CENTRAL PACIFIC FINANCIAL CORP

Previous wording

•the effects of any acquisitions or dispositions we may make;

Current wording

•the effects of any acquisitions or dispositions we may make or evaluate, and the costs associated with any potential or actual acquisition or disposition, including re-engagement in any potential acquisition process;

Previous wording

Central Pacific Bank is a full-service community bank with 27 branches and 55 ATMs located throughout the State of Hawaii as of June 30, 2024.

Current wording

Central Pacific Bank is a full-service community bank with 27 branches and 56 ATMs located throughout the State of Hawaii as of September 30, 2024.

Previous wording

Net income for the three months ended June 30, 2024 was $15.8 million, or $0.58 per diluted share, compared to net income of $14.5 million, or $0.53 per diluted share for the three months ended June 30, 2023.

Current wording

Net income for the nine months ended September 30, 2024 was $42.1 million, or $1.55 per diluted share, compared to net income of $43.8 million, or $1.62 per diluted share for the nine months ended September 30, 2023.

Previous wording

During the three months ended June 30, 2024, the Company recorded a provision for credit losses of $2.2 million, compared to a provision of $4.3 million during the three months ended June 30, 2023. The decrease was primarily due to a decrease in loan balances outstanding and improvements in the Hawaii economic forecast assumptions used in the Company's estimate of the ACL in the current quarter.

Current wording

During the three months ended September 30, 2024, the Company recorded a provision for credit losses of $2.8 million, compared to a provision of $4.9 million during the three months ended September 30, 2023. The decrease was primarily due to a decrease in loan balances outstanding and improvements in the Hawaii economic forecast assumptions used in the Company's estimate of the ACL.

Previous wording

During the six months ended June 30, 2024, the Company recorded a provision for credit losses of $6.2 million, compared to a provision of $6.2 million during the six months ended June 30, 2023.

Current wording

During the nine months ended September 30, 2024, the Company recorded a provision for credit losses of $9.0 million, compared to a provision of $11.0 million during the nine months ended September 30, 2023.

Previous wording

The Company's pre-provision net revenue ("PPNR"), a non-GAAP financial measure which excludes the provision for credit losses and income tax expense, for the three months ended June 30, 2024 was $22.9 million, compared to $23.3 million for the three months ended June 30, 2023.

Current wording

The Company's pre-provision net revenue ("PPNR"), a non-GAAP financial measure which excludes the provision for credit losses and income tax expense from net income, for the three months ended September 30, 2024 was $19.9 million, compared to $22.4 million for the three months ended September 30, 2023. The Company's PPNR for the nine months ended September 30, 2024 was $63.6 million, compared to $68.7 million for the nine months ended September 30, 2023. The decrease in PPNR for the three and nine months ended September 30, 2024 is primarily due to the aforementioned expenses related to a strategic opportunity. See the following section titled "Non-GAAP Financial Measures" for reconciliation of PPNR.

Previous wording

The Company uses certain non-GAAP financial measures in addition to our GAAP results to provide useful information for evaluating our cash operating performance, ability to service debt, compliance with debt covenants and measurement against competitors. This information should be considered as supplemental in nature and should not be considered in isolation or as a substitute for the related financial information prepared in accordance with GAAP. In addition, these non-GAAP financial measures may not be comparable to similarly entitled measures reported by other companies.

Current wording

The Company uses certain non-GAAP financial measures in addition to our GAAP results to provide useful information which we believe are better indicators of the Company's core activities. This information should be considered as supplemental in nature and should not be considered in isolation or as a substitute for the related financial information prepared in accordance with GAAP. In addition, these non-GAAP financial measures may not be comparable to similarly entitled measures reported by other companies.

Previous wording

The Company believes that PPNR, a non-GAAP financial measure, is useful as a tool to help evaluate the ability to provide for credit costs through operations. The following table presents a reconciliation of the Company's PPNR for the periods presented:

Current wording

The Company believes that PPNR, a non-GAAP financial measure, is useful as a tool to help evaluate the ability to provide for credit costs through operations. The following table presents a reconciliation of the Company's PPNR and adjusted PPNR for the periods presented:

Previous wording

The lower PPNR in the three and six months ended June 30, 2024 was primarily due to lower net interest income of $0.8 million and $4.8 million, respectively, compared to the year-ago periods. The lower net interest income was primarily due to higher average balances and rates paid on interest-bearing deposits, which outpaced the higher average yields earned on loans and investment securities.

Current wording

The lower adjusted PPNR in the nine months ended September 30, 2024 was primarily due to lower net interest income of $2.9 million compared to the year-ago period. The lower net interest income was primarily due to higher average balances and rates paid on interest-bearing deposits driven by the high interest rate environment in 2024, which outpaced the higher average yields earned on loans and investment securities.

Previous wording

The following table presents a calculation of our efficiency ratio for the periods presented:

Current wording

The following table presents a calculation of our efficiency ratio and adjusted efficiency ratio for the periods presented:

Previous wording

Our efficiency ratio increased to 64.26% in the second quarter of 2024, compared to 63.17% in the year-ago quarter.

Current wording

Our adjusted efficiency ratio increased to 65.51% in the third quarter of 2024, compared to 63.91% in the year-ago quarter.

Previous wording

For the six months ended June 30, 2024, our efficiency ratio increased to 65.14%, compared to 63.88% in the year-ago period.

Current wording

For the nine months ended September 30, 2024, our adjusted efficiency ratio increased to 65.26%, compared to 63.89% in the year-ago period.

Previous wording

The higher efficiency ratio in the second quarter of 2024, compared to the same year-ago period, was due to lower net interest income and higher other operating expense, partially offset by higher other operating income.

Current wording

The higher adjusted efficiency ratio in the third quarter of 2024, compared to the same year-ago period, was due to higher other operating expense, partially offset by higher net interest income and other operating income.

Previous wording

The higher efficiency ratio in the six months ended June 30, 2024, compared to the same year-ago period, was due to lower net interest income, partially offset by higher other operating income and lower other operating expense.

Current wording

The higher adjusted efficiency ratio in the nine months ended September 30, 2024, compared to the same year-ago period, was due to higher other operating expense and lower net interest income, partially offset by higher other operating income.

Previous wording

Visitors to Maui decreased by approximately 57% in September 2023 compared to September 2022 but has started to recover at a slow but steady pace as West Maui officially reopened to visitors in early October 2023 and government officials are encouraging travelers to return to Maui, while avoiding the affected area, to support its economic recovery. In June 2024, average daily visitors to Maui were down by approximately 22% compared to June 2023. The unemployment rate for the Island of Maui was 8.4% in September 2023 and has since improved to 3.1% in June 2024.

Current wording

Visitors to Maui decreased by approximately 57% in September 2023 compared to September 2022 but has started to recover at a slow but steady pace as West Maui officially reopened to visitors in early October 2023 and government officials are encouraging travelers to return to Maui, while avoiding the affected area, to support its economic recovery. In August 2024, visitors to Maui were up by approximately 80% compared to August 2023, but still down by 25% from August 2019. The unemployment rate for the Island of Maui was 8.4% in September 2023 and has since improved to 4.0% in September 2024.

Previous wording

Despite the Maui wildfires, Hawaii’s economy continued its recovery from the COVID-19 pandemic. According to preliminary statistics from the Hawaii Tourism Authority ("HTA"), a total of 4.8 million visitors arrived to the Hawaiian Islands during the six months ended June 30, 2024, mainly from the U.S. Mainland, compared to 5.0 million in the same prior year period and 5.2 million from the same period in the pre-pandemic and record year in 2019. Average daily visitors from Japan were up approximately 59% during the five months ended May 31, 2024 compared to the same prior year period, but were down by approximately 56% from the same period in 2019.

Current wording

Despite the Maui wildfires, Hawaii’s economy continued its recovery from the COVID-19 pandemic. According to preliminary statistics from the Hawaii Tourism Authority ("HTA"), a total of 6.5 million visitors arrived to the Hawaiian Islands during the eight months ended August 31, 2024, mainly from the U.S. Mainland, compared to 6.7 million in the same prior year period and 7.1 million from the same period in the pre-pandemic and record year in 2019. Average daily visitors from Japan were up approximately 27% during the eight months ended August 31, 2024 compared to the same prior year period, but were down by approximately 54% from the same period in 2019.

Previous wording

Total spending for visitors arriving in the six months ended June 30, 2024 was $10.26 billion, down 4.8% from $10.78 billion in the same period last year, and up by 15.9% from $8.86 billion in the six months ended June 30, 2019.

Current wording

Total spending for visitors arriving in the eight months ended August 31, 2024 was $14.06 billion, down 2.3% from $14.39 billion in the same period last year, and up by 16.6% from $12.06 billion in the eight months ended August 31, 2019.

Previous wording

According to a May 2024 report by the University of Hawaii Economic Research Organization ("UHERO"), total visitor arrivals by air are expected to be approximately 9.8 million in 2024, which is an increase of approximately 1.9% from 9.6 million last year. Visitor spending is expected to decline approximately 4.2% to $19.84 billion in 2024 from last year's record year for visitor spending of $20.71 billion.

Current wording

According to a September 2024 report by the University of Hawaii Economic Research Organization ("UHERO"), total visitor arrivals by air are expected to be approximately 9.7 million in 2024, which is an increase of approximately 0.9% from 9.6 million last year. Visitor spending is expected to decline approximately 4.0% to $19.89 billion in 2024 from last year's record year for visitor spending of $20.71 billion.

Previous wording

The Department of Labor and Industrial Relations reported that Hawaii's seasonally adjusted annual unemployment rate was 2.9% in the month of June 2024, compared to 2.8% in the month of June 2023 and the national seasonally adjusted unemployment rate of 4.1% in the month of June 2024. UHERO projects Hawaii's seasonally adjusted annual unemployment rate to remain low at approximately 3.1% in 2024.

Current wording

The Department of Labor and Industrial Relations reported that Hawaii's seasonally adjusted annual unemployment rate was 2.9% in the month of September 2024, compared to 3.0% in the month of September 2023 and the national seasonally adjusted unemployment rate of 4.1% in the month of September 2024. UHERO projects Hawaii's seasonally adjusted annual unemployment rate to remain low at approximately 3.0% in 2024.

Previous wording

Real estate lending is one of the primary focuses for the Company, including residential mortgage and commercial mortgage loans. As a result, the Company is dependent on the strength of Hawaii's real estate market. While the Hawaii housing market continues to experience some moderation in sales activity and prices, there continues to be strong demand and low inventory. According to the Honolulu Board of Realtors, sales of Oahu single-family homes in the six months ended June 30, 2024 were up 6.7%, while sales of Oahu condominiums were down 5.8% from the same prior year period. The Oahu single-family home median price in the six months ended June 30, 2024 rose by 3.3% to $1.09 million from $1.05 million in the same prior year period. The Oahu condominium median price in the six months ended June 30, 2024 rose by 2.0% to $510,000 from $500,000 in the same prior year period.

Current wording

Real estate lending is one of the primary focuses for the Company, including residential mortgage and commercial mortgage loans. As a result, the Company is dependent on the strength of Hawaii's real estate market. While the Hawaii housing market continues to experience some moderation in sales activity, there continues to be strong demand and low inventory. According to the Honolulu Board of Realtors, sales of Oahu single-family homes in the nine months ended September 30, 2024 were up 5.8%, while sales of Oahu condominiums were down 5.6% from the same prior year period. The Oahu single-family home median price in the nine months ended September 30, 2024 rose by 4.8% to $1.10 million from $1.05 million in the same prior year period. The Oahu condominium median price in the nine months ended September 30, 2024 rose by 1.0% to $510,000 from $505,000 in the same prior year period.

Previous wording

Hawaii's economy is measured by the growth of real personal income and real gross state product. UHERO projects real personal income to grow by 0.9% and real gross state product to grow by 1.5% in 2024.

Current wording

Hawaii's economy is measured by the growth of real personal income and real gross state product. UHERO projects real personal income to grow by 1.4% and real gross state product to grow by 1.0% in 2024.

Previous wording

Net interest margin is defined as annualized net interest income, on a taxable-equivalent basis using a federal statutory tax rate of 21%, as a percentage of average interest earning assets. A comparison of net interest income on a taxable-equivalent basis for the three and six months ended June 30, 2024 and 2023 is presented below.

Current wording

A comparison of net interest income and net interest margin on a taxable-equivalent basis for the three and nine months ended September 30, 2024 and 2023 is presented below. Net interest margin is defined as annualized net interest income, on a taxable-equivalent basis using a federal statutory tax rate of 21%, as a percentage of average interest earning assets.

Previous wording

Net interest income (expressed on a taxable-equivalent basis) was $52.1 million for the second quarter of 2024, representing a decrease of $0.8 million, or 1.6% from $52.9 million in the year-ago quarter. The decrease in net interest income from the year-ago quarter was primarily due to an increase in interest expense of $7.3 million, which was attributable to increases in average balances and average rates paid on interest-bearing deposits, combined with decreases in average investment securities and loans balances. The increases in average balances and average rates paid on interest-bearing deposits reflected the shift in the deposit portfolio composition from demand to higher cost savings and money market and time deposits. These negative variances were partially offset by increases in average balances and yields earned on interest-bearing deposits in other financial institutions, combined with increases in average yields earned on investment securities and loans.

Current wording

Net interest income (expressed on a taxable-equivalent basis) was $54.0 million for the third quarter of 2024, representing an increase of $1.9 million, or 3.6% from $52.1 million in the year-ago quarter. The increase in net interest income from the year-ago quarter was primarily due to higher average yields earned on interest earning assets, combined with declines in average interest-bearing demand balances and average time deposits over $250,000 balances. These positive variances were partially offset by declines in average investment securities and loans and higher average rates paid on interest-bearing deposits.

Previous wording

Taxable-equivalent interest income was $76.0 million for the second quarter of 2024, representing an increase of $6.5 million, or 9.3%, from $69.5 million in the year-ago quarter. The increase during the second quarter of 2024, compared to the year-ago quarter was primarily attributable to an increase in average yield earned on loans of 43 basis points ("bp" or "bps"), resulting in an increase in interest income of approximately $5.7 million and an increase in average yield earned on investment securities of 39 bps, resulting in an increase in interest income of approximately $1.4 million, combined with increases in the average balance and average yield earned on interest-bearing deposits in other financial institutions resulting in an increase in interest income of approximately $1.3 million. These increases were partially offset by decreases in average loans and investment securities balances of $157.6 million and $53.9 million, respectively, resulting in decreases in interest income of approximately $1.7 million and $0.3 million, respectively.

Current wording

Taxable-equivalent interest income was $78.0 million for the third quarter of 2024, representing an increase of $5.4 million, or 7.5%, from $72.6 million in the year-ago quarter. The increase during the third quarter of 2024, compared to the year-ago quarter was primarily attributable to an increase in average yield earned on loans of 40 basis points ("bp" or "bps"), resulting in an increase in interest income of approximately $5.3 million and an increase in average yield earned on investment securities of 51 bps, resulting in an increase in interest income of approximately $1.9 million, combined with increases in the average balance and average yield earned on interest-bearing deposits in other financial institutions resulting in an increase in interest income of approximately $0.4 million. The increase in the average yield earned on investment securities was partially attributable to income of $1.1 million from an interest rate swap that became effective on March 31, 2024. These increases were partially offset by decreases in average loans and investment securities balances of $176.4 million and $22.3 million, respectively, resulting in decreases in interest income of approximately $2.0 million and $0.1 million, respectively.

Previous wording

Interest expense was $23.9 million for the second quarter of 2024, representing an increase of $7.3 million, or 44.2%, from $16.6 million in the year-ago quarter. Due to the high interest rate environment, average rates paid on interest-bearing deposits of 1.83% increased by 64 bps from the year-ago quarter, resulting in an increase in interest expense of approximately $7.6 million.

Current wording

Interest expense was $24.0 million for the third quarter of 2024, representing an increase of $3.6 million, or 17.4%, from $20.5 million in the year-ago quarter. Due to the high interest rate environment, average rates paid on interest-bearing deposits of 1.82% increased by 33 bps from the year-ago quarter, resulting in an increase in interest expense of approximately $4.9 million. The increase was partially offset by a decrease in average interest-bearing deposits of $95.6 million, resulting in a decrease in interest expense of approximately $1.3 million.

Previous wording

Our net interest margin of 2.97% for the second quarter of 2024 increased by 1 bp from 2.96% in the year-ago quarter. The increase in net interest margin for the second quarter of 2024 was primarily attributable to increases in average yields earned on interest-bearing deposits in other financial institutions, investment securities and loans, which outpaced the increase in average rates paid on interest-bearing deposits.

Current wording

Our net interest margin of 3.07% for the third quarter of 2024 increased by 19 bps from 2.88% in the year-ago quarter. The increase in net interest margin for the third quarter of 2024 was primarily attributable to increases in average yields earned on interest-bearing deposits in other financial institutions, investment securities and loans, which outpaced the increase in average rates paid on interest-bearing deposits.

Previous wording

In an effort to rein in inflation, the FRB aggressively increased interest rates since the first quarter of 2022 when the Federal Funds Rate target was 0.00% to 0.25%. Since then, the FRB has raised the Federal Funds Rate by more than five percentage points, to the current 5.25% to 5.50%, a 22-year high. The FRB kept the Federal Funds Rate target steady during the most recent meeting in June 2024, as well as the prior meetings in 2024. Policymakers signaled that rates could begin to decline in the future, however it likely will not occur until they are confident that inflation is moving sustainably towards 2%.

Current wording

In an effort to rein in inflation, the FRB aggressively increased interest rates since the first quarter of 2022 when the Federal Funds Rate target was 0.00% to 0.25%. Since then, the FRB has raised the Federal Funds Rate by more than five percentage points, up to a 22-year high, 5.25% to 5.50% in July 2023. The Federal Funds rate remained at that level until September 2024. At the September 2024 Federal Open Market Committee ("FOMC") meeting, the FOMC lowered interest rates by 50 bps to 4.75% to 5.00%, as they gained greater confidence that inflation is moving sustainably towards its 2% target.

Previous wording

Net interest income (expressed on a taxable-equivalent basis) was $102.4 million for the six months ended June 30, 2024, representing a decrease of 4.6% from $107.3 million in the six months ended June 30, 2023. The decrease from the year-ago period was primarily due to higher average balances and average rates paid on interest-bearing deposits and long-term debt, combined with a decrease in average loans and investment securities balances. These negative variances were partially offset by increases in average yields earned on interest-bearing deposits in other financial institutions, loans and investment securities.

Current wording

Net interest income (expressed on a taxable-equivalent basis) was $156.4 million for the nine months ended September 30, 2024, representing a decrease of $3.0 million or 1.9% from $159.5 million in the nine months ended September 30, 2023. The decrease from the year-ago period was primarily due to higher average balances and average rates paid on interest-bearing deposits and long-term debt, combined with a decrease in average loans and investment securities balances. These negative variances were partially offset by increases in average yields earned on interest-earning assets.

Previous wording

Taxable-equivalent interest income was $150.6 million for the six months ended June 30, 2024, representing an increase of $14.0 million, or 10.3%, from $136.5 million in the year-ago period. The increase was primarily attributable to increases in average yields earned on loans of 42 bps, resulting in an increase in interest income of approximately $11.5 million. In addition, the increase in average balance and yield earned on interest-bearing deposits in other financial institutions of $166.7 million and 54 bps, respectively, resulted in an increase in interest income of approximately $4.7 million. These increases were partially offset by a decrease in average loan balances of $141.5 million during the six months ended June 30, 2024, compared to the year-ago period, resulting in a decrease in interest income of approximately $3.0 million.

Current wording

Taxable-equivalent interest income was $228.6 million for the nine months ended September 30, 2024, representing an increase of $19.5 million, or 9.3%, from $209.1 million in the year-ago period. The increase was primarily attributable to increases in average yields earned on loans and investment securities of 42 bps and 31 bps, respectively, resulting in increases in interest income of approximately $16.9 million and $3.5 million, respectively. The increase in the average yield earned on investment securities was partially attributable to income of $1.9 million from an interest rate swap that became effective on March 31, 2024. In addition, the increase in average balance and yield earned on interest-bearing deposits in other financial institutions of $119.3 million and 22 bps, respectively, resulted in an increase in interest income of approximately $5.0 million. These increases were partially offset by a decrease in average loan balances of $153.2 million during the nine months ended September 30, 2024, compared to the year-ago period, resulting in a decrease in interest income of approximately $5.0 million.

Previous wording

Interest expense was $48.1 million for the six months ended June 30, 2024, which increased by $18.9 million, or 64.8%, from $29.2 million in the year-ago period. Due to the high interest rate environment, average rates paid on interest-bearing deposits of 1.82% increased by 78 bps and average interest-bearing deposit balances increased by $128.2 million from the year-ago period, resulting in increases in interest expense of approximately $17.8 million and $1.7 million, respectively.

Current wording

Interest expense was $72.2 million for the nine months ended September 30, 2024, which increased by $22.5 million, or 45.3%, from $49.7 million in the year-ago period. Due to the high interest rate environment, average rates paid on interest-bearing deposits of 1.82% increased by 63 bps and average interest-bearing deposit balances increased by $52.8 million from the year-ago period, resulting in increases in interest expense of approximately $22.3 million and $0.8 million, respectively.

Previous wording

Our net interest margin of 2.90% for the six months ended June 30, 2024 decreased by 12 bps from 3.02% in the year-ago period. As previously discussed, the decrease in net interest margin for the six months ended June 30, 2024 compared to the year-ago period was primarily attributable to the aforementioned increases in average rates paid on interest-bearing deposits and long-term debt, which outpaced the increases in average yields earned on interest-bearing deposits in other financial institutions, loans and investment securities.

Current wording

Our net interest margin of 2.95% for the nine months ended September 30, 2024 decreased by 3 bps from 2.98% in the year-ago period. As previously discussed, the decrease in net interest margin for the nine months ended September 30, 2024 compared to the year-ago period was primarily attributable to the aforementioned increases in average rates paid on interest-bearing deposits and long-term debt, which outpaced the increases in average yields earned on interest-earning assets.

Previous wording

For the second quarter of 2024, total other operating income was $12.1 million, which increased by $1.7 million, or 16.2%, from $10.4 million in the year-ago quarter. The increase was primarily due to higher other service charges and fees of $0.9 million, mortgage banking income of $0.4 million and income from fiduciary activities of $0.4 million.

Current wording

For the third quarter of 2024, total other operating income was $12.7 million, which increased by $2.7 million, or 26.7%, from $10.0 million in the year-ago quarter. The increase was primarily due to higher income from bank-owned life insurance ("BOLI") of $1.5 million, other service charges and fees of $0.7 million, and income from fiduciary activities of $0.2 million. The higher income from BOLI was primarily attributable to volatile equity market returns and their impact on corporate-owned life insurance policies used to hedge deferred compensation expense.

Previous wording

For the six months ended June 30, 2024, total other operating income was $23.4 million, which increased by $1.9 million, or 9.0%, from $21.4 million in the year-ago period. The increase from the same year-ago period was primarily due to higher other service charges and fees of $1.2 million, income from fiduciary activities of $0.5 million, mortgage banking income of $0.4 million and income from bank-owned life insurance of $0.3 million. The higher other service charges and fees was attributable to higher investment services fees, ATM and debit card fees and fees on foreign exchange. The higher income from BOLI during the six months ended June 30, 2024 was primarily attributable to volatile equity market returns and their impact on corporate-owned life insurance policies used to hedge deferred compensation expense.

Current wording

For the nine months ended September 30, 2024, total other operating income was $36.1 million, which increased by $4.6 million, or 14.6%, from $31.5 million in the year-ago period. The increase from the same year-ago period was primarily due to higher other service charges and fees of $1.9 million, income from BOLI of $1.8 million, income from fiduciary activities of $0.7 million, and mortgage banking income of $0.5 million. The higher other service charges and fees was attributable to higher investment services fees, ATM and debit card fees and fees on foreign exchange. The higher income from BOLI during the nine months ended September 30, 2024 was primarily attributable to volatile equity market returns.

Previous wording

For the six months ended June 30, 2024, total other operating expense was $81.7 million and decreased by $0.3 million, or 0.3%, from $82.0 million in the same year-ago period. The decrease was primarily due to lower salaries and employee benefits of $0.9 million, computer software expense of $0.6 million and legal and professional services of $0.5 million, partially offset by higher directors' deferred compensation plan expense of $0.7 million compared to the same year-ago period. The lower salaries and employee benefits was primarily attributable to tighter management of personnel count.

Current wording

For the nine months ended September 30, 2024, total other operating expense was $128.4 million and increased by $6.8 million, or 5.6%, from $121.6 million in the same year-ago period. The increase was primarily due to the aforementioned $3.1 million in expenses related to a strategic opportunity, higher salaries and employee benefits of $2.4 million, and higher directors' deferred compensation plan expense of $1.8 million compared to the same year-ago period. The higher salaries and employee benefits and directors' deferred compensation plan expense were partially attributable to volatile equity market returns and are consistent with the increase in income from BOLI which is used to hedge the deferred compensation expenses. These increases were partially offset by lower computer software expense of $0.4 million, legal and professional services of $0.4 million, and FDIC insurance assessment of $0.4 million.

Previous wording

The Company recorded income tax expense of $4.8 million for the second quarter of 2024, compared to $4.5 million in the same year-ago period. The effective tax rate for the second quarter of 2024 was 23.41%, compared to 23.60% in the same year-ago period.

Current wording

The Company recorded income tax expense of $3.8 million for the third quarter of 2024, compared to $4.3 million in the same year-ago period. The effective tax rate ("ETR") for the third quarter of 2024 was 22.03%, compared to 24.87% in the same year-ago period.

Previous wording

The Company recorded income tax expense of $8.8 million for the six months ended June 30, 2024, compared to $9.5 million in the same year-ago period. The effective tax rate for the six months ended June 30, 2024 was 23.45%, compared to 23.71% in the same year-ago period.

Current wording

The Company recorded income tax expense of $12.6 million for the nine months ended September 30, 2024, compared to $13.9 million in the same year-ago period. The effective tax rate for the nine months ended September 30, 2024 was 23.00%, compared to 24.06% in the same year-ago period.

Previous wording

The decrease in the effective tax rate for the three and six months ended June 30, 2024 was primarily attributable to higher tax-exempt BOLI income compared to the same year-ago period, and lower pre-tax income compared to the same year-ago period.

Current wording

The decrease in income tax expense and the effective tax rate for the three and nine months ended September 30, 2024 was primarily attributable to higher tax-exempt BOLI income, additional low-income housing tax credits recognized, and lower pre-tax income compared to the same year-ago periods.

Previous wording

The Company's net deferred tax assets ("DTA"), net of valuation allowance, totaled $28.2 million and $29.5 million at June 30, 2024 and December 31, 2023, respectively, and was included in other assets on our consolidated balance sheets. The decrease in DTA was primarily due to projected utilization of net operating loss carryforwards, which rose in 2022 due to unrealized losses on investment securities.

Current wording

The Company's net deferred tax assets ("DTA"), net of valuation allowance, totaled $22.5 million and $29.5 million at September 30, 2024 and December 31, 2023, respectively, and was included in other assets on our consolidated balance sheets. The decrease in DTA was primarily due to projected utilization of net operating loss carryforwards, which arose in 2022 due to unrealized losses on investment securities.

Previous wording

Total assets were $7.39 billion at June 30, 2024 and decreased by $255.8 million, or 3.3%, from $7.64 billion at December 31, 2023, as excess liquidity was used to pay off high-cost government time deposits that matured during the six months ended June 30, 2024.

Current wording

Total assets were $7.42 billion at September 30, 2024 and decreased by $227.4 million, or 3.0%, from $7.64 billion at December 31, 2023, as loans, net of deferred costs, decreased by $96.4 million and excess liquidity was used to pay off high-cost government time deposits that matured during the nine months ended September 30, 2024.

Previous wording

Investment securities totaled $1.29 billion at June 30, 2024, which increased by $13.0 million, or 1.0%, from $1.28 billion at December 31, 2023. The increase in the investment securities portfolio reflected purchases of $62.3 million, partially offset by principal runoff of $46.1 million and a market valuation reduction on the AFS portfolio of $3.2 million.

Current wording

Investment securities totaled $1.33 billion at September 30, 2024, which increased by $50.0 million, or 3.9%, from $1.28 billion at December 31, 2023. The increase in the investment securities portfolio reflected purchases of $95.5 million and an increase in the market valuation on the AFS portfolio of $25.9 million, partially offset by principal runoff of $71.4 million.