BOK FINANCIAL CORP

Previous wording

BOK Financial reported net income of $163.7 million or $2.54 per diluted share for the second quarter of 2024 compared to $83.7 million or $1.29 per diluted share for the first quarter of 2024. Excluding the gain on conversion of Visa shares, the additional FDIC special assessment expense, and the contribution of Visa shares to the BOKF Foundation, net income would have been $131.1 million or $2.02 per share for the second quarter of 2024, both of which are non-GAAP measures 1. PPNR 1, also a non-GAAP measure, increased $104.1 million to $219.0 million compared to the first quarter of 2024.

Current wording

BOK Financial reported net income of $140.0 million, or $2.18 per diluted share, for the third quarter of 2024 compared to $163.7 million, or $2.54 per diluted share, for the second quarter of 2024. PPNR 1, a non-GAAP measure, decreased $43.7 million to $175.3 million compared to the second quarter of 2024.

Previous wording

•Fees and commissions revenue totaled $200.0 million, consistent with the prior quarter. Higher fiduciary and asset management revenue and transaction card revenue was offset by lower brokerage and trading revenue.

Current wording

•Fees and commissions revenue totaled $202.5 million, an increase of $2.5 million over the prior quarter. Higher transaction card revenue and other revenue was partially offset by lower brokerage and trading revenue.

Previous wording

•Period end outstanding loan balances totaled $24.6 billion at June 30, 2024, growing $381 million over March 31, 2024, largely due to growth in commercial loans, partially offset by a reduction in commercial real estate loans. Average loan balances increased $437 million to $24.4 billion.

Current wording

•Period end outstanding loan balances totaled $24.0 billion at September 30, 2024, a decrease of $569 million compared to June 30, 2024, largely due to a reduction in commercial loans, partially offset by growth in commercial real estate loans and loans to individuals. Average loan balances decreased $80 million to $24.3 billion.

Previous wording

•The provision for credit losses of $8.0 million in the second quarter of 2024 reflects continued loan growth and a stable economic forecast. Net charge-offs were $6.9 million or 0.11% of average loans on an annualized basis in the second quarter. The resulting combined allowance for credit losses totaled $330 million or 1.34% of outstanding loans at June 30, 2024. The combined allowance for credit losses was $329 million or 1.36% of outstanding loans at March 31, 2024.

Current wording

•The provision for credit losses of $2.0 million in the third quarter of 2024 reflects continued strong credit quality, net loan paydowns, and relatively minor changes in economic forecast scenario assumptions. Net recoveries were $54 thousand, or less than 0.01% of average loans on an annualized basis, in the third quarter. The resulting combined allowance for credit losses totaled $332 million, or 1.39% of outstanding loans, at September 30, 2024. The combined allowance for credit losses was $330 million, or 1.34% of outstanding loans, at June 30, 2024.

Previous wording

•Nonperforming assets not guaranteed by U.S. government agencies were $86 million, a $27 million decrease compared to March 31, 2024. Potential problem loans increased by $6.0 million while other loans especially mentioned increased by $123 million compared to March 31, 2024.

Current wording

•Nonperforming assets not guaranteed by U.S. government agencies were $80 million, a $6.0 million decrease compared to June 30, 2024. Potential problem loans increased by $80 million while other loans especially mentioned decreased by $55 million compared to June 30, 2024.

Previous wording

•Period end deposits were $36.2 billion at June 30, 2024, an $858 million increase over March 31, 2024. Average deposits increased $627 million, including an $872 million increase in average interest-bearing deposits, partially offset by a $244 million reduction in demand deposit balances. The loan to deposit ratio was 68% at June 30, 2024, unchanged from the prior quarter.

Current wording

•Period end deposits were $37.2 billion at September 30, 2024, growing $985 million over June 30, 2024. Average deposits increased $1.1 billion, including a $1.2 billion increase in average interest-bearing deposits, partially offset by a $113 million reduction in demand deposit balances. The loan to deposit ratio was 64% at September 30, 2024, compared to 68% at June 30, 2024.

Previous wording

•Assets under management or administration totaled $107.5 billion at June 30, 2024, increasing $1.9 billion compared to March 31, 2024.

Current wording

•Assets under management or administration totaled $110.7 billion at September 30, 2024, increasing $3.2 billion over June 30, 2024.

Previous wording

•The Company's tangible common equity ratio 1, a non-GAAP measure, was 8.38% at June 30, 2024 and 8.21% at March 31, 2024. The tangible common equity ratio is primarily based on total shareholders' equity, which includes unrealized gains and losses on available for sale securities. Adjusted for all securities portfolio losses, including the tax adjusted losses in the investment portfolio, the tangible common equity ratio 1 would be 8.06% at June 30, 2024 and 7.92% at March 31, 2024.

Current wording

•The Company's tangible common equity ratio 1, a non-GAAP measure, was 9.22% at September 30, 2024, and 8.38% at June 30, 2024. The tangible common equity ratio is primarily based on total shareholders' equity, which includes unrealized gains and losses on available-for-sale securities. Adjusted for all securities portfolio losses, including the tax adjusted losses in the investment portfolio, the tangible common equity ratio 1 would be 9.01% at September 30, 2024, and 8.06% at June 30, 2024.

Previous wording

•The common equity Tier 1 capital ratio at June 30, 2024 was 12.10%. Other regulatory capital ratios include the Tier 1 capital ratio at 12.11%, total capital ratio at 13.25%, and leverage ratio at 9.39%. At March 31, 2024, the common equity Tier 1 capital ratio was 11.99%, the Tier 1 capital ratio was 12.00%, total capital ratio was 13.15%, and leverage ratio was 9.42%.

Current wording

•The common equity Tier 1 capital ratio at September 30, 2024, was 12.73%. Other regulatory capital ratios include the Tier 1 capital ratio at 12.74%, total capital ratio at 13.91%, and leverage ratio at 9.67%. At June 30, 2024, the common equity Tier 1 capital ratio was 12.10%, the Tier 1 capital ratio was 12.11%, total capital ratio was 13.25%, and leverage ratio was 9.39%.

Previous wording

•The Company repurchased 412,176 shares of common stock at an average price of $90.38 per share in the second quarter of 2024 and 616,630 shares at an average price of $83.89 in the first quarter of 2024. We view share buybacks opportunistically, but within the context of maintaining our strong capital position.

Current wording

•No shares were repurchased during the third quarter of 2024. The Company repurchased 412,176 shares at an average price of $90.38 in the second quarter of 2024. We view share buybacks opportunistically, but within the context of maintaining our strong capital position.

Previous wording

•The Company paid a regular cash dividend of $35.3 million or $0.55 per common share during the second quarter of 2024. On July 30, 2024, the board of directors approved a quarterly cash dividend of $0.55 per common share payable on or about August 30, 2024 to shareholders of record as of August 15, 2024.

Current wording

•The Company paid a regular cash dividend of $35.1 million, or $0.55 per common share, during the third quarter of 2024. On October 29, 2024, the board of directors approved a quarterly cash dividend of $0.57 per common share payable on or about November 27, 2024, to shareholders of record as of November 15, 2024.

Previous wording

Highlights of the six months ended June 30, 2024 compared to the six months ended June 30, 2023 included:

Current wording

Highlights of the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023, included:

Previous wording

•Net interest income totaled $589.6 million for the six months ended June 30, 2024 and $674.6 million for the six months ended June 30, 2023. Net interest income decreased $71.6 million from changes in interest rates and decreased $13.6 million from changes in earning assets. Net interest margin was 2.59% compared to 3.22%. In response to rising inflation, the Federal Reserve increased the federal funds rate 525 basis points since the beginning of 2022. The resulting impact on market interest rates increased net interest margin at first as our earning assets, led by our significant percentage of variable-rate commercial loans, repriced at a higher rate and faster pace than our interest-bearing liabilities. Throughout 2023 and into the second quarter of 2024, we have experienced margin compression reflecting deposit repricing activity and demand deposit migration into interest-bearing accounts. Loan yields increased 55 basis points while funding costs increased 125 basis points. Average earning assets increased $3.7 billion to $45.4 billion driven largely by higher average loan balances and trading securities balances. Total interest-bearing deposits increased $5.6 billion, offset by a decrease of $3.2 billion in demand deposit balances. Other borrowed funds increased $930 million.

Current wording

•Net interest income totaled $897.7 million for the nine months ended September 30, 2024, and $975.5 million for the nine months ended September 30, 2023. Net interest income decreased $62.4 million from changes in interest rates and decreased $15.4 million from changes in earning assets. Net interest margin was 2.62% compared to 3.03%. In response to rising inflation, the Federal Reserve increased the federal funds rate 525 basis points since the beginning of 2022. The resulting impact on market interest rates increased net interest margin at first as our earning assets, led by our significant percentage of variable-rate commercial loans, repriced at a higher rate and faster pace than our interest-bearing liabilities. Throughout 2023 and into the third quarter of 2024, we have experienced margin compression reflecting deposit repricing activity and demand deposit migration into interest-bearing accounts. Loan yields increased 43 basis points, while funding costs increased 91 basis points. Average earning assets increased $3.1 billion to $45.6 billion, driven largely by higher average loan balances and trading securities balances. Total interest-bearing deposits increased $5.5 billion, partially offset by a decrease of $2.7 billion in demand deposit balances. Other borrowed funds decreased $152 million.

Previous wording

•Fees and commissions revenue totaled $400.6 million for the six months ended June 30, 2024, a $14.1 million increase over the six months ended June 30, 2023. Fiduciary and asset management revenue increased $9.2 million led by growth in trust fees and Cavanal Hill fund fees. Mortgage banking revenue increased $8.1 million, primarily due to higher production volume. Deposit service charges increased $5.2 million due to growth in commercial service charges. Brokerage and trading revenue decreased $5.2 million, largely due to decreased customer hedging revenue, primarily attributed to our energy and interest rate derivative customers. The prior period included $6.2 million of insurance brokerage revenue recognized prior to the sale of BOKFI. This decrease was fully offset by an increase of $6.9 million in investment banking revenue driven by growth in underwriting fees and financial advisory fees. Other revenue decreased $4.3 million, primarily due to a reduction in fees earned on derivative counterparty margin.

Current wording

•Fees and commissions revenue totaled $603.1 million for the nine months ended September 30, 2024, an $18.8 million increase over the nine months ended September 30, 2023. Fiduciary and asset management revenue increased $14.4 million led by growth in trust fees and Cavanal Hill fund fees. Mortgage banking revenue increased $13.1 million, primarily due to higher production volume. Deposit service charges increased $8.0 million due to growth in commercial service charges. Brokerage and trading revenue decreased $17.1 million, largely due to reduced trading volumes and decreased customer hedging revenue, primarily attributed to our energy customers. The prior period also included $8.9 million of insurance brokerage revenue recognized prior to the sale of BOKFI. This decrease was almost entirely offset by an increase of $7.3 million in investment banking revenue driven by growth in underwriting fees and financial advisory fees.

Previous wording

•Total operating expense was $677.1 million for the six months ended June 30, 2024, an increase of $52.6 million compared to the six months ended June 30, 2023. Personnel expense increased $20.9 million. Regular compensation increased $11.7 million, largely related to annual merit increases, salary adjustments, and business expansion in 2023. Employee benefits expense increased $5.8 million related to higher employee healthcare costs and retirement plan costs. Incentive compensation expense was up $3.4 million, primarily due to higher loan and trading volumes and deferred compensation expense, which is largely offset by changes in fair value of deferred compensation investments. Non-personnel expense increased $31.6 million to $283.3 million. Charitable contributions to the BOKF Foundation increased $12.5 million, largely due to the donation of Visa shares valued at $10.0 million. FDIC insurance costs grew due to recognition of $7.6 million in additional special assessment expense during 2024. Other expense also increased $6.7 million due to higher operational losses.

Current wording

•Total operating expense was $1.0 billion for the nine months ended September 30, 2024, an increase of $69.3 million compared to the nine months ended September 30, 2023. Personnel expense increased $37.0 million. Regular compensation increased $15.2 million, largely related to annual merit increases, salary adjustments, and business expansion. Incentive compensation expense was up $11.9 million, primarily due to higher deferred compensation expense, which is largely offset by changes in the fair value of deferred compensation investments, and increased share-based compensation expense resulting from changes in assumptions on certain performance-based equity awards. Employee benefits expense increased $9.8 million related to higher employee healthcare costs and retirement plan costs. Non-personnel expense increased $32.3 million to $417.5 million. Charitable contributions to the BOKF Foundation increased $12.4 million, largely due to the donation of converted Visa shares to the BOKF Foundation. FDIC insurance costs were up due to recognition of $6.2 million in additional special assessment expense during 2024. Other expense also increased $6.4 million due to higher operational losses.

Previous wording

•The provision for expected credit losses was $16.0 million for the six months ended June 30, 2024, reflecting growth in loan balances and a stable economic forecast. A $33.0 million provision for expected credit losses was recorded for the six months ended June 30, 2023.

Current wording

•The provision for expected credit losses was $18.0 million for the nine months ended September 30, 2024. A $40.0 million provision for expected credit losses was recorded for the nine months ended September 30, 2023.

Previous wording

Tax-equivalent net interest income totaled $298.2 million for the second quarter of 2024, compared to $295.7 million for the prior quarter. Net interest income increased $2.5 million from changes in interest rates and increased $49 thousand from changes in earning assets. Table 1 shows the effect on net interest income from changes in average balances and interest rates for various types of earning assets and interest-bearing liabilities.

Current wording

Tax-equivalent net interest income totaled $310.5 million for the third quarter of 2024, compared to $298.2 million for the prior quarter. Net interest income increased $9.9 million from changes in interest rates and increased $2.4 million from changes in earning assets. Table 1 shows the effect on net interest income from changes in average balances and interest rates for various types of earning assets and interest-bearing liabilities.

Previous wording

Average earning assets increased $1.2 billion compared to the first quarter of 2024. Average loan balances increased $437 million, largely due to growth in commercial loans, partially offset by a reduction in commercial real estate loans. The average balance of available for sale securities, which consists largely of residential and commercial mortgage-backed securities guaranteed by U.S. government agencies, increased $218 million while the average balance of trading securities increased $552 million.

Current wording

Average earning assets decreased $108 million compared to the second quarter of 2024. The average balance of trading securities decreased $120 million. Average loan balances decreased $80 million due to a reduction in commercial loans, largely offset by growth in commercial real estate loans and loans to individuals. The average balance of investment (held-to-maturity) securities decreased $57 million and average restricted equity securities reduced $43 million. The average balance of available-for-sale securities, which consists largely of residential and commercial mortgage-backed securities guaranteed by U.S. government agencies, increased $184 million.

Previous wording

Total average deposits increased $627 million over the first quarter of 2024, including an $872 million increase in interest-bearing deposits, partially offset by a $244 million decrease in demand deposits. Funds purchased and repurchase agreements grew $580 million while other borrowings increased $307 million.

Current wording

Total average deposits increased $1.1 billion over the second quarter of 2024, including a $1.2 billion increase in interest-bearing deposits, partially offset by a $113 million decrease in demand deposits. Funds purchased and repurchase agreements decreased $822 million while other borrowings decreased $785 million.

Previous wording

Net interest margin was 2.56% compared to 2.61% in the first quarter of 2024. The pace of demand deposit migration and deposit repricing has slowed compared to the previous quarter and was offset by improving yields on the available for sale securities portfolio. For the second quarter of 2024, our core net interest margin excluding trading activities 1, a non-GAAP measure, was 2.94% compared to 2.97% in the prior quarter. The tax-equivalent yield on earning assets was 5.80%, an increase of 7 basis points. The available for sale securities portfolio yield increased 23 basis points to 3.71%. Loan yields grew 1 basis point to 7.41%. The yield on trading securities decreased 6 basis points to 5.06% and the yield on interest-bearing cash and cash equivalents increased 90 basis points to 5.86%.

Current wording

Net interest margin was 2.68% compared to 2.56% in the second quarter of 2024, due to increased yields on our available-for-sale securities portfolio, combined with higher loan fees driven by payoffs and the funding shift from wholesale borrowings to interest-bearing deposits. For the third quarter of 2024, our core net interest margin excluding trading activities 1, a non-GAAP measure, was 3.02% compared to 2.94% in the prior quarter. The tax-equivalent yield on earning assets was 5.89%, an increase of 9 basis points. Loan yields grew 6 basis points to 7.47%. The available-for-sale securities portfolio yield increased 5 basis points to 3.76%. The yield on trading securities was up 30 basis points to 5.36% and the yield on interest-bearing cash and cash equivalents decreased 53 basis points to 5.33%.

Previous wording

Funding costs were 4.15%, a 7 basis point increase over the prior quarter. The cost of interest-bearing deposits increased 7 basis points to 3.76%. The cost of funds purchased and repurchase agreements increased 23 basis points to 4.28% while the cost of other borrowings increased 2 basis points to 5.58%. The benefit to net interest margin from assets funded by non-interest liabilities was 91 basis points, a decrease of 5 basis points.

Current wording

Funding costs were 4.11%, a 4 basis point decrease compared to the prior quarter. The cost of interest-bearing deposits increased 3 basis points to 3.79%. The cost of funds purchased and repurchase agreements decreased 39 basis points to 3.89% while the cost of other borrowings decreased 3 basis points to 5.55%. The benefit to net interest margin from assets funded by non-interest liabilities was 90 basis points, a decrease of 1 basis point.

Previous wording

Other operating revenue was $259.7 million for the second quarter of 2024, an increase of $98.0 million over the first quarter of 2024. The second quarter of 2024 included $53.8 million pre-tax gain on the conversion of our Visa B shares under the recently announced exchange offer by Visa, Inc. The prior quarter included $45.2 million of losses from repositioning the available for sale securities portfolio.

Current wording

Other operating revenue was $208.2 million for the third quarter of 2024, a decrease of $51.5 million compared to the second quarter of 2024. The second quarter of 2024 included $53.8 million pre-tax gain on the conversion of our Visa B shares under the exchange offer by Visa, Inc.

Previous wording

Diversified sources of fees and commissions revenue are a significant part of our business strategy and represented 40% of combined net interest income before provision for credit losses and fees and commissions revenue for the second quarter of 2024. We believe that a variety of fee revenue sources provides diversification to changes resulting from market or economic conditions such as interest rates, values in the equity markets, commodity prices and consumer spending, all of which can be volatile. Many of the economic factors, such as decreasing interest rates, that we expect will result in a decline in net interest income or fiduciary and asset management revenue may also increase mortgage banking production volumes and related trading. The velocity of changes in market conditions and interest rates may result in timing differences between when offsetting impacts and benefits are realized. Generally, for operating revenues not as directly related to movement in interest rates, we expect growth to come through offering new products and services and by further development of our presence in other markets. However, current and future economic conditions, regulatory constraints, increased competition and saturation in our existing markets could affect the rate of future increases.

Current wording

Diversified sources of fees and commissions revenue are a significant part of our business strategy and represented 40% of combined net interest income before provision for credit losses and fees and commissions revenue for the third quarter of 2024. We believe that a variety of fee revenue sources provides diversification to changes resulting from market or economic conditions such as interest rates, values in the equity markets, commodity prices and consumer spending, all of which can be volatile. Many of the economic factors, such as decreasing interest rates, that we expect will result in a decline in net interest income or fiduciary and asset management revenue may also increase mortgage banking production volumes and related trading. The velocity of changes in market conditions and interest rates may result in timing differences between when offsetting impacts and benefits are realized. Generally, for operating revenues not as directly related to movement in interest rates, we expect growth to come through offering new products and services and by further development of our presence in other markets. However, current and future economic conditions, regulatory constraints, increased competition, and saturation in our existing markets could affect the rate of future increases.

Previous wording

Brokerage and trading revenue, which includes revenues from trading, customer hedging, retail brokerage and investment banking, decreased $6.2 million compared to the first quarter of 2024.

Current wording

Brokerage and trading revenue, which includes revenues from trading, customer hedging, retail brokerage, and investment banking, decreased $2.6 million compared to the second quarter of 2024.

Previous wording

Trading revenue includes net realized and unrealized gains and losses primarily related to residential mortgage-backed securities guaranteed by U.S. government agencies and related derivative instruments that enable our mortgage banking customers to manage their production risk. Trading revenue also includes net realized and unrealized gains and losses on municipal securities and other financial instruments that we sell to institutional customers, along with changes in the fair value of financial instruments we hold as economic hedges against market risk of our trading securities. Trading revenue was $27.7 million, a $9.8 million decrease compared to the prior quarter, driven by margin compression due to market conditions in the second quarter of 2024.

Current wording

Trading revenue includes net realized and unrealized gains and losses primarily related to residential mortgage-backed securities guaranteed by U.S. government agencies and related derivative instruments that enable our mortgage banking customers to manage their production risk. Trading revenue also includes net realized and unrealized gains and losses on municipal securities and other financial instruments that we sell to institutional customers, along with changes in the fair value of financial instruments we hold as economic hedges against market risk of our trading securities. Trading revenue was $23.6 million, a $4.1 million decrease compared to the prior quarter. A decline in U.S. agency residential mortgage-backed securities trading volumes, driven by market conditions in the third quarter of 2024, was partially offset by an increase in municipal trading revenue led by strong activity in this sector.

Previous wording

Customer hedging revenue is based primarily on realized and unrealized changes in the fair value of derivative contracts held for customer risk management programs. As more fully discussed under Customer Risk Management Programs in Note 3 of the Consolidated Financial Statements, we offer commodity, interest rate, foreign exchange and equity derivatives to our customers. Customer hedging revenue totaled $6.8 million for the second quarter of 2024 and was relatively consistent with the prior quarter. Customer hedging revenue includes credit valuation adjustments of the fair value of derivatives to reflect the risk of counterparty default.

Current wording

Customer hedging revenue is based primarily on realized and unrealized changes in the fair value of derivative contracts held for customer risk management programs. As more fully discussed under Customer Risk Management Programs in Note 3 of the Consolidated Financial Statements, we offer commodity, interest rate, foreign exchange, and equity derivatives to our customers. Customer hedging revenue totaled $7.4 million for the third quarter of 2024, an increase of $662 thousand, and was primarily attributed to our interest rate derivative customers. Customer hedging revenue includes credit valuation adjustments of the fair value of derivatives to reflect the risk of counterparty default.

Previous wording

Investment banking, which includes fees earned upon completion of underwriting, financial advisory services and loan syndication fees, totaled $13.7 million, an increase of $3.0 million over the first quarter of 2024, largely related to the timing and volume of completed underwriting and loan syndication transactions.

Current wording

Investment banking, which includes fees earned upon completion of underwriting, financial advisory services, and loan syndication fees, totaled $14.4 million, up $680 thousand over the prior quarter, largely related to the timing and volume of transactions.

Previous wording

Transaction card revenue includes revenues from processing transactions on behalf of members of our TransFund electronic fund transfer network, merchant services fees paid by customers for account management and electronic processing of card transactions and interchange fees from our corporate card program. Transaction card revenue totaled $27.2 million for the second quarter of 2024, a $1.8 million increase, primarily due to growth in the volume of transactions processed during the quarter.

Current wording

Transaction card revenue includes revenues from processing transactions on behalf of members of our TransFund electronic fund transfer network, merchant services fees paid by customers for account management and electronic processing of card transactions and interchange fees from our corporate card program. Transaction card revenue totaled $28.5 million for the third quarter of 2024, a $1.2 million increase, primarily due to growth in the volume of transactions processed during the quarter.

Previous wording

Fiduciary and asset management revenue is earned through managing or holding of assets for customers and executing transactions or providing related services. Fiduciary and asset management revenue is largely based on the fair value of assets. Rates applied to asset values vary based on the nature of the relationship. Fiduciary relationships and managed asset relationships generally have higher fee rates than non-fiduciary and/or managed relationships. Fiduciary and asset management revenue was $57.6 million for the second quarter of 2024, a $2.3 million increase over the first quarter of 2024, led by higher seasonal tax preparation fee income.

Current wording

Fiduciary and asset management revenue is earned through managing or holding of assets for customers and executing transactions or providing related services. Fiduciary and asset management revenue is largely based on the fair value of assets. Rates applied to asset values vary based on the nature of the relationship. Fiduciary relationships and managed asset relationships generally have higher fee rates than non-fiduciary and/or managed relationships. Fiduciary and asset management revenue was $57.4 million for the third quarter of 2024, consistent with the second quarter of 2024. Growth in our trust fee income this quarter nearly fully offset prior quarter's seasonal tax preparation fees.

Previous wording

1 Assets under management or administration balance excludes certain assets under custody held by a sub-custodian where minimal revenue is recognized. $21 billion, $20 billion, and $19 billion of such assets are excluded from assets under management or administration at June 30, 2024, March 31, 2024, and June 30, 2023, respectively.

Current wording

1 Assets under management or administration balance excludes certain assets under custody held by a sub-custodian where minimal revenue is recognized. $21 billion, $21 billion, and $18 billion of such assets are excluded from assets under management or administration at September 30, 2024, June 30, 2024, and September 30, 2023, respectively.

Previous wording

A summary of changes in assets under management or administration for the three and six months ended June 30, 2024 and 2023 follows:

Current wording

A summary of changes in assets under management or administration for the three and nine months ended September 30, 2024, and 2023 follows:

Previous wording

Assets under management as of June 30, 2024 consist of 42% fixed income, 35% equities, 15% cash, and 8% alternative investments.

Current wording

Assets under management as of September 30, 2024, consist of 40% fixed income, 39% equities, 13% cash, and 8% alternative investments.

Previous wording

Deposit service charges and fees increased $887 thousand or 3% over the first quarter of 2024, primarily due to growth in commercial service charges and check card fees.

Current wording

Deposit service charges and fees increased $878 thousand over the second quarter of 2024, primarily due to growth in overdraft fees and commercial service charges, combined with increased check card revenue.

Previous wording

Mortgage banking revenue was relatively consistent with the first quarter of 2024. Mortgage production volume increased $63 million to $235 million. Production revenue as a percentage of production volume, which includes unrealized gains and losses on our mortgage commitment pipeline and related hedges, decreased 104 basis points to 1.01%.

Current wording

Mortgage banking revenue was consistent with the second quarter of 2024. Mortgage production volume decreased $3.2 million to $232 million. Production revenue as a percentage of production volume, which includes unrealized gains and losses on our mortgage commitment pipeline and related hedges, decreased 34 basis points to 0.67%.

Previous wording

Other operating expense for the second quarter of 2024 totaled $336.7 million, a decrease of $3.7 million compared to the first quarter of 2024. Our efficiency ratio 1 was 59.83% for the second quarter of 2024, compared to 67.13% in the prior quarter.

Current wording

Other operating expense for the third quarter of 2024 totaled $341.0 million, an increase of $4.3 million compared to the second quarter of 2024. Our efficiency ratio 1 was 65.11% for the third quarter of 2024, compared to 59.83% in the prior quarter.

Previous wording

Personnel expense decreased $11.6 million compared to the first quarter of 2024. Cash-based incentive compensation decreased $7.1 million due to a shift in the timing of expense recognition as commercial incentive compensation plans move to being primarily share-based rather than cash-based awards. Deferred compensation, which is offset by changes in the fair value of deferred compensation investments, decreased $2.3 million, directly related to market movements. Employee benefits expense decreased $2.0 million due to a seasonal decrease in payroll taxes, partially offset by higher healthcare costs. Regular compensation decreased $1.9 million. A greater amount of compensation expense was capitalized during the second quarter due to an annual update of standards costs for loan originations coupled with an increase in mortgage loan production volume. Share-based compensation was up $1.7 million reflecting changes in assumptions of certain performance-based equity awards.

Current wording

Personnel expense increased $15.7 million compared to the second quarter of 2024. Cash-based incentive compensation increased $7.8 million as the prior quarter received a benefit due to a shift in the timing of expense recognition as commercial incentive compensation plans moved to being primarily share-based rather than cash-based awards. Share-based compensation was up $3.5 million reflecting changes in assumptions of certain performance-based equity awards. Deferred compensation, which is offset by changes in the fair value of deferred compensation investments, increased $1.8 million, directly related to market movements. Regular compensation increased $2.7 million, driven by additional staffing and a reduction in the amount of compensation expense capitalized during the third quarter. This was due to decreased loan production levels and the implementation of a significant project in the prior quarter.

Previous wording

The effective tax rate was 22.41% for the second quarter of 2024, 21.70% for the first quarter of 2024 and 22.49% for the second quarter of 2023. When compared to the first quarter of 2024, the effective tax rate increased due to higher forecasted and actual pre-tax income. The effective rate for the six months ended June 30, 2024 and June 30, 2023 was 22.17% and 22.25%, respectively.

Current wording

The effective tax rate was 19.22% for the third quarter of 2024 and 22.41% for the second quarter of 2024. The effective tax rate for the third quarter of 2024 decreased primarily due to the release of reserves for uncertain tax positions as the statute of limitations had expired. The effective rate for the nine months ended September 30, 2024, and September 30, 2023, was 21.13% and 21.54%, respectively, decreasing primarily due to lower forecasted pre-tax income.

Previous wording

We operate three principal lines of business: Commercial Banking, Consumer Banking and Wealth Management. Commercial Banking includes lending, treasury and cash management services and customer risk management products for small businesses, middle market and larger commercial customers. Commercial Banking also includes the TransFund EFT network. Consumer Banking includes retail lending and deposit services, lending and deposit services to small business customers served through our consumer branch network and all mortgage banking activities. Wealth Management provides fiduciary services, private banking services and investment advisory services in all markets. Wealth Management also underwrites state and municipal securities and engages in brokerage and trading activities.

Current wording

We operate three principal segments: Commercial Banking, Consumer Banking, and Wealth Management. Commercial Banking includes lending, treasury and cash management services, and customer risk management products for small businesses, middle market and larger commercial customers. Commercial Banking also includes the TransFund EFT network. Consumer Banking includes retail lending and deposit services, lending and deposit services to small business customers served through our consumer branch network, and all mortgage banking activities. Wealth Management provides fiduciary services, private banking services, and investment advisory services in all markets. Wealth Management also underwrites state and municipal securities and engages in brokerage and trading activities.

Previous wording

In addition to our lines of business, we have a Funds Management unit. The primary purpose of this unit is to manage our overall liquidity needs and interest rate risk. Each line of business borrows funds from and provides funds to the Funds Management unit as needed to support their operations. Operating results for Funds Management and other include the effect of interest rate risk positions and risk management activities, securities gains and losses including impairment charges, the provision for credit losses in excess of net loans charged off, tax planning strategies and certain executive compensation costs that are not attributed to the lines of business. The Funds Management unit also initially recognizes accruals for loss contingencies when losses become probable. Actual losses are recognized by the lines of business if the accruals are settled.

Current wording

In addition to our reportable segments, we have a Funds Management unit. The primary purpose of this unit is to manage our overall liquidity needs and interest rate risk. Each segment borrows funds from and provides funds to the Funds Management unit as needed to support their operations. Operating results for Funds Management and other include the effect of interest rate risk positions and risk management activities, securities gains and losses including impairment charges, the provision for credit losses in excess of net loans charged off, tax planning strategies, and certain executive compensation costs that are not attributed to the segment. The Funds Management unit also initially recognizes accruals for loss contingencies when losses become probable. Actual losses are recognized by the segment if the accruals are settled.

Previous wording

We allocate resources and evaluate the performance of our lines of business using the net direct contribution, which includes the allocation of funds and capital costs. Credit costs are attributed to the lines of business based on net loans charged off or recovered. The difference between credit costs attributed to the lines of business and the consolidated provision for credit losses is attributed to Funds Management. In addition, we measure the performance of our business lines after allocations of certain indirect expenses and taxes based on statutory rates.

Current wording

We allocate resources and evaluate the performance of our reportable segments using the net direct contribution, which includes the allocation of funds and capital costs. Credit costs are attributed to the segments based on net loans charged off or recovered. The difference between credit costs attributed to the segment and the consolidated provision for credit losses is attributed to Funds Management. In addition, we measure the performance of our segments after allocations of certain indirect expenses and taxes based on statutory rates.