RED RIVER BANCSHARES INC

Previous wording

The purpose of this discussion and analysis is to focus on significant changes in the financial condition of Red River Bancshares, Inc. on a consolidated basis from December 31, 2023 through March 31, 2024, and on our results of operations for the quarters ended March 31, 2024 and December 31, 2023, and for the three months ended March 31, 2024 and March 31, 2023.

Current wording

The purpose of this discussion and analysis is to focus on significant changes in the financial condition of Red River Bancshares, Inc. on a consolidated basis from December 31, 2023 through June 30, 2024, and on our results of operations for the quarters ended June 30, 2024 and March 31, 2024, and for the six months ended June 30, 2024 and June 30, 2023.

Previous wording

Red River Bancshares, Inc. is the bank holding company for Red River Bank, a Louisiana state-chartered bank established in 1999 that provides a fully integrated suite of banking products and services tailored to the needs of our commercial and retail customers. Red River Bank operates from a network of 27 banking centers throughout Louisiana and one combined LDPO in New Orleans, Louisiana. Banking centers are located in the following Louisiana markets: Central, which includes the Alexandria MSA; Northwest, which includes the Shreveport-Bossier City MSA; Capital, which includes the Baton Rouge MSA; Southwest, which includes the Lake Charles MSA; the Northshore, which includes Covington; Acadiana, which includes the Lafayette MSA; and New Orleans.

Current wording

Red River Bancshares, Inc. is the bank holding company for Red River Bank, a Louisiana state-chartered bank established in 1999 that provides a fully integrated suite of banking products and services tailored to the needs of our commercial and retail customers. Red River Bank operates from a network of 28 banking centers throughout Louisiana and one combined LDPO in New Orleans, Louisiana. Banking centers are located in the following Louisiana markets: Central, which includes the Alexandria MSA; Northwest, which includes the Shreveport-Bossier City MSA; Capital, which includes the Baton Rouge MSA; Southwest, which includes the Lake Charles MSA; the Northshore, which includes Covington; Acadiana, which includes the Lafayette MSA; and New Orleans.

Previous wording

FIRST QUARTER 2024 FINANCIAL AND OPERATIONAL HIGHLIGHTS

Current wording

SECOND QUARTER 2024 FINANCIAL AND OPERATIONAL HIGHLIGHTS

Previous wording

•Net income for the first quarter of 2024 was $8.2 million, or $1.16 diluted EPS, a decrease of $104,000, or 1.3%, compared to $8.3 million, or $1.16 diluted EPS, for the fourth quarter of 2023. Net income in the first quarter benefited from approximately $800,000 of nonrecurring noninterest income payments and operating expense reduction items.

Current wording

•Net income for the second quarter of 2024 was $8.0 million, or $1.16 diluted EPS, a decrease of $201,000, or 2.5%, compared to $8.2 million, or $1.16 diluted EPS, for the first quarter of 2024. Net income for the second quarter benefited from higher net interest income and an improved net interest margin FTE. Net income for the first quarter of 2024 benefited from approximately $800,000 of nonrecurring noninterest income payments and operating expense reduction items.

Previous wording

•For the first quarter of 2024, the return on assets was 1.07%, and the return on equity was 10.77%.

Current wording

•For the second quarter of 2024, the return on assets was 1.05%, and the return on equity was 10.69%.

Previous wording

•Net interest income and net interest margin FTE were fairly consistent between the first quarter of 2024 and the prior quarter. Net interest income for the first quarter of 2024 was $21.4 million compared to $21.3 million for the prior quarter. Net interest margin FTE for the first quarter of 2024 was 2.83% compared to 2.82% for the prior quarter. These results were due to improved yields on securities and loans offset by higher deposit costs.

Current wording

•Net interest income and net interest margin FTE increased for the second quarter of 2024 compared to the prior quarter. Net interest income for the second quarter of 2024 was $21.8 million compared to $21.4 million for the prior quarter. Net interest margin FTE for the second quarter of 2024 was 2.92% compared to 2.83% for the prior quarter. These increases were due to improved yields on loans and securities outpacing higher deposit rates.

Previous wording

•As of March 31, 2024, assets were $3.07 billion, which was $55.5 million, or 1.8%, lower than December 31, 2023. The decrease was due to a $56.0 million decrease in deposits.

Current wording

•As of June 30, 2024, assets were $3.05 billion, which was $24.8 million, or 0.8%, lower than March 31, 2024. The decrease was due to a $29.2 million decrease in deposits.

Previous wording

•As of March 31, 2024, NPAs were $2.5 million, or 0.08% of assets, and the ACL was $21.6 million, or 1.06% of loans HFI.

Current wording

•As of June 30, 2024, NPAs were $3.2 million, or 0.11% of assets, and the ACL was $21.6 million, or 1.06% of loans HFI.

Previous wording

•We paid a quarterly cash dividend of $0.09 per common share in the first quarter of 2024, up from $0.08 per common share for each quarter in 2023.

Current wording

•We paid a quarterly cash dividend of $0.09 per common share in the second quarter of 2024.

Previous wording

•As of March 31, 2024, capital levels were strong with a stockholders’ equity to assets ratio of 9.74%, a leverage ratio of 11.44%, and a total risk-based capital ratio of 17.84%.

Current wording

•As of June 30, 2024, capital levels were strong with a stockholders’ equity to assets ratio of 10.07%, a leverage ratio of 11.74%, and a total risk-based capital ratio of 18.01%.

Previous wording

Net income for the three months ended March 31, 2024, was $8.2 million, or $1.16 diluted EPS, a decrease of $1.4 million, or 14.7%, compared to $9.6 million, or $1.33 diluted EPS, for the three months ended March 31, 2023. The decrease in net income was due to a $1.5 million decrease in net interest income, a $385,000 increase in operating expenses, and a $300,000 increase in the provision for credit losses, partially offset by a $588,000 increase in noninterest income and a $233,000 decrease in income tax expense. The return on assets for the three months ended March 31, 2024, was 1.07%, compared to 1.28% for the three months ended March 31, 2023. The return on equity was 10.77% for the three months ended March 31, 2024, compared to 14.33% for the three months ended March 31, 2023. Our efficiency ratio for the three months ended March 31, 2024, was 60.37%, compared to 56.84% for the three months ended March 31, 2023.

Current wording

Net income for the six months ended June 30, 2024, was $16.2 million, or $2.31 diluted EPS, a decrease of $2.4 million, or 12.9%, compared to $18.6 million, or $2.58 diluted EPS, for the six months ended June 30, 2023. The decrease in net income was due to a $1.3 million decrease in net interest income, a $942,000 increase in operating expenses, a $321,000 decrease in noninterest income, and a $300,000 increase in the provision for credit losses, partially offset by a $441,000 decrease in income tax expense. The return on assets for the six months ended June 30, 2024, was 1.06%, compared to 1.24% for the six months ended June 30, 2023. The return on equity was 10.73% for the six months ended June 30, 2024, compared to 13.54% for the six months ended June 30, 2023. Our efficiency ratio for the six months ended June 30, 2024, was 61.23%, compared to 57.74% for the six months ended June 30, 2023.

Previous wording

In 2023, the interest rate environment continued to trend upward. The FOMC increased the federal funds rate by 50 bps in the first quarter of 2023, by 25 bps in the second and third quarters of 2023, and kept the rate consistent through the first quarter of 2024 with a target range of 5.25%-5.50%. The average effective federal funds rate for the first quarter of 2024 and the fourth quarter of 2023 was 5.33% compared to 4.52% for the first quarter of 2023. The net interest income and net interest margin FTE for the first quarter of 2024 were fairly consistent with the prior quarter. However, compared to the first quarter of 2023, both the net interest income and net interest margin FTE for the first quarter of 2024 were impacted by the federal funds rate increases in 2023.

Current wording

In 2023, the interest rate environment continued to trend upward. The FOMC increased the federal funds rate by 50 bps in the first quarter of 2023, by 25 bps in the second and third quarters of 2023, and kept the rate consistent through the second quarter of 2024 with a target range of 5.25%-5.50%. The average effective federal funds rate was 5.33% for the first and second quarters of 2024, compared to 4.75% for the first six months of 2023. The net interest income and net interest margin FTE increased in the second quarter of 2024 compared to the prior quarter. The net interest income and net interest margin FTE decreased for the six months ended June 30, 2024, compared to the six months ended June 30, 2023.

Previous wording

Net interest income for the first quarter of 2024 was $21.4 million, which was $69,000, or 0.3%, higher than the fourth quarter of 2023, due to a $977,000 increase in interest and dividend income, offset by a $908,000 increase in interest expense. The increase in interest and dividend income was due to higher interest income on loans and securities, partially offset by lower interest income on short-term liquid assets. Loan income increased $995,000 due to higher rates on new and renewed loans, combined with higher balances in loans HFI. The average rate on new and renewed loans was 7.56% for the first quarter of 2024, compared to 7.39% for the prior quarter. Interest income on securities increased $408,000, primarily due to higher yields on securities recently purchased. Interest income on short-term liquid assets decreased due to lower balances in these accounts during the first quarter. The increase in interest expense was due to higher rates on new and renewed time deposits and larger balances in certain higher cost deposit accounts.

Current wording

Net interest income for the second quarter of 2024 was $21.8 million, which was $424,000, or 2.0%, higher than the first quarter of 2024, due to a $663,000 increase in interest and dividend income, partially offset by a $239,000 increase in interest expense. The increase in interest and dividend income was due to higher interest income on loans, partially offset by lower interest income on short-term liquid assets. Loan income increased $989,000 due to higher rates on new and renewed loans, combined with higher balances in loans HFI. The average rate on new and renewed loans was 7.98% for the second quarter of 2024, compared to 7.56% for the prior quarter. Interest income on short-term liquid assets decreased due to lower balances in these accounts during the second quarter. The increase in interest expense was primarily due to higher rates on new and renewed time deposits, combined with larger balances in these accounts.

Previous wording

The net interest margin FTE increased one bp to 2.83% for the first quarter of 2024, compared to 2.82% for the prior quarter. This increase was due to improved yields on securities and loans, offset by higher deposit costs. The yield on securities increased 22 bps, due to reinvesting securities cash flows received into new securities at higher yields. The yield on loans increased 15 bps due to higher rates on new and renewed loans. These increases were largely offset by a 33 bp increase in the rate on time deposits during the first quarter. The cost of deposits increased 15 bps to 1.70% for the first quarter of 2024, compared to 1.55% for the previous quarter.

Current wording

The net interest margin FTE increased nine bps to 2.92% for the second quarter of 2024, compared to 2.83% for the prior quarter. This increase was due to improved yields on loans and securities, partially offset by higher deposit costs. The yield on loans increased 12 bps due to higher rates on new and renewed loans. The yield on securities increased eight bps due to reinvesting securities cash flows received into new securities at higher yields. These increases were partially offset by an eight bp increase in the rate on interest-bearing deposits during the second quarter. The cost of deposits increased five bps to 1.75% for the second quarter of 2024, compared to 1.70% for the previous quarter.

Previous wording

In the first quarter of 2024, the target range for the federal funds rate remained at 5.25%-5.50%. The market’s expectation is that the FOMC will lower the federal funds rate in 2024. During the remainder of 2024, we anticipate receiving approximately $100.0 million in securities cash flows. We expect to redeploy these cash flows into higher yielding assets, which should benefit both net interest income and net interest margin FTE. As of March 31, 2024, floating rate loans were 13.3% of loans HFI, and floating rate transaction deposits were 6.4% of interest-bearing transaction deposits. Depending on balance sheet activity and the movement in interest rates, we expect the net interest margin FTE to improve slightly throughout 2024.

Current wording

In the second quarter of 2024, the target range for the federal funds rate remained at 5.25%-5.50%. The market’s expectation is that the FOMC will lower the target federal funds rate in the second half of 2024. During the 12 months ending June 30, 2025, we anticipate receiving approximately $126.0 million in securities cash flows with an average yield of 2.40%, and we project approximately $215.3 million of fixed rate loans will mature with an average yield of 5.55%. We expect to redeploy these balances into higher yielding assets, which should benefit both net interest income and net interest margin FTE. As of June 30, 2024, floating rate loans were 13.9% of loans HFI, and floating rate transaction deposits were 6.5% of interest-bearing transaction deposits. Depending on balance sheet activity and the movement in interest rates, we expect the net interest margin FTE to improve slightly in the third and fourth quarters of 2024.

Previous wording

(1)Includes average outstanding balances of loans HFS of $2.0 million and$2.3 million for the three months ended March 31, 2024 and December 31, 2023, respectively.

Current wording

(1)Includes average outstanding balances of loans HFS of$3.2 million and$2.0 million for the three months ended June 30, 2024 and March 31, 2024, respectively.

Previous wording

Net interest income for the three months ended March 31, 2024 was $21.4 million, which was $1.5 million, or 6.7%, lower than $22.9 million for the three months ended March 31, 2023. Net interest income decreased due to a $6.8 million increase in interest expense, partially offset by a $5.3 million increase in interest and dividend income.

Current wording

Net interest income for the six months ended June 30, 2024 was $43.2 million, which was $1.3 million, or 2.9%, lower than $44.4 million for the six months ended June 30, 2023. Net interest income decreased due to an $11.8 million increase in interest expense, partially offset by a $10.5 million increase in interest and dividend income.

Previous wording

The increase in interest expense for the three months ended March 31, 2024, when compared to the three months ended March 31, 2023, was due to an increase in deposit rates as we responded to deposit rate pressure, combined with larger balances in higher cost deposit accounts. During 2023, we experienced a change in the deposit mix due to customers moving deposits from lower yielding categories to higher yielding categories. The increase in interest and dividend income for the three months ended March 31, 2024, compared to the same period prior year, was primarily due to higher interest income on loans. Loan income increased $4.1 million due to higher rates on new, renewed, and floating rate loans and a $96.7 million increase in the average balance of loans, when compared to the same period prior year.

Current wording

The increase in interest expense for the six months ended June 30, 2024, when compared to the six months ended June 30, 2023, was due to an increase in deposit rates as we responded to deposit rate pressure, combined with larger balances in higher cost deposit accounts. During 2023, we experienced a change in the deposit mix due to customers moving deposits from lower yielding categories to higher yielding categories. The increase in interest and dividend income for the six months ended June 30, 2024, compared to the same period prior year, was primarily due to higher interest income on loans and short-term liquid assets. Loan income increased $8.2 million due to higher rates on new, renewed, and floating rate loans and a $103.0 million increase in the average balance of loans, when compared to the same period prior year. The interest income on short-term liquid assets increased $1.5 million due to the higher interest rate environment and a $32.0 million increase in the average balance of these assets.

Previous wording

Net interest margin FTE decreased 30 bps to 2.83% for the three months ended March 31, 2024, from 3.13% for the three months ended March 31, 2023, due to the increase in the cost of deposits exceeding the increase in the yield on earning assets. The cost of deposits increased 99 bps to 1.70% for the three months ended March 31, 2024, from 0.71% for the three months ended March 31, 2023, due to a 138 bp increase in the rate on interest-bearing deposits, combined with customers moving deposits from lower yielding categories to higher yielding categories in 2023. Within total interest-bearing deposits, the rate on time deposits and interest-bearing transaction deposits increased 213 and 88 bps, respectively. These rates increased as we continued to respond to deposit rate pressure in 2023.

Current wording

Net interest margin FTE decreased 15 bps to 2.89% for the six months ended June 30, 2024, from 3.04% for the six months ended June 30, 2023, due to the increase in the cost of deposits exceeding the increase in the yield on earning assets. The cost of deposits increased 85 bps to 1.72% for the six months ended June 30, 2024, from 0.87% for the six months ended June 30, 2023, due to a 117 bp increase in the rate on interest-bearing deposits, combined with customers moving deposits from lower yielding categories to higher yielding categories. Within total interest-bearing deposits, the rate on time deposits and interest-bearing transaction deposits increased 177 and 73 bps, respectively. These rates increased as we continued to respond to deposit rate pressure.

Previous wording

The net interest margin FTE was positively impacted for the three months ended March 31, 2024, when compared to the three months ended March 31, 2023, by the increase in the yield on earning assets. The yield on loans increased 55 bps due to higher rates on new, renewed, and floating rate loans due to the higher interest rate environment. The yield on securities increased 43 bps for the three months ended March 31, 2024, compared to the three months ended March 31, 2023, due to reinvesting securities cash flows received into new securities at higher yields. In addition, the yield on short-term liquid assets increased 82 bps due to the FOMC’s increases to the target federal funds range, compared to the same period prior year.

Current wording

The net interest margin FTE was positively impacted by the increase in the yield on earning assets, for the six months ended June 30, 2024, when compared to the six months ended June 30, 2023. The yield on loans increased 54 bps due to higher rates on new, renewed, and floating rate loans due to the higher interest rate environment. The yield on securities increased 44 bps for the six months ended June 30, 2024, compared to the six months ended June 30, 2023, due to reinvesting securities cash flows received into new securities at higher yields. In addition, the yield on short-term liquid assets increased 65 bps due to the FOMC’s increases to the target federal funds range, compared to the same period prior year.

Previous wording

The following table presents average balance sheet information, interest income, interest expense, and the corresponding average yields earned and rates paid for the three months ended March 31, 2024 and 2023:

Current wording

The following table presents average balance sheet information, interest income, interest expense, and the corresponding average yields earned and rates paid for the six months ended June 30, 2024 and 2023:

Previous wording

(1)Includes average outstanding balances of loans HFS of $2.0 million and $1.3 million for the three months ended March 31, 2024 and 2023, respectively.

Current wording

(1)Includes average outstanding balances of loans HFS of $2.6 million and $2.4 million for the six months ended June 30, 2024 and 2023, respectively.

Previous wording

The provision for credit losses for the first quarter of 2024 was $300,000, which was $50,000 higher than the provision for credit losses of $250,000 for the fourth quarter of 2023. The provision in the first quarter was due to potential economic challenges resulting from the current inflationary environment, changing monetary policy, and loan growth. We will continue to evaluate future provision needs in relation to current economic situations, loan growth, trends in asset quality, forecasted information, and other conditions influencing loss expectations.

Current wording

The provision for credit losses for the second quarter of 2024 was $300,000, which was consistent with the first quarter of 2024. The provision in the first and second quarters was due to potential economic challenges resulting from the current inflationary environment, changing monetary policy, and loan growth. We will continue to evaluate future provision needs in relation to current economic situations, loan growth, trends in asset quality, forecasted information, and other conditions influencing loss expectations.

Previous wording

The provision for credit losses for the first quarter of 2024 was $300,000 due to potential economic challenges resulting from the current inflationary environment, changing monetary policy, and loan growth. Effective January 1, 2023, we adopted ASC 326, the CECL methodology for estimating credit losses. For the cumulative effect of adopting ASC 326, we recorded a $569,000, net of tax, decrease to stockholders’ equity as of January 1, 2023. No provision expense was recorded for the first quarter of 2023 under the new CECL methodology.

Current wording

The provision for credit losses for the six months ended June 30, 2024, was $600,000, an increase of $300,000, or 100.0%, from $300,000 for the six months ended June 30, 2023. The primary drivers of the increase were the current inflationary environment, changing monetary policy, current economic forecasts, and loan growth. Effective January 1, 2023, we adopted ASC 326, the CECL methodology for estimating credit losses. For the cumulative effect of adopting ASC 326, we recorded a $569,000, net of tax, decrease to stockholders’ equity as of January 1, 2023. No provision expense was recorded for the first quarter of 2023 under the new CECL methodology.

Previous wording

Noninterest income decreased $259,000 to $4.9 million for the first quarter of 2024 compared to $5.2 million for the fourth quarter of 2023. The decrease in noninterest income was mainly due to a loss on equity securities and decreases in service charges on deposit accounts, loan and deposit income, and income from SBIC limited partnerships of which Red River Bank is a member, partially offset by an increase in net debit card income.

Current wording

Noninterest income increased $170,000 to $5.1 million for the second quarter of 2024 compared to $4.9 million for the first quarter of 2024. The increase in noninterest income was mainly due to an increase in mortgage loan income and income from SBIC limited partnerships of which Red River Bank is a member, partially offset by a decrease in brokerage income and net debit card income.

Previous wording

Mortgage loan income increased $181,000 to $456,000 for the three months ended March 31, 2024, compared to the same period prior year due to increased purchase activity.

Current wording

Mortgage loan income increased $194,000 to $650,000 for the second quarter of 2024, compared to the prior quarter due to increased purchase activity.

Previous wording

SBIC income for the first quarter of 2024 was $352,000, compared to $393,000 for the previous quarter. This decrease was primarily due to lower distributions from these partnerships in the first quarter. We received distribution payments of $114,000 in the first quarter of 2024 and $166,000 in the fourth quarter of 2023, in addition to the normal income from these partnerships.

Current wording

SBIC income increased $102,000 to $454,000 for the second quarter of 2024, compared to the prior quarter. This increase was primarily due to higher normal income received from these partnerships in the second quarter. In the first quarter of 2024, we received a distribution payment of $114,000, in addition to normal income from these partnerships. We expect SBIC income to be lower in future quarters.

Previous wording

Debit card income, net, increased $147,000 to $1.0 million for the first quarter of 2024, compared to $875,000 for the previous quarter. We terminated our existing debit card provider contract, which resulted in $145,000 of nonrecurring income for the first quarter of 2024. In January 2024, a newly negotiated debit card provider contract became effective.

Current wording

Debit card income, net, decreased $73,000 to $949,000 for the second quarter of 2024, compared to the prior quarter. In the first quarter of 2024, we terminated our previous debit card provider contract, which resulted in $145,000 of nonrecurring income. In January 2024, a newly negotiated debit card provider contract became effective. The second quarter of 2024 benefited from a higher number of debit card transactions and related income.

Previous wording

Noninterest income increased $588,000 to $4.9 million for the three months ended March 31, 2024, compared to $4.3 million for the three months ended March 31, 2023. The increase in noninterest income was mainly due to higher mortgage and brokerage income, income from SBIC limited partnerships of which Red River Bank is a member, and net debit card income.

Current wording

Noninterest income decreased $321,000 to $10.0 million for the six months ended June 30, 2024, compared to $10.3 million for the six months ended June 30, 2023. The decrease in noninterest income was mainly due to lower income from SBIC limited partnerships of which Red River Bank is a member, partially offset by higher mortgage loan income, brokerage income, and net debit card income.

Previous wording

Brokerage income increased $180,000 to $987,000 for the three months ended March 31, 2024, compared to the same period prior year. This increase was primarily due to investing activities of new clients. Assets under management were $1.07 billion and $965.2 million as of March 31, 2024 and 2023, respectively.

Current wording

Brokerage income increased $150,000 to $1.9 million for the six months ended June 30, 2024, compared to the same period prior year. This increase was primarily due to higher investing activities by clients. Assets under management were $1.09 billion and $997.3 million as of June 30, 2024 and 2023, respectively.

Previous wording

Debit card income, net, increased $88,000 to $1.0 million for the three months ended March 31, 2024, compared to $934,000 for the same period prior year due to the termination of our existing debit card provider contract in the first quarter of 2024, which resulted in $145,000 of nonrecurring income.

Current wording

Debit card income, net, increased $113,000 to $2.0 million for the six months ended June 30, 2024, compared to the same period prior year. In the first quarter of 2024, we terminated our previous debit card provider contract, which resulted in $145,000 of nonrecurring income. In January 2024, a newly negotiated debit card provider contract became effective, which resulted in an increase in debit card income. These increases were partially offset by higher debit card processing expenses in the first half of 2024.

Previous wording

Operating expenses decreased $150,000 to $15.9 million for the first quarter of 2024, compared to $16.0 million for the fourth quarter of 2023. The decrease in operating expenses was due to lower loan and deposit expenses and data processing expense, partially offset by higher personnel expenses and other taxes.

Current wording

Operating expenses increased $816,000 to $16.7 million for the second quarter of 2024, compared to $15.9 million for the first quarter of 2024. Theincrease in operating expenses was due to higher loan and deposit expenses, data processing expense, other business development expenses, legal and professional expenses, and occupancy and equipment expenses, partially offset by lower other taxes.

Previous wording

Loan and deposit expenses decreased $298,000 to ($42,000) for the first quarter of 2024, compared to the prior quarter. This decrease was primarily due to the receipt of a $262,000 negotiated, variable rebate from a vendor in the first quarter of 2024.

Current wording

Loan and deposit expenses increased $351,000 to$309,000 for the second quarter of 2024, compared to the prior quarter. The first quarter of 2024 benefited from the receipt of a $262,000 negotiated, variable rebate from a vendor.

Previous wording

Data processing expense decreased $284,000 to $347,000 for the first quarter of 2024, compared to the prior quarter. This decrease was attributable to receipt of a $284,000 periodic refund from our data processing center in the first quarter of 2024.

Current wording

Data processing expense increased $304,000 to$651,000 for the second quarter of 2024, compared to the prior quarter. The first quarter of 2024 benefited from the receipt of a $284,000 periodic refund from our data processing center.

Previous wording

Operating expenses increased $385,000 to $15.9 million for the three months ended March 31, 2024, compared to $15.5 million for the three months ended March 31, 2023. The increase in operating expenses was mainly due to higher personnel expenses, legal and professional expenses, and other taxes, partially offset by lower loan and deposit expenses and occupancy and equipment expenses.

Current wording

Operating expenses increased $942,000 to $32.6 million for the six months ended June 30, 2024, compared to $31.6 million for the six months ended June 30, 2023. Theincrease in operating expenses was mainly due to higher personnel expenses, legal and professional expenses, other business development expenses, and occupancy and equipment expenses, partially offset by lower loan and deposit expenses and other taxes.

Previous wording

Personnel expenses increased $550,000 to $9.6 million for the three months ended March 31, 2024, compared to the same period prior year. This increase was primarily due to an increase in headcount and increased revenue-based commission compensation, offset by a decrease in medical insurance expense. As of March 31, 2024 and 2023, we had 358 and 352 total employees, respectively.

Current wording

Personnel expenses increased $607,000 to$19.2 million for thesix months ended June 30, 2024, compared to the same period prior year. This increase was primarily due to higher compensation expense as a result of net staff changes, offset by a decrease in medical insurance expense. As of June 30, 2024 and 2023, we had 361 and 353 total employees, respectively.

Previous wording

Legal and professional expenses increased $102,000 to $618,000 for the three months ended March 31, 2024, compared to the same period prior year. This increase was primarily due to higher contracted services as well as higher professional and advisory services mainly related to a newly negotiated debit card provider contract effective January 2024.

Current wording

Legal and professional expenses increased $250,000 to $1.3 million for the six months ended June 30, 2024, compared to the same period prior year. This increase was due to higher contracted services, higher public company expenses, and higher professional and advisory services mainly related to a newly negotiated debit card provider contract effective January 2024.

Previous wording

Occupancy and equipment expenses decreased $101,000 to $1.6 million for the three months ended March 31, 2024, compared to the same period prior year. This decrease was primarily due to $161,000 of nonrecurring expenses in the first quarter of 2023 related to opening our new operations center building, partially offset by a full period of expenses in the first quarter of 2024 related to properties that were expanded or opened in 2023.

Current wording

Occupancy and equipment expenses increased $43,000 to$3.3 million for thesix months ended June 30, 2024, compared to the same period prior year. This increase was primarily due to a full period of expenses related to properties that were expanded or opened in 2023 and $67,000 of nonrecurring expenses related to our new location in the New Orleans market and other 2024 property renovations. The first half of 2023 had $189,000 of nonrecurring expenses related to opening our new operations center building and the expansion of a banking center in the Southwest market.

Previous wording

Loan and deposit expenses decreased $247,000 to ($42,000) for the three months ended March 31, 2024, compared to the same period prior year. This decrease was primarily due to the receipt of a $262,000 negotiated, variable rebate from a vendor in the first quarter of 2024.

Current wording

Loan and deposit expenses decreased $222,000 to $267,000 for the six months ended June 30, 2024, compared to the same period prior year. The first half of 2024 benefited from the receipt of a $262,000 negotiated, variable rebate from a vendor.

Previous wording

Other taxes increased $51,000 to $737,000 for the three months ended March 31, 2024, compared to the same period prior year. This increase was primarily due to higher stock repurchase tax expense related to higher stock repurchases in the first quarter of 2024, partially offset by a decrease in State of Louisiana bank stock tax resulting from lower deposit account balances and lower net income for the applicable tax years.

Current wording

Other taxes decreased $141,000 to $1.2 million for the six months ended June 30, 2024, compared to the same period prior year. This decreasewas primarily due to a decrease in State of Louisiana bank stock tax resulting from lower deposit account balances and lower net income for the applicable tax years.