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Financial report summary
?Risks
- Economic conditions in the market areas the Bank serves may adversely impact its earnings and could increase the credit risk associated with its loan portfolio and the value of its investment portfolio.
- Competition in the Bank’s market areas may limit future success.
- We may not be able to continue to grow organically or through acquisitions.
- Growth through future acquisitions could, in some circumstances, adversely affect profitability or other performance measures.
- If goodwill recorded in connection with acquisitions becomes impaired, it could have an adverse impact on earnings and capital.
- There can be no assurance we will be able to continue paying dividends on our common stock at recent levels.
- The allowance for credit losses may not be adequate to cover actual loan losses, which could adversely affect earnings.
- The Bank’s loan portfolio mix increases the exposure to credit risks tied to deteriorating conditions.
- The Bank has a high concentration of loans secured by real estate, so any future deterioration in the real estate markets could require material increases in the ACL and adversely affect our business, financial condition, and results of operations.
- Non-performing assets could increase, which could adversely affect our business, financial condition, and results of operations.
- A decline in the fair value of the Bank’s investment portfolio could adversely affect earnings and capital.
- The Bank is subject to environmental liability risk associated with our lending activities.
- We face competition from technologies used to support and enable banking and financial services.
- Fluctuating interest rates can adversely affect profitability and shareholders’ equity.
- We may be impacted by the retirement of London Interbank Offered Rate (“LIBOR”) as a reference rate.
- Our business is subject to the risks of earthquakes, floods, fires, and other natural catastrophes.
- Our future performance will depend on our ability to respond timely to technological change.
- A failure in or breach of the Bank’s operational or security systems, or those of the Bank’s third-party service providers, including as a result of cyber attacks, could disrupt business, result in the disclosure or misuse of confidential or proprietary information, damage our reputation, increase costs and cause losses.
- We operate in a highly regulated environment and changes or increases in, or supervisory enforcement of, banking or other laws and regulations or governmental fiscal or monetary policies could adversely affect us.
- National and international economic and geopolitical conditions could adversely affect our future results of operations or market price of our stock.
- Our business is heavily dependent on the services of members of the senior management team.
- We could suffer operational, reputational and financial harm if we fail to properly anticipate and manage risk.
- Changes in accounting standards could materially impact our financial statements.
- Climate change may materially adversely affect the Company's business, financial condition, and results of operations.
Management Discussion
- The banking industry experienced significant pressures during the current year with historic increases in interest rates during the last eighteen months and three notable bank failures in 2023. These events led to higher cost deposits and customers’ prioritizing the safety of their deposits. The Company was not immune to the impact of these events during 2023 and had the greatest pressure on its deposit costs and the resulting net interest margin. While the Company experienced an overall decline in net income during the year, the Company strategically navigated through the current year, which the Company believes will contribute to its long-term success.
- The Company ended the year at $27.743 billion in assets, which was a $1.107 billion, or 4 percent, increase over the prior year end and was driven by the increase in the loan portfolio and cash liquidity that more than offset the decrease in debt securities. Loan growth was $951 million, or 6 percent, during 2023 with increases in all loan categories. During the year, the Company focused on its diversified deposit and repurchase agreement product offerings resulting in a slight decline of $108 million, or 50 basis points, during the year. The Company also focused on maintaining a strong liquidity position and ended the current year with available liquidity of $15.0 billion including cash, borrowing capacity, and unpledged securities. Stockholders’ equity increased $177 million, or $1.57 per share, which was the combined result of earnings retention and the decrease in the unrealized loss on AFS debt securities in 2023. The Company declared quarterly dividends totaling $1.32 per share during 2023 and 2022.
- The Company had net income for the current year of $223 million, which was a decrease of $80.3 million, or 26 percent, over the prior year net income of $303 million, which was driven by the increase in cost of funds outpacing the increase in interest income. Diluted earnings per share for the year was $2.01, a decrease of 27 percent, from the 2022 diluted earnings per share of $2.74. The Company's net interest margin for 2023 was 2.73 percent, a 54 basis points decrease from the net interest margin of 3.27 percent from 2022, which was primarily driven by the volatile interest rate environment and the higher cost of funds. The Company was successful in controlling costs during the current year with an $8.5 million, or 2 percent, increase in non-interest expense which was primarily driven by a $6.0 million FDIC special assessment and the FDIC uniformly increasing all depository institutions premiums during 2023. Excluding the increase in regulatory assessment and insurance, non-interest expense decreased $7.3 million, or 2 percent, during the current year which was driven by increased operating efficiencies, a decrease in performance related compensation and a decrease in staffing levels.