35 unchanged sentences
The ACL and allowance for unfunded commitments were $39.8 million and $2.0 million, respectively at December 31, 2023, compared to $39.8 million and $2.1 million, respectively at December 31, 2022.
−Removed: The $8.5 million decrease in the ACL was the result of several factors.
−Removed: The first was the annual model recalibration.
−Removed: Each year, in the first quarter, management reviews each model variable to determine if adjustments are necessary to improve the model’s predictability.
−Removed: In the first quarter 2022 the delay periods were shortened to pick up more recent losses.
−Removed: Also, the qualitative factor maximum scorecard ranges for certain cohorts were reduced, which reduced
−Removed: Additionally, the qualitative factors for uncertainty were lowered due to the seasoning of the acquired loans, and as well as lower qualitative factors, due to the sale of non farm non residential commercial loans in the third quarter.
−Removed: Finally, the reserve was impacted by improved portfolio performance.
−Removed: The qualitative amount of the reserve decreased $3.3 million to $11.0 million.
+Added: The qualitative amount of the reserve decreased $44 thousand to $11.0 million.
The quantitative amount is $28.4 million at December 31, 2023, compared to $28.6 million at December 31, 2022.
11 unchanged sentences
If an entity intends to sell or it is more likely than not it will be required to sell the security before recovery of its amortized cost basis, the security’s amortized cost is written down to fair value through income.
−Removed: If an entity does not intend to sell the security and it is not more likely than not that the entity will be required to sell the security before recovery of its amortized cost basis less any current-period loss, a credit loss exists and an allowance for credit losses is recorded, limited to the amount that the fair value of the security is less than its amortized cost basis.
+Added: If an entity does not intend to sell the security and it is not more likely than not that the entity will be required to sell the security before recovery of its amortized cost basis, then the Corporation evaluates whether the decline in fair value has resulted from credit losses or other factors.
+Added: If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security is compared to the amortized cost basis of the security.
+Added: If the present value of cash flows expected to be collected is less than the amortized cost basis for the security, a credit loss exists and an allowance for credit losses is recorded, limited to the amount that the fair value of the security is less than its amortized basis.
Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income, net of applicable taxes.
9 unchanged sentences
Net income for 2023 was $60.7 million, or $5.08 per share versus $71.1 million, or $5.82 per share for 2022.
−Removed: The increase in 2022 net income is primarily due to increased interest rates and growth in earning assets.
−Removed: Return on average assets at December 31, 2022 increased 28.18% to 1.41% compared to 1.10% at December 31, 2021.
+Added: The decrease in 2023 net income is primarily due to increased provision for credit losses, as well as decreased non-interest income and increased non-interest expenses, as described in those respective sections in the following pages.
+Added: Return on average assets at December 31, 2023 decreased 10.64% to 1.26% compared to 1.41% at December 31, 2022.
The primary components of income and expense affecting net income are discussed in the following analysis.
2 unchanged sentences
Net interest income increased in 2023 to $167.3 million compared to $165.0 million in 2022.
−Removed: Total average interest earning assets increased to $4.80 billion in 2022 from $4.61 billion in 2021.
+Added: Total average interest earning assets decreased to $4.56 billion in 2023 from $4.80 billion in 2022.
The tax-equivalent yield on these assets increased to 5.12% in 2023 from 3.92% in 2022.
−Removed: Total average interest-
−Removed: bearing liabilities increased to $3.61 billion in 2022 from $3.43 billion in 2021.
+Added: Total average interest-bearing liabilities decreased to $3.50 billion in 2023 from $3.61 billion in 2022.
The average cost of these interest-bearing liabilities increased to 1.74% in 2023 from 0.51% in 2022.
11 unchanged sentences
Non-interest earning assets:
−Removed: Cash and due from banks
Premises and equipment, net
39 unchanged sentences
The provision for credit losses charged to expense is based upon current expected loss and the results of a detailed analysis estimating an appropriate and adequate allowance for credit losses.
−Removed: The analysis is governed by Accounting Standards Codification (ASC 326), implemented in 2020, which uses an economic forecast that includes the impact of the COVID-19 pandemic.
−Removed: For the year ended December 31, 2022, the negative provision for credit losses was $2.0 million, a decrease of $4.5 million, or 182%, compared to 2021.
−Removed: The negative provision for the year was the result of several factors.
+Added: The analysis is governed by Accounting Standards Codification (ASC 326), implemented in 2020, which used an economic forecast that included the impact of the COVID-19 pandemic.
+Added: For the year ended December 31, 2023, the provision for credit losses was $7.3 million, an increase of $9.3 million, or 460%, compared to 2022.
+Added: The negative provision for the first quarter of 2022 was the result of several factors.
The first was the annual model recalibration.
11 unchanged sentences
Net charge-offs for 2023 were $7.3 million as compared to $6.5 million for 2022 and $2.6 million for 2021.
−Removed: Non-accrual loans, excluding TDR’s, decreased to $8.5 million at December 31, 2022 from $9.6 million at December 31, 2021.
−Removed: Loans past due 90 days and still on accrual increased to $1.1 million compared to $515 thousand at December 31, 2021.
+Added: Non-accrual loans, increased to $23.6 million at December 31, 2023 from $8.5 million at December 31, 2022.
+Added: The increase in non-accrual loans is due to a commercial relationship that was downgraded.
+Added: Loans past due 90 days and still on accrual decreased to $960 thousand compared to $1.1 million at December 31, 2022.
On July 12, 2022, the Corporation sold seven classified non-farm nonresidential commercial loans, which were acquired in the two acquisitions in 2019 and 2021, with a total principal balance of $14.9 million.
−Removed: The net recovery on the sale of $361 thousand includes the charge-off of the seven loans of $2,145 thousand, netted by the $2,072 thousand reserve on those loans, previously charged off in the period, and the $434 thousand unamortized discount
−Removed: remaining from the acquisitions.
−Removed: As the related charge offs were previously reserved for and related to acquired loans, the increase in net charge offs for the year does not have a significant impact on the future expected losses.
+Added: The net recovery on the sale of $361 thousand includes the charge-off of the seven loans of $2,145 thousand, netted by the $2,072 thousand reserve on those loans, previously
+Added: charged off in the period, and the $434 thousand unamortized discount remaining from the acquisitions.
+Added: As the related charge offs were previously reserved for and related to acquired loans, the increase in net charge offs for 2022 does not have a significant impact on the future expected losses.
NON-INTEREST INCOME
−Removed: Non-interest income of $46.7 million increased $4.6 million from the $42.1 million earned in 2021.
−Removed: The change in non-interest income from 2021 to 2022 was primarily driven by a $4.0 million legal settlement received in February, 2022, and a $2.5 million bank owned life insurance mortality payment.
−Removed: The Corporation does not expect these items to reoccur.
+Added: Non-interest income of $42.7 million decreased $4.0 million from the $46.7 million earned in 2022.
+Added: The change in non-interest income from 2022 to 2023 was primarily driven by a $4.0 million legal settlement received in February, 2022.
+Added: The Corporation does not expect this item to reoccur.
NON-INTEREST EXPENSES
Non-interest expenses increased to $130.2 million in 2023 from $126.0 million in 2022.
−Removed: The year-over-year changes are, in part, impacted by the acquisition of Hancock Bancorp in the fourth quarter of 2021.
+Added: The increase in non-interest expenses is consistent with the rate of increases in prior years and considered normal with the growth of our business.
The Corporation’s federal income tax provision was $11.8 million in 2023 compared to $16.7 million in 2022.
The overall effective tax rate in 2023 of 16.3% decreased as compared to a 2022 effective rate of 19.0%.
+Added: The decrease in effective tax rate is due to a $1 million increase in tax credit investments, as well as an increase in tax exempt interest income.
COMPARISON OF 2022 TO 2021
Net income for 2022 was $71.1 million, or $5.82 per share versus $53.0 million, or $4.02 per share for 2021.
−Removed: The decrease in
−Removed: 2021 net income is due to increased expenses from the Hancock acquisition, as well as declining interest rates.
−Removed: Net interest income decreased $2.9 million in 2021 compared to 2020.
−Removed: The provision for credit losses decreased $8.0 million from $10.5 million in 2020 to $2.5 million in 2021.
−Removed: Non-interest expenses increased $4.6 million and non-interest income decreased $392 thousand.
−Removed: The increase in non-interest expenses was largely due to the acquisition of HopFed, Inc.
−Removed: The provision for income taxes increased $934 thousand from 2020 to 2021 and the effective tax rate increased to 19.2% in 2021 from 17.8% in 2020.
−Removed: The increase is primarily due to increase of general business tax credits benefits earned in 2020.
+Added: The increase in 2022 net income is primarily due to increased interest rates and growth in earning assets .
+Added: Net interest income increased $21.6 million in 2022 compared to 2021.
+Added: The provision for credit losses decreased $4.5 million from $2.5 million in 2021 to a negative provision of $2.0 million in 2022.
+Added: Non-interest income increased $4.6 million and non-interest expenses increased $8.6 million.
+Added: The change in non-interest income from 2021 to 2022 was primarily driven by a $4.0 million legal settlement received in February 2022, and a $2.5 million bank owned life insurance mortality payment.
+Added: The Corporation does not expect these items to reoccur.
+Added: The year-over-year changes in non-interest expenses are, in part, impacted by the acquisition of Hancock Bancorp in the fourth quarter of 2021.
+Added: The provision for income taxes increased $4.1 million from 2021 to 2022 and the effective tax rate decreased to 19.0% in 2022 from 19.2% in 2021.
+Added: The increase in income tax expense is primarily due to the overall increase in net income before income taxes.
COMPARISON AND DISCUSSION OF 2023 BALANCE SHEET TO 2022
2 unchanged sentences
Loans, net increased by $100.4 million to $3.13 billion.
−Removed: Deposits decreased $40.7 million while borrowings decreased by $28.8 million.
−Removed: Total shareholders’ equity decreased $107.3 million to $475.3 million at December 31, 2022.
−Removed: Accumulated other comprehensive income decreased $137.6 million primarily due to the market value of the securities portfolio, which reflected the large decrease in securities pricing.
−Removed: In 2022 dividends paid by the Corporation totaled $1.17 per share.
+Added: Deposits decreased $278.8 million while borrowings increased by $95.3 million.
+Added: Total shareholders’ equity increased $52.7 million to $528.0 million at December 31, 2023.
+Added: Accumulated other comprehensive income increased $12.9 million primarily due to the market value of the securities portfolio, which reflected a slight increase in securities pricing.
+Added: In 2023 dividends declared by the Corporation totaled $0.99 per share.
There were also 40,496 shares from the treasury with a value of $1.52 million that were contributed to the ESOP plan in 2023 compared to 29,966 shares with a value of $1.45 million in 2022.
2 unchanged sentences
During 2023 the portfolio’s balance decreased by 5.4%.
−Removed: The average life of the portfolio
−Removed: increased from 5.0 years in 2021 to 6.9 years in 2022.
+Added: Given the performance of the
+Added: market, the Corporation shifted away from purchases to replace maturities in 2023.
+Added: The average life of the portfolio decreased from 6.9 years in 2022 to 6.5 years in 2023.
The portfolio structure will continue to provide cash flows to be reinvested during 2024.
17 unchanged sentences
(1) Distribution of maturities is based on the estimated life of the asset.
−Removed: Net unrealized gain/loss on available for sale securities decreased $188.1 million from a net unrealized gain of $19.9 million in 2021 to a net unrealized loss of $168.2 million in 2022.
−Removed: This decrease was primarily due to the significant decline in the markets in 2022.
−Removed: The decrease is not related to credit, but due to interest rates.
+Added: Net unrealized gain/loss on available for sale securities increased $14.8 million from a net unrealized loss of $168.2 million in 2022 to a net unrealized loss of $153.4 million in 2023.
The Corporation does not expect realized losses, as there is no intent to sell at a loss.
9 unchanged sentences
Variable interest rates
+Added: Commercial Real Estate represents $1.3 million of total exposure as of December 31, 2023, and is within regulatory guidance.
+Added: This exposure is well diversified by geography, real estate type, and industry designation.
+Added: During the underwriting process, Commercial Real Estate is stressed using a combination of several risk variables, such as interest rate change, cap rate changes, revenue and expense variances, and term changes.
+Added: Periodic review of this exposure is performed to identify and monitor any potential weaknesses within a specific credit.
ALLOWANCE FOR CREDIT LOSSES
22 unchanged sentences
These components are added together and compared to the balance of our allowance at the evaluation date.
−Removed: The allowance for credit losses as a percentage of total loans decreased to 1.30% at year-end 2022 compared to 1.72%
−Removed: at year-end 2021.
−Removed: The decrease was the result of several factors.
−Removed: The first was the annual model recalibration.
−Removed: Each year, in the first quarter, management reviews each model variable to determine if adjustments are necessary to improve the model’s predictability.
−Removed: In the first quarter 2022 the delay periods were shortened to pick up more recent losses.
−Removed: Also, the qualitative factor maximum scorecard ranges for certain cohorts were reduced, which reduced the reserve.
−Removed: Secondly, management removed two qualitative factors that were deemed no longer applicable.
−Removed: The first was related to acquisition uncertainty, which management believes to have seasoned adequately that it was no longer warranted.
−Removed: The second was related to the CECL model and the related uncertainty.
−Removed: The uncertainty surrounded the newness of the model and potential regulatory scrutiny.
−Removed: Following two exam cycles, management elected to remove the factor.
−Removed: Also, during the quarter, historical loss rates continued to decline, which lowers the required reserve.
−Removed: The historical loss rate declined in most segments.
−Removed: The declines in historical loss rates were offset by increased qualitative factors due to the concerns of continuing inflation and overall economic conditions during the year, exclusive of the recalibration items noted above.
+Added: The allowance for credit losses as a percentage of total loans decreased to 1.26% at year-end 2023 compared to 1.30% at year-end 2022.
Based on management’s analysis of the current portfolio, an evaluation that includes consideration of changes in CECL model assumptions of credit quality, economic conditions, and loan composition, management believes the allowance is adequate.
−Removed: Non-performing loans of $13.4 million at December 31, 2022 decreased from $14.9 million at December 31, 2021.
+Added: Non-performing loans of $24.6 million at December 31, 2023 increased from $9.6 million at December 31, 2022.
+Added: The increase in nonperforming loans is due to a commercial relationship that was downgraded.
The table below presents the allocation of the allowance to the loan portfolios at year-end.
5 unchanged sentences
It is the Corporation’s policy to discontinue the accrual of interest on loans where, in management’s opinion, serious doubt exists as to collectability.
−Removed: The amounts shown below represent non-accrual loans, loans which have been restructured to provide for a reduction or deferral of interest or principal because of deterioration in the financial condition of the borrower and those loans which are past due more than 90 days where the Corporation continues to accrue interest.
−Removed: Restructured loans decreased in 2022 and increased in 2021 due to the decreased number and balance of loans added combined with the continued receipt of payments in accordance with the restructuring terms.
−Removed: Additional information regarding restructured loans is available in the footnotes to the financial statements.
+Added: The amounts shown below represent non-accrual loans and those loans which are past due more than 90 days where the Corporation continues to accrue interest.
Non-accrual loans
−Removed: Accruing restructured loans
−Removed: Nonaccrual restructured loans
Accruing loans past due over 90 days
1 unchanged sentence
The ratio of the allowance for loan losses as a percentage of nonperforming loans was 161.9% at December 31, 2023, compared to 414.4% in 2022.
−Removed: In the footnotes to the financial statements the amount reported for nonperforming loans is the recorded investment
−Removed: which includes accrued interest receivable.
+Added: In the footnotes to the financial statements the amount reported for nonperforming loans is the recorded investment which includes accrued interest receivable.
The following loan categories comprise significant components of the nonperforming loans at December 31, 2023 and 2022:
18 unchanged sentences
Other time deposits
+Added: Deposits decreased 6.86% to $4.1 billion at September 30, 2023 compared to December 31, 2022.
+Added: The decline was in part driven by a decline in interest bearing public funds checking, and a decline in institutional deposits as a result of a pricing decision.
+Added: Brokered time deposits decreased to $747 thousand at December 31, 2023, from $8.5 million at December 31, 2022.
+Added: The Corporation estimates that uninsured deposits (1) totaled $938.9 million, or 23% of total deposits, at December 31, 2023, compared to $1.27 billion, or 29%, at December 31, 2022.
The maturities of certificates of deposit of more than $100 thousand outstanding at December 31, 2023, are summarized as follows:
4 unchanged sentences
Over 12 months
+Added: (1) Uninsured deposits include the Call Report estimate of uninsured deposits less affiliate deposits, estimated insured portion of servicing deposits, additional structured FDIC coverage and collateral deposits.
OTHER BORROWINGS
−Removed: Advances from the Federal Home Loan Bank decreased to $9.6 million in 2022 compared to $15.9 million in 2021.
+Added: Advances from the Federal Home Loan Bank increased to $108.6 million in 2023 compared to $9.6 million in 2022.
The Asset/Liability Committee reviews these funding sources and considers the related strategies on a monthly basis.
29 unchanged sentences
The change in interest rates assumes a parallel shift in interest rates of 100, 200, and 300 basis points.
−Removed: Given a 100 basis point increase in rates, net interest income would increase 1.94% over the next 12 months and increase 4.64% over the following 12 months.
−Removed: Given a 100 basis point decrease in rates, net interest income would decrease 3.30% over the next 12 months and decrease 6.74% over the following 12 months.
+Added: Given a 100 basis point increase in rates, net interest income would decrease 1.28% over the next 12 months and increase 1.33% over the following 12 months.
+Added: Given a 100 basis point decrease in rates, net interest income would increase 0.74% over the next 12 months and decrease 2.08% over the following 12 months.
These estimates assume all rate changes occur overnight and management takes no action as a result of this change.
7 unchanged sentences
Given the current rate environment, the Corporation anticipates $13.0 million in securities to be called within the next 12 months.
+Added: The Corporation also has $197.7 million of unused borrowing capacity available with the Federal Home Loan Bank of Indianapolis, $237.5 million available with the Federal Reserve Bank, and $125 million of available fed funds lines with correspondent banks.
+Added: With these sources of funds, the Corporation currently anticipates adequate liquidity to meet the expected obligations of its customers.
The Corporation also has additional sources of liquidity available through secured and unsecured borrowing capacity.
16 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.