COMMERCE BANCSHARES INC MO

Previous wording

The following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes and with the statistical information and financial data appearing in this report as well as the Company's 2023 Annual Report on Form 10-K. Results of operations for the three and six months ended June 30, 2024 are not necessarily indicative of results to be attained for any other period.

Current wording

The following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes and with the statistical information and financial data appearing in this report as well as the Company's 2023 Annual Report on Form 10-K. Results of operations for the three and nine months ended September 30, 2024 are not necessarily indicative of results to be attained for any other period.

Previous wording

For the quarter ended June 30, 2024, net income attributable to Commerce Bancshares, Inc. (net income) amounted to $139.6 million, an increase of $11.8 million, or 9.2%, compared to the second quarter of the previous year. For the current quarter, the annualized return on average assets was 1.86%, the annualized return on average equity was 18.52%, and the efficiency ratio was 55.95%. Diluted earnings per common share was $1.07 per share in the current quarter, an increase of 10.3% compared to $.97 per share in the second quarter of 2023, and increased 24.4% compared to $.86 per share in the previous quarter.

Current wording

For the quarter ended September 30, 2024, net income attributable to Commerce Bancshares, Inc. (net income) amounted to $138.0 million, an increase of $17.4 million, or 14.4%, compared to the third quarter of the previous year. For the current quarter, the annualized return on average assets was 1.80%, the annualized return on average equity was 16.81%, and the efficiency ratio was 56.31%. Diluted earnings per common share was $1.07 per share in the current quarter, an increase of 16.3% compared to $.92 per share in the third quarter of 2023, and did not change compared to $1.07 per share in the previous quarter.

Previous wording

Compared to the second quarter of last year, net interest income increased $12.7 million, or 5.1%, mainly due to an increase in interest income on loans of $26.1 million and a $21.7 million decrease in interest expense on borrowings. This increase was partly offset by an increase of $29.7 million in interest expense on deposits. The provision for credit losses decreased $1.0 million, or 15.5%, compared to the same quarter in the prior year. Non-interest income increased $4.6 million, or 3.1%, compared to the second quarter of 2023, mainly due to an increase in trust fees, capital market fees, and deposit account fees, partly offset by lower letter of credit fees. Net gains on investment securities totaled $3.2 million in the current quarter compared to net gains of $3.4 million in the same quarter of last year. Securities gains in the current quarter primarily resulted from net gains of $178.2 million on equity investments and net gains in fair value of $5.7 million recorded on private equity investments. These gains were largely offset by net losses of $179.1 million on sales of available for sale debt securities. Non-interest expense increased $4.6 million, or 2.0%, over the second quarter of 2023, mainly due to increases in salaries expense and data processing and software expense, partly offset by lower deposit insurance expense and lower marketing expense.

Current wording

Compared to the third quarter of last year, net interest income increased $13.8 million, or 5.6%, mainly due to an increase in interest income on loans of $13.8 million and a $10.5 million decrease in interest expense on borrowings. This increase in interest income was partly offset by an increase of $7.6 million in interest expense on deposits. The provision for credit losses decreased $2.5 million, or 21.5%, compared to the same quarter in the prior year. Non-interest income increased $16.1 million, or 11.2%, compared to the third quarter of 2023, mainly due to an increase in trust fees, gains on sales of real estate, capital market fees, and deposit account fees. Net gains on investment securities totaled $3.9 million in the current quarter compared to net gains of $4.3 million in the same quarter of last year. Securities gains in the current quarter primarily resulted from net gains of $2.0 million on sales of private equity investments and net gains in fair value of $7.4 million recorded on private equity investments. These gains were partly offset by net losses of $5.4 million on sales of available for sale debt securities. Non-interest expense increased $9.6 million, or 4.2%, over the third quarter of 2023, mainly due to increases in salaries and benefits expense, data processing and software expense, and marketing expense, partly offset by lower deposit insurance expense.

Previous wording

Net income for the first six months of 2024 was $252.2 million, an increase of $5.0 million, or 2.0%, from the same period last year. Diluted earnings per common share was $1.93, an increase of 2.7% compared to $1.88 per share in the same period last year. For the first six months of 2024, the annualized return on average assets was 1.67%, the annualized return on average equity was 16.98%, and the efficiency ratio was 58.75%. Net interest income increased $10.1 million, or 2.0%, over the same period last year. This growth was largely due to an increase of $67.0 million in interest income on loans, an increase of $16.5 million in interest earned on deposits with banks, and a $24.8 million decrease in interest expense on borrowings, largely offset by a $85.3 million increase in interest expense on deposits. The provision for credit losses was $10.3 million for the first six months of 2024, compared to a provision of $17.9 million in the same period last year. Non-interest income increased $15.9 million, or 5.6%, from the first six months of last year mainly due to higher trust and deposit account fees. Non-interest expense increased $26.2 million, or 5.8%, over the first six months of last year mainly due to increases in salaries and data processing and software expense and higher litigation settlement expense.

Current wording

Net income for the first nine months of 2024 was $390.2 million, an increase of $22.4 million, or 6.1%, from the same period last year. Diluted earnings per common share was $3.00, an increase of 7.1% compared to $2.80 per share in the same period last year. For the first nine months of 2024, the annualized return on average assets was 1.71%, the annualized return on average equity was 16.92%, and the efficiency ratio was 57.92%. Net interest income increased $23.9 million, or 3.2%, over the same period last year. This growth was largely due to an increase of $80.8 million in interest income on loans, an increase of $19.8 million in interest earned on deposits with banks, and a $35.4 million decrease in interest expense on borrowings, partly offset by a $92.9 million increase in interest expense on deposits. The provision for credit losses was $19.4 million for the first nine months of 2024, compared to a provision of $29.6 million in the same period last year. Non-interest income increased $32.0 million, or 7.5%, from the first nine months of last year mainly due to higher trust fees, deposit account fees, and capital market fees. Non-interest expense increased $35.8 million, or 5.3%, over the first nine months of last year mainly due to increases in salaries expense, data processing and software expense, and litigation settlement expense.

Previous wording

Net interest income in the second quarter of 2024 was $262.2 million, an increase of $12.7 million over the second quarter of 2023. On a fully taxable-equivalent (FTE) basis, net interest income totaled $264.6 million in the second quarter of 2024, up $12.8 million over the same period last year and up $13.3 million over the previous quarter. The increase in net interest income compared to the second quarter of 2023 was mainly due to higher interest income earned on loans (FTE) of $26.5 million and lower interest expense on borrowings of $21.7 million, partly offset by higher deposit interest expense of $29.7 million. The increase in total interest earned on loans (FTE) was the result of higher loan yields on all loan products, especially commercial loans, many of which have variable rates, coupled with higher average balances. Interest expense on borrowings decreased mainly due to lower average balances, while the increase in deposit interest expense was due to higher average rates paid. The Company's net yield on earning assets (FTE) was 3.55% in the current quarter compared to 3.12% in the second quarter of 2023.

Current wording

Net interest income in the third quarter of 2024 was $262.4 million, an increase of $13.8 million over the third quarter of 2023. On a fully taxable-equivalent (FTE) basis, net interest income totaled $264.6 million in the third quarter of 2024, up $13.7 million over the same period last year and up $60 thousand over the previous quarter. The increase in net interest income compared to the third quarter of 2023 was mainly due to higher interest income earned on loans (FTE) of $14.1 million and lower interest expense on borrowings of $10.6 million, partly offset by higher deposit interest expense of $7.6 million and lower investment securities interest income of $7.0 million. The increase in total interest earned on loans (FTE) was mainly the result of higher loan yields on most loan products, especially commercial loans, many of which have variable rates. Interest income on investment securities declined mainly due to lower average balances. Interest expense on borrowings decreased mainly due to lower average balances, while the increase in deposit interest expense was due to higher average rates paid, partly offset by lower average balances. The Company's net yield on earning assets (FTE) was 3.50% in the current quarter compared to 3.11% in the third quarter of 2023.

Previous wording

Total interest income (FTE) increased $20.8 million over the second quarter of 2023. Interest income on loans (FTE) was $269.2 million during the second quarter of 2024, an increase of $26.5 million, or 10.9%, over the same quarter last year. The increase in interest income over the same quarter of last year was primarily due to an increase of 46 basis points in the average rate earned and growth of $505.4 million, or 3.0%, in average loan balances. Most of the increase in interest income occurred in the business, business real estate and consumer loan categories. The largest increase to interest income occurred in business loan interest, which grew $10.7 million due to a 53 basis point increase in the average rate earned, coupled with growth in average balances of $223.0 million, or 3.9%. Business real estate loan interest income increased $4.5 million due to an increase of 30 basis points in the average rate earned and higher average balances of $125.2 million, or 3.5%. Consumer loan interest income grew $5.2 million due to a 93 basis point increase in the average rate earned. In addition, construction and land loan interest income increased $1.9 million due to an increase of 44 basis points in the average rate earned and higher average loan balances of $21.3 million, or 1.5%. Personal real estate loan interest income grew $3.5 million due to a 36 basis point increase in the average rate earned and growth of $84.0 million, or 2.8%, in average loan balances.

Current wording

Total interest income (FTE) increased $10.7 million over the third quarter of 2023. Interest income on loans (FTE) was $271.8 million during the third quarter of 2024, an increase of $14.1 million, or 5.5%, over the same quarter last year. The increase in interest income over the same quarter of last year was primarily due to an increase of 33 basis points in the average rate earned and growth of $57.6 million in average loan balances. Most of the increase in interest income occurred in the business, personal real estate and consumer loan categories. The largest increase to interest income occurred in business loan interest, which grew $7.4 million due to a 40 basis point increase in the average rate earned, coupled with growth in average balances of $117.6 million, or 2.0%. Personal real estate loan interest income increased $3.3 million due to an increase of 37 basis points in the average rate earned and higher average balances of $55.1 million, or 1.8%. Consumer loan interest income grew $3.9 million due to a 67 basis point increase in the average rate earned and higher average balances of $27.2 million, or 1.3%. Business real estate loan interest income grew $292 thousand due to a 15 basis point increase in the average rate earned, partly offset by a decrease of $61.2 million, or 1.7%, in average loan balances. These increases in interest income were partly offset by a decrease in construction and land loan interest income of $1.4 million due to a decline of $108.3 million, or 7.2%, in average loan balances, partly offset by a 27 basis point increase in the average rate earned.

Previous wording

Interest income on investment securities (FTE) was $71.4 million during the second quarter of 2024, which was a decrease of $3.2 million from the same quarter last year. The decrease in interest income occurred mainly in interest earned on mortgage-backed securities and asset-backed securities. Interest income earned on mortgage-backed securities declined $4.1 million due to a $762.6 million, or 12.1%, decrease in average balances. In addition, the Company recorded a $740 thousand adjustment to premium amortization at June 30, 2024, which increased income and reflected slower forward prepayment speed estimates on mortgage-backed securities. The adjustment this quarter was lower than the $1.7 million in the same quarter last year. Interest income earned on asset-backed securities declined $3.6 million due to lower average balances of $1.0 billion, or 36.9%, partly offset by a 42 basis point increase in the average rate earned. Interest income earned on state and municipal obligations declined $2.5 million due to a $462.6 million, or 30.2%, decrease in average balances. These decreases to interest income were partly offset by growth in interest income on U.S. government and federal agency obligations of $6.2 million, driven by a 162 basis point increase in the average rate earned and higher average balances of $166.3 million. Interest income related to the Company's U.S. Treasury inflation-protected securities, which is tied to the non-seasonally adjusted Consumer Price Index (CPI-U), increased $1.2 million over the same quarter last year. Additionally, the average rate earned on investment securities during the three months ended June 30, 2024 increased 38 basis points over the same period in the prior year. The average balance of the total investment portfolio (excluding unrealized fair value adjustments on available for sale debt securities) was $10.4 billion in the second quarter of 2024, compared to $12.6 billion in the second quarter of 2023.

Current wording

Interest income on investment securities (FTE) was $63.3 million during the third quarter of 2024, which was a decrease of $7.0 million from the same quarter last year. The decrease in interest income occurred mainly in interest earned on mortgage-backed securities which declined $7.0 million due to a $1.1 billion, or 17.5%, decrease in average balances and an 11 basis point decline in the average rate earned. In addition, the Company recorded a $286 thousand adjustment to premium amortization at September 30, 2024, which decreased income and reflected slightly faster forward prepayment speed estimates on mortgage-backed securities. This was lower than the $1.3 million adjustment increasing income in the same quarter last year. Interest income earned on asset-backed securities declined $3.9 million due to lower average balances of $1.0 billion, or 40.3%, partly offset by a 46 basis point increase in the average rate earned. Interest income earned on state and municipal obligations declined $2.5 million mainly due to a $534.9 million, or 38.4%, decrease in average balances. Interest earned on other securities decreased $5.3 million, mainly due to a $2.3 million dividend from a private equity investment received in the third quarter of 2023, coupled with a decline of $290.3 million, or 56.4%, in average balances of debt securities. These decreases to interest income were partly offset by growth in interest income on U.S. government and federal agency obligations of $11.7 million, driven by a 137 basis point increase in the average rate earned and higher average balances of $902.7 million, or 91.5%. Interest income related to the Company's U.S. Treasury inflation-protected securities, which is tied to the non-seasonally adjusted Consumer Price Index (CPI-U), decreased $1.8 million from the same quarter last year. Additionally, the average rate earned on investment securities during the three months ended September 30, 2024 increased 19 basis points over the same period in the prior year. The average balance of the total investment portfolio (excluding unrealized fair value adjustments on available for sale debt securities) was $10.0 billion in the third quarter of 2024, compared to $11.9 billion in the third quarter of 2023.

Previous wording

The average fully taxable-equivalent yield on total interest earning assets was 4.98% in the second quarter of 2024, up from 4.34% in the second quarter of 2023.

Current wording

The average fully taxable-equivalent yield on total interest earning assets was 4.96% in the third quarter of 2024, up from 4.51% in the third quarter of 2023.

Previous wording

Total interest expense increased $8.0 million compared to the second quarter of 2023 due to an increase of $29.7 million in interest expense on interest bearing deposits, partly offset by a $21.7 million decrease in interest expense on borrowings. The increase in deposit interest expense resulted mainly from an increase of $26.8 million in interest expense on interest checking and money market deposit accounts due to an 80 basis point increase in the average rate paid and an increase of $243.7 million in average balances. In addition, interest expense on certificates of deposit increased $2.9 million mainly due to an increase of 55 basis points in the average rate paid. The overall rate paid on total deposits increased 70 basis points over the same quarter last year. Interest expense on other borrowings decreased $21.1 million due to a decrease of $1.6 billion in average Federal Home Loan Bank (FHLB) borrowings. In addition, interest expense on federal funds purchased decreased $2.8 million mainly due to a $242.1 million decrease in the average balance, while interest expense on customer repurchase agreements increased $2.3 million mainly due to a 35 basis point increase in the average rate paid. The overall average rate incurred on all interest bearing liabilities was 2.21% and 1.87% in the second quarters of 2024 and 2023, respectively.

Current wording

Total interest expense decreased $2.9 million compared to the third quarter of 2023 due to a decrease of $10.6 million in interest expense on borrowings, partly offset by a $7.6 million increase in interest expense on interest bearing deposits. Interest expense on other borrowings decreased $9.2 million due to a decrease of $684.8 million in average Federal Home Loan Bank (FHLB) borrowings. In addition, interest expense on federal funds purchased decreased $4.0 million mainly due to a $302.2 million decrease in the average balance, while interest expense on customer repurchase agreements increased $2.6 million mainly due to a 36 basis point increase in the average rate paid. The increase in deposit interest expense resulted mainly from an increase of $14.4 million in interest expense on interest checking and money market deposit accounts due to a 41 basis point increase in the average rate paid and an increase of $194.2 million, or 1.5%, in average balances. This increase was partly offset by a decrease in interest expense on certificates of deposit of $6.8 million mainly due to a $622.3 million, or 19.8%, decrease in average balances. The overall rate paid on total deposits increased 24 basis over the same quarter last year. The overall average rate incurred on all interest bearing liabilities was 2.22% and 2.12% in the third quarters of 2024 and 2023, respectively.

Previous wording

Net interest income (FTE) for the first six months of 2024 was $515.9 million compared to $505.2 million for the same period in 2023. For the first six months of 2024, the net interest margin was 3.44% compared to 3.18% for the same period in 2023.

Current wording

Net interest income (FTE) for the first nine months of 2024 was $780.5 million compared to $756.1 million for the same period in 2023. For the first nine months of 2024, the net interest margin was 3.46% compared to 3.16% for the same period in 2023.

Previous wording

Total interest income (FTE) for the first six months of 2024 increased $70.4 million over the same period last year mainly due to higher interest income on loans (FTE) and balances at the Federal Reserve, partly offset by lower interest income on investment securities (FTE). Loan interest income (FTE) increased $67.7 million, or 14.5%, due to a 59 basis point increase in the average rate earned and a $590.1 million, or 3.6%, increase in average loan balances. Most of the increase occurred in the business, business real estate and consumer loan categories, but interest income in all loan categories increased due to higher average rates earned and average loan balances. Interest income on investment securities (FTE) decreased $9.0 million due to a $2.3 billion decrease in average balances, partly offset by a 32 basis point increase in the average rate earned. Interest earned on asset-backed and mortgage-backed securities decreased $7.2 million and $4.9 million, respectively, due to lower average balances, partly offset by increases in the average rate earned. Interest earned on state and municipal obligations decreased $6.0 million due to declines in both the average balance and the average rate earned. These decreases in interest income on investment securities were partly offset by an increase in interest earned on U.S. government and federal agency obligations of $5.5 million, mainly due to an increase in the average rate earned. Interest income on securities purchased under agreements to resell decreased $4.0 million due to lower average balances, partly offset by higher average rates earned. Interest income on balances at the Federal Reserve increased $16.5 million due to higher average balances and average rates earned.

Current wording

Total interest income (FTE) for the first nine months of 2024 increased $81.1 million over the same period last year mainly due to higher interest income on loans (FTE) and balances at the Federal Reserve, partly offset by lower interest income on investment securities (FTE). Loan interest income (FTE) increased $81.9 million, or 11.3%, due to a 50 basis point increase in the average rate earned and a $410.7 million, or 2.5%, increase in average loan balances. Most of the increase occurred in the business, business real estate and consumer loan categories, but interest income in all loan categories increased mostly due to higher average rates earned. Interest income on investment securities (FTE) decreased $16.0 million due to a $2.2 billion decrease in average balances, partly offset by a 28 basis point increase in the average rate earned. Interest earned on mortgage-backed and asset-backed securities decreased $11.8 million and $11.1 million, respectively, due to lower average balances, partly offset by increases in the average rate earned. Interest earned on state and municipal obligations decreased $8.5 million due to declines in both the average balance and the average rate earned. These decreases in interest income on investment securities were partly offset by an increase in interest earned on U.S. government and federal agency obligations of $17.2 million, due to increases in both the average balance and the average rate earned. Interest income on securities purchased under agreements to resell decreased $3.5 million due to lower average balances, partly offset by higher average rates earned. Interest income on deposits at the Federal Reserve increased $19.8 million due to higher average balances and average rates earned.

Previous wording

Total interest expense for the first six months of 2024 increased $59.7 million compared to the same period last year. Interest expense on deposits increased $85.3 million, due to a 97 basis point increase in the average rate paid and a $493.6 million increase in average balances. Interest expense on borrowings decreased $25.6 million, mainly due lower FHLB borrowings of $1.1 billion. In addition, interest expense on federal funds purchased declined mainly due to lower average balances, while interest expense on customer repurchase agreements increased due to higher average rates and average balances. The overall cost of total interest bearing liabilities increased to 2.21% compared to 1.55% in the same period last year.

Current wording

Total interest expense for the first nine months of 2024 increased $56.7 million compared to the same period last year. Interest expense on deposits increased $92.9 million, due to a 72 basis point increase in the average rate paid and a $138.3 million increase in average balances. Interest expense on borrowings decreased $36.2 million, mainly due lower FHLB borrowings of $950.9 million. In addition, interest expense on federal funds purchased declined mainly due to lower average balances, while interest expense on customer repurchase agreements increased due to higher average rates and average balances. The overall cost of total interest bearing liabilities increased to 2.21% compared to 1.74% in the same period last year.

Previous wording

The table below is a summary of net bank card transaction fees for the six month periods ended June 30, 2024 and 2023.

Current wording

The table below is a summary of net bank card transaction fees for the nine month periods ended September 30, 2024 and 2023.

Previous wording

For the second quarter of 2024, total non-interest income amounted to $152.2 million compared to $147.6 million in the same quarter last year, which was an increase of $4.6 million, or 3.1%. The increase was mainly due to higher trust fees, deposit account fees and capital market fees, partly offset by lower net bank card fees and letter of credit fees. Trust fees increased $5.0 million, or 10.6%, mainly due to growth of $4.8 million in private client trust fees. Bank card transaction fees for the current quarter declined $2.2 million, or 4.5%, from the same period last year, mainly due to lower net corporate card fees, partly offset by growth in net merchant fees. The decline in net corporate card fees of $3.0 million was mainly due to lower interchange fees and higher rewards expense. Net merchant fees increased $506 thousand mainly due to higher interchange fees, partly offset by higher network expense. Compared to the second quarter of last year, deposit account fees increased $2.7 million, or 11.9%, mainly due to higher corporate cash management fees of $2.4 million. Consumer brokerage fees declined $199 thousand, while capital market fees increased $1.8 million, or 61.6%, mainly due to higher underwriting fees. Other non-interest income decreased $3.1 million, or 17.8%, mainly due to decreases of $2.3 million in letter of credit fees and $919 thousand in swap fees.

Current wording

For the third quarter of 2024, total non-interest income amounted to $159.0 million compared to $142.9 million in the same quarter last year, which was an increase of $16.1 million, or 11.2%. The increase was mainly due to higher trust fees, capital market fees, deposit account fees and gains on the sales of real estate. Trust fees increased $5.5 million, or 11.1%, mainly due to growth of $4.5 million in private client trust fees. Bank card transaction fees for the current quarter grew $671 thousand, or 1.4%, over the same period last year. Net credit card fees increased $527 thousand and debit card fees increased $288 thousand mainly due to higher interchange fees and lower rewards expense. Net corporate card fees grew $234 thousand mainly due to lower rewards expense, while net merchant fees decreased $378 thousand mainly due to higher network expense. Compared to the third quarter of last year, deposit account fees increased $2.3 million, or 9.9%, mainly due to higher corporate cash management fees of $2.1 million. Consumer brokerage fees increased $799 thousand, mainly due to higher annuity fees, while capital market fees increased $2.5 million, or 70.1%, mainly due to higher trading securities income. Other non-interest income increased $3.9 million, or 28.9%, mainly due to an increase of $3.4 million in gains on the sales of real estate and an increase of $1.8 million in fair value adjustments was recorded on the Company's deferred compensation plan, which is held in a trust and recorded as both an asset and liability, affecting both other income and other expense. These increases were partly offset by lower tax credit sales income of $1.4 million.

Previous wording

Non-interest income for the first six months of 2024 was $301.1 million compared to $285.2 million in the first six months of 2023, which was an increase of $15.9 million, or 5.6%. The increase was mainly due to higher trust fees, deposit account fees and capital market fees, partly offset by lower net bank card fees. Trust fees increased $10.8 million, or 11.7%, mainly due to higher private client and institutional trust fees. Bank card transaction fees for the current year declined $2.0 million, or 2.0%, from the same period last year, mainly due to a decrease of $2.9 million in net corporate card fees, partly offset by an increase in net merchant fees of $402 thousand. Deposit account fees increased $5.1 million, or 11.5%, mainly due to higher corporate cash management fees and overdraft and return item fees. Capital market fees increased $2.3 million, or 37.2%, mainly due to higher underwriting fees, while loan fees and sales increased $1.2 million mainly due to higher loan commitment fees and mortgage banking revenue. Other non-interest income decreased $764 thousand, or 2.5%, mainly due to decreases of $2.2 million in letter of credit fees and $1.4 million in swap fees. These decreases were partly offset by higher tax credit sales income of $1.9 million and cash sweep commissions of $1.3 million.

Current wording

Non-interest income for the first nine months of 2024 was $460.1 million compared to $428.2 million in the first nine months of 2023, which was an increase of $32.0 million, or 7.5%. The increase was mainly due to higher trust fees, deposit account fees and capital market fees. Trust fees increased $16.3 million, or 11.5%, mainly due to higher private client and institutional trust fees. Bank card transaction fees for the current year declined $1.3 million, or .9%, from the same period last year, mainly due to a decrease of $2.6 million in net corporate card fees, partly offset by an increase in net credit card fees of $846 thousand. Deposit account fees increased $7.4 million, or 10.9%, mainly due to higher corporate cash management fees. Capital market fees increased $4.8 million, or 49.0%, mainly due to higher trading securities and underwriting income, while loan fees and sales increased $1.7 million mainly due to higher loan commitment fees and mortgage banking revenue. Other non-interest income increased $3.1 million, or 7.1%, mainly due to higher gains on the sales of assets of $3.3 million and an increase of $1.9 million in cash sweep commissions. These increases were partly offset by declines in letter of credit fees of $2.3 million and swap fees of $1.6 million.

Previous wording

Net gains on investment securities, which were recognized in earnings during the three months ended June 30, 2024 and 2023, are shown in the table above. Net securities gains of $3.2 million were reported in the second quarter of 2024, compared to net gains of $3.4 million in the same period last year. The net gains in the second quarter of 2024 were mainly comprised of net gains of $178.2 million on equity investments and net gains in fair value of $5.7 million recorded on private equity investments. These gains were largely offset by net losses of $179.1 million on sales of available for sale debt securities. The net gains on investment securities for the same quarter last year were primarily comprised of $9.1 million of net gains in fair value on the Company’s private equity investments, partially offset by losses of $5.4 million on the sale of available for sale securities.

Current wording

Net gains on investment securities, which were recognized in earnings during the three months ended September 30, 2024 and 2023, are shown in the table above. Net securities gains of $3.9 million were reported in the third quarter of 2024, compared to net gains of $4.3 million in the same period last year. The net gains in the third quarter of 2024 were mainly comprised of net gains in fair value of $7.4 million recorded on private equity investments and net gains of $2.0 million on the sales of private equity investments. These gains were partly offset by net losses of $5.4 million on sales of available for sale debt securities. The net gains on investment securities for the same quarter last year were primarily comprised of $5.6 million of net gains in fair value on the Company’s private equity investments, partially offset by a loss of $1.2 million on the sale of private equity investments.

Previous wording

Net gains on investment securities of $3.0 million were recognized in earnings for the six months ended June 30, 2024, compared to net gains of $3.1 million for the same period in 2023. Net gains in the first half of 2024 were mainly comprised of net gains of $178.3 million on equity investments and net gains in fair value of $12.8 million recorded on private equity investments, largely offset by net losses of $187.5 million on sales of available for sale securities. Net gains in the first half of 2023 were mainly comprised of net gains in fair value of $11.3 million on private equity investments, due to fair value adjustments, partially offset by losses of $8.4 million on sales of available for sale debt securities. The portion of private equity activity attributable to minority interests is reported as non-controlling interest in the consolidated statements of income and resulted in expense of $1.8 million during the first six months of 2024 and expense of $2.5 million during the first six months of 2023.

Current wording

Net gains on investment securities of $6.8 million were recognized in earnings for the nine months ended September 30, 2024, compared to net gains of $7.4 million for the same period in 2023. Net gains in the first nine months of 2024 were mainly comprised of net gains of $178.1 million on equity investments and net gains in fair value of $20.2 million recorded on private equity investments, largely offset by net losses of $192.9 million on sales of available for sale securities. Net gains in the first nine months of 2023 were mainly comprised of net gains in fair value of $16.9 million on private equity investments, due to fair value adjustments, partially offset by losses of $8.4 million on sales of available for sale debt securities. The portion of private equity activity attributable to minority interests is reported as non-controlling interest in the consolidated statements of income and resulted in expense of $3.4 million during the first nine months of 2024 and expense of $3.3 million during the first nine months of 2023.

Previous wording

The Company's significant gains in equity securities for the three and six months ended June 30, 2024 primarily relate to gains recorded on its shares of Visa, as described in Note 3, Investment Securities. Likewise, the $179.1 million losses realized on the Company's available for sale debt securities portfolio relate to the successful execution of its planned available for sale debt security portfolio repositioning, in which the Company sold bonds with an amortized cost of $1.2 billion and subsequently reinvested the proceeds into higher yielding available for sale debt securities. Additional information about the Company's available for sale debt portfolio repositioning transactions is discussed in Note 3, Investment Securities.

Current wording

The Company's significant gains in equity securities for the three and nine months ended September 30, 2024 primarily relate to gains recorded on its shares of Visa, as described in Note 3, Investment Securities. Likewise, the $192.9 million losses realized on the Company's available for sale debt securities portfolio mainly relate to the successful execution of its planned available for sale debt security portfolio repositioning, in which the Company sold bonds with an amortized cost of $1.2 billion and subsequently reinvested the proceeds into higher yielding available for sale debt securities. Additional information about the Company's available for sale debt portfolio repositioning transactions is discussed in Note 3, Investment Securities.

Previous wording

Non-interest expense for the second quarter of 2024 amounted to $232.2 million, an increase of $4.6 million, or 2.0%, compared to expense of $227.6 million in the second quarter of last year. The increase in expense over the same period last year was mainly due to higher salaries expense, data processing and software expense and other non-interest expense, partly offset by lower marketing and deposit insurance expense. Salaries and employees benefits expense increased $3.7 million, or 2.5%, mainly due to higher full-time salaries expense of $3.8 million and other salaries expense of $1.0 million, partly offset by lower healthcare expense of $1.5 million. Full-time equivalent employees totaled 4,724 at June 30, 2024, compared to 4,680 at June 30, 2023. Data processing and software expense increased $2.8 million, or 9.8%, mainly due to increased costs for service providers. Occupancy expense decreased $451 thousand, or 3.5%, while marketing expense declined $1.0 million, or 15.9%. Deposit insurance expense decreased $1.8 million partly due to a $1.2 million accrual adjustment in the current quarter to the special assessment by the FDIC to replenish the Deposit Insurance Fund. Other non-interest expense increased $1.2 million, or 5.7%, mainly due to a $5.0 million donation to a related charitable foundation, partly offset by deconversion expense of $2.1 million recorded in the same period last year.

Current wording

Non-interest expense for the third quarter of 2024 amounted to $237.6 million, an increase of $9.6 million, or 4.2%, compared to expense of $228.0 million in the third quarter of last year. The increase in expense over the same period last year was mainly due to higher salaries and benefits expense, data processing and software expense and marketing expense, partly offset by lower deposit insurance expense. Salaries and employee benefits expense increased $6.3 million, or 4.3%, mainly due to higher full-time salaries expense of $3.5 million and incentive compensation expense of $2.2 million. Full-time equivalent employees totaled 4,711 at September 30, 2024, compared to 4,714 at September 30, 2023. Data processing and software expense increased $1.5 million, or 4.7%, mainly due to increased costs for service providers, and marketing expense increased $1.1 million, or 18.0%. Deposit insurance expense decreased $1.1 million which was partly the result of a $525 thousand accrual adjustment in the current quarter to the FDIC's special assessment. Other non-interest expense increased $1.2 million, or 14.6%, mainly due to an increase of $1.8 million in fair value adjustments recorded on the Company's deferred compensation plan.

Previous wording

Non-interest expense amounted to $477.9 million for the first six months of 2024, an increase of $26.2 million, or 5.8%, over the first six months of 2023. Salaries and benefits expense increased $11.1 million, or 3.8%, mainly due to higher full-time salaries expense, other salaries expense and payroll taxes, partly offset by a decrease in healthcare expense. Data processing and software expense increased $5.8 million, or 10.2%, due to increased costs for service providers and higher bank card processing fees. Occupancy expense increased $364 thousand, or 1.4%, while equipment expense increased $387 thousand, or 4.0%, due to higher depreciation and service contract expense. Marketing expense decreased $2.4 million, or 20.7%, while deposit insurance increased $1.5 million, or 17.5%, due to accrual adjustments in 2024 to the special assessment by the FDIC. Other non-interest expense increased $9.3 million, or 23.3%, mainly due to litigation settlement expense of $10.0 million, net of insurance, and the charitable donation of $5.0 million, partly offset by deconversion expense of $2.1 million recorded in 2023.

Current wording

Non-interest expense amounted to $715.5 million for the first nine months of 2024, an increase of $35.8 million, or 5.3%, over the first nine months of 2023. Salaries and benefits expense increased $17.4 million, or 4.0%, mainly due to higher full-time salaries expense, incentive compensation and payroll taxes. Data processing and software expense increased $7.3 million, or 8.3%, due to increased costs for service providers and higher bank card processing fees. Equipment expense increased $976 thousand, or 6.8%, mainly due to higher depreciation expense, while marketing expense decreased $1.3 million, or 7.4%. Other non-interest expense increased $11.9 million, or 40.5%, mainly due to litigation settlement expense of $10.0 million, net of insurance, and a $5.0 million donation to a related charitable foundation, both recorded in 2024, partly offset by deconversion expense of $2.1 million recorded in 2023.

Previous wording

The following schedule provides a breakdown of the allowance for credit losses on loans (ACL) by loan class and the percentage of the allowance for loan losses to the related loan class at period end.

Current wording

The following schedule provides a breakdown of the allowance for credit losses on loans (ACL) by loan class and the percentage of the allowance for credit losses to the related loan class at period end.

Previous wording

Net loan charge-offs in the second quarter of 2024 amounted to $9.8 million, compared to $8.9 million in the prior quarter and $6.5 million in the second quarter of last year. Comp ared to the same period last year, total net loan charge-offs in thesecond quarter of 2024 increased $3.3 million and increased $880 thousand from the previous quarter. The increase over the prior year was mainly driven by increases in net charge-offs on consumer credit card, consumer and business loans of $2.1 million, $531 thousand, and $457 thousand, respectively. The increase from the previous quarter was driven by the increase in net charge-offs on consumer credit card and business loans.

Current wording

Net loan charge-offs in the third quarter of 2024 amounted to $9.6 million, compared to $9.8 million in the prior quarter and $9.8 million in the third quarter of last year. Comp ared to the same period last year, total net loan charge-offs in thethird quarter of 2024 decreased $205 thousand and decreased $178 thousand from the previous quarter. The decrease over the prior year was mainly driven by a $2.5 million decrease in net charge-offs on business loans, partly offset by higher net charge-offs of $1.6 million and $962 thousand on consumer credit card and consumer loans, respectively. The decrease from the previous quarter was driven by decreases in net charge-offs on consumer credit card and business loans, partly offset by an increase in net charge-offs on consumer loans.

Previous wording

For the three months ended June 30, 2024, annualized net charge-offs on average consumer credit card loans were 4.91%, compared to 4.60% in the previous quarter and 3.38% in the same period last year. Consumer loan annualized net charge-offs in the current quarter amounted to .34%, compared to .38% in the prior quarter and .24% in the same period last year. In thesecond quarter of 2024, total annualized net loan charge-offs were .23%, compared to .21% in the previous quarter and .16% in the same period last year.

Current wording

For the three months ended September 30, 2024, annualized net charge-offs on average consumer credit card loans were 4.46%, compared to 4.91% in the previous quarter and 3.32% in the same period last year. Consumer loan annualized net charge-offs in the current quarter amounted to .52%, compared to .34% in the prior quarter and .34% in the same period last year. In thethird quarter of 2024, total annualized net loan charge-offs were .22%, compared to .23% in the previous quarter and .23% in the same period last year.

Previous wording

For the three months ended June 30, 2024, the provision for credit losses on loanswas $7.8 million which was a $2.0 million increase over the $5.9 million provision recorded in the same period last year and a $902 thousand increase over the $6.9 million provision recorded at March 31, 2024. The increase in the provision for credit losses on loans during the second quarter of 2024 over the same period last year was due to higher net loan charge-offs during the second quarter of 2024, partly offset by a larger reduction in the allowance for credit losses on loans in the current quarter compared to the same period last year.

Current wording

The provision for credit losses on loanswas $11.9 million, which was a $1.5 million decrease over the $13.3 million provision recorded in the same period last year and a $4.0 million increase over the $7.8 million provision recorded at June 30, 2024. The decrease in the provision for credit losses on loans during the third quarter of 2024 over the same period last year was due to growth in the allowance for credit losses on loans in the third quarter of 2023.

Previous wording

For thesix months ended June 30, 2024, net loan charge-offs amounted to $18.6 million, which was a $5.4 million increase over the first six months of 2023. The increase in net charge-offs on loans during the first six months of 2024 was primarily driven by an increase in net charge-offs on consumer credit card and consumer loans. For the six months ended June 30, 2024, annualized net loan charge-offs on consumer credit card and consumer loans were 4.75% and .36%, respectively, compared to 3.27% and .25%, respectively, for the same period last year. The annualized net charge-offs on loans for the six months ended June 30, 2024 and 2023, respectively, were .22% and .16%.

Current wording

For the nine months ended September 30, 2024, net loan charge-offs amounted to $28.2 million, which was a $5.2 million increase over the first nine months of 2023. The increase in net charge-offs on loans during the first nine months of 2024 was primarily driven by an increase in net charge-offs on consumer credit card and consumer loans, partly offset by lower net charge-offs on business loans. For the nine months ended September 30, 2024, annualized net loan charge-offs on consumer credit card and consumer loans were 4.65% and .41%, respectively, compared to 3.28% and .28%, respectively, for the same period last year. The annualized net charge-offs on loans for the nine months ended September 30, 2024 and 2023, respectively, were .22% and .18%.

Previous wording

For the six months ended June 30, 2024, the provision for credit losses on loans was $14.8 million, which was a $7.0 million decrease from the $21.8 million provision recorded in the same period last year. Changes in the provision are driven by changes in the estimate for the allowance for credit losses on loans. The decrease in the provision for credit losses on loans in the first half of 2024 compared to the same period last year was primarily due to a reduction of the allowance for credit losses on loans during 2024, caused in part by an improving economic forecast in 2024, whereas the allowance for credit losses on loans in the first half of 2023 was increasing due to a weakening economic forecast which included a mild recession. The decrease in the provision for credit losses on loans during the first half of 2024 compared to the same period in the prior year was partly offset by higher net charge-offs recorded in the six months ended June 30, 2024 compared to the first half of 2023.

Current wording

For the nine months ended September 30, 2024, the provision for credit losses on loans was $26.7 million, which was an $8.5 million decrease from the $35.2 million provision recorded in the same period last year. Changes in the provision are driven by changes in the estimate for the allowance for credit losses on loans. The decrease in the provision for credit losses on loans in the first nine months of 2024 compared to the same period last year was primarily due to a reduction of the allowance for credit losses on loans during 2024, caused in part by an improving economic forecast in 2024, whereas the allowance for credit losses on loans in the first nine months of 2023 was increasing due to a weakening economic forecast which included a mild recession. The decrease in the provision for credit losses on loans during the first nine months of 2024 compared to the same period in the prior year was partly offset by higher net charge-offs recorded in the nine months ended September 30, 2024 compared to the first nine months of 2023.

Previous wording

For the six months ended June 30, 2024, the allowance for credit losses on loans decreased by $3.8 million, compared to the allowance for credit losses on loans at December 31, 2023. During the six months ended June 30, 2024, the allowance for credit losses on commercial loans decreased by $984 thousand, while the allowance for credit losses related to personal banking loans, including consumer credit card loans, decreased $2.9 million. The decrease in the allowance for credit losses on loans during the first half of 2024 was primarily the result of a slightly more optimistic economic forecast at June 30, 2024, coupled with a faster prepayment speed assumption in the personal real estate portfolio compared to the assumptions used at December 31, 2023. The allowance for credit losses on loans was $158.6 million at June 30, 2024 and was .92%, .94% and .94% of total loans at June 30, 2024, December 31, 2023 and June 30, 2023, respectively.

Current wording

For the nine months ended September 30, 2024, the allowance for credit losses on loans decreased by $1.6 million, compared to the allowance for credit losses on loans at December 31, 2023. During the nine months ended September 30, 2024, the allowance for credit losses on commercial loans decreased by $1.2 million, while the allowance for credit losses related to personal banking loans, including consumer credit card loans, decreased $402 thousand. The decrease in the allowance for credit losses on loans during the first nine months of 2024 was primarily the result of a slightly more optimistic economic forecast at September 30, 2024 and a decrease in outstanding loan balances, partially offset by an increase in the allowance related to loans risk-rated special mention, substandard, or non-accrual. The allowance for credit losses on loans was $160.8 million at September 30, 2024 and was .94%, .94% and .95% of total loans at September 30, 2024, December 31, 2023 and September 30, 2023, respectively.

Previous wording

In the current quarter, the provision for credit losses on unfunded lending commitments was a benefit of $2.4 million, compared to a provision of $607 thousand for the three months ended June 30, 2023. For the six months ended June 30, 2024, the provision for credit losses on unfunded commitments was a benefit of $4.5 million compared to a benefit of $3.9 million in the first six months of 2023. At June 30, 2024, the liability for unfunded lending commitments was $20.7 million, compared to $25.2 million at December 31, 2023 and $29.2 million at June 30, 2023. The liability decreased primarily due to decreases in unfunded lending commitment balances, coupled with improvement in loss rate assumptions for the Company's construction loans. The Company's unfunded lending commitments primarily relate to construction loans, and the Company's estimate for credit losses in its unfunded lending commitments utilizes the same model and forecast as its estimate for credit losses on loans. See Note 2 for further discussion of the model inputs utilized in the Company's estimate of credit losses.

Current wording

In the current quarter, the provision for credit losses on unfunded lending commitments was a benefit of $2.7 million, compared to a benefit of $1.7 million for the nine months ended September 30, 2023. For the nine months ended September 30, 2024, the provision for credit losses on unfunded commitments was a benefit of $7.3 million compared to a benefit of $5.6 million in the first nine months of 2023. At September 30, 2024, the liability for unfunded lending commitments was $18.0 million, compared to $25.2 million at December 31, 2023 and $27.5 million at September 30, 2023. The liability decreased primarily due to decreases in unfunded lending commitment balances, coupled with improvement in loss rate assumptions for the Company's construction loans. The Company's unfunded lending commitments primarily relate to construction loans, and the Company's estimate for credit losses in its unfunded lending commitments utilizes the same model and forecast as its estimate for credit losses on loans. See Note 2 for further discussion of the model inputs utilized in the Company's estimate of credit losses.

Previous wording

Non-accrual loans totaled $19.3 million at June 30, 2024, an increase of $12.0 million from the balance at December 31, 2023. The increase occurred mainly in business real estate non-accrual loans, which increased $15.0 million. The increase was partly offset by a $3.1 million decrease in business non-accrual loans. At June 30, 2024, non-accrual loans were comprised of business real estate (78.0%), revolving home equity (10.2%), personal real estate (9.2%), and business (2.6%) loans. Foreclosed real estate totaled $143 thousand at June 30, 2024, a decrease of $127 thousand compared to December 31, 2023. Total loans past due 90 days or more and still accruing interest were $18.6 million as of June 30, 2024, a decrease of $3.3 million from

Current wording

Non-accrual loans totaled $18.4 million at September 30, 2024, an increase of $11.1 million from the balance at December 31, 2023. The increase occurred mainly in business real estate non-accrual loans, which increased $14.9 million. The increase was partly offset by a $3.3 million decrease in business non-accrual loans. At September 30, 2024, non-accrual loans were comprised of business real estate (81.1%), revolving home equity (10.7%), personal real estate (6.2%), and business (1.9%) loans. Foreclosed real estate totaled $1.0 million at September 30, 2024, an increase of $780 thousand compared to December 31, 2023. Total loans past due 90 days or more and still accruing interest totaled $22.0 million as of September 30, 2024, an increase of $122 thousand from December 31, 2023. Balances by class for non-accrual loans and loans past due 90 days and still accruing interest are shown in the "Delinquent and non-accrual loans" section in Note 2 to the consolidated financial statements.

Previous wording

In addition to the non-performing and past due loans mentioned above, the Company also has identified loans for which management has concerns about the ability of the borrowers to meet existing repayment terms. They are classified as substandard under the Company's internal rating system. The loans are generally secured by either real estate or other borrower assets, reducing the potential for loss should they become non-performing. Although these loans are generally identified as potential problem loans, they may never become non-performing. Such loans totaled $242.2 million at June 30, 2024 compared with $216.4 million at December 31, 2023, resulting in an increase of $25.8 million, or 11.9%.

Current wording

In addition to the non-performing and past due loans mentioned above, the Company also has identified loans for which management has concerns about the ability of the borrowers to meet existing repayment terms. They are classified as substandard under the Company's internal rating system. The loans are generally secured by either real estate or other borrower assets, reducing the potential for loss should they become non-performing. Although these loans are generally identified as potential problem loans, they may never become non-performing. Such loans totaled $319.4 million at September 30, 2024 compared with $216.4 million at December 31, 2023, resulting in an increase of $103.0 million, or 47.6%.

Previous wording

When borrowers are experiencing financial difficulty, the Company may agree to modify the contractual terms of a loan to a borrower in order to assist the borrower in repaying principal and interest owed to the Company. At June 30, 2024, the Company held $84.7 million of loans that had been modified during the six months ended June 30, 2024. These loans are further discussed in the"Modifications for borrowers experiencing financial difficulty"section in Note 2 to the consolidated financial statements.

Current wording

When borrowers are experiencing financial difficulty, the Company may agree to modify the contractual terms of a loan to a borrower in order to assist the borrower in repaying principal and interest owed to the Company. At September 30, 2024, the Company held $184.4 million of loans that had been modified during the nine months ended September 30, 2024. These loans are further discussed in the"Modifications for borrowers experiencing financial difficulty"section in Note 2 to the consolidated financial statements.

Previous wording

The Company's portfolio of construction and land loans, as shown in the table below, amounted to 8.1% of total loans outstanding at June 30, 2024. The largest component of construction and land loans was commercial construction, which decreased $65.2 million during the six months ended June 30, 2024. At June 30, 2024, multi-family residential construction loans totaled approximately $469.2 million, or 40.5%, of the commercial construction loan portfolio, compared to $414.6 million, or 33.9%, at December 31, 2023.

Current wording

The Company's portfolio of construction and land loans, as shown in the table below, amounted to 8.1% of total loans outstanding at September 30, 2024. The largest component of construction and land loans was commercial construction, which decreased $53.8 million during the nine months ended September 30, 2024. At September 30, 2024, multi-family residential construction loans totaled approximately $459.1 million, or 39.3%, of the commercial construction loan portfolio, compared to $414.6 million, or 33.9%, at December 31, 2023.

Previous wording

Total business real estate loans were $3.6 billion at June 30, 2024 and comprised 20.8% of the Company's total loan portfolio. These loans include properties such as manufacturing and warehouse buildings, small office and medical buildings, churches, hotels and motels, shopping centers, and other commercial properties. At June 30, 2024, 33.1% of business real estate loans were for owner-occupied real estate properties, which have historically resulted in lower net charge-off rates than non-owner-occupied commercial real estate loans.

Current wording

Total business real estate loans were $3.6 billion at September 30, 2024 and comprised 21.0% of the Company's total loan portfolio. These loans include properties such as manufacturing and warehouse buildings, small office and medical buildings, churches, hotels and motels, shopping centers, and other commercial properties. At September 30, 2024, 33.4% of business real estate loans were for owner-occupied real estate properties, which have historically resulted in lower net charge-off rates than non-owner-occupied commercial real estate loans.

Previous wording

The Company had $331.4 million in revolving home equity loans at June 30, 2024 that were collateralized by residential real estate. Most of these loans (92.1%) are written with terms requiring interest-only monthly payments. These loans are offered in three main product lines: LTV up to 80%, 80% to 90%, and 90% to 100%. As of June 30, 2024, the outstanding principal of loans with an original LTV higher than 80% was $29.9 million, or 9.0% of the portfolio, compared to $32.3 million as of December 31, 2023. Total revolving home equity loan balances over 30 days past due were $4.9 million at June 30, 2024 and $4.4 million at December 31, 2023, and the outstanding balance of revolving home equity loans on non-accrual status was $2.0 million at both June 30, 2024 and December 31, 2023. The weighted average FICO score for the total portfolio balance at June 30, 2024 is 785. At maturity, the accounts are re-underwritten, and if they qualify under the Company's credit, collateral and capacity policies, the borrower is given the option to renew the line of credit or convert the outstanding balance to an amortizing loan. If criteria are not met, amortization is required, or the borrower may pay off the loan. During the remainder of 2024 through 2026, approximately 16% of the Company's current outstanding balances are expected to mature. Of these balances, approximately 84% have a FICO score of 700 or higher. The Company does not expect a significant increase in losses as these loans mature, due to their high FICO scores, low LTVs, and low historical loss levels.

Current wording

The Company had $342.4 million in revolving home equity loans at September 30, 2024 that were collateralized by residential real estate. Most of these loans (92.0%) are written with terms requiring interest-only monthly payments. These loans are offered in three main product lines: LTV up to 80%, 80% to 90%, and 90% to 100%. As of September 30, 2024, the outstanding principal of loans with an original LTV higher than 80% was $30.7 million, or 9.0% of the portfolio, compared to $32.3 million as of December 31, 2023. Total revolving home equity loan balances over 30 days past due were $4.7 million at September 30, 2024 and $4.4 million at December 31, 2023, and the outstanding balance of revolving home equity loans on non-accrual status was $2.0 million at both September 30, 2024 and December 31, 2023. The weighted average FICO score for the total portfolio balance at September 30, 2024 is 785. At maturity, the accounts are re-underwritten, and if they qualify under the Company's credit, collateral and capacity policies, the borrower is given the option to renew the line of credit or convert the outstanding balance to an amortizing loan. If criteria are not met, amortization is required, or the borrower may pay off the loan. During the remainder of 2024 through 2026, approximately 11% of the Company's current outstanding balances are expected to mature. Of these balances, approximately 82% have a FICO score of 700 or higher. The Company does not expect a significant increase in losses as these loans mature, due to their high FICO scores, low LTVs, and low historical loss levels.

Previous wording

Within the consumer loan portfolio are several direct and indirect product lines, which include loans for the purchase of automobiles, motorcycles, marine and RVs. Auto loans comprised 38.6% of the consumer loan portfolio at June 30, 2024, and outstanding balances for auto loans were $827.6 million and $820.3 million at June 30, 2024 and December 31, 2023, respectively. The balances over 30 days past due amounted to $9.9 million at June 30, 2024 and $9.5 million at December 31, 2023, respectively, and comprised 1.2% of the outstanding balances of these loans at both June 30, 2024 and December 31, 2023. For the six months ended June 30, 2024, $196.4 million of new auto loans were originated, compared to $210.1 million during the first six months of 2023. At June 30, 2024, the automobile loan portfolio had a weighted average FICO score of 757, and net charge-offs on auto loans were .4% of average auto loans.

Current wording

Within the consumer loan portfolio are several direct and indirect product lines, which include loans for the purchase of automobiles, motorcycles, marine and RVs. Auto loans comprised 37.9% of the consumer loan portfolio at September 30, 2024, and outstanding balances for auto loans were $799.7 million and $820.3 million at September 30, 2024 and December 31, 2023, respectively. The balances over 30 days past due amounted to $11.1 million at September 30, 2024 and $9.5 million at December 31, 2023, respectively, and comprised 1.4% of the outstanding balances of these loans at September 30, 2024 and 1.2% at December 31, 2023. For the nine months ended September 30, 2024, $260.6 million of new auto loans were originated, compared to $290.3 million during the first nine months of 2023. At September 30, 2024, the automobile loan portfolio had a weighted average FICO score of 754, and net charge-offs on auto loans were .6% of average auto loans.

Previous wording

The Company's consumer loan portfolio also includes fixed rate home equity loans, typically for home repair or remodeling, and these loans comprised 10.7% of the consumer loan portfolio at June 30, 2024. Losses on these loans have historically been low, and the Company saw net recoveries of $62 thousand for the first six months of 2024. Private banking loans comprised 34.2% of the consumer loan portfolio at June 30, 2024. The Company's private banking loans are generally well-collateralized, and at June 30, 2024 were secured primarily by assets held by the Company's trust department. The remaining portion of the Company's consumer loan portfolio is comprised of health services financing, motorcycles, marine and RV loans. Net charge-offs on private banking, health services financing, motorcycle and marine and RV loans totaled $2.1 million in the first six months of 2024 and were .4% of the average balances of these loans at June 30, 2024.

Current wording

The Company's consumer loan portfolio also includes fixed rate home equity loans, typically for home repair or remodeling, and these loans comprised 10.8% of the consumer loan portfolio at September 30, 2024. Losses on these loans have historically been low, and the Company saw net recoveries of $78 thousand for the first nine months of 2024. Private banking loans comprised 34.6% of the consumer loan portfolio at September 30, 2024. The Company's private banking loans are generally well-collateralized, and at September 30, 2024 were secured primarily by assets held by the Company's trust department. The remaining portion of the Company's consumer loan portfolio is comprised of health services financing, motorcycles, marine and RV loans. Net charge-offs on private banking, health services financing, motorcycle and marine and RV loans totaled $3.2 million in the first nine months of 2024 and were .4% of the average balances of these loans at September 30, 2024.

Previous wording

The Company offers low promotional rates on selected consumer credit card products. Out of a portfolio at June 30, 2024 of $566.9 million in consumer credit card loans outstanding, approximately $112.3 million, or 19.8%, carried a low promotional rate. Within the next six months, $50.0 million of these loans are scheduled to convert to the ongoing higher contractual rate. To mitigate some of the risk involved with this credit card product, the Company performs credit checks and detailed analysis of the customer borrowing profile before approving the loan application. Management believes that the risks in the consumer loan portfolio are reasonable and the anticipated loss ratios are within acceptable parameters.

Current wording

The Company offers low promotional rates on selected consumer credit card products. Out of a portfolio at September 30, 2024 of $574.7 million in consumer credit card loans outstanding, approximately $116.0 million, or 20.2%, carried a low promotional rate. Within the next six months, $48.2 million of these loans are scheduled to convert to the ongoing higher contractual rate. To mitigate some of the risk involved with this credit card product, the Company performs credit checks and detailed analysis of the customer borrowing profile before approving the loan application. Management believes that the risks in the consumer loan portfolio are reasonable and the anticipated loss ratios are within acceptable parameters.

Previous wording

The Company's energy lending portfolio is comprised of lending to the petroleum and natural gas sectors and totaled $268.8 million, or 1.6% of total loans at June 30, 2024, a decrease of $3.2 million from December 31, 2023, as shown in the table below.

Current wording

The Company's energy lending portfolio is comprised of lending to the petroleum and natural gas sectors and totaled $262.2 million, or 1.5% of total loans at September 30, 2024, a decrease of $9.8 million from December 31, 2023, as shown in the table below.

Previous wording

Income tax expense was $38.6 million in the second quarter of 2024, compared to $31.7 million in the first quarter of 2024 and $36.0 million in the second quarter of 2023. The Company's effective tax rate, including the effect of non-controlling interest, was 21.7% in the second quarter of 2024, compared to 21.9% in the first quarter of 2024 and 22.0% in the second quarter of 2023.

Current wording

Income tax expense was $38.2 million in the third quarter of 2024, compared to $38.6 million in the second quarter of 2024 and $33.4 million in the third quarter of 2023. The Company's effective tax rate, including the effect of non-controlling interest, was 21.7% in the third quarter of 2024, unchanged from both the previous quarter, and the third quarter of 2023.

Previous wording

Total assets of the Company were $30.6 billion at June 30, 2024 and $31.7 billion at December 31, 2023. Earning assets (excluding the allowance for credit losses on loans and fair value adjustments on debt securities) amounted to $29.8 billion at June 30, 2024 and $31.1 billion at December 31, 2023, and consisted of 58% in loans and 33% in investment securities at June 30, 2024.

Current wording

Total assets of the Company were $31.5 billion at September 30, 2024 and $31.7 billion at December 31, 2023. Earning assets (excluding the allowance for credit losses on loans and fair value adjustments on debt securities) amounted to $30.5 billion at September 30, 2024 and $31.1 billion at December 31, 2023, and consisted of 56% in loans and 34% in investment securities at September 30, 2024.