What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-02-28 compared with 2022-02-28 · 189 added, 225 removed, 1078 unchanged (28% of the section changed)

16 unchanged sentences

Other intangible assets, net 4,126 2,564

Accounts and drafts receivable from customers 95,779 4,992

Other assets 69,301 43,460

16 unchanged sentences

Retained earnings 131,682 112,220

Common shares in treasury, at cost ( 1,771,477 and 1,113,103 shares at December 31, 2021 and 2020, respectively)

Common shares in treasury, at cost ( 1,836,116 shares at December 31, 2022 and 1,771,477 shares at December 31, 2021, respectively)

( 81,211 ) ( 78,904 )

Accumulated other comprehensive income (loss) 453 ( 15 )

Accumulated other comprehensive (loss) income ( 59,321 ) 453

Total shareholders’ equity 206,325 245,798

7 unchanged sentences

Fee Revenue and Other Income:

Information services payment and processing revenue $ 106,455 $ 97,204 $ 107,953

Bank service fees 2,239 1,704 1,386

Gains on sales of securities 51 1,075 19

Processing fees $ 76,470 $ 74,589 $ 74,638

Financial fees 43,757 32,733 23,107

Other 4,755 2,369 2,696

12 unchanged sentences

Net interest income 58,844 44,326 45,325

(Release of) provision for credit losses ( 130 ) 810 250

Net interest income after (release of) provision for credit losses 44,456 44,515 47,166

Provision for (release of) credit losses 1,350 ( 130 ) 810

Net interest income after provision for (release of) credit losses 57,494 44,456 44,515

Total net revenue 182,476 154,147 144,956

19 unchanged sentences

Net income $ 34,904 $ 28,604 $ 25,176

Other comprehensive income (loss):

Other comprehensive (loss) income:

Net unrealized (loss) gain on securities available-for-sale ( 79,746 ) ( 10,447 ) 6,689

5 unchanged sentences

Foreign currency translation adjustments ( 143 ) ( 191 ) 66

Other comprehensive income 468 13,905 4,952

Total comprehensive income $ 29,072 $ 39,081 $ 35,356

Other comprehensive (loss) income ( 59,774 ) 468 13,905

Total comprehensive (loss) income $ ( 24,870 ) $ 29,072 $ 39,081

See accompanying notes to consolidated financial statements.

12 unchanged sentences

Stock-based compensation expense 6,732 2,859 2,267

(Release of) provision for credit losses ( 130 ) 810 250

Deferred income tax (benefit) expense ( 698 ) ( 874 ) 1,247

Increase (decrease) in current income tax liability 206 1,237 ( 1,838 )

Provision for (release of) credit losses 1,350 ( 130 ) 810

Deferred income tax benefit ( 1,163 ) ( 698 ) ( 874 )

Increase in current income tax liability 724 206 1,237

(Decrease) increase in pension liability ( 2,484 ) ( 1,811 ) 4,423

10 unchanged sentences

Purchases of premises and equipment, net ( 5,866 ) ( 4,369 ) ( 2,001 )

Asset acquisition of Gateway Giving, LLC — — ( 2,833 )

Asset acquisition of TouchPoint ( 4,814 ) — —

Net cash used in investing activities ( 306,390 ) ( 528,517 ) ( 43,900 )

1 unchanged sentence

Net increase in noninterest-bearing demand deposits 60,115 89,138 142,413

Net increase (decrease) in interest-bearing demand and savings deposits 90,310 166,289 ( 1,133 )

Net (decrease) increase in interest-bearing demand and savings deposits ( 17,838 ) 90,310 166,289

Net decrease in time deposits ( 6,563 ) ( 8,801 ) ( 14,982 )

Net increase (decrease) in accounts and drafts payable 215,016 210,495 ( 22,400 )

Net (decrease) increase in short-term borrowings — ( 18,000 ) 18,000

Net (increase) decrease in accounts and drafts receivable from customers ( 90,787 ) 6 59,404

Net increase in accounts and drafts payable 17,204 215,010 151,091

Net decrease in short-term borrowings — — ( 18,000 )

Cash dividends paid ( 15,442 ) ( 15,446 ) ( 15,599 )

1 unchanged sentence

Other financing activities, net ( 594 ) ( 850 ) ( 1,098 )

Net cash provided by financing activities 338,370 462,693 6,652

Net cash (used in) provided by financing activities ( 59,204 ) 338,370 462,693

Net (decrease) increase in cash and cash equivalents ( 313,986 ) ( 155,600 ) 466,574

17 unchanged sentences

$ 7,753 $ 205,397 $ 90,341 $ ( 45,381 ) $ ( 13,920 ) $ 244,190

Cumulative effect of accounting change (ASU 2016-13), net of tax $ ( 856 ) $ ( 856 )

Balance, January 1, 2020 $ 7,753 $ 205,397 $ 89,485 $ ( 45,381 ) $ ( 13,920 ) $ 243,334

Net income 25,176 25,176

7 unchanged sentences

( 6,825 ) ( 6,825 )

Other comprehensive loss 4,952 4,952

Other comprehensive income 13,905 13,905

Balance, December 31, 2020

$ 7,753 $ 204,875 $ 99,062 $ ( 50,515 ) $ ( 15 ) $ 261,160

Cumulative effect of accounting change (ASU 2016-13), net of tax ( 856 ) ( 856 )

Balance, January 1, 2020 $ 7,753 $ 205,397 $ 89,485 $ ( 45,381 ) $ ( 13,920 ) $ 243,334

Net income 28,604 28,604

19 unchanged sentences

( 5,299 ) ( 5,299 )

Other comprehensive income 468 468

Other comprehensive loss ( 59,774 ) ( 59,774 )

Balance, December 31, 2022

16 unchanged sentences

Unrealized gains and losses, net of the related tax effect, are excluded from earnings and reported in accumulated other comprehensive income, a component of shareholders’ equity.

Securities are periodically evaluated for credit losses in accordance with the guidance provided in FASB ASC Topic 326, Financial Instruments – Credit Losses .

Securities are periodically evaluated for credit losses in accordance with the guidance provided in FASB ASC Topic 326, Financial Instruments – Credit Losses ("ASC 326").

For available for sale investment securities in an unrealized loss position, the entire loss in fair value is required to be recognized in current earnings if the Company intends to sell the securities or believes it likely that it will be required to sell the security before the anticipated recovery.

6 unchanged sentences

Losses would be charged against the allowance for credit losses on securities when management believes the uncollectibility of an available-for-sale security is confirmed or when either of the conditions regarding intent or requirement to sell is met.

Prior to the adoption of Accounting Standards Update ("ASU") 2016-13, Financial Instruments – Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments ("ASU 2016-13") as of January 1, 2020, the Company evaluated a decline in the fair value of any available-for-sale security below cost to determine whether the decline was deemed other than temporary and, if so, would result in a charge to earnings and the establishment of a new cost basis for the security.

To determine whether impairment was other than temporary, the Company considered guidance provided in the FASB ASC Topic 320, Investments – Debt and Equity Securities .

When determining whether a debt security was other-than-temporarily impaired, the Company assessed whether it had the intent to sell the security and whether it was more likely than not that the Company would be required to sell prior to recovery of the amortized cost basis.

Evidence considered in this assessment included the reasons for impairment, the severity and duration of the impairment, changes in value subsequent to year-end and forecasted performance of the investee.

Premiums and discounts are amortized or accreted to interest income over the expected lives of the respective securities using the level-yield method.

9 unchanged sentences

Management utilizes a systematic, documented approach in determining the appropriate level of the ACL.

Management’s approach provides for estimated current expected credit losses on loans in accordance with ASU 2016-13.

Management’s approach provides for estimated current expected credit losses on loans in accordance with ASC 326.

These estimates are based upon a number of factors, such as payment history, financial condition of the borrower, expected future cash flows and collateral exposure.

4 unchanged sentences

Historical credit loss experience, of both the Company and similar peer banks, provides the basis for the estimation of expected credit losses.

Adjustments to historical loss information are made for lending management experience, concentration risk, asset quality trends, borrower’s ability to pay, collateral, and other environmental factors.

Adjustments to historical loss information are made for concentration risk, asset quality trends, borrower’s ability to pay, collateral, and other environmental factors.

It is difficult to estimate how potential changes in any one economic factor or input might affect the overall ACL because a wide variety of factors and inputs are considered in estimating the allowance and changes in those factors and inputs considered may not occur at the same rate and may not be consistent across all loan types.

15 unchanged sentences

Construction and Land Development – The Company originates loans to finance construction projects including faith-based and commercial projects.

Construction loans are generally collateralized by first liens on the real estate and have

floating interest rates.

Construction loans are generally collateralized by first liens on the real estate and have floating interest rates.

The primary risks of construction loans are construction completion and timing risk.

1 unchanged sentence

Additionally, the fair value of the underlying collateral may fluctuate as market conditions change.

The ACL is calculated as the difference between the amortized cost basis and the projections from the weighted-average remaining maturity ("WARM") model that the Company developed.

The ACL is calculated as the difference between the amortized cost basis of the loan portfolio and the projections from the weighted-average remaining maturity ("WARM") model that the Company developed.

The WARM model utilizes an attrition analysis, including events such as payoffs, matured loans, and renewals in the borrowers’ control, to anticipate the length of time it would take for each portfolio segment to runoff.

2 unchanged sentences

However, for the faith-based CRE ACL, beyond the reasonable and supportable forecast period, loss rates are reverted immediately to the Company’s long-run historical averages, as this represents a unique loan segment to the peer portfolios.

The economic forecast is based on management’s assessment of the length and pattern of the current economic cycle.

The economic forecast is based on management’s assessment of the length and pattern of the current economic

The resulting annual charge off rate determined for each year in the WARM model is applied to the loan balances estimated in the attrition analysis.

11 unchanged sentences

When it is determined that specific loans, or portions thereof, are uncollectible, these amounts are charged off against the ACL.

Prior to the adoption of ASU 2016-13 as of January 1, 2020, the Company determined reserves for losses on the loan portfolio in the allowance for loan losses ("ALLL").

The ALLL was increased by provisions charged to expense and was available to absorb charge-offs, net of recoveries.

Management utilized a systematic, documented approach in determining the appropriate level of the ALLL.

Management’s approach provided for estimated credit losses on individually evaluated loans in accordance with FASB ASC 310, Allowance for Credit Losses (“ASC 310”).

These estimates were based upon a number of factors, such as payment history, financial condition of the borrower, expected future cash flows and discounted collateral exposure.

Unfunded loan commitments

6 unchanged sentences

Management evaluates all investments in an unrealized loss position on a quarterly basis, and more frequently when economic or market conditions warrant such evaluation.

If the Company has the intent to sell the security or it is more likely than not that the Company will be required to sell the security, the security is written down to fair value and the

entire loss is recorded in earnings.

If the Company has the intent to sell the security or it is more likely than not that the Company will be required to sell the security, the security is written down to fair value and the entire loss is recorded in earnings.

If either of the above criteria is not met, the Company will evaluate whether the decline in fair value is the result of credit losses or other factors.

31 unchanged sentences

Comprehensive Income Comprehensive income consists of net income, changes in net unrealized gains (losses) on available-for-sale securities and pension liability adjustments and is presented in the accompanying consolidated statements of shareholders' equity and consolidated statements of comprehensive income.

Information Services Revenue A majority of the Company’s revenues are attributable to fees for providing services related to processing and payment of invoices.

These services include invoice processing, transportation invoice rating, payment

processing and services, auditing, and the generation of accounting and transportation information.

Processing Fees A majority of the Company’s fee revenue is attributable to providing services related to processing and payment of invoices.

These services include invoice processing, transportation invoice rating, payment processing and services, auditing, and the generation of accounting and transportation information.

The Company also processes, pays and generates management information from electric, gas, telecommunications, environmental, and other invoices.

2 unchanged sentences

Revenues are recognized in the period services are rendered and earned under the service agreements, as long as collection is reasonably assured.

Financial fees The Company earns fees on a transaction level basis for invoice payment services when making customer payments.

Fees are recognized at the point in time when the payment transactions are made, which is when the performance obligation is satisfied.

Income Taxes Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.

17 unchanged sentences

Pension Plans The amounts recognized in the consolidated financial statements related to pension are determined from actuarial valuations.

Inherent in these valuations are assumptions including expected return on plan assets, discount rates at which the liabilities could be settled at December 31, 2021, rate of increase in future compensation levels and mortality rates.

Inherent in these valuations are assumptions including expected return on plan assets, discount rates at which the liabilities could be settled at December 31, 2022, rate of increase in mortality rates.

These assumptions are updated annually and are disclosed in Note 10.

12 unchanged sentences

Impact of New and Not Yet Adopted Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, .

The standard was effective for fiscal periods beginning after December 15, 2019.

The CARES Act was signed into law on March 27, 2020 and included provisions that temporarily delayed the required implementation date of ASU 2016-13 to the earlier of the end of the national pandemic or December 31, 2020.

The Consolidated Appropriations Act was signed into law on December 27, 2020 and extended the deferral of required implementation of ASU 2016-13 to the earlier of the first day of a company’s fiscal year that begins after the date the COVID-19 national emergency comes to an end or January 1, 2022.

The Company elected to defer the adoption of ASU 2016-13 until December 31, 2020 with an effective date of January 1, 2020.

The ASU required measurement and recognition of expected credit losses for financial instruments held at amortized cost, which include allowances for credit losses expected over the life of the portfolio, rather than incurred losses, which include allowances for current known and inherent losses within the portfolio.

Under this standard, the Company is required to hold an allowance equal to the expected life-of-loan losses on the loan portfolio.

It also applies to off-balance sheet credit exposures such as loan commitments, standby letters of credit and other similar instruments.

In addition, ASU 2016-13 made changes to the accounting for available-for-sale debt securities.

The Company adopted ASU 2016-13 using a modified retrospective approach.

Results for annual reporting periods beginning after January 1, 2020 are presented under ASU 2016-13 while prior period amounts continue to be reported in accordance with previously applicable GAAP.

Upon adoption, the Company recognized increases of $ 723,000 in the allowance for credit losses and $ 402,000 in the reserve for unfunded commitments, with a corresponding reduction to retained earnings, net of tax, of $ 856,000 .

No allowance for credit loss was required upon adoption for the investment securities portfolio.

Consistent with the provisions of the CARES Act, results for quarterly reporting periods beginning after December 31, 2020 in the Company’s Form 10-Q are presented under ASU 2016-13 while prior quarterly period amounts continue to be reported in accordance with previously applicable GAAP.

The following table illustrates the impact of the adoption of ASU 2016-13:

(In thousands) December 31, 2019 Impact of ASU 2016-13 Adoption As Reported Under ASU 2016-13

Allowance for loan/credit losses on loans $ 10,556 $ 723 $ 11,279

Deferred tax asset 2,298 269 2,567

Reserve for unfunded commitments — 402 402

Shareholders’ equity:

Retained earnings 90,341 ( 856 ) 89,485

Risks and Uncertainties

On March 11, 2020, the WHO declared the outbreak of COVID-19 as a global pandemic.

The declaration of a global pandemic meant that almost all public commerce and related business activities was, to varying degrees, curtailed with the goal of decreasing the rate of new infections.

In late fiscal 2020, vaccines for combating COVID-19 were approved by health agencies and have been administered throughout the country.

Although vaccination efforts have been widespread and continuing, and a significant amount of previous business and other restrictions have been lifted, the continued impact of COVID-19, including any increases in the infection rates, new variants, and renewed governmental action to slow the spread of COVID-19, cannot be estimated.

The ongoing impact of COVID-19, including the impact of restrictions imposed to combat its spread, could result in additional and prolonged business closures, supply chain disruptions, work restrictions and activity restrictions.

The Company is closely monitoring developments related to COVID-19, checking regularly for updated information and recommendations from the WHO and the CDC, from national, state, and local governments, and evaluating courses of

action being taken by peers.

At this time, the Company remains subject to heightened business, operational, market, credit and other risks related to the COVID-19 pandemic, including, but not limited to, those discussed below, which may have an adverse effect on business, financial condition and results of operations.

Financial position and results of operations - The global health crisis caused by COVID-19 has and will continue to negatively impact business activity throughout the world.

The COVID-19 outbreak and associated counter-acting measures implemented by governments around the world, as well as increased business uncertainty and shortages in the labor force, have had, and continue to have, an adverse impact on the Company’s financial results and are discussed in more detail below.

Although many restrictions have been relaxed with some success and economic conditions have been improving, many states and localities are still experiencing moderate to high levels of COVID-19 cases, prompting continued restrictions and the need for additional aid and other forms of relief for affected individuals, businesses and other entities.

When and if COVID-19 is demonstrably contained, the Company anticipates a rebound in economic activity;

however, any such rebound is contingent upon the rate and effectiveness of the containment efforts deployed by federal, state, and local governments.

In light of the evolving health, social, economic and business environment, governmental regulations or mandates, and business disruptions that have occurred and could continue to occur, the aggregate impact that COVID-19 could have on the Company’s financial condition and operating results remains uncertain.

To the extent any business disruptions continue for an extended period, additional cost control actions will be considered.

Future asset impairment charges, increases in allowance for credit losses, or restructuring charges could be more likely and will be dependent on the severity and duration of this crisis and its effect on the Company’s borrowers.

For payment processing services, business closures cause a decrease in the number of transactions and dollars processed due to the decline in customers’ business activity.

Other financial impact could occur, though such potential impact is unknown at this time.

Capital and liquidity - While the Company believes that it has sufficient capital to withstand an extended economic recession brought about by COVID-19, its reported and regulatory capital ratios could be adversely impacted by future financial losses.

The Company maintains access to multiple sources of liquidity.

If an extended recession caused large numbers of the Bank’s customers to draw down deposits, the Company might become more reliant on more expensive sources of funding.

Asset valuation - Currently, the Company does not expect COVID-19 to affect its ability to fairly value the assets on its balance sheet;

however, this could change in future periods.

While certain valuation assumptions and judgments will change to account for pandemic-related circumstances such as widening credit spreads, the Company does not anticipate significant changes in methodology used to determine the fair value of assets measured in accordance with GAAP.

An economic slowdown as a result of COVID-19 could cause a decline in the Company’s stock price or the occurrence of what management would deem to be a triggering event that could, under certain circumstances, necessitate a goodwill or intangible asset impairment test and result in an impairment charge being recorded for that period.

In the event that the Company concludes that all or a portion of its goodwill is impaired, a non-cash charge for the amount of such impairment would be recorded to earnings.

Such a charge would have no impact on tangible capital or regulatory capital.

Processes, controls and business continuity - In accordance with its federally mandated Pandemic Plan and Business Continuity Plan, many Cass employees around the globe continue to work and conduct business remotely.

In the past several years, Cass has invested in sophisticated technology initiatives that enable employees to operate remotely with full system(s) access along with unified and transparent voice and electronic communications capabilities.

The Company cannot predict when or how it will fully lift the actions put in place as part of the Business Continuity Plan, including work from home requirements and travel restrictions.

Cass does not believe the work from home protocol has materially adversely impacted internal controls, financial reporting systems, or operations.

In March 2022, the FASB issued 2022-02, Financial Instruments – Credit Losses (Topic 326):

Troubled Debt Restructurings and Vintage Disclosures ("ASU 2022-02").

This ASU eliminates the accounting guidance for troubled debt restructurings by creditors that have adopted the CECL methodology for estimating allowances for credit losses and enhances the disclosure requirements for loan restructurings made with borrowers experiencing financial difficulty.

In addition, the amendments require a public business entity to disclose current period gross charge-offs for financing receivables and net investment in leases by year of origination in the vintage disclosures.

ASU 2022-02 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

The Company does not expect implementation of this ASU to have a material impact on the consolidated financial statements.

Capital Requirements and Regulatory Restrictions

The Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies.

Failure to meet minimum capital requirements can result in certain mandatory, and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s consolidated financial statements.

Under capital adequacy guidelines, the Company and the Bank must meet specific capital guidelines

that involve quantitative measures of assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices.

Failure to meet minimum capital requirements can result in certain mandatory, and possibly additional

discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s consolidated financial statements.

Under capital adequacy guidelines, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices.

The Company’s and the Bank’s capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

10 unchanged sentences

Approval is also required if dividends declared exceed the net profits for that year combined with the retained net profits for the preceding two years.

Under the foregoing dividend restrictions and while maintaining its “well capitalized” status, at December 31, 2021, unappropriated retained earnings of $ 34,976,000 were available at the Bank for the declaration of dividends to the Company without prior approval from regulatory authorities.

Under the foregoing dividend restrictions and while maintaining its “well capitalized” status, at December 31, 2022, unappropriated retained earnings of $ 29.2 million were available at the Bank for the declaration of dividends to the Company without prior approval from regulatory authorities.

In addition to regulatory requirements and considerations, any payment of dividends in the future will depend on the Company’s earnings, financial condition and other factors considered relevant by the Company’s Board of Directors.

53 unchanged sentences

Corporate bonds 96,348 — ( 11,251 ) 85,097

Treasury securities 158,935 — ( 3,652 ) 155,283

Asset backed securities issued or guaranteed by U.S.

7 unchanged sentences

government agencies or sponsored enterprises 170,711 135 ( 2,200 ) 168,646

Corporate bonds 84,538 72 ( 272 ) $ 84,338

Asset backed securities issued or guaranteed by U.S.

government agencies or sponsored enterprises 49,835 — ( 494 ) 49,341

Total $ 664,271 $ 13,138 $ ( 3,956 ) $ 673,453

12 unchanged sentences

Corporate bonds 32,517 3,629 47,580 7,622 80,097 11,251

Treasury securities 155,283 3,652 — — 155,283 3,652

Asset backed securities issued or guaranteed by U.S.

1 unchanged sentence

Total $ 456,451 $ 22,374 $ 260,284 $ 48,259 $ 716,735 $ 70,633

There were 101 securities, or 28 %, in an unrealized loss position as of December 31, 2021 compared to zero securities in an unrealized loss position as of December 31, 2020.

No ne of these securities were in an unrealized loss position for greater than 12 months at December 31, 2021.

The amortized cost and fair value of debt and equity securities by

contractual maturity are shown in the following table.

December 31, 2021

Less than 12 months 12 months or more Total

(In thousands) Estimated

Fair Value Unrealized

Losses Estimated

Fair Value Unrealized

Losses Estimated

Fair Value Unrealized

State and political subdivisions $ 60,083 $ 990 $ — $ — $ 60,083 $ 990

Mortgage-backed securities issued or guaranteed by U.S.

government agencies or sponsored enterprises 163,652 2,200 — — 163,652 2,200

Corporate bonds 55,120 272 — — — 55,120 272

Asset backed securities issued or guaranteed by U.S.

Government agencies or sponsored enterprises 49,341 494 — — 49,341 494

Total $ 328,196 $ 3,956 $ — $ — $ 328,196 $ 3,956

There were 311 securities, or 91.7 %, in an unrealized loss position as of December 31, 2022 compared to 101 securities, or 28.0 %, in an unrealized loss position as of December 31, 2021.

Of these securities, 101 , or 29.8 %, were in an unrealized loss position for greater than 12 months at December 31, 2022.

The Company does not intend to sell, or believe it is likely to sell, its available for sale securities in an unrealized loss position before the anticipated recovery of current unrealized losses.

As such, the Company did not recognize any credit losses on any available for sale debt securities in 2022 or 2021.

The amortized cost and fair value of debt and equity securities by contractual maturity are shown in the following table.

Expected maturities may differ from contractual maturities because borrowers have the right to prepay obligations with or without prepayment penalties.

10 unchanged sentences

Total $ 825,047 $ 754,468

The premium related to the purchase of state and political subdivisions was $ 6,361,000 and $ 6,013,000 at December 31, 2021 and 2020, respectively.

The premium related to the purchase of state and political subdivisions was $ 5.8 million and $ 6.4 million at December 31, 2022 and 2021, respectively.

There were no securities pledged to secure public deposits or for other purposes at December 31, 2022.

Proceeds from sales of investment securities classified as available-for-sale were $ 63,774,000 in 2021, $ 21,943,000 in 2020, and $ 4,648,000 in 2019.

Gross realized gains on the sales in 2021, 2020, and 2019 were $ 55,000 , $ 1,075,000 , and $ 19,000 , respectively.

There were $ 4,000 of gross realized losses on sales in 2021 and no gross realized losses in 2020 or 2019.

The Company did not recognize credit losses on any available for sale debt securities in 2021 or 2020.

Proceeds from sales of investment securities classified as available-for-sale were $ 3.8 million in 2022, $ 63.8 million in 2021, and $ 21.9 million in 2020.

Gross realized gains on the sales in 2022, 2021, and 2020 were $ 15,000 , $ 55,000 , and $ 1.1 million, respectively.

Gross realized losses on the sales in 2022, 2021, and 2020 were $ 0 , $ 4,000 and $ 0 , respectively.

The Company originates commercial, industrial and real estate loans to businesses and faith-based ministries throughout the metropolitan St.

Louis, Missouri area, Orange County, California, Colorado Springs, Colorado and other selected cities in the United States.

Louis, Missouri area, Colorado Springs, Colorado and other selected cities in the United States.

The Company does not have any particular concentration of credit in any one economic sector;

8 unchanged sentences

Construction 8,094 14,664

PPP 6,299 109,704

Total loans $ 1,082,906 $ 960,567

21 unchanged sentences

PPP 6,299 — — — — 6,299

Other 130 — — — — 130

Total $ 960,567 $ — $ — $ — $ — $ 960,567

12 unchanged sentences

Construction 8,094 — — 8,094

PPP 6,299 — — 6,299

Other 42 — — 42

1 unchanged sentence

(1) Loans subject to normal monitoring involve borrowers of acceptable-to-strong credit quality and risk and have the apparent ability to satisfy their loan obligation.

(2) Loans subject to special monitoring possess some credit deficiency or potential weakness which requires a high level of management attention.

The Company had no loans that were considered individually evaluated credits at December 31, 2021.

(2) Loans subject to special monitoring possess some credit deficiency or potential weakness which requires a higher level of management attention.

The Company had one loan that was considered an individually evaluated credit at December 31, 2022, with no specific allowance.

This loan was paid off in full in January 2023.

The following table presents the credit exposure of the loan portfolio by internally assigned credit grade as of December 31, 2021:

12 unchanged sentences

PPP 6,299 — — 6,299

Other 130 — — 130

Total $ 947,973 $ 12,594 $ — $ 960,567

(1) Loans subject to normal monitoring involve borrowers of acceptable-to-strong credit quality and risk and have the apparent ability to satisfy their loan obligation.

(2) Loans subject to special monitoring possess some credit deficiency or potential weakness which requires a high level of management attention.

The Company had one loan that was considered an individually evaluated credit in the amount of $ 2,500,000 at December 31, 2020, with a specific allowance for credit loss of $ 500,000 .

There were no loan modifications considered as troubled debt restructurings during the year ended December 31, 2021.

The recorded investment by category for loans considered as troubled debt restructurings during the year ended December 31, 2020 is as follows:

(In thousands) Number of Loans Pre-Modification

Outstanding Balance Post-Modification

Outstanding Balance

Commercial and industrial 1 $ 8,773 $ 8,773

Faith-based real estate 1 1,029 1,029

Total 2 $ 9,802 $ 9,802

During the year ended December 31, 2020, two loans were restructured to change the amortization schedule to reduce payments from the borrowers while the contractual interest rate remained unchanged.

There were no loans restructured that subsequently defaulted during the years ended December 31, 2021 or 2020.

(2) Loans subject to special monitoring possess some credit deficiency or potential weakness which requires a higher level of management attention.

The Company had no loans that were considered individually evaluated credits at December 31, 2021.

There were no loan modifications considered as troubled debt restructurings during the year ended December 31, 2022 and 2021.

A summary of the ACL by category for the period ended December 31, 2022 is as follows:

12 unchanged sentences

Allowance for credit losses on loans:

Balance at December 31, 2019 $ 4,874 $ 1,528 $ 3,842 $ 312 $ 10,556

Cumulative effect of accounting change (ASU 2016-13) ( 526 ) ( 401 ) 1,636 14 —

Balance at January 1, 2020 $ 4,635 $ 1,175 $ 5,717 $ 417 $ 11,944

Provision for credit losses 268 48 238 91 645

Provision for (release of) credit losses (1)

387 ( 144 ) ( 48 ) ( 125 ) 70

Recoveries 12 — 15 — 27

1 unchanged sentence

$ 5,034 $ 1,031 $ 5,684 $ 292 $ 12,041

(1) For the period ended December 31, 2020, there was a provision for credit losses of $ 165,000 for unfunded commitments.

As of December 31, 2021 and 2020, there were loans totaling $ 0 and $ 161,475 , respectively, to affiliates of executive officers or directors.

(1) For the period ended December 31, 2021, there was a release of credit losses of $ 200,000 for unfunded commitments.

As of December 31, 2022 and 2021, there were no loans to executive officers or directors, or their affiliates.

Premises and Equipment

7 unchanged sentences

Internally developed software 27,308 22,665

58,599 54,302

Less accumulated depreciation 40,486 36,245

Total 64,444 58,599

Total depreciation charged to expense in 2021, 2020 and 2019 amounted to $ 4,313,000 , $ 4,471,000 , and $ 4,227,000 , respectively.

Less accumulated depreciation 44,486 40,486

Total premises and equipment, net $ 19,958 $ 18,113

Total depreciation charged to expense in 2022, 2021 and 2020 amounted to $ 4.0 million, $ 4.3 million, and $ 4.5 million, respectively.

Acquired Intangible Assets

The Company accounts for intangible assets in accordance with FASB ASC 350, Goodwill and Other Intangible Assets , which requires that intangibles with indefinite useful lives be tested annually for impairment, or when management deems there is a triggering event, and those with finite useful lives be amortized over their useful lives.

In June 2022, the Company acquired the assets of mobile church management software developer TouchPoint, a division of the Pursuant Group, Inc., and recorded intangible assets of $ 5.3 million.

Those intangible assets were valued at $ 3.0 million for goodwill, $ 1.7 million for the customer list, $ 368,000 for software, and $ 183,000 for the trade name.

The goodwill is deductible for tax purposes over 15 years, starting in 2022.

The intangible assets and financial results of TouchPoint are included in the Information Services operating segment.

The purchase price of the acquisition consisted of cash considerations of $ 4.9 million and potential contingent consideration in the form of an earn out up to $ 2.5 million.

The Company valued the contingent earn out component at $ 389,000 .

The fair value of the contingent consideration was estimated on the acquisition date as the present value of the expected future contingent payments which were determined using a Monte Carlo simulation.

The contingent consideration is based upon 4 years of earnings before interest, taxes, depreciation and amortization (EBITDA) subsequent to the acquisition date.

The Company and Pursuant Group, Inc.

agreed to settle the contingent consideration at the determined fair

value of $ 389,000 during the fourth quarter of 2022.

As such, there is no contingent consideration related to TouchPoint going forward.

Details of the Company’s intangible assets are as follows:

13 unchanged sentences

Total intangible assets $ 27,936 $ ( 6,501 ) $ 22,646 $ ( 5,820 )

Customer lists are amortized over 7 and 10 years;

patents over 18 years, software over 3 years and 7 years, trade name over 20 years and other intangible assets over 15 years.

Amortization of intangible assets amounted to $ 859,000 for the years ended December 31, 2021, and 2020.

Estimated future amortization of intangibles is $ 540,000 in both 2022 and 2023, $ 498,000 in 2024, $ 490,000 in 2025, and $ 342,000 in 2026.

Customer lists are amortized over 7 to 10 years;

patents over 18 years, software over 3 years to 7 years, trade name over 10 years to 20 years and other intangible assets over 15 years.

Amortization of intangible assets amounted to $ 680,000 and $ 859,000 for the years ended December 31, 2022, and 2021, respectively.

Estimated future amortization of intangibles is $ 780,000 in 2023, $ 738,000 in 2024, $ 730,000 in 2025, $ 582,000 in 2026, and $ 262,000 in 2027.

Interest-Bearing Deposits

10 unchanged sentences

Weighted average interest rate 1.74 % 0.15 %

(1) The scheduled maturities of time deposits not covered by deposit insurance consist of $ 7,010,000 within one year and $ 5,990,000 within one to three years.

(1) The scheduled maturities of time deposits not covered by deposit insurance consist of $ 17.7 million within one year and $ 264,000 within one to three years.

Interest expense consists of the following:

(In thousands) 2022 2021 2020

16 unchanged sentences

Unused Available Lines of Credit

As of December 31, 2021, the Bank had unsecured lines of credit at six correspondent banks to purchase federal funds up to a maximum of $ 83,000,000 in aggregate.

As of December 31, 2021, the Bank had secured lines of credit with the Federal Home Loan Bank of $ 228,849,000 collateralized by commercial mortgage loans.

At December 31, 2021, the Company had lines of credit from two banks up to a maximum of $ 150,000,000 in aggregate collateralized by state and

political subdivision securities.

As of December 31, 2022, the Bank had unsecured lines of credit at six correspondent banks to purchase federal funds up to a maximum of $ 83.0 million in aggregate.

As of December 31, 2022, the Bank had secured lines of credit with the Federal Home Loan Bank of $ 237.8 million collateralized by commercial mortgage loans.

At December 31, 2022, the Company had lines of credit from three banks up to a maximum of $ 200.0 million in aggregate collateralized by state and political subdivision securities.

There were no amounts outstanding at December 31, 2022, and 2021 under any of the lines of credit.

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As such, subsequent to February 28, 2021, there is no service cost associated with the Plan.

The Company accrues and makes contributions designed to fund normal service costs on a current basis using the projected unit

credit with service proration method to amortize prior service costs arising from improvements in pension benefits and qualifying service prior to the establishment of the Plan over a period of approximately 30 years.

A summary of the activity in the Plan’s projected benefit obligation, assets, funded status and amounts recognized in the Company’s consolidated balance sheets is as follows:

4 unchanged sentences

Interest cost 3,293 3,076

Actuarial (gain) loss ( 5,822 ) 15,087

Plan amendments — ( 18,322 )

Actuarial gain ( 31,982 ) ( 5,822 )

Benefits paid ( 3,201 ) ( 2,968 )

2 unchanged sentences

Fair value, January 1 $ 114,136 $ 106,667

Actual return 10,107 14,826

Actual investment return ( 26,820 ) 10,107

Employer contribution — 330

Expenses paid from plan assets ( 721 ) —

Benefits paid ( 3,201 ) ( 2,968 )

10 unchanged sentences

Weighted average discount rate 5.25 % 2.85 % 2.55 %

Rate of increase in compensation levels (a) (a) (a)

Rate of increase in compensation levels N/A (a) (a)

(a) 6.0 % graded down to 3.25 % over the first seven years of service.

The accumulated benefit obligation was $ 117,323,000 and $ 121,095,000 as of December 31, 2021 and 2020, respectively.

The Company made a contribution of $ 330,000 during 2021, while in 2020 there was no contribution made to the Plan.

The accumulated benefit obligation was $ 85.4 million and $ 117.3 million as of December 31, 2022 and 2021, respectively.

The Company made no contribution of during 2022, while in 2021 there was a contribution of $ 330,000 made to the Plan.

The Company has not determined if it will make a contribution to the Plan in 2023.

The following pension benefit payments, which reflect expected future service, as appropriate, are expected to be paid by the Plan:

The following pension benefit payments, as appropriate, are expected to be paid by the Plan:

2023 $ 4,193,000

4 unchanged sentences

2026-2030 27,845,000

The Plan’s pension cost included the following components:

The Plan’s (benefit) pension cost included the following components:

For the Year Ended

4 unchanged sentences

Net amortization and deferral — 393 1,946

Net periodic pension (benefit) cost $ ( 1,839 ) $ 4,134 $ 4,464

The following represent the major assumptions used to determine the net pension cost of the Plan:

Net periodic (benefit) pension cost $ ( 2,564 ) $ ( 1,839 ) $ 4,134

The following represent the major assumptions used to determine the net (benefit) pension cost of the Plan:

2022 2021 2020

Weighted average discount rate 2.85 % 2.55 % 3.30 %

Rate of increase in compensation levels (a ) (a ) (a )

Rate of increase in compensation levels N/A (a ) (a )

Expected long-term rate of return on assets 6.00 % 6.00 % 6.50 %

2 unchanged sentences

For 2021, the Pri-2012 Mortality Table and the MP-2020 Mortality Improvement Table were used.

For 2019, the RP-2014 Mortality Table and the MP-2018 Mortality Improvement Table were used.

For 2020, the Pri-2012 Mortality Table and the MP-2019 Mortality Improvement Table were used.

The investment objective for the Plan is to maximize total return with a tolerance for average risk.

Asset allocation is a balance between fixed income and equity investments, with a target allocation of approximately 68.5 % fixed income, 14.0 % U.S.

equity and 26 % non-U.S.

equity, 14.0 % non-U.S.

equity, and real estate 3.5 %.

Due to volatility in the market, this target allocation is not always desirable and asset allocations can fluctuate between acceptable ranges.

7 unchanged sentences

Equities 14.0 % 7.98 % 17.66 %

Small Cap U.S.

Equities 5 % 8.57 % 22.09 %

International (Developed) 10.0 % 9.07 % 18.52 %

International (Emerging) 4.0 % 11.91 % 26.71 %

Real Estate 3.5 % 7.19 % 15.13 %

Applying appropriate correlation factors between each of the asset classes the long-term rate of return on assets is estimated to be 6.00 %.

26 unchanged sentences

Benefits paid ( 348 ) ( 282 )

Actuarial (gain)/loss ( 1,148 ) 1,523

Actuarial gain ( 2,811 ) ( 1,148 )

Balance, December 31

4 unchanged sentences

Weighted average discount rate 5.15 % 2.65 % 2.20 %

Rate of increase in compensation levels (a) (a) (a)

Rate of increase in compensation levels N/A (a) (a)

(a) 6.00 % graded down to 3.25 % over the first seven years of service.

The accumulated benefit obligation was $ 12,420,000 and $ 12,492,000 as of December 31, 2021 and 2020, respectively.

The accumulated benefit obligation was $ 9.6 million and $ 12.4 million as of December 31, 2022 and 2021, respectively.

Since this is an unfunded plan, there are no plan assets.

14 unchanged sentences

Prior service cost $ — $ — $ — $ —

Net actuarial loss 5,417 15,429 2,783 4,135

Net actuarial loss (gain) 6,833 5,417 ( 136 ) 2,783

Total $ 6,833 $ 5,417 $ ( 136 ) $ 2,783

The estimated pretax prior service cost and net actuarial loss in accumulated other comprehensive loss at December 31, 2021 expected to be recognized as components of net periodic benefit cost in 2022 for the Plan are both $ 0 .

The estimated pretax prior service cost and net actuarial loss (gain) in accumulated other comprehensive loss at December 31, 2022 expected to be recognized as components of net periodic benefit cost in 2023 for the Plan are each $ 0 .

The estimated pretax prior service cost and net actuarial loss in accumulated other comprehensive loss at December 31, 2022 expected to be recognized as components of net periodic benefit cost in 2023 for the SERP are each $ 0 .

The Company also maintains a noncontributory profit sharing program, which covers most of its employees.

Employer contributions are calculated based upon formulas which relate to current operating results and other factors.

Profit sharing expense recognized in personnel expense in the consolidated statements of income in 2021, 2020, and 2019 was $ 6,436,000 , $ 5,665,000 , and $ 6,841,000 , respectively.

Profit sharing expense recognized in personnel expense in the consolidated statements of income in 2022, 2021, and 2020 was $ 7.9 million, $ 6.4 million, and $ 5.7 million, respectively.

The Company also sponsors a defined contribution 401(k) plan to provide additional retirement benefits to substantially all employees.

Contributions under the 401(k) plan for 2021, 2020 and 2019 were $ 3,488,000 , $ 1,508,000 , and $ 1,378,000 , respectively.

Contributions under the 401(k) plan for 2022, 2021 and 2020 were $ 4.6 million, $ 3.5 million, and $ 1.5 million, respectively.

In conjunction with the freezing of the Plan, contribution rates to employees increased on March 1, 2021.

1 unchanged sentence

The Amended and Restated Omnibus Stock and Performance Compensation Plan (the “Omnibus Plan”) provides incentive opportunities for key employees and non-employee directors and to align the personal financial interests of such individuals with those of the Company’s shareholders.

The Omnibus Plan permits the issuance of up to 1,500,000 shares of the Company’s common stock in the form of stock options, SARs, restricted stock, restricted stock units and performance awards.

The Omnibus Plan permits the issuance of up to 1.5 million shares of the Company’s common stock in the form of stock options, SARs, restricted stock, restricted stock units and performance awards.

Restricted Stock

12 unchanged sentences

The fair value of such shares are based on the market price on the date of grant.

Amortization of the restricted stock bonus awards totaled $ 1,793,000 for 2021, $ 1,463,000 for 2020 and $ 1,551,000 for 2019.

As of December 31, 2021, the total unrecognized compensation expense related to non-vested restricted stock awards was $ 1,647,000 , and the related weighted average period over which it is expected to be recognized is approximately 0.57 years.

The total fair value of shares vested during the years ended December 2021, 2020, and 2019 was $ 1,152,000 , $ 1,005,000 , and $ 527,000 , respectively.

Amortization of restricted stock bonus awards totaled $ 2.4 million for 2022, $ 1.8 million for 2021 and $ 1.5 million for 2020.

As of December 31, 2022, the total unrecognized compensation expense related to non-vested restricted stock awards was $ 1.4 million, and the related weighted average period over which it is expected to be recognized is approximately 0.60 years.

The total fair value of shares vested during the years ended December 2022, 2021, and 2020 was $ 1.1 million, $ 1.2 million, and $ 1.0 million, respectively.

Performance-Based Restricted Stock

1 unchanged sentence

The number of shares issued ranges from 0 % to 150 % of the target opportunity based on the actual achievement of financial goals for the three-year performance period.

Following is a summary of the activity of the PBRS, based on 100% of target value:

For the Years Ended

December 31, 2021

Shares Fair Value

Following is a summary of the activity of the PBRS, based on 100% of target value, for the year ended December 31, 2022:

Shares Weighted Average

Balance at December 31, 2021

5 unchanged sentences

138,785 $ 43.19

The PBRS that vested during the year ended December 31, 2021 achieved financial goals of 94.4 %, resulting in the issuance of 31,150 shares of common stock.

The PBRS that vested during the year ended December 31, 2020 achieved financial goals of 117.3 %, resulting in the issuance of 34,222 shares of common stock.

The PBRS that vested during the year ended December 31, 2022 achieved weighted average financial goals of 52.9 % of target, resulting in the issuance of 18,021 shares of common stock.

The PBRS that vested during the year ended December 31, 2021 achieved weighted average financial goals of 94.4 % of target, resulting in the issuance of 31,150 shares of common stock.

The outstanding PBRS at December 31, 2022 will vest at scheduled vesting dates and the actual number of shares of common stock issued will range from 0 % to 150 % of the target opportunity based on the actual achievement of financial goals for the respective three-year performance period.

6 unchanged sentences

Exercised ( 70,764 ) 30.52

Forfeited ( 2,088 ) 31.92

Balance at December 31, 2022

117,089 34.91

Exercisable at December 31, 2022

46,325 $ 41.62

The total intrinsic value of SARs exercised during 2021 and 2020 was $ 630,000 and $ 275,000 , respectively.

The total intrinsic value of SARs exercised during 2022 and 2021 was $ 2.2 million and $ 630,000 , respectively.

The average remaining contractual term for SARs outstanding as of December 31, 2022 was 0.73 years, and the aggregate intrinsic value was $ 192,000 .

The average remaining contractual term for SARs outstanding as of December 31, 2021 was 1.21 years, and the aggregate intrinsic value was $ 741,000 .

The total compensation cost for share-based payment arrangements was $ 2,859,000 , $ 2,267,000 , and $ 3,144,000 , in 2021, 2020, and 2019, respectively.

The total compensation cost for share-based payment arrangements was $ 6.7 million, $ 2.9 million, and $ 2.3 million in 2022, 2021, and 2020, respectively.

Other Operating Expense

2 unchanged sentences

(In thousands) 2022 2021 2020

Postage and supplies $ 1,851 $ 1,465 $ 1,875

Promotional expense $ 2,889 $ 2,627 $ 2,184

Professional fees 1,625 2,140 2,388

Outside service fees 7,874 7,413 5,845

Data processing services 3,365 2,650 1,900

Telecommunications 554 765 748

Other 7,950 4,053 5,458

19 unchanged sentences

Total income tax expense $ 7,996 $ 5,217 $ 5,165

Income tax expense in 2021 totaled $ 5,217,000 compared to $ 5,165,000 and $ 7,062,000 in 2020 and 2019, respectively.

Income tax expense in 2022 totaled $ 8.0 million compared to $ 5.2 million in 2021 and 2020.

When measured as a percent of pre-tax income, the Company’s effective tax rate was 18.6 % in 2022, 15.4 % in 2021, and 17.0 % in 2020.

6 unchanged sentences

Stock compensation 2,745 1,875

Unrealized loss on investment securities available-for-sale (1)

Research and development expenses 772 —

Lease liability 2,261 1,145

Other 640 633

Total deferred tax assets $ 30,343 $ 10,764

5 unchanged sentences

Right of use asset ( 2,178 ) ( 1,032 )

Prepaid expenses ( 847 ) ( 479 )

Other ( 144 ) ( 18 )

1 unchanged sentence

Net deferred tax assets $ 22,579 $ 2,791

(1) The deferred tax asset associated with the unrealized losses on securities is mainly a result of changes in interest rates, and the unrealized losses are considered to be temporary as the fair value is expected to recover as the securities approach their respective maturity dates.

The issuers of the securities are of high credit quality and all principal amounts are expected to be paid when the securities mature.

The Company does not intend to sell and it is likely that the Company will not be required to sell the securities prior to their anticipated recovery.

A valuation allowance would be provided on deferred tax assets when it is more likely than not that some portion of the assets will not be realized.

56 unchanged sentences

At December 31, 2022, an allowance for unfunded commitments of $ 232,000 had been recorded, as compared to $ 367,000 at December 31, 2021.

See Item 8, "Financial Statements and Supplementary Data—Note 1” for information related to CECL adoption.

See Note 1 "Summary of Significant Accounting Policies" for information related to CECL.

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.

21 unchanged sentences

The following is detail of the Company’s revenue from contracts with clients.

Invoice processing fees – The Company earns fees on a per-item or monthly basis for the invoice processing services rendered on behalf of customers.

Processing fees – The Company earns fees on a per-item or monthly basis for the invoice processing services rendered on behalf of customers.

Per-item fees are recognized at the point in time when the performance obligation is satisfied.

1 unchanged sentence

The contracts have no significant impact of variable consideration and no significant financing components.

Invoice payment fees – The Company earns fees on a transaction level basis for invoice payment services when making customer payments.

Financial fees – The Company earns fees on a transaction level basis for invoice payment services when making customer payments.

Fees are recognized at the point in time when the payment transactions are made, which is when the performance obligation is satisfied.

9 unchanged sentences

In-scope of ASC 606

Invoice processing fees $ 77,704 $ 74,674 $ 81,329

Invoice payment fees 28,751 22,530 26,624

Processing fees $ 76,470 $ 74,589 $ 74,638

Financial fees 43,757 32,733 23,107

Information services payment and processing revenue 120,227 107,322 97,745

11 unchanged sentences

The Information Services segment provides transportation, energy, telecommunication, and environmental invoice processing and payment services to large corporations.

The Banking Services segment provides banking services primarily to privately held businesses and faith-based ministries, including on-line generosity services, as well as supporting the banking needs of the Information Services segment.

In addition, this segment provides church management software and on-line generosity services primarily for faith-based ministries.

The Banking Services segment provides banking services primarily to privately held businesses, franchise restaurants and faith-based ministries, as well as supporting the banking needs of the Information Services segment.

The Company’s accounting policies for segments are the same as those described in Note 1 of this report.

Management evaluates segment performance based on tax-equivalized (as defined in the footnote to the chart on the following table) pre-tax income after allocations for corporate expenses.

Management evaluates segment performance based on tax-equivalized (as defined in the footnote to the chart on the following table) pre-

tax income after allocations for corporate expenses.

Transactions between segments are accounted for at what management believes to be fair value.

1 unchanged sentence

Funding sources represent average balances and deposits generated by Information Services and Banking Services and there is no allocation methodology used.

Segment interest income is a function of the relative share of average funding sources generated by each segment multiplied by the following rates:

• Information Services – one or more fixed rates depending upon the specific characteristics of the funding source, and

• Banking Services – a variable rate that is based upon the overall performance of the Company’s earning assets.

Banking Services interest income is determined by actual interest income on loans minus actual interest expense paid on deposits plus/minus an allocation for interest income or expense dependent on the remaining available liquidity of the segment.

Information Services interest income is determined by multiplying available liquidity by actual yields on short-term investments and investment securities.

Any difference between total segment interest income and overall total Company interest income is included in Corporate, Eliminations, and Other.

4 unchanged sentences

and Other Total

Fee income from customers $ 105,452 $ 2,631 $ 1,608 $ 109,691

Fee income $ 120,234 $ 3,606 $ 1,142 $ 124,982

Interest income* 28,528 40,913 ( 5,426 ) 64,015

5 unchanged sentences

Total assets 1,595,939 1,182,439 ( 205,355 ) 2,573,023

Funding Sources 937,478 876,018 — 1,813,496

Fee income from customers $ 96,548 $ 2,607 $ 1,286 $ 100,441

Average funding sources 1,379,355 953,346 — 2,332,701

Fee income $ 106,678 $ 1,405 $ 1,608 $ 109,691

Interest income* 24,332 24,732 ( 1,694 ) 47,370

5 unchanged sentences

Total assets 1,450,594 1,090,626 13,681 2,554,901

Funding Sources 734,999 738,165 — 1,473,164

Fee income from customers $ 107,942 $ 1,660 $ 467 $ 110,069

Average funding sources 1,150,493 876,018 — 2,026,511

Fee income $ 97,640 $ 1,515 $ 1,286 $ 100,441

Interest income* 20,343 29,494 ( 261 ) 49,576

5 unchanged sentences

Total assets 1,188,745 997,483 17,007 2,203,235

Funding Sources 676,068 592,905 — 1,268,973

Average funding sources 902,486 737,962 — 1,640,448

* Presented on a tax-equivalent basis assuming a tax rate of 21%.

The tax-equivalent adjustment was approximately $ 1,873,000 for 2021, $ 1,888,000 for 2020, and $ 2,084,000 for 2019.

The tax-equivalent adjustment was approximately $ 1.7 million for 2022, $ 1.9 million for 2021, and $ 1.9 million for 2020.

The Company leases certain premises under operating leases.

As of December 31, 2021, the Company had lease liabilities of $ 4,887,000 and right-of-use assets of $ 4,421,000 .

As of December 31, 2022, the Company had lease liabilities of $ 9.5 million and right-of-use assets of $ 9.2 million.

Lease liabilities and right-of-use assets are reflected in other liabilities and other assets , respectively.

Included in occupancy expense on the consolidated statements of income for 2021 was operating lease cost of $ 1,651,000 , short-term lease cost of $ 186,000 , and there was no variable lease cost.

The Company paid cash of $ 1,779,000 for operating lease amounts included in the measurement of lease liabilities for the year ended December 31, 2021.

Included in occupancy expense on the consolidated statements of income for 2022 was operating lease cost of $ 1.5 million, short-term lease cost of $ 203,000 , and there was no variable lease cost.

The Company paid cash of $ 1.6 million for operating lease amounts included in the measurement of lease liabilities for the year ended December 31, 2022.

No right-of-use assets were obtained in exchange for lease liabilities during the year ended December 31, 2022.

2 unchanged sentences

however, these renewal options are not included in the calculation of the lease liabilities as they are not reasonably certain to be exercised.

There has been no significant change in the Company’s expected future minimum lease payments since December 31, 2020.

The increase in the Company’s expected future minimum lease payments since December 31, 2021 was a result of renewing the lease on the Company's corporate headquarters for 10 years, effective September 2022.

A maturity analysis of operating lease liabilities and undiscounted cash flows as of December 31, 2022 was as follows:

25 unchanged sentences

Premises and equipment, net 19,525 17,443

Accounts and drafts receivable from customers 95,779 4,992

Other assets 119,627 90,948

10 unchanged sentences

Income from subsidiaries – management fees $ 4,315 $ 3,115 $ 2,854

Information services revenue 104,426 95,078 106,198

Net interest income after (release of) provision for credit losses 11,316 10,932 15,713

Gain on sales of investment securities 51 1,075 19

Other income 919 458 518

Total income 119,827 110,397 125,047

Processing fees 74,382 72,579 72,513

Financial fees 42,243 31,847 22,565

Other fees 2,606 970 1,533

Net interest income after provision for (release of) credit losses 13,435 11,316 10,932

Total revenue 136,981 119,827 110,397

Salaries and employee benefits 94,047 80,434 77,577

19 unchanged sentences

Cash flows from investing activities:

Net (increase) decrease in securities ( 226,090 ) 65,689 26,150

Net decrease (increase) in loans 8,799 ( 2,545 ) ( 24,999 )

Net decrease (increase) in securities 3,064 ( 226,090 ) 65,689

Net (increase) decrease in loans ( 34,295 ) 8,799 ( 2,545 )

Net (increase) decrease in payments in advance of funding ( 2,347 ) ( 96,864 ) 11,595

1 unchanged sentence

Purchases of premises and equipment, net ( 5,851 ) ( 2,233 ) ( 1,810 )

Asset acquisition of Gateway Giving, LLC — — ( 2,833 )

Asset acquisition of TouchPoint ( 4,814 ) — —

Net cash (used in) provided by investing activities ( 48,243 ) ( 341,507 ) 72,929

Cash flows from financing activities:

Net increase (decrease) in accounts and drafts payable 208,656 208,339 ( 21,875 )

Net (increase) decrease in accounts and drafts receivable from customers ( 90,787 ) 6 59,404

Net increase in accounts and drafts payable 16,393 208,650 148,935

Short-term borrowings — — ( 18,000 )

2 unchanged sentences

Other financing activities, net ( 594 ) ( 850 ) ( 1,098 )

Net cash provided by (used in) financing activities 161,363 166,817 ( 28,033 )

Net increase (decrease) in cash and cash equivalents ( 154,531 ) 266,911 ( 50,681 )

Net cash (used in) provided by financing activities ( 95,729 ) 161,363 166,817

Net (decrease) increase in cash and cash equivalents ( 100,720 ) ( 154,531 ) 266,911

Cash and cash equivalents at beginning of year 132,635 287,166 20,255

9 unchanged sentences

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 28, 2023 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Change in Accounting Principle

As discussed in Note 1 to the consolidated financial statements, the Company has changed its method of accounting for the allowance for credit losses as of January 1, 2020 due to the adoption of ASU No.

2016-13, Financial Instruments - Credit Losses (ASC Topic 326).

As explained below, auditing the Company’s allowance for credit losses on loans was a critical audit matter.

Basis for Opinion

19 unchanged sentences

Given the Company’s recent historical loss experience, the impact of the qualitative risk factors related to the collective ACL is a substantial percentage of the overall collective ACL.

These qualitative risk factors may increase or reduce reserve levels and include adjustments for assumptions related to loan concentrations, lending management experience and risk tolerance, loan review and audit results, asset quality and portfolio trends, value of underlying collateral, and loan portfolio growth.

These qualitative risk

factors may increase or reduce reserve levels and include adjustments for assumptions related to loan concentrations, lending management experience and risk tolerance, loan review and audit results, asset quality and portfolio trends, value of underlying collateral, and loan portfolio growth.

We identified the assessment of the qualitative risk factors related to the collective ACL as a critical audit matter.

20 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data