SEACOAST BANKING CORP OF FLORIDA
For the period ended Jun 30, 2024. Filed Aug 7, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 7, 2024
SBCF$33.54-0.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-08.
0000730708-24-000139
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-07.
0000730708-24-000197
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 170 previous paragraphs and 182 current paragraphs.
84 unchanged; 71 reworded; 27 added; 15 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 18 previous and 19 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (27)
Current report
Seacoast provides integrated financial services including commercial and consumer banking, wealth management, and mortgage services to customers at 77 full-service branches across Florida, and through advanced mobile and online banking solutions. The Company’s financial results in the second quarter of 2024 include emerging loan growth and stabilizing deposit costs, supporting an improved outlook for net interest income. Growth in noninterest income continues, and with significant cost-saving initiatives now complete, Seacoast continues to prudently manage expenses while strategically investing to support continued growth. Highlights include:
Current report
•Net income of $30.2 million, or $0.36 per average diluted share, an increase of 16% from the prior quarter.
Current report
•Pre-tax pre-provision earnings on an adjusted basis 1 increased $2.0 million to $44.5 million from the prior quarter.
Current report
•Demonstrating the Company’s consistent focus on driving efficiency while making investments for organic growth, adjusted noninterest expense 1 is down 10% from the prior year quarter.
Current report
•Continued success in the wealth management division, with assets under management increasing 12% year to date to reach a record $1.9 billion.
Current report
•Continued growth in lending pipelines, with the overall pipeline increasing to $834.4 million.
Current report
•Asset quality remains well controlled, including a reduction in nonperforming loans compared to the prior quarter.
Current report
•Tangible book value per share increased to $15.41.
Current report
•Strong capital position, with a Tier 1 capital ratio of 14.8%, and a tangible common equity to tangible assets ratio of 9.3%.
Current report
As the Company completes its transition from a successful period of sequential bank acquisitions, the most recent of which was integrated in the second quarter of 2023, the renewed focus on organic customer growth is generating momentum across all markets and business segments.
Current report
increase of $13.2 million, or 31%, compared to the six months ended June 30, 2023. For the six months ended June 30, 2024, adjusted net income 1 totaled $61.4 million, or $0.72 per average diluted share, compared to $67.7 million, or $0.81 per average diluted share for the six months ended June 30, 2023.
Current report
For the six months ended June 30, 2024, net interest margin (on a fully taxable equivalent basis)1 decreased 88 basis points to 3.21% compared to the six months ended June 30, 2023, largely driven by the growth in deposit costs. The yield on total loans increased from 5.88% for the six months ended June 30, 2023 to 5.92% for the six months ended June 30, 2024, reflecting the impact of the higher interest rate environment. The yield on securities was 3.59% for the six months ended June 30, 2024, compared to 2.99% for the six months ended June 30, 2023, also reflecting the impact of a higher interest rate environment. The effect on net interest margin of accretion of purchase discounts on acquired loans was an increase of 31 basis points for the six months ended June 30, 2024, and 49 basis points for the six months ended June 30, 2023. The cost of deposits was 2.25% for the six months ended June 30, 2024, an increase of 116 basis points compared to the six months ended June 30, 2023.
Current report
Average loans decreased $29.5 million for the second quarter of 2024 compared to the first quarter of 2024, and decreased $96.1 million, or 1%, from the second quarter of 2023. For the six months ended June 30, 2024, average loans increased $282.7 million, or 3%, from the six months ended June 30, 2023.
Current report
2024 and 1.38% in the second quarter of 2023. For the six months ended June 30, 2024, the cost of average total deposits (including noninterest bearing demand deposits) was 2.25% compared to 1.09% for the six months ended June 30, 2023.
Current report
The Company had an average balance of $149.2 million in FHLB borrowings outstanding for the second quarter of 2024, with an average interest rate of 4.29%, compared to $102.4 million for the first quarter of 2024, with an average interest rate of 3.77%, and $251.6 million for the second quarter of 2023, with an average interest rate of 3.62%. The Company had an average balance of $125.8 million in FHLB borrowings outstanding for the six months ended June 30, 2024, with an average interest rate of 4.08%, compared to $266.9 million for the six months ended June 30, 2023, with an average interest rate of 3.81%.
Current report
Long-term debt balances averaged $106.5 million in the second quarter of 2024, $106.4 million in the first quarter of 2024, and $105.9 million in the second quarter of 2023. The average rate on long-term debt for the second quarter of 2024 was 7.03%, a decrease of 28 basis points compared to the first quarter of 2024 and an increase of 23 basis points compared to the second quarter of 2023. For the six months ended June 30, 2024, long-term debt averaged $106.5 million, compared to $102.2 million for the six months ended June 30, 2023. The average rate on long-term debt for the six months ended June 30, 2024 was 7.17%, an increase of 44 basis points compared to the six months ended June 30, 2023. The long-term debt is comprised of trust preferred securities issued by subsidiary trusts of the Company, and notes assumed in bank acquisitions in 2022 and 2023.
Current report
Noninterest income totaled $22.2 million for the second quarter of 2024, an increase of $1.7 million, or 8%, compared to the first quarter of 2024 and an increase of $0.6 million, or 3% from the second quarter of 2023. Noninterest income totaled $42.7 million for the six months ended June 30, 2024, a decrease of $1.3 million, or 3%, compared to the six months ended June 30, 2023.
Current report
Service charges on deposits were $5.3 million in the second quarter of 2024, compared to $5.0 million in the first quarter of 2024, and $4.6 million in the second quarter of 2023. For the six months ended June 30, 2024, service charges on deposits totaled $10.3 million, an increase of $1.5 million, or 17%, compared to the six months ended June 30, 2023. Our investments in talent and market expansion across the state have resulted in continued growth in treasury management services to commercial customers.
Current report
Insurance agency income increased $0.1 million, or 5%, compared to the first quarter of 2024 and totaled $1.4 million for the three months ended June 30, 2024. For the six months ended June 30, 2024, insurance agency income totaled $2.6 million, an increase of $0.4 million, or 17%, compared to the six months ended June 30, 2023, reflecting continued growth and expansion of insurance services.
Current report
Other income was $6.0 million in the second quarter of 2024, an increase of $0.7 million, or 14%, compared to the first quarter of 2024, and an increase of $1.2 million, or 25%, compared to the second quarter of 2023. The second quarter of 2024 includes a gain on the sale of a single nonperforming commercial real estate loan. For the six months ended June 30, 2024, other income totaled $11.2 million, a decrease of $0.2 million, or 2%, compared to the six months ended June 30, 2023.
Current report
Noninterest expense for the second quarter of 2024 totaled $82.5 million, a decrease of $7.8 million, or 9%, compared to the first quarter of 2024, and a decrease of $25.3 million, or 23%, from the second quarter of 2023. For the six months ended June 30, 2024, noninterest expense totaled $172.9 million, a decrease of $42.4 million, or 20%, compared to the six months ended June 30, 2023. The decreases can be attributed to the completion of cost-saving initiatives and prudent management of expenses while strategically investing to support continued growth, benefiting nearly every category of expense. Noninterest expenses are detailed as follows:
Current report
Salaries and wages totaled $38.9 million for the second quarter of 2024, $40.3 million for the first quarter of 2024, and $45.2 million for the second quarter of 2023. The first quarter of 2024 included $2.1 million in severance-related expenses arising from a reduction in the workforce. For the six months ended June 30, 2024, salaries and wages totaled $79.2 million, a decrease of $13.5 million, or 15%, compared to the six months ended June 30, 2023. The company continues to prioritize investment in growth-focused talent.
Current report
Marketing expenses totaled $3.3 million in the second quarter of 2024, $2.7 million in the first quarter of 2024, and $2.0 million in the second quarter of 2023. For the six months ended June 30, 2024, marketing expenses totaled $5.9 million, an increase of $1.6 million, or 38%, compared to the six months ended June 30, 2023. Planned investments in branding and in marketing campaigns across the state led to higher marketing expenses.
Current report
Legal and professional fees for the second quarter of 2024 were $2.0 million, a decrease of $0.2 million, or 8%, compared to the first quarter of 2024, and a decrease of $2.1 million, or 51%, compared to the second quarter of 2023, which included $1.7 million in acquisition-related expenses. For the six months ended June 30, 2024, legal and professional fees totaled $4.1 million, a decrease of $7.4 million, or 64%, compared to the six months ended June 30, 2023. The 2023 period included $6.5 million in costs directly associated with bank acquisitions.
Current report
For the second quarter of 2024, the Company recorded tax expense of $8.9 million, an increase of $1.1 million, or 14%, compared to the first quarter of 2024 and a decrease of $1.3 million, or 13%, compared to the second quarter of 2023. The effective tax rate for the second quarter of 2024 was 22.8%, compared to 24.6% in the first quarter of 2024 and 23.1% in the second quarter of 2023. For the six months ended June 30, 2024, tax expense totaled $16.7 million, an increase of $3.9 million, or 30%, compared to the six months ended June 30, 2023, with an effective tax rate of 22.9% for the six months ended June 30, 2024, compared to 23.0% for the six months ended June 30, 2023.
Current report
Commercial and commercial real estate originations during the second quarter of 2024 were $406.0 million, an increase of $145.9 million, or 56%, compared to the first quarter of 2024, and an increase of $98.5 million, or 32%, compared to the second quarter of 2023. The Company is benefiting from the investment made in recent years to attract talent from regional banks across its markets. This talent is onboarding significant new relationships, resulting in growing pipelines. Commercial and commercial real estate pipelines were $743.8 million as of June 30, 2024, an increase of 49% from $498.6 million at March 31, 2024, and an increase of 274% from $199.0 million at June 30, 2023.
Current report
The Company recorded provision expense of $4.9 million and $6.3 million, respectively, for the three and six months ended June 30, 2024, compared to $0.8 million and $30.8 million, respectively, for the three and six months ended June 30, 2023. The Company recorded net charge-offs of $9.9 million and $13.6 million, respectively, in the three and six months ended June 30, 2024, compared to $0.7 million and $3.9 million, respectively, for the three and six months ended June 30, 2023.
Removed paragraphs (15)
Previous report
In the first quarter of 2023, the Company completed the acquisition of Professional Holding Corp. (“Professional”), parent company of Professional Bank, adding deposits of approximately $2.1 billion and loans of approximately $2.0 billion.
Previous report
Average loans increased $1.4 million for the first quarter of 2024 compared to the fourth quarter of 2023, and increased $665.5 million, or 7%, from the first quarter of 2023.
Previous report
The Company had an average balance of $102.4 million in FHLB borrowings outstanding for the first quarter of 2024, with a weighted average interest rate of 4.15%, compared to $59.0 million for the fourth quarter of 2023, with a weighted average interest rate of 3.23%, and $282.4 million for the first quarter of 2023, with a weighted average interest rate of 4.26%.
Previous report
Long-term debt balances averaged $106.4 million in the first quarter of 2024, $106.2 million in the fourth quarter of 2023, and $98.4 million in the first quarter of 2023. The average rate on long-term debt for the first quarter of 2024 was 7.31%, an increase of 15 basis points compared to the fourth quarter of 2023 and an increase of 66 basis points compared to the first quarter of 2023.
Previous report
Noninterest income totaled $20.5 million for the first quarter of 2024, an increase of $3.2 million, or 18%, compared to the fourth quarter of 2023 and a decrease of $1.9 million, or 9% from the first quarter of 2023.
Previous report
Service charges on deposits were $5.0 million in the first quarter of 2024, compared to $4.8 million in the fourth quarter of 2023, and $4.2 million in the first quarter of 2023. The increase in fees primarily reflects the benefit of an expanded deposit base and the continued expansion of commercial treasury management services and new customer acquisition.
Previous report
Insurance agency income increased $0.2 million, or 21%, compared to the fourth quarter of 2023 and totaled $1.3 million.
Previous report
Other income was $5.2 million in the first quarter of 2024, an increase of $0.5 million, or 12%, compared to the fourth quarter of 2023, and a decrease of $1.4 million, or 21% compared to the first quarter of 2023. The increase compared to the prior quarter reflects higher marine and aircraft loan production sold, as well as higher SBIC income. The decrease compared to the first quarter of 2023 was attributed to BOLI death benefits of $2.1 million in the first quarter of 2023.
Previous report
Noninterest expense for the first quarter of 2024 totaled $90.4 million, an increase of $4.0 million, or 5%, compared to the fourth quarter of 2023, and a decrease of $17.1 million, or 16%, from the first quarter of 2023. Noninterest expenses are detailed as follows:
Previous report
Salaries and wages totaled $40.3 million for the first quarter of 2024, $38.4 million for the fourth quarter of 2023, and $47.6 million for the first quarter of 2023. The increase compared to the fourth quarter of 2023 reflects severance-related costs arising from reductions in the workforce early in the first quarter of 2024. The decrease compared to the first quarter of 2023 reflects $4.2 million in merger-related expenses during the first quarter of 2023. The first quarter of 2023 also included expenses related to the net addition of branch locations and associates, as well as new bankers and operational staff associated with acquisitions.
Previous report
Marketing expenses totaled $2.7 million in the first quarter of 2024, $3.0 million in the fourth quarter of 2023, and $2.2 million in the first quarter of 2023.
Previous report
Legal and professional fees for the first quarter of 2024 were $2.2 million, a decrease of $1.1 million, or 35%, compared to the fourth quarter of 2023, and a decrease of $5.3 million, or 71%, compared to the first quarter of 2023. There were no acquisition-related expenses in the first quarter of 2024 or the fourth quarter of 2023, compared to $4.8 million in the first quarter of 2023.
Previous report
For the first quarter of 2024, the Company recorded tax expense of $7.8 million, compared to $8.3 million in the fourth quarter of 2023 and $2.7 million in the first quarter of 2023. Lower income tax expense in the first quarter of 2024 compared to the fourth quarter of 2023 and the first quarter of 2023 is primarily due to lower pre-tax income.
Previous report
Commercial and commercial real estate originations during the first quarter of 2024 were $260.0 million, a decrease of $74.2 million, or 22%, compared to the fourth quarter of 2023, and a decrease of $60.2 million, or 19%, compared to the first quarter of 2023. Lower originations compared to the fourth quarter of 2023 were consistent with typical seasonality. Lower originations compared to the first quarter of 2023 were largely the result of the impact of higher rates on customer demand. Commercial and commercial real estate pipelines were $498.6 million as of March 31, 2024, an increase of 63% from $306.5 million at December 31, 2023, and an increase of 72% from $289.2 million at March 31, 2023.
Previous report
During the three months ended March 31, 2024, the Company recorded provision expense of $1.4 million. The Company reported net charge-offs for the three months ended March 31, 2024 of $3.6 million.
Reworded paragraphs (71)
Previous wording
The emphasis of this discussion will be on the three months ended March 31, 2024 compared to the three months ended March 31, 2023 for the consolidated statements of income. For the consolidated balance sheets, the emphasis of this discussion will be the balances as of March 31, 2024 compared to December 31, 2023.
Current wording
The emphasis of this discussion will be on the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023 for the consolidated statements of income. For the consolidated balance sheets, the emphasis of this discussion will be the balances as of June 30, 2024 compared to December 31, 2023.
Previous wording
All statements other than statements of historical fact could be forward-looking statements. You can identify these forward-looking statements through the use of words such as “may,” “will,” “anticipate,” “assume,” “should,” “support,” “indicate,” “would,” “believe,” “contemplate,” “expect,” “estimate,” “continue,” “further,” “plan,” “point to,” “project,” “could,” “intend,”
Current wording
All statements other than statements of historical fact could be forward-looking statements. You can identify these forward-looking statements through the use of words such as “may,” “will,” “anticipate,” “assume,” “should,” “support,” “indicate,”
Previous wording
“target” or other similar words and expressions of the future. These forward-looking statements may not be realized due to a variety of factors, including, without limitation:
Current wording
“would,” “believe,” “contemplate,” “expect,” “estimate,” “continue,” “further,” “plan,” “point to,” “project,” “could,” “intend,” “target” or other similar words and expressions of the future. These forward-looking statements may not be realized due to a variety of factors, including, without limitation:
Previous wording
•Governmental monetary and fiscal policies, including interest rate policies of the Board of Governors of the Federal Reserve, as well as legislative, tax and regulatory changes, including those that impact the money supply and inflation;
Current wording
•Governmental monetary and fiscal policies, including interest rate policies of the Board of Governors of the Federal Reserve, as well as legislative, tax and regulatory changes including proposed overdraft and late fee caps, including those that impact the money supply and inflation;
Previous wording
•Interest rate risks (including the impact of interest rates on macroeconomic conditions, customer and client behavior, and on our net interest income), sensitivities, and the shape of the yield curve;
Current wording
•Interest rate risks (including the impact of interest rates on macroeconomic conditions, customer and client behavior, and on our net interest income), as well as the impact of prolonged elevated interest rates on our financial projections and models, sensitivities, and the shape of the yield curve;
Previous wording
•Seacoast’s ability to comply with any regulatory requirements and the risk that the regulatory environment may not be conducive to or may prohibit the consummation of future mergers and/or business combinations, may increase the length of time and amount of resources required to consummate such transactions, and may reduce the anticipated benefit;
Current wording
•Seacoast’s ability to comply with any regulatory requirements and the risk that the regulatory environment may not be conducive to or may prohibit or delay the consummation of future mergers and/or business combinations, may increase the length of time and amount of resources required to consummate such transactions, and may reduce the anticipated benefit;
Previous wording
•The Company’s ability to identify and address increased cybersecurity risks, including those impacting vendors and other third parties which may be exacerbated by recent developments in generative artificial intelligence;
Current wording
•The Company’s ability to identify and address increased cybersecurity risks, including those impacting vendors and other third parties which may be exacerbated by developments in generative artificial intelligence;
Previous wording
•Dependence on key suppliers or vendors to obtain equipment or services for the business on acceptable terms, including the impact of supply chain distruptions;
Current wording
•Dependence on key suppliers or vendors to obtain equipment or services for the business on acceptable terms;
Previous wording
•The effects of war or other conflicts, including the impacts related to or resulting from Russia’s military action in Ukraine and the escalating conflicts in the Middle East, acts of terrorism, natural disasters, including hurricanes in the Company’s footprint, health emergencies, epidemics or pandemics, or other catastrophic events that may affect general economic conditions and/or increase costs, including, but not limited to, property and casualty and other insurance costs;
Current wording
•The effects of war or other conflicts, acts of terrorism, natural disasters, including hurricanes in the Company’s footprint, health emergencies, epidemics or pandemics, or other catastrophic events that may affect general economic conditions and/or increase costs, including, but not limited to, property and casualty and other insurance costs;
Previous wording
•A deterioration of the credit rating for U.S. long-term sovereign debt, actions that the U.S. government may take to avoid exceeding the debt ceiling, and uncertainties surrounding the debt ceiling and the federal budget;
Current wording
•A deterioration of the credit rating for U.S. long-term sovereign debt, actions that the U.S. government may take to avoid exceeding the debt ceiling, and uncertainties surrounding the federal budget and economic policy;
Previous wording
For the first quarter of 2024, the Company reported net income of $26.0 million, or $0.31 per average diluted share, a decrease of $3.5 million, or 12%, from the fourth quarter of 2023 and an increase of $14.2 million, or 120%, compared to the first quarter of 2023. Adjusted net income 1 for the first quarter of 2024 totaled $31.1 million, or $0.37 per average diluted share, a decrease of $0.2 million, or 1%, compared to the fourth quarter of 2023 and an increase of $7.5 million, or 31%, compared to the first quarter of 2023.
Current wording
For the second quarter of 2024, the Company reported net income of $30.2 million, or $0.36 per average diluted share, an increase of $4.2 million, or 16%, from the first quarter of 2024 and a decrease of $1.0 million, or 3%, compared to the second quarter of 2023. Adjusted net income 1 for the second quarter of 2024 totaled $30.3 million, or $0.36 per average diluted share, a decrease of $0.9 million, or 3%, compared to the first quarter of 2024 and a decrease of $13.2 million, or 30%, compared to the second quarter of 2023. For the six months ended June 30, 2024, net income totaled $56.3 million, or $0.66 per average diluted share, an
Previous wording
Net interest income for the first quarter of 2024 totaled $105.1 million, a decrease of $5.7 million, or 5%, compared to the fourth quarter of 2023, and a decrease of$26.1 million, or 20%, compared to the first quarter of 2023. The decrease from the prior quarter reflects higher interest expense on deposits driven by higher deposit costs attributed in part to overall growth in deposit balances. The decrease was partially offset by higher yields on loans and securities. The decrease from the prior year is primarily due to the higher cost of deposits.
Current wording
Net interest income for the second quarter of 2024 totaled $104.4 million, a modest decrease of $0.7 million, or 1%, compared to the first quarter of 2024, and a decrease of$22.5 million, or 18%, compared to the second quarter of 2023. The decrease from the prior quarter reflects higher interest expense on deposits resulting from growth in deposit balances and the impact of the continued elevated rate environment. The decrease was partially offset by higher yields on loans and securities. The decrease from the prior year is primarily due to the higher cost of deposits. For the six months ended June 30, 2024, net interest income totaled $209.5 million, a decrease of $48.6 million, or 19%, compared to the six months ended June 30, 2023.
Previous wording
Net interest income (on a fully taxable equivalent basis)1 for the first quarter of 2024 was $105.3 million, a decrease of $5.7 million, or 5%, compared to the fourth quarter of 2023, and a decrease of $26.1 million, or 20%, compared to the first quarter of 2023. Accretion on acquired loans totaled $10.6 million for the first quarter of 2024, compared to $11.3 million for the fourth quarter of 2023, and $15.9 million for the first quarter of 2023.
Current wording
Net interest income (on a fully taxable equivalent basis)1 for the second quarter of 2024 was $104.7 million, a decrease of $0.6 million, or 1%, compared to the first quarter of 2024, and a decrease of $22.5 million, or 18%, compared to the second quarter of 2023. Accretion on acquired loans totaled $10.2 million for the second quarter of 2024, compared to $10.6 million for the first quarter of 2024, and $14.6 million for the second quarter of 2023. For the six months ended June 30, 2024, net interest income (on a fully taxable equivalent basis)1 was $210.0 million, a decrease of $48.6 million, or 1%, compared to the six months ended June 30, 2023.
Previous wording
Net interest margin (on a fully tax equivalent basis)1 was 3.24% in the first quarter of 2024, compared to 3.36% in the fourth quarter of 2023, and 4.31% in the first quarter of 2023. The decrease during the first quarter of 2024 was largely driven by the growth in deposit costs. Compared to the fourth quarter of 2023, securities yields expanded five basis points to 3.47% and loan yields increased to 5.90% during the first quarter of 2024. The effect on net interest margin of accretion of purchase discounts on acquired loans were increases of 33 basis points in the first quarter of 2024, 34 basis points in the fourth quarter of 2023, and 53 basis points in the first quarter of 2023. The cost of deposits was 2.19% in the first quarter of 2024, compared to 2.00% in the fourth quarter of 2023, and 0.77% in the first quarter of 2023. For the first quarter of 2024, the higher cost of deposits reflects the impact of the continuing elevated interest rate environment.
Current wording
Net interest margin (on a fully taxable equivalent basis)1 decreased six basis points from 3.24% in the first quarter of 2024 to 3.18% in the second quarter of 2024, and decreased 68 basis points from 3.86% in the second quarter of 2023, largely driven by the growth in deposit costs. Compared to the first quarter of 2024, securities yields increased 22 basis points in the second quarter of 2024 to 3.69% and compared to the second quarter of 2023, increased 56 basis points. The yield on loans increased to 5.93% for the second quarter of 2024 from 5.90% in the first quarter of 2024 and from 5.89%in the second quarter of 2023, reflecting the impact of a higher interest rate environment. The effect on net interest margin of accretion of purchase discounts on acquired loans was an increase of 30 basis points for the second quarter of 2024, 33 basis points in the first quarter, and 44 basis points in the second quarter of 2023. The cost of deposits was 2.31% in the second quarter of 2024, compared to 2.19% in the first quarter of 2024, and 1.38% in the second quarter of 2023.
Previous wording
The following table details the trend for net interest income and margin results (on a tax equivalent basis)1, the yield on earning assets and the rate paid on interest bearing liabilities for the periods specified:
Current wording
The following table details the trend for net interest income and margin results (on a fully taxable equivalent basis)1, the yield on earning assets and the rate paid on interest bearing liabilities for the periods specified:
Previous wording
Average loans as a percentage of average earning assets totaled 77% for the first quarter of 2024, 77% for the fourth quarter of 2023 and 76% for the first quarter of 2023.
Current wording
Average loans as a percentage of average earning assets totaled 76% for the second quarter of 2024, 77% for the first quarter of 2024 and 76% for the second quarter of 2023. For each of the six months ended June 30, 2024 and June 30, 2023, average loans as a percentage of average earning assets totaled 76%.
Previous wording
Average investment securities increased $78.0 million, or 3%, during the first quarter of 2024 compared to the fourth quarter of 2023, and were $131.5 million, or 5%, lower compared to the first quarter of 2023. Securities yields expanded five basis points to 3.47% during the first quarter of 2024 from 3.42% in the fourth quarter of 2023, benefiting from recent portfolio restructurings.
Current wording
During the second quarter of 2024, average investment securities increased $50.3 million, or 2%, compared to the first quarter of 2024, and decreased $54.1 million, or 2.0%, compared to the second quarter of 2023. Securities yields increased 22 basis points to 3.69% during the second quarter of 2024 from 3.47% in the first quarter of 2024, benefiting from recent purchases. For the six months ended June 30, 2024, average investment securities were $2.6 billion, a decrease of $92.8 million, or 3%, compared to the six months ended June 30, 2023.
Previous wording
The cost of average interest-bearing liabilities increased 22 basis points in the first quarter of 2024 to 3.20% from 2.98% in the fourth quarter of 2023, and increased 177 basis points from 1.43% in the first quarter of 2023. The cost of average total deposits (including noninterest bearing demand deposits) was 2.19% in the first quarter of 2024, 2.00% in the fourth quarter of 2023 and 0.77% in the first quarter of 2023.
Current wording
The cost of average interest-bearing liabilities increased 13 basis points in the second quarter of 2024 to 3.33% from 3.20% in the first quarter of 2024, and increased 107 basis points from 2.26% in the second quarter of 2023. The cost of average total deposits (including noninterest bearing demand deposits) was 2.31% in the second quarter of 2024, 2.19% in the first quarter of
Previous wording
During the first quarter of 2024, average transaction deposits (noninterest and interest bearing demand) decreased $311.9 million, or 5%, compared to the fourth quarter of 2023 and decreased $539.3 million, or 8%, compared to the first quarter of 2023. The Company’s deposit mix remains favorable, with 87% of average deposit balances comprised of savings, money market, and demand deposits for the three months ended March 31, 2024.
Current wording
During the second quarter of 2024, average transaction deposits (noninterest and interest-bearing demand) decreased $91.7 million, or 1%, compared to the first quarter of 2024 and decreased $804.4 million, or 12%, compared to the second quarter of 2023. For the six months ended June 30, 2024, average transaction deposits decreased $672.3 million, or 10%, compared to the six months ended June 30, 2023. The Company’s deposit mix remains favorable, with 87% of average deposit balances comprised of savings, money market, and demand deposits for the six months ended June 30, 2024.
Previous wording
Average balances of sweep repurchase agreements with customers decreased $2.2 million, or 1%, from the fourth quarter of 2023 and increased $159.9 million, or 92%, compared to the first quarter of 2023. The average rate on customer sweep repurchase accounts was 3.71% for the first quarter of 2024, compared to 3.54% for the fourth quarter of 2023, and 2.02% for the first quarter of 2023.
Current wording
Average balances of sweep repurchase agreements with customers decreased $39.8 million, or 12%, from the first quarter of 2024 and increased $48.8 million, or 20%, compared to the second quarter of 2023. The average rate on customer sweep repurchase accounts was 3.68% for the second quarter of 2024, compared to 3.71% for the first quarter of 2024, and 2.61% for the second quarter of 2023. For the six months ended June 30, 2024, the average balance was $313.5 million compared to an average balance of $209.4 million for the six months ended June 30, 2023 with average rates of 3.70% and 2.37%, respectively.
Previous wording
The following tables detail average balances, net interest income and margin results (on a tax equivalent basis, a non-GAAP measure) for the periods presented:
Current wording
The following tables detail average balances, net interest income and margin results (on a fully taxable equivalent basis, a non-GAAP measure) for the periods presented:
Previous wording
Interchange income decreased to $1.9 million for the first quarter of 2024, compared to $2.4 million for the fourth quarter of 2023, and $4.7 million for the first quarter of 2023. The decrease in interchange income compared to the prior quarter is due to an annual volume-based incentive earned from the payment network provider in the previous quarter. The decrease compared to the prior year quarter is due to the impact of the Durbin amendment, which became effective for the first time for the Company on July 1, 2023, limiting network interchange fees earned on debit card transactions.
Current wording
Interchange income increased $0.1 million, or 3%, compared to the first quarter of 2024 and decreased $3.1 million, or 62%, compared to the second quarter of 2023. The decrease compared to the prior year quarter is due to the impact of the Durbin amendment, which became effective for the first time for the Company on July 1, 2023, limiting network interchange fees earned on debit card transactions. For the six months ended June 30, 2024, interchange income totaled $3.8 million, a decrease of $5.9 million, or 61%, compared to the six months ended June 30, 2023.
Previous wording
Wealth management income, including trust fees and brokerage commissions and fees, was $3.5 million in the first quarter of 2024, compared to $3.3 million for the fourth quarter of 2023 and $3.1 million for the first quarter of 2023. The wealth management division continues to demonstrate success in building relationships, and during the first quarter of 2024, assets under management grew $160 million, or 9%, to $1.9 billion.
Current wording
Wealth management income, including trust fees and brokerage commissions and fees, was $3.8 million in the second quarter of 2024, compared to $3.5 million for the first quarter of 2024 and $3.3 million for the second quarter of 2023. For the six months ended June 30, 2024, wealth management income totaled $7.3 million, an increase of $0.9 million, or 14%, compared to the six months ended June 30, 2023. The wealth management division continues to demonstrate success in building relationships, and assets under management have increased $202.8 million, or 12%, from December 31, 2023, to $1.9 billion.
Previous wording
Bank owned life insurance (“BOLI”) income was $2.3 million for the first quarter of 2024 compared to $2.2 million for the fourth quarter of 2023 and $1.9 million for the first quarter of 2023. The increase of $0.3 million, or 18%, compared to the first quarter of 2023 is attributed to additions, including those from bank acquisitions.
Current wording
Bank owned life insurance (“BOLI”) income was $2.6 million for the second quarter of 2024, compared to $2.3 million for the first quarter of 2024 and $2.1 million for the second quarter of 2023. For the six months ended June 30, 2024, BOLI income totaled $4.9 million, an increase of $0.9 million, or 22%, compared to the six months ended June 30, 2023, with policy exchanges executed in the first quarter of 2024 resulting in improved ongoing yields.
Previous wording
Net securities gains of $0.2 million in the first quarter of 2024 include gains of $4.1 million on the sale of the Company’s holdings of Visa Class B stock. This was largely offset by losses of $3.8 million on the sale of $86.8 million, or 3%, of the bank’s investment securities portfolio. The proceeds were reinvested at a yield of 5.53%, with an expected earnback on the trade of 1.9 years.
Current wording
Net securities activity resulted in losses of$44 thousand during thesecond quarter of 2024, gains of $0.2 million in the first quarter of 2024, and losses of$0.2 million in the second quarter of 2023. The first quarter of 2024 included gains of $4.1 million on the sale of the Company’s holdings of Visa Class B stock, which was largely offset by losses of $3.8 million on the sale of $86.8 million, or 3%, of the bank’s investment securities portfolio. The proceeds were reinvested at a yield of 5.53%, with an expected earnback on the trade of 1.9 years.
Previous wording
During the first quarter of 2024, employee benefit costs, which include costs associated with the Company’s self-funded health insurance benefits, 401(k) plan, payroll taxes, and unemployment compensation, were $7.9 million, an increase of $1.2 million, or 18%, compared to the fourth quarter of 2023, and a decrease of $0.7 million, or 8%, compared to the first quarter of 2023. The increase compared to the fourth quarter of 2023 reflects higher seasonal payroll taxes and 401(k) contributions. The decrease compared to the first quarter of 2023 is related to reductions in the workforce.
Current wording
During the second quarter of 2024, employee benefits, which include costs associated with the Company’s self-funded health insurance benefits, 401(k) plan, payroll taxes, and unemployment compensation, were $6.9 million, a decrease of $1.0 million, or 13%, compared to the first quarter of 2024, and a decrease of $0.6 million, or 8%, compared to the second quarter of 2023. The decrease compared to the first quarter of 2024 reflects higher seasonal payroll taxes and 401(k) contributions impacting the first quarter. The decrease compared to the second quarter of 2023 is related to reductions in the workforce. For the six months ended June 30, 2024, employee benefit costs totaled $14.8 million, a decrease of $1.3 million, or 8%, compared to the six months ended June 30, 2023.
Previous wording
The Company utilizes third parties for its core data processing systems. Ongoing data processing costs are directly related to the number of transactions processed and the negotiated rates associated with those transactions. Outsourced data processing costs totaled $12.1 million, $8.6 million, and $14.6 million for the first quarter of 2024, fourth quarter of 2023, and first quarter of 2023, respectively. The increased costs in the first quarter of 2024 are attributed to $4.1 million in charges associated with contract terminations and modifications to consolidate systems, which should lead to lower ongoing operating expenses.
Current wording
The Company utilizes third parties for its core data processing systems. Ongoing data processing costs are directly related to the number of transactions processed and the negotiated rates associated with those transactions. Outsourced data processing costs totaled $8.2 million, $12.1 million, and $20.2 million for the second quarter of 2024, first quarter of 2024, and second quarter of 2023, respectively. The Company incurred one-time charges of $4.1 million early in the first quarter of 2024 associated with consolidation activities, leading to a comparative decline in expense in these categories in the second quarter of 2024. For the six months ended June 30, 2024, outsourced data processing costs totaled $20.3 million, a decrease of $14.4 million, or 42%, compared to the six months ended June 30, 2023. The 2023 period included $17.5 million in costs directly associated with bank acquisitions.
Previous wording
Total occupancy, furniture and equipment expenses were $10.0 million in the first quarter of 2024, $9.5 million in the fourth quarter of 2023, and $10.3 million in the first quarter of 2023. Expenses in the first quarter of 2024 included charges of $0.8 million associated with early lease terminations and consolidation of locations as part of the Company’s expense reduction initiative.
Current wording
Total occupancy and furniture and equipment expenses were $9.1 million in the second quarter of 2024, $10.0 million in the first quarter of 2024, and $10.9 million in the second quarter of 2023. The first quarter of 2024 included charges of $0.8 million associated with early lease terminations and consolidation of locations as part of the Company’s expense reduction initiative. For the six months ended June 30, 2024, occupancy and furniture and equipment expenses totaled $19.2 million, a decrease of $2.0 million, or 10%, compared to the six months ended June 30, 2023.
Previous wording
The provision for credit losses was $1.4 million for the first quarter of 2024, compared to $4.0 million for the fourth quarter of 2023, and $31.6 million for the first quarter of 2023. The first quarter of 2023 included a $26.6 million day-one provision associated with the acquisition of Professional.
Current wording
The provision for credit losses was $4.9 million for the second quarter of 2024, compared to $1.4 million for the first quarter of 2024, and a net benefit of $0.8 million for the second quarter of 2023. For the six months ended June 30, 2024, provision for credit losses was $6.3 million, compared to $30.8 million for the six months ended June 30, 2023. The first quarter of 2023 included a $26.6 million day-one provision recorded in conjunction with the Professional acquisition.
Previous wording
Total assets as of March 31, 2024 were $14.8 billion, an increase of $0.2 billion, or 2%, from December 31, 2023.
Current wording
Total assets as of June 30, 2024 were $15.0 billion, an increase of $372.4 million, or 3%, from December 31, 2023.
Previous wording
At March 31, 2024, the Company had $1.9 billion in AFS securities and $669.9 million in HTM securities. The Company’s total debt securities portfolio increased $103.0 million from December 31, 2023. During the three months ended March 31, 2024, the Company recognized a $4.1 million gain on the opportunistic sale of Visa Class B shares. The gain was offset by a partial repositioning of the securities portfolio, in which $86.8 million of securities were sold, with $3.8 million in realized losses. Additionally, during the three months ended March 31, 2024, there were $261.0 million of debt securities purchased and $61.2 million in paydowns and maturities over the same period.
Current wording
At June 30, 2024, the Company had $2.0 billion in AFS securities and $658.1 million in HTM securities. The Company’s total debt securities portfolio increased $108.9 million from December 31, 2023. During the first quarter of 2024, the Company recognized a $4.1 million gain on the opportunistic sale of its Visa Class B shares. The gain was offset by a partial repositioning of the securities portfolio, in which $86.8 million of securities were sold, with $3.8 million in realized losses. During the six months ended June 30, 2024, there were $376.7 million of debt securities purchased and $167.2 million in paydowns and maturities over the same period.
Previous wording
Debt securities generally return principal and interest monthly. The modified duration of the AFS securities portfolio and the total portfolio was 4.5 and 4.9, respectively, at both March 31, 2024 and December 31, 2023.
Current wording
Debt securities generally return principal and interest monthly. The modified duration of the AFS securities portfolio and the total portfolio was 4.5 and 4.8, respectively, at June 30, 2024 compared to 4.5 and 4.9, respectively, at December 31, 2023.
Previous wording
At March 31, 2024, AFS securities had gross unrealized losses of $223.6 million and gross unrealized gains of $3.6 million, compared to gross unrealized losses of $217.7 million and gross unrealized gains of $4.4 million at December 31, 2023.
Current wording
At June 30, 2024, AFS securities had gross unrealized losses of $228.1 million and gross unrealized gains of $3.3 million, compared to gross unrealized losses of $217.7 million and gross unrealized gains of $4.4 million at December 31, 2023.
Previous wording
The credit quality of the Company’s securities holdings is primarily investment grade. U.S. Treasury securities, obligations of U.S. government agencies, and obligations of U.S. government sponsored entities totaled $2.2 billion, or 83%, of the total portfolio.
Current wording
The credit quality of the Company’s securities holdings is primarily investment grade. U.S. Treasury securities, obligations of U.S. government agencies, and obligations of U.S. government sponsored entities totaled $2.2 billion, or 85%, of the total portfolio.
Previous wording
The portfolio includes $136.6 million, with a fair value of $126.2 million, in private label residential and commercial mortgage-backed securities and collateralized mortgage obligations. Included are $127.0 million, with a fair value of $116.9 million, in private label residential securities with weighted average credit support of 23%. The collateral underlying these mortgage investments includes both fixed-rate and adjustable-rate residential mortgage loans. Commercial securities totaled $9.6 million, with a fair value of $9.2 million. These securities have weighted average credit support of 26%. The collateral underlying these mortgages are primarily pooled multifamily loans.
Current wording
The portfolio includes $131.3 million, with a fair value of $120.7 million, in private label residential and commercial mortgage-backed securities and collateralized mortgage obligations. Included are $121.6 million, with a fair value of $111.4 million, in private label residential securities with weighted average credit support of 23%. The collateral underlying these mortgage investments includes both fixed-rate and adjustable-rate residential mortgage loans. Commercial securities totaled $9.6 million, with a fair value of $9.2 million. These securities have weighted average credit support of 22%. The collateral underlying these mortgages are primarily pooled multifamily loans.
Previous wording
The Company also has invested $284.7 million in floating rate collateralized loan obligations. Collateralized loan obligations are special purpose vehicles that purchase first lien broadly syndicated corporate loans while providing support to senior tranche investors. As of March 31, 2024, all of the Company’s collateralized loan obligations were in AAA/AA tranches with weighted average credit support of 34%. The Company utilizes credit models with assumptions of loan level defaults, recoveries, and prepayments to evaluate each security for potential credit losses. The result of this analysis did not indicate expected credit losses.
Current wording
The Company also has invested $267.8 million in floating rate collateralized loan obligations. Collateralized loan obligations are special purpose vehicles that purchase first lien broadly syndicated corporate loans while providing support to senior tranche investors. As of June 30, 2024, all of the Company’s collateralized loan obligations were in AAA/AA tranches with weighted average credit support of 34%. The Company utilizes credit models with assumptions of loan level defaults, recoveries, and prepayments to evaluate each security for potential credit losses. The result of this analysis did not indicate expected credit losses.
Previous wording
Loans, net of unearned income and excluding the allowance for credit losses, were $10.0 billion at March 31, 2024, an $84.9 million, or 1%, decrease from December 31, 2023.
Current wording
Loans, net of unearned income and excluding the allowance for credit losses, were $10.0 billion at June 30, 2024, a $24.4 million, or 0.2%, decrease from December 31, 2023.
Previous wording
The Company remains committed to sound risk management procedures. Portfolio diversification in terms of asset mix, industry, and loan type has been and continues to be an important element of the Company’s lending strategy. The average loan size is only $332 thousand, and the average commercial loan size is only $742 thousand at March 31, 2024, reflecting the Company’s longtime focus on granularity and on creating valuable customer relationships. Lending policies contain guardrails that pertain to lending by type of collateral and purpose, along with limits regarding loan concentrations and the principal amount of loans. The Company’s exposure to commercial real estate lending remains well below regulatory limits (see “Loan Concentrations”).
Current wording
The Company remains committed to sound risk management procedures. Portfolio diversification in terms of asset mix, industry, and loan type has been and continues to be an important element of the Company’s lending strategy. The average loan size is only $345 thousand, and the average commercial loan size is only $758 thousand at June 30, 2024, reflecting the Company’s longtime focus on granularity and on creating valuable customer relationships. Lending policies contain guardrails that pertain to lending by type of collateral and purpose, along with limits regarding loan concentrations and the principal amount of loans. The Company’s exposure to commercial real estate lending remains well below regulatory limits (see “Loan Concentrations”).
Previous wording
The amortized cost basis of loans included net deferred costs of $44.9 million at March 31, 2024 and $43.1 million at December 31, 2023. At March 31, 2024, the remaining fair value adjustments on acquired loans were $163.4 million, or 4.6%, of the outstanding acquired loan balances, compared to $174.0 million, or 4.8%, of the acquired loan balances at December 31, 2023. The discount is accreted into interest income over the remaining lives of the related loans on a level yield basis.
Current wording
The amortized cost basis of loans included net deferred costs of $45.5 million at June 30, 2024 and $43.1 million at December 31, 2023. At June 30, 2024, the remaining fair value adjustments on acquired loans were $151.4 million, or 4.5%, of the outstanding acquired loan balances, compared to $174.0 million, or 4.8%, of the acquired loan balances at December 31, 2023. The discount is accreted into interest income over the remaining lives of the related loans on a level yield basis.
Previous wording
CRE non-owner occupied loans increased by $48.4 million in the three months ended March 31, 2024, totaling $3.37 billion at March 31, 2024 compared to $3.32 billion at December 31, 2023. Non-owner occupied CRE loans are collateralized by properties where the source of repayment is typically from the sale or lease of the property. Within the non-owner occupied CRE portfolio, the largest segment is Retail properties, which totaled approximately $1.12 billion at March 31, 2024.
Current wording
Non-owner occupied CRE loans increased by $103.4 million in the six months ended June 30, 2024, totaling $3.4 billion at June 30, 2024 compared to $3.3 billion at December 31, 2023. Non-owner occupied CRE loans are collateralized by properties where the source of repayment is typically from the sale or lease of the property. Within the non-owner occupied CRE portfolio, the largest segment is Retail properties, which totaled approximately $1.1 billion at June 30, 2024. This segment targets grocery or credit tenant-anchored shopping plazas, single credit tenant retail buildings, smaller outparcels, and other small retail units. Loans in this segment have a weighted average loan to value of 50% and an average loan size of $2.2 million.
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