FIRST FINANCIAL BANKSHARES INC

Previous wording

Performance Summary. Net earnings for the second quarter of 2024 were $52.49 million compared to earnings of $50.87 million for the second quarter of 2023. Diluted earnings per share was $0.37 for the second quarter of 2024 and $0.36 for the second quarter of 2023.

Current wording

Performance Summary. Net earnings for the third quarter of 2024 were $55.31 million, an increase of 11.61% when compared to earnings of $49.56 million for the third quarter of 2023. Diluted earnings per share was $0.39 for the third quarter of 2024 and $0.35 for the third quarter of 2023.

Previous wording

The return on average assets was 1.61% for the second quarter of 2024, as compared to 1.58% for the second quarter of 2023. The return on average equity was 14.43% for the second quarter of 2024 as compared to 14.89% for the second quarter of 2023.

Current wording

The return on average assets was 1.66% for the third quarter of 2024, as compared to 1.53% for the third quarter of 2023. The return on average equity was 14.00% for the third quarter of 2024 as compared to 14.51% for the third quarter of 2023.

Previous wording

Net earnings for the six-months ended June 30, 2024 were $105.88 million compared to earnings of $103.44 million for the six-months ended June 30, 2023. Diluted earnings per share was $0.74 for the first six months of 2024 and $0.72 for the first six months of 2023.

Current wording

Net earnings for the nine-months ended September 30, 2024 were $161.19 million, an increase of 5.36% when compared to earnings of $153.00 million for the nine-months ended September 30, 2023. Diluted earnings per share was $1.13 for the first nine months of 2024 and $1.07 for the first nine months of 2023.

Previous wording

The return on average assets was 1.62% for the first six months of 2024, as compared to 1.62% for the first six months of 2023. The return on average equity was 14.43% for the first six-months of 2024, as compared to 15.58% for the same period in 2023.

Current wording

The return on average assets was 1.63% for the first nine months of 2024, as compared to 1.59% for the first nine months of 2023. The return on average equity was 14.28% for the first nine months of 2024, as compared to 15.22% for the same period in 2023.

Previous wording

Tax-equivalent net interest income was $105.85 million for the second quarter of 2024, as compared to $98.82 million for the same period last year. The increase in 2024 tax equivalent net interest income compared to 2023 was largely attributable to the change in the mix of interest earning assets primarily derived from an increase in average loans offset by a decrease in taxable and tax-exempt investment securities. Additionally, the rates received on loans continued to increase along with the rates paid on deposits. Average earning assets were $12.23 billion for the second quarter of 2024, as compared to $12.05 billion during the second quarter of 2023. The increase of $178.07 million in average earning assets for the second quarter of 2024 when compared to the same period in 2023 was primarily a result of (i) an increase in loans of $722.02 million, offset by (ii) a decrease in tax-exempt securities of $248.71 million, and (iii) a decrease in taxable investment securities of $338.70 million. Average interest-bearing liabilities were $8.26 billion for the second quarter of 2024, as compared to $7.75 billion in the same period in 2023. The yield on earning assets increased 75 basis points while the rate paid on interest-bearing liabilities increased 75 basis points for the second quarter of 2024 compared to the second quarter of 2023.

Current wording

Tax-equivalent net interest income was $109.74 million for the third quarter of 2024, as compared to $96.97 million for the same period last year. The increase in 2024 tax equivalent net interest income compared to 2023 was largely attributable to the change in the mix of interest earning assets primarily derived from an increase in average loans offset by a decrease in taxable and tax-exempt investment securities. Additionally, the rates received on loans continued to increase along with the rates paid on deposits. Average earning assets were $12.48 billion for the third quarter of 2024, as compared to $11.96 billion during the third quarter of 2023. The increase of $516.97 million in average earning assets for the third quarter of 2024 when compared to the same period in 2023 was primarily a result of (i) an increase in loans of $749.17 million, offset by (ii) a decrease in tax-exempt securities of $160.45 million, and (iii) a decrease in taxable investment securities of $217.80 million. Average interest-bearing liabilities were $8.37 billion for the third quarter of 2024, as compared to $7.88 billion in the same period in 2023. The yield on earning assets increased 60 basis points while the rate paid on interest-bearing liabilities increased 44 basis points for the third quarter of 2024 compared to the third quarter of 2023.

Previous wording

Tax-equivalent net interest income was $208.66 million for the six-months ended June 30, 2024 as compared to $198.23 million for the same period in 2023. The increase in 2024 tax equivalent net interest income compared to 2023 was largely attributable to the change in the mix of interest earning assets primarily derived from an increase in average loans offset by a decrease in taxable and tax-exempt investment securities. Additionally, the rates received on loans continued to increase along with the rates paid on deposits. Average earning assets were $12.30 billion for the six-months ended June 30, 2024, as compared to $12.06 billion during the same period last year. The increase of $237.08 million in average earning assets for the six-months ended June 30, 2024 when compared to the same period in 2023 was primarily a result of (i) an increase in loans of $713.05 million, offset by (ii) a decrease in tax-exempt securities of $282.10 million, and (iii) a decrease in taxable investment securities of $317.09 million. Average interest-bearing liabilities were $8.29 billion for the six-months ended June 30, 2024, as compared to $7.73 billion in the same period in 2023. The yield on earning assets increased 75 basis points while the rate paid on interest-bearing liabilities increased 90 basis points for the six-months ended June 30, 2024 as compared to the six-months ended June 30, 2023.

Current wording

Tax-equivalent net interest income was $318.40 million for the nine-months ended September 30, 2024 as compared to $295.20 million for the same period in 2023. The increase in 2024 tax equivalent net interest income compared to 2023 was largely attributable to the change in the mix of interest earning assets primarily derived from an increase in average loans offset by a decrease in taxable and tax-exempt investment securities. Additionally, the rates received on loans continued to increase along with the rates paid on deposits. Average earning assets were $12.36 billion for the nine-months ended September 30, 2024, as compared to $12.03 billion during the same period last year. The increase of $331.18 million in average earning assets for the nine-months ended September 30, 2024 when compared to the same period in 2023 was primarily a result of (i) an increase in loans of $724.81 million, offset by (ii) a decrease in tax-exempt securities of $241.10 million, and (iii) a decrease in taxable investment securities of $283.50 million. Average interest-bearing liabilities were $8.32 billion for the nine-months ended September 30, 2024, as compared to $7.78 billion in the same period in 2023. The yield on earning assets increased 70 basis points while the rate paid on interest-bearing liabilities increased 74 basis points for the nine-months ended September 30, 2024 as compared to the nine-months ended September 30, 2023.

Previous wording

The net interest margin, on a tax equivalent basis, was 3.48% for the second quarter of 2024, an increase of 19 basis points from the same period in 2023. The net interest margin, on a tax equivalent basis, for the first six-months of 2024 was 3.41%, an increase of 9 basis points from the same period in 2023. The net interest margin has expanded during the past year primarily due to (i) a shift in asset mix from investment securities to higher yielding loans, (ii) increased loan yields due to renewing loans and variable rate loans repricing higher. The Federal Reserve began aggressively increasing interest rates in March 2022 and continuing into 2023 with increases of 25 basis points in February, March, May, and July 2023, respectively, resulting in a target rate range of 5.25% to 5.50% at June 30, 2024. Loan rates on variable loans have increased as the majority of such loans are indexed to the applicable prime rate (currently 8.50% at June 30, 2024).

Current wording

The net interest margin, on a tax equivalent basis, was 3.50% for the third quarter of 2024, an increase of 28 basis points from the same period in 2023. The net interest margin, on a tax equivalent basis, for the first nine-months of 2024 was 3.44%, an increase of 16 basis points from the same period in 2023. The net interest margin has expanded during the past year primarily due to (i) a shift in asset mix from investment securities to higher yielding loans, and (ii) increased loan yields due to new and renewing loans and variable rate loans repricing higher. The Federal Reserve began aggressively increasing interest rates in March 2022 and continuing into 2023 with increases of 25 basis points in February, March, May, and July 2023. Most recently, the Federal Reserve decreased interest rates 50 basis points in September 2024, resulting in a target rate range of 4.75% to 5.00% at September 30, 2024.

Previous wording

There are $951.90 million of municipal and related deposits which are indexed to short-term treasury rates which have continued to increase with the changes in the applicable rate index. Average municipal and related deposits totaled $1.51 billion and $1.48 billion for the six-months ended June 30, 2024 and 2023, respectively, with an average rate paid of 3.98% and 2.62%, for the respective six-months then ended.

Current wording

There are $938.59 million of municipal and related deposits which are indexed to short-term treasury rates which have continued to increase with the changes in the applicable rate index. Average municipal and related deposits totaled $1.48 billion for both of the nine-months ended September 30, 2024 and 2023, respectively, with an average rate paid of 4.03% and 2.95%, for the respective nine-months then ended.

Previous wording

Includes tax equivalent yield adjustment of approximately $2.57 million and $2.95 million in the second quarters of 2024 and 2023, respectively, using an effective tax rate of 21% for both periods.

Current wording

Includes tax equivalent yield adjustment of approximately $2.63 million and $2.82 million in the third quarters of 2024 and 2023, respectively, using an effective tax rate of 21% for both periods.

Previous wording

Includes tax equivalent yield adjustment of approximately $5.15 million and $6.08 million in the first six months of 2024 and 2023, respectively, using an effective tax rate of 21% for both periods.

Current wording

Includes tax equivalent yield adjustment of approximately $7.77 million and $8.90 million in the first nine months of 2024 and 2023, respectively, using an effective tax rate of 21% for both periods.

Previous wording

Noninterest Expense. Total noninterest expense for the second quarter of 2024 was $65.01 million, compared to $57.61 million for the same period of 2023. An important measure in determining whether a financial institution effectively manages noninterest expense is the efficiency ratio, which is calculated by dividing noninterest expense by the sum of net interest income on a tax-equivalent basis and noninterest income. Lower ratios indicate better efficiency since more income is generated with a lower noninterest expense total. Our efficiency ratio was 47.41% for the second quarter of 2024 compared to 44.74% for the same quarter in 2023.

Current wording

Noninterest Expense. Total noninterest expense for the third quarter of 2024 was $66.01 million, compared to $59.54 million for the same period of 2023. An important measure in determining whether a financial institution effectively manages noninterest expense is the efficiency ratio, which is calculated by dividing noninterest expense by the sum of net interest income on a tax-equivalent basis and noninterest income. Lower ratios indicate better efficiency since more income is generated with a lower noninterest expense total. Our efficiency ratio was 46.45% for the third quarter of 2024 compared to 47.62% for the same quarter in 2023.

Previous wording

All other categories of noninterest expense for the second quarter of 2024 totaled $27.54 million, compared to $25.85 million in the same quarter a year ago. Noninterest expense, excluding salary related costs, for the three-months ended June 30, 2024 increased largely due to increases in software amortization and expense, legal expenses and professional and service fees when compared to the same period in 2023.

Current wording

All other categories of noninterest expense for the third quarter of 2024 totaled $28.52 million, compared to $26.60 million in the same quarter a year ago. Noninterest expense, excluding salary related costs, for the three-months ended September 30, 2024 increased largely due to increases in software amortization and expense, legal expenses and professional and service fees when compared to the same period in 2023.

Previous wording

Total noninterest expense for the first six months of 2024 was $128.95 million, compared to $114.87 million for the same period of 2023. Our efficiency ratio was 47.88% for the first six months of 2024 compared to 44.84% for the same period in 2023.

Current wording

Total noninterest expense for the first nine months of 2024 was $194.97 million, compared to $174.41 million for the same period of 2023. Our efficiency ratio was 47.39% for the first nine months of 2024 compared to 45.75% for the same period in 2023.

Previous wording

Salaries, commissions and employee benefits for the first six months of 2024 totaled $74.16 million, compared to $63.23 million for the same period in 2023. The net increase was primarily a result of merit-based and market driven pay increases, performance based incentive accruals, an increase of $3.58 million in profit sharing expense and an increase of $2.62 million in medical insurance expense.

Current wording

Salaries, commissions and employee benefits for the first nine months of 2024 totaled $111.65 million, compared to $96.16 million for the same period in 2023. The net increase was primarily a result of merit-based and market driven pay increases, additions to the middle market lending team and the audit and risk departments, performance based incentive accruals, an increase of $5.64 million in profit sharing expense and an increase of $2.20 million in medical insurance expense.

Previous wording

All other categories of noninterest expense for the six-months ended June 30, 2024 totaled $54.80 million, compared to $51.64 million in the same period a year ago. Noninterest expense, excluding salary related costs, for the six-months ended June 30, 2024 increased largely due to increases in software amortization and expense, legal expenses, professional and service fees and FDIC insurance fees. An additional $440 thousand was accrued in the first quarter of 2024 for the FDIC special assessment over the Company's regular accrual.

Current wording

All other categories of noninterest expense for the nine-months ended September 30, 2024 totaled $83.31 million, compared to $78.25 million in the same period a year ago. Noninterest expense, excluding salary related costs, for the nine-months ended September 30, 2024 increased largely due to increases in software amortization and expense, legal expenses, and professional and service fees.

Previous wording

Loans. The portfolio is comprised of loans made to businesses, professionals, individuals, and farm and ranch operations located in the primary trade areas served by our subsidiary bank. As of June 30, 2024, total loans held-for-investment were $7.52 billion, an increase of $370.94 million, as compared to December 31, 2023.

Current wording

Loans. The portfolio is comprised of loans made to businesses, professionals, individuals, and farm and ranch operations located in the primary trade areas served by our subsidiary bank. As of September 30, 2024, total loans held-for-investment were $7.72 billion, an increase of $574.40 million, as compared to December 31, 2023.

Previous wording

As compared to year-end 2023 balances, total real estate loans increased $153.07 million, total consumer loans increased $95.13 million, total commercial loans increased $121.45 million, and agricultural loans increased $1.30 million. Loans averaged $7.41 billion for the second quarter of 2024, an increase of $722.02 million over the prior year second quarter average balances. Loans averaged $7.31 billion for the first six months of 2024, an increase of $713.05 million from the prior year six-month period average balances.

Current wording

As compared to year-end 2023 balances, total real estate loans increased $346.45 million, total commercial loans increased $129.85 million, total consumer loans increased $99.73 million, and agricultural loans decreased $1.62 million. Loans averaged $7.64 billion for the third quarter of 2024, an increase of $749.17 million over the prior year third quarter average balances. Loans averaged $7.42 billion for the first nine months of 2024, an increase of $724.81 million from the prior year nine-month period average balances.

Previous wording

Loans held-for-sale, consisting of secondary market mortgage loans, totaled $19.67 million, $19.22 million, and $14.25 million at June 30, 2024 and 2023, and December 31, 2023, respectively. At June 30, 2024 and 2023, and December 31, 2023, $275 thousand, $1.13 million and $3.18 million, respectively, are valued using the lower of cost or fair value, and the remaining amounts are valued under the fair value option.

Current wording

Loans held-for-sale, consisting of secondary market mortgage loans, totaled $20.11 million, $12.23 million, and $14.25 million at September 30, 2024 and 2023, and December 31, 2023, respectively. At September 30, 2024 and 2023, and December 31, 2023, $3.60 million, $321 thousand and $3.18 million, respectively, are valued using the lower of cost or fair value, and the remaining amounts are valued under the fair value option.

Previous wording

Commercial real estate loans (owner and non-owner occupied CRE) represent 24.81% of the Company's total loan portfolio as of June 30, 2024. Non-owner occupied CRE represents $815.71 million, or 10.85%, of the Company's total loan portfolio as of June 30, 2024. The properties securing this portfolio are diverse as to geographic location in Texas as well as industry type. Collateral for CRE loans is located throughout the Company’s markets in central west Texas, the Dallas-Fort Worth metroplex and southeast Texas with less than 1% of properties located outside of the state. The largest concentrations in the CRE portfolio as to type are industrial/warehouse at approximately 15.25% and multifamily at approximately 8.74% as of June 30, 2024. All additional property type categories are 5% or less of the CRE portfolio. Credit underwriting standards are periodically reviewed and adjusted based upon observations from our ongoing monitoring of economic conditions in our lending areas. In response to the current interest rate environment and increases in benchmark rates, the Company has enhanced stress testing and loan review activities to mitigate interest rate reset risk with a specific emphasis on borrowers’ abilities to absorb the impact of higher interest rates on loans.

Current wording

Commercial real estate loans (owner and non-owner occupied CRE) represent 24.77% of the Company's total loan portfolio as of September 30, 2024. Non-owner occupied CRE represents $825.93 million, or 10.69%, of the Company's total loan portfolio as of September 30, 2024. The properties securing this portfolio are diverse as to geographic location in Texas as well as industry type. Collateral for CRE loans is located throughout the Company’s markets in central west Texas, the Dallas-Fort Worth metroplex and southeast Texas with less than 1% of properties located outside of the state. The largest concentrations in the CRE portfolio as to type are industrial/warehouse at approximately 13.44% and multifamily at approximately 7.78% as of September 30, 2024. All additional property type categories are 6% or less of the CRE portfolio. Credit underwriting standards are periodically reviewed and adjusted based upon observations from our ongoing monitoring of economic conditions in our lending areas. In response to the current interest rate environment and increases in benchmark rates, the Company has enhanced stress testing and loan review activities to mitigate interest rate reset risk with a specific emphasis on borrowers’ abilities to absorb the impact of higher interest rates on loans.

Previous wording

Of the $4.39 billion of variable interest rate loans shown above, loans totaling $1.82 billion mature or reprice over the next twelve months. Of this amount, approximately $1.49 billion will reprice immediately upon changes in the underlying index rate (primarily U.S. prime rate) with the remaining $329.70 million being subject to floors above or ceilings below the current index.

Current wording

Of the $4.52 billion of variable interest rate loans shown above, loans totaling $1.92 billion mature or reprice over the next twelve months. Of this amount, approximately $1.51 billion will reprice immediately upon changes in the underlying index rate (primarily U.S. prime rate) with the remaining $410.16 million being subject to floors above or ceilings below the current index.

Previous wording

Asset Quality. Our loan portfolio is subject to periodic reviews by our centralized independent loan review group as well as periodic examinations by bank regulatory agencies. Loans are placed on nonaccrual status when, in the judgment of management, the collectability of principal or interest under the original terms becomes doubtful. Nonaccrual, past due 90 days or more and still accruing, and foreclosed assets were $61.19 million at June 30, 2024, as compared to $29.25 million at June 30, 2023 and $35.10 million at December 31, 2023. As a percent of loans held-for-investment and foreclosed assets, these assets were 0.81% at June 30, 2024, 0.43% at June 30, 2023, and 0.49% at December 31, 2023. As a percent of total assets, these assets were 0.46% at June 30, 2024, as compared to 0.23% at June 30, 2023 and 0.27% at December 31, 2023, respectively. We believe the level of these assets to be manageable and are not aware of any material classified credits not properly disclosed as nonperforming at June 30, 2024.

Current wording

Asset Quality. Our loan portfolio is subject to periodic reviews by our centralized independent loan review group as well as periodic examinations by bank regulatory agencies. Loans are placed on nonaccrual status when, in the judgment of management, the collectability of principal or interest under the original terms becomes doubtful. Nonaccrual, past due 90 days or more and still accruing, and foreclosed assets were $64.42 million at September 30, 2024, as compared to $39.70 million at September 30, 2023 and $35.10 million at December 31, 2023. As a percent of loans held-for-investment and foreclosed assets, these assets were 0.83% at September 30, 2024, 0.57% at September 30, 2023, and 0.49% at December 31, 2023. As a percent of total assets, these assets were 0.47% at September 30, 2024, as compared to 0.31% at September 30, 2023 and 0.27% at December 31, 2023, respectively. We believe the level of these assets to be manageable and are not aware of any material classified credits not properly disclosed as nonperforming at September 30, 2024.

Previous wording

The provision for loan losses of $5.91 million for the three-months ended June 30, 2024 is combined with the reversal of provision for unfunded commitments of $22 thousand and reported in the net aggregate of $5.89 million under the provision for credit losses in the consolidated statements of earnings for the three-months ended June 30, 2024. The provision for loan losses of $7.17 million for the six-months ended June 30, 2024 is combined with the reversal of provision for unfunded commitments of $470 thousand and reported in the net aggregate of $6.70 million under the provision for credit losses on the consolidated statements of earnings for the six-months ended June 30, 2024.

Current wording

The provision for loan losses of $5.55 million for the three-months ended September 30, 2024 is combined with the provision for unfunded commitments of $571 thousand and reported in the net aggregate of $6.12 million under the provision for credit losses in the consolidated statements of earnings for the three-months ended September 30, 2024. The provision for loan losses of $12.72 million for the nine-months ended September 30, 2024 is combined with the provision for unfunded commitments of $101 thousand and reported in the net aggregate of $12.82 million under the provision for credit losses on the consolidated statements of earnings for the nine-months ended September 30, 2024.

Previous wording

The provision for loan losses of $6.52 million for the three-months ended June 30, 2023 is combined with the reversal of provision for unfunded commitments of $949 thousand and reported in the aggregate of $5.57 million under the provision for credit losses in the consolidated statements of earnings for the three-months ended June 30, 2023. The provision for loan losses of $11.23 million for the six-months ended June 30, 2023 is combined with the reversal of provision for unfunded commitments of $2.88 million and reported in the net aggregate of $8.35 million under the provision for credit losses in the consolidated statements of earnings for the six-months ended June 30, 2023.

Current wording

The provision for loan losses of $3.82 million for the three-months ended September 30, 2023 is combined with the reversal of provision for unfunded commitments of $1.55 million and reported in the aggregate of $2.28 million under the provision for credit losses in the consolidated statements of earnings for the three-months ended September 30, 2023. The provision for loan losses of $15.05 million for the nine-months ended September 30, 2023 is combined with the reversal of provision for unfunded commitments of $4.42 million and reported in the net aggregate of $10.63 million under the provision for credit losses in the consolidated statements of earnings for the nine-months ended September 30, 2023.

Previous wording

As a percent of average loans, net loan charge-offs were 0.02% for the second quarter of 2024, as compared to net loan charge-offs of 0.05% for the second quarter of 2023. As a percent of average loans, net loan charge-offs were 0.02% for the first six months of 2024, as compared to net loan charge-offs of 0.02% for the first six months of 2023. The allowance for credit losses as a percent of loans held-for-investment was 1.27% as of June 30, 2024, as compared to 1.28% as of June 30, 2023 and 1.24% as of December 31, 2023, respectively.

Current wording

As a percent of average loans, net loan charge-offs were 0.04% for the third quarter of 2024, as compared to net loan charge-offs of 0.04% for the third quarter of 2023. As a percent of average loans, net loan charge-offs were 0.03% for the first nine months of 2024, as compared to net loan charge-offs of 0.02% for the first nine months of 2023. The allowance for credit losses as a percent of loans held-for-investment was 1.29% as of September 30, 2024, as compared to 1.28% as of September 30, 2023 and 1.24% as of December 31, 2023, respectively.

Previous wording

Interest-Bearing Demand Deposits in Banks. The Company had interest-bearing deposits in banks of $103.32 million at June 30, 2024 compared to $23.84 million at June 30, 2023 and $255.24 million at December 31, 2023, respectively. At June 30, 2024, interest-bearing deposits in banks included $87.79 million maintained at the Federal Reserve Bank of Dallas and $15.52 million on deposit with the FHLB.

Current wording

Interest-Bearing Demand Deposits in Banks. The Company had interest-bearing deposits in banks of $287.48 million at September 30, 2024 compared to $180.01 million at September 30, 2023 and $255.24 million at December 31, 2023, respectively. At September 30, 2024, interest-bearing deposits in banks included $273.63 million maintained at the Federal Reserve Bank of Dallas and $13.85 million on deposit with the FHLB.

Previous wording

Available-for-Sale Securities. At June 30, 2024, securities with a fair value of $4.57 billion were classified as securities available-for-sale. As compared to December 31, 2023, the available-for-sale portfolio at June 30, 2024 reflected (i) a decrease of $140.26 million in U.S. Treasury securities, (ii) a decrease of $51.78 million in obligations of states and political subdivisions, (iii) an increase of $17.69 million in mortgage-backed securities, and (iv) an increase of $14.61 million in corporate bonds and other securities. Fluctuations in the available-for-sale securities portfolio balances were primarily driven by calls and maturities, and changes in unrealized losses during the first six months of 2024. Our mortgage related securities are backed by GNMA, FNMA or FHLMC, or are collateralized by securities backed by these agencies.

Current wording

Available-for-Sale Securities. At September 30, 2024, securities with a fair value of $4.61 billion were classified as securities available-for-sale. As compared to December 31, 2023, the available-for-sale portfolio at September 30, 2024 reflected (i) a decrease of $189.22 million in U.S. Treasury securities, (ii) a decrease of $25.67 million in obligations of states and political subdivisions, (iii) an increase of $92.35 million in mortgage-backed securities, and (iv) an increase of $2.08 million in corporate bonds and other securities. Fluctuations in the available-for-sale securities portfolio balances were primarily driven by calls and maturities, and changes in unrealized losses during the first nine months of 2024. Our mortgage related securities are backed by GNMA, FNMA or FHLMC, or are collateralized by securities backed by these agencies.

Previous wording

As of June 30, 2024, the investment portfolio had an overall tax equivalent yield of 2.37%, a weighted average life of 7.22 and modified duration of 5.95 years.

Current wording

As of September 30, 2024, the investment portfolio had an overall tax equivalent yield of 2.43%, a weighted average life of 6.28 and modified duration of 5.36 years.

Previous wording

Deposits. Deposits held by our subsidiary bank represent our primary source of funding. Total deposits were $11.41 billion as of June 30, 2024, as compared to $10.81 billion as of June 30, 2023 and $11.14 billion as of December 31, 2023.

Current wording

Deposits. Deposits held by our subsidiary bank represent our primary source of funding. Total deposits were $11.76 billion as of September 30, 2024, as compared to $10.72 billion as of September 30, 2023 and $11.14 billion as of December 31, 2023.

Previous wording

Table 9 provides a breakdown of average deposits and rates paid over the three and six month periods ended June 30, 2024 and 2023, respectively.

Current wording

Table 9 provides a breakdown of average deposits and rates paid over the three and nine month periods ended September 30, 2024 and 2023, respectively.

Previous wording

The estimated amount of uninsured and uncollateralized deposits including related accrued and unpaid interest is approximately $5.26 billion as of June 30, 2024.

Current wording

The estimated amount of uninsured and uncollateralized deposits including related accrued and unpaid interest is approximately $5.35 billion as of September 30, 2024.

Previous wording

Borrowings. Included in borrowings were federal funds purchased, advances from the FHLB and other borrowings of $23.70 million, $28.18 million and $22.15 million at June 30, 2024 and 2023, and December 31, 2023, respectively. The average balance of federal funds purchased, advances from the FHLB and other borrowings were $22.93 million and $145.00 million in the second quarters of 2024 and 2023, respectively. The weighted average interest rates paid on these borrowings were 1.60% and 4.32% for the second quarters of 2024 and 2023, respectively. The average balance of federal funds purchased, advances from the FHLB and other borrowings were $77.95 million and $96.68 million in the first six months of 2024 and 2023, respectively. The weighted average interest rates paid on these borrowings were 3.95% and 4.02% for the first six months of 2024 and 2023, respectively.

Current wording

Borrowings. Included in borrowings were federal funds purchased, advances from the FHLB and other borrowings of $25.98 million, $129.75 million and $22.15 million at September 30, 2024 and 2023, and December 31, 2023, respectively. The average balance of federal funds purchased, advances from the FHLB and other borrowings were $24.67 million and $54.12 million in the third quarters of 2024 and 2023, respectively. The weighted average interest rates paid on these borrowings were 1.87% and 3.80% for the third quarters of 2024 and 2023, respectively. The average balance of federal funds purchased, advances from the FHLB and other borrowings were $60.06 million and $82.34 million in the first nine months of 2024 and 2023, respectively. The weighted average interest rates paid on these borrowings were 3.66% and 3.97% for the first nine months of 2024 and 2023, respectively.

Previous wording

Repurchase Agreements. Securities sold under repurchase agreements of $138.95 million, $559.48 million and $381.93 million at June 30, 2024 and 2023, and December 31, 2023, respectively. Securities sold under repurchase agreements are generally with significant customers of the Company that require short-term liquidity for their funds for which we pledge certain securities that have a fair value equal to at least the amount of the short-term borrowings. The average balances of securities sold under repurchase agreements were $212.59 million and $570.07 million for the second quarters of 2024 and 2023, respectively. The average rates paid on securities sold under repurchase agreements were 3.59% and 2.78% for the second quarters of 2024 and 2023, respectively. The average balances of securities sold under repurchase agreements were $265.01 million and $573.67 million for the first six months of 2024 and 2023, respectively. The average rates paid on securities sold under repurchase agreements were 3.38% and 2.46% for the first six months of 2024 and 2023, respectively. The average balances of securities sold under repurchase agreements has decreased from the prior year as customers have moved funds to IntraFi deposit accounts.

Current wording

Repurchase Agreements. Securities sold under repurchase agreements of $57.56 million, $621.79 million and $381.93 million at September 30, 2024 and 2023, and December 31, 2023, respectively. Securities sold under repurchase agreements are generally with significant customers of the Company that require short-term liquidity for their funds for which we pledge certain securities that have a fair value equal to at least the amount of the short-term borrowings. The average balances of securities sold under repurchase agreements were $100.89 million and $567.06 million for the third quarters of 2024 and 2023, respectively. The average rates paid on securities sold under repurchase agreements were 2.92% and 3.16% for the third quarters of 2024 and 2023, respectively. The average balances of securities sold under repurchase agreements were $209.91 million and $571.45 million for the first nine months of 2024 and 2023, respectively. The average rates paid on securities sold under repurchase agreements were 3.31% and 2.69% for the first nine months of 2024 and 2023, respectively. The average balances of securities sold under repurchase agreements has decreased from the prior year as customers have moved funds to IntraFi deposit accounts.

Previous wording

The fair value of our investment securities classified as available-for-sale totaled $4.57 billion at June 30, 2024. During the six months ended June 30, 2024, the corresponding unrealized loss before taxes on the portfolio of $510.92 million at December 31, 2023, changed to an unrealized loss before taxes of $559.43 million at June 30, 2024, which is recorded net of taxes in accumulated other comprehensive earnings (loss) in shareholders' equity. The unrealized gains or losses, net of taxes, on the portfolio are excluded from the calculation of all regulatory capital ratios. The changes in the fair value were driven by changes in interest rates based on expected actions by the Federal Reserve Board and other market conditions. The overall valuation of the portfolio is most correlated to the 5-year U.S. Treasury rates based on the composition and duration of the portfolio. At June 30, 2024, the 5-year U.S. Treasury rate was 4.33% compared to 3.84% at December 31, 2023, representing a 49 basis point increase during the first six months of 2024. As of June 30, 2024, an increase of 100 basis points in the 5-year U.S. Treasury rate would result in an increase to unrealized losses by approximately $228 million before taxes, while a 100 basis point decrease in the same rate would result in a decrease to unrealized losses by approximately $189 million before taxes. We believe that we have the ability to hold these securities based on our overall liquidity and intent to hold the portfolio.

Current wording

The fair value of our investment securities classified as available-for-sale totaled $4.61 billion at September 30, 2024. During the nine months ended September 30, 2024, the corresponding unrealized loss before taxes on the portfolio of $510.92 million at December 31, 2023, changed to an unrealized loss before taxes of $417.83 million at September 30, 2024, which is recorded net of taxes in accumulated other comprehensive earnings (loss) in shareholders' equity. The unrealized gains or losses, net of taxes, on the portfolio are excluded from the calculation of all regulatory capital ratios. The changes in the fair value were driven by changes in interest rates based on expected actions by the Federal Reserve Board and other market conditions. The overall valuation of the portfolio is most correlated to the 5-year U.S. Treasury rates based on the composition and duration of the portfolio. At September 30, 2024, the 5-year U.S. Treasury rate was 3.57% compared to 3.84% at December 31, 2023, representing a 27 basis point decrease during the first nine months of 2024. As of September 30, 2024, an increase of 100 basis points in the 5-year U.S. Treasury rate would result in an increase to unrealized losses by approximately $218 thousand before taxes, while a 100 basis point decrease in the same rate would result in a decrease to unrealized losses by approximately $183 thousand before taxes. We believe that we have the ability to hold these securities based on our overall liquidity and intent to hold the portfolio.

Previous wording

Total shareholders’ equity was $1.52 billion, or 11.54% of total assets at June 30, 2024, as compared to $1.37 billion, or 10.66% of total assets at June 30, 2023, and $1.50 billion, or 11.44% of total assets at December 31, 2023. Included in shareholders' equity at June 30, 2024, and 2023, and December 31, 2023 were $441.56 million, $490.28 million and $403.30 million, respectively, in unrealized losses on investment securities available-for-sale, net of related income taxes, although such amount is excluded from and does not impact regulatory capital. For the second quarter of 2024, total shareholders’ equity averaged $1.46 billion, or 11.18% of average assets, as compared to $1.37 billion, or 10.63% of average assets, during the same period in 2023. For the first six months of 2024, total shareholders' equity averaged $1.48 billion, or 11.22% of average assets, as compared to $1.34 billion, or 10.37% of average assets, during the same period in 2023.

Current wording

Total shareholders’ equity was $1.66 billion, or 12.24% of total assets at September 30, 2024, as compared to $1.24 billion, or 9.71% of total assets at September 30, 2023, and $1.50 billion, or 11.44% of total assets at December 31, 2023. Included in shareholders' equity at September 30, 2024, and 2023, and December 31, 2023 were $329.82 million, $639.93 million and $403.30 million, respectively, in unrealized losses on investment securities available-for-sale, net of related income taxes, although such amount is excluded from and does not impact regulatory capital. For the third quarter of 2024, total shareholders’ equity averaged $1.57 billion, or 11.83% of average assets, as compared to $1.36 billion, or 10.58% of average assets, during the same period in 2023. For the first nine months of 2024, total shareholders' equity averaged $1.51 billion, or 11.42% of average assets, as compared to $1.34 billion, or 10.44% of average assets, during the same period in 2023.

Previous wording

As of June 30, 2024 and 2023, and December 31, 2023, we had a total risk-based capital ratio of 19.55%, 19.62% and 19.62%, a Tier 1 capital to risk-weighted assets ratio of 18.42%, 18.48% and 18.50%, a common equity Tier 1 to risk-weighted assets ratio of 18.42%, 18.48% and 18.50% and a Tier 1 leverage ratio of 12.40%, 11.81% and 12.06%, respectively. The regulatory capital ratios as of June 30, 2024 and 2023, and December 31, 2023 were calculated under Basel III rules.

Current wording

As of September 30, 2024 and 2023, and December 31, 2023, we had a total risk-based capital ratio of 20.03%, 19.49% and 19.62%, a Tier 1 capital to risk-weighted assets ratio of 18.83%, 18.35% and 18.50%, a common equity Tier 1 to risk-weighted assets ratio of 18.83%, 18.35% and 18.50% and a Tier 1 leverage ratio of 12.53%, 12.00% and 12.06%, respectively. The regulatory capital ratios as of September 30, 2024 and 2023, and December 31, 2023 were calculated under Basel III rules.

Previous wording

Liquidity. Liquidity is our ability to meet cash demands as they arise. Such needs can develop from loan demand, deposit withdrawals or acquisition opportunities. Potential obligations resulting from the issuance of standby letters of credit and commitments to fund future borrowings to our loan customers are other factors affecting our liquidity needs. Many of these obligations and commitments are expected to expire without being drawn upon; therefore, the total commitment amounts do not necessarily represent future cash requirements affecting our liquidity position. The potential need for liquidity arising from these types of financial instruments is represented by the contractual notional amount of the instrument. Asset liquidity is provided by cash and assets which are readily marketable, or which will mature in the near future. Liquid assets include cash, federal funds sold, and short-term investments in time deposits in banks. Liquidity is also provided by access to funding sources, which include core depositors and correspondent banks that maintain accounts with and sell federal funds to our subsidiary bank. Other sources of funds include our ability to borrow from short-term sources, such as purchasing federal funds from correspondent banks, sales of securities under agreements to repurchase and other borrowings (see below) and an unfunded $25.00 million revolving line of credit established with Frost Bank, a nonaffiliated bank, which matures on June 30, 2025 (see next paragraph). Our subsidiary bank also has federal funds purchased lines of credit with two non-affiliated banks totaling $130.00 million. At June 30, 2024, there were no amounts drawn on these lines of credit. Our subsidiary bank also has (i) an available line of credit with the FHLB totaling $2.03 billion at June 30, 2024, secured by portions of our loan portfolio and certain investment securities, and (ii) access to the Federal Reserve Bank of Dallas lending program secured by portions of certain investment securities. At June 30, 2024, there was $786.50 million used on the FHLB line advance for undisbursed commitments (letters of credit) used to secure public funds.

Current wording

Liquidity. Liquidity is our ability to meet cash demands as they arise. Such needs can develop from loan demand, deposit withdrawals or acquisition opportunities. Potential obligations resulting from the issuance of standby letters of credit and commitments to fund future borrowings to our loan customers are other factors affecting our liquidity needs. Many of these obligations and commitments are expected to expire without being drawn upon; therefore, the total commitment amounts do not necessarily represent future cash requirements affecting our liquidity position. The potential need for liquidity arising from these types of financial instruments is represented by the contractual notional amount of the instrument. Asset liquidity is provided by cash and assets which are readily marketable, or which will mature in the near future. Liquid assets include cash, federal funds sold, and short-term investments in time deposits in banks. Liquidity is also provided by access to funding sources, which include core depositors and correspondent banks that maintain accounts with and sell federal funds to our subsidiary bank. Other sources of funds include our ability to borrow from short-term sources, such as purchasing federal funds from correspondent banks, sales of securities under agreements to repurchase and other borrowings (see below) and an unfunded $25.00 million revolving line of credit established with Frost Bank, a nonaffiliated bank, which matures on June 30, 2025 (see next paragraph). Our subsidiary bank also has federal funds purchased lines of credit with two non-affiliated banks totaling $130.00 million. At September 30, 2024, there were no amounts drawn on these lines of credit. Our subsidiary bank also has (i) an available line of credit with the FHLB totaling $2.20 billion at September 30, 2024, secured by portions of our loan portfolio and certain investment securities, and (ii) access to the Federal Reserve Bank of Dallas lending program secured by portions of certain investment securities. At September 30, 2024, there was $641.50 million used on the FHLB line advance for undisbursed commitments (letters of credit) used to secure public funds.

Previous wording

In addition, we anticipate that future acquisitions of financial institutions, expansion of branch locations or offerings of new products could also place a demand on our cash resources. Available cash and cash equivalents at our parent company which totaled $119.16 million at June 30, 2024, investment securities which totaled $2.14 million at June 30, 2024 and mature over 6 to 7 years, available dividends from our subsidiaries which totaled $331.64 million at June 30, 2024, utilization of available lines of credit, and future debt or equity offerings are expected to be the source of funding for these potential acquisitions or expansions.

Current wording

In addition, we anticipate that future acquisitions of financial institutions, expansion of branch locations or offerings of new products could also place a demand on our cash resources. Available cash and cash equivalents at our parent company which totaled $107.32 million at September 30, 2024, investment securities which totaled $2.16 million at September 30, 2024 and mature over 5 to 6 years, available dividends from our subsidiaries which totaled $375.30 million at September 30, 2024, utilization of available lines of credit, and future debt or equity offerings are expected to be the source of funding for these potential acquisitions or expansions.

Previous wording

Off-Balance Sheet (“OBS”)/Reserve for Unfunded Commitments. We are a party to financial instruments with OBS risk in the normal course of business to meet the financing needs of our customers. These financial instruments include unfunded lines of credit, commitments to extend credit and federal funds sold to correspondent banks and standby letters of credit. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in our consolidated balance sheets. At June 30, 2024, the Company’s reserve for unfunded commitments totaled $7.43 million which is recorded in other liabilities.

Current wording

Off-Balance Sheet (“OBS”)/Reserve for Unfunded Commitments. We are a party to financial instruments with OBS risk in the normal course of business to meet the financing needs of our customers. These financial instruments include unfunded lines of credit, commitments to extend credit and federal funds sold to correspondent banks and standby letters of credit. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in our consolidated balance sheets. At September 30, 2024, the Company’s reserve for unfunded commitments totaled $8.00 million which is recorded in other liabilities.

Previous wording

We believe we have no other OBS arrangements or transactions with unconsolidated, special purpose entities that would expose us to liability that is not reflected on the face of the financial statements. The above table does not include balances related to the Company’s IRLC and forward mortgage-backed security trades. Total commercial commitments were $2.20 billion at June 30, 2024, compared to $2.02 billion at June 30, 2023, and $1.92 billion at December 31, 2023.

Current wording

We believe we have no other OBS arrangements or transactions with unconsolidated, special purpose entities that would expose us to liability that is not reflected on the face of the financial statements. The above table does not include balances related to the Company’s IRLC and forward mortgage-backed security trades. Total commercial commitments were $2.09 billion at September 30, 2024, compared to $1.98 billion at September 30, 2023, and $1.92 billion at December 31, 2023.

Previous wording

Parent Company Funding. Our ability to fund various operating expenses, dividends, and cash acquisitions is generally dependent on our own earnings (without giving effect to our subsidiaries), cash reserves and funds derived from our subsidiaries. These funds historically have been produced by intercompany dividends and management fees that are limited to reimbursement of actual expenses. We anticipate that our recurring cash sources will continue to include dividends and management fees from our subsidiaries. At June 30, 2024, $331.64 million was available for the payment of intercompany dividends by our subsidiaries without the prior approval of regulatory agencies. Our subsidiaries paid aggregate dividends of $25.50 million and $64.00 million for the six-months ended June 30, 2024 and 2023, respectively.

Current wording

Parent Company Funding. Our ability to fund various operating expenses, dividends, and cash acquisitions is generally dependent on our own earnings (without giving effect to our subsidiaries), cash reserves and funds derived from our subsidiaries. These funds historically have been produced by intercompany dividends and management fees that are limited to reimbursement of actual expenses. We anticipate that our recurring cash sources will continue to include dividends and management fees from our subsidiaries. At September 30, 2024, $375.30 million was available for the payment of intercompany dividends by our subsidiaries without the prior approval of regulatory agencies. Our subsidiaries paid aggregate dividends of $40.50 million and $97.50 million for the nine-months ended September 30, 2024 and 2023, respectively.