# QCR HOLDINGS INC (QCRH) FY 2024 MD&A

Verbatim Item 7 Management's Discussion and Analysis from QCR HOLDINGS INC's 10-K for fiscal year 2024.

SEC filing source: https://www.sec.gov/Archives/edgar/data/906465/000155837025001954/qcrh-20241231x10k.htm
Accession: 0001558370-25-001954
Filing date: 2025-02-28
Report date: 2024-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/QCRH/
All MD&A years: /company/QCRH/mda/
Previous year: /company/QCRH/mda/fy2023/ (FY 2023)
Next year: /company/QCRH/mda/fy2025/ (FY 2025)

Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

This section generally discusses 2024 and 2023 items and annual comparison between our fiscal 2024 performance compared to our fiscal 2023 performance.  A detailed review of our fiscal 2023 performance compared to our fiscal 2022 performance can be found in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”  This discussion should be read together with our Consolidated Financial Statements and the accompanying notes thereto included or incorporated by reference elsewhere in this document.

Additionally, a comprehensive list of the acronyms and abbreviations used throughout this discussion is included in Note 1 to the Consolidated Financial Statements.

GENERAL

The Company was formed in February 1993 for the purpose of organizing QCBT. Over the past 31 years, the Company has grown to include four banking subsidiaries and a number of nonbanking subsidiaries. As of December 31, 2024, the Company had $9.0 billion in consolidated assets, including $6.7 billion in total loans/leases, and $7.1 billion in deposits. The financial results of acquired entities for the periods since their acquisition are included in this Annual Report on Form 10-K and in our Quarterly Reports on Form 10-Q. Further information related to acquired entities has been presented in the Annual Reports on Form 10-K previously filed with the SEC corresponding to the period of each acquisition.

CRITICAL ACCOUNTING POLICIES AND CRITICAL ACCOUNTING ESTIMATES

The Company’s financial statements are prepared in accordance with GAAP. The financial information contained within these statements is, to a significant extent, financial information that is based on approximate measures of the financial effects of transactions and events that have already occurred.  The preparation of financial statements, in conformity with GAAP, requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance, determination of the fair value of loans acquired in business combinations, impairment of goodwill, the fair value of financial instruments, and the fair value of securities. A more detailed discussion of these critical accounting policies and estimates can be found in Note 1 to the Consolidated Financial Statements.

Based on its consideration of accounting policies and estimates that involve the most complex and subjective decisions and assessments, management has identified the following as critical accounting policies and estimates:

ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LEASES AND OFF-BALANCE SHEET EXPOSURES

​

The Company’s allowance methodology incorporates a variety of risk considerations, both quantitative and qualitative, in establishing an allowance that management believes is appropriate at each reporting date. The Company’s methodologies for estimating the ACL consider available relevant information about the collectability of cash flows, including information about past events, current conditions, and reasonable and supportable forecasts.  The methodologies apply historical loss information adjusted for asset-specific characteristics, economic conditions at the measurement date, and forecasts about future economic conditions that are expected to exist through the contractual lives of the financial assets and that are reasonable and supportable to the identified pools of financial assets with similar risk characteristics for which the historical loss experience was observed.  If a loan is determined

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to no longer share similar risk characteristics with other assets in the segmented pool, it is evaluated on an individual basis.

​

The Company also estimates expected credit losses over the contractual term of the loan for the unfunded portion of the loan commitment that is not unconditionally cancellable by the Company.  Management uses an estimated average utilization rate to determine the exposure of default.  The allowance for OBS exposures is calculated using probability of default and loss given default using the same segmentation and qualitative factors used for loans and leases.

Although management believes the level of the ACL as of December 31, 2024 was adequate to absorb losses inherent in the loan/lease portfolio, the HTM portfolio and OBS exposures, a decline in local economic conditions, or other factors, could result in increasing losses that cannot be reasonably predicted at this time.

GOODWILL

The Company records all assets and liabilities purchased in an acquisition, including intangibles, at fair value. Goodwill is not amortized but is subject, at a minimum, to annual tests for impairment. In certain situations, interim impairment tests may be required if events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount.

​

The initial recognition of goodwill and subsequent impairment analysis requires us to make subjective judgments concerning estimates of how the acquired assets will perform in the future using valuation methods, which may include using the current market price of stock or discounted cash flow analyses. Additionally, estimated cash flows may extend beyond five years and, by their nature, are difficult to determine over an extended timeframe. Events and factors that may significantly affect the estimates include, among others, competitive forces, customer behaviors, changes in revenue growth trends, cost structures, technology, changes in discount rates and market conditions. In determining the reasonableness of cash flow estimates, the Company reviews historical performance of the underlying assets or similar assets in an effort to assess and validate assumptions utilized in its estimates.

​

In assessing the fair value of reporting units, we may consider the stage of the current business cycle and potential changes in market conditions. We may also utilize other information to validate the reasonableness of our valuations, including public market comparables and multiples of recent mergers and acquisitions of similar businesses. Valuation multiples may be based on tangible capital ratios of comparable companies and business segments. These multiples may be adjusted to consider competitive differences, including size, operating leverage and other factors. The carrying amount of a reporting unit is determined based on the capital required to support the reporting unit’s activities, including its tangible and intangible assets. The determination of a reporting unit’s capital allocation requires judgment and considers many factors, including the regulatory capital regulations and capital characteristics of comparably situated companies in relevant industry sectors. In certain circumstances, the Company will engage a third-party to independently validate our assessment of the fair value of our reporting units.

​

The Company assesses the impairment of goodwill whenever events or changes in circumstances indicate the carrying value may not be recoverable. Factors considered important, which could trigger an impairment review, include the following:

​

[[GREPCENT_TABLE]]
[["","\u25cf","Significant under-performance relative to expected historical or projected future operating results;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Significant changes in the manner of use of the acquired assets or the strategy for the overall business;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Significant negative industry or economic trends;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Significant decline in the market price for our common stock over a sustained period; or"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Market capitalization relative to net book value."]]
[[/GREPCENT_TABLE]]

​

During the third quarter of 2024, the Company incurred goodwill impairment expense of $432 thousand related to the decision to discontinue offering new loans and leases through m2.

​

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The Company’s management performed an annual assessment at the reporting unit level and determined no goodwill impairment existed as of November 30, 2024.

​

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EXECUTIVE OVERVIEW

The Company reported net income of $113.9 million for the year ended December 31, 2024, and diluted EPS of $6.71. For the same period in 2023 the Company reported net income of $113.6 million and diluted EPS of $6.73.

The year ended December 31, 2024 was highlighted by several significant items:

[[GREPCENT_TABLE]]
[["","\u25cf","Record annual net income of $113.9 million, or $6.71 per diluted share;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Record adjusted net income (non-GAAP) of $119.3 million, or $7.03 per diluted share (non-GAAP);"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Significant capital markets revenue of $71.1 million;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Robust loan growth of 10% prior to loan securitizations and strong deposit growth of 8%;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Tangible book value (non-GAAP) per share increased $6.40, or 15%; and"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Increased TCE/TA ratio (non-GAAP) by 80 basis points to 9.55%."]]
[[/GREPCENT_TABLE]]

​

​

Following is a table that represents the various net income measurements for the years ended December 31, 2024 and 2023.

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","\u200b","Year Ended December 31,"],["\u200b","","\u200b","\u200b","2024","\u200b","2023"],["\u200b","\u200b","\u200b","(dollars in thousands, except per share data)"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Net income","\u200b","\u200b","$","113,850","\u200b","$","113,558"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Diluted earnings per common share","\u200b","\u200b","$","6.71","\u200b","$","6.73"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Weighted average common and common equivalent shares outstanding","\u200b","\u200b","","16,959,853","\u200b","","16,866,391"]]
[[/GREPCENT_TABLE]]

​

The Company reported adjusted net income (non-GAAP) of $119.3 million, with adjusted diluted EPS of $7.03. See section titled “GAAP to Non-GAAP Reconciliations” for additional information. Adjusted net income for the year excludes a number of non-core or non-recurring items, after-tax, as set forth in the “GAAP to Non-GAAP Reconciliation” section.

Following is a table that represents the major income and expense categories for the years ended December 31, 2024 and 2023.

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","\u200b","Year Ended December 31,"],["\u200b","","","2024","","2023"],["\u200b","\u200b","\u200b","(dollars are in thousands)"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Net interest income","\u200b","\u200b","$","231,788","\u200b","$","221,006"],["Provision for credit losses","\u200b","\u200b","","17,098","\u200b","","16,539"],["Noninterest income","\u200b","\u200b","","115,529","\u200b","","132,684"],["Noninterest expense","\u200b","\u200b","","207,642","\u200b","","210,531"],["Federal and state income tax expense","\u200b","\u200b","","8,727","\u200b","","13,062"],["Net income","\u200b","\u200b","$","113,850","\u200b","$","113,558"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"]]
[[/GREPCENT_TABLE]]

The following are some noteworthy developments in the Company’s financial results:

[[GREPCENT_TABLE]]
[["","\u25cf","Net interest income increased $10.8 million, or 4.9%, in 2024 compared to the prior year. The increase in 2024 was primarily due to higher loan and investment average balances, margin expansion from higher loan yields partially offset by an increase in the cost of interest-bearing deposits."]]
[[/GREPCENT_TABLE]]

​

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[[GREPCENT_TABLE]]
[["","\u25cf","Provision expense increased $559 thousand when comparing 2024 to 2023. The increase in 2024 was due to overall loan growth and increased net charge offs. See the \u201cProvision for Credit Losses\u201d section of this Annual Report on Form 10-K for additional details."]]
[[/GREPCENT_TABLE]]

​

[[GREPCENT_TABLE]]
[["","\u25cf","Noninterest income decreased $17.2 million, or 12.9%, when compared to the prior year. The decrease in 2024 was primarily attributable to lower capital markets revenue from swap fees. The demand for low-income housing remains healthy and the economics associated with these tax credit projects continue to be favorable. The Company has a strong pipeline for this business and expects it to continue to be a solid source of fee income in 2025. During the third quarter of 2024, the Company executed a derivative strategy with a notional value of approximately $409.0 million. These derivatives are designed to safeguard the Company\u2019s regulatory capital against the adverse effects of a significant decline in long-term interest rates. These derivatives are unhedged and are marked to market, with gains or losses recorded in noninterest income and reflected as a non-core item. For the year ending December 31, 2024, the Company recorded a $3.5 million loss on these derivatives."]]
[[/GREPCENT_TABLE]]

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[[GREPCENT_TABLE]]
[["","\u25cf","Noninterest expense decreased $2.9 million, or 1.4%, in 2024 compared to the prior year, primarily due to lower variable incentive compensation associated with the lower capital markets revenue offset partially with restructuring expenses and goodwill impairment related to the decision to discontinue offering new loans and leases through m2 in September 2024."]]
[[/GREPCENT_TABLE]]

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STRATEGIC FINANCIAL METRICS

The Company has established strategic financial metrics by which it manages its business and measures its performance. The metrics are periodically updated to reflect business developments. While the Company is determined to work prudently to achieve these metrics, there is no assurance that they will be met. Moreover, the Company’s ability to achieve these metrics may be affected by the factors discussed under “Forward-Looking Statements” as well as the factors detailed in the “Risk Factors” section included under Item 1A. of Part I of this Annual Report on Form 10-K. The Company’s strategic financial metrics are as follows:

[[GREPCENT_TABLE]]
[["","\u25cf","Grow loans/leases by 9% per year, funded by core deposits;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Grow fee-based income by at least 6% per year; and"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Limit our annual operating expense growth to 5% per year."]]
[[/GREPCENT_TABLE]]

The following table shows the evaluation of the Company’s strategic financial metrics:

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","For the Year Ending"],["Strategic Financial Metric*","","Key Metric","","Target","December 31, 2024","December 31, 2023"],["Loan and lease growth organically","","Loans and leases growth",""," 9% annually","\u200b","9.6","%","\u200b","6.6","%"],["Fee income growth","","Fee income growth",""," 6% annually","\u200b","(10.8)","%","\u200b","75.1","%"],["Improve operational efficiencies and hold noninterest expense growth","\u200b","Noninterest expense growth",""," 5% annually","\u200b","(2.4)","%","\u200b","16.3","%"]]
[[/GREPCENT_TABLE]]

* Ratios and amounts provided for these measurements represent year-to-date actual amounts for the respective period. The calculations provided exclude non-core noninterest income and noninterest expense.

It should be noted that these initiatives are long-term targets.

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STRATEGIC DEVELOPMENTS

The Company took the following actions in 2024  to support our corporate strategy and further the strategic financial metrics shown above:

[[GREPCENT_TABLE]]
[["","\u25cf","The Company grew loans and leases in 2024 by 3.7%, or 9.6% when excluding the $386.5 million in loan securitizations completed during the year. The loan growth was driven by both LIHTC and our traditional lending and leasing businesses."]]
[[/GREPCENT_TABLE]]

​

[[GREPCENT_TABLE]]
[["","\u25cf","The Company completed two LIHTC loan securitizations in 2024, with a total outstanding principal balance at the securitization date of $389.8 million and a total carrying value on these loans of $386.5 million. The securitizations consisted of $230.7 of nontaxable LIHTC loans through a Freddie Mac sponsored M-series transaction, and $155.8 million of taxable LIHTC loans through a Freddie Mac sponsored Q-series transaction. The Company recorded a net gain on the transactions of $955 thousand reported in capital markets revenue on the consolidated statements of income. The Company plans to continue to utilize securitizations as a liquidity and management tool, and to provide additional capacity to produce LIHTC loans and the related capital markets revenue."]]
[[/GREPCENT_TABLE]]

​

[[GREPCENT_TABLE]]
[["","\u25cf","Correspondent banking continues to be a core line of business for the Company. The Company is competitively positioned with experienced staff, software systems and processes to continue growing in the four states it currently serves \u2013 Iowa, Wisconsin, Missouri and Illinois. The Company acts as the correspondent bank for 189 downstream banks with total noninterest bearing deposits of $76.6 million and total interest-bearing deposits of $611.5 million as of December 31, 2024. This line of business provides a strong source of noninterest bearing and interest-bearing deposits, fee income, high-quality loan participations and bank stock loans. The Company also manages off-balance sheet liquidity held at the Federal Reserve on behalf of the downstream banks, which totaled $439.0 million as of December 31, 2024 as compared to $214.9 million as of December 31, 2023."]]
[[/GREPCENT_TABLE]]

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[[GREPCENT_TABLE]]
[["","\u25cf","The Company is focused on executing interest rate swaps on select commercial loans, including LIHTC permanent loans. The interest rate swaps help the commercial borrowers obtain a fixed interest rate while the Company receives a variable interest rate as well as an upfront nonrefundable fee dependent on the pricing. Management believes that these swaps help the Company more efficiently manage its interest rate risk. The Company will continue to review opportunities to execute these swaps at all of its subsidiary banks, as the circumstances are appropriate for the borrower and the Company. Levels of capital markets revenue from swap fee income are influenced by prevailing interest rates. Capital markets revenue, primarily from swap fee income totaled $71.1 million in 2024 as compared to $92.1 million in 2023. Capital markets revenue from swap fees averaged $17.8 million per quarter for the year 2024 and $23.0 million per quarter for the year 2023."]]
[[/GREPCENT_TABLE]]

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[[GREPCENT_TABLE]]
[["","\u25cf","Over many years, the Company has been successful in expanding its wealth management client base. Trust and investment advisory and management fees continue to be a significant contributor to noninterest income. Assets under management increased by $1.1 billion in 2024. There were 469 new relationships added in 2024 totaling $1.5 billion of new assets under management. Income is generated primarily from fees charged based on assets under administration for corporate and personal trusts and for custodial services. The majority of the trust fees are determined based on the value of the investments within the fully-managed trusts. Similar to trust fees, investment advisory and management fees are largely determined based on the value of the investments managed. The Company expects trust and investment advisory and management fees to be negatively impacted during periods of lower market valuations and positively impacted during periods of higher market valuations. The Company has recently expanded its wealth management client base into the southwest Missouri and the central Iowa markets."]]
[[/GREPCENT_TABLE]]

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[[GREPCENT_TABLE]]
[["","\u25cf","Noninterest expense in 2024 totaled $207.6 million as compared to $210.5 million in 2023. The decrease was primarily due to a reduction in salaries and benefits expenses related to lower variable incentive compensation and fewer FTEs."]]
[[/GREPCENT_TABLE]]

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GAAP TO NON-GAAP RECONCILIATIONS

The following table presents certain non-GAAP financial measures related to the “TCE/TA ratio,” “adjusted net income,” “adjusted EPS,” “adjusted ROAA,” “NIM (TEY),” “adjusted NIM,” “efficiency ratio” and “adjusted efficiency ratio”. In compliance with applicable rules of the SEC, all non-GAAP measures are reconciled to the most directly comparable GAAP measure, as follows:

[[GREPCENT_TABLE]]
[["","\u25cf","TCE/TA ratio (non-GAAP) is reconciled to stockholders\u2019 equity and total assets;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Adjusted net income, adjusted EPS and adjusted ROAA (all non-GAAP measures) are reconciled to net income;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","NIM (TEY) (non-GAAP) and adjusted NIM (TEY) (non-GAAP) are reconciled to NIM; and"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Efficiency ratio (non-GAAP) and adjusted efficiency ratio (non-GAAP) are reconciled to noninterest expense, net interest income and noninterest income."]]
[[/GREPCENT_TABLE]]

The TCE/TA non-GAAP ratio has been a focus for our investors and management believes that this ratio may assist investors in analyzing the Company’s capital position without regard to the effects of intangible assets.  

The following tables also include several “adjusted” non-GAAP measurements of financial performance.  The Company’s management believes that these measures are important to investors as they exclude non-core or non-recurring income and expense items; therefore, they provide a better comparison for analysis and may provide a better indicator of future performance.

NIM (TEY) is a financial measure that the Company’s management utilizes to take into account the tax benefit associated with certain loans and securities. It is standard industry practice to measure net interest margin using tax-equivalent measures.  In addition, the Company calculates NIM without the impact of acquisition accounting net accretion (adjusted NIM), as accretion amounts can fluctuate a great deal, making comparisons difficult.

The adjusted efficiency ratio and efficiency ratio are utilized by management to compare the Company to peers. They are standard ratios used to calculate overhead as a percentage of revenue in the banking industry and widely utilized by investors.

Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied, and are not audited. Although these non-GAAP financial measures are frequently used by investors to evaluate a company, they have limitations as analytical tools and should not be considered in isolation, or as a substitute for analyses of results as reported under GAAP.

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[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","\u200b","As of","","\u200b","\u200b","\u200b","\u200b"],["GAAP TO NON-GAAP","","\u200b","December 31,","","December 31,","","\u200b","\u200b","\u200b","\u200b"],["RECONCILIATIONS","\u200b","\u200b","2024","\u200b","2023","","\u200b","\u200b","\u200b","\u200b"],["\u200b","","\u200b","(dollars in thousands, except per share data)","\u200b","\u200b","\u200b","\u200b","\u200b"],["TCE/TA RATIO","","\u200b","\u200b","","","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Stockholders' equity (GAAP)","\u200b","\u200b","$","997,387","\u200b","$","886,596","\u200b","\u200b","\u200b","\u200b","\u200b"],["Less: Intangible assets","\u200b","\u200b","","149,657","\u200b","","152,848","\u200b","\u200b","\u200b","\u200b","\u200b"],["TCE (non-GAAP)","\u200b","\u200b","$","847,730","\u200b","$","733,748","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Total assets (GAAP)","\u200b","\u200b","$","9,026,030","\u200b","$","8,538,894","\u200b","\u200b","\u200b","\u200b","\u200b"],["Less: Intangible assets","\u200b","\u200b","","149,657","\u200b","","152,848","\u200b","\u200b","\u200b","\u200b","\u200b"],["TA (non-GAAP)","\u200b","\u200b","$","8,876,373","\u200b","$","8,386,046","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["TCE/TA ratio (non-GAAP)","\u200b","\u200b","","9.55","%","","8.75","%","\u200b","\u200b","\u200b","\u200b"]]
[[/GREPCENT_TABLE]]

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Table of Contents

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","For the Year Ended"],["\u200b","\u200b","December 31,","","December 31,"],["\u200b","","2024","","2023"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["ADJUSTED NET INCOME","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Net income (GAAP)","\u200b","$","113,850","\u200b","$","113,558","\u200b"],["Less non-core items (post-tax) (*):","\u200b","","","\u200b","","","\u200b"],["Income:","\u200b","","","\u200b","","","\u200b"],["Securities gains (losses), net","\u200b","$","\u2014","\u200b","$","(356)","\u200b"],["Fair value gain (loss) on derivatives, net","\u200b","\u200b","(3,425)","\u200b","\u200b","(997)","\u200b"],["Total non-core income (non-GAAP)","\u200b","$","(3,425)","\u200b","$","(1,353)","\u200b"],["Expense:","\u200b","","","\u200b","","","\u200b"],["Post-acquisition compensation, transition and integration costs","\u200b","\u200b","\u2014","\u200b","\u200b","164","\u200b"],["Goodwill impairment","\u200b","\u200b","432","\u200b","\u200b","\u2014","\u200b"],["Restructuring expense","\u200b","","1,544","\u200b","","\u2014","\u200b"],["Total non-core expense (non-GAAP)","\u200b","$","1,976","\u200b","$","164","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Adjusted net income (non-GAAP)","\u200b","$","119,251","\u200b","$","115,075","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["ADJUSTED EPS","\u200b","","","\u200b","","","\u200b"],["Adjusted net income (non-GAAP) (from above)","\u200b","$","119,251","\u200b","$","115,075","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Weighted average common shares outstanding","\u200b","","16,829,004","\u200b","","16,732,406","\u200b"],["Weighted average common and common equivalent shares outstanding","\u200b","","16,959,853","\u200b","","16,866,391","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Adjusted EPS (non-GAAP):","\u200b","","","\u200b","","","\u200b"],["Basic","\u200b","$","7.09","\u200b","$","6.88","\u200b"],["Diluted","\u200b","$","7.03","\u200b","$","6.82","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["ADJUSTED ROAA (non-GAAP)","\u200b","","","\u200b","","","\u200b"],["Adjusted net income (non-GAAP) (from above)","\u200b","$","119,251","\u200b","$","115,075","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Average Assets","\u200b","$","8,837,393","\u200b","$","8,165,805","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Adjusted ROAA (non-GAAP)","\u200b","","1.35","%","","1.41","%"],["Adjusted ROAE (non-GAAP)","\u200b","\u200b","12.61","%","\u200b","13.94","%"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["ADJUSTED NIM (TEY)*","\u200b","\u200b","\u200b","\u200b","","\u200b","\u200b"],["Net interest income (GAAP)","\u200b","$","231,788","\u200b","$","221,006","\u200b"],["Plus: Tax equivalent adjustment","\u200b","","36,532","\u200b","","28,237","\u200b"],["Net interest income - tax equivalent (non-GAAP)","\u200b","$","268,320","\u200b","$","249,243","\u200b"],["Less: Acquisition accounting net accretion","\u200b","\u200b","1,565","\u200b","\u200b","2,173","\u200b"],["Adjusted net interest income","\u200b","$","266,755","\u200b","$","247,070","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Average earning assets","\u200b","$","8,058,631","\u200b","$","7,435,361","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["NIM (GAAP)","\u200b","","2.88","%","","2.97","%"],["NIM (TEY) (non-GAAP)","\u200b","","3.33","%","","3.35","%"],["Adjusted NIM (TEY) (non-GAAP)","\u200b","\u200b","3.31","%","\u200b","3.32","%"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["EFFICIENCY RATIO","\u200b","","","\u200b","","","\u200b"],["Noninterest expense (GAAP)","\u200b","$","207,642","\u200b","$","210,531","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Net interest income (GAAP)","\u200b","$","231,788","\u200b","$","221,006","\u200b"],["Noninterest income (GAAP)","\u200b","","115,529","\u200b","","132,684","\u200b"],["Total income","\u200b","$","347,317","\u200b","$","353,690","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Efficiency ratio (noninterest expense/total income) (non-GAAP)","\u200b","","59.78","%","","59.52","%"],["Adjusted efficiency ratio (core noninterest expense/core total income) (Non-GAAP)","\u200b","\u200b","58.37","%","\u200b","59.18","%"]]
[[/GREPCENT_TABLE]]

​

*    Non-core or non-recurring items (after-tax) are calculated using an estimated effective tax rate of 21% with the exception of goodwill impairment expense which is not deductible for tax.

​

NET INTEREST INCOME AND MARGIN (TAX EQUIVALENT BASIS)

Net interest income increased 5% for the year ended December 31, 2024, compared to the prior year. Net interest income, on a tax equivalent basis (non-GAAP), increased 8% to $268.3 million for the year ended December 31, 2024, as compared to the prior year. Net interest income changed primarily due to the Company’s loan and investment growth and continued expansion of loan and investment yields, which were partially offset by deposit growth and higher yields on deposit accounts.

45

Table of Contents

A comparison of yields, spread and margin as reported on the Company’s financial statements and on a tax equivalent basis is as follows:

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","GAAP","\u200b","Tax Equivalent Basis"],["\u200b","\u200b","For the Year Ended","\u200b","For the Year Ended"],["\u200b","\u200b","December 31,","\u200b","December 31,","\u200b","December 31,","December 31,"],["\u200b","\u200b","2024","\u200b","2023","\u200b","2024","2023"],["Average Yield on Interest-Earning Assets","\u200b","5.98","%","\u200b","5.56","%","\u200b","6.43","%","\u200b","5.94","%"],["Average Cost of Interest-Bearing Liabilities","\u200b","3.83","%","\u200b","3.31","%","\u200b","3.83","%","\u200b","3.31","%"],["Net Interest Spread","\u200b","2.15","%","\u200b","2.25","%","\u200b","2.60","%","\u200b","2.63","%"],["NIM (TEY) (Non-GAAP)","\u200b","2.88","%","\u200b","2.97","%","\u200b","3.33","%","\u200b","3.35","%"],["NIM Excluding Acquisition Accounting Net Accretion (Non-GAAP)","\u200b","2.86","%","\u200b","2.94","%","\u200b","3.31","%","\u200b","3.32","%"]]
[[/GREPCENT_TABLE]]

Acquisition accounting net accretion can fluctuate, mostly depending on the payoff or renewal activity of the acquired loans. In evaluating net interest income and NIM, it is important to understand the impact of acquisition accounting net accretion when comparing periods. The above table reports NIM with and without the acquisition accounting net accretion to allow for additional comparisons.  A comparison of acquisition accounting net accretion included in NIM is as follows:

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","For the Year Ended"],["\u200b","December 31,","\u200b","December 31,"],["\u200b","2024","","\u200b","2023"],["\u200b","\u200b","(dollars in thousands)"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Acquisition Accounting Net Accretion in NIM","$","1,565","\u200b","$","2,173"]]
[[/GREPCENT_TABLE]]

​

The Company's management closely monitors and manages NIM. From a profitability standpoint, an important challenge for the Company's subsidiary banks and equipment financing/leasing company is focusing on quality growth in conjunction with the improvement of their NIMs. Management continually addresses this issue with pricing and other balance sheet management strategies which included better loan pricing, reducing reliance on rate-sensitive funding, closely managing deposit rates and finding additional ways to manage cost of funds through derivatives.

46

Table of Contents

The Company’s average balances, interest income/expense, and rates earned/paid on major balance sheet categories are presented in the following table:

[[GREPCENT_TABLE]]
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deposits","\u200b","$","4,700,762","\u200b","","161,584","\u200b","","3.44","%","\u200b","$","4,191,913","\u200b","","121,662","\u200b","2.90","%","\u200b","$","3,715,017","\u200b","","35,359","\u200b","0.95","%"],["Time deposits","\u200b","","1,153,407","\u200b","","51,547","\u200b","","4.47","\u200b","\u200b","","1,010,827","\u200b","","37,784","\u200b","3.74","\u200b","\u200b","","568,245","\u200b","","7,003","\u200b","1.23","\u200b"],["Short-term borrowings","\u200b","","1,850","\u200b","","98","\u200b","","5.24","\u200b","\u200b","","2,781","\u200b","","152","\u200b","6.44","\u200b","\u200b","","8,637","\u200b","","299","\u200b","3.46","\u200b"],["FHLB advances","\u200b","","375,214","\u200b","","19,751","\u200b","","5.18","\u200b","\u200b","","323,904","\u200b","","16,740","\u200b","5.10","\u200b","\u200b","","286,474","\u200b","","6,954","\u200b","2.39","\u200b"],["Other 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liabilities","\u200b","","418,810","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","","406,274","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","","274,241","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Total liabilities","\u200b","$","7,891,545","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","$","7,340,248","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","$","6,458,148","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Stockholders' equity","\u200b","","945,848","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","","825,557","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","","748,032","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Total liabilities and stockholders' equity","\u200b","$","8,837,393","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","$","8,165,805","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","$","7,206,180","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Net interest income","\u200b","\u200b","\u200b","\u200b","$","268,320","\u200b","\u200b","\u200b","\u200b","\u200b","","\u200b","\u200b","$","249,243","\u200b","\u200b","\u200b","\u200b","","\u200b","\u200b","$","247,460","\u200b","\u200b","\u200b"],["Net interest spread","\u200b","","\u200b","\u200b","","\u200b","\u200b","","2.60","%","\u200b","","\u200b","\u200b","","\u200b","\u200b","2.63","%","\u200b","","\u200b","\u200b","","\u200b","\u200b","3.38","%"],["Net interest margin","\u200b","","\u200b","\u200b","","\u200b","\u200b","","2.88","%","\u200b","","\u200b","\u200b","","\u200b","\u200b","2.97","%","\u200b","","\u200b","\u200b","","\u200b","\u200b","3.49","%"],["Net interest margin (TEY)(Non-GAAP)","\u200b","","\u200b","\u200b","","\u200b","\u200b","","3.33","%","\u200b","","\u200b","\u200b","","\u200b","\u200b","3.35","%","\u200b","","\u200b","\u200b","","\u200b","\u200b","3.73","%"],["Adjusted net interest margin (TEY)(Non-GAAP)","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","3.31","%","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","3.32","%","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","3.60","%"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Ratio of average interest-earning assets to average interest-bearing liabilities","\u200b","","123.73","%","","\u200b","\u200b","","\u200b","\u200b","\u200b","","127.95","%","","\u200b","\u200b","\u200b","\u200b","\u200b","","138.36","%","","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"]]
[[/GREPCENT_TABLE]]

​

[[GREPCENT_TABLE]]
[["(1)","Interest earned and yields on nontaxable investment securities and loans are determined on a tax equivalent basis using a 21% tax rate."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(2)","Loan/lease fees are not material and are included in interest income from loans/leases receivable in accordance with accounting and regulatory guidance."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(3)","Non-accrual loans/leases are included in the average balance for gross loans/leases receivable in accordance with accounting and regulatory guidance."]]
[[/GREPCENT_TABLE]]

​

47

Table of Contents

The Company’s components of change in net interest income are presented in the following table:

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","For the years ended December 31, 2024 and 2023"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Inc./(Dec.)","\u200b","Components","\u200b","Inc./(Dec.)","\u200b","Components"],["\u200b","\u200b","from","\u200b","of Change (1)","\u200b","from","\u200b","of Change (1)"],["\u200b","","Prior Year","","Rate","","Volume","","Prior Year","","Rate","","Volume"],["\u200b","\u200b","2024 vs. 2023","\u200b","2023 vs. 2022"],["\u200b","\u200b","(dollars in thousands)","\u200b","(dollars in thousands)"],["INTEREST INCOME","\u200b","\u200b","","","\u200b","","","\u200b","","","\u200b","","","\u200b","","","\u200b"],["Federal funds sold","\u200b","$","(306)","\u200b","$","21","\u200b","$","(327)","\u200b","$","588","\u200b","$","424","\u200b","$","164"],["Interest-bearing deposits at financial institutions","\u200b","","1,940","\u200b","","(8)","\u200b","","1,948","\u200b","","3,048","\u200b","","2,674","\u200b","","374"],["Investment securities - taxable","\u200b","","2,289","\u200b","","911","\u200b","","1,378","\u200b","","2,849","\u200b","","2,433","\u200b","","416"],["Investment securities - nontaxable (2)","\u200b","\u200b","13,571","\u200b","\u200b","6,723","\u200b","\u200b","6,848","\u200b","\u200b","3,991","\u200b","\u200b","2,392","\u200b","\u200b","1,599"],["Restricted investment securities","\u200b","","645","\u200b","","644","\u200b","","1","\u200b","","278","\u200b","","59","\u200b","","219"],["Gross loans/leases receivable (2) (3)","\u200b","","58,603","\u200b","","31,398","\u200b","","27,205","\u200b","","121,982","\u200b","","83,631","\u200b","","38,351"],["Total change in interest income","\u200b","$","76,742","\u200b","$","39,689","\u200b","$","37,053","\u200b","$","132,736","\u200b","$","91,613","\u200b","$","41,123"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["INTEREST EXPENSE","\u200b","","","\u200b","","","\u200b","","","\u200b","","","\u200b","","","\u200b"],["Interest-bearing deposits","\u200b","","39,922","\u200b","","24,167","\u200b","","15,755","\u200b","","86,303","\u200b","","81,223","\u200b","","5,080"],["Time deposits","\u200b","","13,763","\u200b","","7,990","\u200b","","5,773","\u200b","","30,781","\u200b","","22,278","\u200b","","8,503"],["Short-term borrowings","\u200b","","(54)","\u200b","","(19)","\u200b","","(35)","\u200b","","(147)","\u200b","","145","\u200b","","(292)"],["Federal Home Loan Bank advances","\u200b","","3,011","\u200b","","271","\u200b","","2,740","\u200b","","9,786","\u200b","","8,774","\u200b","","1,012"],["Other borrowings","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014","\u200b","\u200b","(53)","\u200b","\u200b","(27)","\u200b","\u200b","(26)"],["Subordinated notes","\u200b","\u200b","1,084","\u200b","\u200b","1,060","\u200b","\u200b","24","\u200b","\u200b","4,030","\u200b","\u200b","220","\u200b","\u200b","3,810"],["Junior subordinated debentures","\u200b","","(61)","\u200b","","(69)","\u200b","","8","\u200b","","253","\u200b","","70","\u200b","","183"],["Total change in interest expense","\u200b","$","57,665","\u200b","$","33,400","\u200b","$","24,265","\u200b","$","130,953","\u200b","$","112,683","\u200b","$","18,270"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Total change in net interest income","\u200b","$","19,077","\u200b","$","6,289","\u200b","$","12,788","\u200b","$","1,783","\u200b","$","(21,070)","\u200b","$","22,853"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(1)","The column \"Inc/(Dec) from Prior Year\" is segmented into the changes attributable to variations in volume and the changes attributable to changes in interest rates. The variations attributable to simultaneous volume and rate changes have been proportionately allocated to rate and volume."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(2)","Interest earned and yields on nontaxable investment securities and loans are determined on a tax equivalent basis using a 21% tax rate."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(3)","Loan/lease fees are not material and are included in interest income from loans/leases receivable in accordance with accounting and regulatory guidance."]]
[[/GREPCENT_TABLE]]

The Company’s operating results are also impacted by various sources of noninterest income, including trust fees, investment advisory and management fees, deposit service fees, capital markets revenue, including swap fee income and gains on loan securitizations, gains from the sales of residential real estate loans and government guaranteed loans, earnings on BOLI,  and other income. Offsetting these items, the Company incurs noninterest expenses, which include salaries and employee benefits, occupancy and equipment expense, professional and data processing fees, FDIC and other insurance expense, loan/lease expense and other administrative expenses.

The Company’s operating results are also affected by economic and competitive conditions, particularly changes in interest rates, income tax rates, government policies and actions of regulatory authorities.

RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2024 and 2023

INTEREST INCOME

For 2024, interest income increased $68.4 million, or 17%, compared to 2023. This was due to higher loan and investment average balances and margin expansion from higher loan and investment yields.

The Company intends to continue to grow quality loans and leases as well as its private placement tax-exempt securities portfolio to maximize yield while minimizing credit and interest rate risk.

48

Table of Contents

INTEREST EXPENSE

Comparing 2024 to 2023, interest expense increased $57.7 million, or 30%, year-over-year. The increase was primarily due to the higher cost of funds as well as an increase in interest bearing and time deposits with lower noninterest bearing deposits. The Company’s cost of funds was 3.83% for the year ending December 31, 2024, an increase from 3.31% for the year ending December 31, 2023.

PROVISION FOR CREDIT LOSSES

The ACL is established through provision for credit losses expense to provide an estimated ACL.  The following table shows the components for the provision for credit losses for the years ended December 31, 2024 and 2023.

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","\u200b","\u200b","Year Ended"],["\u200b","\u200b","\u200b","\u200b","December 31,","\u200b","December 31,"],["\u200b","","\u200b","\u200b","2024","","2023"],["\u200b","\u200b","\u200b","\u200b","(dollars in thousands)"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Provision for credit losses - loans and leases","\u200b","\u200b","\u200b","$","18,739","\u200b","$","11,550"],["Provision for credit losses - off-balance sheet exposures","\u200b","\u200b","\u200b","\u200b","(1,256)","\u200b","\u200b","3,977"],["Provision for credit losses - held to maturity securities","\u200b","\u200b","\u200b","\u200b","60","\u200b","\u200b","23"],["Provision for credit losses - available for sale securities","\u200b","\u200b","\u200b","","(445)","\u200b","","989"],["Total provision for credit losses","\u200b","\u200b","\u200b","$","17,098","\u200b","$","16,539"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"]]
[[/GREPCENT_TABLE]]

​

The Company’s total provision for credit losses was $17.1 million for 2024, an increase of $559 thousand from 2023. The increase in provision for credit losses on loans and leases was driven by the loan growth, increased net charge-offs,  and higher criticized loan balances.  For the year ended December 31, 2024, the provision for credit losses related to OBS was a negative provision of $1.3 million, compared to a $4.0 million provision for the year ended December 31, 2023.  The decrease was due to a decrease in the balance of unfunded commitments, improved credit quality and economic conditions. The provision related to HTM securities for the year ended December 31, 2024 was $60 thousand as compared to a $23 thousand provision for the year ended December 31, 2023.  There was a negative provision of $445 thousand related to AFS securities for the year ended December 31, 2024 as compared to a $989 thousand provision related to AFS securities for the year ended December 31, 2023, resulting from the write down in 2023 and subsequent change in fair value in 2024, of a debt investment in a failed bank. This was a legacy investment acquired as part of the 2022 GFED acquisition and an allowance was established for the entire balance of the investment.

The ACL for loans and leases is established based on a number of factors, including the Company’s historical loss experience, delinquencies and charge-off trends, economic and other forecasts, the local, state and national economies and the risk associated with the loans/leases and securities in the portfolio as described in more detail in the “Critical Accounting Policies and Critical Accounting Estimates” section of this Annual Report on Form 10-K.

The Company had an ACL on loans/leases of 1.32% of gross loans/leases held for investment at December 31, 2024, compared to 1.33% of gross loans/leases held for investment at December 31, 2023.  Management evaluates the allowance needed on the loans acquired in previous acquisitions factoring in the remaining discount, which was $2.3 million and $3.9 million at December 31, 2024 and 2023, respectively.

Additional discussion of the Company’s allowance can be found in the “Financial Condition” section of this Annual Report on Form 10-K.

49

Table of Contents

NONINTEREST INCOME

The following tables set forth the various categories of noninterest income for the years ended December 31, 2024 and 2023.

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Year Ended","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","December 31,","\u200b","December 31,","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","2024","","2023","","$ Change","","% Change"],["\u200b","\u200b","(dollars in thousands)","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Trust fees","\u200b","$","13,028","\u200b","$","11,697","\u200b","$","1,331","","11.4","%"],["Investment advisory and management fees","\u200b","","4,864","\u200b","","3,864","\u200b","","1,000","","25.9","\u200b"],["Deposit service fees","\u200b","","8,530","\u200b","","8,177","\u200b","","353","","4.3","\u200b"],["Gains on sales of residential real estate loans, net","\u200b","","2,041","\u200b","","1,611","\u200b","","430","","26.7","\u200b"],["Gains on sales of government guaranteed portions of loans, net","\u200b","","85","\u200b","","54","\u200b","","31","","57.4","\u200b"],["Capital markets revenue","\u200b","","71,057","\u200b","","92,065","\u200b","","(21,008)","","(22.8)","\u200b"],["Securities losses, net","\u200b","","\u2014","\u200b","","(451)","\u200b","","451","","100.0","\u200b"],["Earnings on bank-owned life insurance","\u200b","","5,443","\u200b","","4,184","\u200b","","1,259","","30.1","\u200b"],["Debit card fees","\u200b","","6,167","\u200b","","6,200","\u200b","","(33)","","(0.5)","\u200b"],["Correspondent banking fees","\u200b","","2,089","\u200b","","1,662","\u200b","","427","","25.7","\u200b"],["Loan related fee income","\u200b","\u200b","3,697","\u200b","\u200b","3,066","\u200b","\u200b","631","","20.6","\u200b"],["Fair value loss on derivatives and trading securities","\u200b","\u200b","(2,779)","\u200b","\u200b","(1,262)","\u200b","\u200b","(1,517)","","(120.2)","\u200b"],["Other","\u200b","","1,307","\u200b","","1,817","\u200b","","(510)","","(28.1)","\u200b"],["Total noninterest income","\u200b","$","115,529","\u200b","$","132,684","\u200b","$","(17,155)","","(12.9)","%"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"]]
[[/GREPCENT_TABLE]]

​

The Company has been successful in expanding its wealth management customer base. Trust fees continue to be a significant contributor to noninterest income. Assets under management increased by $1.1 billion in 2024 with 469 new relationships totaling $1.5 billion in new assets under management.  Income is generated primarily from fees charged based on assets under administration for corporate and personal trusts and for custodial services. The majority of the trust fees are determined based on the value of the investments within the fully-managed trusts. Trust fees increased 11% in 2024 as compared to 2023 due to growth in assets under management and market performance. The Company expects trust fees to be negatively impacted during periods of significantly lower market valuations and positively impacted during periods of significantly higher market valuation. During 2024 and 2023, the Company expanded its wealth management customer base into the southwest Missouri and central Iowa markets.  

Investment advisory and management fees increased 26% in 2024 as compared to 2023. Similar to trust fees, fees from these services are largely determined based on the market value of the investments managed. As a result, fee income from this line of business fluctuates with market valuations.  

Deposit service fees increased 4% in 2024 as compared to 2023. This was the result of core deposit growth offset by a decrease in non-sufficient funds and service charge fee income. The Company continues to be successful in expanding its core deposit base with a targeted focus on growing the number of net new accounts in 2024.

Gains on sales of residential real estate loans, net, increased 27% in 2024 as compared to 2023. The increase was primarily due to higher volumes of client residential real estate purchase activity generating higher levels of gains.

The Company has grown its capital markets revenue significantly over the past several years.  The Company’s interest rate swap program consists of back-to-back interest rate swaps with two types of commercial borrowers: (1) traditional commercial loans of a certain minimum size and sophistication; and (2) LIHTC permanent loans.  Most of the growth has been in the latter category as the Company has grown relationships with strong LIHTC developers with many years of experience.  The LIHTC industry is strong and growing with an increased need for affordable housing.  The back-to-back interest rate swaps allow commercial borrowers to pay a fixed interest rate while the Company receives a variable interest rate as well as an upfront nonrefundable fee dependent upon the pricing from an upstream counter party.

50

Table of Contents

​

Capital markets revenue totaled $71.1 million in 2024 as compared to $92.1 million in 2023. In the traditional commercial portfolio, the pricing is more competitive and the duration is shorter as compared to the LIHTC permanent loans. Therefore, the mix of loans with interest rate swaps continued to be heavily weighted towards LIHTC permanent loans. Future levels of swap fee income are dependent upon the needs of our traditional commercial and LIHTC borrowers, and the size of the related nonrefundable swap fee may fluctuate depending on the interest rate environment.

​

Also included in capital markets revenue are gains/losses on loan securitizations. Net gains on loan securitizations totaled $955 thousand in 2024 as compared to $644 thousand in 2023.  LIHTC securitizations will likely be used in the future as a tool to provide capacity for continued LIHTC loan production.

​

There were no securities gains or losses in 2024 as compared to securities losses, net of gains, totaling $451 thousand in 2023.  The Company sold $30 million of securities during the first quarter of 2023.  The securities sold were part of a strategy to partially deleverage the balance sheet and reduce higher cost borrowings and the related negative arbitrage.  The losses were successfully earned back within the calendar year.  

Earnings on BOLI increased 30% in 2024. The increase is primarily due to income of $2.2 million on death benefit proceeds of a former executive that were received in 2024.  There were no purchases of BOLI in 2024 or 2023. Yields on BOLI (based on a simple average and excluding the impact of the federal income tax exemption) were 4.97% for 2024 and 2.82% for 2023. Notably, a portion of the Company’s BOLI is variable rate whereby the returns are determined by the performance of the equity markets. Management intends to continue to review its BOLI investments to be consistent with policy and regulatory limits in conjunction with the rest of its earning assets in an effort to maximize returns while minimizing risk.

Debit card fees are the interchange fees paid on certain debit card customer transactions. Debit card fees remained stable in 2024 as compared to 2023. These fees can vary based on customer debit card usage, so fluctuations from period to period may occur. As an opportunity to maximize fees, the Company offers deposit products with a higher interest rate that incentivizes debit card activity.

Correspondent banking fees increased 26% in 2024 primarily due to a shift of correspondent banking balances from non-interest bearing accounts to interest bearing accounts, in light of increasing rates.  Fees from correspondent banks generally increase when non-interest bearing account balances decrease due to lower associated earnings credits.  Correspondent banking continues to be a core strategy for the Company, as this line of business provides a high level of deposits that can be used to fund loan growth as well as a steady source of fee income.  The Company now serves 189 banks in Iowa, Illinois, Missouri and Wisconsin.

Loan related fee income increased 21% in 2024. The increase was primarily due to loan growth.

Fair value loss on derivatives and trading securities increased 120% in 2024. During 2024, the Company executed a derivative strategy with a notional value of approximately $409 million.  These derivatives are unhedged and are marked to market, with gains or losses recorded in noninterest income which was a contributing factor in the increase in fair value losses. The Company had fair value gains on trading securities which partially offset the fair value loss on derivatives. The Company also uses unhedged cap instruments to manage interest rate risk related to the variability of interest payments due to changes in interest rates.  See Note 7 to the Consolidated Financial Statements for additional information.

Other noninterest income decreased 28% in 2024 primarily due to declines in the market value of the Company’s equity investments.  Included in other noninterest income is income on equity investments.  Income on equity investments is largely determined based on the market value of the investments.  As a result, income fluctuates with market valuations.

51

Table of Contents

NONINTEREST EXPENSES

The following tables set forth the various categories of noninterest expenses for the years ended December 31, 2024 and 2023.

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Year Ended","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","December 31,","\u200b","December 31,","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","2024","","2023","","$ Change","","% Change"],["\u200b","\u200b","(dollars in thousands)","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Salaries and employee benefits","\u200b","$","128,186","\u200b","$","136,619","\u200b","$","(8,433)","","(6.2)","%"],["Occupancy and equipment expense","\u200b","","25,413","\u200b","","25,031","\u200b","","382","","1.5","\u200b"],["Professional and data processing fees","\u200b","","19,373","\u200b","","16,271","\u200b","","3,102","","19.1","\u200b"],["Restructuring expense","\u200b","\u200b","1,954","\u200b","\u200b","\u2014","\u200b","\u200b","1,954","","100.0","\u200b"],["Post-acquisition compensation, transition and integration costs","\u200b","","\u2014","\u200b","","207","\u200b","","(207)","","(100.0)","\u200b"],["FDIC insurance, other insurance and regulatory fees","\u200b","","7,444","\u200b","","7,137","\u200b","","307","","4.3","\u200b"],["Loan/lease expense","\u200b","","1,629","\u200b","","2,868","\u200b","","(1,239)","","(43.2)","\u200b"],["Net cost of (income from) and gains/losses on operations of other real estate","\u200b","","(21)","\u200b","","(26)","\u200b","","5","","19.2","\u200b"],["Advertising and marketing","\u200b","","7,058","\u200b","","6,042","\u200b","","1,016","","16.8","\u200b"],["Communication and data connectivity","\u200b","\u200b","1,397","\u200b","\u200b","2,063","\u200b","\u200b","(666)","","(32.3)","\u200b"],["Supplies","\u200b","\u200b","1,064","\u200b","\u200b","1,254","\u200b","\u200b","(190)","","(15.2)","\u200b"],["Bank service charges","\u200b","","2,428","\u200b","","2,592","\u200b","","(164)","","(6.3)","\u200b"],["Correspondent banking expense","\u200b","","1,321","\u200b","","963","\u200b","","358","","37.2","\u200b"],["Intangibles amortization","\u200b","","2,761","\u200b","","2,938","\u200b","","(177)","","(6.0)","\u200b"],["Goodwill impairment","\u200b","\u200b","432","\u200b","\u200b","\u2014","\u200b","\u200b","432","\u200b","(100.0)","\u200b"],["Payment card processing","\u200b","\u200b","2,653","\u200b","\u200b","2,656","\u200b","\u200b","(3)","","(0.1)","\u200b"],["Trust expense","\u200b","\u200b","1,580","\u200b","\u200b","1,396","\u200b","\u200b","184","","13.2","\u200b"],["Other","\u200b","","2,970","\u200b","","2,520","\u200b","","450","","17.9","\u200b"],["Total noninterest expense","\u200b","$","207,642","\u200b","$","210,531","\u200b","$","(2,889)","","(1.4)","%"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"]]
[[/GREPCENT_TABLE]]

​

Management places strong emphasis on overall cost containment and is committed to improving the Company’s general efficiency.

Salaries and employee benefits, which is the largest component of noninterest expense, decreased 6% in 2024 as compared to 2023. This decrease was primarily related to lower variable incentive compensation and fewer FTEs with the announced changes at m2 and more open positions.

Occupancy and equipment expense increased 2% in 2024 as compared to 2023. This increase was due to higher IT service contracts expense and depreciation.

Professional and data processing fees increased 19% in 2024 as compared to 2023. The increase was due primarily to increased CDARS and ICS expenses as well as increased data processing expenses.  Generally, professional and data processing fees can fluctuate depending on certain one-time project costs. Management will continue to focus on minimizing such one-time costs and driving recurring costs down through contract negotiation or managed reduction in activity where costs are determined on a usage basis.

Restructuring expenses totaled $2.0 million in 2024 due to the decision to discontinue offering new loans and leases through m2.  The charges consisted primarily of severance and retention compensation as well as vendor contract termination fees.  There were no restructuring expenses in 2023.

There were no post-acquisition compensation, transition and integration costs in 2024.  Post-acquisition compensation, transition and integration costs totaled $207 thousand in 2023.  These costs were comprised primarily of personnel costs, IT integration and conversion costs related to the acquisition of GFED in 2022.  

52

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FDIC insurance, other insurance and regulatory fee expense increased 4% in 2024.  The increase in expense was due to an increase in the asset growth and higher FDIC insurance rates.

Loan/lease expense decreased 43% in 2024 as compared to 2023. The decrease was due primarily to lower legal expense on loan workouts and higher recoveries of legal expenses incurred on loan workouts. Generally, loan/lease expense has a direct relationship with the level of NPLs; however, it may deviate depending upon the individual NPLs.  NPLs have increased 35% since December 31, 2023.

Net cost of (income from) and gains/losses on operations of other real estate includes gains/losses on the sale of OREO, write-downs of OREO and all income/expenses associated with OREO. Net income from operations totaled $21 thousand for 2024 as compared to $26 thousand for 2023.

Advertising and marketing expense increased 17% in 2024 as compared to 2023. The increase in expense was primarily due to increased marketing of our deposit products.

Communication and data connectivity expense decreased 32% in 2024 as compared to 2023. The decrease was primarily due to improvements to our data center connectivity channels and a reduction in cell phone and air card expenses as the Company continues to improve operational efficiencies.

Supplies expense decreased 15% in 2024 as compared to 2023. The decrease was primarily due to improved management of supply stock and the timing of purchases.

Bank service charges, a large portion of which includes indirect costs incurred to provide services to QCBT’s correspondent banking customer portfolio, decreased 6% in 2024 as compared to 2023.   The decrease was due primarily to the Company incurring, in the fourth quarter of 2023, a bank service charge related to collateral held at the FHLB.

Correspondent banking expense increased 37% in 2024 as compared to 2023. The increase in correspondent expenses includes planned costs for an upgraded safekeeping platform. These are direct costs incurred to provide services to QCBT’s correspondent banking customer portfolio, including safekeeping and cash management services.

Intangible amortization expense decreased 6% in 2024 as compared to 2023. The amortization expense is due to prior acquisitions. These expenses will naturally decrease as intangibles become fully amortized unless there is an addition to intangible assets.

Goodwill impairment expense totaled $432 thousand in 2024 due to the decision to discontinue offering new loans and leases through m2.  There was no goodwill impairment in 2023.

Payment card processing expense remained stable in 2024 as compared to 2023.

Trust expense increased 13% in 2024 as compared to 2023. The increase was due to an increase in assets under management of $1.1 billion in 2024.

Other noninterest expense increased 18% in 2024 as compared to 2023.  The increase was due primarily to increased insurance claim loss reserves at our QCRH Risk Management, Inc. micro captive entity.  Also included in other noninterest expense are other items such as meals and entertainment, subscriptions and sales and use tax.

53

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INCOME TAX EXPENSE

The provision for income taxes was $8.7 million for 2024, or an effective tax rate of 7.1%, compared to $13.1 million for 2023, or an effective tax rate of 10.3%.  Refer to the reconciliation of the expected income tax rate to the effective tax rate that is included in Note 14 to the Consolidated Financial Statements for additional details.

FINANCIAL CONDITION AS OF DECEMBER 31, 2024 AND 2023

OVERVIEW

Following is a table that represents the major categories of the Company’s balance sheet.  

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","\u200b","As of December 31,"],["\u200b","\u200b","\u200b","2024","\u200b","\u200b","\u200b","2023"],["\u200b","\u200b","\u200b","(dollars in thousands)"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Amount","","%","","\u200b","Amount","","%"],["Cash, federal funds sold, and interest-bearing deposits","\u200b","$","262,324","","3","%","\u200b","$","237,492","","3","%"],["Securities","\u200b","\u200b","1,200,435","","13","%","\u200b","\u200b","1,005,528","","12","%"],["Net loans/leases","\u200b","\u200b","6,694,563","","74","%","\u200b","\u200b","6,456,216","","75","%"],["Derivatives","\u200b","\u200b","186,781","\u200b","2","%","\u200b","\u200b","187,341","\u200b","2","%"],["Other assets","\u200b","\u200b","681,927","\u200b","8","%","\u200b","\u200b","652,317","\u200b","8","%"],["Total assets","\u200b","$","9,026,030","","100","%","\u200b","$","8,538,894","","100","%"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Total deposits","\u200b","$","7,061,187","","79","%","\u200b","$","6,514,005","","77","%"],["Total borrowings","\u200b","\u200b","569,532","","6","%","\u200b","\u200b","718,295","","8","%"],["Derivatives","\u200b","\u200b","214,823","\u200b","2","%","\u200b","\u200b","215,735","\u200b","3","%"],["Other liabilities","\u200b","\u200b","183,101","","2","%","\u200b","\u200b","204,263","","2","%"],["Total stockholders' equity","\u200b","\u200b","997,387","","11","%","\u200b","\u200b","886,596","","10","%"],["Total liabilities and stockholders' equity","\u200b","$","9,026,030","","100","%","\u200b","$","8,538,894","","100","%"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"]]
[[/GREPCENT_TABLE]]

​

In 2024, total assets increased $487.1 million, or 6%. The Company’s securities portfolio increased $194.9 million, or 19%, during 2024.  The Company’s net loan/lease portfolio increased $238.3 million, or 3.7%, during 2024. Deposits grew $547.2 million, or 8%, during 2024. Borrowings decreased $148.8 million, or 21%, during 2024 due primarily to an increase in core deposits which allowed borrowings to mature.

INVESTMENT SECURITIES

The composition of the Company’s securities portfolio is managed to meet liquidity needs while prioritizing the impact on interest rate risk and maximizing return, while minimizing credit risk. Over the recent years, the Company has continued to change the mix of the portfolio by decreasing U.S. government sponsored agency securities, while increasing tax-exempt municipal securities. Of the latter, the large majority are privately placed tax-exempt debt issuances by municipalities located in the Midwest (with some in or near the Company’s existing markets) that require a thorough underwriting process before investment and are generated by our specialty finance group.

Trading securities had a fair value of $83.5 million as of December 31, 2024 and consisted of retained beneficial interests acquired in conjunction with the loan securitizations completed by the Company in 2024 and 2023.

​

54

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Following is a breakdown of the Company’s securities portfolio by type, the percentage of net unrealized gains (losses) to carrying value on the total portfolio, and the portfolio duration as of December 31, 2024 and 2023.

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","2024","\u200b","\u200b","2023","","\u200b"],["\u200b","\u200b","Amount","","%","","\u200b","Amount","","%","","\u200b"],["\u200b","\u200b","(dollars in thousands)"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["U.S. govt. sponsored agency securities","\u200b","$","20,591","","2","%","\u200b","$","14,973","","1","%","\u200b"],["Municipal securities","\u200b","","971,313","","81","%","\u200b","","853,442","","85","%","\u200b"],["Residential mortgage-backed and related securities","\u200b","","50,042","","4","%","\u200b","","59,196","","6","%","\u200b"],["Asset-backed securities","\u200b","\u200b","9,224","\u200b","1","%","\u200b","\u200b","15,423","\u200b","2","%","\u200b"],["Other securities","\u200b","","65,736","","5","%","\u200b","","40,125","","4","%","\u200b"],["Trading securities","\u200b","","83,529","","7","%","\u200b","","22,369","","2","%","\u200b"],["\u200b","\u200b","$","1,200,435","","100","%","\u200b","$","1,005,528","","100","%","\u200b"],["\u200b","\u200b","","","","","\u200b","\u200b","","","","","\u200b","\u200b"],["Securities as a % of total assets","\u200b","","13.30","%","","\u200b","\u200b","","11.78","%","","\u200b","\u200b"],["Net unrealized losses as a % of Amortized Cost","\u200b","","(7.32)","%","","\u200b","\u200b","","(4.96)","%","","\u200b","\u200b"],["Duration (in years)","\u200b","","5.8","","","\u200b","\u200b","","6.2","","","\u200b","\u200b"],["Annual yield on investment securities (tax equivalent)","\u200b","\u200b","4.55","%","\u200b","\u200b","\u200b","\u200b","4.30","%","\u200b","\u200b","\u200b"]]
[[/GREPCENT_TABLE]]

​

Due to increases in intermediate and long-term interest rates during 2024, which directly impact the fair value of the Company’s AFS portfolio, the AFS portfolio declined $18.5 million, or 6.2%, from December 31, 2023 to December 31, 2024.  

The Company has not invested in non-agency commercial or residential mortgage-backed securities or pooled trust preferred securities.

The following is a breakdown of the weighted-average yield for each range of maturities by category of HTM securities:

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","Weighted"],["\u200b","\u200b","Amortized","\u200b","Average"],["\u200b","","Cost*","","Yield"],["\u200b","\u200b","(dollars in thousands)"],["Municipal securities:","\u200b","","","","","\u200b"],["Within 1 year","\u200b","$","1,662","","3.11","%"],["After 1 but within 5 years","\u200b","","34,942","","5.52","%"],["After 5 but within 10 years","\u200b","","142,384","","4.96","%"],["After 10 years","\u200b","","628,004","","4.93","%"],["Total","\u200b","$","806,992","","4.96","%"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Other securities:","\u200b","","","","","\u200b"],["After 1 but within 5 years","\u200b","$","1,050","","4.51","%"],["After 5 but within 10 years","\u200b","\u200b","28,018","\u200b","7.73","%"],["Total","\u200b","$","29,068","","7.61","%"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Total HTM Securities","\u200b","$","836,060","\u200b","\u200b","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"]]
[[/GREPCENT_TABLE]]

* Amortized cost above excludes ACL of $263 thousand.

The weighted-average yield is calculated by dividing the total interest for each security per maturity range by the total amortized cost within that maturity range. Yields are not computed on a tax equivalent basis.

There have been no major changes within the tax-exempt portfolio.

55

Table of Contents

See Note 2 to the Consolidated Financial Statements for additional information regarding the Company’s investment securities.

LOANS/LEASES

During 2024, total loans/leases grew 3.7%, or 10.9%, when excluding the $386.5 million in loan securitizations during the year. The mix of loan/lease types within the Company’s loan/lease portfolio is presented in the following tables.

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","As of","\u200b"],["\u200b","\u200b","December 31, 2024","\u200b","\u200b","December 31, 2023","\u200b"],["\u200b","","Amount","","%","","\u200b","Amount","","%"],["\u200b","\u200b","(dollars in thousands)","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["C&I - revolving","\u200b","$","387,991","","6","%","\u200b","$","325,243","","5","%"],["C&I - other","\u200b","\u200b","1,514,932","\u200b","22","%","\u200b","\u200b","1,481,778","\u200b","23","\u200b"],["CRE - owner occupied","\u200b","\u200b","605,993","\u200b","9","%","\u200b","\u200b","607,365","\u200b","9","\u200b"],["CRE - non-owner occupied","\u200b","\u200b","1,077,852","\u200b","16","%","\u200b","\u200b","1,008,892","\u200b","16","\u200b"],["Construction and land development","\u200b","\u200b","1,313,543","\u200b","19","%","\u200b","\u200b","1,420,525","\u200b","22","\u200b"],["Multi-family","\u200b","","1,132,110","","17","%","\u200b","","996,143","","15","\u200b"],["Direct financing leases","\u200b","","17,076","","-","%","\u200b","","31,164","","-","\u200b"],["1-4 family real estate","\u200b","","588,179","","9","%","\u200b","","544,971","","8","\u200b"],["Consumer","\u200b","","146,728","","2","%","\u200b","","127,335","","2","\u200b"],["Total loans/leases","\u200b","$","6,784,404","","100","%","\u200b","$","6,543,416","","100","%"],["Less allowance","\u200b","","(89,841)","","\u200b","\u200b","\u200b","","(87,200)","","","\u200b"],["Net loans/leases","\u200b","$","6,694,563","\u200b","\u200b","\u200b","\u200b","$","6,456,216","\u200b","\u200b","\u200b"]]
[[/GREPCENT_TABLE]]

​

CRE loans are predominantly included within the CRE – owner occupied, CRE – non-owner occupied, construction and land development and multi-family loan classes, however, CRE loans can also be included in 1-4 family real estate based on the nature of the loan.  As CRE loans have historically been the Company’s largest portfolio segment, management places a strong emphasis on monitoring the composition of the Company’s CRE loan portfolio.  For example, management tracks the level of owner-occupied CRE loans relative to non-owner-occupied loans because owner-occupied loans are generally considered to have less risk.  Additionally, the Company reviews CRE concentrations by industry in relation to risk-based capital on a quarterly basis. Approximately 43% of the CRE portfolio are LIHTC loans of which all are performing and all are pass rated.

​

Historically, the Company structures most residential real estate loans to conform to the underwriting requirements of Freddie Mac and Fannie Mae to allow the subsidiary banks to resell the loans on the secondary market to avoid the interest rate risk associated with longer term fixed rate loans and recognizing noninterest income from the gain on sale. Loans originated for this purpose were classified as held for sale and are included in the residential real estate loans in the table above. Historically, the subsidiary banks structure most loans that will not conform to those underwriting requirements as adjustable-rate mortgages that mature or adjust in one to five years, and then retain these loans in their portfolios. The Company also holds 15-year fixed rate residential real estate loans originated in prior years that met certain credit guidelines. In addition, the Company has not originated any subprime, Alt-A, no documentation, or stated income residential real estate loans throughout its history.

56

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The following tables set forth the remaining maturities by loan/lease type as of December 31, 2024 and 2023. Maturities are based on contractual dates.

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","As of December 31, 2024"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","Maturities After One Year"],["\u200b","\u200b","Due in one","\u200b","Due after one","\u200b","Due after 5","\u200b","Due after","\u200b","Predetermined","\u200b","Adjustable"],["\u200b","","year or less","","through 5 years","","through 15 years","\u200b","15 years","","interest rates","","interest rates"],["\u200b","\u200b","(dollars in thousands)"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["C&I - revolving","\u200b","$","290,702","\u200b","$","96,689","\u200b","$","600","\u200b","$","\u2014","\u200b","$","28,306","\u200b","$","68,983","\u200b"],["C&I - other","\u200b","","241,747","\u200b","","842,568","\u200b","\u200b","301,673","\u200b","","128,944","\u200b","","886,330","\u200b","","386,855","\u200b"],["CRE - owner occupied","\u200b","\u200b","86,065","\u200b","\u200b","340,535","\u200b","\u200b","160,258","\u200b","\u200b","19,135","\u200b","\u200b","324,166","\u200b","\u200b","195,762","\u200b"],["CRE - non-owner occupied","\u200b","\u200b","250,736","\u200b","\u200b","614,583","\u200b","\u200b","190,362","\u200b","\u200b","22,171","\u200b","\u200b","634,587","\u200b","\u200b","192,529","\u200b"],["Construction and land development","\u200b","\u200b","175,329","\u200b","\u200b","241,147","\u200b","\u200b","29,310","\u200b","\u200b","867,757","\u200b","\u200b","162,472","\u200b","\u200b","975,742","\u200b"],["Multi-family","\u200b","\u200b","36,138","\u200b","\u200b","180,199","\u200b","\u200b","310,731","\u200b","\u200b","605,042","\u200b","\u200b","179,003","\u200b","\u200b","916,969","\u200b"],["Direct financing leases","\u200b","","2,059","\u200b","","15,017","\u200b","","\u2014","\u200b","","\u2014","\u200b","","15,017","\u200b","","\u2014","\u200b"],["1-4 family real estate","\u200b","","44,112","\u200b","","154,489","\u200b","","165,514","\u200b","","224,064","\u200b","","385,908","\u200b","","158,159","\u200b"],["Consumer","\u200b","","16,385","\u200b","","57,306","\u200b","","72,530","\u200b","","507","\u200b","","62,735","\u200b","","67,608","\u200b"],["\u200b","\u200b","$","1,143,273","\u200b","$","2,542,533","\u200b","$","1,230,978","\u200b","$","1,867,620","\u200b","$","2,678,524","\u200b","$","2,962,607","\u200b"]]
[[/GREPCENT_TABLE]]

​

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","As of December 31, 2023"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","Maturities After One Year"],["\u200b","\u200b","Due in one","\u200b","Due after one","\u200b","Due after 5","\u200b","\u200b","Due after","Predetermined","\u200b","Adjustable"],["\u200b","","year or less","","through 5 years","","through 15 years","\u200b","\u200b","15 years","interest rates","","interest rates"],["\u200b","\u200b","(dollars in thousands)"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["C&I - revolving","\u200b","$","233,863","\u200b","$","82,045","\u200b","$","9,335","\u200b","$","\u2014","\u200b","$","22,493","\u200b","$","68,887","\u200b"],["C&I - other","\u200b","","255,913","\u200b","","738,966","\u200b","\u200b","355,756","\u200b","","131,143","\u200b","","821,463","\u200b","","404,402","\u200b"],["CRE - owner occupied","\u200b","\u200b","47,107","\u200b","\u200b","331,933","\u200b","\u200b","205,090","\u200b","\u200b","23,235","\u200b","\u200b","381,218","\u200b","\u200b","179,040","\u200b"],["CRE - non-owner occupied","\u200b","\u200b","131,038","\u200b","\u200b","665,220","\u200b","\u200b","177,934","\u200b","\u200b","34,700","\u200b","\u200b","683,516","\u200b","\u200b","194,338","\u200b"],["Construction and land development","\u200b","\u200b","269,193","\u200b","\u200b","256,029","\u200b","\u200b","82,176","\u200b","\u200b","813,127","\u200b","\u200b","223,164","\u200b","\u200b","928,168","\u200b"],["Multi-family","\u200b","\u200b","17,873","\u200b","\u200b","178,245","\u200b","\u200b","275,159","\u200b","\u200b","524,866","\u200b","\u200b","170,477","\u200b","\u200b","807,793","\u200b"],["Direct financing leases","\u200b","","1,710","\u200b","","29,043","\u200b","","411","\u200b","","\u2014","\u200b","","29,454","\u200b","","\u2014","\u200b"],["1-4 family real estate","\u200b","","22,368","\u200b","","172,885","\u200b","","169,420","\u200b","","180,298","\u200b","","410,837","\u200b","","111,766","\u200b"],["Consumer","\u200b","","10,269","\u200b","","53,736","\u200b","","62,807","\u200b","","523","\u200b","","56,048","\u200b","","61,018","\u200b"],["\u200b","\u200b","$","989,334","\u200b","$","2,508,102","\u200b","$","1,338,088","\u200b","$","1,707,892","\u200b","$","2,798,670","\u200b","$","2,755,412","\u200b"]]
[[/GREPCENT_TABLE]]

​

See Note 3 to the Consolidated Financial Statements for additional information on the Company’s loan/lease portfolio.

​

ALLOWANCE FOR CREDIT LOSSES ON LOANS/LEASES AND OFF-BALANCE SHEET EXPOSURES

The adequacy of the ACL was determined by management based on factors that included the overall composition of the loan/lease portfolio, types of loans/leases, historical loss experience, loan/lease delinquencies, potential substandard and doubtful credits, economic conditions, collateral positions, government guarantees and other factors that, in management’s judgment, deserved evaluation. To ensure that an adequate ACL was maintained, provisions were made based on a number of factors, including the increase in loans/leases and a detailed analysis of the loan/lease portfolio. The loan/lease portfolio is reviewed and analyzed quarterly with specific detailed reviews completed on all credits risk-rated less than “fair quality” as described in Note 1 to the Consolidated Financial Statements and carrying aggregate exposure in excess of $250 thousand. The adequacy of the allowance is monitored by the credit administration staff and reported to management and the board of directors.

​

​

57

Table of Contents

Changes in the ACL for loans/leases for the years ended December 31, 2024, 2023 and 2022 are presented as follows.

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Year Ended"],["\u200b","","December 31, 2024","\u200b","December 31, 2023","\u200b","December 31, 2022"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Balance, beginning","\u200b","$","87,200","\u200b","$","87,706","\u200b","$","78,721"],["Initial ACL recorded for PCD loans","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014","\u200b","\u200b","5,902"],["Change in ACL for the transfer of loans to LHFS","\u200b","\u200b","(4,598)","\u200b","\u200b","(3,545)","\u200b","\u200b","\u2014"],["Provision","\u200b","","18,739","\u200b","","11,550","\u200b","","9,636"],["Charge-offs","\u200b","","(13,969)","\u200b","","(9,392)","\u200b","","(7,525)"],["Recoveries","\u200b","","2,469","\u200b","","881","\u200b","","972"],["Balance, ending","\u200b","$","89,841","\u200b","$","87,200","\u200b","$","87,706"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"]]
[[/GREPCENT_TABLE]]

​

The Company recorded an $11.0 million (pre-tax) provision for credit losses on loans in 2022, for the CECL Day 2 provision as a result of the GFED acquisition.

​

Net charge-offs by segment and their percentage of average loans and leases are as follows.

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Year ended December 31,"],["\u200b","\u200b","2024","\u200b","2023","\u200b"],["\u200b","\u200b","\u200b","Amount","% of Average Loans","\u200b","\u200b","Amount","% of Average Loans","\u200b"],["\u200b","\u200b","(dollars in thousands)"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Average amount of loans/leases outstanding, before allowance","\u200b","$","6,764,754","\u200b","\u200b","$","6,337,551","\u200b","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Net charge-offs:","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["C&I - revolving","\u200b","\u200b","\u2014","0.00","\u200b","\u200b","\u2014","0.00","\u200b"],["C&I - other","\u200b","\u200b","(10,227)","0.15","\u200b","\u200b","(8,137)","0.13","\u200b"],["CRE owner occupied","\u200b","\u200b","(10)","0.00","\u200b","\u200b","(219)","0.00","\u200b"],["CRE non-owner occupied","\u200b","\u200b","\u2014","0.00","\u200b","\u200b","31","(0.00)","\u200b"],["Construction and land development","\u200b","\u200b","(1,084)","0.02","\u200b","\u200b","(48)","0.00","\u200b"],["Multi-family","\u200b","\u200b","\u2014","0.00","\u200b","\u200b","\u2014","0.00","\u200b"],["1-4 family real estate","\u200b","\u200b","\u2014","0.00","\u200b","\u200b","5","(0.00)","\u200b"],["Consumer","\u200b","\u200b","(179)","0.00","\u200b","\u200b","(143)","0.00","\u200b"],["Total net charge-offs","\u200b","$","(11,500)","\u200b","\u200b","$","(8,511)","\u200b","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"]]
[[/GREPCENT_TABLE]]

​

Changes in the ACL for OBS exposures for the years ended December 31, 2024, 2023 and 2022 are as follows.

​

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","\u200b","For the Year Ended","\u200b"],["\u200b","\u200b","\u200b","December 31, 2024","\u200b","December 31, 2023","","December 31, 2022","\u200b"],["\u200b","\u200b","\u200b","(dollars in thousands)","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Balance, beginning","\u200b","\u200b","$","9,529","\u200b","$","5,552","\u200b","$","6,886","\u200b"],["Provisions (credited) to expense","\u200b","\u200b","","(1,256)","\u200b","","3,977","\u200b","","(1,334)","\u200b"],["Balance, ending","\u200b","\u200b","$","8,273","\u200b","$","9,529","\u200b","$","5,552","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"]]
[[/GREPCENT_TABLE]]

58

Table of Contents

​

The Company recorded a negative $1.3 million provision for credit losses related to OBS exposures in 2024. The decrease in provision in 2024 was driven by a decrease in unfunded commitments in the LIHTC lending business during the year. At December 31, 2024, the allowance for OBS exposures was $8.3 million.

The following is a table that reports the criticized and classified loan totals as of December 31, 2024 and 2023.

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","\u200b","As of December 31,"],["Internally Assigned Risk Rating *","","\u200b","2024","","\u200b","2023"],["\u200b","\u200b","\u200b","(dollars in thousands)"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Special Mention","\u200b","$","73,636","","$","125,308"],["Substandard/Classified loans***","\u200b","\u200b","84,930","","\u200b","70,425"],["Doubtful/Classified loans***","\u200b","\u200b","\u2014","","\u200b","\u2014"],["Criticized Loans **","\u200b","$","158,566","","$","195,733"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Criticized Loans as a % of Total Loans/Leases","\u200b","\u200b","2.34","%","\u200b","2.99","%"],["Classified Loans as a % of Total Loans/Leases","\u200b","\u200b","1.25","%","\u200b","1.08","%"]]
[[/GREPCENT_TABLE]]

​

*    Amounts above exclude the government guaranteed portion, if any. The Company assigns internal risk ratings of Pass (Rating 2) for the government

guaranteed portion.

**   Criticized loans are defined as C&I and CRE loans with internally assigned risk ratings of 9, 10, or 11, regardless of performance.

*** Classified loans are defined as C&I and CRE loans with internally assigned risk ratings of 10 or 11, regardless of performance.

Criticized loans decreased 17% and classified loans increased 26% in 2024 as compared to 2023.  The Company continues its strong focus on improving credit quality in an effort to limit NPLs.

The following table summarizes the trend in allowance as a percentage of gross loans/leases and as a percentage of NPLs as of December 31, 2024 and 2023.

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","As of December 31,"],["\u200b","\u200b","2024","","2023"],["ACL for loans/leases / Total loans/leases held for investment","\u200b","1.32","%","1.33","%"],["ACL for loans/leases / NPLs","\u200b","202.57","%","265.54","%"]]
[[/GREPCENT_TABLE]]

​

The following table presents the allowance by type and the percentage of loan/lease type to total loans/leases.

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","As of December 31,"],["\u200b","\u200b","2024","\u200b","\u200b","2023","\u200b"],["\u200b","","Amount","","%","","\u200b","Amount","","%"],["\u200b","\u200b","(dollars in thousands)"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["C&I - revolving","","$","3,856","","6","%","\u200b","$","4,224","","5","%"],["C&I - other*","","\u200b","34,002","","22","%","\u200b","\u200b","27,460","","23","%"],["CRE - owner occupied","\u200b","\u200b","7,147","\u200b","9","%","\u200b","\u200b","8,223","\u200b","9","%"],["CRE - non-owner occupied","\u200b","\u200b","11,137","\u200b","16","%","\u200b","\u200b","11,581","\u200b","16","%"],["Construction and land development","\u200b","\u200b","15,099","\u200b","19","%","\u200b","\u200b","16,856","\u200b","22","%"],["Multi-family","\u200b","\u200b","12,173","\u200b","17","%","\u200b","\u200b","12,463","\u200b","15","%"],["1-4 family real estate","","\u200b","4,934","","9","%","\u200b","\u200b","4,917","","8","%"],["Consumer","","\u200b","1,493","","2","%","\u200b","\u200b","1,476","","2","%"],["\u200b","\u200b","$","89,841","","100","%","\u200b","$","87,200","","100","%"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"]]
[[/GREPCENT_TABLE]]

* Included within the C&I – Other segment is an ACL on leases of $580 thousand and $992 thousand as of December 31, 2024 and 2023, respectively. Leases represent less than 1% of total loans/leases.

Although management believes that the ACL for loans/leases at December 31, 2024 is at a level adequate to absorb losses on existing loans/leases, there can be no assurance that such losses will not exceed the estimated amounts or

59

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that the Company will not be required to make additional provisions in the future. Unpredictable future events could adversely affect cash flows for both commercial and individual borrowers, which could cause the Company to experience increases in problem assets, delinquencies and losses on loans/leases, and may require additional increases in the provision for credit losses. Asset quality is a priority for the Company and its subsidiaries. The ability to grow profitably is in part dependent upon the ability to maintain that quality. The Company continually focuses efforts at its subsidiary banks and its leasing company with the intention to improve the overall quality of the Company’s loan/lease portfolio.

See Note 3 to the Consolidated Financial Statements for additional information on the Company’s ACL.

NONPERFORMING ASSETS

The table below presents the amounts of NPAs and related ratios.

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","As of December 31,"],["\u200b","\u200b","2024","\u200b","2023","\u200b"],["\u200b","\u200b","(dollars in thousands)"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Nonaccrual loans/leases (1)","\u200b","$","40,080","\u200b","$","32,753","\u200b"],["Accruing loans/leases past due 90 days or more","\u200b","\u200b","4,270","\u200b","\u200b","86","\u200b"],["Total NPLs","\u200b","","44,350","\u200b","\u200b","32,839","\u200b"],["Other repossessed assets","\u200b","\u200b","543","\u200b","\u200b","\u2014","\u200b"],["OREO","\u200b","\u200b","661","\u200b","\u200b","1,347","\u200b"],["Total NPAs","\u200b","$","45,554","\u200b","$","34,186","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["NPLs to total loans/leases","\u200b","\u200b","0.65","%","\u200b","0.50","%"],["NPAs to total loans/leases plus repossessed property","\u200b","\u200b","0.67","%","\u200b","0.52","%"],["NPAs to total assets","\u200b","\u200b","0.50","%","\u200b","0.40","%"],["Nonaccrual loans/leases to total loans/leases","\u200b","\u200b","0.59","%","\u200b","0.50","%"],["ACL to nonaccrual loans","\u200b","\u200b","224.15","%","\u200b","266.24","%"]]
[[/GREPCENT_TABLE]]

​

[[GREPCENT_TABLE]]
[["(1)","Includes government guaranteed portions of loans, if applicable."]]
[[/GREPCENT_TABLE]]

NPAs at December 31, 2024 were $45.6 million, up $11.4 million from December 31, 2023.  The increase from the prior year was driven by changes in the classification of three client relationships. The ratio of NPAs to total assets was 0.50% at December 31, 2024, up from 0.40% at December 31, 2023.

The majority of the Company’s NPAs consists of nonaccrual loans/leases. For nonaccrual loans/leases, management thoroughly reviewed these loans/leases and provided specific allowances as appropriate.

OREO and other repossessed assets are carried at the lower of carrying amount or fair value less costs to sell.

The policy of the Company is to place a loan/lease on nonaccrual status if: (a) payment in full of interest or principal is not expected; or (b) principal or interest has been in default for a period of 90 days or more unless the obligation is both in the process of collection and well secured.  A loan/lease is well secured if it is secured by collateral with sufficient market value to repay principal and all accrued interest. A debt is in the process of collection if collection of the debt is proceeding in due course either through legal action, including judgment enforcement procedures, or in appropriate circumstances, through collection efforts not involving legal action which are reasonably expected to result in repayment of the debt or in its restoration to current status.

The Company’s lending/leasing practices remain unchanged and asset quality remains a top priority for management.

60

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DEPOSITS

Deposits grew $547.2 million, or 8.4%, during 2024, primarily due to an increase in interest-bearing deposits and time deposits from both core client and brokered sources.  

The table below presents the composition of the Company’s deposit portfolio.

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","As of December 31,"],["\u200b","\u200b","2024","","2023"],["\u200b","\u200b","Amount","","%","","Amount","","%"],["\u200b","\u200b","(dollars in thousands)"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Noninterest bearing demand deposits","\u200b","$","921,160","","13","%","$","1,038,689","","16","%"],["Interest bearing demand deposits","\u200b","","4,828,216","","68","%","","4,338,390","","67","%"],["Time deposits","\u200b","","953,496","","14","%","","851,950","","13","%"],["Brokered deposits","\u200b","","358,315","","5","%","","284,976","","4","%"],["\u200b","\u200b","$","7,061,187","","100","%","$","6,514,005","","100","%"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"]]
[[/GREPCENT_TABLE]]

The Company actively participates in the ICS/CDARS program, which is a trusted resource that provides FDIC insurance coverage for clients of the Company that maintain larger deposit balances.  Deposits in the ICS/CDARS program (which are included in interest bearing demand deposits and time deposits in the preceding table) totaled $2.4 billion, or 33.8% of all deposits, as of December 31, 2024.  

​

The Company’s correspondent bank deposit portfolio and funds managed consists of the following:

​

[[GREPCENT_TABLE]]
[["","\u25cf","Noninterest-bearing deposits which represent the correspondent banks\u2019 operating cash used for processing transactions with the FRB;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Money market deposits which represent some excess liquidity; and"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","EBA balances of the correspondent banks held at the FRB."]]
[[/GREPCENT_TABLE]]

The Company had total uninsured deposits of $2.0 billion and $1.8 billion as of December 31, 2024 and 2023 respectively. The table below represents the time deposits in FDIC uninsured accounts by maturity:

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","As of December 31,"],["\u200b","\u200b","2024","\u200b","2023"],["\u200b","","(dollars in thousands)"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["U.S. Time Deposits in Amounts in Excess of FDIC insurance limit:","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["One to three months","","$","191,427","","$","213,425"],["Three to six months","","\u200b","172,379","","\u200b","160,812"],["Six to twelve months","","\u200b","164,510","","\u200b","130,490"],["Over twelve months","","\u200b","13,750","","\u200b","9,960"],["\u200b","\u200b","$","542,066","\u200b","$","514,687"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"]]
[[/GREPCENT_TABLE]]

There were no other time deposits otherwise uninsured. The Company had no deposits by foreign depositors in domestic offices as of December 31, 2024 and 2023.

Management will continue to focus on growing its core deposit portfolio, including its correspondent banking business at QCBT, as well as shifting the mix from brokered and other higher cost deposits to lower cost core deposits. With the significant success achieved by QCBT in growing its correspondent banking business, QCBT has developed procedures to proactively monitor this industry concentration of deposits and loans. Other deposit-related industry concentrations and large accounts are monitored by the internal asset liability management committee. See discussion

61

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regarding policy limits on bank stock loans in the Lending/Leasing section under Item 1. – Business in Part I of this Annual Report on Form 10-K.

SHORT-TERM BORROWINGS

The subsidiary banks purchase federal funds for short-term funding needs from the FRB or from their correspondent banks. The table below presents the composition of the Company’s short-term borrowings.

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","\u200b","As of December 31,"],["\u200b","","","2024","","2023"],["\u200b","\u200b","\u200b","(dollars in thousands)"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Federal funds purchased","\u200b","\u200b","$","1,800","\u200b","$","1,500","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"]]
[[/GREPCENT_TABLE]]

The Company’s federal funds purchased fluctuates based on the short-term funding needs of the Company’s subsidiary banks. See Note 9 to the Consolidated Financial Statements for additional information on the Company’s short-term borrowings.

FHLB ADVANCES AND OTHER BORROWINGS

As a result of their membership in the FHLB of Des Moines, the subsidiary banks have the ability to borrow funds for short-term or long-term purposes under a variety of programs. The subsidiary banks can utilize FHLB advances for loan matching as a hedge against the possibility of changing interest rates or when these advances provide a less costly or more readily available source of funds than customer deposits.

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","As of December 31,"],["\u200b","","2024","\u200b","2023"],["\u200b","\u200b","(dollars in thousands)"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["FHLB Advances","\u200b","$","285,383","\u200b","\u200b","$","435,000","\u200b"],["Weighted Average Interest Rate at Year-End","\u200b","","4.55","%","\u200b","","5.39","%"]]
[[/GREPCENT_TABLE]]

​

It is management’s intention to reduce its reliance on wholesale funding, including FHLB advances and brokered deposits.  Replacement of this funding with core deposits helps to reduce interest expense as wholesale funding tends to be higher cost.  However, the Company may choose to utilize advances and/or brokered deposits to supplement funding needs, as this is a way for the Company to effectively and efficiently manage interest rate risk.

​

The Company renewed its revolving credit note in the second quarter of 2024.  At renewal, the available line amount remained unchanged at $50.0 million for which there was no outstanding balance as of December 31, 2024. Interest on the revolving line of credit is calculated at the greater of: (a) the effective Prime Rate less 0.50% or (b) 3.00% per annum.  The collateral on the revolving line of credit is 100% of the outstanding stock of the Company’s bank subsidiaries.

See Notes 10 and 11 to the Consolidated Financial Statements for additional information regarding FHLB advances and other borrowings.

SUBORDINATED NOTES

The Company had subordinated notes totaling $233.5 million and $233.1 million as of December 31, 2024 and 2023, respectively.

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See Note 12 to the Consolidated Financial Statements for additional information regarding the subordinated notes.

JUNIOR SUBORDINATED DEBENTURES

The Company had junior subordinated debentures totaling $48.9 million and $48.7 million as of December 31, 2024 and 2023, respectively.  

STOCKHOLDERS’ EQUITY

The table below presents the composition of the Company’s stockholders’ equity.

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","As of December 31,"],["\u200b","\u200b","2024","","2023"],["\u200b","\u200b","(dollars in thousands)"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Common stock","\u200b","$","16,882","\u200b","$","16,749","\u200b"],["Additional paid in capital","\u200b","","374,975","\u200b","","370,814","\u200b"],["Retained earnings","\u200b","","665,171","\u200b","","554,992","\u200b"],["AOCI","\u200b","","(59,641)","\u200b","","(55,959)","\u200b"],["Total stockholders' equity","\u200b","$","997,387","\u200b","$","886,596","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["TCE / TA ratio (non-GAAP)*","\u200b","","9.55","%","","8.75","%"]]
[[/GREPCENT_TABLE]]

​

*   TCE/TA ratio is defined as total common stockholders’ equity excluding goodwill and other intangibles divided by total assets.  This ratio is a non-GAAP measure. Refer to the “GAAP to Non-GAAP Reconciliations” section of this Annual Report on Form 10-K for more information.

As of December 31, 2024 and 2023, no preferred stock was outstanding.

On May 19, 2022, the board of directors of the Company approved a share repurchase program under which the Company is authorized to repurchase, from time to time as the Company deems appropriate, up to an additional 1,500,000 shares of its outstanding common stock, or approximately 10% of the outstanding shares as of December 31, 2021. There were no shares and 175,000 shares of common stock purchased by the Company during the year ended December 31, 2024 and 2023, respectively.  There were 760,915 shares of common stock remaining for repurchase under the stock repurchase program as of December 31, 2024.  The stock repurchase program does not obligate the Company to repurchase any shares of its common stock, and other than repurchases that have been completed to date, there is no assurance that the Company will do so.  Under the stock repurchase program, the Company may repurchase shares of common m stock from time to time in open market or privately negotiated transactions.  The number, timing and price of shares repurchased will depend on a number of factors, including business and market conditions, regulatory requirements, availability of funds, and other factors, including opportunities to deploy the Company’s capital.  The Company may, in its discretion, begin, suspend or terminate repurchases at any time prior to the program’s expiration, without any prior notice.

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The following table presents the rollforward of stockholders’ equity for the years ended December 31, 2024 and 2023, respectively.

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","For the Year Ended December 31,"],["\u200b","","2024","","2023"],["\u200b","\u200b","(dollars in thousands)"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Beginning balance","\u200b","$","886,596","\u200b","$","772,724"],["Net income","\u200b","","113,850","\u200b","","113,558"],["Other comprehensive income (loss), net of tax","\u200b","","(3,312)","\u200b","","8,939"],["Repurchase and cancellation of shares of common stock as a result of a share repurchase program","\u200b","\u200b","\u2014","\u200b","\u200b","(8,686)"],["Common cash dividends declared","\u200b","","(4,041)","\u200b","","(4,020)"],["Other *","\u200b","","4,294","\u200b","","4,081"],["Ending balance","\u200b","$","997,387","\u200b","$","886,596"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"]]
[[/GREPCENT_TABLE]]

*   Includes primarily stock-based compensation.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity measures the ability of the Company to meet maturing obligations and its existing commitments, to withstand fluctuations in deposit levels, to fund its operations, and to provide for customers’ credit needs. The Company monitors liquidity risk through contingency planning stress testing on a regular basis. The Company seeks to avoid over concentration of funding sources and to establish and maintain contingent funding facilities that can be drawn upon if normal funding sources become unavailable. One source of liquidity is cash and short-term assets, such as interest-bearing deposits in other banks, cash and due from banks and federal funds sold, which averaged $210.7 million and $180.4 million during 2024 and 2023, respectively. The Company’s on balance sheet liquidity position can fluctuate based on short-term activity in deposits and loans.

The subsidiary banks have a variety of sources of short-term liquidity available to them, including federal funds purchased from correspondent banks, FHLB advances, wholesale structured repurchase agreements, brokered deposits, lines of credit, borrowing at the Federal Reserve Discount Window, sales of securities AFS, and loan/lease participations or sales. The Company also generates liquidity from the regular principal payments and prepayments made on its loan/lease portfolio, and on the regular monthly payments on its securities portfolio.

At December 31, 2024, the subsidiary banks had 27 lines of credit totaling $1.2 billion, of which $746.7 million was secured and $450.8 million was unsecured. At December 31, 2024, $1.2 billion was available under these lines of credit.

At December 31, 2023, the subsidiary banks had 25 lines of credit totaling $699.3 million, of which $248.5 million was secured and $450.8 million was unsecured. At December 31, 2023, $699.3 million was available under these lines of credit.

The Company has emphasized growing the number and amount of lines of credit in an effort to strengthen this contingent source of liquidity.  Additionally, the Company maintains a $50.0 million secured revolving credit note with a variable interest rate and a maturity of June 30, 2025. At December 31, 2024, the full $50.0 million was available. See Note 11 to the Consolidated Financial Statements for additional information.

As of December 31, 2024, the Company had $688.1 million in correspondent banking deposits spread over 189 relationships.  While the Company believes that these funds are relatively stable, there is the potential for large fluctuations that can impact liquidity.  Seasonality and the liquidity needs of these correspondent banks can impact balances.  Management closely monitors these fluctuations and runs stress scenarios to measure the impact on liquidity and interest rate risk with various levels of correspondent deposit run-off.

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Investing activities used cash of $845.2 million during 2024 compared to $749.3 million during 2023. Proceeds from calls, maturities, pay downs and sales of securities were $78.4 million for 2024 compared to $141.9 million for 2023. Purchases of securities used cash of $213.5 million for 2024 compared to $187.6 million for 2023. The net increase in loans/leases used cash of $642.9 million for 2024 compared to $676.7 million for 2023.

Financing activities provided cash of $395.8 million for 2024 compared to $410.3 million for 2023. Net increases in deposits totaled $547.2 million for 2024 as compared to $529.8 million for 2023. Net short-term borrowings increased $300 thousand for 2024 compared to a decrease of $128.1 million for 2023. Net increases in long-term FHLB advances totaled $10.4 million for 2024 as compared to $135.0 million for 2023.  Short-term FHLB advances decreased $160.0 million in 2024 as compared to $115.0 million in 2023.  There were no repurchases or cancellations of shares in 2024. Repurchase and cancellation of shares totaled $8.7 million in 2023.

Total cash provided by operating activities was $444.5 million for 2024 compared to $376.3 million for 2023.

Throughout its history, the Company has secured additional capital through various resources, including common and preferred stock and the issuance of trust preferred securities and subordinated notes.

​

The Company has two LIHTC securitizations that closed in 2024 and two LIHTC securitizations that closed in 2023.  LIHTC securitizations may continue to be an ongoing tool in managing liquidity and capital.  See Note 4 to the Consolidated Financial Statements for details on these securitization transactions as well as the related variable interest entities.

​

As of December 31, 2024 and 2023, the subsidiary banks remained “well-capitalized” in accordance with regulatory capital requirements administered by the federal banking authorities. See Note 17 to the Consolidated Financial Statements for detail of the capital amounts and ratios for the Company and its subsidiary banks.

COMMITMENTS, CONTINGENCIES, CONTRACTUAL OBLIGATIONS AND OFF-BALANCE SHEET ARRANGEMENTS

In the normal course of business, the subsidiary banks make various commitments and incur certain contingent liabilities that are not presented in the accompanying Consolidated Financial Statements. The commitments and contingent liabilities include various guarantees, commitments to extend credit, and standby letters of credit.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The subsidiary banks evaluate each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the banks upon extension of credit, is based upon management’s credit evaluation of the counterparty. Collateral held varies but may include accounts receivable, marketable securities, inventory, property, plant and equipment, and income-producing commercial properties.

Standby letters of credit are conditional commitments issued by the subsidiary banks to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements and, generally, have terms of one year or less. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The banks hold collateral, as described above, supporting those commitments if deemed necessary. In the event the customer does not perform in accordance with the terms of the agreement with the third party, the banks would be required to fund the commitments. The maximum potential amount of future payments the banks could be required to make is represented by the contractual amount. If the commitment is funded, the banks would be entitled to seek recovery from the customer. At

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December 31, 2024 and 2023, no amounts had been recorded as liabilities for the banks’ potential obligations under these guarantees.

As of December 31, 2024 and 2023, commitments to extend credit aggregated $1.9 billion and $2.0 billion, respectively. As of December 31, 2024 and 2023, standby letters of credit aggregated $28.8 million and $23.7 million, respectively. Management does not expect that all of these commitments will be funded.

Additional information regarding commitments, contingencies, and off-balance sheet arrangements is described in Note 19 to the Consolidated Financial Statements.

The Company has various financial obligations, including contractual obligations and commitments, which may require future cash payments. The significant fixed and determinable contractual obligations to third parties are deposits without a stated maturity, certificates of deposit, short-term borrowings, subordinated notes, and junior subordinated debentures and totaled $7.9 billion as of December 31, 2024.

The Company entered into a construction contract in 2024 for the construction of a new CSB facility in Ankeny, Iowa.  The Company will pay the contractor a contract price of approximately $41.3 million, subject to additions and deductions as provided in the contract documents.  As of December 31, 2024, the Company has paid $8.7 million of the contract price, resulting in a remaining future commitment of $32.6 million.  Construction is anticipated to be completed in 2026.

The Company entered into a construction contract in 2023 for the construction of a new CRBT facility in Cedar Rapids, Iowa.  The Company will pay the contractor a contract price of approximately $17.0 million, subject to additions and deductions as provided in the contract documents.  As of December 31, 2024, the Company has paid $15.8 million of the contract price, resulting in a future commitment of $1.2 million.  Construction is anticipated to be completed in March 2025.

The Company’s operating contract obligations represent short and long-term contractual payments for data processing equipment and services, software, and other equipment and professional services and totaled $28.9 million as of December 31, 2024.

LOAN SECURITIZATIONS

The Company completed two LIHTC loan securitizations in 2024, through arrangements with Freddie Mac. The securitizations were M-series securitizations for the sale of nontaxable LIHTC loans with a carrying value of $230.7 million and Q-series securitizations for the sale of taxable LIHTC loans with a carrying value of $155.8 million and resulting in a $955 thousand net gain on sale which included the impact of the fair value of retained beneficial interests, guarantee liabilities and transaction costs. The Company retained beneficial interests from these securitizations in the amount of $60.3 million which are designated as trading securities on the consolidated balance sheet and carried at fair value.  In conjunction with the securitizations, variable interest entities were formed. See Note 4 to the Consolidated Financial Statements for details on these securitization transactions as well as the related variable interest entities.

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IMPACT OF INFLATION AND CHANGING PRICES

The Consolidated Financial Statements of the Company and the accompanying notes have been prepared in accordance with U.S. GAAP, which requires the measurement of financial position and operating results in terms of historical dollar amounts without considering the changes in the relative purchasing power of money over time due to inflation. The impact of inflation is reflected in the increased cost of the Company’s operations. Unlike industrial companies, nearly all of the assets and liabilities of the Company are monetary in nature. As a result, interest rates have a greater impact on the Company’s performance than do the effects of general levels of inflation. Interest rates do not necessarily move in the same direction or to the same extent as the price of goods and services.

FORWARD-LOOKING STATEMENTS

This document (including information incorporated by reference) contains, and future oral and written statements of the Company and its management may contain, forward-looking statements, within the meaning of such term in the Private Securities Litigation Reform Act of 1995, with respect to the financial condition, results of operations, plans, objectives, future performance and business of the Company. Forward-looking statements, which may be based upon beliefs, expectations and assumptions of the Company’s management and on information currently available to management, are generally identifiable by the use of words such as “believe,” “expect,” “anticipate,” “bode,” “predict,” “suggest,”  “project,” “appear,” “plan,” “intend,” “estimate,” “annualize,” “may,” “will,” “would,” “could,” “should,” “likely,” “might,” “potential,” “continue,” “annualized,” “target,” “outlook,” as well as the negative forms of those words, or other similar expressions. Additionally, all statements in this document, including forward-looking statements, speak only as of the date they are made, and the Company undertakes no obligation to update any statement in light of new information or future events.

The Company’s ability to predict results or the actual effect of future plans or strategies is inherently uncertain. The factors that could have a material adverse effect on the operations and future prospects of the Company and its subsidiaries are detailed in the “Risk Factors” section included under Item 1A. of Part I of this Annual Report on Form 10-K. In addition to the risk factors described in that section, there are other factors that could have a material adverse effect on the operations and future prospects of the Company and its subsidiaries. These additional factors include, but are not limited to, the following:

[[GREPCENT_TABLE]]
[["","\u25cf","The strength of the local, state, national and international economies and financial markets (including effects of inflationary pressures and supply chain constraints)."]]
[[/GREPCENT_TABLE]]

​

[[GREPCENT_TABLE]]
[["","\u25cf","Effects on the U.S. economy resulting from the implementation of policies proposed by the new presidential administration, including tariffs, mass deportations and tax regulations."]]
[[/GREPCENT_TABLE]]

​

[[GREPCENT_TABLE]]
[["","\u25cf","The economic impact of any future terrorist threats and attacks, widespread disease or pandemics, acts of war or threats thereof (including the Russian invasion of Ukraine and ongoing conflicts in the Middle East), or other adverse events that could cause economic deterioration or instability in credit markets, and the response of the local, state and national governments to any such adverse external events."]]
[[/GREPCENT_TABLE]]

​

[[GREPCENT_TABLE]]
[["","\u25cf","New or revised accounting policies and practices, as may be adopted by state and federal banking agencies, the FASB, the SEC or the PCAOB."]]
[[/GREPCENT_TABLE]]

​

[[GREPCENT_TABLE]]
[["","\u25cf","Changes in local, state and federal laws, regulations and governmental policies concerning the Company\u2019s general business and any changes in response to the bank failures in 2023."]]
[[/GREPCENT_TABLE]]

​

[[GREPCENT_TABLE]]
[["","\u25cf","The imposition of tariffs or other governmental policies impacting the value of products produced by the Company\u2019s commercial borrowers."]]
[[/GREPCENT_TABLE]]

​

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[[GREPCENT_TABLE]]
[["","\u25cf","Increased competition in the financial services sector, including from non-bank competitors such as credit unions and fintech companies, and the inability to attract new customers."]]
[[/GREPCENT_TABLE]]

​

[[GREPCENT_TABLE]]
[["","\u25cf","Changes in technology and the ability to develop and maintain secure and reliable electronic systems."]]
[[/GREPCENT_TABLE]]

​

[[GREPCENT_TABLE]]
[["","\u25cf","Unexpected results of acquisitions which may include failure to realize the anticipated benefits of the acquisitions and the possibility that transaction costs may be greater than anticipated."]]
[[/GREPCENT_TABLE]]

​

[[GREPCENT_TABLE]]
[["","\u25cf","The loss of key executives and employees, talent shortages and employee turnover."]]
[[/GREPCENT_TABLE]]

​

[[GREPCENT_TABLE]]
[["","\u25cf","Changes in consumer spending."]]
[[/GREPCENT_TABLE]]

​

[[GREPCENT_TABLE]]
[["","\u25cf","Unexpected outcomes and costs of existing or new litigation or other legal proceedings and regulatory actions involving the Company."]]
[[/GREPCENT_TABLE]]

​

[[GREPCENT_TABLE]]
[["","\u25cf","The economic impact on the Company and its customers of climate change, natural disasters and exceptional weather occurrences such as tornadoes, floods and blizzards."]]
[[/GREPCENT_TABLE]]

​

[[GREPCENT_TABLE]]
[["","\u25cf","Fluctuations in the value of securities held in our securities portfolio, including as a result of changes in interest rates."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Credit risk and risks from concentrations (by type of borrower, geographic area, collateral and industry) within our loan portfolio and large loans to certain borrowers (including CRE loans)."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","The overall health of the local and national real estate market."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","The ability to maintain an adequate level of allowance for credit losses on loans."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","The concentration of large deposits from certain clients who have balances above current FDIC insurance limits and who may withdraw deposits to diversify their exposure."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","The ability to successfully manage liquidity risk, which may increase dependence on non-core funding sources such as brokered deposits, and may negatively impact the Company\u2019s cost of funds."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","The level of non-performing assets on our balance sheets."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Interruptions involving our information technology and communications systems or third-party servicers."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","The occurrence of fraudulent activity, breaches or failures of our third-party vendors\u2019 information security controls or cybersecurity-related incidents, including as a result of sophisticated attacks using artificial intelligence and similar tools or as a result of insider fraud."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Changes in the interest rates and repayment rates of the Company\u2019s assets."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","The effectiveness of our risk management framework."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","The ability of the Company to manage the risks associated with the foregoing as well as anticipated."]]
[[/GREPCENT_TABLE]]

​

These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.

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