CULLENFROST BANKERS INC

Previous wording

The following discussion should be read in conjunction with our consolidated financial statements, and notes thereto, for the year ended December 31, 2023, and the other information included in the 2023 Form 10-K. Operating results for the three and six months ended June 30, 2024 are not necessarily indicative of the results for the year ending December 31, 2024 or any future period.

Current wording

The following discussion should be read in conjunction with our consolidated financial statements, and notes thereto, for the year ended December 31, 2023, and the other information included in the 2023 Form 10-K. Operating results for the three and nine months ended September 30, 2024 are not necessarily indicative of the results for the year ending December 31, 2024 or any future period.

Previous wording

Net income available to common shareholders totaled $143.8 million, or $2.21 per diluted common share, and $277.9 million, or $4.27 per diluted common share, for the three and six months ended June 30, 2024 compared to $160.4 million, or $2.47 per diluted common share, and $336.4 million, or $5.17 per diluted common share for the three and six months ended June 30, 2023.

Current wording

Net income available to common shareholders totaled $144.8 million, or $2.24 per diluted common share, and $422.7 million, or $6.51 per diluted common share, for the three and nine months ended September 30, 2024, compared to $154.0 million, or $2.38 per diluted common share, and $490.4 million, or $7.54 per diluted common share for the three and nine months ended September 30, 2023.

Previous wording

Net income available to common shareholders decreased $16.6 million, or 10.4%, for the three months ended June 30, 2024 and decreased $58.6 million, or 17.4%, for the six months ended June 30, 2024 compared to the same periods in 2023. The decrease during the three months ended June 30, 2024 was primarily the result of a $31.9 million increase in non-interest expense and a $5.9 million increase in credit loss expense partly offset by an $11.4 million increase in net interest income, a $7.7 million increase in non-interest income, and a $2.1 million decrease in income tax expense. The decrease during the six months ended June 30, 2024 was primarily the result of a $73.0 million increase in non-interest expense, which included $9.0 million related to a special Federal Deposit Insurance Corporation (“FDIC”) deposit insurance assessment discussed below, and a $10.4 million increase in credit loss expense partly offset by a $13.8 million increase in non-interest income, a $9.4 million decrease in income tax expense, and a $1.7 million increase in net interest income.

Current wording

Net income available to common shareholders decreased $9.2 million, or 5.9%, for the three months ended September 30, 2024 and decreased $67.7 million, or 13.8%, for the nine months ended September 30, 2024, compared to the same periods in 2023. The decrease during the three months ended September 30, 2024 was primarily the result of a $30.2 million increase in non-interest expense and an $8.2 million increase in credit loss expense partly offset by an $18.9 million increase in net interest income, a $7.7 million increase in non-interest income, and a $2.6 million decrease in income tax expense. The decrease during the nine months ended September 30, 2024 was primarily the result of a $103.2 million increase in non-interest expense, which included $9.0 million related to a special Federal Deposit Insurance Corporation (“FDIC”) deposit insurance assessment discussed below, and an $18.6 million increase in credit loss expense partly offset by a $21.5 million increase in non-interest income, a $20.6 million increase in net interest income, and a $12.0 million decrease in income tax expense.

Previous wording

Net interest income is the difference between interest income on earning assets, such as loans and securities, and interest expense on liabilities, such as deposits and borrowings, which are used to fund those assets. Net interest income is our largest source of revenue, representing 77.9% of total revenue during the first six months of 2024. Net interest margin is the ratio of taxable-equivalent net interest income to average earning assets for the period. The level of interest rates and the volume and mix of earning assets and interest-bearing liabilities impact net interest income and net interest margin.

Current wording

Net interest income is the difference between interest income on earning assets, such as loans and securities, and interest expense on liabilities, such as deposits and borrowings, which are used to fund those assets. Net interest income is our largest source of revenue, representing 78.0% of total revenue during the first nine months of 2024. Net interest margin is the ratio of taxable-equivalent net interest income to average earning assets for the period. The level of interest rates and the volume and mix of earning assets and interest-bearing liabilities impact net interest income and net interest margin.

Previous wording

The Federal Reserve influences the general market rates of interest, including the deposit and loan rates offered by many financial institutions. As of June 30, 2024, approximately 41.3% of our loans had a fixed interest rate, while the remaining loans had floating interest rates that were primarily tied to a benchmark developed by the American Financial Exchange, the Secured Overnight Financing Rate (“SOFR”) (approximately 29.8%); the prime interest rate (approximately 21.7%); or the American Interbank Offered Rate (“AMERIBOR”) (approximately 7.1%). Certain other loans are tied to other indices; however, such loans do not make up a significant portion of our loan portfolio as of June 30, 2024.

Current wording

The Federal Reserve influences the general market rates of interest, including the deposit and loan rates offered by many financial institutions. As of September 30, 2024, approximately 41.7% of our loans had a fixed interest rate, while the remaining loans had floating interest rates that were primarily tied to a benchmark developed by the American Financial Exchange, the Secured Overnight Financing Rate (“SOFR”) (approximately 31.1%); the prime interest rate (approximately 21.0%); or the American Interbank Offered Rate (“AMERIBOR”) (approximately 6.1%). Certain other loans are tied to other indices; however, such loans do not make up a significant portion of our loan portfolio as of September 30, 2024.

Previous wording

As of June 30, 2024, the target range for the federal funds rate was 5.25% to 5.50%. In June 2024, the Federal Reserve released projections whereby the midpoint of the projected appropriate target range for the federal funds rate would fall to 5.1% by the end of 2024 and subsequently decrease to 4.1% by the end of 2025. While there can be no such assurance that any increases or decreases in the federal funds rate will occur, these projections imply up to a 25 basis point decrease in the federal funds rate during the remainder of 2024, followed by a 100 basis point decrease in 2025.

Current wording

As of September 30, 2024, the target range for the federal funds rate was 4.75% to 5.00%. In September 2024, the Federal Reserve released projections whereby the midpoint of the projected appropriate target range for the federal funds rate would fall to 4.4% by the end of 2024 and subsequently decrease to 3.4% by the end of 2025. While there can be no such assurance that any increases or decreases in the federal funds rate will occur, these projections imply up to a 50 basis point decrease in the federal funds rate during the remainder of 2024, followed by a 100 basis point decrease in 2025.

Previous wording

We are primarily funded by core deposits, with non-interest-bearing demand deposits historically being a significant source of funds. This lower-cost funding base is expected to have a positive impact on our net interest income and net interest margin in a rising interest rate environment. Nonetheless, our access to and pricing of deposits may be negatively impacted by, among other factors, periods of higher interest rates which could promote increased competition for deposits, including from new financial technology competitors, or provide customers with alternative investment options. During this most recent, higher interest rate cycle, we have seen a decrease in our non-interest-bearing deposits. See Item 3. Quantitative and Qualitative Disclosures About Market Risk elsewhere in this report for information about our sensitivity to interest rates. Further analysis of the components of our net interest margin is presented below.

Current wording

We are primarily funded by core deposits, with non-interest-bearing demand deposits historically being a significant source of funds. This lower-cost funding base is expected to have a positive impact on our net interest income and net interest margin, particularly in rising or high interest rate environments. Nonetheless, our access to and pricing of deposits may be negatively impacted by, among other factors, periods of higher interest rates which could promote increased competition for deposits, including from new financial technology competitors, or provide customers with alternative investment options. During this most recent, higher interest rate cycle, we have seen a decrease in our non-interest-bearing deposits, although as market interest rates for deposits decreased in the latter part of the third quarter of 2024, period-end non-interest bearing deposits increased $468.1 million compared to the end of the second quarter. See Item 3. Quantitative and Qualitative Disclosures About Market Risk elsewhere in this report for information about our sensitivity to increases and decreases in interest rates. Further analysis of the components of our net interest margin is presented below.

Previous wording

Taxable-equivalent net interest income for the three months ended June 30, 2024 increased $9.0 million, or 2.2%, while taxable-equivalent net interest income for the six months ended June 30, 2024 decreased $5.5 million, or 0.7%, compared to the same periods in 2023. Taxable-equivalent net interest income for the six months ended June 30, 2024 included 182 days compared to 181 for the same period in 2023 as a result of the leap year. The additional day added approximately $3.0 million to taxable-equivalent net interest income during the six months ended June 30, 2024. Excluding the impact of the additional day results in an effective decrease in taxable-equivalent net interest income of approximately $8.4 million during the six months ended June 30, 2024.

Current wording

Taxable-equivalent net interest income for the three months ended September 30, 2024 increased $17.8 million, or 4.4%, while taxable-equivalent net interest income for the nine months ended September 30, 2024 increased $12.4 million, or 1.0%, compared to the same periods in 2023. Taxable-equivalent net interest income for the nine months ended September 30, 2024 included 274 days compared to 273 for the same period in 2023 as a result of the leap year. The additional day added approximately $3.0 million to taxable-equivalent net interest income during the nine months ended September 30, 2024. Excluding the impact of the additional day results in an effective increase in taxable-equivalent net interest income of approximately $9.4 million during the nine months ended September 30, 2024.

Previous wording

The increase in taxable-equivalent net interest income during the three months ended June 30, 2024 was primarily related to increases in the average volume of and yield on loans; increases in the average volume of and yield on interest-bearing deposits (primarily amounts held in an interest-bearing account at the Federal Reserve); and an increase in the average yield on taxable securities, among other things. The impact of these items was partly offset by an increase in the average volume of higher-yielding time deposit accounts combined with increases in the average costs of interest-bearing deposit accounts and repurchase agreements and decreases in the average volumes of taxable and tax-exempt securities, among other things.

Current wording

The increase in taxable-equivalent net interest income during the three months ended September 30, 2024 was primarily related to increases in the average volume of and yield on loans; increases in the average yields on taxable and tax-exempt securities; and an increase in the average volume of interest-bearing deposits (primarily amounts held in an interest-bearing account at the Federal Reserve), among other things. The impact of these items was partly offset by an increase in the average volume of higher-yielding time deposit accounts; decreases in the average volumes of taxable and tax-exempt securities; increases in the average costs of interest-bearing deposit accounts; and an increase in the average volume of repurchase agreements, among other things.

Previous wording

The decrease in taxable-equivalent net interest income during the six months ended June 30, 2024 was primarily related to an increase in the average volume of higher-yielding time deposit accounts combined with increases in the average costs of interest-bearing deposit accounts and repurchase agreements and decreases in the average volumes of tax-exempt securities, taxable securities, and interest-bearing deposits (primarily amounts held in an interest-bearing account at the Federal Reserve), among other things. The impact of these items was partly offset by increases in the average volume of and yield on loans and increases in the average yields on interest-bearing deposits (primarily amounts held in an interest-bearing account at the Federal Reserve) and taxable securities, among other things.

Current wording

The increase in taxable-equivalent net interest income during the nine months ended September 30, 2024 was primarily related to increases in the average volume of and yield on loans and increases in the average yields on interest-bearing deposits (primarily amounts held in an interest-bearing account at the Federal Reserve) and taxable securities, and to a lesser extent, tax-exempt securities, among other things. The impact of these items was partly offset by an increase in the average volume of higher-yielding time deposit accounts combined with increases in the average costs of interest-bearing deposit accounts and repurchase agreements and decreases in the average volumes of tax-exempt securities, taxable securities, and interest-bearing deposits (primarily amounts held in an interest-bearing account at the Federal Reserve), among other things.

Previous wording

As a result of the aforementioned fluctuations, the taxable-equivalent net interest margin increased 9 basis points from 3.45% during the three months ended June 30, 2023 to 3.54% during the three months ended June 30, 2024 while the taxable-equivalent net interest margin increased 5 basis points from 3.46% during the six months ended June 30, 2023 to 3.51% during the six months ended June 30, 2024.

Current wording

As a result of the aforementioned fluctuations, the taxable-equivalent net interest margin increased 12 basis points from 3.44% during the three months ended September 30, 2023 to 3.56% during the three months ended September 30, 2024 while the taxable-equivalent net interest margin increased 7 basis points from 3.45% during the nine months ended September 30, 2023 to 3.52% during the nine months ended September 30, 2024.

Previous wording

The average volume of interest-earning assets for the three months ended June 30, 2024 decreased $402.7 million while the average volume of interest-earning assets for the six months ended June 30, 2024 decreased $1.2 billion compared to the same periods in 2023. The decrease in the average volume of interest-earning assets during the three months ended June 30, 2024 was primarily related to a $1.8 billion decrease in average taxable securities and an $891.4 million decrease in average tax-exempt securities partly offset by a $2.0 billion increase in average loans and a $275.5 million increase in average interest-bearing deposits (primarily amounts held in an interest-bearing account at the Federal Reserve). The average taxable-equivalent yield on interest-earning assets increased 46 basis points from 4.77% during the three months ended June 30, 2023 to 5.23% during the three months ended June 30, 2024.

Current wording

The average volume of interest-earning assets for the three months ended September 30, 2024 increased $734.2 million while the average volume of interest-earning assets for the nine months ended September 30, 2024 decreased $552.8 million compared to the same periods in 2023. The increase in the average volume of interest-earning assets during the three months ended September 30, 2024 was primarily related to a $2.1 billion increase in average loans and a $326.4 million increase in average interest-bearing deposits (primarily amounts held in an interest-bearing account at the Federal Reserve) partly offset by a $1.3 billion decrease in average taxable securities and an $375.2 million decrease in average tax-exempt securities. The average taxable-equivalent yield on interest-earning assets increased 34 basis points from 4.92% during the three months ended September 30, 2023 to 5.26% during the three months ended September 30, 2024.

Previous wording

The decrease in the average volume of interest-earning assets during the six months ended June 30, 2024 was primarily related to a $1.3 billion decrease in average taxable securities, a $1.2 billion decrease in average tax-exempt securities, and a $522.7 million decrease in average interest-bearing deposits (primarily amounts held in an interest-bearing account at the Federal Reserve) partly offset by a $1.9 billion increase in average loans. The average taxable-equivalent yield on interest-earning assets increased 51 basis points from 4.67 during the six months ended June 30, 2023 to 5.18% during the six months ended June 30, 2024. The average taxable-equivalent yields on interest-earning assets during the comparable periods was impacted by changes in market interest rates (as noted in the table above) and changes in the volume and relative mix of interest-earning assets.

Current wording

The decrease in the average volume of interest-earning assets during the nine months ended September 30, 2024 was primarily related to a $1.3 billion decrease in average taxable securities, a $947.0 million decrease in average tax-exempt securities, and a $236.3 million decrease in average interest-bearing deposits (primarily amounts held in an interest-bearing account at the Federal Reserve) partly offset by a $2.0 billion increase in average loans. The average taxable-equivalent yield on interest-earning assets increased 46 basis points from 4.75 during the nine months ended September 30, 2023 to 5.21% during the nine months ended September 30, 2024. The average taxable-equivalent yields on interest-earning assets during the comparable periods was impacted by changes in market interest rates (as noted in the table above) and changes in the volume and relative mix of interest-earning assets.

Previous wording

The average taxable-equivalent yield on loans increased 44 basis points from 6.64% during the three months ended June 30, 2023 to 7.08% during the three months ended June 30, 2024 while the average taxable-equivalent yield on loans increased 53 basis points from 6.51% during the six months ended June 30, 2023 to 7.04% during the six months ended June 30, 2024. The average taxable-equivalent yield on loans during the three and six months ended June 30, 2024 was positively impacted by increases in market interest rates (as noted in the table above). The average volume of loans for the three months ended June 30, 2024 increased $2.0 billion, or 11.3%, while the average volume of loans for the six months ended June 30, 2024 increased $1.9 billion, or 10.8%, compared to the same periods in 2023. Loans made up approximately 43.2% and 42.4% of average interest-earning assets during the three and six months ended June 30, 2024, compared to 38.5% and 37.3% during the same respective periods in 2023. The increases were primarily related to the use of available funds to originate loans.

Current wording

The average taxable-equivalent yield on loans increased 29 basis points from 6.83% during the three months ended September 30, 2023 to 7.12% during the three months ended September 30, 2024 while the average taxable-equivalent yield on loans increased 45 basis points from 6.62% during the nine months ended September 30, 2023 to 7.07% during the nine months ended September 30, 2024. The average taxable-equivalent yields on loans during the three and nine months ended September 30, 2024 were partly impacted by changes in market interest rates (as noted in the table above). The average volume of loans for the three months ended September 30, 2024 increased $2.1 billion, or 11.8%, while the average volume of loans for the nine months ended September 30, 2024 increased $2.0 billion, or 11.1%, compared to the same periods in 2023. Loans made up approximately 43.6% and 42.8% of average interest-earning assets during the three and nine months ended September 30, 2024, compared to 39.6% and 38.1% during the same respective periods in 2023. The increases were primarily related to the use of available funds to originate loans.

Previous wording

The average taxable-equivalent yield on securities was 3.38% during the three months ended June 30, 2024, increasing 14 basis points from 3.24% during the three months ended June 30, 2023 while the average taxable-equivalent yield on securities was 3.35% during the six months ended June 30, 2024, increasing 11 basis points from 3.24% during the six months ended June 30, 2023. The average yield on taxable securities was 2.92% during the three months ended June 30, 2024, increasing 21 basis points from 2.71% during the same period in 2023 while the average yield on taxable securities was 2.88% during the six months ended June 30, 2024, increasing 19 basis points from 2.69% during the same period in 2023. The average taxable-equivalent yield on tax-exempt securities was 4.30% during the three months ended June 30, 2024, increasing 3 basis points from 4.27% during the same period in 2023 while the average taxable-equivalent yield on tax-exempt securities was 4.29% during the six months ended June 30, 2024, increasing 4 basis points from 4.25% during the same period in 2023.

Current wording

The average taxable-equivalent yield on securities was 3.40% during the three months ended September 30, 2024, increasing 16 basis points from 3.24% during the three months ended September 30, 2023 while the average taxable-equivalent yield on securities was 3.36% during the nine months ended September 30, 2024, increasing 12 basis points from 3.24% during the nine months ended September 30, 2023. The average yield on taxable securities was 2.94% during the three months ended September 30, 2024, increasing 18 basis points from 2.76% during the same period in 2023 while the average yield on taxable securities was 2.90% during the nine months ended September 30, 2024, increasing 19 basis points from 2.71% during the same period in 2023. The average taxable-equivalent yield on tax-exempt securities was 4.32% during the three months ended September 30, 2024, increasing 6 basis points from 4.26% during the same period in 2023 while the average taxable-equivalent yield on tax-exempt securities was 4.30% during the nine months ended September 30, 2024, increasing 4 basis points from 4.26% during the same period in 2023.

Previous wording

Tax-exempt securities made up approximately 35.5% and 35.4% of total average securities during the three and six months ended June 30, 2024, compared to 35.2% and 36.9% during the same respective periods in 2023. The average volume of total securities during the three months ended June 30, 2024 decreased $2.6 billion, or 12.4%, compared to the same period in 2023 while the average volume of total securities during the six months ended June 30, 2024 decreased $2.5 billion, or 11.8%, compared to the same period in 2023. Securities made up approximately 40.9% and 41.5% of average interest-earning assets during the three and six months ended June 30, 2024 compared to 46.3% and 45.9% during the same respective periods in 2023. The decreases during the three and six months ended June 30, 2024 were primarily related to the use of funds provided by maturities, calls and principal repayments of these securities to support the origination of loans and to provide liquidity to offset the decrease in non-interest-bearing deposits.

Current wording

Tax-exempt securities made up approximately 35.0% and 35.2% of total average securities during the three and nine months ended September 30, 2024, compared to 34.0% and 36.0% during the same respective periods in 2023. The average volume of total securities during the three months ended September 30, 2024 decreased $1.7 billion, or 8.1%, compared to the same period in 2023 while the average volume of total securities during the nine months ended September 30, 2024 decreased $2.2 billion, or 10.6%, compared to the same period in 2023. Securities made up approximately 41.0% and 41.3% of average interest-earning assets during the three and nine months ended September 30, 2024, compared to 45.3% and 45.6% during the same respective periods in 2023. The decreases during the three and nine months ended September 30, 2024 were primarily related to the use of funds provided by maturities, calls and principal repayments of these securities to support the origination of loans and to provide liquidity to offset the decrease in non-interest-bearing deposits.

Previous wording

Average interest-bearing deposits (primarily amounts held in an interest-bearing account at the Federal Reserve) for the three months ended June 30, 2024 increased $275.5 million, or 4.0%, compared to the same period in 2023 while average interest-bearing deposits (primarily amounts held in an interest-bearing account at the Federal Reserve) for the six months ended June 30, 2024 decreased $522.7 million, or 6.7%, compared to the same period in 2023. The increase during the three months ended June 30, 2024 was partly related to funds provided from maturities of taxable and tax-exempt securities. The decrease during the six months ended June 30, 2024 was partly related to the reinvestment of amounts held in an interest-bearing account at the Federal Reserve into loans. Balances held at the Federal Reserve were also impacted by a decrease in customer deposits (primarily non-interest-bearing). Interest-bearing deposits (primarily amounts held in an interest-bearing account at the Federal Reserve) made up approximately 15.7% and 15.9% of average interest-earning assets during the three and six months ended June 30, 2024 compared to 15.0% and 16.6% during the same respective periods in 2023. The average yields on interest-bearing deposits (primarily amounts held in an interest-bearing account at the Federal Reserve) was 5.40% during both the three and six months ended June 30, 2024, compared to 5.05% and 4.78% during the three and six months ended June 30, 2023. The average yields on interest-bearing deposits during the three and six months ended June 30, 2024 were impacted by higher interest rates paid on reserves held at the Federal Reserve, compared to the same respective periods in 2023.

Current wording

Average interest-bearing deposits (primarily amounts held in an interest-bearing account at the Federal Reserve) for the three months ended September 30, 2024 increased $326.4 million, or 4.8%, compared to the same period in 2023 while average interest-bearing deposits (primarily amounts held in an interest-bearing account at the Federal Reserve) for the nine months ended September 30, 2024 decreased $236.3 million, or 3.2%, compared to the same period in 2023. The increase during the three months ended September 30, 2024 was partly related to funds provided from maturities of taxable and tax-exempt securities combined with an increase in the funds provided from an increase in the average balance of repurchase agreements. The decrease during the nine months ended September 30, 2024 was partly related to the reinvestment of amounts held in an interest-bearing account at the Federal Reserve into loans. Balances held at the Federal Reserve were also impacted by a decrease in customer deposits (primarily non-interest-bearing). Interest-bearing deposits (primarily amounts held in an interest-bearing account at the Federal Reserve) made up approximately 15.3% and 15.7% of average interest-earning assets during the three and nine months ended September 30, 2024, compared to 14.9% and 16.0% during the same respective periods in 2023. The average yields on interest-bearing deposits (primarily amounts held in an interest-bearing account at the Federal Reserve) were 5.32% and 5.37% during the three and nine months ended September 30, 2024, respectively, compared to 5.33% and 4.95% during the three and nine months ended September 30, 2023, respectively. The average yield on interest-bearing deposits during the nine months ended September 30, 2024 were impacted by a higher average interest rate paid on reserves held at the Federal Reserve, compared to the same period in 2023.

Previous wording

The average rate paid on interest-bearing liabilities was 2.59% during the three months ended June 30, 2024, increasing 48 basis points from 2.11% during the same period in 2023 while the average rate paid on interest-bearing liabilities was 2.57% during the six months ended June 30, 2024, increasing 62 basis points from 1.95% during the same period in 2023. Average deposits decreased $496.8 million, or 1.2%, during the three months ended June 30, 2024 compared to the same period in 2023 and included a $1.6 billion decrease in average non-interest-bearing deposits partly offset by a $1.1 billion increase in average interest-bearing deposits. Average deposits decreased $1.3 billion, or 3.0%, during the six months ended June 30, 2024 compared to the same period in 2023 and included a $2.1 billion decrease in average non-interest-bearing deposits partly offset by an $842.1 million increase in average interest-bearing deposits. The ratio of average interest-bearing deposits to total average deposits was 66.2% and 66.0% during the three and six months ended June 30, 2024 compared to 62.9% and 62.0% during the same respective periods in 2023. The average cost of deposits is primarily impacted by changes in market interest rates as well as changes in the volume and relative mix of interest-bearing deposits. The average cost of interest-bearing deposits and total deposits was 2.39% and 1.58%, respectively, during the three months ended June 30, 2024 compared to 1.87% and 1.18%, respectively, during the same period in 2023. The average cost of interest-bearing deposits and total deposits was 2.36% and 1.56%, respectively, during the six months ended June 30, 2024 compared to 1.70% and 1.05%, respectively, during the same period in 2023. The average cost of deposits during the comparable periods were impacted by increases in the interest rates we pay on our interest-bearing deposit products as a result of an increase in market interest rates.

Current wording

The average rate paid on interest-bearing liabilities was 2.60% during the three months ended September 30, 2024, increasing 27 basis points from 2.33% during the same period in 2023 while the average rate paid on interest-bearing liabilities was 2.58% during the nine months ended September 30, 2024, increasing 50 basis points from 2.08% during the same period in 2023. Average deposits decreased $94.7 million, or 0.2%, during the three months ended September 30, 2024, compared to the same period in 2023 and included a $1.2 billion decrease in average non-interest-bearing deposits partly offset by a $1.1 billion increase in average interest-bearing deposits. Average deposits decreased $867.5 million, or 2.1%, during the nine months ended September 30, 2024, compared to the same period in 2023 and included a $1.8 billion decrease in average non-interest-bearing deposits partly offset by a $918.4 million increase in average interest-bearing deposits. The ratio of average interest-bearing deposits to total average deposits was 66.5% and 66.1% during the three and nine months ended September 30, 2024, compared to 63.7% and 62.5% during the same respective periods in 2023. The average cost of deposits is primarily impacted by changes in market interest rates as well as changes in the volume and relative mix of interest-bearing deposits. The average cost of interest-bearing deposits and total deposits was 2.41% and 1.60%, respectively, during the three months ended September 30, 2024, compared to 2.12% and 1.35%, respectively, during the same period in 2023. The average cost of interest-bearing deposits and total deposits was 2.38% and 1.57%, respectively, during the nine months ended September 30, 2024, compared to 1.84% and 1.15%, respectively, during the same period in 2023. The average cost of deposits during the comparable periods were impacted by increases in the interest rates we pay on our interest-bearing deposit products as a result of an increase in market interest rates.

Previous wording

Our net interest spread, which represents the difference between the average rate earned on earning assets and the average rate paid on interest-bearing liabilities, was 2.64% and 2.61% during the three and six months ended June 30, 2024 compared to 2.66% and 2.72% during the same respective periods in 2023. The net interest spread, as well as the net interest margin, will be impacted by future changes in short-term and long-term interest rate levels, as well as the impact from the competitive environment, including from new financial technology competitors, and the availability of alternative investment options. A discussion of the effects of changing interest rates on net interest income is set forth in Item 3. Quantitative and Qualitative Disclosures About Market Risk included elsewhere in this report.

Current wording

Our net interest spread, which represents the difference between the average rate earned on earning assets and the average rate paid on interest-bearing liabilities, was 2.66% and 2.63% during the three and nine months ended September 30, 2024, compared to 2.59% and 2.67% during the same respective periods in 2023. The net interest spread, as well as the net interest margin, will be impacted by future changes in short-term and long-term interest rate levels, as well as the impact from the competitive environment, including from new financial technology competitors, and the availability of alternative investment options. A discussion of the effects of changing interest rates on net interest income is set forth in Item 3. Quantitative and Qualitative Disclosures About Market Risk included elsewhere in this report.

Previous wording

Total non-interest income for the three and six months ended June 30, 2024 increased $7.7 million, or 7.4%, and increased $13.8 million, or 6.6%, respectively, compared to the same periods in 2023. Changes in the various components of non-interest income are discussed in more detail below.

Current wording

Total non-interest income for the three and nine months ended September 30, 2024 increased $7.7 million, or 7.3%, and increased $21.5 million, or 6.8%, respectively, compared to the same periods in 2023. Changes in the various components of non-interest income are discussed in more detail below.

Previous wording

Trust and Investment Management Fees. Trust and investment management fees increased $2.0 million, or 5.1%, for the three months ended June 30, 2024 and increased $5.0 million, or 6.6%, for the six months ended June 30, 2024, compared to the same respective periods in 2023. Investment management fees are the most significant component of trust and investment management fees, making up approximately 80.6% and 78.5% of total trust and investment management fees for the first six months of 2024 and 2023, respectively. The increases in trust and investment management fees during the three and six months ended June 30, 2024 were primarily related to increases in investment management fees (up $2.8 million and $5.5 million, respectively) and oil and gas fees (up $906 thousand and $838 thousand, respectively), partly offset by decreases in estate fees (down $996 thousand and $885 thousand, respectively), and real estate fees (down $753 thousand and $783 thousand, respectively). Investment management fees are generally based on the market value of assets within an account and are thus impacted by volatility in the equity and bond markets. The increases in investment management fees during the three and six months ended June 30, 2024 were primarily related to increases in the average value of assets maintained in accounts. The increases in the average value of assets were partly related to higher equity valuations during 2024 relative to 2023. The increase in oil and gas fees was primarily related to higher average market prices in 2024, particularly in the second quarter, relative to 2023. The decreases in estate fees and real estate fees were primarily related to decreased transaction volumes relative to 2023.

Current wording

Trust and Investment Management Fees. Trust and investment management fees increased $3.4 million, or 9.0%, for the three months ended September 30, 2024 and increased $8.4 million, or 7.4%, for the nine months ended September 30, 2024, compared to the same respective periods in 2023. Investment management fees are the most significant component of trust and investment management fees, making up approximately 81.4% and 79.5% of total trust and investment management fees for the first nine months of 2024 and 2023, respectively. The increases in trust and investment management fees during the three and nine months ended September 30, 2024 were primarily related to increases in investment management fees (up $3.4 million and $8.9 million, respectively) and oil and gas fees (up $333 thousand and $1.2 million, respectively), partly offset by decreases in estate fees (down $215 thousand and $1.1 million, respectively), and real estate fees (down $157 thousand and $940 thousand, respectively). Investment management fees are generally based on the market value of assets within an account and are thus impacted by volatility in the equity and bond markets. The increases in investment management fees during the three and nine months ended September 30, 2024 were primarily related to increases in the average value of assets maintained in accounts. The increases in the average value of assets were partly related to higher equity valuations during 2024 relative to 2023. The increase in oil and gas fees was primarily related to higher average market prices in 2024, particularly in the second quarter, relative to 2023, which impacted the amount of royalties received, and increases in new lease bonuses. The decreases in estate fees and real estate fees were primarily related to decreased transaction volumes relative to 2023.

Previous wording

At June 30, 2024, trust assets, including both managed assets and custody assets, were primarily composed of equity securities (42.5% of assets), fixed income securities (33.5% of assets), alternative investments (9.7% of assets) and cash equivalents (8.3% of assets). The estimated fair value of these assets was $48.9 billion (including managed assets of $24.7 billion and custody assets of $24.3 billion) at June 30, 2024, compared to $47.2 billion (including managed assets of $23.8 billion and custody assets of $23.5 billion) at December 31, 2023 and $44.9 billion (including managed assets of $22.4 billion and custody assets of $22.5 billion) at June 30, 2023.

Current wording

At September 30, 2024, trust assets, including both managed assets and custody assets, were primarily composed of equity securities (43.2% of assets), fixed income securities (32.9% of assets), alternative investments (9.5% of assets) and cash equivalents (8.3% of assets). The estimated fair value of these assets was $50.4 billion (including managed assets of $25.6 billion and custody assets of $24.9 billion) at September 30, 2024, compared to $47.2 billion (including managed assets of $23.8 billion and custody assets of $23.5 billion) at December 31, 2023 and $44.5 billion (including managed assets of $22.5 billion and custody assets of $22.0 billion) at September 30, 2023.

Previous wording

Service Charges on Deposit Accounts. Service charges on deposit accounts for the three and six months ended June 30, 2024 increased $2.6 million, or 11.2%, and increased $5.5 million, or 12.2%, respectively, compared to the same periods in 2023. The increase during the three months ended June 30, 2024 was primarily related to increases in commercial service charges (up $1.3 million); overdraft charges on consumer and commercial accounts (up $748 thousand and $385 thousand, respectively), and consumer service charges (up $176 thousand). The increase during the six months ended June 30, 2024, was primarily related to increases in commercial service charges (up $2.8 million); overdraft charges on consumer and commercial accounts (up $1.7 million and $744 thousand, respectively), and consumer service charges (up $395 thousand). The increases in commercial service charges during the three and six months ended June 30, 2024 were partly related to increases in billable services related to analyzed treasury management accounts partly offset by the effect of a higher average earnings credit rate applied to deposits maintained by treasury management customers which resulted in customers paying for less of their services through fees rather than with earnings credits applied to their deposit balances. The increases in commercial service charges were also partly related, to a lesser extent, to increases in service fees on non-analyzed accounts. Overdraft charges totaled

Current wording

2024 were partly related to increases in billable services related to analyzed treasury management accounts partly offset by the effect of a higher average earnings credit rate applied to deposits maintained by treasury management customers which resulted in customers paying for less of their services through fees rather than with earnings credits applied to their deposit balances. The increases in commercial service charges were also partly related, to a lesser extent, to increases in service fees on non-analyzed accounts. Overdraft charges totaled $13.8 million ($10.4 million consumer and $3.4 million commercial) during the three months ended September 30, 2024, compared to $11.0 million ($8.3 million consumer and $2.6 million commercial) during the same period in 2023. Overdraft charges totaled $37.8 million ($28.4 million consumer and $9.4 million commercial) during the nine months ended September 30, 2024, compared to $32.5 million ($24.6 million consumer and $7.9 million commercial) during the same period in 2023. The increases in overdraft charges during the three and nine months ended September 30, 2024 were impacted by increases in the volumes of fee assessed overdrafts relative to 2023, in part due to growth in the number of accounts.

Previous wording

Insurance Commissions and Fees. Insurance commissions and fees for the three and six months ended June 30, 2024 increased $979 thousand, or 7.6%, and increased $323 thousand, or 1.0%, respectively, compared to the same periods in 2023. The increase during the three months ended June 30, 2024 was primarily the result of an increase in commission income (up $891 thousand). The increase during the six months ended June 30, 2024 was primarily the result of an increase in commission income (up $455 thousand) partly offset by a decrease in contingent income (down $132 thousand). The increases in commission income during the three and six months ended June 30, 2024 were primarily related to increases in commercial lines property and casualty commissions and, to a lesser extent, increases in personal lines property and casualty commissions, partly offset by decreases in life insurance commissions and benefit plan commissions. The increases in commercial and personal lines property and casualty commissions during the three and six months ended June 30, 2024 were related to increases in the underlying exposure bases and increases in rates, and, in the case of commercial lines, increased business volumes. The decrease in life insurance commissions during the three and six months ended June 30, 2024 was primarily due to a decrease in business volume, mostly due to a significant transaction in the first quarter of 2023. The decreases in benefit plan commissions during the three and six months ended June 30, 2024 were primarily related to premium and exposure rate decreases within the existing customer base.

Current wording

Insurance Commissions and Fees. Insurance commissions and fees for the three and nine months ended September 30, 2024 increased $1.2 million, or 8.8%, and increased $1.5 million, or 3.4%, respectively, compared to the same periods in 2023. The increase during the three months ended September 30, 2024 was primarily the result of an increase in commercial lines property and casualty commissions (up $944 thousand). The increase during the nine months ended September 30, 2024 was primarily the result of an increases in both commercial lines and personal lines property and casualty commissions (up $2.7 million and $327 thousand, respectively), partly offset by decreases in life insurance commissions (down $1.3 million) and benefit plan commissions (down $321 thousand). The increases in commercial lines property and casualty commissions during the three and nine months ended September 30, 2024 and personal lines property and casualty commissions during the nine months ended September 30, 2024 were related to increases in the underlying exposure bases and increases in rates, and, in the case of commercial lines, increased business volumes. The decrease in life insurance commissions during the nine months ended September 30, 2024 was primarily due to a decrease in business volumes mostly due to a significant transaction in the first quarter of 2023. The decrease in benefit plan commissions during the nine months ended September 30, 2024 was primarily related to a decrease in business volumes as well as premium and exposure rate decreases within the existing customer base.

Previous wording

Contingent income totaled $532 thousand and $4.1 million during the three and six months ended June 30, 2024, respectively, compared to $445 thousand and $4.3 million during the same respective periods in 2023. Contingent income primarily consists of amounts received from various property and casualty insurance carriers related to portfolio growth and the loss performance of insurance policies previously placed. These performance related contingent payments are seasonal in nature and are mostly received during the first quarter of each year. This performance related contingent income totaled $3.0 million and $3.2 million during the six months ended June 30, 2024 and 2023, respectively. The decrease in performance related contingent income was primarily related to a deterioration of the loss performance of commercial lines insurance policies previously placed and lower growth within the commercial lines portfolio, partly due to a tightening of underwriting standards. The decrease in contingent income related to our commercial lines portfolio was partly offset by an increase in contingent commissions related to our personal lines portfolio due to improved loss performance. Contingent income also includes amounts received from various benefit plan insurance companies related to the volume of business generated and/or the subsequent retention of such business. This benefit plan related contingent income totaled $366 thousand and $1.1 million during the three and six months ended June 30, 2024, respectively, compared to $430 thousand and $1.1 million during the same respective periods in 2023.

Current wording

Contingent income totaled $413 thousand and $4.5 million during the three and nine months ended September 30, 2024, respectively, compared to $210 thousand and $4.5 million during the same respective periods in 2023. Contingent income primarily consists of amounts received from various property and casualty insurance carriers related to portfolio growth and the loss performance of insurance policies previously placed. These performance related contingent payments are seasonal in nature and are mostly received during the first quarter of each year. This performance related contingent income totaled $3.2 million during the nine months ended September 30, 2024 and $3.2 million during the nine months ended September 30, 2023. While total performance related contingent income remained flat during the respective nine month periods in 2024 and 2023, performance related contingent income related to commercial lines insurance policies decreased due to a deterioration of the loss performance of commercial lines insurance policies previously placed and lower growth within the commercial lines portfolio, partly due to a tightening of underwriting standards. This decrease was offset by an increase in performance related contingent income related to our personal lines portfolio due to improved loss performance. Contingent income also includes amounts received from various benefit plan insurance companies related to the volume of business generated and/or the subsequent retention of such business. This benefit plan related contingent income totaled $252 thousand and $1.4 million during the three and nine months ended September 30, 2024, respectively, compared to $135 thousand and $1.2 million during the same respective periods in 2023.

Previous wording

Net interchange and card transaction fees for the three and six months ended June 30, 2024 increased $101 thousand, or 1.9%, and decreased $314 thousand, or 3.1%, respectively, compared to the same periods in 2023. A comparison of gross and net interchange and card transaction fees for the reported periods is presented in the table below.

Current wording

Net interchange and card transaction fees for the three and nine months ended September 30, 2024 increased $756 thousand, or 16.2%, and increased $442 thousand, or 3.0%, respectively, compared to the same periods in 2023. A comparison of gross and net interchange and card transaction fees for the reported periods is presented in the table below.

Previous wording

Other Charges, Commissions, and Fees. Other charges, commissions, and fees for the three months ended June 30, 2024 increased $930 thousand, or 7.7%, compared to the same period in 2023. The increase was primarily related to increases in income from the placement of money market accounts (up $584 thousand) and annuities (up $341 thousand); letter of credit fees (up $294); and merchant services rebates/bonuses (up $259 thousand), among other things, partly offset by decreases in capital markets advisory fees (down $596 thousand), and other service charges (down $314 thousand), among other things. Other charges, commissions, and fees for the six months ended June 30, 2024 increased $1.3 million, or 5.4%, compared to the same period in 2023. The increase was primarily related to increases in income from the placement of money market accounts (up $1.0 million); letter of credit fees (up $537 thousand); merchant services rebates/bonuses (up $531 thousand); and income from the placement of annuities (up $249 thousand) and mutual funds (up $226 thousand); among other things, partly offset by decreases in capital markets advisory fees (down $782 thousand), commitment fees on unused lines of credit (down $552 thousand), and other service charges (down $568 thousand), among other things.

Current wording

Other Charges, Commissions, and Fees. Other charges, commissions, and fees for the three months ended September 30, 2024 decreased $68 thousand, or 0.5%, compared to the same period in 2023. The decrease was primarily related to decreases in capital markets advisory fees (down $419 thousand), other service charges (down $284 thousand), and income from the placement of mutual funds (down $187 thousand), among other things, mostly offset by increases in income from the placement of annuities (up $338 thousand) and money market accounts (up $188 thousand); letter of credit fees (up $174); and merchant services rebates/bonuses (up $126 thousand), among other things. Other charges, commissions, and fees for the nine months ended September 30, 2024 increased $1.2 million, or 3.3%, compared to the same period in 2023. The increase was primarily related to increases in income from the placement of money market accounts (up $1.2 million); letter of credit fees (up $711 thousand); merchant services rebates/bonuses (up $657 thousand); and income from the placement of annuities (up $587 thousand); among other things, partly offset by decreases in capital markets advisory fees (down $1.2 million), other service charges (down $853 thousand), and commitment fees on unused lines of credit (down $658 thousand), among other things.

Previous wording

Net Gain/Loss on Securities Transactions. During the six months ended June 30, 2023, we sold certain available-for-sale securities with amortized costs totaling $1.5 billion and realized a net gain of $54 thousand. Prevailing market conditions provided us an opportunity to sell certain lower-yielding securities to enhance our liquidity position and provide us the flexibility to be more opportunistic with the subsequent reinvestment of these funds. There were no sales of securities during the six months ended June 30, 2024.

Current wording

During the nine months ended September 30, 2023, we sold certain available-for-sale securities with amortized costs totaling $1.9 billion and realized a net gain of $66 thousand. Prevailing market conditions in 2023 provided us an opportunity to sell certain lower-yielding securities to enhance our liquidity position and provide us the flexibility to be more opportunistic with the subsequent reinvestment of these funds.

Previous wording

Other Non-Interest Income. Other non-interest income for the three and six months ended June 30, 2024 increased $1.0 million, or 10.1%, and $2.0 million, or 9.3%, respectively, compared to the same periods in 2023. The increase during the three months ended June 30, 2024 was primarily related to an increase in public finance underwriting fees (up $1.1 million). The increase during the six months ended June 30, 2024 was primarily related to increases in public finance underwriting fees (up $3.7 million), income from customer derivative and foreign exchange transactions (up $874 thousand), and earnings on the cash surrender value of life insurance (up $454 thousand), among other things, partly offset by a decrease in sundry and other miscellaneous income (down $2.4 million), among other things. The increases in public finance underwriting fees and income from customer derivative and securities trading transactions were primarily related to increases in transaction volumes. The decrease in sundry income was related to certain non-recurring items recognized in 2023 including $1.4 million related to a distribution received from a Small Business Investment Company (“SBIC”) fund investment and $575 thousand related to a partnership interest, among other things.

Current wording

Other Non-Interest Income. Other non-interest income for the three months ended September 30, 2024 decreased $1.4 million, or 10.5%, compared to the same period in 2023. The decrease was primarily related to decreases in sundry and other miscellaneous income (down $1.4 million) and income from customer derivative and foreign exchange transactions (down $1.1 million) partly offset by increases in gains on the sale of foreclosed and other assets (up $449 thousand) and public finance underwriting fees (up $397 thousand), among other things. Other non-interest income for the nine months ended September 30, 2024 increased $642 thousand, or 1.8%, compared to the same period in 2023. The increase was primarily related to increases in public finance underwriting fees (up $4.1 million), income from customer securities trading activities (up $635 thousand), and earnings on the cash surrender value of life insurance (up $622 thousand), among other things, partly offset by a decrease in sundry and other miscellaneous income (down $3.8 million), among other things. The fluctuations in public finance underwriting fees and income from customer derivative, foreign exchange and securities trading transactions were primarily related to variations in transaction volumes. Sundry and other miscellaneous income during the nine months ended September 30, 2024 included, among other things, $535 thousand related to the recovery of prior write-offs; $379 thousand related to a volume bonus received from a clearing broker; $184 thousand related to distributions received from a Small Business Investment Company (“SBIC”) investment; and $162 thousand related to merchant services performance and revenue milestone bonuses. Sundry and other miscellaneous income during the same period in 2023 included, among other things, $1.5 million related to distributions received from a Small Business Investment Company (“SBIC”) investment; $1.3 million related to the recovery of prior write-offs; $950 thousand related to merchant services performance and revenue milestone bonuses; $839 thousand related to a volume bonus received from a clearing broker; and $575 thousand related to a partnership interest.

Previous wording

Total non-interest expense for the three and six months ended June 30, 2024 increased $31.9 million, or 11.2%, and increased $73.0 million, or 12.8%, respectively, compared to the same periods in 2023. Changes in the various components of non-interest expense are discussed below.

Current wording

Total non-interest expense for the three and nine months ended September 30, 2024 increased $30.2 million, or 10.3%, and increased $103.2 million, or 11.9%, respectively, compared to the same periods in 2023. Changes in the various components of non-interest expense are discussed below.

Previous wording

Salaries and Wages. Salaries and wages for the three and six months ended June 30, 2024 increased $18.0 million, or 13.5%, and $35.7 million, or 13.5%, respectively, compared to the same periods in 2023. The increase in salaries and wages was primarily related to increases in salaries due to annual merit and market increases and increases in the number of employees. The increase in the number of employees was partly related to our investment in organic expansion in various markets. Salaries and wages during the three and six months ended June 30, 2024 were also impacted, to a lesser extent, by increases in incentive compensation and commissions. We are continuing to experience a competitive labor market which has resulted in and could continue to result in an increase in our staffing costs.

Current wording

Salaries and Wages. Salaries and wages for the three and nine months ended September 30, 2024 increased $19.1 million, or 13.9%, and $54.8 million, or 13.7%, respectively, compared to the same periods in 2023. The increases in salaries and wages were primarily related to increases in salaries due to annual merit and market increases and increases in the number of employees. The increase in the number of employees was partly related to our investment in organic expansion in various markets. Salaries and wages during the three and nine months ended September 30, 2024 were also impacted, to a lesser extent, by increases in incentive compensation and commissions. We are continuing to experience a competitive labor market which has resulted in and could continue to result in an increase in our staffing costs.

Previous wording

Employee Benefits. Employee benefits expense for the three and six months ended June 30, 2024 increased $2.0 million, or 7.5%, and increased $4.1 million, or 6.7%, respectively, compared to the same periods in 2023. The increases were primarily related to medical/dental benefits expense (up $1.5 million and $3.0 million during the three and six months ended June 30, 2024, respectively) and payroll taxes (up $1.3 million and $2.6 million during the three and six months ended June 30, 2024, respectively), among other things, partly offset by decreases in 401(k) plan expense, primarily related to discretionary profit sharing contributions, (down $618 thousand and $1.4 million during the three and six months ended June 30, 2024, respectively) and increases in the net periodic benefit related to our defined benefit retirement plan (up $208 thousand and $415 thousand during the three and six months ended June 30, 2024, respectively), among other things.

Current wording

Employee Benefits. Employee benefits expense for the three and nine months ended September 30, 2024 increased $2.5 million, or 9.5%, and increased $6.6 million, or 7.6%, respectively, compared to the same periods in 2023. The increases were primarily related to medical/dental benefits expense (up $1.3 million and $4.4 million during the three and nine months ended September 30, 2024, respectively) and payroll taxes (up $1.2 million and $3.8 million during the three and nine months ended September 30, 2024, respectively), among other things, partly offset, during the nine months ended September 30, 2024, by a decrease in 401(k)/profit sharing plan expense, primarily related to discretionary profit sharing contributions, (down $1.4 million) and increases in the net periodic benefit related to our defined benefit retirement plan (up $206 thousand and $621 thousand during the three and nine months ended September 30, 2024, respectively), among other things.

Previous wording

Net Occupancy. Net occupancy expense for the three and six months ended June 30, 2024 increased $660 thousand, or 2.1%, and increased $2.1 million, or 3.4%, respectively, compared to the same periods in 2023. The increases during the three and six months ended June 30, 2024 were primarily related to increases in depreciation on buildings and leasehold improvements (together up $910 thousand and $2.0 million, respectively), and repairs/maintenance/service contracts expense (up $528 thousand and $1.1 million, respectively), among other things, partly offset by decreases in property taxes (down $395 thousand and $737 thousand, respectively), and utilities expense (down $306 thousand and $653 thousand, respectively), among other things. The increases in the aforementioned components of net occupancy expense were impacted, in part, by our expansion efforts.

Current wording

Net Occupancy. Net occupancy expense for the three and nine months ended September 30, 2024 increased $916 thousand, or 2.9%, and increased $3.0 million, or 3.2%, respectively, compared to the same periods in 2023. The increases during the three and nine months ended September 30, 2024 were primarily related to increases in depreciation on buildings and leasehold improvements (together up $814 thousand and $2.9 million, respectively), and repairs/maintenance/service contracts expense (up $1.1 million and $2.2 million, respectively), among other things, partly offset by decreases in property taxes (down $444 thousand and $1.2 million, respectively), and, during the nine months ended September 30, 2024, utilities expense (down $634 thousand), among other things. The increases in the aforementioned components of net occupancy expense were impacted, in part, by our expansion efforts.

Previous wording

Technology, Furniture, and Equipment. Technology, furniture, and equipment expense for the three and six months ended June 30, 2024 increased $2.9 million, or 8.8%, and increased $5.4 million, or 8.3%, respectively, compared to the same periods in 2023. The increases during the three and six months ended June 30, 2024 were primarily related to increases in cloud services expense (up $2.4 million and $4.5 million, respectively), service contracts expense (up $720 thousand and $1.4 million, respectively) and software maintenance (up $314 thousand and $811 thousand, respectively), among other things. The increases from these items were partly offset by decreases in depreciation on furniture and equipment (down $773 thousand and $1.7 million, respectively), among other things.

Current wording

Technology, Furniture, and Equipment. Technology, furniture, and equipment expense for the three and nine months ended September 30, 2024 increased $2.5 million, or 7.1%, and increased $7.9 million, or 7.8%, respectively, compared to the same periods in 2023. The increases during the three and nine months ended September 30, 2024 were primarily related to increases in cloud services expense (up $1.9 million and $6.4 million, respectively), service contracts expense (up $854 thousand and $2.3 million, respectively), software amortization (up $371 thousand and $767 thousand, respectively), and, during the nine months ended September 30, 2024, software maintenance (up $707 thousand), among other things. The increases from these items were partly offset by decreases in depreciation on furniture and equipment (down $612 thousand and $2.3 million, respectively), among other things.

Previous wording

Deposit Insurance. Deposit insurance expense totaled $8.4 million and $23.1 million for the three and six months ended June 30, 2024, respectively, compared to $6.2 million and $12.4 million for the three and six months ended June 30, 2023, respectively. The increases during the three and six months ended June 30, 2024 were primarily related to additional accruals related to the special deposit insurance assessment discussed below.

Current wording

Deposit Insurance. Deposit insurance expense totaled $7.2 million and $30.3 million for the three and nine months ended September 30, 2024, respectively, compared to $6.0 million and $18.5 million for the three and nine months ended September 30, 2023, respectively. The increase during the three months ended September 30, 2024 was primarily related to an increase in the assessment rate. The increase during the nine months ended September 30, 2024 was primarily related to additional accruals related to the special deposit insurance assessment discussed below and, to a lesser extent, an increase in the average assessment rate.

Previous wording

As more fully discussed in our 2023 Form 10-K, during the fourth quarter of 2023, we accrued $51.5 million ($40.7 million after tax) related to a special deposit insurance assessment to recover losses to the Deposit Insurance Fund ("DIF") incurred as a result of recent bank failures and the FDIC's use of the systemic risk exception to cover certain deposits that were otherwise uninsured. This amount was based on our estimate of the full amount of the assessment at that time. In February 2024, the FDIC notified insured depository institutions that their loss estimate related to the aforementioned bank failures had increased. As a result, we accrued an additional $7.7 million ($6.1 million after tax), related to an expected update of the special assessment during the first quarter of 2024. Upon receipt of the update during the second quarter of 2024, we accrued an additional $1.2 million ($984 thousand after tax) related to the special assessment. This updated assessment was made under the FDIC's final rule whereby the estimated loss pursuant to the systemic risk determination can be periodically adjusted. The FDIC has also retained the ability to cease collection early, extend the special assessment collection period and impose a final shortfall special assessment. The extent to which any such additional future assessments will impact our future deposit insurance expense is currently uncertain.

Current wording

As more fully discussed in our 2023 Form 10-K, during the fourth quarter of 2023, we accrued $51.5 million ($40.7 million after tax) related to a special deposit insurance assessment to recover losses to the Deposit Insurance Fund ("DIF") incurred as a result of bank failures in 2023 and the FDIC's use of the systemic risk exception to cover certain deposits that were otherwise uninsured. This amount was based on our estimate of the full amount of the assessment at that time. In February 2024, the FDIC notified insured depository institutions that their loss estimate related to the aforementioned bank failures had increased. As a result, we accrued an additional $7.7 million ($6.1 million after tax), related to an expected update of the special assessment during the first quarter of 2024. Upon receipt of the update during the second quarter of 2024, we accrued an additional $1.2 million ($984 thousand after tax) related to the special assessment. This updated assessment was made under the FDIC's final rule whereby the estimated loss pursuant to the systemic risk determination can be periodically adjusted. The FDIC has also retained the ability to cease collection early, extend the special assessment collection period and impose a final shortfall special assessment. The extent to which any such additional future assessments will impact our future deposit insurance expense is currently uncertain.

Previous wording

Other Non-Interest Expense. Other non-interest expense for the three and six months ended June 30, 2024 increased $6.1 million, or 11.3%, and increased $15.1 million, or 14.2%, respectively, compared to the same periods in 2023. The increase during the three months ended June 30, 2024 included increases in professional services expense (up $862 thousand), which was primarily related to information technology services; advertising/promotions expense (up $757 thousand); fraud losses (up $500 thousand); research and platform fees (up $486 thousand); and business development expense (up $413 thousand), among other things. The increase during the six months ended June 30, 2024 included increases in advertising/promotions expense (up $4.8 million); professional services expense (up $2.1 million), which was primarily related to information technology services; fraud losses (up $1.2 million); business development expense (up $742 thousand); stationery/printing expense (up $797 thousand); and research and platform fees (up $720 thousand), among other things.

Current wording

Other Non-Interest Expense. Other non-interest expense for the three and nine months ended September 30, 2024 increased $3.9 million, or 7.0%, and increased $19.0 million, or 11.7%, respectively, compared to the same periods in 2023. The increase during the three months ended September 30, 2024 included increases in professional services expense (up $1.3 million), which was primarily related to information technology services; sundry and other miscellaneous expense (up $959 thousand); travel, meals and entertainment (up $618 thousand); and business development expense (up $592 thousand), among other things. These increases were partly offset by decreases in fraud losses (down $1.5 million) and advertising/promotions expense (down $951 thousand), among other things. The increase during the nine months ended September 30, 2024 included increases in advertising/promotions expense (up $3.8 million); professional services expense (up $3.4 million), which was primarily related to information technology services; business development expense (up $1.3 million); travel, meals and entertainment (up $1.2 million); stationery/printing expense (up $1.1 million); research and platform fees (up $968 thousand); postage expense (up $796 thousand); and sundry and other miscellaneous expense (up $781 thousand), among other things.

Previous wording

Net interest income for the three and six months ended June 30, 2024 increased $12.6 million, or 3.3%, and increased $4.2 million, or 0.5%, respectively, compared to the same periods in 2023. The increases during the three and six months ended June 30, 2024 were primarily related to increases in the average volumes of and yields on loans; increases in the average yields on, and for the three months ended, the average volume of interest-bearing deposits (primarily amounts held in an interest-bearing account at the Federal Reserve); and increases in the average yields on taxable securities, among other things. The impact of these items was partly offset by increases in the average volume of higher-yielding time deposit accounts combined with increases in the average costs of interest-bearing deposit accounts and repurchase agreements and decreases in the average volumes of taxable and tax-exempt securities, among other things. Net interest income for the first six months of 2024 was also positively impacted by an additional day as a result of leap year. See the analysis of net interest income included in the section captioned “Net Interest Income” included elsewhere in this discussion.

Current wording

Net interest income for the three and nine months ended September 30, 2024 increased $18.8 million, or 4.9%, and increased $23.0 million, or 2.0%, respectively, compared to the same periods in 2023. The increase during the three months ended September 30, 2024 was primarily related to increases in the average volume of and yield on loans; increases in the average yields on taxable and tax-exempt securities; and an increase in the average volume of interest-bearing deposits (primarily amounts held in an interest-bearing account at the Federal Reserve), among other things. The impact of these items was partly offset by an increase in the average volume of higher-yielding time deposit accounts; decreases in the average volumes of taxable and tax-exempt securities; increases in the average costs of interest-bearing deposit accounts; and an increase in the average volume of repurchase agreements, among other things. The increase during the nine months ended September 30, 2024 was primarily related to increases in the average volume of and yield on loans and increases in the average yields on interest-bearing deposits (primarily amounts held in an interest-bearing account at the Federal Reserve) and taxable securities, and to a lesser extent, tax-exempt securities, among other things. The impact of these items was partly offset by an increase in the average volume of higher-yielding time deposit accounts combined with increases in the average costs of interest-bearing deposit accounts and repurchase agreements and decreases in the average volumes of tax-exempt securities, taxable securities, and interest-bearing deposits (primarily amounts held in an interest-bearing account at the Federal Reserve), among other things. Net interest income for the first nine months of 2024 was also positively impacted by an additional day as a result of leap year. See the analysis of net interest income included in the section captioned “Net Interest Income” included elsewhere in this discussion.

Previous wording

Credit loss expense for the three and six months ended June 30, 2024 totaled $15.8 million and $29.4 million, respectively, compared to $9.9 million and $19.0 million during the same periods in 2023. See the sections captioned “Credit Loss Expense” and “Allowance for Credit Losses” elsewhere in this discussion for further analysis of credit loss expense related to loans and off-balance-sheet commitments.

Current wording

Credit loss expense for the three and nine months ended September 30, 2024 totaled $19.4 million and $48.8 million, respectively, compared to $11.2 million and $30.2 million during the same periods in 2023. See the sections captioned “Credit Loss Expense” and “Allowance for Credit Losses” elsewhere in this discussion for further analysis of credit loss expense related to loans and off-balance-sheet commitments.

Previous wording

Non-interest income for the three and six months ended June 30, 2024 increased $4.4 million, or 7.6%, and increased $7.1 million, or 5.9%, respectively, compared to the same periods in 2023. The increases during the three and six months ended June 30, 2024 were primarily related to increases in service charges on deposit accounts; insurance commissions and fees; and other non-interest income, partly offset by decreases in other charges, commissions, and fees, and, for the six months ended June 30, 2024, a decrease in interchange and card transaction fees. The increases in service charges on deposit accounts were primarily related to increases in commercial service charges and overdraft charges on consumer and commercial accounts. The increases in insurance commissions and fees were primarily related to increases in commission income primarily related to increases in commercial lines property and casualty commissions and, to a lesser extent, increases in personal lines property and casualty commissions, partly offset by decreases in life insurance commissions and benefit plan commissions. The increases in other non-interest income were primarily related to increases in public finance underwriting fees and income from customer derivative and foreign exchange transactions, among other things, partly offset by decreases in sundry and other miscellaneous income, among other things. The decreases in other charges, commissions, and fees were decreases in capital markets advisory fees, commitment fees on unused lines of credit and other service charges, among other things, partly offset by increases in letter of credit fees; and merchant services rebates/bonuses, among other things. See the analysis of these categories of non-interest income included in the section captioned “Non-Interest Income” included elsewhere in this discussion.

Current wording

Non-interest income for the three and nine months ended September 30, 2024 increased $3.5 million, or 5.6%, and increased $10.6 million, or 5.8%, respectively, compared to the same periods in 2023. The increases during the three and nine months ended September 30, 2024 were primarily related to increases in service charges on deposit accounts; insurance commissions and fees; and interchange and card transaction fees partly offset by decreases in other charges, commissions and fees; and, for the three months ended September 30, 2024, a decrease in other non-interest income. The increases in service charges on deposit accounts were primarily related to increases in commercial service charges and overdraft charges on consumer and commercial accounts. The increases in insurance commissions and fees were primarily related to increases in commercial lines property and casualty commissions and, to a lesser extent during the nine months ended September 30, 2024, an increase in personal lines property and casualty commissions. The increases in commercial and personal lines property and casualty commissions during the nine months ended September 30, 2024 were partly offset by decreases in life insurance commissions and benefit plan commissions. The decreases in other charges, commissions, and fees were primarily related to decreases in capital markets advisory fees, other service charges, and commitment fees on unused lines of credit, among other things, partly offset by increases in letter of credit fees, and merchant services rebates/bonuses, among other things. The decrease in other non-interest income during the three months ended September 30, 2024 was primarily related to decreases in sundry and other miscellaneous income and income from customer derivative and foreign exchange transactions, among other things, partly offset by increases in public finance underwriting fees, partly offset by increases in gains on the sale of foreclosed and other assets and public finance underwriting fees, among other things. See the analysis of these categories of non-interest income included in the section captioned “Non-Interest Income” included elsewhere in this discussion.