UMB FINANCIAL CORP
For the period ended Jun 30, 2024. Filed Aug 1, 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 1, 2024
UMBF$133.77-0.7%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 2024-05-07.
0000950170-24-053990
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-01.
0000950170-24-088982
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 142 previous paragraphs and 159 current paragraphs.
84 unchanged; 53 reworded; 19 added; 3 removed; 2 previous and 3 current paragraphs rearranged.
Tables are not compared: 15 previous and 21 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 (19)
Current report
the Company’s ability to complete the announced merger with Heartland Financial, USA Inc. (HTLF), including the planned issuance of shares of the Company’s common stock in connection with the merger;
Current report
the Company’s ability to manage the expenses associated with the merger with HTLF and the impact these expenses may have on the Company’s financial results;
Current report
the Company’s ability to obtain, or timing of obtaining, required regulatory approvals and the approval of each entity’s shareholders;
Current report
the benefits from the merger may not be fully realized or may take longer to realize than expected;
Current report
the Company’s ability to promptly and effectively integrate the merger of HTLF;
Current report
On April 28, 2024, the Company entered into an Agreement and Plan of Merger (the Merger Agreement) with HTLF, a Delaware corporation, and Blue Sky Merger Sub Inc., a Delaware corporation and wholly owned subsidiary of the Company. The Merger Agreement and the merger were unanimously approved by the boards of directors of the Company and HTLF. Pending regulatory approval and approval by the shareholders of the Company and HTLF, the merger is expected to close in the first quarter of 2025. Under the terms of the Merger Agreement, HTLF stockholders will receive a fixed exchange ratio of 0.55 shares of the Company’s common stock for each share of HTLF stock, with a total market value of approximately $2.0 billion.
Current report
Additionally, on April 29, 2024, the Company also announced that in connection with the execution of the Merger Agreement, it entered into a forward sale agreement with BofA Securities, Inc. or its affiliate to issue 2,800,000 shares of its common stock for approximate proceeds of $201.6 million. The underwriters were granted an option to purchase up to an additional 420,000 shares of the Company's common stock exercisable within 30 days of April 28, 2024. The underwriters exercised this option in full on April 30, 2024, upon which the Company entered into an additional forward sale agreement relating to the 420,000 shares of the Company's common stock. The forward purchase agreement is classified as an equity instrument under ASC 815-40, Contracts in Entity’s Own Equity.
Current report
Trading and investment banking fees for the three-month period ended June 30, 2024 increased $0.7 million, or 13.8%, and increased $0.8 million, or 8.1%, for the six-month period ended June 30, 2024 compared to the same periods in 2023. These changes were primarily driven by the volatile market’s impact on trading volume. The income in this category is market driven and impacted by general increases or decreases in trading volume.
Current report
Service charges on deposit accounts for the three-month period ended June 30, 2024 increased $0.9 million, or 4.1%, and increased $0.5 million, or 1.1%, for the six-month period ended June 30, 2024. The increase for the three-month period was driven by increased healthcare income related to customer transfer and conversion fees. The increase for the six-month period was driven by higher corporate service charge income.
Current report
Brokerage fees for the three-month period ended June 30, 2024 increased $0.4 million, or 3.1%, compared to the same period in 2023. For the six-month period ended June 30, 2024, brokerage fees decreased $0.1 million, or 0.4%, compared to the same period in 2023. The changes in the three-month and six-month periods were driven by 12b-1 fees and money market income.
Current report
Other noninterest income for the three-month period ended June 30, 2024, decreased $4.6 million, or 27.0%, compared to the same period in 2023, driven by a $4.0 million gain recognized in the second quarter of 2023, a decrease of $2.2 million in company-owned life insurance, partially offset by increases of $0.5 million in derivative and bank-owned life insurance income, respectively. For the six-month period, other noninterest income decreased $0.4 million, or 1.2%, compared to the same period in 2023, primarily driven by a $2.5 million decrease in company-owned life insurance and a $1.9 million decrease in derivative income, offset by a gain on sale of land of $1.8 million received in the first quarter of 2024 and an increase of $1.4 million in bank-owned life insurance.
Current report
Salaries and employee benefits decreased by $0.5 million, or 0.3%, and was flat for the three and six-month periods ended June 30, 2024, respectively, compared to the same periods in 2023. Salaries and wages expense increased $2.0 million, or 2.3%, and increased $2.4 million, or 1.4%, for the three and six-month periods ended June 30, 2024, respectively, compared to the same periods in 2023. Bonus and commission expense decreased $0.7 million, or 2.2%, and decreased $0.1 million, or 0.2%, for the three and six-month periods ended June 30, 2024, respectively, compared to the same periods in 2023. Employee benefits expense decreased $1.7 million, or 6.7%, and decreased $2.3 million, or 4.0%, for the three and six-month periods ended June 30, 2024, respectively, compared to the same periods in 2023, driven by changes in deferred compensation expense.
Current report
Equipment expense decreased $1.5 million, or 8.7%, and $2.8 million, or 8.1%, for the three and six-month periods ended June 30, 2024, respectively, compared to the same periods in 2023, primarily due to decreased software expense.
Current report
Legal and consulting expense increased $9.5 million, or 134.7%, and $10.1 million, or 70.5%, for the three and six-month periods ended June 30, 2024, respectively, compared to the same periods in 2023, primarily due to expense related to the recently announced acquisition of HTLF.
Current report
Bankcard expense increased $3.5 million, or 42.3%, and $6.9 million, or 45.0%, for the three and six-month periods ended June 30, 2024, respectively, compared to the same periods in 2023 primarily driven by higher administrative expense.
Current report
Regulatory fees decreased $3.6 million, or 58.1%, and increased $10.3 million, or 88.1%, for the three and six-month periods ended June 30, 2024, respectively, compared to the same periods in 2023 primarily driven by adjustments to the FDIC special assessment liability.
Current report
Other expense decreased $0.7 million, or 10.2%, and $4.6 million, or 27.2%, for the three and six-month periods ended June 30, 2024, respectively, compared to the same periods in 2023. For both periods, the decrease was driven by lower operational losses.
Current report
On April 28, 2024, the Company entered into the Merger Agreement with HTLF, a Delaware corporation and Blue Sky Merger Sub Inc., a Delaware corporation and wholly owned subsidiary of the Company. The Merger Agreement and the merger were unanimously approved by the boards of directors of the Company and HTLF. Pending regulatory approval and approval by the shareholders of the Company and HTLF, the merger is expected to close in the first quarter of 2025. Under the terms of the Merger Agreement, HTLF stockholders will receive a fixed exchange ratio of 0.55 shares of the Company’s common stock for each share of HTLF stock, with a total market value of approximately $2.0 billion.
Current report
Additionally, on April 29, 2024, the Company also announced that in connection with the execution of the Merger Agreement, it entered into a forward sale agreement with BofA Securities, Inc. or its affiliate to issue 2,800,000 shares of its common stock for approximate proceeds of $201.6 million. The underwriters were granted an option to purchase up to an additional 420,000 shares of the Company's common stock exercisable within 30 days of April 28, 2024. The underwriters exercised this option in full on April 30, 2024, upon which the Company entered into an additional forward sale agreement relating to the 420,000 shares of the Company's common stock. The forward purchase agreement is classified as an equity instrument under ASC 815-40, Contracts in Entity’s Own Equity.
Removed paragraphs (3)
Previous report
Other noninterest income for the three-month period ended March 31, 2024 increased $4.2 million, or 28.7%, compared to the same period in 2023, driven by a $4.0 million legal settlement and a $1.8 million gain on sale of land, both recorded in the first quarter of 2024. These increases were partially offset by a decrease of $2.4 million in derivative income.
Previous report
Bankcard expense increased $3.4 million, or 48.1%, for the three-month period ended March 31, 2024, compared to the same period in 2023, primarily due to higher administrative expenses and fraud losses.
Previous report
Regulatory fees increased $13.8 million, or 249.4%, for the three-month period ended March 31, 2024, compared to the same period in 2023, primarily due to the $13.0 million FDIC special assessment recorded in the first quarter of 2024 as discussed above.
Reworded paragraphs (53)
Previous wording
This Management’s Discussion and Analysis of Financial Condition and Results of Operations highlights the material changes in the results of operations and changes in financial condition of the Company for the three-month period ended March 31, 2024. It should be read in conjunction with the accompanying Consolidated Financial Statements, Notes to Consolidated Financial Statements and other financial information appearing elsewhere in this Form 10-Q and the Form 10-K. Results of operations for the periods included in this review are not necessarily indicative of results to be attained during any future period.
Current wording
This Management’s Discussion and Analysis of Financial Condition and Results of Operations highlights the material changes in the results of operations and changes in financial condition of the Company for the three and six months ended June 30, 2024. It should be read in conjunction with the accompanying Consolidated Financial Statements, Notes to Consolidated Financial Statements and other financial information appearing elsewhere in this Form 10-Q and the Form 10-K. Results of operations for the periods included in this review are not necessarily indicative of results to be attained during any future period.
Previous wording
The first financial objective is to continuously improve operating efficiencies. The Company has focused on identifying efficiencies that simplify our organizational and reporting structures, streamline back-office functions, and take advantage of synergies and newer technologies among various platforms and distribution networks. The Company has identified and expects to continue identifying ongoing efficiencies through the normal course of business that, when combined with increased revenue, will contribute to improved operating leverage. During the first quarter of 2024, total revenue increased $26.8 million, or 7.2%, as compared to the first quarter of 2023, while noninterest expense increased $17.8 million, or 7.5%, for the same period. As part of the initiative to improve operating efficiencies, the Company continues to invest in technological advances that it believes will help management drive operating leverage in the future through improved data analysis and automation. The Company also continues to evaluate core systems and will invest in enhancements that it believes will yield operating efficiencies.
Current wording
The first financial objective is to continuously improve operating efficiencies. The Company has focused on identifying efficiencies that simplify our organizational and reporting structures, streamline back-office functions, and take advantage of synergies and newer technologies among various platforms and distribution networks. The Company has identified and expects to continue identifying ongoing efficiencies through the normal course of business that, when combined with increased revenue, will contribute to improved operating leverage. During the second quarter of 2024, total revenue increased $26.3 million, or 7.2%, as compared to the second quarter of 2023, while noninterest expense increased $8.4 million, or 3.5%, for the same period. As part of the initiative to improve operating efficiencies, the Company continues to invest in technological advances that it believes will help management drive operating leverage in the future through improved data analysis and automation. The Company also continues to evaluate core systems and will invest in enhancements that it believes will yield operating efficiencies.
Previous wording
The second financial objective is to increase net interest income through profitable loan and deposit growth and the optimization of the balance sheet. During the first quarter of 2024, the Company had a decrease in net interest income of $2.3 million, or 0.9%, from the same period in 2023. The change in net interest income was driven by higher interest expense due to an unfavorable mix shift in the composition of liabilities, partially offset by increased loan growth. These changes are driven by the higher interest rate environment compared to the first quarter of 2023. The increase in interest income was driven by a $2.1 billion, or 9.8%, increase in average loans and a $1.8 billion, or 115.4%, increase in average interest-bearing due from banks, coupled with the impact of higher short-term and long-term interest rates. The funding for these assets was driven primarily by a 20.3% increase in average interest-bearing liabilities, including an increase in average borrowed funds of $983.1 million compared to the same period in 2023. Net interest margin, on a tax-equivalent basis, decreased 28 basis points compared to the same period in 2023, primarily due to increased cost and mix of interest-bearing liabilities, partially offset by increased loan volumes, repricing of earning assets, and the benefit of interest free funds. Net interest spread contracted by 43 basis points during the same period. The Company expects to see continued volatility in the economic markets resulting from governmental responses to inflation and recessionary signs in the economy. These changing conditions could have impacts on the balance sheet and income statement of the Company for the remainder of the year.
Current wording
The second financial objective is to increase net interest income through profitable loan and deposit growth and the optimization of the balance sheet. During the second quarter of 2024, the Company had an increase in net interest income of $19.5 million, or 8.6%, from the same period in 2023. The change in net interest income was driven by increased average loan growth and higher rates, partially offset by higher interest expense due to an unfavorable mix shift in the composition of liabilities. These changes are driven by the higher interest rate environment compared to the second quarter of 2023. The increase in interest income was driven by a $1.6 billion, or 7.3%, increase in average loans, driven by organic loan growth, coupled with the impact of higher short-term and long-term interest rates. The funding for these assets was driven primarily by a $3.3 billion, or 15.8%, increase in average interest-bearing deposits, offset by a decrease in average borrowed funds of $1.4 billion, or 44.4%, compared to the same period in 2023. Net interest margin, on a tax-equivalent basis, increased seven basis points compared to the same period in 2023, primarily due to increased loan yields, earning asset mix, and the benefit of free funds, partially offset by the cost and mix of interest-bearing liabilities. Net interest spread contracted by four basis points during the same period. The Company expects to see continued volatility in the economic markets resulting from governmental responses to inflation and reversionary signs in the economy. These changing conditions could have impacts on the balance sheet and income statement of the Company for the remainder of the year.
Previous wording
See greater detail below under Noninterest Income. The Company continues to emphasize its asset management, brokerage, bankcard services, healthcare services, and treasury management businesses. For the three-month period ended March 31, 2024, noninterest income represented 39.9% of total revenues, compared to 35.0% for the same period in 2023. The recent economic changes have impacted fee income, especially those with assets tied to market values and interest rates.
Current wording
The third financial objective is to grow the Company’s revenue from noninterest sources. The Company seeks to grow noninterest revenues throughout all economic and interest rate cycles, while positioning itself to benefit in periods of economic growth. Noninterest income increased $6.8 million, or 5.0%, to $144.9 million for the three months ended June 30, 2024, compared to the same period in 2023. See greater detail below under Noninterest Income. The Company continues to emphasize its asset management, brokerage, bankcard services, healthcare services, and treasury management businesses. For the three months ended June 30, 2024, noninterest income represented 37.2% of total revenue, compared to 38.0% for the same period in 2023. The recent economic changes have impacted fee income, especially those with assets tied to market values and interest rates.
Previous wording
The fourth financial objective is effective capital management. The Company places a significant emphasis on maintaining a strong capital position, which management believes promotes investor confidence, provides access to funding sources under favorable terms, and enhances the Company’s ability to capitalize on business growth and acquisition opportunities. The Company continues to maximize shareholder value through a mix of reinvesting in organic growth, evaluating acquisition opportunities that complement the Company’s strategies, increasing dividends over time, and appropriately utilizing a share repurchase program. At March 31, 2024, the Company had $3.2 billion in total shareholders’ equity. This is an increase of $338.2 million, or 12.0%, compared to total shareholders’ equity at March 31, 2023. At March 31, 2024, the Company had a total risk-based capital ratio of 13.03%. The Company did not repurchase shares of common stock during the first quarter of 2024, except for shares acquired pursuant to the Company's share-based incentive programs.
Current wording
The fourth financial objective is effective capital management. The Company places a significant emphasis on maintaining a strong capital position, which management believes promotes investor confidence, provides access to funding sources under favorable terms, and enhances the Company’s ability to capitalize on business growth and acquisition opportunities. The Company continues to maximize shareholder value through a mix of reinvesting in organic growth, evaluating acquisition opportunities that complement the Company’s strategies, increasing dividends over time, and appropriately utilizing a share repurchase program. At June 30, 2024, the Company had $3.2 billion in total shareholders’ equity. This is an increase of $395.7 million, or 14.0%, compared to total shareholders’ equity at June 30, 2023. At June 30, 2024, the Company had a total risk-based capital ratio of 13.08%. The Company did not repurchase shares of common stock during the second quarter of 2024, except for shares acquired pursuant to the Company's share-based incentive programs.
Previous wording
During November 2023, the Federal Deposit Insurance Corporation (the FDIC) approved a final rule to implement a special assessment to recover the losses to the Deposit Insurance Fund (the DIF) associated with protecting uninsured depositors following the closures of certain financial institutions in March of 2023. The assessment base for the special assessment is equal to an insured depository institution’s uninsured deposits as of December 31, 2022, adjusted to exclude the first $5 billion, and will be collected at an annual rate of 13.4 basis points for eight quarterly assessment periods. The Company’s portion of this special assessment was $52.8 million and was recognized in noninterest expense during the fourth quarter of 2023. During February 2024, the FDIC increased the estimated loss attributable to the 2023 bank failures by 25%, which in turn increased the special assessment the FDIC will charge to insured depository institutions. The Company recorded $13.0 million of expense related to the updated special assessment in the first quarter of 2024 and its impacts are discussed below.
Current wording
During November 2023, the Federal Deposit Insurance Corporation (the FDIC) approved a final rule to implement a special assessment to recover the losses to the Deposit Insurance Fund (the DIF) associated with protecting uninsured depositors following the closures of certain financial institutions in March of 2023. The assessment base for the special assessment is equal to an insured depository institution’s uninsured deposits as of December 31, 2022, adjusted to exclude the first $5 billion, and will be collected at an annual rate of 13.4 basis points for eight quarterly assessment periods. The Company’s portion of this special assessment was $52.8 million and was recognized in noninterest expense during the fourth quarter of 2023. During 2024, the FDIC increased the estimated loss attributable to the 2023 bank failures, which in turn increased the special assessment the FDIC will charge to insured depository institutions. The Company recorded $9.2 million of expense related to the updated special assessment during the six months ended June 30, 2024 and its impacts are discussed below.
Previous wording
The following is a summary regarding the Company’s earnings for the first quarter of 2024. The changes identified in the summary are explained in greater detail below. The Company recorded net income of $110.3 million for the three-month period ended March 31, 2024, compared to net income of $92.4 million for the same period a year earlier. Basic earnings per share for the first quarter of 2024 was $2.27 per share ($2.25 per share fully-diluted) compared to basic earnings per share of $1.91 per share ($1.90 per share fully-diluted) for the first quarter of 2023. Return on average assets and return on average common shareholders’ equity for the three-month period ended March 31, 2024 were 1.06% and 14.11%, respectively, compared to 0.97% and 13.76%, respectively, for the three-month period ended March 31, 2023.
Current wording
The following is a summary regarding the Company’s earnings for the second quarter of 2024. The changes identified in the summary are explained in greater detail below. The Company recorded net income of $101.3 million for the three-month period ended June 30, 2024, compared to net income of $90.1 million for the same period a year earlier. Basic earnings per share for the second quarter of 2024 were $2.08 per share ($2.07 per share fully-diluted) compared to $1.86 per share ($1.85 per share fully-diluted) for the second quarter of 2023. Return on average assets and return on average common shareholders’ equity for the three-month period ended June 30, 2024 were 0.96% and 12.73%, respectively, compared to 0.90% and 12.56%, respectively, for the three-month period ended June 30, 2023.
Previous wording
Net interest income for the three-month period ended March 31, 2024 decreased $2.3 million, or 0.9%, compared to the same period in 2023. For the three-month period ended March 31, 2024, average earning assets increased $3.4 billion, or 9.4%, compared to the same period in 2023. Net interest margin, on a tax-equivalent basis, decreased to 2.48% for the three-month period ended March 31, 2024, compared to 2.76% for the same period in 2023.
Current wording
Net interest income for the three and six-month periods ended June 30, 2024 increased $19.5 million, or 8.6%, and increased $17.2 million, or 3.7%, respectively, compared to the same periods in 2023. For the three-month period ended June 30, 2024, average earning assets increased by $2.0 billion, or 5.2%, and for the six-month period ended June 30, 2024, they increased by $2.7 billion, or 7.2%, compared to the same periods in 2023. Net interest margin, on a tax-equivalent basis, increased to 2.51% and decreased to 2.50% for the three and six-month periods ended June 30, 2024, respectively, compared to 2.44% and 2.59% for the same periods in 2023.
Previous wording
The provision for credit losses decreased by $13.3 million for the three-month period ended March 31, 2024, as compared to the same period in 2023. Provision expense for both periods is primarily impacted by macro-economic data and portfolio credit metrics. The Company’s nonperforming loans increased $2.3 million to $17.8 million at March 31, 2024, compared to March 31, 2023. The ACL on loans as a percentage of total loans decreased to 0.96% as of March 31, 2024, compared to 0.97% at March 31, 2023. For a description of the Company’s methodology for computing the ACL, please see the summary discussion in the “Provision and Allowance for Credit Losses” section included below.
Current wording
The provision for credit losses increased by $1.1 million for the three-month period ended June 30, 2024 and decreased by $12.2 million for the six-month period ended June 30, 2024, as compared to the same periods in 2023. These changes were driven by loan growth, portfolio credit metric changes, and changes in macro-economic metrics in the current period as compared to the prior periods. The Company’s nonperforming loans decreased $5.6 million to $13.7 million at June 30, 2024, compared to June 30, 2023. The ACL on loans as a percentage of total loans remained flat at 0.99% as of June 30, 2024, compared to June 30, 2023. For a description of the Company’s methodology for computing the ACL, please see the summary discussion in the “Provision and Allowance for Credit Losses” section included below.
Previous wording
Noninterest income increased by $29.0 million, or 22.3%, for the three-month period ended March 31, 2024, compared to the same period in 2023. These changes are discussed in greater detail below under Noninterest Income.
Current wording
Noninterest income increased by $6.8 million, or 5.0%, for the three-month period ended June 30, 2024, and increased by $35.9 million, or 13.4%, for the six-month period ended June 30, 2024, compared to the same periods in 2023. These changes are discussed in greater detail below under Noninterest Income.
Previous wording
Noninterest expense increased by $17.8 million, or 7.5%, for the three-month period ended March 31, 2024, compared to the same period in 2023. These changes are discussed in greater detail below under Noninterest Expense.
Current wording
Noninterest expense increased by $8.4 million, or 3.5%, for the three-month period ended June 30, 2024, and increased by $26.1 million, or 5.5%, for the six-month period ended June 30, 2024, compared to the same periods in 2023. These changes are discussed in greater detail below under Noninterest Expense.
Previous wording
Net interest income is a significant source of the Company’s earnings and represents the amount by which interest income on earning assets exceeds the interest expense paid on liabilities. The volume of interest-earning assets and the related funding sources, the overall mix of these assets and liabilities, and the rates paid on each affect net interest income. Net interest income for the three-month period ended March 31, 2024 decreased $2.3 million, or 0.9%, compared to the same period in 2023.
Current wording
Net interest income is a significant source of the Company’s earnings and represents the amount by which interest income on earning assets exceeds the interest expense paid on liabilities. The volume of interest-earning assets and the related funding sources, the overall mix of these assets and liabilities, and the rates paid on each affect net interest income. Net interest income for the three and six-month periods ended June 30, 2024 increased $19.5 million, or 8.6%, and increased $17.2 million, or 3.7%, compared to the same periods in 2023.
Previous wording
Table 1 shows the impact of earning asset rate changes compared to changes in the cost of interest-bearing liabilities. As illustrated in this table, net interest spread for the three months ended March 31, 2024 decreased 43 basis points as compared to the same period in 2023. Net interest margin for the three months ended March 31, 2024 decreased 28 basis points compared to the same period in 2023. The changes are primarily due to increased cost and mix of interest-bearing liabilities, partially offset by increased loan volumes and repricing of earning assets. The impact of the increased cost and mix of interest-bearing liabilities had a significant impact in the first quarter of 2024. The cost of interest-bearing liabilities increased 112 basis points from the first quarter of 2023 while the yield on earning assets increased 69 basis points compared to the same period. Earning asset balance increases have been primarily driven by higher average loan and interest-bearing due from bank balances. These variances have led to a decrease in the Company’s net interest income during 2024, as compared to results for the same period in 2023. The Company expects to see continued volatility in the economic markets and governmental responses to changes in the economy. These changing conditions could have impacts on the balance sheet and income statement of the Company the remainder of the year. For the impact of the contribution from free funds, see the Analysis of Net Interest Margin within Table 2 below. Table 2 also illustrates how the changes in volume and interest rates have resulted in an increase in net interest income.
Current wording
Table 1 shows the impact of earning asset rate changes compared to changes in the cost of interest-bearing liabilities. As illustrated in this table, net interest spread for the three months ended June 30, 2024 decreased four basis points as compared to the same period in 2023. Net interest margin for the three months ended June 30, 2024 increased seven basis points compared to the same period in 2023. Net interest spread for the six-month period ended June 30, 2024 decreased by 21 basis points as compared to the same period in 2023. Net interest margin for the six-month period ended June 30, 2024 decreased by nine basis points compared to the same period in 2023. The changes for three-month period ended June 30, 2024 are primarily due to increased average loan balances and rates and the benefit of free funds, partially offset by higher interest costs due to unfavorable mix shift in the composition of liabilities. The changes for the six-month period ended June 30, 2024 were related to the cost and mix of interest-bearing liabilities, partially offset by increased loan volumes, repricing of earning assets, and the benefit of interest free funds. The impact of the increased cost and mix of interest-bearing liabilities had a significant impact in the second quarter of 2024. The cost of interest-bearing liabilities increased 57 basis points from the second quarter of 2023 while the yield on earning assets increased 53 basis points compared to the same period. The cost of interest-bearing liabilities increased 82 basis points for the six-month period ended June 30, 2024 as compared to the same period in 2023 while the yield on earning assets increased 61 basis points compared to the same period. Earning asset balance increases have been primarily driven by higher average loan balances. The Company expects to see continued volatility in the economic markets and governmental responses to changes in the economy. These changing conditions could have impacts on the balance sheet and income statement of the Company for the remainder of the year. For the impact of the contribution from free funds, see the Analysis of Net Interest Margin within Table 2 below. Table 2 also illustrates how the changes in volume and interest rates have resulted in an increase in net interest income.
Previous wording
The following table presents, for the periods indicated, the average earning assets and resulting yields, as well as the average interest-bearing liabilities and resulting yields, expressed in both dollars and rates. All average balances are daily average balances. The average yield on earning assets without the tax-equivalent basis adjustment would have been 5.25% for the three-month period ended March 31, 2024, and 4.55% for the same period in 2023.
Current wording
The following table presents, for the periods indicated, the average earning assets and resulting yields, as well as the average interest-bearing liabilities and resulting yields, expressed in both dollars and rates. All average balances are daily average balances. The average yield on earning assets without the tax-equivalent basis adjustment would have been 5.38% for the three-month period ended June 30, 2024, and 4.84% for the same period in 2023. The average yield on earning assets without the tax-equivalent basis adjustment would have been 5.31% for the six-month period ended June 30, 2024, and 4.70% for the same period in 2023.
Previous wording
Table 2 presents the dollar amount of change in net interest income and margin due to volume and rate. Table 2 also reflects the effect that interest-free funds have on net interest margin. The average balance of interest-free funds (total earning assets less interest-bearing liabilities) decreased $1.3 billion for the three-month period ended March 31, 2024, compared to the same period in 2023. The benefit from interest-free funds increased 15 basis points in the three-month period ended March 31, 2024 compared to the same period in 2023.
Current wording
Table 2 presents the dollar amount of change in net interest income and margin due to volume and rate. Table 2 also reflects the effect that interest-free funds have on net interest margin. The average balance of interest-free funds (total earning assets less interest-bearing liabilities) increased $12.7 million and decreased $645.1 million for the three and six-month periods ended June 30, 2024, respectively, compared to the same periods in 2023. The benefit from interest-free funds increased 11 and 12 basis points in the three and six-month periods ended June 30, 2024, respectively, compared to the same periods in 2023, primarily due to increased short-term interest rates.
Previous wording
Based on the factors above, management of the Company recorded $10.0 million as provision for credit losses for the three-month period ended March 31, 2024, compared to $23.3 million for the same period in 2023. This change is the result of applying the methodology for computing the allowance for credit losses, coupled with the impacts of the current and forecasted economic environment. As illustrated in Table 3 below, the ACL on loans decreased to 0.96% of total loans as of March 31, 2024, compared to 0.97% of total loans as of March 31, 2023.
Current wording
Based on the factors above, management of the Company recorded $14.1 million as provision for credit losses for the three-month period ended June 30, 2024, as compared to $13.0 million for the same period in 2023. For the six-month period ended June 30, 2024, management of the Company recorded $24.1 million as provision for credit losses, as compared to $36.3 million for the same period in 2023. These changes are the result of applying the methodology for computing the ACL, coupled with the impacts of the current and forecasted economic environment. As illustrated in Table 3 below, the ACL on loans remained flat at 0.99% of total loans as of June 30, 2024, compared to June 30, 2023.
Previous wording
Table 3 presents a summary of the Company’s ACL for the three-month periods ended March 31, 2024 and 2023, and for the year ended December 31, 2023. Net charge-offs were $3.0 million for the three-month period ended March 31, 2024, compared to $4.6 million for the same period in 2023. See “Credit Risk Management” under “Item 3. Quantitative and Qualitative Disclosures About Market Risk” in this report for information relating to nonaccrual loans, past due loans, restructured loans and other credit risk matters.
Current wording
Table 3 presents a summary of the Company’s ACL for the six-month periods ended June 30, 2024 and 2023, and for the year ended December 31, 2023. Net charge-offs were $5.9 million for the six-month period ended June 30, 2024, compared to $4.5 million for the same period in 2023. See “Credit Risk Management” under “Item 3. Quantitative and Qualitative Disclosures About Market Risk” in this report for information relating to nonaccrual loans, past due loans, restructured loans and other credit risk matters.
Previous wording
Noninterest income increased by $29.0 million, or 22.3%, during the three-month period ended March 31, 2024, compared to the same period in 2023. Table 4 above summarizes the components of noninterest income and the respective year-over-year comparison for each category.
Current wording
Noninterest income increased by $6.8 million, or 5.0%, during the three-month period ended June 30, 2024, and increased $35.9 million, or 13.4%, during the six-month period ended June 30, 2024, compared to the same periods in 2023. Table 4 above summarizes the components of noninterest income and the respective year-over-year comparison for each category.
Previous wording
Trust and securities processing income consists of fees earned on personal and corporate trust accounts, custody of securities services, trust investments and wealth management services, mutual fund assets, and alternative asset servicing. The increase in these fees for the three-month period ended March 31, 2024, compared to the same period in 2023, was primarily due to an increase in fund services revenue, trust services income, and corporate trust revenue. For the three-month period ended March 31, 2024, fund services revenue increased $5.0 million, or 14.5%, trust services income increased $1.1 million, or 8.3%, and corporate trust revenue increased $1.0 million, or 6.8%, in each case compared to the same period in 2023. The recent volatile markets have impacted the income in this category. Since trust and securities processing fees are primarily asset-based, which are highly correlated to the change in market value of the assets, the related income for the remainder of the year will be affected by changes in the securities markets. Management continues to emphasize sales of services to both new and existing clients as well as increasing and improving the distribution channels.
Current wording
Trust and securities processing income consists of fees earned on personal and corporate trust accounts, custody of securities services, trust investments and wealth management services, mutual fund assets, and alternative asset servicing. The increase in these fees for the three and six-month periods ended June 30, 2024, compared to the same periods in 2023, was primarily due to an increase in fund services and corporate trust revenues. For the three-month period ended June 30, 2024, fund services revenue increased $5.6 million, or 16.1%, corporate trust revenue increased $1.5 million, or 11.4%, and trust income increased $1.3 million, or 9.8%, compared to the same period in 2023. For the six-month period ended June 30, 2024, fund services revenue increased $10.6 million, or 15.3%, corporate trust revenue increased $2.5 million, or 9.0%, and trust services revenue increased $2.5 million, or 9.1%, compared to the same period in 2023. The recent volatile markets have impacted the income in this category. Since trust and securities processing fees are primarily asset-based, which are highly correlated to the change in market value of the assets, the related income for the remainder of the year will be affected by changes in the securities markets. Management continues to emphasize sales of services to both new and existing clients as well as increasing and improving the distribution channels.
Previous wording
Bankcard fees for the three-month period ended March 31, 2024 increased $3.8 million, or 20.9%, compared to the same period in 2023. This increase was driven by higher interchange income, coupled with lower rebate and reward costs.
Current wording
Bankcard fees for the three and six-month periods ended June 30, 2024 increased $3.8 million, or 20.3%, and increased $7.6 million, or 20.6%, respectively, as compared to the same periods in 2023. The increase was driven by increased interchange income and lower rewards and rebate costs.
Previous wording
Investment securities gains, net for the three-month period ended March 31, 2024 increased by $14.7 million, or 276.0%, compared to the same period in 2023. This increase was driven by a $10.7 million gain on disposition of one of the Company's securities without readily determinable fair value, coupled with the $4.8 million impairment of an available-for-sale subordinated debt security during the first quarter of 2023. The income in this category is highly correlated to the change in market value of the assets, and the related income for the remainder of the year will be affected by changes in the securities markets. The Company’s investment portfolio is continually evaluated for opportunities to improve its performance and risk profile relative to market conditions and the Company’s interest rate expectations. This can result in differences from quarter to quarter in the amount of realized gains or losses on this portfolio.
Current wording
Investment securities gains, net for the three and six-month periods ended June 30, 2024 decreased $2.8 million, or 307.4%, and increased $11.9 million, or 269.6%, respectively, compared to the same periods in 2023. The decrease for the three-month period ended June 30, 2024, was primarily driven by a change in valuation of one of the Company's securities without readily determinable fair values during the second quarter of 2024. The increase for the six-month period was driven by a net gain of $8.6 million on the disposition of two of the Company's securities without readily determinable market value during the first quarter of 2024, coupled with a $4.9 million impairment loss on one Corporate available-for-sale security during the same period in 2023. The income in this category is highly correlated to the change in market value of the assets, and the related income for the remainder of the year will be affected by changes in the securities markets. The Company’s investment portfolio is continually evaluated for opportunities to improve its performance and risk profile relative to market conditions and the Company’s interest rate expectations. This can result in differences from quarter to quarter in the amount of realized gains or losses on this portfolio.
Previous wording
Noninterest expense increased by $17.8 million, or 7.5%, for the three-month period ended March 31, 2024, compared to the same period in 2023. Table 5 above summarizes the components of noninterest expense and the respective year-over-year comparison for each category.
Current wording
Noninterest expense increased $8.4 million, or 3.5%, and increased $26.1 million, or 5.5%, for the three and six-month periods ended June 30, 2024, respectively, compared to the same periods in 2023. Table 5 above summarizes the components of noninterest expense and the respective year-over-year comparison for each category.
Previous wording
Processing fees increased $4.7 million, or 20.2%, for the three-month period ended March 31, 2024, compared to the same period in 2023, primarily due to increased software subscription cost.
Current wording
Processing fees increased $3.1 million, or 11.8%, and $7.8 million, or 15.7%, for the three and six-month periods ended June 30, 2024, respectively, compared to the same periods in 2023, primarily due to increased software subscription costs.
Previous wording
The Company’s effective tax rate was 17.6% for the three months ended March 31, 2024, compared to 17.2% for the same period in 2023.
Current wording
The Company’s effective tax rate was 18.9% for the six months ended June 30, 2024, compared to 17.6% for the same period in 2023. The increase in the effective tax rate for 2024 is primarily attributable to a smaller portion of income being earned from tax-exempt municipal securities and a decrease in excess tax benefits associated with stock compensation recorded in the first six months of 2024 compared to the same period a year earlier.
Previous wording
For the three-month period ended March 31, 2024, Commercial Banking net income increased $25.8 million to $83.1 million, as compared to the same period in 2023. Net interest income increased $6.2 million, or 4.1%, for the three-month period ended March 31, 2024, compared to the same period in 2023, primarily driven by strong loan growth, earning asset mix changes and the increase in short-term interest rates. Provision for credit losses decreased $13.5 million for the period, driven by portfolio metric changes and changes in macro-economic metrics in 2024 as compared to 2023, partially offset by loan growth. Noninterest income increased $20.1 million, or 87.6%, compared to the same period in 2023, primarily due to an increase of $10.7 million in investment securities gains, an increase of $4.7 million in miscellaneous income driven by a legal settlement in the first quarter of 2024, an increase of $2.4 million in bankcard fees, and an increase of $1.8 million in service charges on deposit accounts. Noninterest expense increased $8.4 million, or 10.0%, to $92.4 million for the three-month period ended March 31, 2024, compared to the same period in 2023. This increase was driven by a $7.4 million increase in regulatory fees driven by the FDIC special assessment in the first quarter of 2024, and an increase of $1.5 million in salaries and employee benefits expense.
Current wording
For the six-month period ended June 30, 2024, Commercial Banking net income increased $38.7 million, or 33.0%, to $156.1 million, as compared to the same period in 2023. Net interest income increased $22.3 million, or 7.6%, for the six-month period ended June 30, 2024, compared to the same period in 2023, driven by strong loan growth, earning asset mix changes, and the increase in short-term interest rates. Provision for credit losses decreased $13.1 million for the period, driven by portfolio metric changes and changes in macro-economic metrics in 2024 as compared to 2023, partially offset by loan growth. Noninterest income increased $22.1 million, or 45.5%, compared to the same period in 2023, primarily due to an increase of $10.7 million in investment security gains, an increase of $5.0 million in bankcard income, an increase of $3.2 million in miscellaneous income driven by a legal settlement in the first quarter of 2024, and an increase of $2.5 million in service charges on deposit accounts. Noninterest expense increased $8.3 million, or 4.9%, to $178.2 million for the six-month period ended June 30, 2024, compared to the same period in 2023. This increase was driven by a $5.0 million increase in regulatory fees driven by the FDIC special assessment, an increase of $1.8 million in bankcard expense, a $0.9 million increase in legal and consulting expense, and an increase of $0.8 million in processing fees.
Previous wording
For the three-month period ended March 31, 2024, Institutional Banking net income decreased $7.3 million, or 17.6%, compared to the same period last year. Net interest income decreased $5.2 million, or 9.5%, compared to the same period last year, due to higher deposit interest expense driven by the increase in short-term interest rates. Noninterest income increased $8.5 million, or 10.1%, primarily due to increases of $6.1 million in trust and securities processing income driven by higher fund services and corporate trust revenue, and $1.8 million in bankcard fees primarily driven by higher interchange income. Noninterest expense increased $11.0 million, or 12.3%, primarily driven by increases of $6.2 million in regulatory fees driven by the FDIC special assessment in the first quarter of 2024, $2.7 million in salaries and employee benefits expense, $1.7 million in processing fees, $1.6 million in bankcard expense, and $1.0 million in equipment expense. These increases were partially offset by a decrease of $1.3 million in technology, service, and overhead expenses.
Current wording
For the six-month period ended June 30, 2024, Institutional Banking net income decreased $3.6 million, or 4.6%, compared to the same period last year. Net interest income decreased $4.1 million, or 3.9%, compared to the same period last year, driven by higher deposit interest expense due to the increase in short-term interest rates. Provision for credit losses increased $1.0 million for the period, driven by portfolio metric changes and changes in macro-economic metrics in 2024 as compared to 2023. Noninterest income increased $16.8 million, or 9.8%, primarily due to increases of $13.0 million in trust and securities processing income driven by higher fund services and corporate trust revenue, an increase of $2.8 million in bankcard income, and an increase of $0.9 million in bond trading income. Noninterest expense increased $14.9 million, or 8.3%, primarily driven by increases of $4.5 million in salaries and employee benefits expense, $4.3 million in regulatory fees driven by the FDIC special assessment, $3.9 million in bankcard expense, $2.8 million in processing fees, $1.2 million in equipment expense and $0.9 million in legal and consulting expense. These increases were partially offset by a decrease of $2.8 million in operational losses.
Previous wording
For the three-month period ended March 31, 2024, Personal Banking net income decreased $0.7 million to a net loss of $6.9 million, as compared to the same period in 2023. Net interest income decreased $3.3 million, or 9.2%, compared to the same period last year due to higher deposit interest expense driven by the increase in short-term interest rates. Provision for credit losses decreased $0.1 million for the period driven by portfolio metric changes and changes in macro-economic metrics in 2024 as compared to 2023, partially offset by loan growth. Noninterest income increased $0.5 million, or 2.2%, for the same period driven by an increase of $1.1 million in trust and securities processing income, an increase of $1.0 million in miscellaneous other income primarily due to the gain on sale of land during the first quarter of 2024, partially offset by a decrease of $1.3 million in investment securities gains. Noninterest expense decreased $1.7 million, or 2.6%, primarily due to a decrease of $2.0 million in technology, service, and overhead expenses, and a decrease of $1.6 million in operational losses, partially offset by increases of $1.1 million in bankcard expense and $0.5 million in marketing and business development expense.
Current wording
For the six-month period ended June 30, 2024, Personal Banking net income decreased $6.1 million, or 44.8%, to a net loss of $19.6 million, as compared to the same period in 2023. Net interest income decreased $1.0 million, or 1.5%, compared to the same period last year due to higher deposit interest expense driven by the increase in short-term interest rates. Provision for credit losses decreased $0.1 million for the period, driven by portfolio metric changes and changes in macro-economic metrics in 2024 as compared to 2023. Noninterest income decreased $3.0 million, or 6.2%, for the same period primarily driven by a decrease of $4.9 million in investment securities gains, partially offset by an increase of $2.6 million in trust and securities processing income. Noninterest expense increased $2.9 million, or 2.3%, primarily due to increases of $3.7 million in technology, service, and overhead expenses, and $1.3 million in bankcard expense, partially offset by a decrease of $2.2 million operational losses.
Previous wording
Total assets of the Company increased $4.7 billion, or 11.7%, as of March 31, 2024, compared to March 31, 2023, primarily due to an increase of $3.6 billion, or 113.8%, in interest-bearing due from banks, and an increase of $1.8 billion, or 8.4%, in loan balances, partially offset by a decrease in securities available for sale of $366.5 million, or 5.3%, and a decrease of $236.7 million, or 4.0%, in securities held to maturity.
Current wording
Total assets of the Company increased $457.7 million, or 1.0%, as of June 30, 2024, compared to December 31, 2023, primarily due to an increase of $1.0 billion, or 4.4% in loan balances. This increase was partially offset by a decrease of $519.4 million, or 10.1%, in interest-bearing due from banks.
Previous wording
Total assets of the Company increased by $1.3 billion, or 3.0%, as of March 31, 2024, compared to December 31, 2023, primarily due to an increase of $1.5 billion, or 29.3% in interest-bearing due from banks and an increase of $465.2 million, or 2.0%, in loan balances, partially offset by a decrease of $527.2 million, or 7.5%, in securities available for sale.
Current wording
Total assets of the Company increased $3.2 billion, or 7.8%, as of June 30, 2024, compared to June 30, 2023, primarily due to an increase in loan balances of $1.7 billion, or 7.6%, an increase of $1.3 billion, or 37.7%, in interest-bearing due from banks, and an increase of $197.4 million, or 1.5%, in total securities.
Previous wording
Actual loan balances totaled $23.6 billion as of March 31, 2024, and increased $465.2 million, or 2.0%, compared to December 31, 2023, and increased $1.8 billion, or 8.4%, compared to March 31, 2023. Compared to December 31, 2023, commercial real estate loans increased $391.2 million, or 4.4%, and credit card loans increased $114.5 million, or 27.0%. Compared to March 31, 2023, commercial real estate loans increased $1.2 billion, or 15.4%, commercial and industrial loans increased $362.7 million, or 3.8%, consumer real estate loans increased $203.8 million, or 7.4%, and credit card loans increased $92.1 million, or 20.6%. The increase in credit card loans in both periods is related to the purchase of $109.4 million in co-branded credit card receivables during the first quarter of 2024. See further information in Note 4, “Loans and Allowance for Credit Losses” in the Notes to Consolidated Financial Statements.
Current wording
Actual loan balances totaled $24.2 billion as of June 30, 2024, and increased $1.0 billion, or 4.4%, compared to December 31, 2023, and increased $1.7 billion, or 7.6%, compared to June 30, 2023. Compared to December 31, 2023, commercial real estate loans increased $555.7 million, or 6.2%, commercial and industrial loans increased $303.5 million, or 3.1%, and credit card loans increased $145.3 million, or 34.3%. Compared to June 30, 2023, commercial real estate loans increased $1.2 billion, or 14.3%, commercial and industrial loans increased $332.1 million, or 3.4%, credit card loans increased $124.1 million, or 27.9%, and consumer real estate loans increased $102.9 million, or 3.5%. The increase in credit card loans in both periods is related to the purchase of $109.4 million in co-branded credit card receivables during the first quarter of 2024. See further information in Note 4, “Loans and Allowance for Credit Losses” in the Notes to Consolidated Financial Statements.
Previous wording
As of March 31, 2024 and December 31, 2023, commercial real estate loans comprised approximately 39.3% and 38.4%, respectively, of the Company's loan portfolio. Commercial real estate loans generally involve a greater degree of credit risk than consumer real estate loans because they typically have larger balances and are more affected by adverse conditions in the economy. Because payments on loans secured by commercial real estate often depend upon the successful operation and management of the properties and the businesses which operate from within them, repayment of such loans may be affected by factors outside the borrower’s control, such as adverse conditions in the real estate market or the economy or changes in government regulations. In recent years, commercial real estate markets have been particularly impacted by the economic disruption resulting from the COVID-19 pandemic. The COVID-19 pandemic has also been a catalyst for the evolution of various remote work options, which could impact the long-term performance of some types of office properties within our commercial real estate portfolio. Due to these risks, the Company is actively monitoring its exposure to commercial real estate.
Current wording
As of June 30, 2024 and December 31, 2023, commercial real estate loans comprised approximately 39.1% and 38.4%, respectively, of the Company's loan portfolio. Commercial real estate loans generally involve a greater degree of credit risk than consumer real estate loans because they typically have larger balances and are more affected by adverse conditions in the economy. Because payments on loans secured by commercial real estate often depend upon the successful operation and management of the properties and the businesses which operate from within them, repayment of such loans may be affected by factors outside the borrower’s control, such as adverse conditions in the real estate market or the economy or changes in government regulations. In recent years, commercial real estate markets have been particularly impacted by the economic disruption resulting from the COVID-19 pandemic. The COVID-19 pandemic has also been a catalyst for the evolution of various remote work options, which could impact the long-term performance of some types of office properties within our commercial real estate portfolio. Due to these risks, the Company is actively monitoring its exposure to commercial real estate.
Previous wording
Generally, these loans are made for investment and real estate development or working capital and business expansion purposes and are primarily secured by real estate with a maximum loan-to-value of 80%. Most of these properties are non-owner occupied and have guarantees as additional security. The Company's investment CRE portfolio (which includes non-owner occupied and construction loans) totaled 27.8% and 26.5% of total Company loans as of March 31, 2024 and December 31, 2023, respectively. The average investment CRE loan was approximately $6.3 million and $5.8 million, as of March 31, 2024 and December 31, 2023, respectively, and 90% are recourse loans as of the end of each period. These loans have an average loan-to-value of 57% as of both March 31, 2024 and December 31, 2023.
Current wording
Generally, these loans are made for investment and real estate development or working capital and business expansion purposes and are primarily secured by real estate with a maximum loan-to-value of 80%. Most of these properties are non-owner occupied and have guarantees as additional security. The Company's investment CRE portfolio (which includes non-owner occupied and construction loans) totaled 27.7% and 26.5% of total Company loans as of June 30, 2024 and December 31, 2023, respectively. The average investment CRE loan was approximately $6.7 million and $5.8 million, as of June 30, 2024 and December 31, 2023, respectively, and 91% and 90% are recourse loans as of June 30, 2024 and December 31, 2023, respectively. These loans have an average loan-to-value of 57% as of both June 30, 2024 and December 31, 2023.
Previous wording
The shift to work-from-home and hybrid work environments has caused a decreased utilization of, and demand for, office space. The Company is actively monitoring its exposure to office space in its non-owner occupied commercial real estate portfolio. The average loan size in the Company's office portfolio was approximately $9.0 million and $9.2 million, as of March 31, 2024 and December 31, 2023, respectively. The average loan-to-value of the office portfolio was 64% as of both March 31, 2024 and December 31, 2023, and 84% are recourse loans as of the end of both periods. Further, only 24% and 30% of the Company's office portfolio as of March 31, 2024 and December 31, 2023, respectively, is in central business districts, which have been more heavily impacted by the shift to remote work. The remainder of the Company's office portfolio is in suburban or medical properties.
Current wording
The shift to work-from-home and hybrid work environments has caused a decreased utilization of, and demand for, office space. The Company is actively monitoring its exposure to office space in its non-owner occupied commercial real estate portfolio. The average loan size in the Company's office portfolio was approximately $9.2 million as of both June 30, 2024 and December 31, 2023. The average loan-to-value of the office portfolio was 63% and 64% as of June 30, 2024 and December 31, 2023, respectively, and 84% are recourse loans as of the end of both periods. Further, only 23% and 30% of the Company's office portfolio as of June 30, 2024 and December 31, 2023, respectively, is in central business districts, which have been more heavily impacted by the shift to remote work. The remainder of the Company's office portfolio is in suburban or medical properties.
Previous wording
The Company’s investment portfolio contains trading, AFS, and HTM securities, as well as FRB stock, FHLB stock, and other miscellaneous investments. Investment securities totaled $12.7 billion as of March 31, 2024, and
Current wording
The Company’s investment portfolio contains trading, AFS, and HTM securities, as well as FRB stock, FHLB stock, and other miscellaneous investments. Investment securities totaled $13.1 billion as of June 30, 2024, and $13.3 billion as of December 31, 2023, and comprised 31.1% and 31.9% of the Company’s earning assets, respectively, as of those dates.
Previous wording
The Company’s AFS securities portfolio comprised 51.6% of the Company’s investment securities portfolio at March 31, 2024 and 53.3% at December 31, 2023. The Company’s AFS securities portfolio provides liquidity as a result of the composition and average life of the underlying securities. This liquidity can be used to fund loan growth or to offset the outflow of traditional funding sources. The average life of the AFS securities portfolio was 57.8 months at March 31, 2024, compared to 52.6 months at December 31, 2023, and 59.8 months at March 31, 2023. In addition to providing a potential source of liquidity, the AFS securities portfolio can be used as a tool to manage interest rate sensitivity. The Company’s goal in the management of its AFS securities portfolio is to maximize return within the Company’s parameters of liquidity goals, interest rate risk, and credit risk.
Current wording
The Company’s AFS securities portfolio comprised 54.1% of the Company’s total securities portfolio at June 30, 2024 and 53.3% at December 31, 2023. The Company’s AFS securities portfolio provides liquidity as a result of the composition and average life of the underlying securities. This liquidity can be used to fund loan growth or to offset the outflow of traditional funding sources. The average life of the AFS securities portfolio was 54.2 months at June 30, 2024, compared to 52.6 months at December 31, 2023, and 58.7 months at June 30, 2023. In addition to providing a potential source of liquidity, the AFS securities portfolio can be used as a tool to manage interest rate sensitivity. The Company’s goal in the management of its AFS securities portfolio is to maximize return within the Company’s parameters of liquidity goals, interest rate risk, and credit risk.
Previous wording
Management expects collateral pledging requirements for public funds, loan demand, and deposit funding to be the primary factors impacting changes in the level of AFS securities. There were $9.4 billion and $10.1 billion of securities pledged to secure U.S. Government deposits, other public deposits, certain trust deposits, derivative transactions, and repurchase agreements at March 31, 2024 and December 31, 2023, respectively.
Current wording
Management expects collateral pledging requirements for public funds, loan demand, and deposit funding to be the primary factors impacting changes in the level of AFS securities. There were $8.8 billion and $10.1 billion of securities pledged to secure U.S. Government deposits, other public deposits, certain trust deposits, derivative transactions, and repurchase agreements at June 30, 2024 and December 31, 2023, respectively.
Previous wording
The Company’s HTM securities portfolio consists of U.S. agency-backed securities, mortgage-backed securities, general obligation bonds, and private placement bonds. The HTM portfolio, net of the ACL, totaled $5.6 billion at March 31, 2024 and $5.7 billion as of December 31, 2023. The average life of the HTM portfolio was 9.0 years at March 31, 2024, compared to 8.4 years at December 31, 2023, and 9.1 years at March 31, 2023.
Current wording
The Company’s HTM securities portfolio consists of U.S. agency-backed securities, mortgage-backed securities, general obligation bonds, and private placement bonds. The HTM portfolio, net of the ACL, totaled $5.5 billion and $5.7 billion at June 30, 2024 and December 31, 2023, respectively. The average life of the HTM portfolio was 8.8 years at June 30, 2024, compared to 8.4 years at December 31, 2023, and 8.6 years at June 30, 2023.
Previous wording
The securities portfolio generates the Company’s second largest component of interest income. The securities portfolio achieved an average yield on a tax-equivalent basis of 2.88% for the three-month period ended March 31, 2024, compared to 2.61% for the same period in 2023.
Current wording
The securities portfolio generates the Company’s second largest component of interest income. The securities portfolio achieved an average yield on a tax-equivalent basis of 2.92% for the six-month period ended June 30, 2024, compared to 2.64% for the same period in 2023.
Previous wording
At March 31, 2024, the unrealized pre-tax net loss on the AFS securities portfolio was $665.9 million, or 9.2% of the $7.2 billion amortized cost value, an increase of $41.7 million as compared to December 31, 2023. At March 31, 2024, the unrealized pre-tax net loss on the securities designated as HTM was $601.3 million, or 10.7% of amortized cost value, compared to $508.5 million at December 31, 2023. During 2022, the Company transferred securities with an amortized cost balance of $4.1 billion and a fair value of $3.8 billion from the AFS category to the HTM category. The transfer of securities was made at fair value at the time of transfer. The remaining balance of unrealized pre-tax losses related to transferred securities was $198.4 million as of March 31, 2024, and $207.2 million as of December 31, 2023, and was included in the amortized cost balance of HTM securities. See further information in Note 5, “Securities” in the Notes to Consolidated Financial Statements.
Current wording
At June 30, 2024, the unrealized pre-tax net loss on the AFS securities portfolio was $678.7 million, or 8.7% of the $7.8 billion amortized cost value, an increase of $54.4 million as compared to December 31, 2023. At June 30, 2024, the unrealized pre-tax net loss on the securities designated as HTM was $636.2 million, or 11.5% of amortized cost value, compared to $508.5 million at December 31, 2023. During 2022, the Company transferred securities with an amortized cost balance of $4.1 billion and a fair value of $3.8 billion from the AFS category to the HTM category. The transfer of securities was made at fair value at the time of transfer. The remaining balance of unrealized pre-tax losses related to transferred securities was $189.5 million as of June 30, 2024, and $207.2 million as of December 31, 2023, and was included in the amortized cost balance of HTM securities. See further information in Note 5, “Securities” in the Notes to Consolidated Financial Statements.
Previous wording
Deposits increased $1.1 billion, or 3.1%, from December 31, 2023 to March 31, 2024 and increased $5.0 billion, or 15.6%, from March 31, 2023 to March 31, 2024. Total noninterest-bearing deposits increased $1.1 billion and total interest-bearing deposits increased $323 thousand from December 31, 2023 to March 31, 2024. Total noninterest-bearing deposits increased $762.3 million, and interest-bearing deposits increased $4.2 billion from March 31, 2023 to March 31, 2024. Deposits can fluctuate at quarter-end due to the operational nature of our commercial and institutional clients and typical seasonal declines in public funds deposits, particularly in the first quarter. The shift from noninterest-bearing to interest-bearing is related to the recent increases in short-term and long-term interest rates. Noninterest-bearing deposits were 35.9%, 33.9%, and 39.1% of total deposits at March 31, 2024, December 31, 2023, and March 31, 2023, respectively.
Current wording
Deposits increased $724.7 million, or 2.0%, from December 31, 2023 to June 30, 2024 and increased $3.0 billion, or 8.9%, from June 30, 2023 to June 30, 2024. Total interest-bearing balances increased $820.8 million, partially offset by a decrease of $96.1 million in noninterest-bearing deposits from December 31, 2023 to June 30, 2024. Total interest-bearing deposits increased $3.1 billion, partially offset by a decrease of $108.3 million in noninterest-bearing deposits from June 30, 2023 to June 30, 2024. Deposits can fluctuate at quarter-end due to the operational nature of our commercial and institutional clients. The shift from noninterest-bearing to interest-bearing deposits is related to the recent increases in short-term and long-term interest rates, as well as recent industry volatility. Noninterest-bearing deposits were 33.0%, 33.9%, and 36.2% of total deposits at June 30, 2024, December 31, 2023, and June 30, 2023, respectively.
Showing the first 40 of 53 pairs. Open the source sections for the rest.
Rearranged current paragraphs (3)
Current report — wording carried from elsewhere
The Company recorded net income of $211.6 million for the six-month period ended June 30, 2024, compared to net income of $182.5 million for the same period a year earlier. Basic earnings per share for the six-month period ended June 30, 2024 were $4.34 per share ($4.32 per share fully-diluted) compared to $3.77 per share ($3.75 per share fully-diluted) for the same period in 2023. Return on average assets and return on average common shareholders’ equity for the six-month period ended June 30, 2024 were 1.01% and 13.41%, respectively, compared to 0.93% and 13.14%, respectively, for the six-month period ended June 30, 2023.
Current report — wording carried from elsewhere
Excluding affiliate deposits of $2.0 billion and collateralized deposits of $5.3 billion, the adjusted estimated uninsured deposits were $18.0 billion as of June 30, 2024. The adjusted ratio of estimated uninsured deposits, excluding affiliate and collateralized deposits, as a percentage of total deposits was approximately 49.4% as of June 30, 2024. The adjusted ratio of estimated uninsured deposits, excluding affiliate and collateralized deposits, as a percentage of total deposits was approximately 45.3% as of December 31, 2023, and 40.9% as of June 30, 2023.
Current report — wording carried from elsewhere
Long-term debt totaled $384.2 million as of June 30, 2024, compared to $383.2 million as of December 31, 2023, and $382.3 million as of June 30, 2023.
Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
The third financial objective is to grow the Company’s revenue from noninterest sources. The Company seeks to grow noninterest revenues throughout all economic and interest rate cycles, while positioning itself to benefit in periods of economic growth. Noninterest income increased $29.0 million, or 22.3%, to $159.2 million for the three months ended March 31, 2024, compared to the same period in 2023. This change is primarily due to increases in investment securities gains, trust and securities processing income, other income and bankcard income.
Previous report — wording carried elsewhere
$13.3 billion as of December 31, 2023, and comprised 29.4% and 31.9% of the Company’s earning assets, respectively, as of those dates.