SOUTH PLAINS FINANCIAL INC

Previous wording

We had net income of $11.1 million, or $0.66 per diluted common share, for the three months ended June 30, 2024, compared to net income of $29.7 million, or $1.71 per diluted common share for the three months ended June 30, 2023. Return on average equity (annualized) was 10.83% and return on average assets (annualized) was 1.07% for the three months ended June 30, 2024, compared to 31.33% and 2.97%, respectively, for the three months ended June 30, 2023.

Current wording

We had net income of $11.2 million, or $0.66 per diluted common share, for the three months ended September 30, 2024, compared to net income of $13.5 million, or $0.78 per diluted common share for the three months ended September 30, 2023. Return on average equity (annualized) was 10.36% and return on average assets (annualized) was 1.05% for the three months ended September 30, 2024, compared to 14.01% and 1.27%, respectively, for the three months ended September 30, 2023.

Previous wording

We had net income of $22.0 million, or $1.30 per diluted common share for the six months ended June 30, 2024, compared to net income of $38.9 million, or $2.23 per diluted common share for the six months ended June 30, 2023. Return on average equity (annualized) was 10.78% and return on average assets (annualized) was 1.06% for the six months ended June 30, 2024, compared to 21.14% and 1.98%, respectively, for the six months ended June 30, 2023.

Current wording

We had net income of $33.2 million, or $1.96 per diluted common share for the nine months ended September 30, 2024, compared to net income of $52.4 million, or $3.01 per diluted common share for the nine months ended September 30, 2023. Return on average equity (annualized) was 10.63% and return on average assets (annualized) was 1.05% for the nine months ended September 30, 2024, compared to 18.70% and 1.73%, respectively, for the nine months ended September 30, 2023.

Previous wording

Net interest income for the six months ended June 30, 2024 was $71.3 million, compared to $68.9 million for the six months ended June 30, 2023, an increase of $2.4 million, or 3.4%, and was comprised of an increase of $19.7 million in interest income, partially offset by an increase of $17.3 million in interest expense. The growth in interest income was attributable to increases of $17.0 million in loan interest income and $2.7 million in interest income from securities and other interest-earning assets. The increase in loan interest income was mainly due to growth of $212.1 million in average loans outstanding and an increase of 70 basis points in the yield on loans. The increase in interest income on securities and other interest-earning assets was primarily due to higher market interest rates. The $17.3 million increase in interest expense was primarily related to an increase of $322.0 million in average interest-bearing deposits and a 105 basis point increase in the rate paid on interest-bearing deposits over the same period in 2023. Additionally, average noninterest-bearing demand deposits decreased $133.2 million for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023.

Current wording

Net interest income for the three months ended September 30, 2024 was $37.3 million, compared to $35.7 million for the three months ended September 30, 2023, an increase of $1.6 million, or 4.5%, and was comprised of an increase of $5.1 million in interest income, partially offset by an increase of $3.5 million in interest expense. The growth in interest income was primarily attributable to an increase of $5.3 million in loan interest income from growth of $64.2 million in average loans outstanding and an increase of 58 basis points in the yield on loans. The $3.5 million increase in interest expense was primarily related to an increase of $111.2 million in average interest-bearing deposits and a 40 basis point increase in the rate paid on interest-bearing deposits over the same period in 2023. Additionally, average noninterest-bearing demand deposits decreased $95.1 million for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023.

Previous wording

For the three months ended June 30, 2024, net interest margin and net interest spread were 3.63% and 2.54%, respectively, compared to 3.65% and 2.73%, respectively, for the same period in 2023, which reflects the changes in interest income and interest expense discussed above.

Current wording

For the three months ended September 30, 2024, net interest margin and net interest spread were 3.65% and 2.55%, respectively, compared to 3.52% and 2.48%, respectively, for the same period in 2023, which reflects the changes in interest income and interest expense discussed above.

Previous wording

Net interest income for the three months ended June 30, 2024 was $35.9 million, compared to $34.6 million for the three months ended June 30, 2023, an increase of $1.3 million, or 3.8%, and was comprised of an increase of $8.4 million in interest income, partially offset by an increase of $7.1 million in interest expense. The growth in interest income was attributable to increases of $7.7 million in loan interest income and $680 thousand in interest income from securities and other interest-earning assets. The increase in loan interest income was mainly due to growth of $188.5 million in average loans outstanding and an increase of 66 basis points in the yield on loans. The increase in interest income on securities and other interest-earning assets was primarily due to higher market interest rates. The $7.1 million increase in interest expense was primarily related to an increase of $255.7 million in average interest-bearing deposits and an 88 basis point increase in the rate paid on interest-bearing deposits over the same period in 2023. Additionally, average noninterest-bearing demand deposits decreased $115.4 million for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023.

Current wording

Net interest income for the nine months ended September 30, 2024 was $108.6 million, compared to $104.6 million for the nine months ended September 30, 2023, an increase of $4.0 million, or 3.8%, and was comprised of an increase of $24.8 million in interest income, partially offset by an increase of $20.8 million in interest expense. The growth in interest income was attributable to increases of $22.3 million in loan interest income and $2.4 million in interest income from securities and other interest-earning assets. The increase in loan interest income was mainly due to growth of $162.8 million in average loans outstanding and an increase of 65 basis points in the yield on loans. The increase in interest income on securities and other interest-earning assets was primarily due to higher market interest rates. The $20.8 million increase in interest expense was primarily related to an increase of $251.7 million in average interest-bearing deposits and an 82 basis point increase in the rate paid on interest-bearing deposits over the same period in 2023. Additionally, average noninterest-bearing demand deposits decreased $120.5 million for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023.

Previous wording

For the six months ended June 30, 2024, net interest margin and net interest spread were 3.60% and 2.52%, respectively, compared to 3.70% and 2.84%, respectively, for the same period in 2023, which reflects the changes in interest income and interest expense discussed above.

Current wording

For the nine months ended September 30, 2024, net interest margin and net interest spread were 3.61% and 2.53%, respectively, compared to 3.64% and 2.71%, respectively, for the same period in 2023, which reflects the changes in interest income and interest expense discussed above.

Previous wording

The Company recorded a provision for credit losses of $1.8 million for the three months ended June 30, 2024, compared to $3.7 million for the three months ended June 30, 2023. The decline in provision of $1.9 million was largely attributable to a decrease in the period net loan growth of $108.0 million and a reduction of $456 thousand in provision for loans individually evaluated.

Current wording

The Company recorded a provision for credit losses of $495 thousand for the three months ended September 30, 2024, compared to a negative provision of $700 thousand for the three months ended September 30, 2023. The increase in provision of $1.2 million was largely attributable to a decrease of $1.3 million in specific reserves during the three months ended September 30, 2023.

Previous wording

The Company recorded a provision for credit losses for the six months ended June 30, 2024 of $2.6 million, compared to $4.7 million for the six months ended June 30, 2023. The decline in provision of $2.1 million was largely attributable to a decrease in the period net loan growth of $150.9 million and a reduction of $399 thousand in provision for loans individually evaluated.

Current wording

The Company recorded a provision for credit losses for the nine months ended September 30, 2024 of $3.1 million, compared to $4.0 million for the nine months ended September 30, 2023. The decline in provision of $900 thousand was largely attributable to a decrease in loan growth, partially offset by an increase in net charge-offs for the nine months ended September 30, 2024, compared to the same period in 2023.

Previous wording

Noninterest income for the three months ended June 30, 2024 was $12.7 million, compared to $47.1 million for the three months ended June 30, 2023, a decrease of $34.4 million, or 73.0%. Significant changes in the components of noninterest income are detailed below.

Current wording

Noninterest income for the three months ended September 30, 2024 was $10.6 million, compared to $12.3 million for the three months ended September 30, 2023, a decrease of $1.6 million, or 13.4%. Significant changes in the components of noninterest income are detailed below.

Previous wording

Service charges on deposit accounts - Income from service charges on deposit accounts increased $204 thousand, or 11.7%, for the three months ended June 30, 2024 as compared to the same period in 2023. The increase was primarily the result of treasury management initiatives taken to drive growth.

Current wording

Service charges on deposit accounts - Income from service charges on deposit accounts increased $183 thousand, or 9.9%, for the three months ended September 30, 2024 as compared to the same period in 2023. The increase was primarily the result of treasury management initiatives taken to drive growth.

Previous wording

Gain on sale of subsidiary - A $33.5 million gain from the sale of Windmark Insurance Agency, Inc. (“Windmark”) was recorded in the second quarter of 2023.

Current wording

Gain on sale of subsidiary - A $33.5 million gain from the sale of Windmark Insurance Agency, Inc. (“Windmark”) was recorded in the second quarter of 2023 and an additional $290 thousand was recorded in the third quarter of 2023.

Previous wording

Noninterest income for the six months ended June 30, 2024 was $24.1 million, compared to $57.8 million for the six months ended June 30, 2023, a decrease of $33.7 million, or 58.3%. Significant changes in the components of noninterest income are detailed below.

Current wording

Noninterest income for the nine months ended September 30, 2024 was $34.8 million, compared to $70.1 million for the nine months ended September 30, 2023, a decrease of $35.3 million, or 50.4%. Significant changes in the components of noninterest income are detailed below.

Previous wording

Service charges on deposit accounts - Income from service charges on deposit accounts increased $316 thousand, or 9.2%, for the six months ended June 30, 2024 as compared to the same period in 2023. The increase was primarily the result of treasury management initiatives taken to drive growth.

Current wording

Service charges on deposit accounts - Income from service charges on deposit accounts increased $499 thousand, or 9.4%, for the nine months ended September 30, 2024 as compared to the same period in 2023. The increase was primarily the result of treasury management initiatives taken to drive growth.

Previous wording

Mortgage banking activities - Income from mortgage banking activities decreased $1.9 million, or 35.4%, to $3.4 million for the three months ended June 30, 2024 from $5.3 million for the three months ended June 30, 2023. This decrease was mainly the result of a decline of $1.1 million in the fair value adjustment of the mortgage servicing rights assets as interest rates that affect the value were relatively flat after rising modestly in the second quarter of 2023. Additionally, mortgage loan originations declined $23.7 million, or 22.1%, in the current year period as compared to the prior year period as mortgage interest rates have risen and overall mortgage lending has slowed.

Current wording

Mortgage banking activities - Income from mortgage banking activities decreased $2.9 million, or 24.0%, to $9.2 million for the nine months ended September 30, 2024 from $12.1 million for the nine months ended September 30, 2023. This decrease was mainly the result of a decline of $1.8 million in the fair value adjustment of the mortgage servicing rights assets as interest rates that affect the value declined in the third quarter of 2024. Additionally, mortgage loan originations declined $37.0 million, or 14.1%, in the current year period as compared to the prior year period.

Previous wording

Gain on sale of subsidiary - A $33.5 million gain from the sale of Windmark was recorded in the second quarter of 2023.

Current wording

Gain on sale of subsidiary - A $33.8 million gain from the sale of Windmark was recorded in the second and third quarters of 2023.

Previous wording

Income from insurance activities - Due to the sale of Windmark in the second quarter of 2023, there was a decline of $1.4 million in income from insurance activities for the six months ended June 30, 2024 as compared to the same period in 2023.

Current wording

Income from insurance activities - Due to the sale of Windmark in the second quarter of 2023, there was a decline of $1.4 million in income from insurance activities for the nine months ended September 30, 2024 as compared to the same period in 2023.

Previous wording

Noninterest expense for the three months ended June 30, 2024 was $32.6 million compared to $40.5 million for the three months ended June 30, 2023, an decrease of $7.9 million, or 19.6%. Significant changes in the components of noninterest expense are detailed below.

Current wording

Noninterest expense for the three months ended September 30, 2024 was $33.1 million compared to $31.5 million for the three months ended September 30, 2023, an increase of $1.6 million, or 5.2%. Significant changes in the components of noninterest expense are detailed below.

Previous wording

Noninterest expense for the six months ended June 30, 2024 was $64.5 million, compared to $72.9 million for the six months ended June 30, 2023, a decrease of $8.4 million, or 11.5%. Significant changes in the components of noninterest expense are detailed below.

Current wording

Noninterest expense for the nine months ended September 30, 2024 was $97.6 million, compared to $104.3 million for the nine months ended September 30, 2023, a decrease of $6.7 million, or 6.4%. Significant changes in the components of noninterest expense are detailed below.

Previous wording

Salaries and employee benefits - Salaries and employee benefits decreased $4.2 million, or 18.1%, from $23.4 million for the three months ended June 30, 2023 to $19.2 million for the three months ended June 30, 2024. This decrease was primarily driven by $4.3 million of Windmark transaction and related incentive-based compensation expenses incurred in the second quarter of 2023.

Current wording

Salaries and employee benefits - Salaries and employee benefits decreased $4.4 million, or 7.2%, from $61.4 million for the nine months ended September 30, 2023 to $57.0 million for the nine months ended September 30, 2024. This decrease was primarily driven by $4.3 million of Windmark transaction and related incentive-based compensation expenses incurred in the second quarter of 2023.

Previous wording

Our total assets increased $16.1 million, or 0.4%, to $4.22 billion at June 30, 2024, compared to $4.20 billion at December 31, 2023. Our gross loans held for investment increased $80.1 million, or 2.7%, to $3.09 billion at June 30, 2024, compared to $3.01 billion at December 31, 2023. Our securities portfolio decreased $31.7 million, or 5.1%, to $591.0 million at June 30, 2024, compared to $622.8 million at December 31, 2023. Total deposits decreased $1.6 million, or 0.0%, to $3.62 billion at June 30, 2024, compared to $3.63 billion at December 31, 2023.

Current wording

Our total assets increased $132.9 million, or 3.2%, to $4.34 billion at September 30, 2024, compared to $4.20 billion at December 31, 2023. Our gross loans held for investment increased $23.2 million, or 0.8%, to $3.04 billion at September 30, 2024, compared to $3.01 billion at December 31, 2023. Our securities portfolio decreased $15.9 million, or 2.5%, to $606.9 million at September 30, 2024, compared to $622.8 million at December 31, 2023. Total deposits increased $93.2 million, or 2.6%, to $3.72 billion at September 30, 2024, compared to $3.63 billion at December 31, 2023.

Previous wording

Loans held for investment increased $80.1 million, or 2.7%, to $3.09 billion at June 30, 2024, compared to $3.01 billion at December 31, 2023. The growth in loans remained relationship-focused and occurred primarily in direct-energy loans, seasonal agricultural-related loans, and single-family property loans, partially offset by decreases in consumer auto loans.

Current wording

Loans held for investment increased $23.2 million, or 0.8%, to $3.04 billion at September 30, 2024, compared to $3.01 billion at December 31, 2023. The growth in loans remained relationship-focused and occurred primarily in direct-energy loans, seasonal agricultural-related loans, and single-family property loans, partially offset by decreases in consumer auto loans and residential construction loans.

Previous wording

At June 30, 2024, there was $1.57 billion in adjustable rate loans, with $876.6 million of these loans that mature or reprice in the next twelve months. Of these loans that mature or reprice in the next twelve months, $591.8 million will reprice immediately upon changes in the underlying index rate, with the remaining $284.8 million being subject to rate floors above the current index or a future repricing date. The Wall Street Journal prime rate is the predominate index used by the Bank. Further, there is $138.0 million of fixed rate loans that mature in the next twelve months as of June 30, 2024.

Current wording

At September 30, 2024, there was $1.56 billion in adjustable rate loans, with $900.9 million of these loans that mature or reprice in the next twelve months. Of these loans that mature or reprice in the next twelve months, $587.6 million will reprice immediately upon changes in the underlying index rate, with the remaining $313.3 million being subject to rate floors above the current index or a future repricing date. The Wall Street Journal prime rate is the predominate index used by the Bank. Further, there is $169.9 million of fixed rate loans that mature in the next twelve months as of September 30, 2024.

Previous wording

The Bank is primarily involved in real estate, commercial, agricultural and consumer lending activities with customers throughout Texas and Eastern New Mexico. We have a collateral concentration, as 72.2% of our loans were secured by real property as of June 30, 2024, compared to 72.7% as of December 31, 2023. We believe that these loans are not concentrated in any one single property type and that they are geographically dispersed throughout the areas we serve. Although the Bank has diversified portfolios, its debtors’ ability to honor their contracts is substantially dependent upon the general economic conditions of the markets in which it operates, which consist primarily of agribusiness, wholesale/retail, oil and gas and related businesses, healthcare industries and institutions of higher education. Commercial real estate loans and residential construction loans represent 39.8% of loans held for investment as of June 30, 2024 and represented 40.1% of loans held for investment as of December 31, 2023. Further, these loans are geographically diversified, primarily throughout the state of Texas as well as Eastern New Mexico.

Current wording

The Bank is primarily involved in real estate, commercial, agricultural and consumer lending activities with customers throughout Texas and Eastern New Mexico. We have a collateral concentration, as 72.8% of our loans were secured by real property as of September 30, 2024, compared to 72.7% as of December 31, 2023. We believe that these loans are not concentrated in any one single property type and that they are geographically dispersed throughout the areas we serve. Although the Bank has diversified portfolios, its debtors’ ability to honor their contracts is substantially dependent upon the general economic conditions of the markets in which it operates, which consist primarily of agribusiness, wholesale/retail, oil and gas and related businesses, healthcare industries and institutions of higher education. Commercial real estate loans and residential construction loans represent 40.2% of loans held for investment as of September 30, 2024 and represented 40.1% of loans held for investment as of December 31, 2023. Further, 97% of the total dollar amount of these loans are secured by collateral located in the state of Texas.

Previous wording

Commercial real estate loans increased $44.2 million, or 4.1%, to $1.13 billion as of June 30, 2024 from $1.08 billion as of December 31, 2023. The increase was primarily driven by an increase in multifamily property loans of $64.9 million and an increase in other commercial real estate loans of $18.0 million, partially offset by a decrease in commercial land development and construction loans of $47.2 million due to the completion of several large projects.

Current wording

Commercial real estate loans increased $39.4 million, or 3.6%, to $1.12 billion as of September 30, 2024 from $1.08 billion as of December 31, 2023. The increase was primarily driven by an increase in multifamily property loans of $67.1 million and an increase in other commercial real estate loans of $24.0 million, partially offset by a decrease in commercial land development and construction loans of $51.9 million due to the completion of several large projects.

Previous wording

Commercial general loans increased $10.4 million, or 2.0%, to $527.8 million as of June 30, 2024 from $517.4 million as of December 31, 2023. The increase in commercial general loans was primarily due to increases in loans to companies in the goods and services and industries.

Current wording

Commercial general loans increased $9.1 million, or 1.8%, to $526.4 million as of September 30, 2024 from $517.4 million as of December 31, 2023. The increase in commercial general loans was primarily due to increases in loans to companies in the services industry of $16.0 million, partially offset by a decrease of $4.5 million in restaurant and retail loans.

Previous wording

Commercial specialized loans increased $50.2 million, or 13.5%, to $422.6 million as of June 30, 2024 from $372.4 million as of December 31, 2023. This increase was primarily due to growth of $47.3 million in energy sector loans.

Current wording

Commercial specialized loans increased $33.9 million, or 9.1%, to $406.3 million as of September 30, 2024 from $372.4 million as of December 31, 2023. This increase was primarily due to growth of $28.5 million in energy sector loans and $5.6 million in agricultural loans.

Previous wording

Consumer and other loans decreased $3.6 million, or 0.4%, to $910.6 million as of June 30, 2024, from $914.2 million as of December 31, 2023. The decrease in these loans was primarily a result of a $32.8 million decrease in consumer auto loans, a decrease of $4.7 million in other consumer loans, partially offset by an increase of $33.9 million in residential mortgage loans. As of June 30, 2024, our consumer loan portfolio was comprised of $568.6 million in 1-4 family residential loans, $272.4 million in auto loans, and $69.5 million in other consumer loans. The consumer auto and other consumer loans portfolios have experienced a decline in new originations due to higher loan rates and economic pressures from inflation on consumers.

Current wording

Consumer and other loans decreased $32.5 million, or 3.6%, to $881.7 million as of September 30, 2024, from $914.2 million as of December 31, 2023. The decrease in these loans was a result of declines of $51.8 million in consumer auto loans and $8.4 million in other consumer loans, partially offset by an increase of $27.7 million in residential mortgage loans. As of September 30, 2024, our consumer loan portfolio was comprised of $562.4 million in 1-4 family residential loans, $253.5 million in auto loans, and $65.8 million in other consumer loans. The consumer auto and other consumer loans portfolios have experienced a decline in new originations due to higher loan rates and economic pressures from inflation on consumers.

Previous wording

Construction loans decreased $21.1 million, or 16.3%, to $108.1 million as of June 30, 2024 from $129.2 million as of December 31, 2023. The decrease resulted from reduced demand for residential construction as interest rate levels remained elevated and projects were completed and sold.

Current wording

Construction loans decreased $26.7 million, or 20.6%, to $102.5 million as of September 30, 2024 from $129.2 million as of December 31, 2023. The decrease resulted from reduced demand for residential construction as interest rate levels remained elevated and projects were completed and sold.

Previous wording

The commercial real estate and construction categories comprise the Company’s nonowner-occupied real estate loans. Total nonowner-occupied real estate loans were $1.23 billion at June 30, 2024 and $1.20 billion at December 31, 2023. Nonowner-occupied commercial real estate are made up of income-producing commercial real estate property loans and construction, acquisition, and development property loans. As of June 30, 2024, total income-producing commercial real estate property loans totaled $852.3 million and was comprised of $284.5 million of multi-family property loans, $171.4 million of retail property loans, $139.1 million of office property loans, $64.1 million in hospitality loans, and $193.3 million in other property loans. Other property loans include types such as industrial, warehouse, mini-storage, and convenience stores. As of June 30, 2024, total construction, acquisition, and development property loans totaled $381.0 million and was comprised of $108.1 million in residential construction property loans and $272.9 million of commercial construction and other land development loans. The weighted average loan-to-value of income-producing nonowner-occupied commercial real estate loans was approximately 55% at June 30, 2024. The weighted average loan-to-value of nonowner-occupied office commercial real estate loans was approximately 61% at June 30, 2024.

Current wording

The commercial real estate and construction categories comprise the Company’s nonowner-occupied real estate loans. Total nonowner-occupied real estate loans were $1.22 billion at September 30, 2024 and $1.21 billion at December 31, 2023. Nonowner-occupied commercial real estate loans are made up of income-producing commercial real estate property loans and construction, acquisition, and development property loans. As of September 30, 2024, total income-producing commercial real estate property loans totaled $865.9 million and was comprised of $286.6 million of multi-family property loans, $175.1 million of retail property loans, $138.6 million of office property loans, $63.5 million in hospitality loans, and $202.1 million in other property loans. Other property loans include types such as industrial, warehouse, mini-storage, and convenience stores. As of September 30, 2024, total construction, acquisition, and development property loans totaled $357.0 million and was comprised of $102.5 million in residential construction property loans and $254.5 million of commercial construction and other land development loans. The weighted average loan-to-value of income-producing nonowner-occupied commercial real estate loans was approximately 53% at September 30, 2024. The weighted average loan-to-value of nonowner-occupied office commercial real estate loans was approximately 59% at September 30, 2024.

Previous wording

Owner-occupied commercial real estate loans totaled $335.0 million at June 30, 2024 and $341.1 million at December 31, 2023.

Current wording

Owner-occupied commercial real estate loans totaled $335.4 million at September 30, 2024 and $341.1 million at December 31, 2023.

Previous wording

The ACL for loans was $43.2 million at June 30, 2024, compared to $42.4 million at December 31, 2023, an increase of $0.8 million, or 1.9%. The increase is primarily a result of a provision for credit losses on loans of $2.5 million being recorded during the six months ended June 30, 2024 largely attributable to growth of $80.1 million in loans held for investment, partially offset by net charge-offs of $1.7 million during the period and an increase in nonperforming loans. Uncertainty regarding forecasted economic conditions remains, due to the continued elevated interest rate environment and persistent inflation in the United States, and additional provisions for credit losses may be necessary in future periods.

Current wording

The ACL for loans was $42.9 million at September 30, 2024, compared to $42.4 million at December 31, 2023, an increase of $500 thousand, or 1.3%. The increase is primarily a result of a provision for credit losses on loans of $3.1 million being recorded during the nine months ended September 30, 2024 largely attributable to growth of $23.2 million in loans held for investment, partially offset by net charge-offs of $2.6 million during the period. Uncertainty regarding forecasted economic conditions remains, due to the continued elevated interest rate environment and persistent inflation in the United States, and additional provisions for credit losses may be necessary in future periods.

Previous wording

Net charge-offs (recoveries) totaled $776 thousand and were 0.10% (annualized) of average loans outstanding for the three months ended June 30, 2024, compared to $383 thousand and 0.05% (annualized) for the three months ended June 30, 2023. There was an increase of $220 thousand in net charge-offs on commercial-general loans in the second quarter of 2024 due to the charge-off of three loans under $135 thousand each. Net charge-offs totaled $1.7 million and were 0.11% (annualized) of average loans outstanding for the six months ended June 30, 2024, compared to $1.0 million and 0.07% (annualized) for the six months ended June 30, 2023. There was an increase of $424 thousand in net charge-offs on commercial-general loans during the first two quarters of 2024 due to the charge-off of several loans under $150 thousand each. The allowance for credit losses on loans as a percentage of loans held for investment was 1.40% at June 30, 2024 and 1.41% at December 31, 2023.

Current wording

Net charge-offs totaled $887 thousand and were 0.11% (annualized) of average loans outstanding for the three months ended September 30, 2024, compared to $362 thousand and 0.05% (annualized) for the three months ended September 30, 2023. There was an increase of $315 thousand in net charge-offs on residential construction loans in the third quarter of 2024 due to the charge-off of one loan and an increase in net charge-offs on consumer auto loans of $146 thousand. Net charge-offs totaled $2.6 million and were 0.11% (annualized) of average loans outstanding for the nine months ended September 30, 2024, compared to $1.4 million and 0.06% (annualized) for the nine months ended September 30, 2023. There was an increase of $479 thousand in net charge-offs on commercial-general loans during the first three quarters of 2024 due to the charge-off of several loans under $150 thousand each. There was also an increase of $596 thousand in net charge-offs on consumer loans during the first three quarters of 2024. The allowance for credit losses on loans as a percentage of loans held for investment was 1.41% at September 30, 2024 and 1.41% at December 31, 2023.

Previous wording

At June 30, 2024, our total nonaccrual loans were $21.8 million, or 0.71% of total loans held for investment, as compared to $3.2 million, or 0.11% of total loans held for investment, at December 31, 2023. These loans within this amount that exceeded $250 thousand were specifically analyzed and specific valuation allowances were established as necessary and included in the ACL for loans as of June 30, 2024 to cover any probable loss. One relationship totaling $20.5 million was placed on nonaccrual after the maturity date was accelerated during the second quarter of 2024. Two relationships totaling approximately $972 thousand that were on nonaccrual at December 31, 2023 were fully repaid in the first quarter of 2024.

Current wording

At September 30, 2024, our total nonaccrual loans were $22.6 million, or 0.74% of total loans held for investment, as compared to $3.2 million, or 0.11% of total loans held for investment, at December 31, 2023. These loans within this amount that exceeded $250 thousand were specifically analyzed and specific valuation allowances were established as necessary and included in the ACL for loans as of September 30, 2024 to cover any probable loss. The previously disclosed $20.0 million multi-family property credit that was placed on nonaccrual status in the second quarter of 2024 after the maturity date was accelerated, was subsequently modified during the third quarter. The modification included more stringent credit metrics. Although the loan remains in nonaccrual status, the loan continues to pay as agreed and is showing improving credit trends. Additionally, two relationships totaling approximately $972 thousand that were on nonaccrual at December 31, 2023 were fully repaid in the first quarter of 2024.

Previous wording

Nonperforming loans were $23.5 million at June 30, 2024 and $5.2 million at December 31, 2023. This increase of $18.3 million is mainly due to the changes in nonaccrual loans noted above.

Current wording

Nonperforming loans were $24.7 million at September 30, 2024 and $5.2 million at December 31, 2023. This increase of $19.5 million is mainly due to the changes in nonaccrual loans noted above.

Previous wording

Our securities portfolio decreased $31.7 million, or 5.1%, to $591.0 million at June 30, 2024, compared to $622.8 million at December 31, 2023. The decrease was primarily due to $20.2 million in maturities, prepayments and calls, net of short-term purchases and maturities and by a $10.3 million decrease in the fair value of available for sale securities at June 30, 2024 as compared to December 31, 2023.

Current wording

Our securities portfolio decreased $15.9 million, or 2.5%, to $606.9 million at September 30, 2024, compared to $622.8 million at December 31, 2023. The decrease was primarily due to $28.9 million in maturities, prepayments and calls, net of purchases, partially offset by a $15.0 million increase in the fair value of available for sale securities at September 30, 2024 as compared to December 31, 2023.

Previous wording

Certain securities have fair values less than amortized cost and, therefore, contain unrealized losses. During the six months ended June 30, 2024, the fair value of the Company’s available for sale securities declined by $10.3 million. At June 30, 2024, the Company evaluated whether the decline in fair value has resulted from credit losses or other factors. Within this evaluation, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by rating agency, and adverse conditions specifically related to the security, among other factors. Based on management’s evaluation no unrealized losses on securities were determined to be due to credit loss. Additionally, we anticipate full recovery of amortized cost with respect to these securities by maturity, or sooner in the event of a more favorable market interest rate environment. We do not intend to sell these securities and it is not probable that we will be required to sell them before recovery of the amortized cost basis, which may be at maturity, thus no ACL or losses have been recognized in the Company’s consolidated financial statements.

Current wording

Certain securities have fair values less than amortized cost and, therefore, contain unrealized losses. At September 30, 2024, the unrealized loss on the Company’s available for sale securities was $67.1 million, down from $82.1 million at December 31, 2023. At September 30, 2024, the Company evaluated whether the decline in fair value has resulted from credit losses or other factors. Within this evaluation, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by rating agency, and adverse conditions specifically related to the security, among other factors. Based on management’s evaluation no unrealized losses on securities were determined to be due to credit loss. Additionally, we anticipate full recovery of amortized cost with respect to these securities by maturity, or sooner in the event of a more favorable market interest rate environment. We do not intend to sell these securities and it is not probable that we will be required to sell them before recovery of the amortized cost basis, which may be at maturity, thus no ACL or losses have been recognized in the Company’s consolidated financial statements.

Previous wording

Total deposits at June 30, 2024 were $3.62 billion, representing an decrease of $1.6 million, or 0.0%, compared to $3.63 billion at December 31, 2023. Although overall total deposits only changed minimally since December 31, 2023, there was a decrease of $22.6 million in noninterest-bearing deposits, partially offset by an increase of $21.0 million in interest-bearing deposits. As of June 30, 2024, 26.3% of total deposits were comprised of noninterest-bearing demand accounts, 62.0% of interest-bearing non-maturity accounts and 11.7% of time deposits.

Current wording

Total deposits at September 30, 2024 were $3.72 billion, representing an increase of $93.2 million, or 2.6%, compared to $3.63 billion at December 31, 2023. The increase since December 31, 2023 consisted of increases of $69.0 million in interest-bearing deposits and $24.2 million in non-interest-bearing deposits. As of September 30, 2024, 26.8% of total deposits were comprised of noninterest-bearing demand accounts, 61.3% of interest-bearing non-maturity accounts and 11.9% of time deposits.

Previous wording

The estimated amount of uninsured deposits as of June 30, 2024 was $1.17 billion. This represented approximately 31% of total deposits and excludes collateralized public fund deposits.

Current wording

The estimated amount of uninsured deposits as of September 30, 2024 was $1.22 billion. This represented approximately 33% of total deposits and excludes collateralized public fund deposits.

Previous wording

In addition to deposits, we utilize advances from the FHLB and other borrowings as a supplementary funding source to finance our operations.

Current wording

In addition to deposits, we may utilize advances from the FHLB and other borrowings as a supplementary funding source to finance our operations.

Previous wording

FHLB Advances. The FHLB allows us to borrow, both short and long-term, on a blanket floating lien status collateralized by first mortgage loans and commercial real estate loans as well as FHLB stock. At June 30, 2024 and December 31, 2023, we had total remaining borrowing capacity from the FHLB of $1.09 billion and $1.10 billion, respectively, with no outstanding balance. We had no long-term FHLB borrowings during the three and six months ended June 30, 2024 or 2023.

Current wording

FHLB Advances. The FHLB allows us to borrow, both short and long-term, on a blanket floating lien status collateralized by first mortgage loans and commercial real estate loans as well as FHLB stock. At September 30, 2024 and December 31, 2023, we had total remaining borrowing capacity from the FHLB of $1.11 billion and $1.10 billion, respectively, with no outstanding balance. We had no long-term FHLB borrowings during the three and nine months ended September 30, 2024 or 2023.