What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2024-02-28 compared with 2023-02-28 · 125 added, 119 removed, 1148 unchanged (18% of the section changed)

37 unchanged sentences

( 84,264 ) ( 81,211 )

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

Accumulated other comprehensive loss ( 47,469 ) ( 59,321 )

Total shareholders’ equity 229,809 206,325

23 unchanged sentences

Net interest income 66,494 58,844 44,326

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

(Release of) provision for credit losses ( 550 ) 1,350 ( 130 )

Net interest income after (release of) provision for credit losses 67,044 57,494 44,456

Total net revenue 197,511 182,476 154,147

19 unchanged sentences

Net income $ 30,059 $ 34,904 $ 28,604

Other comprehensive (loss) income:

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

Other comprehensive income (loss):

Net unrealized gain (loss) on securities available-for-sale 12,605 ( 79,746 ) ( 10,447 )

Tax effect ( 3,000 ) 18,981 2,487

Reclassification adjustments for gains included in net income ( 15 ) ( 51 ) ( 1,075 )

Reclassification adjustments for losses (gains) included in net income 173 ( 15 ) ( 51 )

Tax effect ( 41 ) 3 12

1 unchanged sentence

Tax effect ( 607 ) ( 358 ) ( 2,705 )

Foreign currency translation adjustments ( 143 ) ( 191 ) 66

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

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

Foreign currency translation adjustments, net of tax 172 ( 143 ) ( 191 )

Other comprehensive income (loss) 11,852 ( 59,774 ) 468

Total comprehensive income (loss) $ 41,911 $ ( 24,870 ) $ 29,072

See accompanying notes to consolidated financial statements.

10 unchanged sentences

Depreciation 4,189 4,021 4,313

Gains on sales of securities ( 15 ) ( 51 ) ( 1,075 )

Losses (gains) on sales of securities 173 ( 15 ) ( 51 )

Stock-based compensation expense 4,139 6,732 2,859

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

(Release of) provision for credit losses ( 550 ) 1,350 ( 130 )

Deferred income tax benefit ( 284 ) ( 1,163 ) ( 698 )

Increase in current income tax liability 724 206 1,237

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

(Increase) decrease in accounts receivable ( 2,520 ) ( 602 ) 756

(Decrease) increase in current income tax liability ( 1,481 ) 724 206

Increase (decrease) in pension liability 806 ( 2,484 ) ( 1,811 )

Increase in accounts receivable ( 3,841 ) ( 2,520 ) ( 602 )

Other operating activities, net ( 1,527 ) 3,104 ( 6,330 )

4 unchanged sentences

Purchases of securities available-for-sale ( 15,332 ) ( 232,083 ) ( 494,226 )

Net increase in loans ( 122,326 ) ( 68,664 ) ( 119,183 )

Net decrease (increase) in loans 68,588 ( 122,326 ) ( 68,664 )

Purchase of bank-owned life insurance — ( 4,000 ) ( 25,119 )

(Increase) decrease in payments in advance of funding ( 2,348 ) ( 96,864 ) 11,595

Decrease (increase) in payments in advance of funding 94,914 ( 2,348 ) ( 96,864 )

Purchases of premises and equipment, net ( 14,324 ) ( 5,866 ) ( 4,369 )

Asset acquisition of TouchPoint — ( 4,814 ) —

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

Net cash provided by (used in) investing activities 284,662 ( 306,390 ) ( 528,517 )

Cash Flows From Financing Activities:

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

Net (decrease) increase in noninterest-bearing demand deposits ( 118,398 ) 60,115 89,138

Net (decrease) increase in interest-bearing demand and savings deposits ( 34,106 ) ( 17,838 ) 90,310

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

Net increase (decrease) in time deposits 36,101 ( 6,563 ) ( 8,801 )

Net (increase) decrease in accounts and drafts receivable from customers ( 14,872 ) ( 90,787 ) 6

Net increase in accounts and drafts payable 3,769 17,204 215,010

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

Cash dividends paid ( 15,959 ) ( 15,442 ) ( 15,446 )

2 unchanged sentences

Net cash (used in) provided by financing activities ( 150,072 ) ( 59,204 ) 338,370

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

Net increase (decrease) in cash and cash equivalents 171,526 ( 313,986 ) ( 155,600 )

Cash and cash equivalents at beginning of year 200,942 514,928 670,528

16 unchanged sentences

$ 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

51 unchanged sentences

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.

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 is more likely than not that it will be required to sell the security before the anticipated recovery.

If neither condition is met, and the Company does not expect to recover the amortized cost basis, the Company determines whether the decline in fair value resulted from credit losses or other factors.

49 unchanged sentences

After the reasonable and supportable forecast period, the model reverts to long-run /historical average loss rates of its peers.

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.

However, for the faith-based CRE ACL, loss rates are determined using the Company’s long-run historical averages, as this loan segment is unique to the Company and does not represent a more than nominal percentage of peer loan portfolios.

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

31 unchanged sentences

Regardless of the historical measurement method used, the Company measures individually evaluated loans based on the fair value of the collateral when the Company determines foreclosure is probable.

Additionally, troubled debt restructurings are measured by discounting the total expected future cash flows at the loan's effective rate of interest as stated in the original loan agreement.

The Company uses its methods as discussed above for recognizing interest on individually evaluated loans.

28 unchanged sentences

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.

Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled.

34 unchanged sentences

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.

Instead, entities are required to evaluate (consistent with the accounting for other loan modifications) whether the modification represents a new loan or continuation of an existing loan.

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.

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

The implementation of this ASU effective January 1, 2023 did not have a material impact on the consolidated financial statements.

In October 2023, the FASB issued 2023-06, Disclosure Improvements - Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative ("ASU 2023-06").

This ASU amends the ASC to incorporate certain disclosure requirements from SEC Release No.

33-10532 - Disclosure Update and Simplification that was issued in 2018.

The effective date for each amendment will be the date on which the SEC's removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited.

ASU 2023-06 is not expected to have a significant impact on the Company's financial statements.

In November 2023, the FASB issued 2023-07, Segment Reporting (Topic 820):

Improvements to Reportable Segment Disclosures ("ASU 2023-07").

This ASU expands segment disclosure requirements for public entities to require disclosure of significant segment expenses and other segment items on an annual and interim basis and to provide in interim periods all disclosures about a reportable segment's profit or loss and assets that are currently required annually.

ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

Early adoption is permitted.

ASU 2023-07 is not expected to have a significant impact on the Company's financial statements.

In December 2023, the FASB issued 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures ("ASU 2023-09").

This ASU requires public business entities to disclose in their rate reconciliation table additional categories of information about federal, state, and foreign income taxes and to provide more details about the reconciling items in some categories if items meet a quantitative threshold.

It also requires all entities to disclose income taxes paid, net of refunds, disaggregated by federal, state, and foreign taxes for annual periods and to disaggregate the information by jurisdiction based on a quantitative threshold, among other things.

ASU 2023-09 is effective for annual periods beginning after December 15, 2024, though early adoption is permitted.

ASU 2023-09 is not expected to have a significant impact on the Company's 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.

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.

78 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.

30 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.

2 unchanged sentences

There were 275 securities, or 98.9 %, in an unrealized loss position as of December 31, 2023 compared to 311 securities, or 91.7 %, in an unrealized loss position as of December 31, 2022.

The unrealized losses at December 31, 2023 were primarily attributable to changes in market interest rates after the securities were purchased.

The Company does not currently intend to sell, and based on current conditions, the Company does not believe it will be required to sell these available-for-sale securities before the recovery of the amortized cost basis, which may be the maturity dates of the securities.

Therefore, the unrealized losses are recorded in accumulated other comprehensive loss.

Of these securities, 210 , or 75.5 %, were in an unrealized loss position for greater than 12 months at December 31, 2023.

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.

At December 31, 2023 and December 31, 2022, the Company had not recorded an allowance for credit losses on securities.

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

11 unchanged sentences

Total $ 684,917 $ 627,117

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, 2023.

Proceeds from sales of investment securities classified as available-for-sale were $ 111.6 million in 2023, $ 3.8 million in 2022, and $ 63.8 million in 2021.

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

Gross realized gains on the sales in 2023, 2022, and 2021 were $ 187,000 , $ 15,000 , and $ 55,000 , respectively.

Gross realized losses on the sales in 2023, 2022, and 2021 were $ 360,000 , $ 0 and $ 4,000 , respectively.

3 unchanged sentences

however, a substantial portion of the commercial and industrial loans is extended to privately-held commercial companies and franchises in these market areas and are generally secured by the assets of the business.

The Company also has a substantial portion of real estate loans secured by mortgages that are extended to faith-based ministries in its market area and selected cities in the United States.

The Company also has a substantial portion of real estate

loans secured by mortgages that are extended to faith-based ministries in its market area and selected cities in the United States.

A summary of loan categories is as follows:

47 unchanged sentences

(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, 2022:

11 unchanged sentences

Construction 8,094 — — 8,094

PPP 6,299 — — 6,299

Other 42 — — 42

2 unchanged sentences

(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.

The Company adopted Accounting Standards Update ASU 2022-02, effective January 1, 2023.

The amendments in ASU 2022-02 eliminated the recognition and measure of troubled debt restructurings and enhanced disclosures for loan modifications to borrowers experiencing financial difficulty.

In some cases, these modifications may result in new loans.

Loan modifications to borrowers experiencing financial difficulty may be in the form of principal forgiveness, an interest rate reduction, an other-than-insignificant payment delay, a term extension, or a combination thereof, among other things.

The following table shows the amortized cost of loans at December 31, 2023 that were both experiencing financial difficulty and modified during the year ended December 31, 2023, segregated by category and type of modification.

(In thousands) Payment Delay Term Extension Interest Rate Reduction Combination Term Extension and Interest Rate Reduction Percentage of Total Loans Held for Investment

Commercial and industrial $ — $ 22,354 $ — $ — 4.48 %

Total $ — $ 22,354 $ — $ — 2.20 %

There were three loans modified during the year ended December 31, 2023.

The terms were extended by periods of two to four years, and there was not an interest rate reduction associated with the modifications.

There were no commitments to lend additional funds to these borrowers at December 31, 2023.

The following table shows the performance of loans that have been modified to borrowers experiencing financial difficulty during the year ended December 31, 2023.

(In thousands) Current 30-59 Days Past Due 60-89 Days Past Due 90 Days or More Past Due Total Past Due

Commercial and industrial $ 22,354 $ — $ — $ — $ —

Total $ 22,354 $ — $ — $ — $ —

There were no modified loans that had a payment default during the year ended December 31, 2023 and that had been modified due to the borrower experiencing financial difficulty within the 12 previous months preceding the default.

Upon the Company's determination that a modified loan has subsequently been deemed uncollectible, the loan is written off.

There were no loans written off during the year ended December 31, 2023.

Prior to the adoption of ASU 2022-02, there were no loans considered troubled debt restructurings as of December 31, 2022.

The Company had no loans evaluated for expected credit losses on an individual basis as of December 31, 2023.

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.

There were no foreclosed loans recorded as other real estate owned as of December 31, 2023 or December 31, 2022.

A summary of the ACL by category for the period ended December 31, 2023 is as follows:

3 unchanged sentences

$ 5,978 $ 940 $ 6,437 $ 184 $ 13,539

Provision for (release of) credit losses (1)

(Release of) provision for credit losses (1)

( 566 ) 153 39 ( 76 ) ( 450 )

Recoveries 13 — — — 13

Balance at December 31, 2023

19 unchanged sentences

Furniture, fixtures and equipment 16,333 14,668

Purchased software 4,648 4,640

Internally developed software 27,308 22,665

Software 44,345 31,956

Total 78,779 64,444

4 unchanged sentences

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:

18 unchanged sentences

Interest-Bearing Deposits

Interest-bearing deposits consist of the following:

I nterest-bearing deposits consist of the following:

(In thousands) 2023 2022

8 unchanged sentences

Weighted average interest rate 3.16 % 1.74 %

(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.

(1) The scheduled maturities of time deposits not covered by deposit insurance consist of $ 21.9 million within one year and $ 1.1 million within one to three years.

Interest expense consists of the following:

19 unchanged sentences

As of December 31, 2023, the Bank had secured lines of credit with the Federal Home Loan Bank of $ 228.3 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.

As of December 31, 2023, the Company had lines of credit from three banks up to a maximum of $ 250.0 million in aggregate collateralized by state and political subdivision securities.

There were no amounts outstanding as of December 31, 2023 and 2022 under any of the lines of credit.

Common Stock and Earnings per Share

34 unchanged sentences

Balance, January 1 $ 85,433 $ 117,323

Service cost — 1,002

Interest cost 4,314 3,293

5 unchanged sentences

Actual investment return 8,097 ( 26,820 )

Employer contribution — 330

Expenses paid from plan assets ( 1,252 ) ( 721 )

6 unchanged sentences

For 2023, 2022 and 2021, the Plan’s expected benefit cash flows were discounted using the FTSE Above Median Double-A Curve.

For 2022, the Pri-2012 Mortality Table and MP-2022 Mortality Improvement Scale were used.

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

For 2023 and 2022, the Pri-2012 Mortality Table and MP-2021 Mortality Improvement Scale were used.

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

1 unchanged sentence

Weighted average discount rate 5.05 % 5.25 % 2.85 %

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

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

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

The accumulated benefit obligation was $ 87.1 million and $ 85.4 million as of December 31, 2023 and 2022, 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 made no contributions during 2023 or 2022 to the Plan.

The Company has not determined if it will make a contribution to the Plan in 2024.

6 unchanged sentences

2029-2033 28,280,000

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

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

For the Year Ended

4 unchanged sentences

Net amortization and deferral 154 — 393

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:

Net periodic pension cost (benefit) $ 733 $ ( 2,564 ) $ ( 1,839 )

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

2023 2022 2021

Weighted average discount rate 5.25 % 2.85 % 2.55 %

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

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

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

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

For 2022, the Pri-2012 Mortality Table and the MP-2021 Mortality Improvement Table were used.

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

For 2023 and 2022, the Pri-2012 Mortality Table and the MP-2021 Mortality Improvement Table were used.

For 2021, the Pri-2012 Mortality Table and the MP-2020 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, 14.0 % non-U.S.

equity, and real estate 3.5 %.

Asset allocation is a balance between fixed income and equity investments, with a target allocation of approximately 86 % fixed income, and 14 % equity.

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

The fixed income component is invested in pooled investment grade securities.

The equity components are invested in pooled large cap, small/mid cap and non-U.S.

components are invested in pooled large cap, small/mid cap and non-U.S.

The expected one-year nominal returns and annual standard deviations are shown by asset class below:

2 unchanged sentences

Core Fixed Income 86.0 % 4.52 % 4.30 %

Large Cap U.S.

Equities 14.0 % 7.98 % 17.66 %

International (Developed) 10.0 % 9.07 % 18.52 %

International (Emerging) 4.0 % 11.91 % 26.71 %

Real Estate 3.5 % 7.19 % 15.13 %

Global Equity 14.0 % 8.54 % 18.12 %

Applying appropriate correlation factors between each of the asset classes the long-term rate of return on assets is estimated to be 5.00 %.

13 unchanged sentences

Core 69,710 — 69,710 51,756 — 51,756

Passive — — — — — —

Opportunistic 4,059 — 4,059 2,756 — 2,756

7 unchanged sentences

Balance, January 1 $ 9,579 $ 12,420

Service cost — 147

Interest cost 472 318

7 unchanged sentences

Weighted average discount rate 4.95 % 5.15 % 2.65 %

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

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

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

18 unchanged sentences

Total $ 4,434 $ 6,833 $ ( 287 ) $ ( 136 )

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 estimated pretax prior service cost and net actuarial loss (gain) in accumulated other comprehensive loss at December 31, 2023 expected to be recognized as components of net periodic benefit cost in 2024 for both the Plan and SERP is $ 0 .

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

3 unchanged sentences

Contributions under the 401(k) plan for 2023, 2022 and 2021 were $ 5.1 million, $ 4.6 million, and $ 3.5 million, respectively.

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

Stock-based Compensation

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 1.5 million shares of the Company’s common stock in the form of stock options, SARs, restricted stock, restricted stock units and performance awards.

Stock-based compensation awards prior to April 17, 2023 were issued under the Company's Amended and Restated Omnibus Stock and Performance Compensation Plan (the "Prior Plan").

On April 18, 2023, shareholders approved the 2023 Omnibus Stock and Performance Compensation Plan (the "2023 Omnibus Plan") to replace the Prior Plan.

The 2023 Omnibus Plan permits the issuance of up to 1.0 million shares of the Company’s common stock in the form of stock options, SARs, restricted stock, restricted stock units, phantom stock, and performance awards.

Restricted Stock

28 unchanged sentences

The PBRS that vested during the year ended December 31, 2023 achieved weighted average financial goals of 86.7 % of target, resulting in the issuance of 26,499 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 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 outstanding PBRS at December 31, 2023 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.

9 unchanged sentences

30,409 $ 46.70

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

The total intrinsic value of SARs exercised during 2023 and 2022 was $ 508,000 and $ 2.2 million, respectively.

The average remaining contractual term for SARs outstanding as of December 31, 2023 was 0.08 years, and the aggregate intrinsic value was $ 0 .

29 unchanged sentences

Total income tax expense $ 7,297 $ 7,996 $ 5,217

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

Income tax expense in 2023 totaled $ 7.3 million compared to $ 8.0 million in 2022 and $ 5.2 million in 2021.

When measured as a percent of pre-tax income, the Company’s effective tax rate was 19.5 % in 2023, 18.6 % in 2022, and 15.4 % in 2021.

7 unchanged sentences

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

13,756 16,798

Research and development expenses 604 772

6 unchanged sentences

Intangible assets ( 1,828 ) ( 1,744 )

Unrealized gain on investment securities available-for-sale — ( 2,185 )

Right of use asset ( 1,927 ) ( 2,178 )

5 unchanged sentences

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.

The Company does not intend to sell and it is more likely than not 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.

6 unchanged sentences

Reductions to unrecognized tax benefits as a result of a lapse of the applicable statute of limitations ( 254 ) ( 199 ) ( 230 )

Decreases in unrecognized tax benefits as a result of settlements with taxing authorities — — ( 48 )

Balance at December 31

1 unchanged sentence

At December 31, 2023, 2022 and 2021, the balances of the Company’s unrecognized tax benefits which would, if recognized, affect the Company’s effective tax rate were $ 1,285,000 , $ 1,129,000 and $ 1,134,000 , respectively.

These amounts are net of the offsetting benefits from other taxing jurisdictions.

These amounts are net of the offsetting expense from other taxing jurisdictions.

As of December 31, 2023, 2022 and 2021, the Company had $ 117,000 , $ 84,000 and $ 85,000 , respectively, in accrued interest related to unrecognized tax benefits.

28 unchanged sentences

Management believes that the risk factor embedded in the interest rates along with the allowance for credit losses approximates a fair valuation.

Individually assessed loans are valued using the fair value of the collateral which is based upon an observable market price or current appraised value and therefore, the fair value is a nonrecurring Level 3 valuation.

Accrued Interest Receivable The carrying amount approximates fair value.

45 unchanged sentences

Service charges on deposit accounts are transaction-based fees that are recognized at the point in time when the performance obligation is satisfied.

Service charges are recognized on a monthly basis representing the period over which the performance obligation is satisfied.

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

The following table presents non-interest income, segregated by revenue streams in-scope and out-of-scope of ASC 606, Revenue from Contracts with Customers ("ASC 606") for the years ended December 31, 2022, 2021 and 2020.

The following table presents non-interest income, segregated by revenue streams in-scope and out-of-scope for the years ended December 31, 2023, 2022 and 2021.

For the Years Ended December 31,

20 unchanged sentences

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 pre-tax income after allocations for corporate expenses.

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

13 unchanged sentences

Intersegment income (expense) ( 4,270 ) 4,270 — —

Tax-equivalized pre-tax income* 26,478 21,566 ( 3,455 ) 44,589

Pre-tax income 23,662 11,587 2,107 37,356

Goodwill 17,173 136 — 17,309

6 unchanged sentences

Intersegment income (expense) ( 3,350 ) 3,350 — —

Tax-equivalized pre-tax income* 25,446 11,004 ( 756 ) 35,694

Pre-tax income 26,478 21,566 ( 5,144 ) 42,900

Goodwill 17,173 136 — 17,309

6 unchanged sentences

Intersegment income (expense) ( 3,222 ) 3,222 — —

Tax-equivalized pre-tax income* 16,230 14,973 1,027 32,230

Pre-tax income 25,446 11,004 ( 2,629 ) 33,821

Goodwill 14,126 136 — 14,262

2 unchanged sentences

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

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

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.

7 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.

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:

A maturity analysis of operating lease liabilities and undiscounted cash flows as of December 31, 2023 is as follows:

(In thousands) December 31,

24 unchanged sentences

Premises and equipment, net 29,765 19,525

Investments in bank-owned life insurance 49,159 47,998

Goodwill 17,172 17,172

Other intangible assets, net 3,346 4,126

Accounts and drafts receivable from customers 110,651 95,779

10 unchanged sentences

(In thousands) 2023 2022 2021

Equity in undistributed income of subsidiaries $ 19,281 $ 10,618 $ 2,252

Dividends received from subsidiaries 7,500 15,000 15,000

Income from subsidiaries – management fees 4,230 4,315 3,115

7 unchanged sentences

Total expenses 145,554 126,453 107,840

Income before income tax and equity in undistributed income of subsidiaries 10,528 11,987 7,473

Income before income tax expense 30,203 36,146 29,239

Income tax expense 144 1,242 635

Income before undistributed income of subsidiaries 9,286 11,352 7,133

Equity in undistributed income of subsidiaries 25,618 17,252 18,043

Net income $ 30,059 $ 34,904 $ 28,604

4 unchanged sentences

Net income $ 30,059 $ 34,904 $ 28,604

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Adjustments to reconcile net income to net cash provided by operating activities:

Equity in undistributed income of subsidiaries ( 19,281 ) ( 10,618 ) ( 2,252 )

5 unchanged sentences

Cash flows from investing activities:

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

Proceeds from sales of securities available-for-sale 86,722 3,838 63,774

Proceeds from maturities of securities available-for-sale 23,032 44,566 95,787

Purchases of securities available-for-sale ( 15,332 ) ( 45,340 ) ( 385,651 )

Net decrease (increase) in loans 3,977 ( 34,295 ) 8,799

Net decrease (increase) in payments in advance of funding 94,914 ( 2,347 ) ( 96,864 )

Purchase of bank-owned life insurance — ( 4,000 ) ( 25,119 )

1 unchanged sentence

Asset acquisition of TouchPoint — ( 4,814 ) —

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

Net cash provided by (used in) investing activities 179,051 ( 48,243 ) ( 341,507 )

Cash flows from financing activities:

1 unchanged sentence

Net increase in accounts and drafts payable 11,875 16,393 208,650

Short-term borrowings — — ( 18,000 )

Cash dividends paid ( 15,959 ) ( 15,442 ) ( 15,446 )

2 unchanged sentences

Net cash (used in) provided by financing activities ( 25,563 ) ( 95,729 ) 161,363

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

Net increase (decrease) in cash and cash equivalents 171,257 ( 100,720 ) ( 154,531 )

Cash and cash equivalents at beginning of year 31,915 132,635 287,166

54 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