HANCOCK WHITNEY CORP

Previous wording

The objective of this discussion and analysis is to provide material information relevant to the assessment of the financial condition and results of operations of Hancock Whitney Corporation and its subsidiaries during the six months ended June 30, 2024 and selected comparable prior periods, including an evaluation of the amounts and certainty of cash flows from operations and outside sources. This discussion and analysis is intended to highlight and supplement financial and operating data and information presented elsewhere in this report, including the consolidated financial statements and related notes. The discussion contains forward-looking statements within the meaning and protections of section 27A of the Securities Act of 1933, as amended, and section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are subject to risks and uncertainties. Should one or more of these risks or uncertainties materialize, our actual results may differ from those expressed or implied by the forward-looking statements. Important factors that could cause actual results to differ materially from the forward-looking statements we make in this Quarterly Report on Form 10-Q and in other reports or documents that we file from time to time with the SEC include, but are not limited to, the following:

Current wording

The objective of this discussion and analysis is to provide material information relevant to the assessment of the financial condition and results of operations of Hancock Whitney Corporation and its subsidiaries during the nine months ended September 30, 2024 and selected comparable prior periods, including an evaluation of the amounts and certainty of cash flows from operations and outside sources. This discussion and analysis is intended to highlight and supplement financial and operating data and information presented elsewhere in this report, including the consolidated financial statements and related notes. The discussion contains forward-looking statements within the meaning and protections of section 27A of the Securities Act of 1933, as amended, and section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are subject to risks and uncertainties. Should one or more of these risks or uncertainties materialize, our actual results may differ from those expressed or implied by the forward-looking statements. Important factors that could cause actual results to differ materially from the forward-looking statements we make in this Quarterly Report on Form 10-Q and in other reports or documents that we file from time to time with the SEC include, but are not limited to, the following:

Previous wording

changes in interest rates, including actions taken by the Federal Reserve Board and the impact of prolonged elevated interest rates on our financial projections, models and guidance;

Current wording

changes in interest rates, including actions taken by the Federal Reserve Board and the impact of fluctuations in interest rates on our financial projections, models and guidance;

Previous wording

risks related to the ability of our operational framework to manage risks associated with our business such as credit risk and operation risk, including third-party vendors and other service providers, which could among other things, result in a breach of operating or security systems as a result of a cyber-attack or similar acts;

Current wording

risks related to the ability of our operational framework to manage risks associated with our business such as credit risk and operation risk, including third-party vendors and other service providers, which could among other things, result in a material breach of operating or security systems as a result of a cyber-attack or similar acts;

Previous wording

our ability to identify and address potential cybersecurity risks, which may be exacerbated by recent developments in generative artificial intelligence, on our systems and/or third party vendors and service providers on which we rely, a failure of which could disrupt our business and result in the disclosure of and/or misuse or misappropriation of confidential or proprietary information, disruption or damage to our systems, increased costs, losses, or adverse effects to our reputation;

Current wording

our ability to identify and address potential cybersecurity risks, which may be exacerbated by recent developments in generative artificial intelligence, on our systems and/or third party vendors and service providers on which we rely, a material failure of which could disrupt our business and result in the disclosure of and/or misuse or misappropriation of confidential or proprietary information, disruption or damage to our systems, increased costs, losses, or adverse effects to our reputation;

Previous wording

Persistent inflation and the Federal Reserve's response to such remain in the forefront of the economic landscape. Thus far, the Federal Reserve has been successful in tempering inflation without precipitating a recession. Headline and core (excluding food and energy) inflation have receded considerably below the 40-year highs experienced in 2022, although at 3% and 3.3%, respectively, in June 2024, both remain above the Federal Reserve's target rate of 2%. Second quarter 2024 gross domestic product (GDP) was 2.8% on an annual basis. The labor market remains strong, but has softened, with the unemployment rate at 4.1% in June 2024, up from 3.8% in March 2024 and 3.6% a year earlier. Amid continued strong economic indicators and sustained disparity between the core inflation rate and the Federal Reserve's target rate, the Federal Reserve's benchmark interest rates has remained elevated for longer than originally anticipated. The Federal Reserve signaled in its July 2024 meeting that they will be attentive to both sides of their dual mandate of maximum employment and stable prices, leaving the door open for rate cuts as early as September 2024, depending on continued progress with economic indicators. While the continued strong pace of consumer spending and the strength of the labor market may help prevent or reduce the severity of a potential recession, the prolonged period of elevated interest rates and uncertainty surrounding the Federal Reserve's future actions with respect to monetary policy may adversely affect capital markets and could result in below-trend economic growth. Economic trends may be further influenced by factors outside of inflation, such continued pressure on the commercial real estate sector, uncertainty surrounding the upcoming U.S. presidential election, and ongoing geopolitical conflict.

Current wording

The Federal Reserve signaled in its July 2024 meeting that it will be attentive to both sides of a dual mandate of maximum employment and stable prices and cut the benchmark interest rate by 50 basis points in September, indicating a shift in focus to maintenance of a strong labor market. Inflation remains a key driver of economic conditions and monetary policy, with headline and core (excluding food and energy) inflation at an annual rate of 2.4% and 3.3%, respectively, in September 2024, still above the Federal Reserve's target inflation rate of 2.0%. The labor market has shown signs of weakening in recent months, with the unemployment rate rising to a nearly three-year high of 4.3% in July 2024. Despite the migration in employment statistics, the relative health of the labor market remains solid, with wage growth and a reduction in the unemployment rate to 4.1% in September, serving as positive economic indicators. Consumer spending remains robust, leading to healthy Gross Domestic Product (GDP) growth of 2.8% on an annualized basis in the third quarter of 2024. U.S. economic activity has remained resilient through substantial burden in recent years, where a continuation of strong consumer spending, the overall health of the labor market and the most recent and anticipated future interest rate cuts may help prevent or reduce the severity of a potential recession in the near-term. However, ongoing price pressures, some volatility in labor markets and uncertainty surrounding the Federal Reserve's future actions with respect to monetary policy may adversely affect capital markets and could result in below-trend economic growth. Economic trends may be further influenced by factors outside of inflation, such as continued pressure on the commercial real estate sector, uncertainty surrounding the impact of change in presidential administration, and ongoing geopolitical conflicts.

Previous wording

Within the financial services industry, institutions continue to grapple with both macroeconomic and industry-specific headwinds. The elevated interest rate environment and heightened competition for deposits has fostered a continued shift within deposit composition toward higher cost products, although the pace of movement has continued to slow, allowing deposit costs to stabilize. The interest rate environment has also steadily affected the affordability of credit to consumers and businesses, moderating loan demand. At the same time, economic uncertainty and industry turmoil have prompted financial institutions to tighten credit standards. Many financial institutions, including ours, have also experienced some degree of deterioration in credit quality metrics from the mostly-benign credit environment experienced during the last three years.

Current wording

Within the financial services sector, institutions continue to contend with industry-specific headwinds. The elevated interest rate environment and heightened competition for deposits has fostered a shift within deposit composition toward higher cost products, although the pace of movement has continued to slow, allowing deposit costs to stabilize. The interest rate environment has also steadily affected the affordability of credit to consumers and businesses, moderating loan demand. At the same time, economic uncertainty and industry turmoil have prompted financial institutions to tighten credit standards. Many financial institutions, including ours, have also experienced some degree of deterioration in credit quality metrics from the mostly-benign credit environment experienced during the majority of the last three years.

Previous wording

Within our markets, loan growth remains tempered in response to heightened interest rates and increased insurance costs. Further, we continue to focus on full-service relationships. However, interest rates on new, renewed and repricing variable rate loans continue to result in higher yields on earning assets and, coupled with stabilization in funding costs, has contributed to net interest margin expansion.

Current wording

Within our markets, loan growth remains tempered in response to heightened interest rates and increased insurance costs. Further, we have continued to reduce exposure to syndicated credits as we focus on full-service relationships. However, interest rates on new, renewed and repricing variable rate loans continue to result in higher yields on earning assets that, coupled with stabilization in funding costs, has contributed to net interest margin expansion during the quarter.

Previous wording

Management applied a weighting of 40% to the baseline and 60% to the mild recessionary S-2 scenario in the computation of the allowance for credit losses at June 30, 2024, consistent with the scenarios and respective weighting used at March 31, 2024. Our overall credit loss outlook has not changed significantly, and we continue to believe a mild recession is reasonably possible due to uncertainty in current economic conditions.

Current wording

Management applied a weighting of 40% to the baseline and 60% to the mild recessionary S-2 scenario in the computation of the allowance for credit losses at September 30, 2024, consistent with the scenarios and respective weighting used at June 30, 2024. Our overall credit loss outlook has not changed significantly, and we continue to believe slower near-term growth or a mild recession is reasonably possible due to uncertainty in current economic conditions.

Previous wording

The baseline scenario continues to incorporate the belief that the Federal Reserve will accomplish its goal of bringing inflation to or below its target without precipitating a recession. Key assumptions within the June 2024 baseline forecast include the following: (1) the Federal Funds rate has reached its terminal value in the rate hiking cycle, with rate cuts of 25 basis points in September and December 2024, with subsequent rate cuts occurring until the benchmark rate reaches 3% in 2027; (2) while there has been softening in the labor market, the economy is at full-employment, and the unemployment rate will remain near its current level of 4% in the coming years; (3) GDP will display modest annual growth of 2.4% in 2024, 1.8% in 2025, and 1.9% in 2026; and (4) the 10-year U.S. Treasury yield will average 4.5% in the second quarter of 2024, and will approach its equilibrium level of 4% in 2025 and remain near this level through the end of the decade.

Current wording

The baseline scenario continues to incorporate the belief that the Federal Reserve will bring inflation at or near its target rate of 2.0% without precipitating a recession. Key assumptions within the September 2024 baseline forecast include the following: (1) the Federal Reserve will make 25-basis point cuts to its benchmark interest rate in both September and December 2024, with subsequent cuts occurring until the benchmark rate reaches 3.0% in 2027; (2) the economy is at near full-employment, and the unemployment rate will remain near its current level of 4% in the coming years; (3) GDP will display modest annual growth of 2.6% in 2024, 2.1% in 2025, and 2.0% in 2026; and (4) the 10-year U.S. Treasury yield will average 4.2% in 2024, and will remain near this level through the end of the decade.

Previous wording

The S-2 scenario presents a downside alternative to the baseline. Compared to baseline, the S-2 scenario assumes that elevated interest rates weaken credit-sensitive spending more than anticipated, geopolitical conflict will create longer and farther-reaching disturbance, and continued disruption in the financial services industry will lead to additional tightening of credit standards. Further, the scenario assumes the unemployment rate will increase considerably to 4.6% in 2024 and 6.4% in 2025 before improving to 4.4% in 2026 and 4.0% in 2027. As the economy weakens, the Federal Reserve commences rate cuts in the third quarter of 2024, deeper than those assumed in the baseline. As a result of these pressures, the U.S. falls into a mild recession beginning in the third quarter of 2024 that lasts for three quarters, with the stock market contracting 22% and a peak-to-trough decline in GDP of 1%.

Current wording

The S-2 scenario presents a downside alternative to the baseline. Compared to baseline, the S-2 scenario assumes that elevated interest rates weaken credit-sensitive spending more than anticipated, fiscal disputes in Congress lead to declines in business and consumer sentiment, geopolitical conflicts will create longer and farther-reaching disturbances, and continued disruption in the financial services industry will lead to additional tightening of credit standards. Further, the scenario assumes the unemployment rate will increase considerably to 6.7% in 2025 before improving to 4.9% in 2026 and 4.0% in 2027. As the economy weakens, the Federal Reserve commences rate cuts in the third quarter of 2024, deeper than those assumed in the baseline. As a result of these pressures, the U.S. falls into a mild recession beginning in the fourth quarter of 2024 that lasts for three quarters, with the stock market contracting 21% and a peak-to-trough decline in GDP of 1%.

Previous wording

The credit loss outlook for our portfolio as a whole has not changed materially since March 31, 2024. We continue to closely monitor our portfolio for customers that are sensitive to prolonged inflation, the elevated interest rate environment and/or other economic circumstances that may impact credit quality. We expect end-of-period loan balances at December 31, 2024 to be flat or slightly down from the previous year end, reflecting our disciplined loan pricing, the potential for economic slowdown and a focus on lending to resilient borrowers with whom we have a full service relationship.

Current wording

The credit loss outlook for our portfolio as a whole has not changed materially since June 30, 2024. We continue to closely monitor our portfolio for customers that are sensitive to prolonged inflation, the elevated interest rate environment and/or other economic circumstances that may impact credit quality. We expect end-of-period loan balances at December 31, 2024 to be flat or slightly down from the previous year end.

Previous wording

There are a number of uncertainties in the current economic outlook, including the Federal Reserve's actions with respect to monetary policy. The full extent of the impact of these factors, among others, is uncertain and may have a negative impact on the U.S. economy, including the possibility of an economic recession in the near or mid-term.

Current wording

There are a number of uncertainties in the current economic outlook, including the Federal Reserve's actions with respect to monetary policy. The full extent of the impact of these factors, among others, is uncertain and may have a negative impact on the U.S. economy, including the possibility of slower growth or an economic recession in the near or mid-term.

Previous wording

Highlights of the Second Quarter 2024

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Highlights of the Third Quarter 2024

Previous wording

We reported net income for the second quarter of 2024 of $114.6 million, or $1.31 per diluted common share, compared to $108.6 million, or $1.24 per diluted common share, in the first quarter of 2024 and $117.8 million, or $1.35 per diluted common share, in the second quarter of 2023. The first quarter of 2024 includes a charge of $3.8 million, or $0.04 per diluted share after-tax, supplemental disclosure item attributable to a revision of the FDIC special assessment recorded in the prior quarter. There were no supplemental disclosure items in the second quarters of 2024 or 2023.

Current wording

We reported net income for the third quarter of 2024 of $115.6 million, or $1.33 per diluted common share, compared to $114.6 million, or $1.31 per diluted common share, in the second quarter of 2024 and $97.7 million, or $1.12 per diluted common share, in the third quarter of 2023.

Previous wording

Second quarter 2024 results compared to first quarter 2024:

Current wording

Third quarter 2024 results compared to second quarter 2024:

Previous wording

Net income of $114.6 million, or $1.31 per diluted share, up $6.0 million, or $0.07 per diluted share

Current wording

Net income of $115.6 million, or $1.33 per diluted share, up $1.0 million, or $0.02 per diluted share

Previous wording

Adjusted pre-provision net revenue, a non-GAAP measure, totaled $156.4 million, up $3.5 million, or 2%

Current wording

Pre-provision net revenue, a non-GAAP measure, totaled $166.5 million, up $10.1 million, or 6%

Previous wording

Criticized commercial loans and nonaccrual loans continued to normalize from historically low levels; annualized net charge-offs declined to 0.12% compared to 0.15%

Current wording

Criticized commercial loans and nonaccrual loans continued to normalize from the recent benign credit environment; annualized net charge-offs increased to 0.30% compared to 0.12%

Previous wording

Common equity tier 1 ratio of 13.25%, up 60 bps, and tangible common equity ratio of 8.77%, up 16 bps

Current wording

Common equity tier 1 ratio of 13.78%, up 53 bps, and tangible common equity ratio of 9.56%, up 79 bps

Previous wording

Efficiency ratio, a non-GAAP measure, of 56.18%, compared to 56.44%

Current wording

Efficiency ratio, a non-GAAP measure, improved to 54.42%, compared to 56.18%

Previous wording

Net interest income (te) for the second quarter of 2024 was $273.3 million, up $4.3 million, or 2%, compared to the first quarter of 2024, and was $542.3 million for the first six months of 2024, down $22.1 million, or 4%, from the comparable period in 2023.

Current wording

Net interest income (te) for the third quarter of 2024 was $274.5 million, up $1.2 million, or less than 1%, compared to the second quarter of 2024, and was $816.7 million for the first nine months of 2024, down $19.7 million, or 2%, from the comparable period in 2023.

Previous wording

The $4.3 million increase in net interest income (te) compared to the first quarter of 2024 is largely attributable to both higher loan yields and volumes, partially offset by higher levels of short-term borrowings. Interest income (te) was up $5.9 million, largely due to an 8 bp increase in the loan yield, which drove an overall 7 bp increase in the yield on average earning assets. Interest expense was up $1.6 million, largely due to a $354.9 million increase in average short-term borrowings which was partially offset by lower deposit costs. The net interest margin for the second quarter of 2024 was 3.37%, up 5 bps from 3.32% in the first quarter of 2024. The increase in the net interest margin from the prior quarter was largely driven by higher loan yields, higher securities yields, and lower deposit costs, partially offset by an increase in borrowing costs.

Current wording

The $1.2 million increase in net interest income (te) compared to the second quarter of 2024 is largely attributable to an additional accrual day, higher loan and securities yields, and lower rates on borrowings, partially offset by an increase in deposit costs. Interest income (te) was up $1.8 million, primarily due to the additional accrual day, with increases in loan and securities yields more than offset by the decline in average loan balances. Interest expense was up $0.6 million, largely due to the additional accrual day and a net increase of 1 bp in the rate paid on interest-bearing deposits, partially offset by both a decrease in the average balance and rates paid on short-term borrowings. The net interest margin for the third quarter of 2024 was 3.39%, up 2 bps from 3.37% in the second quarter of 2024. The increase in the net interest margin from the prior quarter was largely driven by higher loan yields, higher securities yields, and lower borrowing costs, partially offset by an increase in deposit costs.

Previous wording

The $22.1 million decrease in net interest income (te) for the six months ended June 30, 2024 compared to the same period in 2023 reflects the growth in and prevailing rates on interest-bearing liabilities outpacing those of earning assets. The decline in net interest income (te) includes a $93.7 million increase in interest expense, partially offset by a $71.6 million increase in interest income (te). The increase in interest expense is largely due to a shift in the mix of deposits from noninterest-bearing and low interest-bearing transaction and savings deposits into higher cost products at competitive interest rates, partially offset by a decrease in the cost of borrowings, largely the result of the decrease in average FHLB advances. The increase in interest income (te) was largely driven by the increase in loan yields and loan growth. The net interest margin was down 8 bps from the first six months of 2023, driven largely by the cost of deposits. The rate on interest-bearing liabilities was up 84 bps compared to the first half of 2023, with the rate on interest-bearing deposits up 110 bps. The yield on average earning assets was up 52 bps, primarily driven by a 52 bp improvement in the loan yield.

Current wording

The $19.7 million decrease in net interest income (te) for the nine months ended September 30, 2024 compared to the same period in 2023 reflects the growth in and prevailing rates on interest-bearing liabilities outpacing those of earning assets. The decline in net interest income (te) includes a $104.8 million increase in interest expense, partially offset by an $85.1 million increase in interest income (te). The increase in interest expense is largely due to a shift in the mix of deposits from noninterest-bearing and low interest-bearing transaction and savings deposits into higher cost products at competitive interest rates, partially offset by a decrease in the cost of borrowings, largely the result of the decrease in average FHLB advances. The increase in interest income (te) was largely driven by higher loan yields. The net interest margin for the nine months ended September 30, 2024 was down 1 bp from the comparative period in 2023, driven largely by the increase in cost of deposits outpacing the yield on earning assets. The rate on interest-bearing liabilities was up 63 bps compared to the first nine months of 2023, with the rate on interest-bearing deposits up 82 bps. The yield on average earning assets was up 46 bps, primarily driven by a 43 bp improvement in the loan yield.

Previous wording

Included in interest income is net purchase accounting accretion of $0.8 million, $0.3 million, and $0.7 million for the three months ended June 30, 2024, March 31, 2024, and June 30, 2023, respectively.

Current wording

Included in interest income is net purchase accounting accretion of $0.5 million, $0.8 million, and $0.6 million for the three months ended September 30, 2024, June 30, 2024, and September 30, 2023, respectively.

Previous wording

Included in interest income is net purchase accounting accretion of $1.1 million, and $1.4 million for the six months ended June 30, 2024 and 2023, respectively.

Current wording

Included in interest income is net purchase accounting accretion of $1.6 million and $2.1 million for the nine months ended September 30, 2024 and 2023, respectively.

Previous wording

During the second quarter of 2024, we recorded a provision for credit losses expense of $8.7 million, compared to $13.0 million in the first quarter of 2024. The provision in the second quarter of 2024 included net charge-offs of $7.3 million and a reserve build of $1.4 million, compared to net charge-offs of $9.0 million and a reserve build of $4.0 million in the first quarter of 2024. Lower levels of charge-offs, loan balances and unfunded exposures are the primary drivers of the improvement in provision expense linked quarter. Annualized net charge-offs as a percentage of average loans in the second quarter of 2024 was 0.12%, down from 0.15%, in the first quarter of 2024. The second quarter of 2024 net charge-offs included $4.1 million in the commercial portfolio and $3.3 million in the consumer portfolio, partially offset by net recoveries of $0.1 million in the residential mortgage portfolio. The first quarter of 2024 net charge-offs included $5.3 million in the commercial portfolio and $3.9 million in the consumer portfolio, partially offset by net recoveries of $0.2 million in the residential mortgage portfolio. Net charge-offs in the commercial portfolio for the first quarter of 2024 includes an $8.8 million charge-off on a single commercial real estate - income producing credit and an $11.8 million recovery from a single legacy energy credit.

Current wording

During the third quarter of 2024, we recorded a provision for credit losses expense of $18.6 million, compared to $8.7 million in the second quarter of 2024. The provision in the third quarter of 2024 included net charge-offs of $18.0 million and a reserve build of $0.6 million, compared to net charge-offs of $7.3 million and a reserve build of $1.4 million in the second quarter of 2024. A higher level of net charge-offs was the primary driver of the increase in provision expense linked quarter. Annualized net charge-offs as a percentage of average loans in the second quarter of 2024 was 0.30%, up from 0.12%, in the second quarter of 2024. The third quarter of 2024 net charge-offs included $14.5 million in the commercial portfolio, $3.5 million in the consumer portfolio and less than $0.1 million in the residential mortgage portfolio. The second quarter of 2024 net charge-offs included $4.1 million in the commercial portfolio and $3.3 million in the consumer portfolio, partially offset by net recoveries of $0.1 million in the residential mortgage portfolio.

Previous wording

We recorded a provision for credit losses expense of $21.7 million for the six months ended June 30, 2024, compared to $13.7 million for the same period in 2023. The provision for credit losses in the first six months of 2024 included net charge-offs of $16.3 million and a reserve build of $5.4 million, compared to net charge-offs of $9.1 million and a reserve build of $4.6 million in the same period in 2023. The $8.0 million increase in provision for credit losses compared to the prior year is primarily attributable to normalization in the level of net charge-offs compared to a relatively benign credit environment. Net charge-offs in the first six months of 2024 of $16.3 million, or 0.14% of average loans, is comprised of net charge-offs of $9.4 million in the commercial portfolio and $7.1 million in the consumer portfolio, partially offset by net recoveries of $0.2 million in the residential mortgage portfolio. Net charge-offs in the first six months of 2023 of $9.1 million, or 0.08% of average loans, is comprised of net charge-offs of $4.6 million in the commercial portfolio and $5.0 million in the consumer portfolio, partially offset by net recoveries of $0.5 million in the residential mortgage portfolio.

Current wording

We recorded a provision for credit losses of $40.3 million for the nine months ended September 30, 2024, compared to $42.2 million for the same period in 2023. The provision for credit losses in the first nine months of 2024 included net charge-offs of $34.3 million and a reserve build of $6.0 million, compared to net charge-offs of $47.3 million and a reserve release of $5.2 million in the same period in 2023. The provision for credit losses for the nine months ended September 30, 2023 includes a $29.7 million charge-off attributable to a single individually evaluated credit that stemmed from borrower-specific circumstances. Net charge-offs in the first nine months of 2024 of $34.3 million, or 0.19% of average loans, is comprised of net charge-offs of $23.8 million in the commercial portfolio and $10.7 million in the consumer portfolio, partially offset by net recoveries of $0.2 million in the residential mortgage portfolio. Net charge-offs in the first nine months of 2023 of $47.3 million, or 0.27% of average loans, is comprised of net charge-offs of $40.1 million in the commercial portfolio and $8.1 million in the consumer portfolio, partially offset by net recoveries of $0.8 million in the residential mortgage portfolio.

Previous wording

Noninterest income totaled $89.2 million for the second quarter of 2024, up $1.3 million, or 2%, from the first quarter of 2024. The increase in noninterest income from the first quarter of 2024 is primarily attributable to increases in derivative income, trust fees and bank card and ATM fees, partially offset by a decline in investment and annuity fees and gains on sales of assets. For the six months ended June 30, 2024, noninterest income totaled $177.0 million, up $13.5 million, or 8%, from the same period in 2023. The increase is largely attributable to investment and annuity fees, other miscellaneous fees, gains on sales of assets, service charges on deposits, secondary mortgage market operations, and income from bank-owned life insurance, partially offset by a decline in derivative income. A more detailed discussion of these and other noninterest income variances follows.

Current wording

Noninterest income totaled $95.9 million for the third quarter of 2024, up $6.7 million, or 8%, from the second quarter of 2024. The increase in noninterest income from the second quarter of 2024 is primarily driven by increases in our specialty lines, with growth across most revenue lines. For the nine months ended September 30, 2024, noninterest income totaled $272.9 million, up $23.4 million, or 9%, from the same period in 2023. The increase is attributable to most fee income lines, partially offset by a decline in derivative income. A more detailed discussion of these and other noninterest income variances follows.

Previous wording

Service charges on deposit accounts are composed of overdraft fees, and nonsufficient funds fees on business accounts, business and corporate account analysis fees, overdraft protection fees and other customer transaction-related charges. Service charges on deposits totaled $22.3 million for the second quarter of 2024, virtually flat compared to the first quarter of 2024, as analysis fees on business accounts resulting from account activity and sales performance were largely offset by decreases in consumer overdraft and service fees as a result of fewer instances of overdraft and the elimination of paper statement fees. For the six months ended June 30, 2024, services charges on deposits totaled $44.5 million, up $2.4 million, or 6%, from the same period in 2023. The year over year increase was driven primarily by analysis fees on business accounts, as a result of activity levels, balance outflows and sales performance, and consumer overdraft fees, partially offset by a decline in consumer service charges as a result of the elimination of paper statement fees.

Current wording

Service charges on deposit accounts are composed of overdraft fees, nonsufficient funds fees on business accounts, business and corporate account analysis fees, overdraft protection fees and other customer transaction-related charges. Service charges on deposits totaled $23.1 million for the third quarter of 2024, up $0.9 million, or 4%, compared to the second quarter of 2024, primarily driven by an increase in both consumer and business overdraft fees. For the nine months ended September 30, 2024, services charges on deposits totaled $67.7 million, up $3.3 million, or 5%, from the same period in 2023. The year over year increase was driven primarily by analysis fees on business accounts as a result of activity levels, balance outflows and sales performance, and consumer and business overdraft fees, partially offset by a decline in consumer service charges as a result of the elimination of paper statement fees.

Previous wording

Trust fee income represents revenue generated from a full range of trust services, including asset management and custody services provided to individuals, businesses and institutions. Trust fees totaled $18.5 million for the second quarter of 2024, up $1.4 million, or 8%, from the first quarter of 2024, largely attributable to increases in personal trust revenue as a result of seasonal tax preparation fees and institutional trust fees driven by market value and sales volume. For the six months ended June 30, 2024, trust fees totaled $35.6 million, an increase of $1.4 million, or 4%, from the same period in 2023. The year over year increase was primarily attributable to corporate and institutional trust revenue, driven by market value and sales volumes.

Current wording

Trust fee income represents revenue generated from a full range of trust services, including asset management and custody services provided to individuals, businesses and institutions. Trust fees totaled $18.0 million for the third quarter of 2024, down $0.5 million, or 2%, from the second quarter of 2024, largely attributable to decreases in personal trust revenue as a result of seasonal tax preparation fees recorded in the prior quarter. For the nine months ended September 30, 2024, trust fees totaled $53.6 million, an increase of $2.8 million, or 6%, from the same period in 2023. The year over year increase was primarily attributable to personal and institutional trust revenue, driven by market value and sales volumes.

Previous wording

Bank card and ATM fees include interchange and other income from credit and debit card transactions, fees earned from processing card transactions for merchants, and fees earned from ATM transactions. Bank card and ATM fees totaled $21.8 million for the second quarter of 2024, up $1.2 million, or 6%, from the first quarter of 2024. The linked quarter increase reflects a return from the typical seasonal declines in debit and consumer credit card activity of the first quarter of the year, and increases in purchasing card and merchant revenue. Bank card and ATM fees for the six months ended June 30, 2024 totaled $42.4 million, up $0.7 million, or 2%, from the same period in 2023. The year over year change was driven primarily by increases in purchasing card activity and merchant fees.

Current wording

Bank card and ATM fees include interchange and other income from credit and debit card transactions, fees earned from processing card transactions for merchants, and fees earned from ATM transactions. Bank card and ATM fees totaled $21.6 million for the third quarter of 2024, down $0.2 million, or 1%, from the second quarter of 2024. The linked quarter decrease was primarily driven by a decline in merchant fees. Bank card and ATM fees for the nine months ended September 30, 2024 totaled $64.1 million, up $1.8 million, or 3%, from the same period in 2023. The year over year change was driven primarily by increases in purchasing card activity and merchant fees, partially offset by a decline in ATM fees.

Previous wording

Investment and annuity fees and insurance commissions, which include both fees earned from sales of annuity and insurance products, as well as managed account fees, totaled $9.8 million, down $2.1 million, or 17%, from the first quarter of 2024. The linked-quarter change was largely driven by a $1.1 million decline in annuity sales following record-high sales performance in the previous quarter, and a $0.5 million decline in investment fees. Investment and annuity fees and insurance commissions for the six months ended June 30, 2024 totaled $21.6 million, up $4.5 million, or 26%, from the same period in 2023. The year over year increase includes a $3.2 million increase in investment fees, and a $1.5 million increase in annuity fees, reflective of continued strong annuity sales performance and fixed-income trading commissions amid the elevated interest rate environment and favorable market conditions.

Current wording

Investment and annuity fees and insurance commissions, which include both fees earned from sales of annuity and insurance products, as well as managed account fees, totaled $10.9 million, up $1.1 million, or 11%, from the second quarter of 2024. The linked-quarter increase was largely driven by sales volume for annuities, fixed income trading and insurance, and to an increase in recurring fees as a result of higher market values of securities. Investment and annuity fees and insurance commissions for the nine months ended

Previous wording

Income from secondary mortgage market operations is comprised of income produced from the origination and sales of residential mortgage loans in the secondary market. We offer a full range of mortgage products to our customers and typically sell longer-term fixed-rate loans while retaining the majority of adjustable-rate loans, as well as loans generated through programs to support customer relationships. Secondary mortgage market operations income will vary based on mortgage application volume, pull through rates, the percentage of loans ultimately sold in the secondary market and the timing of such sales. Income from secondary mortgage market operations was $3.5 million in the second quarter of 2024, up $0.7 million, or 23%, from the first quarter of 2024. For the six months ended June 30, 2024, income from secondary mortgage market operations totaled $6.4 million, up $2.0 million, or 44%, from the same period in 2023. The linked-quarter and year over year increases were largely driven by an upward trend in the percentage of mortgage loans sold in the secondary market as opposed to those held in our portfolio.

Current wording

Income from secondary mortgage market operations is comprised of income produced from the origination and sales of residential mortgage loans in the secondary market. We offer a full range of mortgage products to our customers and typically sell longer-term fixed-rate loans while retaining the majority of adjustable-rate loans, as well as loans generated through programs to support customer relationships. Secondary mortgage market operations income will vary based on mortgage application volume, pull through rates, the percentage of loans ultimately sold in the secondary market and the timing of such sales. Income from secondary mortgage market operations was $3.4 million in the third quarter of 2024, down $0.2 million, or 5%, from the second quarter of 2024. For the nine months ended September 30, 2024, income from secondary mortgage market operations totaled $9.8 million, up $2.7 million, or 39%, from the same period in 2023. The year over year increase was largely driven by an upward trend in the percentage of mortgage loans sold in the secondary market as opposed to those held in our portfolio.

Previous wording

Income from bank-owned life insurance (BOLI) is typically generated through insurance benefit proceeds as well as the growth of the cash surrender value of insurance contracts held. Income from BOLI was $3.8 million for the second quarter of 2024, down $0.5 million, or 11%, from the first quarter of 2024, largely attributable to a decline in mortality gains. Income from BOLI for the six months ended June 30, 2024 totaled $8.0 million, up $1.3 million, or 20% from the same period in 2023 and is reflective of increases in both income from cash surrender value and mortality gains.

Current wording

Income from bank-owned life insurance (BOLI) is typically generated through insurance benefit proceeds as well as the growth of the cash surrender value of insurance contracts held. Income from BOLI was $4.4 million for the third quarter of 2024, up $0.6 million, or 16%, from the second quarter of 2024, primarily attributable to an increase in mortality gains. Income from BOLI for the nine months ended September 30, 2024 totaled $12.4 million, up $2.1 million, or 20%, from the same period in 2023 and is reflective of increases in both income from mortality gains and changes in cash surrender value.

Previous wording

Credit-related fees include fees assessed on letters of credit and unused portions of loan commitments. Credit-related fees were $3.1 million for the second quarter of 2024, virtually flat compared to the first quarter of 2024. Credit-related fees for the six months ended June 30, 2024 totaled $6.3 million, up $0.3 million, or 4%, from the same period in 2023. Income from these products will vary based on letters of credit issued, credit line utilization and prevailing assessment rates.

Current wording

Credit-related fees include fees assessed on letters of credit and unused portions of loan commitments. Credit-related fees were $2.9 million for the third quarter of 2024, down $0.2 million, or 7%, compared to the second quarter of 2024, primarily driven by a decrease in standby letter of credit fees. Credit-related fees for the nine months ended September 30, 2024 totaled $9.2 million, down $0.1 million, or 1%, from the same period in 2023. Income from these products will vary based on letters of credit issued, credit line utilization and prevailing assessment rates.

Previous wording

Income or loss from customer and other derivatives is largely from our customer interest rate derivative program and totaled a loss of $1.1 million for the second quarter of 2024, compared to a loss of $2.8 million in the prior quarter. Derivative income can be volatile and is dependent upon the composition of the portfolio, volume and mix of sales and termination activity, and market value adjustments due to market interest rate movement. The linked-quarter improvement is largely reflective of a loss of $1.5 million recorded in the first quarter of 2024 related to assumption changes for certain valuation inputs on customer derivatives. For the six months ended June 30, 2024, loss from customer and other derivatives totaled $3.9 million, compared to income of $1.2 million for the same period in 2023. The current period includes the $1.5 million loss resulting from assumption changes associated with customer derivatives described above and $1.4 million increase in losses resulting from assumption changes to the Visa B derivative liability. The remainder of the decline is largely tied to the change in the interest rate environment present in each of the comparative periods, which affects demand for variable rate loans and related derivative products, valuation adjustments, and related collateral income/expense for the program as a whole.

Current wording

Income or loss from customer and other derivatives is largely from our customer interest rate derivative program. Income from customer and other derivatives totaled $0.9 million for the third quarter of 2024, compared to a loss of $1.1 million in the second quarter of 2024. Derivative income can be volatile and is dependent upon the composition of the portfolio, volume and mix of sales and termination activity, and market value adjustments due to market interest rate movement. The linked-quarter improvement is largely reflective of $1.4 million of expense resulting from assumption changes to the Visa B derivative liability recorded in the prior quarter that did not recur. For the nine months ended September 30, 2024, loss from customer and other derivatives totaled $2.9 million, compared to income of $1.6 million for the same period in 2023. The current period includes a $1.5 million loss resulting from assumption changes associated with customer derivatives recorded in the first quarter of 2024 and a $0.5 million unfavorable variance in income from the Visa B derivative liability. The remainder of the year-over-year decline is largely a result of changes in the interest rate environment in each of the comparative periods, which affects demand for variable rate loans and related derivative products, valuation adjustments, and related collateral income/expense for the program as a whole.

Previous wording

Net gains on sales of premises, equipment and other assets consists primarily of net revenue earned from sales of excess-bank owned facilities and equipment no longer in use, gains on sales of Small Business Administration and other non-residential mortgage loans, and leases and other assets associated with the equipment finance line of business. Net gains on sales of premises, equipment and other assets totaled $1.0 million for the second quarter of 2024, compared to $2.8 million for the first quarter of 2024. The linked-quarter decline was largely driven by a gain on sale of bank premises and equipment and other miscellaneous activity recorded in the first quarter of 2024. Net gains on sales of premises, equipment and other assets for the six months ended June 30, 2024 totaled $3.8 million, compared to $1.0 million in the same period in 2023. The level of net gains or losses in a given reporting period will vary based on a variety of circumstances.

Current wording

Net gains on sales of premises, equipment and other assets consists primarily of net revenue earned from sales of excess-bank owned facilities and equipment no longer in use, gains on sales of Small Business Administration (SBA) and other non-residential mortgage loans, and leases and other assets associated with the equipment finance line of business. Net gains on sales of premises, equipment and other assets totaled $2.9 million for the third quarter of 2024, compared to $1.0 million for the second quarter of 2024. The linked-quarter increase was largely driven by gains on sales of SBA loans. Net gains on sales of premises, equipment and other assets for the nine months ended September 30, 2024 totaled $6.8 million, compared to $2.3 million in the same period in 2023. The year over year increase was largely driven by an increase in the volume of SBA loan sales and income earned from such, and gains on the sale of bank premises and equipment. The level of net gains or losses on sales of these assets in a given reporting period will vary based on a variety of circumstances.

Previous wording

Other miscellaneous income is comprised of various items, including income from small business investment companies (SBIC), Federal Home Loan Bank (FHLB) stock dividends, and fees from loan syndication and other specialty lines of business. Other miscellaneous income totaled $6.4 million, up $0.6 million, or 9%. The linked-quarter increase was largely driven by a $0.5 million increase in SBIC income, which can vary from period to period. For the six months ended June 30, 2024, other miscellaneous income totaled $12.2 million, up $3.0 million, or 33%, from the same period in 2023. The year over year increase was largely driven by a $2.1 million increase in dividends on FHLB stock and other various smaller items.

Current wording

Other miscellaneous income is comprised of various items, including income from investments in small business investment companies (SBIC), Federal Home Loan Bank (FHLB) stock dividends, and fees from loan syndication and other specialty lines of business. Other miscellaneous income totaled $7.7 million, up $1.3 million, or 20%. The linked-quarter change was largely driven by increases of $0.7 million in SBIC income and $0.2 million in loan syndication fees. For the nine months ended September 30, 2024, other miscellaneous income totaled $19.9 million, up $3.9 million, or 24%, from the same period in 2023, the primary driver of which was a $2.2 million increase in dividends on FHLB stock.

Previous wording

We expect noninterest income to be up four to five percent for the full year of 2024 from the 2023 adjusted noninterest income of $337.7 million.

Current wording

We expect noninterest income to be up six to seven percent for the full year of 2024 from the 2023 adjusted noninterest income of $337.7 million.

Previous wording

Noninterest expense for the second quarter of 2024 was $206.0 million, down $1.7 million, or less than 1%, from the first quarter of 2024. Included in noninterest expense in the first quarter of 2024 was a supplemental disclosure item of $3.8 million attributable to a revision of the FDIC's special assessment related to certain bank failures of 2023. Excluding the impact of the supplemental disclosure item, noninterest expense for the second quarter of 2024 was up $2.1 million, or 1%, from the first quarter of 2024, with increases in data processing, other miscellaneous expenses, travel, professional services, advertising and net other retirement expense partially offset by decreases in personnel expenses, other real estate and foreclosed assets expense, and entertainment and contributions. For the six months ended June 30, 2024, noninterest expense totaled $413.7 million, up $10.7 million, or 3%, from the same period in 2023. Excluding the impact of the supplemental disclosure item, noninterest expense for the six months ended June 30, 2024 was up $6.9 million, or 2%, from the same period in 2023. The year over year increase was largely driven by personnel expense and data processing expense, partially offset by a decrease in net other retirement expense. A more detailed discussion of these and other noninterest expense variances follows.

Current wording

Noninterest expense for the third quarter of 2024 was $203.8 million, down $2.2 million, or 1%, from the second quarter of 2024, with decreases in personnel expense, other miscellaneous losses and deposit insurance and regulatory fees, partially offset by an increase in professional services expense and a decrease in net gains from other real estate and foreclosed asset. For the nine months ended September 30, 2024, noninterest expense totaled $617.6 million, up $9.9 million, or 2%, from the same period in 2023. Year to date noninterest expense includes a $3.8 million supplemental disclosure item attributable to an FDIC special assessment. Excluding the impact of the supplemental disclosure item, noninterest expense for the nine months ended September 30, 2024 was up $6.1 million, or 1%, from the same period in 2023. The year over year increase was largely driven by personnel expense and data processing expense, partially offset by a decrease in net other retirement expense. A more detailed discussion of these and other noninterest expense variances follows.