities was $3.9 billion at December 31, 2024, a decrease of $829 million from December 31, 2023, driven largely by an increase in pledged FHLB letters of credits of $699 million, resulting a higher level of free securities.

The liability portion of the balance sheet provides liquidity mainly through the ability to use cash sourced from various customers’ interest-bearing and noninterest-bearing deposit accounts. At December 31, 2024, deposits totaled $29.5 billion, a decrease of $197 million, or 1%, from December 31, 2023. The decrease is reflective of the maturity of $583 million of brokered deposits that were not replaced, partially offset by organic growth.

Core deposits represent total deposits excluding certificates of deposits (CDs) of $250,000 or more and brokered deposits. Core deposits totaled $27.8 billion at December 31, 2024, a decrease of $293 million from December 31, 2023. The ratio of core deposits to total deposits was 94.12% at December 31, 2024 up from 92.51% at December 31, 2023. The largest driver in the increase in the ratio was the decline in brokered deposits.

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.

Purchases of federal funds, securities sold under agreements to repurchase and other short-term borrowings from customers provide additional sources of liquidity to meet short-term funding requirements. Besides funding from customer sources, the Bank has a line of credit with the FHLB that is secured by blanket pledges of certain mortgage loans. At December 31, 2024, the Bank had not borrowed from the FHLB and had approximately $5.5 billion remaining available under this line. The Bank also has unused borrowing capacity at the Federal Reserve’s discount window of approximately $3.2 billion. There were no outstanding borrowings with the Federal Reserve at December 31, 2024 and December 31, 2023, or at any point during the years then ended.

Wholesale funds, which are comprised of short-term borrowings, long-term debt and brokered deposits were 3.09% of core deposits at December 31, 2024 and 7.21% at December 31, 2023. Wholesale funds totaled $856 million at December 31, 2024, a decrease of $1.1 billion from December 31, 2023. The decrease was primarily due to the repayment of $700 million of FHLB borrowings and the maturity of $582 million of brokered time deposits, partially offset by a $184 million increase in customer securities sold under agreements to repurchase. The Company has established an internal target for wholesale funds to be less than 25% of core deposits.

Other key measures used to monitor liquidity include the liquid asset ratio and the loan to deposit ratio. The liquid asset ratio (liquid assets, consisting of cash, short-term investments and free securities, divided by total liabilities) measures our ability to meet short-term obligations. Our liquid asset ratio was 15.26% at December 31, 2024 compared to 12.69% at December 31, 2023. Management has established a minimum liquid asset ratio of 7.5% and an internal target of 12% or greater. The loan to deposit ratio (average loans outstanding during the reporting period divided by average deposits outstanding) measures the amount of funds the Company lends for each dollar of deposits on hand. Our average loan-to-deposit ratio was 81.01% for the year ended December 31, 2024 compared to 80.04% for the year ended December 31, 2023. Management has established a target range for the loan to deposit ratio of 87% to 89%, but has and will continue to operate outside that range under certain market conditions and circumstances.

Cash generated from operations is another important source of funds to meet liquidity needs. The Consolidated Statements of Cash Flows included in Part II, Item 8 of this document present operating cash flows and summarize all significant sources and uses of funds during the years ended December 31, 2024 and 2023.

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Dividends received from the Bank have been the primary source of funds available to the Parent Company for the payment of dividends to our stockholders and for servicing its debt. The liquidity management process takes into account the various regulatory provisions that can limit the amount of dividends that the Bank can distribute to the Parent Company, as described in Note 12 – Stockholder’s Equity to the consolidated financial statements. The Parent targets cash and other liquid assets to provide liquidity in an amount sufficient to fund approximately six quarters of ongoing cash or liquid asset needs, consisting primarily of common stockholder dividends, debt service requirements, and any expected share repurchase or early extinguishment of debt. The Parent may operate below the target level on a temporary basis if a return to the target can be achieved in the near-term, generally not to exceed four quarters. The Parent had cash totaling $272.7 million at December 31, 2024.

Material Cash Requirements

The Company has sufficient access to liquidity for operations. The following table summarizes select significant contractual obligations as of December 31, 2024, according to payments due by period. The table excludes obligations under deposit contracts and short-term borrowings discussed previously in this analysis. The maturities of time deposits in amounts greater than $250,000 are presented in Table 22. Purchase obligations represent material legal and binding contracts to purchase services and goods that cannot be settled or terminated without paying substantially all of the contractual amounts.

TABLE 29. Contractual Cash Obligations