BV Financial Inc

Previous wording

changes in the economic assumptions used to calculate the allowance for credit losses;

Current wording

changes in the economic assumptions and methodology used to calculate the allowance for credit losses;

Previous wording

At June 30, 2024, we had a net deferred tax asset totaling $8.8 million. In accordance with ASC Topic 740 “Income Taxes,” we use the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. If currently available information raises doubt as to the realization of the deferred tax assets, a valuation allowance is established if it is not more likely than not realizable. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. We exercise significant judgment in evaluating the amount and timing of recognition of the resulting deferred tax assets and liabilities. These judgments require us to make projections of future taxable income. The judgments and estimates we make in determining our deferred tax assets are inherently subjective and are reviewed on a regular basis as regulatory or business factors change. Any reduction in estimated future taxable income may require us to record a valuation allowance against our deferred tax assets. A valuation allowance that results in additional income tax expense in the period in which it is recognized would negatively affect income. Management believes, based upon current facts, that it is more likely than not that there will be sufficient taxable income in future years to realize its federal and state deferred tax asset.

Current wording

At September 30, 2024, we had a net deferred tax asset totaling $8.4 million. In accordance with ASC Topic 740 “Income Taxes,” we use the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. If currently available information raises doubt as to the realization of the deferred tax assets, a valuation allowance is established. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. We exercise significant judgment in evaluating the amount and timing of recognition of the resulting deferred tax assets and liabilities. These judgments require us to make projections of future taxable income. The judgments and estimates we make in determining our deferred tax assets are inherently subjective and are reviewed on a regular basis as regulatory or business factors change. Any reduction in estimated future taxable income may require us to record a valuation allowance against our deferred tax assets. A valuation allowance that results in additional income tax expense in the period in which it is recognized would negatively affect income. Management believes, based upon current facts, that it is more likely than not that there will be sufficient taxable income in future years to realize its federal and state deferred tax asset.

Previous wording

Assets. Assets were $897.2 million at June 30, 2024, an increase of $11.9 million, or 1.4%, from $885.3 million at December 31, 2023. The increase was due primarily to a $16.9 million increase in cash and cash equivalents offset by decreases of $2.4 million of loans and $1.9 million in securities available for sale.

Current wording

Assets. Assets were $892.7 million at September 30, 2024, an increase of $7.4 million, or 0.8%, from $885.3 million at December 31, 2023. The increase was due primarily to a $20.3 million increase in cash and cash equivalents which was primarily offset by decreases of $11.6 million in loans and $2.0 million in other non-earning assets.

Previous wording

Cash and Cash Equivalents. Cash and cash equivalents increased $16.9 million, or 22.9%, to $90.6 million at June 30, 2024 from $73.7 million at December 31, 2023 primarily due to the increase in deposits and proceeds from the maturity and prepayment of securities coupled with a lower level of loan originations.

Current wording

Cash and Cash Equivalents. Cash and cash equivalents increased $20.3 million, or 27.7%, to $93.8 million at September 30, 2024 from $73.5 million at December 31, 2023 primarily due to the decreases in loans and other non-interest earning assets.

Previous wording

Loans. Loans receivable decreased $2.4 million, or 0.34%, to $702.4 million at June 30, 2024 from $704.8 million at December 31, 2023. Decreases in one- to four-family real estate loans of $13.2 million and owner-occupied commercial real estate loans of $16.2 million were partially offset by increases in investor commercial real estate loans and commercial loans of $26.9 million.

Current wording

Loans. Loans receivable decreased $11.6 million, or 1.6%, to $693.2 million at September 30, 2024 from $704.8 million at December 31, 2023. Decreases in one- to four-family real estate loans of $15.5 million and owner-occupied commercial real estate loans of $15.8 million were partially offset by increases in investor commercial real estate loans and commercial loans of $24.8 million.

Previous wording

Our allowance for credit losses – loans was relatively unchanged at $8.5 million at June 30, 2024. The slight decrease in the ACL resulted from lower historical loss rates and lower life of loan calculations. The ratio of our allowance for credit losses to total loans was 1.22% at June 30, 2024 compared to 1.16% at June 30, 2023, while the allowance for credit losses to non-performing loans was 103.88% at June 30, 2024 compared to 179.14% at June 30, 2023.

Current wording

Our allowance for credit losses – loans decreased $553,000 to $8.0 million at September 30, 2024 compared to $8.6 million at December 31, 2023. The decrease in the ACL resulted from lower historical loss rates and lower life of loan calculations. The ratio of our allowance for credit losses to total loans was 1.15% at September 30, 2024 and September 30, 2023, while the allowance for credit losses to non-performing loans was 201.60% at September 30, 2024 compared to 81.05% at December 31, 2023.

Previous wording

Securities. Securities available for sale decreased $1.9 million, or 5.5%, to $32.9 million at June 30, 2024 from $34.8 million at December 31, 2023. The decrease was due to new purchases not fully replacing maturities and paydowns in the portfolio. Securities held-to-maturity were relatively unchanged at $10.1 million.

Current wording

Securities. Securities available for sale increased by $4.4 million, or 12.6%, to $39.2 million at September 30, 2024 from $34.8 million at December 31, 2023. The increase was due to purchases used primarily to secure local government deposits offset by paydowns in the mortgage-backed securities. The held-to-maturity portfolio decreased by $4.2 million or 40.9% due to maturities and paydowns not being replaced by purchases.

Previous wording

Deposits. Total deposits increased $6.2 million, or 1.0%, to $640.3 million at June 30, 2024 from $634.1 million at December 31, 2023. Interest-bearing deposits increased $7.2 million, or 1.5%, to $499.3 million at June 30, 2024 from $492.1 million at December 31, 2023. Noninterest bearing deposits decreased $1.0 million, or 0.7%, to $141.0 million at June 30, 2024 from $142.0 million at December 31, 2023. During the first quarter of 2024, the Company replaced $10.0 million in retail certificates of deposit with $10.0 million of brokered deposits at a lower cost than what would have been required to retain the retail certificates.

Current wording

Deposits. Total deposits increased $193,000, or 0.03% to $634.3 million at September 30, 2024 from $634.1 million at December 31, 2023. Interest-bearing deposits increased $2.9 million, or 0.6%, to $495.0 million at September 30, 2024 from $492.1 million at December 31, 2023. Noninterest bearing deposits decreased $2.7 million, or 1.9%, to $139.3 million at September 30, 2024 from $142.0 million at December 31, 2023.

Previous wording

Stockholders’ Equity. Stockholders’ equity increased $6.4 million, or 3.2%, to $205.5 million at June 30, 2024, primarily due to net income of $7.0 million.

Current wording

Stockholders’ Equity. Stockholders’ equity increased $10.6 million, or 5.4%, to $209.7 million at September 30, 2024 from $199.1 million at December 31, 2023 primarily due to net income of $9.8 million.

Previous wording

Comparison of Operating Results for the Three and Six Months Ended June 30, 2024 and 2023

Current wording

Comparison of Operating Results for the Three and Nine Months Ended September 30, 2024 and 2023

Previous wording

Average Balances and Yields. The following table sets forth average balance sheets, average yields and costs, and certain other information for the periods indicated. No tax-equivalent yield adjustments have been made, as the effects would be immaterial. All average balances are daily average balances. Non-accrual loans are included in the computation of average balances only. The yields set forth below include the effect of deferred fees, discounts, and premiums that are amortized or accreted to interest income or interest expense. Average balances exclude loans held for sale, if applicable. Net deferred loan origination fees totaled $2.0 million and $1.6 million at June 30, 2024 and 2023, respectively.

Current wording

Average Balances and Yields. The following table sets forth average balance sheets, average yields and costs, and certain other information for the periods indicated. No tax-equivalent yield adjustments have been made, as the effects would be immaterial. All average balances are daily average balances. Non-accrual loans are included in the computation of average balances only. The yields set forth below include the effect of deferred fees, discounts, and premiums that are amortized or accreted to interest income or interest expense. Average balances exclude loans held for sale, if applicable. Net deferred loan origination fees totaled $2.1 million and $1.5 million at September 30, 2024 and 2023, respectively.

Previous wording

The following table sets forth the effects of changing rates and volumes on our net interest income for the six months ended June 30, 2024 and 2023. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by current rate). The total column represents the sum of the prior columns. For purposes of this table, changes attributable to both rate and volume which cannot be segregated have been allocated proportionately based on the changes due to rate and volume.

Current wording

The following table sets forth the effects of changing rates and volumes on our net interest income for the nine months ended September 30, 2024 and 2023. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by current rate). The total column represents the sum of the prior columns. For purposes of this table, changes attributable to both rate and volume which cannot be segregated have been allocated proportionately based on the changes due to rate and volume.

Previous wording

Net Income. Net income was $3.4 million, or $0.32 per diluted share, for the three months ended June 30, 2024 compared to $3.9 million, or $0.49 per diluted share, for the three months ended June 30, 2023. In the three months ended June 30, 2023, the Company recognized a gain on the sale of foreclosed real estate of $678,000. Net income was $6.0 million, or $0.52 per diluted share, for the six months ended June 30, 2024 compared to $7.0 million, or $0.88 per diluted share, for the six months ended June 30, 2023. In the six months ended June 30, 2023, the Company received $225,000 in life insurance proceeds in addition to the gain on the sale of foreclosed real estate of $678,000 recognized in the second quarter.

Current wording

Net Income. Net income was $3.8 million or $0.35 per diluted share for the three months ended September 30, 2024 compared to $3.7 million or $0.35 per diluted share for the three months ended September 30, 2023. In the quarter ended September 30, 2024, the Company recorded a recovery for credit losses of $714,000 as a result of the improvement in the asset quality of the Company’s loan portfolio. In the quarter ended September 30, 2023, the Company recognized a recovery for credit loss of $333,000. Net income was $9.8 million or $0.91 per diluted share for the nine months ended September 30, 2024 compared to $10.7 million or $1.20 per diluted share for the nine months ended September 30, 2023. The difference between the nine months ended September 30, 2024 when compared to the same period in 2023 is that in the nine months ended September 30, 2023, the Company recognized a gain on the sale of foreclosed real estate of $678,000, a gain on the sale of fixed assets of $188,000 and received $225,000 in life insurance death benefits. These items did not recur in 2024.

Previous wording

Interest Income. Interest income increased $1.1 million, or 10.2%, to $11.6 million for the three months ended June 30, 2024 from $10.5 million for the three months ended June 30, 2023. The increase was due primarily to increases in interest income on loans, and interest income on cash, cash equivalents and other interest-earning assets. Interest income on loans increased $850,000 or 9.1%, to $10.2 million for the three months ended June 30, 2024 from $9.3 million for the three months ended June 30, 2023 due to increases in the average balance of loans and the average yield on loans. The average balance of loans increased $26.3 million, or 3.9%, to $705.5 million for the three months ended June 30, 2024 from $679.2 million for the three months ended June 30, 2023. The weighted average yield on loans increased 28 basis points to 5.79% for the three months ended June 30, 2024 compared to 5.51% for the three months ended June 30, 2023, as variable rate loans reset to higher interest rates and the rates on new loans exceeded the rates on paid off loans due to the higher interest rate environment. Interest income on cash, cash equivalents and other interest-earning assets increased $200,000 to $1.0 million for the three months ended June 30, 2024 from $843,000 for the three months ended June 30, 2023 due to an increase in the average balance of cash, cash equivalents and other interest-earning assets and a 10 basis point increase in the average yield.

Current wording

Interest Income. Interest income increased $435,000, or 3.7%, to $12.1 million for the three months ended September 30, 2024 from $11.7 million for the three months ended September 30, 2023. The increase was due primarily to an increase in interest income on loans, partially offset by a decrease in other interest income on cash and cash equivalents. Interest income on loans increased $759,000 or 7.8%, to $10.5 million for the three months ended September 30, 2024 from $9.8 million for the three months ended September 30, 2023 due to increases in the average yield on loans. The average balance of loans decreased $12.1 million, or 1.7%, to $690.2 million for the three months ended September 30, 2024 from $702.3 million for the three months ended September 30, 2023. The weighted average yield on loans increased 53 basis points to 6.05% for the three months ended September 30, 2024 compared to 5.52% for the three months ended September 30, 2023, as variable rate loans reset to higher interest rates and the rates on new loans exceeded the rates on paid off loans due to the higher interest rate environment. Other interest income decreased related to interest income on cash, cash equivalents and other interest-earning assets $370,000 to $1.2 million for the three months ended September 30, 2024 from $1.6 million for the three months ended September 30, 2023 due to a decrease in the average balance of cash, cash equivalents and other interest-earning assets.

Previous wording

Interest income increased $2.4 million, or 11.8%, to $22.6 million for the six months ended June 30, 2024 from $20.2 million for the six months ended June 30, 2023. The increase was due primarily to increases in interest income on loans, and interest income on cash, cash equivalents and other interest-earning assets. Interest income on loans increased $1.9 million, or 10.3%, to $20.0 million for the six months ended June 30, 2024 from $18.1 million for the six months ended June 30, 2023 due to increases in the average balance of loans and the average yield on loans. The average balance of loans increased $33.4 million, or 5.0%, to $706.9 million for the six months ended June 30, 2024 from $673.6 million for the six months ended June 30, 2023. The weighted average yield on loans increased 12 basis points to 5.54% for the six months ended June 30, 2024 compared to 5.42% for the six months ended June 30, 2023, as variable rate loans reset to higher interest rates and the rates on new loans exceeded the rates on paid off loans due to the higher interest rate environment. Interest income on cash, cash equivalents and other interest-earning assets increased $469,000 to $1.9 million for the six months ended June 30, 2024 from $1.4 million for the six months ended June 30, 2023 due to an increase in the average balance of cash, cash equivalents and other interest-earning assets and a 26 basis point increase in the average yield.

Current wording

Interest income increased $2.8 million, or 8.9%, to $34.8 million for the nine months ended September 30, 2024 from $31.9 million for the nine months ended September 30, 2023. The increase was due primarily to increases in interest income on loans, and, to a lesser extent, other interest income on cash, cash equivalents and other interest-earning assets. Interest income on loans increased $2.6 million, or 9.4%, to $30.5 million for the nine months ended September 30, 2024 from $27.9 million for the nine months ended September 30, 2023 due to increases in the average balance of loans and the average yield on loans. The average balance of loans increased $12.6 million, or 1.8%, to $701.3 million for the nine months ended September 30, 2024 from $688.7 million for the nine months ended September 30, 2023. The weighted average yield on loans increased 40 basis points to 5.79% for the nine months ended September 30, 2024 compared to 5.39% for the nine months ended September 30, 2023, as variable rate loans reset to higher interest rates and the rates on new loans exceeded the rates on paid off loans due to the higher interest rate environment. Other interest income on cash, cash equivalents and other interest-earning assets increased $100,000 to $3.1 million for the nine months ended September 30, 2024 from $3.0 million for the nine months ended September 30, 2023 due to a 29 basis point increase in the average yield, offset by a slight decrease in the average balance of cash, cash equivalents and other interest-earning assets.

Previous wording

Interest Expense. Interest expense increased $406,000, or 17.7%, to $2.7 million for the three months ended June 30, 2024 compared to $2.3 million for the three months ended June 30, 2023, due to a $976,000 increase in interest expense on deposits as rates paid increased and depositors moved money into higher-cost certificates of deposit, partially offset by a decrease in interest expense on borrowed money of $495,000 as there were no advances outstanding from the FHLB in the quarter ended June 30, 2024.

Current wording

Interest Expense. Interest expense remained unchanged at $2.8 million for the three months ended September 30, 2024 and 2023. Interest expense on deposits increased $619,000 for the three months ended September 30, 2024 compared to the three months ended September 30, 2023, as rates paid increased and depositors moved money into higher-cost certificates of deposit, offset by a decrease in interest expense on borrowed money of $608,000 as there were no advances outstanding from the FHLB in the quarter ended September 30, 2024.

Previous wording

The increase in interest expense on deposits was due to a 80 basis point increase in the average rate, offset by a $9.0 million decrease in the average balance of interest-bearing deposits to $498.5 million at June 30, 2024 from $507.5 million for the three months ended June 30, 2023. The average rate on interest-bearing deposits was 1.80% for the three months ended June 30, 2024 compared to 1.00% for the three months ended June 30, 2023.

Current wording

The increase in interest expense on deposits was due to a 56 basis point increase in the average rate, offset by a $21.9 million decrease in the average balance of interest-bearing deposits to $490.8 million at September 30, 2024 from $512.7 million for the three months ended September 30, 2023. The average rate on interest-bearing deposits was 1.92% for the three months ended September 30, 2024 compared to 1.36% for the three months ended September 30, 2023.

Previous wording

We had no interest expense on FHLB advances for the three months ended June 30, 2024 compared to $495,000 for the three months ended June 30, 2023 as all advances were paid off.

Current wording

We had no interest expense on FHLB advances for the three months ended September 30, 2024 compared to $530,000 for the three months ended September 30, 2023 as all advances were paid off.

Previous wording

Interest expense on subordinated debentures decreased $76,000, or 14.0%, to $466,000 for the three months ended June 30, 2024 compared to $541,000 for the three months ended June 30, 2023. The decrease was due primarily to the pay-off of $3.0 million in junior subordinated debt assumed in a prior acquisition.

Current wording

Interest expense on subordinated debentures decreased $79,000, or 14.7%, to $466,000 for the three months ended September 30, 2024 compared to $545,000 for the three months ended September 30, 2023. The decrease was due primarily to the pay-off in the first quarter of 2024 of $3.0 million in junior subordinated debt assumed in a prior acquisition.

Previous wording

Interest expense increased $2.0 million or 51.7% to $5.7 million for the six months ended June 30, 2024 compared to $3.8 million for the six months ended June 30, 2023 primarily due to a $2.3 million increase in interest expense on deposits as rates paid increased and depositors moved money into higher-cost certificate of deposit accounts, and an increase of $445,000 in interest expense on subordinated debt, offset by a $783,000 decrease in interest expense on borrowed money as there were no advances outstanding from the FHLB during the six months ended June 30, 2024.

Current wording

Interest expense increased $2.0 million, or 29.7%, to $8.6 million for the nine months ended September 30, 2024 compared to $6.6 million for the nine months ended September 30, 2023 primarily due to a $2.9 million increase in interest expense on deposits as rates paid increased and depositors moved money into higher-cost certificate of deposit accounts, and an increase of $364,000 in interest expense on subordinated debt, offset by a $1.3 million decrease in interest expense on borrowed money as there were no advances outstanding from the FHLB during the nine months ended September 30, 2024.

Previous wording

The increase in interest expense on deposits was due to a 85 basis point increase in the average rate, offset by a $12.7 million decrease in the average balance of interest-bearing deposits to $495.3 million at June 30, 2024 from $508.0 million for the six months ended June 30, 2023. The average rate on interest-bearing deposits was 1.62% for the six months ended June 30, 2024 compared to 0.77% for the six months ended June 30, 2023.

Current wording

The increase in interest expense on deposits was due to a 83 basis point increase in the average rate, offset by a $22.1 million decrease in the average balance of interest-bearing deposits to $493.8 million at September 30, 2024 from $515.9 million for the nine months ended September 30, 2023. The average rate on interest-bearing deposits was 1.78% for the nine months ended September 30, 2024 compared to 0.95% for the nine months ended September 30, 2023.

Previous wording

We had no interest expense on FHLB advances for the six months ended June 30, 2024 compared to $783,000 for the six months ended June 30, 2023 as all advances were paid off.

Current wording

We had no interest expense on FHLB advances for the nine months ended September 30, 2024 compared to $1.3 million for the nine months ended September 30, 2023 as all advances were paid off.

Previous wording

Interest expense on subordinated debentures increased $445,000, or 41.4%, to $1.5 million for the six months ended June 30, 2024 compared to $1.1 million for the six months ended June 30, 2023. The average rate on subordinated debentures increased 279 basis points to 8.64% for the six months ended June 30, 2024 compared to 5.85% for the six months ended June 30, 2023. The increase was due primarily to the write-off (increase in interest expense) of the remaining purchase accounting fair market value adjustment of $566,000 upon the pay-off of $3.0 million in junior subordinated debt assumed in a prior acquisition.

Current wording

Interest expense on subordinated debentures increased $363,000, or 22.4%, to $2.0 million for the nine months ended September 30, 2024 compared to $1.6 million for the nine months ended September 30, 2023. The average rate on subordinated debentures increased 171 basis points to 7.53% for the nine months ended September 30, 2024 compared to 5.82% for the nine months ended September 30, 2023. The increase was due primarily to the write-off (increase in interest expense) of the remaining purchase accounting fair market value adjustment of $566,000 upon the pay-off in the first quarter of 2024 of $3.0 million in junior subordinated debt assumed in a prior acquisition.

Previous wording

Net Interest Income. Net interest income was $8.9 million for the three months ended June 30, 2024 compared to $8.2 million in the three months ended June 30, 2023. The net interest margin for the three months ended June 30, 2024 was 4.33% compared to 4.19% for the three months ended June 30, 2023. The increase in net interest income was due to higher average balances of interest-earning assets and higher yields on these assets offsetting the increase in interest expense due to higher rates paid on deposits.

Current wording

Net Interest Income. Net interest income was $9.3 million for the three months ended September 30, 2024 compared to $8.9 million in the three months ended September 30, 2023. The net interest margin for the three months ended September 30, 2024 was 4.49% compared to 4.07% for the three months ended September 30, 2023. The increase in net interest income was due to higher yields on interest-earning assets, and lower balances of interest-bearing liabilities offsetting higher rates paid on deposits.

Previous wording

Net interest income was $16.9 million for the six months ended June 30, 2024 compared to $16.4 million for the six months ended June 30, 2023. The net interest margin for the six months ended June 30, 2024 was 4.12% compared to 4.26% for the six months ended June 30, 2023. The increase in net interest income was due to higher average balances of interest-earning assets and higher yields on these assets offsetting the increase in interest expense due to higher rates paid on deposits.

Current wording

Net interest income was $26.2 million for the nine months ended September 30, 2024, compared to $25.3 million in the nine months ended September 30, 2023. The net interest margin for the nine months ended September 30, 2024 was 4.25% compared to 4.15% for the nine months ended September 30, 2023. The increase in net interest income was due to higher yields on interest earning assets, and lower balances of interest-bearing liabilities offsetting higher rates paid on deposits.

Previous wording

We recorded a recovery for credit losses of $111,000 for the three months ended June 30, 2024 compared to a recovery for credit losses of $150,000 for the three months ended June 30, 2023. We recorded a recovery for credit losses of $92,000 for the six months ended June 30, 2024 compared to a recovery for credit losses of $147,000 for the six months ended June 30, 2023. Our allowance for credit losses was $8.5 million at June 30, 2024 compared to $8.2 million at June 30, 2023. The ratio of our allowance for credit losses to total loans was 1.22% at June 30, 2024 compared to 1.16% at June 30, 2023, while the allowance for credit losses to non-performing loans was 103.9% at June 30, 2024 compared to 179.1% at June 30, 2023. The Company had net recoveries on previously charged off loans of $67,000 in the quarter ended June 30, 2024 as compared to net recoveries of $129,000 in the quarter ended June 30, 2023 and net recoveries of $152,000 in the six months ended June 30, 2024 as compared to net recoveries of $166,000 in the six months ended June 30, 2023.

Current wording

We recorded a recovery for credit losses of $714,000 for the three months ended September 30, 2024 compared to a recovery for credit losses of $333,000 for the three months ended September 30, 2023. We recorded a recovery of credit losses of $806,000 for the nine months ended September 30, 2024 compared to a recovery of credit losses of $480,000 for the nine months ended September 30, 2023. Our allowance for credit losses was $8.0 million at September 30, 2024 compared to $8.2 million at September 30, 2023. The ratio of our allowance for credit losses to total loans was 1.15% at September 30, 2024 compared to 1.15% at September 30, 2023, while the allowance for credit losses to non-performing loans was 201.6% at September 30, 2024 compared to 213.5% at September 30, 2023. The Company had net recoveries on previously charged off loans of $132,000 in the quarter ended September 30, 2024 as compared to net recoveries of $255,000 in the quarter ended September 30, 2023 and net recoveries of $284,000 in the nine months ended September 30, 2024 as compared to net recoveries of $421,000 in the nine months ended September 30, 2023.

Previous wording

Non-interest Income. For the three months ended June 30, 2024, noninterest income totaled $596,000 compared to $1.4 million for the quarter ended June 30, 2023. In the quarter ended June 30, 2023, the Company recognized a gain of $678,000 on the sale of foreclosed real estate.

Current wording

Non-interest Income. For the three months ended September 30, 2024, noninterest income totaled $696,000 compared to $882,000 for the quarter ended September 30, 2023. For the quarter ended September 30, 2023, the Company recognized a gain of $188,000 on the sale of a former branch building.

Previous wording

For the six months ended June 30, 2024, noninterest income totaled $1.2 million as compared to $2.2 million for the six months ended June 30, 2023. In the six months ended June 30, 2023, the Company recognized a gain of $678,000 on the sale of foreclosed real estate and $225,000 in life insurance proceeds.

Current wording

For the nine months ended September 30, 2024, noninterest income totaled $1.9 million as compared to $3.1 million for the nine months ended September 30, 2023. In the nine months ended September 30, 2023, the Company recognized a gain of $678,000 on the sale of foreclosed real estate, a gain of $188,000 on the sale of a former branch building and $225,000 in life insurance death benefits.

Previous wording

Non-interest Expense. For the three months ended June 30, 2024, noninterest expense totaled $4.9 million compared to $4.5 million for the three months ended June 30, 2023. Increases in compensation and benefits increased by $232,000, or 8.1%, due to increases in staffing and salary levels, occupancy expense increased by $43,000, or 11.7%, due to higher rent and maintenance expenses, data processing expense increased by $334,000, or 10.0%, due to annual increases and project expenses and professional fees increased due to price increases and the costs of being a public company.

Current wording

Non-interest Expense. For the three months ended September 30, 2024, noninterest expense totaled $5.5 million compared to $5.0 million in the three months ended September 30, 2023. Compensation and benefits increased $344,000, or 10.9%, due to increases in salary and benefits. Professional fees increased by $180,000, or 81.9%, primarily due to legal and accounting costs related to the Company becoming a public company, and data processing expense increased by $21,000 or 6.2%. These increases were partially offset by decreases in all other categories of expenses.

Previous wording

Income Tax Expense. We recognized income tax expense of $1.3 million and $1.3 million for the three months ended June 30, 2024 and 2023, respectively, resulting in effective rates of 28.0% and 25.2%, respectively. In the six months ended June 30, 2024 and 2023, we recognized income tax expense of $2.3 million and $2.5 million, respectively, resulting in effective tax rates of 28.2% and 26.3%, respectively.

Current wording

Income Tax Expense. We recognized income tax expense of $1.4 million for each of the three months ended September 30, 2024 and 2023, resulting in effective rates of 27.5% and 27.5%, respectively. In the nine months ended September 30, 2024 and 2023, we recognized income tax expense of $3.8 million and $3.9 million, respectively, resulting in effective tax rates of 27.9% and 26.7%, respectively.

Previous wording

Asset Quality. Non-performing assets at June 30, 2024 totaled $8.4 million consisting of $8.2 million in nonperforming loans and $170,000 in other real estate owned, compared to $10.9 million at December 31, 2023, consisting of $10.7 million in non-performing loans and $170,000 in other real estate owned. During the quarter, our largest non-accrual loan, a $6.8 million investor commercial real estate loan, was reduced by a $3.0 million cash payment. In July, the remaining $3.8 million balance paid off. At June 30, 2024, the allowance for credit losses on loans was $8.5 million, which represented 1.22% of total loans and 103.9% of non-performing loans compared to $8.5 million at December 31, 2023, which represented 1.21% of total loans and 81.0% of non-performing loans.

Current wording

Asset Quality. Non-performing assets at September 30, 2024 totaled $4.1 million consisting of $3.9 million in nonperforming loans and $160,000 in other real estate owned, compared to $10.7 million at December 31, 2023, consisting of $10.6 million in non-performing loans and $170,000 in other real estate owned. During the quarter, our largest loan on non-accrual, a $3.8 million investor commercial real estate loan paid off. At September 30, 2024, the allowance for credit losses on loans was $8.0 million, which represented 1.15% of total loans and 201.6% of non-performing loans compared to $8.6 million at December 31, 2023, which represented 1.21% of total loans and 81.1% of non-performing loans.

Previous wording

Liquidity. Liquidity describes our ability to meet the financial obligations that arise in the ordinary course of business. Liquidity is primarily needed to meet the borrowing and deposit withdrawal requirements of our customers and to fund current and planned expenditures. Our primary sources of funds are deposits, principal and interest payments on loans and securities and proceeds from maturities of securities. We also have the ability to borrow from the FHLB of Atlanta. At June 30, 2024, we had $162.5 million available under a line of credit with the FHLB of Atlanta, and had $25.0 million of FHLB in unfunded letters of credit used to secure municipal deposits outstanding against the line of credit with the FHLB of Atlanta. This resulted in additional borrowing availability from the FHLB of $137.5 million, none of which was outstanding at June 30, 2024. The Company also has a short-term unsecured facility from a correspondent bank in the amount of $20.0 million.

Current wording

Liquidity. Liquidity describes our ability to meet the financial obligations that arise in the ordinary course of business. Liquidity is primarily needed to meet the borrowing and deposit withdrawal requirements of our customers and to fund current and planned expenditures. Our primary sources of funds are deposits, principal and interest payments on loans and securities and proceeds from maturities of securities. We also have the ability to borrow from the FHLB of Atlanta. At September 30, 2024, we had $151.6 million available under a line of credit with the FHLB of Atlanta, and had $23.0 million of FHLB in unfunded letters of credit used to secure municipal deposits outstanding against the line of credit with the FHLB of Atlanta. This resulted in additional borrowing availability from the FHLB of $128.6 million, none of which was outstanding at September 30, 2024. The Company also has a short-term unsecured facility from a correspondent bank in the amount of $20.0 million.

Previous wording

We monitor our liquidity position on a daily basis. We anticipate that we will have sufficient funds to meet our current funding commitments. Based on our deposit retention experience and current pricing strategy, we anticipate that a significant portion of maturing time deposits will be retained. However, if a substantial portion of these deposits is not retained, we may utilize FHLB advances, brokered deposits or raise interest rates on deposits to attract new accounts, which may result in higher levels of interest expense. At June 30, 2024, the Company had $10.0 million in brokered deposits and no brokered deposits at June 30, 2023. In addition, we had $57.4 million of municipal deposits at June 30, 2024, which represented 9.0% of total deposits. The Bank's uninsured deposits totaled $198.3 million, or 29.0% of total deposits, of which $50.6 million were secured using the market value of pledged collateral or letters of credit issued by FHLB, and an additional $44.5 million were deposits of the Company at the Bank.

Current wording

We monitor our liquidity position on a daily basis. We anticipate that we will have sufficient funds to meet our current funding commitments. Based on our deposit retention experience and current pricing strategy, we anticipate that a significant portion of maturing time deposits will be retained. However, if a substantial portion of these deposits is not retained, we may utilize FHLB advances, brokered deposits or raise interest rates on deposits to attract new accounts, which may result in higher levels of interest expense. At September 30, 2024, the Company had $10.0 million in brokered deposits and no brokered deposits at September 30, 2023. In addition, we had $57.7 million of municipal deposits at September 30, 2024, which represented 9.1% of total deposits. The Bank's uninsured deposits totaled $204.6 million, or 30.1% of total deposits, of which $51.6 million were secured using the market value of pledged collateral or letters of credit issued by FHLB, and an additional $45.4 million were deposits of the Company at the Bank.