WILSON BANK HOLDING CO
For the period ended Mar 31, 2025. Filed May 9, 2025.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2025 · Filed May 9, 2025
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What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-30; filed 2024-11-08.
0000950170-24-123778
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-05-09.
0000950170-25-067712
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 133 previous paragraphs and 125 current paragraphs.
57 unchanged; 56 reworded; 10 added; 14 removed; 6 previous and 2 current paragraphs rearranged.
Tables are not compared: 18 previous and 15 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (10)
Current report
On November 12, 2024, Wilson Bank entered in a purchase and assumption agreement pursuant to which it agreed to acquire certain assets, including certain loans, and assume certain liabilities, including certain deposits, of a branch office in Cookeville, Tennessee that was then being operated by another bank. This transaction was consummated on April 25, 2025. Total assets acquired were approximately $15.9 million, inclusive of approximately $14.1 million in loans, while liabilities assumed were approximately $25.4 million, inclusive of $25.3 million in deposits. The acquisition is not expected to significantly impact the Bank's operations.
Current report
In March 2025, the Bank converted its Chattanooga loan production office to a full service branch, and in connection therewith it entered into a lease for the location for the new full service branch. The costs associated with this expansion, including lease expenses, are not expected to be significant.
Current report
The provision for credit losses-loans for the three months ended March 31, 2025 was $2,233,000 compared to no provision for the three months ended March 31, 2024. The increase was primarily due to loan growth and the credit deterioration of a single commercial real estate borrower.
Current report
There was a benefit to the provision for credit losses-off balance sheet exposures of $393,000 for the three months ended March 31, 2025 while there was no provision or benefit for the credit losses-off balance sheet exposures for the three months ended March 31, 2024. The increase in the benefit for the provision for credit losses-off balance sheet exposures was primarily due to an updated expected line utilization and an increase in our unconditionally cancellable commitments.
Current report
The increase in non-interest income for the three months ended March 31, 2025 when compared to the comparable period in 2024 is primarily attributable to increases in brokerage income, income on BOLI and annuity contracts, and a decrease in loss on sale of fixed assets.
Current report
The increase in income on BOLI and annuity contracts was attributable to the purchase of additional policies since the first quarter of 2024.
Current report
The increase in occupancy expenses for the three months ended March 31, 2025 was primarily due to expenses related to furnishings for new offices and renovations for current offices.
Current report
The increase in FDIC insurance in the three months ended March 31, 2025 was primarily due to the bank's growth throughout 2024.
Current report
The increase in audit, legal and consulting expenses in the three months ended March 31, 2025 was primarily due to the timing and payment of invoices related to our annual audit.
Current report
The increase in other operating expenses in the three months ended March 31, 2025 was primarily due to an increase in credit card expense, an increase in expenses related to employee recruitment, and an increase in expenses related to employee education.
Removed paragraphs (14)
Previous report
Net earnings of the Company for the three months ended September 30, 2024 were $12,686,000, an increase of $1,200,000, or 10.45%, from $11,486,000 for the three months ended September 30, 2023. The increase in net earnings for the third quarter of 2024 compared to the third quarter of 2023 was primarily due to an increase in net interest income, partially offset by increases in non-interest expense and provision for credit losses, as well as a decrease in non-interest income. The decrease in non-interest income was primarily due to management's decision to strategically restructure the securities portfolio, which resulted in $1,414,000 of net losses from sales of $86,515,000 of available-for-sale securities.
Previous report
Notes:
Previous report
The provision for credit losses-loans for the three and nine months ended September 30, 2024 was $3,563,000 compared to a provision of $1,641,000 and$5,681,000 for the three and nine months ended September 30, 2023, respectively. Significant loan growth in the third quarter and a single relationship downgrade during that quarter, partially offset by an improved economic outlook, contributed to management's decision in the third quarter of 2024 to record a provision of $3,563,000 after recording no provision in the first six months of 2024.
Previous report
There was a benefit to the provision for credit losses-off balance sheet exposures of $563,000 for the three and nine months ended September 30, 2024 compared to a benefit of $677,000 and $2,975,000 for the three and nine months ended September 30, 2023. A slight decline in unfunded balances for the first nine months of 2024 and an improved economic outlook in the third quarter of 2024 led to the release in the off balance sheet exposures in the third quarter of 2024.
Previous report
The decrease in non-interest income for the three months ended September 30, 2024 when compared to the comparable period in 2023 is primarily attributable to an increase in loss on sale of securities, partially offset by an increase in brokerage income. The increase in non-interest income for the nine months ended September 30, 2024 was primarily attributable to an increase in brokerage income, an increase in service charges on deposit accounts, and an increase in gain on sale of loans, partially offset by an increase in the loss on sale of securities and a loss on sale of fixed assets.
Previous report
The increase in gain on sale of loans for the nine months ended September 30, 2024 compared to the comparable time period in 2023 was primarily due to the declining mortgage interest rate market positively impacting the fair value of our interest rate lock commitments.
Previous report
The increase in service charges on deposit accounts for the nine months ended September 30, 2024 compared to the comparable time period in 2023 was primarily due to an increase in overdraft fees as a result of an increase in transaction volume.
Previous report
The increase in loss on sale of securities for the nine months ended September 30, 2024 compared to the comparable time period in 2023 was due to management's decision in the third quarter of 2024 to take advantage of favorable market conditions and restructure the securities portfolio in an attempt to improve the Bank's positioning relative to interest rate risk. This restructuring included the sale of approximately $86.5 million of available-for-sale securities that were in a loss position for a net loss of $1.4 million and the reinvestment of a portion of the net proceeds in higher yielding securities. The Company also sold $2.5 million of investment securities in the second quarter of 2024 for a net loss of $318,000.
Previous report
The increase in other operating expenses for the three and nine months ended September 30, 2024 compared to the comparable periods in 2023 was primarily due to costs associated with a new employee development program, including employee engagement activities. Also contributing to the increase for the nine months ended September 30, 2024 were increased mailing costs associated with the mailing of account change notices and the Company's annual report to shareholders.
Previous report
The decrease in occupancy expenses for the three and nine months ended September 30, 2024 was primarily due to the closure of our leased Wal-Mart branch that we closed on January 13, 2024.
Previous report
The decrease in furniture and equipment expense for the three and nine months ended September 30, 2024 was primarily due to a decrease in depreciation expense which resulted from the full depreciation of the Company's operations building equipment and Cool Springs branch equipment.
Previous report
The decrease in advertising and public relations expense for the three and nine months ended September 30, 2024 was primarily due to the competitive rate environment experienced in 2023, which caused the Bank to increase marketing efforts focused on driving deposit growth.
Previous report
FDIC insurance expense decreased in the three months ended September 30, 2024 when compared to the three months ended September 30, 2023 due to a change in the Bank's assessment rate.
Previous report
Deposits increased by $339,475,000, or 7.77%, in the first nine months of 2024 due to a strategic focus on growing customers by utilizing deposit promotions. Included in deposits at September 30, 2024 were $19,140,000 in brokered deposits, compared to $69,135,000 at December 31, 2023. The decrease in brokered deposits from December 31, 2023 to September 30, 2024 was the result of management's decision to not renew some brokered deposits when they matured, as the Company has been able to grow lower cost core deposits.
Reworded paragraphs (56)
Previous wording
The purpose of this discussion is to provide insight into the financial condition and results of operations of Wilson Bank Holding Company (the "Company", "our" or "we") and its bank subsidiary, Wilson Bank & Trust (the "Bank") and Encompass Home Lending LLC ("Encompass"), a company offering mortgage banking services that is 51% owned by the Bank and 49% owned by two home builders operating in the Bank's market areas. The results of Encompass, which commenced operations on June 1, 2022, are consolidated in the Company's financial statements included elsewhere in this Quarterly Report on Form 10-Q. This discussion should be read in conjunction with the Company's consolidated financial statements appearing elsewhere in this report. Reference should also be made to the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 filed with the Securities and Exchange Commission (the "SEC") on February 28, 2024 (the "2023 Form 10-K") for a more complete discussion of factors that impact the Company's liquidity, capital and results of operations.
Current wording
The purpose of this discussion is to provide insight into the financial condition and results of operations of Wilson Bank Holding Company (the "Company", "our" or "we") and its bank subsidiary, Wilson Bank & Trust (the "Bank") and Encompass Home Lending LLC ("Encompass"), a company offering mortgage banking services that is 51% owned by the Bank and 49% owned by two home builders operating in the Bank's market areas. The results of Encompass are consolidated in the Company's financial statements included elsewhere in this Quarterly Report on Form 10-Q. This discussion should be read in conjunction with the Company's consolidated financial statements appearing elsewhere in this report. Reference should also be made to the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 filed with the Securities and Exchange Commission (the "SEC") on February 28, 2025 (the "2024 Form 10-K") for a more complete discussion of factors that impact the Company's liquidity, capital and results of operations.
Previous wording
The Company cautions investors that future financial and operating results may differ materially from those projected in forward-looking statements made by, or on behalf of, the Company. The words “expect,” “intend,” “should,” “may,” “could,” “believe,” “suspect,” “anticipate,” “seek,” “plan,” “estimate” and similar expressions are intended to identify such forward-looking statements, but other statements not based on historical fact may also be considered forward-looking. Such forward-looking statements involve known and unknown risks and uncertainties, including, but not limited to those described in the 2023 Form 10-K, and also include, without limitation, (i) deterioration in the financial condition of borrowers resulting in significant increases in credit losses and provisions for these losses, (ii) deterioration in the real estate market conditions in the Company’s market areas including demand for residential real estate loans as a result of elevated rates on residential real estate mortgage loans, (iii) the impact of increased competition with other financial institutions, including pricing pressures on loans and deposits, and the resulting impact on the Company's results, including as a result of compression to net interest margin, (iv) adverse conditions in local or national economies, including the economy in the Company’s market areas, including as a result of the impact of escalating geopolitical tensions, political uncertainty, inflationary pressures and the elevated rate environment, supply chain disruptions and labor shortages on our customers and on their businesses, (v) the sale of investment securities in a loss position before their value recovers, including as a result of asset liability management strategies or in response to liquidity needs, (vi) fluctuations or differences in interest rates on earning assets and interest bearing liabilities from those that the Company is modeling or anticipating, including as a result of the Bank's inability to maintain deposit rates or defer increases to those rates in an elevated rate environment or lower rates in a falling rate environment, (vii) the ability to grow and retain low-cost core deposits, (viii) significant downturns in the business of one or more large customers, (ix) the inability of the Company to comply with regulatory capital requirements, including those resulting from changes to capital calculation methodologies, required capital maintenance levels, or regulatory requests or directives, (x) changes in state or Federal regulations, policies, or legislation applicable to banks and other financial service providers, including regulatory or legislative developments arising out of current unsettled conditions in the economy, (xi) changes in capital levels and loan underwriting, credit review or loss reserve policies associated with economic conditions, examination conclusions, or regulatory developments, (xii) inadequate allowance for credit losses, (xiii) the effectivenes…
Excerpt shortened here; the source contains the full paragraph.
Current wording
The Company cautions investors that future financial and operating results may differ materially from those projected in forward-looking statements made by, or on behalf of, the Company. The words “expect,” “intend,” “should,” “may,” “could,” “believe,” “suspect,” “anticipate,” “seek,” “plan,” “estimate” and similar expressions are intended to identify such forward-looking statements, but other statements not based on historical fact may also be considered forward-looking. Such forward-looking statements involve known and unknown risks and uncertainties, including, but not limited to those described in the 2024 Form 10-K, and also include, without limitation, (i) deterioration in the financial condition of borrowers resulting in significant increases in credit losses and provisions for these losses, (ii) deterioration in the real estate market conditions in the Company’s market areas including demand for residential real estate loans as a result of elevated rates on residential real estate mortgage loans, (iii) the impact of U.S. and global economic conditions, trade policies and tensions, including changes in, or the imposition of, tariffs and/or trade barriers and the economic impacts, volatility and uncertainty resulting therefrom, and geopolitical instability, (iv) the impact of increased competition with other financial institutions, including pricing pressures on loans and deposits, and the resulting impact on the Company's results, including as a result of compression to net interest margin, (v) adverse conditions in local or national economies, including the economy in the Company’s market areas, including as a result of the impact of escalating geopolitical tensions, political uncertainty, inflationary pressures and the elevated rate environment, supply chain disruptions and labor shortages on our customers and on their businesses, (vi) the sale of investment securities in a loss position before their value recovers, including as a result of asset liability management strategies or in response to liquidity needs, (vii) fluctuations or differences in interest rates on earning assets and interest bearing liabilities from those that the Company is modeling or anticipating, including as a result of the Bank's inability to maintain deposit rates or defer increases to those rates in an elevated rate environment or lower rates in a falling rate environment, (viii) the ability to grow and retain low-cost core deposits, (ix) significant downturns in the business of one or more large customers, (x) the inability of the Company to comply with regulatory capital requirements, including those resulting from changes to capital calculation methodologies, required capital maintenance levels, or regulatory requests or directives, (xi) changes in state or Federal regulations, policies, or legislation applicable to banks and other financial service providers, including regulatory or legislative developments arising out of current unsettled conditions in th…
Excerpt shortened here; the source contains the full paragraph.
Previous wording
Accounting policies related to the allowance for credit losses on financial instruments including loans and off-balance-sheet credit exposures are considered to be critical as these policies involve considerable subjective judgment and estimation by management. In the case of loans, the allowance for credit losses is a contra-asset valuation account, calculated in accordance with ASC 326, that is deducted from the amortized cost basis of loans to present the net amount expected to be collected. In the case of off-balance-sheet credit exposures, the allowance for credit losses is a liability account, calculated in accordance with ASC 326, reported as a component of accrued interest payable and other liabilities in our consolidated balance sheets. The amount of each allowance account represents management's best estimate of current expected credit losses on these financial instruments considering available information, from internal and external sources, relevant to assessing exposure to credit loss over the contractual term of the instrument. Relevant available information includes historical credit loss experience, current conditions and reasonable and supportable forecasts. While historical credit loss experience provides the basis for the estimation of expected credit losses, adjustments to historical loss information may be made for differences in current portfolio-specific risk characteristics, environmental conditions or other relevant factors. While management utilizes its best judgment and information available, the ultimate adequacy of our allowance accounts is dependent upon a variety of factors beyond our control, including the performance of our portfolios, the economy, changes in interest rates and the view of the regulatory authorities toward classification of assets. For additional information regarding critical accounting policies, refer to Note 1 - Summary of Significant Accounting Policies and Note 2 - Loans and Allowance for Credit Losses in the notes to consolidated financial statements contained elsewhere in this Quarterly Report.
Current wording
Accounting policies related to the allowance for credit losses on financial instruments including loans and off-balance-sheet credit exposures are considered to be critical as these policies involve considerable subjective judgment and estimation by management. In the case of loans, the allowance for credit losses is a contra-asset valuation account, calculated in accordance with ASC 326, that is deducted from the amortized cost basis of loans to present the net amount expected to be collected. In the case of off-balance-sheet credit exposures, the allowance for credit losses is a liability account, calculated in accordance with ASC 326, reported as a component of accrued interest payable and other liabilities in our consolidated balance sheets. The amount of each allowance account represents management's best estimate of current expected credit losses on these financial instruments considering available information, from internal and external sources, relevant to assessing exposure to credit loss over the contractual term of the instrument. Relevant available information includes historical credit loss experience, current conditions and reasonable and supportable forecasts. While historical credit loss experience provides the basis for the estimation of expected credit losses, adjustments to historical loss information may be made for differences in current portfolio-specific risk characteristics, environmental conditions or other relevant factors. While management utilizes its best judgment and information available, the ultimate adequacy of our allowance accounts is dependent upon a variety of factors beyond our control, including the performance of our portfolios, the economy, changes in interest rates and the view of the regulatory authorities toward classification of assets. The ACL process is continually reviewed and updated as needed based on quarterly reviews, new data, and/or calculation improvements with material impacts disclosed as appropriate. For additional information regarding critical accounting policies, refer to Note 1 - Summary of Significant Accounting Policies and Note 2 - Loans and Allowance for Credit Losses in the notes to consolidated financial statements contained elsewhere in this Quarterly Report.
Previous wording
Net earnings of the Company increased$3,875,000, or 10.27%, to$41,591,000 for thenine months ended September 30, 2024, from$37,716,000 in the first nine months of 2023. The increase in net earnings for the first nine months of 2024 compared to the first nine months of 2023 was primarily due to an increase in net interest income and non-interest income, partially offset by increases in non-interest expense and provision for credit losses.
Current wording
Net earnings of the Company increased$3,624,000, or 28.38%, to$16,392,000 for thethree months ended March 31, 2025, from$12,768,000 in thef irst quarter of 2024. The increase in net earnings for the first quarter of 2025 compared to the first quarter of 2024 was primarily due to an increase in net interest income and non-interest income, partially offset by increases in non-interest expense and provision for credit losses.
Previous wording
The increase in net interest income for the three and nine months ended September 30, 2024 when compared to the comparable periods in 2023 was due to an increase in average interest earning asset balances and an increase in the average yield earned on earning assets, partially offset by an increase in cost of funds and an increase in average interest bearing deposit balances.
Current wording
The increase in net interest income for the three months ended March 31, 2025 when compared to the comparable period in 2024 was due to an increase in average interest earning asset balances, an increase in the average yield earned on earning assets, and a decrease in the cost of funds, partially offset by an increase in average interest bearing deposit balances.
Previous wording
Return on average assets (ROA) and return on average shareholders' equity (ROE) are common benchmarks for bank profitability and are calculated by taking our annualized net earnings for the relevant period and dividing that amount by our average assets and average equity for the relevant periods, respectively. ROA and ROE measure a company’s return on investment in a format that is easily comparable to other financial institutions. ROA is particularly important to the Company as it serves as the basis for certain executive and employee bonuses. The ROA for the three and nine months ended September 30, 2024 was 0.99% and 1.12%, respectively; while the ROA for the three and nine months ended September 30, 2023 was 1.00% and 1.13%, respectively. The ROE for the three and nine months ended September 30, 2024 was 10.66% and 12.42% , respectively; while the ROE for the three and nine months ended September 30, 2023 was 11.65% and 12.96%, respectively. The decrease in ROA and ROE for the three months ended September 30, 2024 was related to the increased provision for credit losses-loans in the third quarter of 2024 and the loss on sale of securities mentioned above. The decrease in ROA and ROE for the nine months ended September 30, 2024 was related to an increase in non-interest expense and the loss on sale of securities mentioned above, partially offset by lower provision for credit losses-loans.
Current wording
Return on average assets ("ROA") and return on average shareholders' equity ("ROE") are common benchmarks for bank profitability and in the case of the Company are calculated by taking our annualized net earnings for the relevant period and dividing that amount by our average assets and average equity for the relevant periods, respectively. ROA and ROE measure a company’s return on investment in a format that is easily comparable to other financial institutions. ROA is particularly important to the Company as it serves as the basis for certain employee bonuses. The ROA for the three months ended March 31, 2025 was 1.23%, while the ROA for the three months ended March 31, 2024 was 1.05%. The ROE for the three months ended March 31, 2025 was 13.35%, while the ROE for the three months ended March 31, 2024 was 11.91%. The increases in ROA and ROE in the first quarter of 2025 was primarily due to an increase in net interest income resulting from an increase in earning assets and an increase in non-interest income, partially offset by increases in non-interest expense and provision for credit losses.
Previous wording
The average balances, interest, and average rates of our assets and liabilities for thethree and nine months ended September 30, 2024 and 2023 are presented in the following table (dollars in thousands):
Current wording
The average balances, interest, and average rates of our assets and liabilities for thethree months ended March 31, 2025 and 2024 are presented in the following table (dollars in thousands):
Previous wording
Loan fees of $4.4 million are included in interest income for the period ended September 30, 2024. Loan fees of $2.9 million are included in interest income for the period ended September 30, 2023.
Current wording
Loan fees of $3.6 million are included in interest income for the period ended March 31, 2025. Loan fees of $2.6 million are included in interest income for the period ended March 31, 2024.
Previous wording
Yields on loans and total earning assets include the impact of State income tax credits related to incentive loans at below market rates and tax exempt loans to municipalities.
Current wording
State income tax credits related to incentive loans at below market rates and tax exempt loans to municipalities.
Previous wording
The components of our loan yield, a key driver to our net interest margin for thethree and nine months ended September 30, 2024 and 2023, were as follows:
Current wording
The components of our loan yield, a key driver to our net interest margin for thethree months ended March 31, 2025 and 2024, were as follows:
Previous wording
Net interest margin for the nine months ended September 30, 2024 and 2023 was 3.29% and 3.33%, respectively. The decrease in net interest margin for the nine months ended September 30, 2024 compared to the prior year comparable periodwas primarily due to an increase in the cost of funds, partially offset by an increase in average interest earning asset balances and an increase in the yield earned on such assets. The net interest spread was 2.87% and 3.03% for the nine months ended September 30, 2024 and 2023, respectively, and was 2.94% and 2.81% for the three months ended September 30, 2024 and 2023, respectively. Net interest margin for the three months ended September 30, 2024 and 2023 was 3.39% and 3.18%, respectively. The increase in net interest margin for the third quarter of 2024 was primarily due to the increase in average interest earning asset balances and an increase in the yield earned on loans outpacing the increase in cost of funds as competitive pressures continued to improve in the third quarter of 2024. The yield on loans increased during the three and nine months ended September 30, 2024 when compared to the comparable periods in 2023 due to the higher rates charged on new loans and the repricing of a portion of the Bank's variable rate loan portfolio.
Current wording
Net interest margin for the three months ended March 31, 2025 and 2024 was 3.53% and 3.14%, respectively. The increase in net interest margin for the first quarter of 2025 was primarily due to the increase in average interest earning asset balances and an increase in the yield earned on loans and a decrease in cost of funds. The yield on loans increased during the three months ended March 31, 2025 when compared to the comparable period in 2024 due to the origination of loans at a higher rate than the previous portfolio rate. The net interest spread was 3.13% and 2.73% for the three months ended March 31, 2025 and 2024, respectively.
Previous wording
Net interest income represents the amount by which interest earned on various earning assets exceeds interest paid on deposits and other interest-bearing liabilities and is the most significant component of the Company’s earnings. Net interest income, excluding tax equivalent adjustments relating to tax exempt securities and loans, for the three and nine months ended September 30, 2024 totaled$41,015,000 and $115,036,000, respectively. Net interest income, excluding tax equivalent adjustments relating to tax exempt securities and loans, for the three and nine months ended September 30, 2023 totaled $34,160,000 and $103,643,000, respectively.
Current wording
Net interest income represents the amount by which interest earned on various earning assets exceeds interest paid on deposits and other interest-bearing liabilities and is the most significant component of the Company’s earnings. Net interest income, excluding tax equivalent adjustments relating to tax exempt securities and loans, for the three months ended March 31, 2025 totaled$44,579,000. Net interest income, excluding tax equivalent adjustments relating to tax exempt securities and loans, for the three months ended March 31, 2024 totaled $35,561,000.
Previous wording
The increase in net interest income for the three and nine months ended September 30, 2024 compared to the comparable periods in 2023 was primarily due to an increase in the volume of average interest earning assets, an increase in interest and fees on loans, an increase in interest earned on deposits with depository institutions, and an increase in interest and dividends earned on securities, partially offset by an increase in interest expense resulting from the increase in the cost of funds and an increase in the volume of average interest bearing deposits.
Current wording
The increase in net interest income for the three months ended March 31, 2025 compared to the comparable period in 2024 was primarily due to an increase in the volume of average interest-earning assets, which along with an increase in the average yield on loans, contributed to an increase in interest, and an increase in interest and dividends earned on securities, partially offset by an increase in interest expense resulting from an increase in the volume of average interest bearing deposits. The increase in origination and other fee income also contributed to the increase in net interest income between the two periods.
Previous wording
The ratio of average earning assets to total average assets for thethree and nine months ended September 30, 2024 was 96.0% and 95.8%, respectively, compared to 95.4% and 95.3%, respectively, for the same periods in 2023.
Current wording
The ratio of average interest-earning assets to total average assets for thethree months ended March 31, 2025 was 96.2%, compared to 95.7% for the three months ended March 31, 2024.
Previous wording
Interest expense increased in the three and nine months ended September 30, 2024 when compared to the comparable periods in 2023 due to an increase in the average balance of our interest bearing deposits combined with competitive pressures in the second half of 2023 and first part of 2024 in the elevated short-term interest rate environment which required the Bank to raise rates paid on deposits. Also negatively impacting interest expense in the three and nine months ended September 30, 2024, was Bank's customers' continued shift of deposits from transaction and money market accounts to time deposit accounts. As competitive pressures have begun to ease in the second half of the third quarter of 2024, and the 50 basis point rate cut by the Federal Reserve in late September 2024 has taken effect, we have begun to lower interest rates on some of our deposit products and anticipate that we will be able to continue to lower the rates we pay on deposits for the remainder of 2024 and into 2025 as time deposits reprice; however, if the competitive pressures begin to rise once again, the Federal Reserve does not cut the federal funds rate any further or at the pace we are anticipating or loan growth outpaces deposit growth, the Bank may have to lower rates at a slower pace. Despite the expectation the Bank will be able to lower rates paid on deposits, we expect interest expense to continue to increase due to an increase in overall deposit balances.
Current wording
Interest expense increased in the three months ended March 31, 2025 when compared to the comparable period in 2024 due to an increase in the volume of average interest-bearing deposits. As the 100 basis points in rate cuts by the Federal Reserve between September 18, 2024 and December 18, 2024 took effect, we began lowering interest rates on some of our deposit products. Though we have been able to lower the rates we pay on deposits as the Federal Reserve began cutting rates, if competitive pressures increase, the Federal Reserve does not cut the federal funds rate any further or loan growth outpaces deposit growth, we may have to once again raise the rates we pay on deposits which would negatively impact our net interest margin. Even if rates remain at current levels or the Federal Reserve begins to cut rates again, we expect interest expense to continue to increase due to an increase in overall deposit balances.
Previous wording
The direction and speed with which short-term interest rates move has an impact on our net interest income. The Federal Reserve influences the general market rates of interest, including the deposit and loan rates offered by many financial institutions. Our loan portfolio is significantly affected by changes in the prime interest rate. The prime interest rate, which is the rate offered on loans to borrowers with strong credit decreased by 50 basis points as the Federal Reserve cut the target rate for the federal funds rate by 50 basis points on September 18, 2024.
Current wording
The direction and speed with which short-term interest rates move has an impact on our net interest income. The Federal Reserve influences the general market rates of interest, including the deposit and loan rates offered by many financial institutions. Our loan portfolio is significantly affected by changes in the prime interest rate. The prime interest rate has decreased by 100 basis points since September 18, 2024 as the Federal Reserve cut the target rate for the federal funds rate by 100 basis points between September 18, 2024 and December 18, 2024. The Company believes that short-term interest rates will remain at or near their current levels throughout 2025, and in such rate environment, expansion of the Company's net interest margin will be dependent upon, in part, whether the Company is forced to maintain deposit rates at their current levels or further increase them for the reasons noted above. However, if short-term interest rates decline further the Company's net interest margin and earnings could be negatively impacted if the yields on loans decrease faster than the Company is able to lower deposit rates, including as a result of loan growth outpacing our ability to add lower cost core deposits or competitive pressures in our markets limiting our ability to reduce the rates we pay on deposits, particularly given that our loan portfolio primarily consists of variable rate loans. Alternatively, if the Company is able to reprice its deposits more quickly than it reprices the rates it earns on loans in such a falling rate environment, then the Company expects its net interest margin would expand.
Previous wording
As discussed below under Financial Condition-Loans, loan growth was higher for the three and nine months ended September 30, 2024 compared to the same periods for 2023. Loan growth for the nine months ended September 30, 2024 was $393,851,000, while loan growth for the nine months ended September 30, 2023 was $379,987,000. For the three months ended September 30, 2024 loan growth was $231,968,000 compared to $117,297,000 for three months ended September 30, 2023.
Current wording
As discussed below under Financial Condition-Loans, loan growth was higher for the three months ended March 31, 2025 compared to the same period for 2024. Loan growth for the three months ended March 31, 2025 was $89,574,000, while loan growth for the three months ended March 31, 2024 was $21,534,000.
Previous wording
The following detail provides a breakdown of the provision for credit loss-loans expense and net (charge-offs) recoveries as of and for the nine months ended September 30, 2024 and 2023:
Current wording
The following detail provides a breakdown of the provision for credit loss-loans expense and net (charge-offs) recoveries as of and for the three months ended March 31, 2025 and 2024:
Previous wording
There was no provision for credit losses on available-for-sale securities for the three and nine months ended September 30, 2024 and 2023, respectively.
Current wording
There was no provision for credit losses on available-for-sale securities for the three months ended March 31, 2025 and 2024, respectively.
Previous wording
Our non-interest income is composed of several components, some of which vary significantly between quarterly and annual periods. The following is a summary of our non-interest income for the three and nine months ended September 30, 2024 and 2023 (in thousands):
Current wording
Our non-interest income is composed of several components, some of which vary significantly between quarterly and annual periods. The following is a summary of our non-interest income for the three months ended March 31, 2025 and 2024 (in thousands):
Previous wording
The increase in brokerage income for the three and nine months ended September 30, 2024 compared to the comparable time periods in 2023 was primarily due to multiple client acquisitions, the completion of estate planning cases, and an increase of overall market share in our market areas as well as the positive performance of financial markets.
Current wording
The increase in brokerage income was primarily due to multiple client acquisitions resulting in an increase of overall market share, the successful addition of new advisors and these advisors' subsequent new relationships, and the positive performance of financial markets in a variety of diversified areas.
Previous wording
The loss on sale of fixed assets for the nine months ended September 30, 2024 was primarily due to write-offs associated with the closure of our leased Wal-Mart branch that we closed on January 13, 2024.
Current wording
The loss on sale of fixed assets in the first quarter of 2024 was primarily due to write-offs associated with the closure of a leased branch location.
Previous wording
Non-interest expense consists primarily of employee costs, occupancy expenses, furniture and equipment expenses, advertising and public relations expenses, data processing expenses, director’s fees, audit, legal and consulting fees, FDIC insurance and other operating expenses. The following is a summary of our non-interest expense for the three and nine months ended September 30, 2024 and 2023 (in thousands):
Current wording
Non-interest expense consists primarily of employee costs, occupancy expenses, furniture and equipment expenses, advertising and public relations expenses, data processing expenses, director’s fees, audit, legal and consulting fees, FDIC insurance and other operating expenses. The following is a summary of our non-interest expense for the three months ended March 31, 2025 and 2024 (in thousands):
Previous wording
The increase in non-interest expense for the three and nine months ended September 30, 2024 when compared to the comparable period in 2023 is primarily attributable to increases in salaries and employee benefits, increases in data processing expenses, and an increase in other operating expenses, partially offset by reduced occupancy expenses, furniture and equipment expenses, and advertising and public relations expenses. Also offsetting a portion of the increase in non-interest expense for the three months ended September 30, 2024 was a decrease in FDIC insurance costs.
Current wording
The increase in non-interest expense for the three months ended March 31, 2025 when compared to the comparable period in 2024 is primarily attributable to increases in salaries and employee benefits, occupancy expenses, data processing expense, FDIC insurance, audit, legal and consulting expenses, and other operating expenses.
Previous wording
Salaries and employee benefits increased for the three and nine months ended September 30, 2024 primarily due to an increase in the number of employees necessary to support the Company’s growth in operations, an increase in incentives and commissions paid due to the increase in loan volume and a large investment relationship obtained, and a one-time company-wide employee bonus triggered by the Bank reaching an asset milestone.
Current wording
The increase in salaries and benefits for the three months ended March 31, 2025 was primarily due to an increase in the number of employees necessary to support the Company's operational growth, an increase in incentives paid due to the increase in loan volumes, and an increase in the accrual for annual bonuses.
Previous wording
Data processing expenses increased in the three and nine months ended September 30, 2024 due to implementation of a new small business online solution, enhanced treasury management solution, and an increase in the number of customers using digital services. The Company anticipates that data processing expenses will continue to increase as the Company’s operations grow, the demand for digital products and services from customers increases, and the cyber threat environment grows.
Current wording
Data processing expense increased for the three months ended March 31, 2025 primarily due to implementation of additional information security solutions, mobile banking pricing changes and an increase in the overall number of customers. The Company anticipates that data processing expenses will continue to increase as the Company's operations grow, the demand for digital products and services from customers increases, and the cyber threat environment grows.
Previous wording
The efficiency ratio is a common and comparable KPI used in the banking industry. The Company uses this metric to monitor how effective management is at using our internal resources. It is calculated by dividing our non-interest expense by our net interest income plus non-interest income. The efficiency ratio for the nine months ended September 30, 2024 and 2023 was 58.68% and 58.98%, respectively. The efficiency ratio for the three months ended September 30, 2024 and 2023 was 59.12% and 62.02%, respectively. The improvement in the efficiency ratio for the nine months ended September 30, 2024 compared to the comparable period in 2023 was primarily due to the increases in net interest income and non-interest income outpacing the increase in non-interest expense. The improvement in the efficiency ratio for the three months ended September 30, 2024 compared to the comparable period in 2023 was primarily due to the increase in net interest income outpacing the increase in non-interest expense.
Current wording
The efficiency ratio is a common and comparable KPI used in the banking industry. The Company uses this metric to monitor how effective management is at using our internal resources. It is calculated by dividing our non-interest expense by our net interest income plus non-interest income. The efficiency ratio for the three months ended March 31, 2025 and 2024 was 55.54% and 61.04%, respectively. The improvement in the efficiency ratio for the three months ended March 31, 2025 compared to the comparable period in 2024 was primarily due to increases in non-interest income and net interest income, outpacing the increase in non-interest expense.
Previous wording
The Company’s income tax expense was $12,042,000 for the nine months ended September 30, 2024, an increase of $1,088,000 over the comparable period in 2023. The percentage of income tax expense to net income before taxes was 22.41% and 22.49% for the nine months ended September 30, 2024 and 2023, respectively. The Company's income tax expense for the three months ended September 30, 2024 was $3,665,000, an increase of $399,000 compared to the three months ended September 30, 2023. The percentage of income tax expense to net income taxes was 22.38% and 22.15% for the three months ended September 30, 2024 and 2023, respectively. Our effective tax rate represents our blended federal and state rate of 26.14% affected by the impact of anticipated favorable permanent differences between our book and taxable income such as share based compensation, bank-owned life insurance, income earned on tax-exempt securities and loans, and certain federal and state tax credits, offset in part by the limitation on deductibility of meals and entertainment expense and non-deductible executive compensation.
Current wording
The Company’s income tax expense was $5,181,000 for the three months ended March 31, 2025, an increase of $1,294,000 over the comparable period in 2024. The percentage of income tax expense to net income before taxes was 24.01% and 23.32% for the three months ended March 31, 2025 and 2024, respectively. Our effective tax rate represents our blended federal and state rate of 26.14% affected by the impact of anticipated favorable permanent differences between our book and taxable income such as share-based compensation, bank-owned life insurance, income earned on tax-exempt securities and loans, and certain federal and state tax credits, offset in part by the limitation on deductibility of meals and entertainment expense and non-deductible executive compensation.
Previous wording
The Company’s total assets increased $405,435,000, or 8.37%, to $5,251,911,000 at September 30, 2024 from $4,846,476,000 at December 31, 2023. Loans, net of allowance for credit losses, totaled $3,941,332,000 at September 30, 2024, an 11.00% increase compared to $3,550,675,000 at December 31, 2023. In 2024, management is targeting owner-occupied commercial real estate, residential real estate lending and consumer lending as areas of focus. Total liabilities increased by 7.95% to $4,768,428,000 at September 30, 2024 compared to $4,417,071,000 at December 31, 2023.
Current wording
The Company’s total assets increased $172,809,000, or 3.22%, to $5,531,468,000 at March 31, 2025 from $5,358,659,000 at December 31, 2024. Loans, net of allowance for credit losses, totaled $4,129,983,000 at March 31, 2025, a 2.17% increase compared to $4,042,392,000 at December 31, 2024. In 2025, management is targeting owner-occupied commercial real estate, residential real estate lending and consumer lending as areas of focus. Total liabilities increased by 3.00% to $5,025,113,000 at March 31, 2025 compared to $4,878,956,000 at December 31, 2024.
Previous wording
Overall, the Bank's loan demand and related new loan production continued to increase throughout the Bank's markets in the third quarter of 2024, yielding a year-to-date total loan growth net of deferred loan fees of 10.95%. Total loan growth net of deferred loan fees for the first nine months of 2024 was $393,851,000, with $231,968,000 of that growth occurring in the third quarter. Contributing to the Company's loan growth in the first nine months of 2024 were the continued population growth and corporate relocations in the Bank's primary market areas and increased marketing efforts. The increase in residential 1-4 family real estate loans is attributable to the Bank successfully growing its residential portfolio through enhanced marketing efforts directed at homebuilders in the Company's market areas, and the increase the Company is seeing in the investor sector of 1-4 family. The increase in commercial and multi-family real estate and 1-4 family equity lines of credit is primarily attributable to continued economic growth and expansion in the Bank's primary market areas. The Company anticipates that loan growth for the second half of 2024 will exceed the loan growth experienced in the first half of 2024.
Current wording
Overall, the Bank's loan demand and related new loan production remained steady throughout the Bank's markets in the first quarter of 2025, yielding a year-to-date total loan growth net of deferred loan fees of 2.19%. Total loan growth net of deferred loan fees for the first three months of 2025 was $89,574,000. Contributing to the Company's loan growth in the first three months of 2025 were the continued population growth and corporate relocations in the Bank's primary market areas and increased marketing efforts. The increase in residential 1-4 family real estate loans is attributable to the Bank successfully growing its residential portfolio through enhanced marketing efforts directed at homebuilders in the Company's market areas, and the increase the Company is seeing in the investor sector of 1-4 family. The increase in commercial and multi-family real estate and 1-4 family equity lines of credit is primarily attributable to continued economic growth and expansion in the Bank's primary market areas. The Company anticipates that loan growth will be steady in 2025.
Previous wording
The allowance for credit losses for loans represents the portion of the loan's amortized cost basis that we do not expect to collect due to credit losses over the loan's life, considering past events, current conditions, and reasonable and supportable forecasts of future economic conditions considering macroeconomic forecasts. Loan losses are charged against the allowance when we believe the collectibility of a loan balance is unlikely. Subsequent recoveries, if any, are credited to the allowance. The allowance for credit losses for loans is based on the loan's amortized cost basis, excluding accrued interest receivables, as we promptly charge off accrued interest receivable determined to be uncollectible. We determine the appropriateness of the allowance through quarterly discounted cash flow modeling of the loan portfolio which considers lending-related commitments and other relevant factors, including macroeconomic forecasts and historical loss rates. In future quarters, we may update information and forecasts that may cause significant changes in the estimate in those future quarters.
Current wording
The allowance for credit losses for loans represents the portion of the loan's amortized cost basis that we do not expect to collect due to credit losses over the loan's life, considering past events, current conditions, and reasonable and supportable forecasts of future economic conditions considering macroeconomic forecasts. Loan losses are charged against the allowance when we believe the un-collectibility of a loan balance is reasonably assured. Subsequent recoveries, if any, are credited to the allowance. The allowance for credit losses for loans is based on the loan's amortized cost basis, excluding accrued interest receivables, as we promptly charge off accrued interest receivable determined to be uncollectible. We determine the appropriateness of the allowance through quarterly discounted cash flow modeling of the loan portfolio which considers lending-related commitments and other relevant factors, including macroeconomic forecasts and historical loss rates. In future quarters, we may update information and forecasts that may cause significant changes in the estimate in those future quarters.
Previous wording
Our allowance for credit losses for loans at September 30, 2024 reflects an amount deemed appropriate to adequately cover all expected future losses as of the date the allowance is determined based on our allowance for credit losses for loans assessment methodology. The allowance for credit losses for loans (net of charge-offs and recoveries) increased to $48,042,000 at September 30, 2024 from $44,848,000 at December 31, 2023, due to significant loan growth in the third quarter and a single relationship downgrade, partially offset by an improved economic outlook, which contributed to management's decision in the third quarter of 2024 to record a provision of $3,563,000 after recording no provision in the first six months of 2024. The allowance for credit losses for loans was 1.20% of total loans outstanding at September 30, 2024 compared to 1.25% at December 31, 2023. The internally classified loans as a percentage of the allowance for credit losses for loans were 98.5% and 13.2% respectively, at September 30, 2024 and December 31, 2023. This increase was primarily due to the credit downgrades and deterioration in payment performance of a few large borrowers.
Current wording
Our allowance for credit losses for loans at March 31, 2025 reflects an amount deemed appropriate to adequately cover all expected future losses as of the date the allowance is determined based on our allowance for credit losses for loans assessment methodology. The allowance for credit losses for loans (net of charge-offs and recoveries) increased to $51,480,000 at March 31, 2025 from $49,497,000 at December 31, 2024, due to loan growth, credit deterioration of a single commercial real estate borrower, and a worsening economic outlook. The allowance for credit losses for loans was 1.23% of total loans outstanding at March 31, 2025 compared to 1.21% at December 31, 2024. The internally classified loans as a percentage of the allowance for credit losses for loans were 101.5% and 97.0% respectively, at March 31, 2025 and December 31, 2024. This increase was primarily due to the credit downgrades and deterioration in payment performance of a few large borrowers.
Previous wording
The allowance for credit losses for loans is an amount that management believes will be adequate to absorb expected losses on existing loans that may become uncollectible as of the measurement date. The allowance for credit losses for loans as a percentage of total loans outstanding at September 30, 2024, net of deferred fees, decreased from the year ended December 31, 2023. The decrease was primarily due to an improved economic outlook for GDP, unemployment, and home prices as mentioned above.
Current wording
The allowance for credit losses for loans is an amount that management believes will be adequate to absorb expected losses on existing loans that may become uncollectible as of the measurement date. The allowance for credit losses for loans as a percentage of total loans outstanding at March 31, 2025, net of deferred fees, increased from the year ended December 31, 2024. The increase was primarily due to a deteriorating economic outlook as mentioned above.
Previous wording
We measure expected credit losses over the life of each loan utilizing two methods. For residential 1-4 family, commercial and multi-family real estate, construction and land development, commercial and industrial, 1-4 family equity lines of credit, municipal, and certain other loan types, we use discounted cash flow models which measure probability of default and loss given default. For farmland, agricultural, credit cards, auto, and other consumer loans we use the remaining life method to estimate credit losses. The measurement of expected credit losses for loan segments utilizing discounted cash flow is impacted by certain macroeconomic variables. Models are adjusted to reflect the current impact of certain macroeconomic variables as well as their expected changes over a reasonable and supportable forecast period.
Current wording
We measure expected credit losses over the life of each loan utilizing two methods. For credit cards, we use the remaining life method to estimate credit losses. For all other portfolios, we use discounted cash flow models which measure probability of default and loss given default. The measurement of expected credit losses for loan segments utilizing discounted cash flow is impacted by certain macroeconomic variables. Models are adjusted to reflect the current impact of certain macroeconomic variables as well as their expected changes over a reasonable and supportable forecast period.
Previous wording
In estimating expected credit losses as of September 30, 2024, we utilized then available forecasts of macroeconomic variables over our reasonable and supportable horizon based on the review of a variety of forecasts of the U.S. economy provided by Moody's Analytics. Key economic variables as forecasted and utilized in our models include: (i) U.S. Gross Domestic Product ("GDP") with annualized quarterly growth rates in the range of 1.9% to 2.2%; (ii) a U.S. unemployment rate in the range of approximately 4.0% to 4.2%; and (iii) a Home Price Index annualized quarterly growth rates in the range of approximately 1.0% to 3.2%.
Current wording
In estimating expected credit losses as of March 31, 2025, we utilized then available forecasts of macroeconomic variables over our reasonable and supportable horizon based on the review of a variety of forecasts of the U.S. economy provided by Moody's Analytics. Key economic variables as forecasted and utilized in our models include: (i) U.S. Gross Domestic Product ("GDP") with annualized quarterly growth rates in the range of 1.5% to 2.1%; (ii) a U.S. unemployment rate in the range of approximately 4.0% to 4.4%; (iii) a Home Price Index annualized quarterly growth rates in the range of approximately 0.7% to 2.8%; (iv) a CRE Price Index annualized quarterly growth rates in the range of approximately -8.3% to -2.2%; and (v) Gross Private Investment annualized quarterly growth rates in the range of approximately 0.8% and 3.0%.
Previous wording
We adjust model results using qualitative factor ("Q-factor") adjustments. Q-Factor adjustments are based upon management judgment and current assessment as to the impact of risks related to changes in lending policies and procedures; economic and business conditions; loan portfolio attributes and credit concentrations; and external factors, among other things, that are not already captured within the modeling inputs, assumptions and other processes. Management assesses the potential impact of such items within a range of major risk to improvement and adjusts the modeled expected credit loss by an aggregate adjustment percentage based upon the assessment.
Current wording
We adjust model results using qualitative factor ("Q-Factor") adjustments. Q-Factor adjustments are based upon management guidance, judgment and current assessment as to the impact of risks related to changes in lending policies and procedures; economic and business conditions; loan portfolio attributes and credit concentrations; and external factors, among other things, that are not already captured within the modeling inputs, assumptions and other processes. Management reviews and assesses the potential impact of such items and adjusts the modeled expected credit loss by an aggregate adjustment percentage based upon the assessment.
Previous wording
Our charge-off policy for collateral dependent loans is similar to our charge-off policy for all loans in that loans are charged-off in the month when a determination is made that the loan is uncollectible. Net charge-offs decreased to $369,000 for the nine months ended September 30, 2024, compared to net charge-offs of $793,000 for the same period in 2023. The ratio of net charge-offs to average total outstanding loans was 0.01% for the nine months ended September 30, 2024 compared to 0.02% for the nine months ended September 30, 2023. Net charge-offs for the three months ended September 30, 2024 and 2023 were $182,000 and $303,000, respectively. Overall, the Bank experienced minimal charge-offs during the three and nine months ended September 30, 2024 and it is expected that charge-offs will continue to be modest for the remainder of 2024; however, a deterioration in local economic conditions may negatively impact charge-offs in the future.
Current wording
Our charge-off policy for collateral dependent loans is similar to our charge-off policy for all loans in that loans are charged-off in the month when a determination is made that the loan is uncollectible. Net charge-offs increased to $250,000 for the three months ended March 31, 2025, compared to net charge-offs of $106,000 for the same period in 2024. The ratio of net charge-offs to average total outstanding loans was 0.01% for the three months ended March 31, 2025 compared to 0.00% for the three months ended March
Previous wording
We also maintain an allowance for credit losses on off-balance sheet exposures, which decreased $563,000 from December 31, 2023 to $2,584,000 at September 30, 2024 as a result of a decrease in our off-balance sheet commitments and an increase in our unconditionally cancellable commitments.
Current wording
We also maintain an allowance for credit losses on off-balance sheet exposures, which decreased $393,000 from $2,555,000 at December 31, 2024 to $2,162,000 at March 31, 2025 as a result of an updated expected line utilization and an increase in our unconditionally cancellable commitments.
Previous wording
The level of the allowance and the amount of the provision for credit losses involve evaluation of uncertainties and matters of judgment. The Company maintains an allowance for credit losses for loans which management believes is adequate to absorb losses in the loan portfolio. A formal calculation is prepared quarterly by the Company's Chief Financial Officer and provided to the Board of Directors to determine the adequacy of the allowance for credit losses. The calculation includes an evaluation of historical default and loss experience, current and forecasted economic conditions, an evaluation of qualitative factors, industry and peer bank loan quality indicators and other factors. See the discussion above under “Application of Critical Accounting Policies and Accounting Estimates” for more information. Management believes the allowance for credit losses at September 30, 2024 to be adequate, but if forecasted economic conditions do not meet management’s current expectations, the allowance for credit losses may require an increase through additional provision for credit loss expense which would negatively impact earnings.
Current wording
The level of the allowance and the amount of the provision for credit losses involve evaluation of uncertainties and matters of judgment. The Company maintains an allowance for credit losses for loans which management believes is adequate to absorb losses in the loan portfolio. A formal calculation is prepared quarterly by the Company's Chief Financial Officer to determine the adequacy of the allowance for credit losses and provided to the Board of Directors. The calculation includes an evaluation of historical default and loss experience, current and forecasted economic conditions, an evaluation of qualitative factors, industry and peer bank loan quality indicators and other factors. See the discussion above under “Application of Critical Accounting Policies and Accounting Estimates” for more information. Management believes the allowance for credit losses at March 31, 2025 to be adequate, but if forecasted economic conditions do not meet management’s current expectations, the allowance for credit losses may require an increase through additional provision for credit loss expense which would negatively impact earnings.
Previous wording
Securities increased $12,974,000, or 1.60%, to $824,055,000 at September 30, 2024 from $811,081,000 at December 31, 2023. The increase is primarily due to the purchase of $124,927,000 in new available-for-sale securities and an increase in the fair value of our available-for-sale securities of $26,365,000 as a result of favorable movement in interest rates, partially offset by the sale of $88,986,000 of securities discussed above and the run-off of our declining balance securities of $45,203,000. As mentioned above, management decided to restructure a portion of the securities portfolio in the third quarter of 2024. The restructuring involved the purchase of approximately $40,982,000 in new securities and the sale of approximately $86,515,000 in securities, both of which are included in the purchase and sale figures above. The average yield, excluding tax equivalent adjustment, of the securities portfolio at September 30, 2024 was 2.40% with a weighted average life of 7.06 years, as compared to an average yield of 2.33% and a weighted average life of 8.25 years at December 31, 2023. The weighted average lives on mortgage-backed securities reflect the repayment rate used for book value calculations.
Current wording
Securities increased $4,653,000, or 0.56%, to $832,546,000 at March 31, 2025 from $827,893,000 at December 31, 2024. The increase is primarily due to the decrease in the unrealized loss position of our securities portfolio and the purchase of new securities, partially offset by the sale of securities and the run-off of our declining balance securities. The average yield, excluding tax equivalent adjustment, of the securities portfolio at March 31, 2025 was 2.54% with a weighted average life of 7.15 years, as compared to an average yield of 2.47% and a weighted average life of 7.00 years at December 31, 2024. The weighted average lives on mortgage-backed securities reflect the repayment rate used for book value calculations.
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Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
31, 2024. Overall, the Bank experienced minimal charge-offs during the three months ended March 31, 2025 and it is expected that charge-offs will continue to be modest for the remainder of 2025; however, a deterioration in local economic conditions may negatively impact charge-offs in the future.
Current report — wording carried from elsewhere
Deposits increased by $130,950,000, or 2.71%, in the first quarter of 2025, primarily due to growth in market share and concerted marketing efforts to drive deposit growth which resulted in the opening of new deposit accounts. The Company had no brokered deposits at March 31, 2025 or December 31, 2024.
Rearranged previous paragraphs (6)
Previous report — wording carried elsewhere
Yields on loans and total earning assets include the impact of State income tax credits related to incentive loans at below market rates and tax exempt loans to municipalities.
Previous report — wording carried elsewhere
Loan fees of $11.3 million are included in interest income for the period ended September 30, 2024. Loan fees of $8.9 million are included in interest income for the period ended September 30, 2023.
Previous report — wording carried elsewhere
The tax equivalent adjustment has been computed using a 21% Federal tax rate.
Previous report — wording carried elsewhere
Annualized net interest income on a tax equivalent basis divided by average interest-earning assets.
Previous report — wording carried elsewhere
Average interest rate on interest-earning assets less average interest rate on interest-bearing liabilities.
Previous report — wording carried elsewhere
If short term rates continue to decline, as the Company believes is likely to happen in the fourth quarter of 2024, the Company’s net interest margin and earnings could be negatively impacted if the yields on loans decrease faster than the Company is able to lower deposit rates, including as a result of loan growth outpacing our ability to add lower cost core deposits or competitive pressures in our markets limiting our ability to reduce the rates we pay on deposits. However, if the Company is able to reprice its deposits more quickly than it reprices the rates it earns on loans in such a falling rate environment, the Company expects its net interest margin would expand.