BANNER CORP
For the period ended Mar 31, 2024. Filed May 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.
Mar 31, 2024 · Filed May 7, 2024
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Comparison of Results of Operations
Comparison of Results of Operations for the Three Months Ended March 31, 2024, December 31, 2023 and March 31, 2023
For the quarter ended March 31, 2024, net income was $37.6 million, or $1.09 per diluted share, compared to $42.6 million, or $1.24 per diluted share, for the preceding quarter and $55.6 million, or $1.61 per diluted share, for the three months ended March 31, 2023. The decrease in net income for the current quarter compared to the preceding quarter was due to decreased net interest income and non-interest income and increased non-interest expense, partially offset by a reduced provision for credit losses. The decrease in net interest income was a result of an increase in funding costs reflecting the high interest rate environment, partially offset by increased yields on loans due to new loans being originated at higher interest rates. The decrease in net income for the same period a year ago was primarily due to decreased net interest income, increased non-interest expenses and an increase in the provision for credit losses, partially offset by increased non-interest income.
Net interest margin for the current quarter was impacted by an increase in funding costs due to the high interest rate environment and its effect on deposit costs, partially offset by increased yields on loans due to new loans being originated at higher interest rates. Total revenue for the quarter ended March 31, 2024, decreased compared to the preceding quarter due to increased funding costs, a decrease in mortgage banking operations income and an increase in the net loss for fair value adjustments on financial instruments carried at fair value, partially offset by increased interest income and deposit fees and other service charges. Total revenue decreased during the three months ended March 31, 2024, compared to the same period a year earlier due to increased funding costs, partially offset by increased interest income and a decrease in the net loss on the sale of securities recorded during the current period.
We recorded a $520,000 provision for credit losses for the quarter ended March 31, 2024, compared to a $2.5 million provision for credit losses in the preceding quarter and a $524,000 recapture of provision for credit losses for the three months ended March 31, 2023. The provision for credit losses for the current quarter is primarily related to the loan growth in the construction and one- to four-family loan portfolios, partially offset by a reduction in unfunded loan commitments in the construction portfolio. The provision for credit losses for the preceding quarter primarily reflected increased loan balances, partially offset by an increase in the trading price of our investments in other banks’ subordinated debt.
Total non-interest income decreased in the quarter ended March 31, 2024, compared to the preceding quarter and increased compared to the same period a year ago. The decrease in non-interest income during the current quarter compared to the preceding quarter was primarily due to a decrease in mortgage banking operations revenue, primarily due to a $3.5 million fair value gain recorded on multifamily loans during the preceding quarter as a result of their transfer from held for sale to held for investment, with no similar transaction recorded in the current quarter, and a decrease in the fair value adjustments on financial instruments carried at fair value during the current quarter, partially offset by an increase in deposit fees and other service charges. The increase in non-interest income during the three months ended March 31, 2024, compared to the same period last year was primarily due to a reduction in the net loss recognized on the sale of securities.
Total non-interest expense increased in the quarter ended March 31, 2024, compared to the preceding quarter and the same period a year ago. The increase in non-interest expense for the current quarter compared to the preceding quarter primarily reflects increases in salary and employee benefits, partially offset by decreases in professional and legal expense and advertising and marketing expense. The increase in non-interest expense compared to the same period a year ago primarily reflects increases in salary and employee benefits, payment and card processing services expense and deposit insurance expense.
| OPERATING DATA: | Quarters Ended | ||
|---|---|---|---|
| (In thousands) | March 31, 2024 | December 31, 2023 | March 31, 2023 |
| Interest income | $184,688 | $183,738 | $166,961 |
| Interest expense | 51,729 | 45,329 | 13,649 |
| Net interest income | 132,959 | 138,409 | 153,312 |
| Provision (recapture) for credit losses | 520 | 2,522 | (524) |
| Net interest income after provision (recapture) for credit losses | 132,439 | 135,887 | 153,836 |
| Deposit fees and other service charges | 11,022 | 9,560 | 10,562 |
| Mortgage banking operations | 2,335 | 5,391 | 2,691 |
| Net loss on sale of securities | (4,903) | (4,806) | (7,252) |
| Net change in valuation of financial instruments carried at fair value | (992) | 139 | (552) |
| All other non-interest income | 4,129 | 3,768 | 3,828 |
| Total non-interest income | 11,591 | 14,052 | 9,277 |
| Salary and employee benefits | 62,369 | 60,111 | 61,389 |
| All other non-interest expenses | 35,272 | 36,510 | 33,232 |
| Total non-interest expense | 97,641 | 96,621 | 94,621 |
| Income before provision for income tax expense | 46,389 | 53,318 | 68,492 |
| Provision for income tax expense | 8,830 | 10,694 | 12,937 |
| Net income | $37,559 | $42,624 | $55,555 |
| PER COMMON SHARE DATA: | Quarters Ended | ||
|---|---|---|---|
| March 31, 2024 | December 31, 2023 | March 31, 2023 | |
| Net income: | |||
| Basic | $1.09 | $1.24 | $1.62 |
| Diluted | 1.09 | 1.24 | 1.61 |
Net Interest Income. Net interest income decreased by $5.5 million, or 4%, for the quarter ended March 31, 2024, compared to the preceding quarter. The decrease was primarily due to an increase in the cost of funding liabilities, partially offset by increases in the average yields on loans and investment securities. Net interest income decreased by $20.4 million, or 13%, to $133.0 million for the three months ended March 31, 2024, compared to $153.3 million for the same quarter a year ago, primarily due to increased funding costs, partially offset by an increase in the average yields on interest-earning assets. The higher funding costs and average yields on interest-earning assets compared to same period a year ago was primarily the result of higher interest rates.
Net interest margin on a tax equivalent basis decreased nine basis points to 3.74% for the first quarter of 2024, compared to 3.83% in the preceding quarter, and decreased 56 basis points from 4.30% in the same period a year ago. Net interest margin for the current quarter was affected by increased funding costs reflecting the persistent high interest rate environment, partially offset by increased yields on loans due to new loans being originated at higher interest rates as well as adjustable-rate loans repricing higher. The increase in the overall cost of funding liabilities was primarily due to the increase in rates across all deposits and most borrowing categories due to higher market rates generally, as well as a shift in the average balance of non-interest bearing deposits to higher costing savings accounts and certificates of deposit.
Interest Income. Interest income for the quarter ended March 31, 2024 was $184.7 million, compared to $183.7 million for the preceding quarter and $167.0 million for the same period in the prior year. The increase in interest income during the current quarter compared to the preceding quarter occurred primarily as a result of average yields on total interest-earning assets increasing 10 basis points. The increased yield on interest-earning assets primarily reflects increases in the average yields on loans. The increase in interest income during the current quarter compared to the same period a year ago primarily reflects an increase in the average yield on interest-earning assets, mostly due to rising interest rates during 2023, partially offset by the lower average balance of interest-earning assets.
Interest income on loans for the current quarter increased $1.9 million from the preceding quarter and increased $23.2 million from the same period in the prior year. The increased interest income on loans for the current quarter compared to the preceding quarter was due to the average loan yields increasing to 5.87% for the quarter ended March 31, 2024, from 5.77% in the preceding quarter, reflecting adjustable-rate loans repricing higher. The average balance of loans receivable for the quarter ended March 31, 2024 increased 1%, compared to the preceding quarter, and increased 7%, compared to the same period the prior year, primarily reflecting the increase in one- to four-family loans.
Interest and dividend income on total investment securities for the current quarter decreased $1.0 million from the preceding quarter and decreased $5.5 million from the same period in the prior year. The decrease was due to a decline in the average balance of total investment securities, partially offset by a higher average yield earned on total investment securities during the current quarter compared to the preceding quarter and the comparable quarter a year ago. The average balance of total investment securities decreased to $3.78 billion for the quarter ended March 31, 2024 (excluding the effect of fair value adjustments), compared to $3.90 billion for the preceding quarter and $4.57 billion for the same period in the prior year. The average yield on the combined portfolio increased to 3.11% for the quarter ended March 31, 2024, from 3.08% in the preceding quarter and 3.10% in the same period in the prior year.
Interest Expense. Interest expense for the quarter ended March 31, 2024 increased $6.4 million, or 14%, compared to the preceding quarter, and increased compared to the same period in the prior year. The increase compared to the preceding quarter occurred as a result of a 22 basis point increase in the average cost of all funding liabilities to 1.53%, partially offset by a decrease in the average balance of funding liabilities, during the current quarter. The average balance of funding liabilities decreased $48.2 million for the quarter ended March 31, 2024, compared to the preceding quarter, primarily due to a decrease in non-interest-bearing deposits, partially offset by higher average balances of certificates of deposit and interest-bearing transaction and savings accounts and FHLB advances. The increase in interest expense compared to the prior year occurred as a result of an increase in the average cost of all funding liabilities compared to the same period in the prior year, partially offset by a decrease in average balances of funding liabilities. The decrease in the average balance of funding liabilities reflects decreases in non-interest-bearing deposits and money market accounts, partially offset by higher average balances of interest-bearing transaction checking and savings accounts, certificates of deposit and FHLB advances.
Deposit interest expense for the quarter ended March 31, 2024 increased $5.3 million, or 13%, compared to the preceding quarter, and increased $35.4 million compared to $9.2 million for the same period in the prior year. The increase compared to the prior quarter and the comparable quarter a year ago was primarily the result of a larger percentage of core deposits being in interest bearing accounts and an increase in the mix of higher cost certificates of deposit as well as an overall increase in the average rate paid on interest-bearing deposits. The cost of interest-bearing deposits increased to 2.15% for the quarter ended March 31, 2024, compared to 1.92% in the preceding quarter and 0.51% for the same period a year earlier. The increase in the average cost of interest-bearing deposits compared to the same period a year ago was primarily the result of an increase in the cost of certificates of deposit along with an increase in the average balance of certificates of deposit. The average rate paid on total deposits, which includes non-interest bearing deposits, was 1.37% for the quarter ended March 31, 2024, compared to 1.18% in the preceding quarter and 0.28% for the same period in the prior year. Average deposit balances decreased for the quarter ended March 31, 2024, from the preceding quarter and the same period a year earlier.
Interest expense on total borrowings for the quarter ended March 31, 2024 increased to $7.1 million from $6.0 million for the preceding quarter and increased from $4.4 million for the same period a year earlier due to an increase in both the average balance of and rate paid on total borrowings. The increase in average borrowings compared to the prior quarter was largely due to an increase in the average balance of FHLB advances. The increase compared to the same period a year ago was also primarily due to an increase in the average balance of FHLB advances, partially offset by a decrease in the average balance of other borrowings. The average rate paid on total borrowings for the quarter ended March 31, 2024 increased from the preceding quarter and from the same period a year earlier.
Analysis of Net Interest Spread. The following table presents for the periods indicated our condensed average balance sheet information, together with interest income and yields earned on average interest-earning assets and interest expense and rates paid on average interest-bearing liabilities with additional comparative data on our operating performance (dollars in thousands):
| ANALYSIS OF NET INTEREST SPREAD | Quarters Ended | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (rates / ratios annualized) · Mar 31, 2024 · Dec 31, 2023 · Mar 31, 2023 | ||||||||||||||||
| (dollars in thousands) · Average Balance · Interest and Dividends · Yield / Cost (3) · Average Balance · Interest and Dividends · Yield / Cost (3) · Average Balance · Interest and Dividends · Yield / Cost (3) | ||||||||||||||||
| Interest-earning assets: | ||||||||||||||||
| Held for sale loans | $9,939 | $167 | 6.76% | $31,148 | $447 | 5.69% | $52,657 | $671 | 5.17% | |||||||
| Mortgage loans | 8,892,561 | 125,284 | 5.67% | 8,770,029 | 123,382 | 5.58% | 8,267,386 | 106,900 | 5.24% | |||||||
| Commercial/agricultural loans | 1,830,095 | 30,847 | 6.78% | 1,822,069 | 30,447 | 6.63% | 1,709,345 | 25,226 | 5.99% | |||||||
| Consumer and other loans | 133,854 | 2,196 | 6.60% | 138,049 | 2,237 | 6.43% | 137,096 | 2,115 | 6.26% | |||||||
| Total loans (1) | 10,866,449 | 158,494 | 5.87% | 10,761,295 | 156,513 | 5.77% | 10,166,484 | 134,912 | 5.38% | |||||||
| Mortgage-backed securities | 2,728,640 | 17,076 | 2.52% | 2,798,647 | 17,541 | 2.49% | 3,093,860 | 19,123 | 2.51% | |||||||
| Other securities | 984,639 | 11,501 | 4.70% | 1,035,842 | 11,993 | 4.59% | 1,404,355 | 15,095 | 4.36% | |||||||
| Interest-bearing deposits with banks | 45,264 | 459 | 4.08% | 45,286 | 506 | 4.43% | 53,584 | 608 | 4.60% | |||||||
| FHLB stock | 19,073 | 209 | 4.41% | 15,326 | 215 | 5.57% | 14,236 | 90 | 2.56% | |||||||
| Total investment securities | 3,777,616 | 29,245 | 3.11% | 3,895,101 | 30,255 | 3.08% | 4,566,035 | 34,916 | 3.10% | |||||||
| Total interest-earning assets | 14,644,065 | 187,739 | 5.16% | 14,656,396 | 186,768 | 5.06% | 14,732,519 | 169,828 | 4.68% | |||||||
| Non-interest-earning assets | 943,725 | 875,719 | 921,217 | |||||||||||||
| Total assets | $15,587,790 | $15,532,115 | $15,653,736 | |||||||||||||
| Deposits: | ||||||||||||||||
| Interest-bearing checking accounts | $2,104,242 | 6,716 | 1.28% | $2,060,226 | 5,907 | 1.14% | $1,779,664 | 906 | 0.21% | |||||||
| Savings accounts | 3,066,448 | 15,279 | 2.00% | 2,885,167 | 12,560 | 1.73% | 2,615,173 | 1,884 | 0.29% | |||||||
| Money market accounts | 1,674,159 | 8,388 | 2.02% | 1,723,426 | 7,644 | 1.76% | 2,167,138 | 3,799 | 0.71% | |||||||
| Certificates of deposit | 1,500,429 | 14,230 | 3.81% | 1,477,474 | 13,231 | 3.55% | 810,821 | 2,655 | 1.33% | |||||||
| Total interest-bearing deposits | 8,345,278 | 44,613 | 2.15% | 8,146,293 | 39,342 | 1.92% | 7,372,796 | 9,244 | 0.51% | |||||||
| Non-interest-bearing deposits | 4,711,922 | — | —% | 5,036,523 | — | —% | 5,960,791 | — | —% | |||||||
| Total deposits | 13,057,200 | 44,613 | 1.37% | 13,182,816 | 39,342 | 1.18% | 13,333,587 | 9,244 | 0.28% | |||||||
| Other interest-bearing liabilities: | ||||||||||||||||
| FHLB advances | 212,989 | 2,972 | 5.61% | 129,630 | 1,870 | 5.72% | 105,984 | 1,264 | 4.84% | |||||||
| Other borrowings | 180,692 | 1,175 | 2.62% | 185,518 | 1,125 | 2.41% | 229,459 | 381 | 0.67% | |||||||
| Junior subordinated debentures and subordinated notes | 181,579 | 2,969 | 6.58% | 182,678 | 2,992 | 6.50% | 189,178 | 2,760 | 5.92% | |||||||
| Total borrowings | 575,260 | 7,116 | 4.98% | 497,826 | 5,987 | 4.77% | 524,621 | 4,405 | 3.41% | |||||||
| Total funding liabilities | 13,632,460 | 51,729 | 1.53% | 13,680,642 | 45,329 | 1.31% | 13,858,208 | 13,649 | 0.40% | |||||||
| Other non-interest-bearing liabilities (2) | 303,412 | 311,539 | 293,205 | |||||||||||||
| Total liabilities | 13,935,872 | 13,992,181 | 14,151,413 | |||||||||||||
| Shareholders’ equity | 1,651,918 | 1,539,934 | 1,502,323 | |||||||||||||
| Total liabilities and shareholders’ equity | $15,587,790 | $15,532,115 | $15,653,736 | |||||||||||||
| Net interest income/rate spread (tax equivalent) | $136,010 | 3.63% | $141,439 | 3.75% | $156,179 | 4.28% | ||||||||||
| Net interest margin (tax equivalent) | 3.74% | 3.83% | 4.30% | |||||||||||||
| Reconciliation to reported net interest income: | ||||||||||||||||
| Adjustments for taxable equivalent basis | (3,051) | (3,030) | (2,867) | |||||||||||||
| Net interest income and margin, as reported | $132,959 | 3.65% | $138,409 | 3.75% | $153,312 | 4.22% | ||||||||||
| Additional Key Financial Ratios: | ||||||||||||||||
| Return on average assets | 0.97% | 1.09% | 1.44% | |||||||||||||
| Adjusted return on average assets(4) | 1.08% | 1.18% | 1.60% | |||||||||||||
| Return on average equity | 9.14% | 10.98% | 15.00% | |||||||||||||
| Adjusted return on average equity(4) | 10.24% | 11.89% | 16.63% | |||||||||||||
| Average equity/average assets | 10.60% | 9.91% | 9.60% | |||||||||||||
| Average interest-earning assets/average interest-bearing liabilities | 164.16% | 169.55% | 186.55% | |||||||||||||
| Average interest-earning assets/average funding liabilities | 107.42% | 107.13% | 106.31% | |||||||||||||
| Non-interest income/average assets | 0.30% | 0.36% | 0.24% | |||||||||||||
| Non-interest expense/average assets | 2.52% | 2.47% | 2.45% | |||||||||||||
| Efficiency ratio | 67.55% | 63.37% | 58.20% | |||||||||||||
| Adjusted efficiency ratio (4) | 63.70% | 60.04% | 54.23% | |||||||||||||
(1)Average balances include loans accounted for on a nonaccrual basis and accruing loans 90 days or more past due. Amortization of net deferred loan fees/costs is included with interest on loans.
(2)Average other non-interest-bearing liabilities include fair value adjustments related to junior subordinated debentures.
(3)Tax-exempt income is calculated on a tax equivalent basis. The tax equivalent yield adjustment to interest earned on loans was $2.0 million for both the quarters ended March 31, 2024 and December 31, 2023, and was $1.7 million for the quarter ended March 31, 2023. The tax equivalent yield adjustment to interest earned on tax exempt securities was $1.0 million, for both the quarters ended March 31, 2024 and December 31, 2023, and was $1.2 million for the quarter ended March 31, 2023.
(4)Represents non-GAAP financial measures. See non-GAAP financial measure reconciliations presented above following First Quarter 2024 Highlights.
Provision and Allowance for Credit Losses. Management estimates the allowance for credit losses using relevant information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. The allowance for credit losses is maintained at a level sufficient to provide for expected credit losses over the life of the loan based on evaluating historical credit loss experience and making adjustments to historical loss information for differences in the specific risk characteristics in the current loan portfolio. These factors include, among others, changes in the size and composition of the loan portfolio, differences in underwriting standards, delinquency rates, actual loss experience and current economic conditions. The following table sets forth an analysis of our allowance for credit losses - loans for the periods indicated (dollars in thousands):
| Quarters Ended | |||
|---|---|---|---|
| CHANGE IN THE ALLOWANCE FOR CREDIT LOSSES - LOANS | Mar 31, 2024 | Dec 31, 2023 | Mar 31, 2023 |
| Balance, beginning of period | $149,643 | $146,960 | $141,465 |
| Provision for credit losses – loans | 1,424 | 3,821 | 774 |
| Recoveries of loans previously charged off: | |||
| Commercial real estate | 1,389 | 129 | 184 |
| One- to four-family residential | 16 | 18 | 117 |
| Commercial business | 781 | 237 | 119 |
| Agricultural business, including secured by farmland | 106 | 16 | 109 |
| Consumer | 159 | 131 | 169 |
| 2,451 | 531 | 698 | |
| Loans charged off: | |||
| Construction and land | — | (933) | — |
| One- to four-family residential | — | (8) | (30) |
| Commercial business | (1,809) | (310) | (1,158) |
| Consumer | (569) | (418) | (292) |
| (2,378) | (1,669) | (1,480) | |
| Net recoveries (charge-offs) | 73 | (1,138) | (782) |
| Balance, end of period | $151,140 | $149,643 | $141,457 |
| Net recoveries (charge-offs) / Average loans receivable | 0.001% | (0.011)% | (0.008)% |
| Allowance for credit losses - loans as a percentage of total loans | 1.39% | 1.38% | 1.39% |
The provision for credit losses - loans reflects the amount required to maintain the allowance for credit losses - loans at an appropriate level based upon management’s evaluation of the adequacy of collective and individual loss reserves. During the quarter ended March 31, 2024, we recorded a provision for credit losses - loans of $1.4 million, compared to a provision for credit losses - loans of $3.8 million during the preceding quarter. The provision for credit losses - loans for the current quarter primarily reflects loan growth in the construction and one- to four-family loan portfolios. The provision for credit losses - loans for the preceding quarter primarily reflected increased loan balances. Future assessments of the expected credit losses will not only be impacted by changes in both the composition and amount of loans, and to the reasonable and supportable forecast, but will also include an updated assessment of qualitative factors, as well as consideration of any required changes in the reasonable and supportable forecast reversion period.
The provision for credit losses - unfunded loan commitments reflects the amount required to maintain the allowance for credit losses - unfunded loan commitments at an appropriate level based upon management’s evaluation of the adequacy of collective and individual loss reserves. The following table sets forth an analysis of our allowance for credit losses - unfunded loan commitments for the periods indicated (dollars in thousands):
| Quarters Ended | |||
|---|---|---|---|
| CHANGE IN THE ALLOWANCE FOR CREDIT LOSSES - UNFUNDED LOAN COMMITMENTS | Mar 31, 2024 | Dec 31, 2023 | Mar 31, 2023 |
| Balance, beginning of period | $14,484 | $15,010 | $14,721 |
| Recapture of provision for credit losses - unfunded loan commitments | (887) | (526) | (1,278) |
| Balance, end of period | $13,597 | $14,484 | $13,443 |
The decrease in the allowance for credit losses - unfunded loan commitments for the current quarter primarily reflects a decrease in unfunded loan commitments in the construction portfolio.
Non-interest Income. The following table presents the key components of non-interest income for the periods indicated (dollars in thousands):
| Quarters Ended | |||||||
|---|---|---|---|---|---|---|---|
| Mar 31, 2024 | Dec 31, 2023 | Change Amount | Change Percent | Mar 31, 2023 | Change Amount | Change Percent | |
| Deposit fees and other service charges | $11,022 | $9,560 | $1,462 | 15.3% | $10,562 | $460 | 4.4% |
| Mortgage banking operations | 2,335 | 5,391 | (3,056) | (56.7) | 2,691 | (356) | (13.2) |
| Bank owned life insurance | 2,237 | 2,609 | (372) | (14.3) | 2,188 | 49 | 2.2 |
| Miscellaneous | 1,892 | 1,159 | 733 | 63.2 | 1,640 | 252 | 15.4 |
| 17,486 | 18,719 | (1,233) | (6.6) | 17,081 | 405 | 2.4 | |
| Net loss on sale of securities | (4,903) | (4,806) | (97) | 2.0 | (7,252) | 2,349 | (32.4) |
| Net change in valuation of financial instruments carried at fair value | (992) | 139 | (1,131) | nm | (552) | (440) | 79.7 |
| Total non-interest income | $11,591 | $14,052 | $(2,461) | (17.5)% | $9,277 | $2,314 | 24.9% |
The decrease in non-interest income during the current quarter compared to the preceding quarter was primarily due to decreases in mortgage banking operations revenue and the valuation of financial instruments carried at fair value during the current quarter, partially offset by increases in deposit fees and other service charges and miscellaneous non-interest income. The increase in non-interest income compared to the same period a year earlier was primarily due to a decrease in the net loss recognized on the sale of securities.
Deposit fees and other service charges increased for the quarter ended March 31, 2024, compared to the preceding quarter primarily as a result of a decrease in debit card expense and an increase in overdraft fee income.
Revenue from mortgage banking operations, including gains on one- to four-family and multifamily loan sales and loan servicing fees, decreased for the quarter ended March 31, 2024, compared to the preceding quarter. The decrease from the preceding quarter primarily reflects a $3.5 million reversal of the lower of cost or market adjustment on multifamily loans held for sale, which had been recognized during the preceding quarter due to the transfer of all remaining multifamily loans held for sale to the held for investment loan portfolio in the fourth quarter of 2023. In 2023, the Bank discontinued the origination of multifamily loans for sale into the secondary market. Gains on sales of one- to four-family loans resulted in income of $1.3 million for the quarter ended March 31, 2024, compared to $882,000 in the preceding quarter, and $1.2 million for same period a year earlier. Home purchase activity accounted for 89% of one- to four-family mortgage loan originations in the first quarter of 2024, compared to 92% in the preceding quarter and 88% in the first quarter of 2023.
Miscellaneous income increased for the quarter ended March 31, 2024, compared to the preceding quarter primarily as a result of an increase in the gain on sale of SBA loans.
The net loss on sale of securities recognized for the quarter ended March 31, 2024 reflects strategic sales of securities to minimize the impact of increasing rates on our securities portfolio. The net loss for fair value adjustments for changes in the valuation of financial instruments carried at fair value were due to declines in the current market valuation of limited partnership investments.
Non-interest Expense. The following table represents key elements of non-interest expense for the periods indicated (dollars in thousands):
| Quarters Ended | |||||||
|---|---|---|---|---|---|---|---|
| Mar 31, 2024 | Dec 31, 2023 | Change Amount | Change Percent. | Mar 31, 2023 | Change Amount | Change Percent | |
| Salary and employee benefits | $62,369 | $60,111 | $2,258 | 3.8% | $61,389 | $980 | 1.6% |
| Less capitalized loan origination costs | (3,676) | (3,871) | 195 | (5.0) | (3,431) | (245) | 7.1 |
| Occupancy and equipment | 12,462 | 12,200 | 262 | 2.1 | 11,970 | 492 | 4.1 |
| Information and computer data services | 7,320 | 7,098 | 222 | 3.1 | 7,147 | 173 | 2.4 |
| Payment and card processing services | 5,710 | 6,088 | (378) | (6.2) | 4,618 | 1,092 | 23.6 |
| Professional and legal expenses | 1,530 | 2,267 | (737) | (32.5) | 2,121 | (591) | (27.9) |
| Advertising and marketing | 1,079 | 1,686 | (607) | (36.0) | 806 | 273 | 33.9 |
| Deposit insurance | 2,809 | 2,926 | (117) | (4.0) | 1,890 | 919 | 48.6 |
| State and municipal business and use taxes | 1,304 | 1,372 | (68) | (5.0) | 1,300 | 4 | 0.3 |
| Real estate operations, net | (220) | 47 | (267) | (568.1) | (277) | 57 | (20.6) |
| Amortization of core deposit intangibles | 723 | 858 | (135) | (15.7) | 1,050 | (327) | (31.1) |
| Miscellaneous | 6,231 | 5,839 | 392 | 6.7 | 6,038 | 193 | 3.2 |
| Total non-interest expense | $97,641 | $96,621 | $1,020 | 1.1% | $94,621 | $3,020 | 3.2% |
The increase in non-interest expense for the current quarter compared to the prior quarter primarily reflects an increase in salary and employee benefits, partially offset by decreases in professional and legal expense and advertising and marketing expense. The increase in non-interest expense for the current quarter compared to the same quarter a year ago primarily reflects increases in salary and employee benefits, payment and card processing services expense and deposit insurance expense.
Salary and employee benefits increased for the quarter ended March 31, 2024, compared to the preceding quarter, primarily due to typically higher first quarter payroll taxes and 401(k) expense, as well as higher medical insurance expense.
Professional and legal expense decreased for the quarter ended March 31, 2024, compared to the preceding quarter, primarily due to a reduction in audit and regulatory expenses and other professional services.
Advertising and marketing expense decreased for the quarter ended March 31, 2024, compared to the preceding quarter, primarily due to a decrease in web-based advertising.
Our efficiency ratio was 67.55% for the current quarter, compared to 63.37% in the preceding quarter and 58.20% for the comparable quarter last year. Our adjusted efficiency ratio, a non-GAAP financial measure, was 63.70% for the current quarter, compared to 60.04% in the preceding quarter and 54.23% for the comparable quarter last year. The efficiency ratio for the current quarter reflects a reduction in total revenues and higher non-interest expenses during the current quarter compared to the prior quarter and the comparable quarter a year ago. See non-GAAP financial measure reconciliations presented above in the First Quarter 2024 Highlights section.
Income Taxes. For the quarter ended March 31, 2024, we recognized $8.8 million in income tax expense for an effective tax rate of 19.0%, which reflects our blended statutory tax rate reduced by the effect of tax-exempt income, certain tax credits, and tax benefits related to restricted stock vesting. Our statutory income tax rate is 23.7%, representing a statutory federal income tax rate of 21.0% and apportioned effects of the state income tax rates. For the quarter ended December 31, 2023, we recognized $10.7 million in income tax expense for an effective tax rate of 20.1%. For the quarter ended March 31, 2023, we recognized $12.9 million in income tax expense for an effective tax rate of 18.9%.
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