FIRST NORTHERN COMMUNITY BANCORP

Previous wording

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Current wording

ITEM 2. – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Previous wording

Significant results and developments during the second quarter and year-to-date 2024 included:

Current wording

Significant results and developments during the third quarter and year-to-date 2024 included:

Previous wording

The Company recorded net income of $8,700,000 for the six months ended June 30, 2024, representing a decrease of $1,353,000, or 13.5%, from net income of $10,053,000 for the same period in 2023. The Company recorded net income of $4,424,000 for the three months ended June 30, 2024, representing a decrease of $140,000, or 3.1%, from net income of $4,564,000 for the same period in 2023.

Current wording

The Company recorded net income of $14,188,000 for the nine months ended September 30, 2024, representing a decrease of $484,000, or 3.3%, from net income of $14,672,000 for the same period in 2023. The Company recorded net income of $5,488,000 for the three months ended September 30, 2024, representing an increase of $869,000, or 18.8%, from net income of $4,619,000 for the same period in 2023.

Previous wording

The following tables present a summary of the results for the three and six months ended June 30, 2024 and 2023, and a summary of financial condition at June 30, 2024 and December 31, 2023.

Current wording

The following tables present a summary of the results for the three and nine months ended September 30, 2024 and 2023, and a summary of financial condition at September 30, 2024 and December 31, 2023.

Previous wording

Following is an analysis of changes in interest income and expense (dollars in thousands) for the three months ended June 30, 2024 over the three months ended June 30, 2023, the six months ended June 30, 2024 over the six months ended June 30, 2023, and the three months ended June 30, 2024 over the three months ended March 31, 2024. Changes not solely due to interest rate or volume have been allocated proportionately to interest rate and volume.

Current wording

Following is an analysis of changes in interest income and expense (dollars in thousands) for the three months ended September 30, 2024 over the three months ended September 30, 2023, the nine months ended September 30, 2024 over the nine months ended September 30, 2023, and the three months ended September 30, 2024 over the three months ended June 30, 2024. Changes not solely due to interest rate or volume have been allocated proportionately to interest rate and volume.

Previous wording

The assets of the Company set forth in the Unaudited Condensed Consolidated Balance Sheets reflect a $32,572,000, or 21.8%, increase in cash and cash equivalents, a $2,850,000, or 14.5%, decrease in certificates of deposit, an $11,283,000, or 2.0%, decrease in investment securities available-for-sale, a $3,317,000, or 0.3%, decrease in net loans held-for-investment, and a $267,000, or 100.0%, increase in loans held-for-sale from December 31, 2023 to June 30, 2024. The increase in cash and cash equivalents was primarily due to an increase in deposit balances coupled with decreases in investment securities and loans due to proceeds from maturities of available-for-sale securities and loan payoffs, net of loan originations. The decrease in certificates of deposit and investment securities available-for-sale was due to net maturities and repayments of investment securities and certificates of deposit. The decrease in net loans held-for-investment was primarily due to net payoffs of agriculture and residential construction loans, which was partially offset by net originations of commercial, commercial real estate and consumer loans. The increase in loans held-for-sale was due to the timing of funding and sale of the loans held-for-sale pipeline. Loans held-for-sale as of June 30, 2024 were subsequently sold in July 2024.

Current wording

The assets of the Company set forth in the Unaudited Condensed Consolidated Balance Sheets reflect a $14,707,000, or 9.9%, increase in cash and cash equivalents, a $466,000, or 2.4%, decrease in certificates of deposit, a $60,047,000, or 10.5%, increase in investment securities available-for-sale, and a $10,161,000, or 1.0%, decrease in net loans held-for-investment from December 31, 2023 to September 30, 2024. The increase in cash and cash equivalents was primarily due to an increase in deposit balances coupled with a decrease in loans due to proceeds from loan payoffs, net of loan originations, which was partially offset by an increase in investment securities due to net purchases of investment securities. The decrease in certificates of deposits was due to net maturities and repayments of certificates of deposit. The decrease in net loans held-for-investment was primarily due to net payoffs of agriculture, residential mortgage, and residential construction loans, which was partially offset by net originations of commercial, commercial real estate and consumer loans.

Previous wording

The liabilities of the Company set forth in the Unaudited Condensed Consolidated Balance Sheets reflect an increase in total deposits of $14,615,000, or 0.9%, from December 31, 2023 to June 30, 2024. The overall increase in total deposits was primarily due to seasonal fluctuations due to changes in market conditions and monetary policy.

Current wording

The liabilities of the Company set forth in the Unaudited Condensed Consolidated Balance Sheets reflect an increase in total deposits of $39,598,000, or 2.3%, from December 31, 2023 to September 30, 2024. The overall increase in total deposits was primarily due to seasonal fluctuations due to changes in market conditions and monetary policy.

Previous wording

Interest income on loans for the six months ended June 30, 2024 was up 8.8% from the same period in 2023, increasing from $25,099,000 to $27,305,000, and was up 0.8% for the three months ended June 30, 2024 over the same period in 2023, increasing from $13,722,000 to $13,830,000. The increase in interest income on loans for the six months ended June 30, 2024 as compared to the same period a year ago was primarily due to an increase in average balance of loans coupled with a 7 basis point increase in yield on loans. The increase in interest income on loans for the three months ended June 30, 2024 as compared to the same period a year ago was primarily due to an increase in average balance of loans, which was partially offset by a 23 basis point decrease in yield on loans.

Current wording

Interest income on loans for the nine months ended September 30, 2024 was up 9.0% from the same period in 2023, increasing from $38,197,000 to $41,620,000, and was up 9.3% for the three months ended September 30, 2024 over the same period in 2023, increasing from $13,098,000 to $14,315,000. The increase in interest income on loans for the nine months ended September 30, 2024 as compared to the same period a year ago was primarily due to an increase in average balance of loans coupled with an 18 basis point increase in yield on loans. The increase in interest income on loans for the three months ended September 30, 2024 as compared to the same period a year ago was primarily due to an increase in average balance of loans coupled with a 39 basis point increase in yield on loans.

Previous wording

Interest income on certificates of deposit for the six months ended June 30, 2024 was down 2.2% from the same period in 2023, decreasing from $362,000 to $354,000, and was down 9.0% for the three months ended June 30, 2024 over the same period in 2023, decreasing from $188,000 to $171,000. The decrease in interest income on certificates of deposit for the six months ended June 30, 2024 as compared to the same period a year ago was primarily due to a decrease in average balances of certificates of deposit, which was partially offset by a 55 basis point increase in yield on certificates of deposit. The decrease in interest income on certificates of deposit for the three months ended June 30, 2024 as compared to the same period a year ago was primarily due to a decrease in average balances of certificates of deposit, which was partially offset by a 52 basis point increase in yield on certificates of deposit.

Current wording

Interest income on certificates of deposit for the nine months ended September 30, 2024 was down 2.5% from the same period in 2023, decreasing from $556,000 to $542,000, and was down 3.1% for the three months ended September 30, 2024 over the same period in 2023, decreasing from $194,000 to $188,000. The decrease in interest income on certificates of deposit for the nine months ended September 30, 2024 as compared to the same period a year ago was primarily due to a decrease in average balances of certificates of deposit, which was partially offset by a 52 basis point increase in yield on certificates of deposit. The decrease in interest income on certificates of deposit for the three months ended September 30, 2024 as compared to the same period a year ago was primarily due to a decrease in average balances of certificates of deposit, which was partially offset by a 44 basis point increase in yield on certificates of deposit.

Previous wording

Interest income on interest-bearing due from banks for the six months ended June 30, 2024 was down 24.1% from the same period in 2023, decreasing from $4,541,000 to $3,445,000, and was down 17.4% for the three months ended June 30, 2024 over the same period in 2023, decreasing from $2,315,000 to $1,913,000. The decrease in interest income on interest-bearing due from banks for the six months ended June 30, 2024 as compared to the same period a year ago was primarily due to a decrease in average balances of interest-bearing due from banks, which was partially offset by a 57 basis point increase in yield on interest-bearing due from banks. The decrease in interest income on interest-bearing due from banks for the three months ended June 30, 2024 as compared to the same period a year ago was primarily due to a decrease in average balances of interest-bearing due from banks, which was partially offset by a 38 basis point increase in yield on interest-bearing due from banks.

Current wording

Interest income on interest-bearing due from banks for the nine months ended September 30, 2024 was down 20.8% from the same period in 2023, decreasing from $6,411,000 to $5,077,000, and was down 12.7% for the three months ended September 30, 2024 over the same period in 2023, decreasing from $1,870,000 to $1,632,000. The decrease in interest income on interest-bearing due from banks for the nine months ended September 30, 2024 as compared to the same period a year ago was primarily due to a decrease in average balances of interest-bearing due from banks, which was partially offset by a 42 basis point increase in yield on interest-bearing due from banks. The decrease in interest income on interest-bearing due from banks for the three months ended September 30, 2024 as compared to the same period a year ago was primarily due to a decrease in average balances of interest-bearing due from banks, which was partially offset by a 12 basis point increase in yield on interest-bearing due from banks.

Previous wording

Interest income on investment securities available-for-sale for the six months ended June 30, 2024 was up 10.2% from the same period in 2023, increasing from $5,849,000 to $6,446,000, and was up 15.8% for the three months ended June 30, 2024 over the same period in 2023, increasing from $2,893,000 to $3,349,000. The increase in interest income on investment securities for the six months ended June 30, 2024 as compared to the same period a year ago was primarily due to a 39 basis point increase in investment yields, which was partially offset by a decrease in average investment securities. The increase in interest income on investment securities for the three months ended June 30, 2024 as compared to the same period a year ago was primarily due to a 50 basis point increase in investment yields, which was partially offset by a decrease in average investment securities.

Current wording

Interest income on investment securities available-for-sale for the nine months ended September 30, 2024 was up 18.5% from the same period in 2023, increasing from $8,733,000 to $10,344,000, and was up 35.2% for the three months ended September 30, 2024 over the same period in 2023, increasing from $2,884,000 to $3,898,000. The increase in interest income on investment securities for the nine months ended September 30, 2024 as compared to the same period a year ago was primarily due to a 49 basis point increase in investment yields, which was partially offset by a decrease in average investment securities. The increase in interest income on investment securities for the three months ended September 30, 2024 as compared to the same period a year ago was primarily due to a 65 basis point increase in investment yields coupled with an increase in average investment securities.

Previous wording

Interest income on other earning assets for the six months ended June 30, 2024 was up 52.5% from the same period in 2023, increasing from $343,000 to $523,000, and was up 61.8% for the three months ended June 30, 2024 over the same period in 2023, increasing from $165,000 to $267,000. This income is primarily derived from dividends received by the Federal Home Loan Bank. The increase in interest income on other earning assets for the six months ended June 30, 2024 as compared to the same period a year ago was primarily due to a 288 basis point increase in yield on other earning assets coupled with an increase in average balances of other earning assets. The increase in interest income on other earning assets for the three months ended June 30, 2024 as compared to the same period a year ago was primarily due to a 358 basis point increase in yield on other earning assets coupled with an increase in average balances of other earning assets.

Current wording

Interest income on other earning assets for the nine months ended September 30, 2024 was up 40.8% from the same period in 2023, increasing from $557,000 to $784,000, and was up 22.0% for the three months ended September 30, 2024 over the same period in 2023, increasing from $214,000 to $261,000. This income is primarily derived from dividends received from the Federal Home Loan Bank. The increase in interest income on other earning assets for the nine months ended September 30, 2024 as compared to the same period a year ago was primarily due to a 250 basis point increase in yield on other earning assets coupled with an increase in average balances of other earning assets. The increase in interest income on other earning assets for the three months ended September 30, 2024 as compared to the same period a year ago was due to a 180 basis point increase in yield on other earning assets.

Previous wording

The Company had no Federal Funds sold balances during the three and six months ended June 30, 2024 and June 30, 2023.

Current wording

The Company had no Federal Funds sold balances during the three and nine months ended September 30, 2024 and September 30, 2023.

Previous wording

Interest expense on deposits for the six months ended June 30, 2024 was up 177.0% from the same period in 2023, increasing from $2,431,000 to $6,733,000, and was up 136.6% for the three months ended June 30, 2024 over the same period in 2023, increasing from $1,501,000 to $3,552,000. The increase in interest expense for the six months ended June 30, 2024 as compared to the same period a year ago was primarily due to a 92 basis point increase in average interest-bearing deposit yield, which was partially offset by a decrease in average balance of interest-bearing liabilities. The increase in interest expense for the three months ended June 30, 2024 as compared to the same period a year ago was primarily due to an 88 basis point increase in average interest-bearing deposit yield, which was partially offset by a decrease in average balance of interest-bearing liabilities.

Current wording

Interest expense on deposits for the nine months ended September 30, 2024 was up 118.6% from the same period in 2023, increasing from $4,817,000 to $10,531,000, and was up 59.2% for the three months ended September 30, 2024 over the same period in 2023, increasing from $2,386,000 to $3,798,000. The increase in interest expense for the nine months ended September 30, 2024 as compared to the same period a year ago was primarily due to an 81 basis point increase in average interest-bearing deposit yield, which was partially offset by a decrease in average balance of interest-bearing liabilities. The increase in interest expense for the three months ended September 30, 2024 as compared to the same period a year ago was primarily due to a 59 basis point increase in average interest-bearing deposit yield, which was partially offset by a decrease in average balance of interest-bearing liabilities.

Previous wording

Provision for credit losses for the six months ended June 30, 2024 was down 71.2% from the same period in 2023, decreasing from $2,600,000 to $750,000, and was down 59.6% for the three months ended June 30, 2024 over the same period in 2023, decreasing from $2,600,000 to $1,050,000. The levels of forecasted national unemployment and forecasted gross domestic product remained relatively stable during the three and six months ended June 30, 2024, however, there was an increase in nonaccrual loans requiring specific reserves during these periods.

Current wording

Provision for credit losses for the nine months ended September 30, 2024 was down 93.6% from the same period in 2023, decreasing from $3,100,000 to $200,000, and was down 210.0% for the three months ended September 30, 2024 over the same period in 2023, decreasing from $500,000 to a reversal of provision of $550,000. The levels of forecasted national unemployment and forecasted gross domestic product remained relatively stable during the three and nine months ended September 30, 2024. The Company recognized a reversal of provision of $550 thousand during the three months ended September 30, 2024, primarily due to a substantial payoff of a non-performing commercial loan relationship.

Previous wording

Non-interest income was down 31.7% for the six months ended June 30, 2024 from the same period in 2023, decreasing from $4,379,000 to $2,991,000. The decrease was primarily driven by a bargain purchase gain recognized during the six months ended June 30, 2023. The Company recognized a bargain purchase gain totaling approximately $1.4 million resulting from the acquisition of the Colusa, Willows, and Orland branches located in California in the first quarter of 2023.

Current wording

Non-interest income was down 26.4% for the nine months ended September 30, 2024 from the same period in 2023, decreasing from $6,155,000 to $4,529,000. The decrease was primarily driven by a bargain purchase gain recognized during the nine months ended September 30, 2023. The Company recognized a bargain purchase gain totaling approximately $1.4 million resulting from the acquisition of the Colusa, Willows, and Orland branches located in California in the first quarter of 2023.

Previous wording

Non-interest income was down 1.5% for the three months ended June 30, 2024 from the same period in 2023, decreasing from $1,506,000 to $1,484,000. The decrease was primarily due to decreases in other income.

Current wording

Non-interest income was down 13.4% for the three months ended September 30, 2024 from the same period in 2023, decreasing from $1,776,000 to $1,538,000. The decrease was primarily due to decreases in other income and losses on sales of securities.

Previous wording

Total non-interest expenses were down 0.6% for the six months ended June 30, 2024 from the same period in 2023, decreasing from $21,651,000 to $21,526,000. The decrease was primarily due to a decrease in salaries and employee benefits, which was partially offset by increases in occupancy and equipment and other expenses. The decrease in salaries and employee benefits was primarily due to decreases in contingent compensation and profit sharing expense. The increase in occupancy and equipment expenses was primarily due to an increase in depreciation expense due to a full six months of expenses related to the acquired branches in the first quarter of 2023. The increase in other expenses was primarily due to increases in loan collection expenses, which was partially offset by a decrease in legal fees.

Current wording

Total non-interest expenses were down 0.2% for the nine months ended September 30, 2024 from the same period in 2023, decreasing from $32,534,000 to $32,460,000. The decrease was primarily due to a decrease in salaries and employee benefits, which was partially offset by increases in occupancy and equipment and other expenses. The decrease in salaries and employee benefits was primarily due to a decrease in full-time equivalent employees and decreases in contingent compensation and profit sharing expense. The increase in occupancy and equipment expenses was primarily due to an increase in depreciation expense due to a full nine months of expenses related to the acquired branches in the first quarter of 2023. The increase in other expenses was primarily due to increases in loan collection expenses, which was partially offset by a decrease in legal fees.

Previous wording

Total non-interest expenses were down 0.7% for the three months ended June 30, 2024 from the same period in 2023, decreasing from $10,367,000 to $10,299,000. The decrease was primarily due to a decrease in salaries and employee benefits, which was partially offset by an increase in other expenses. The decrease in salaries and employee benefits was primarily due to decreases in contingent compensation and profit sharing expense. The increase in other expenses was primarily due to an increase in loan collection expenses, which was partially offset by a decrease in FDIC assessment expense.

Current wording

Total non-interest expenses were up 0.5% for the three months ended September 30, 2024 from the same period in 2023, increasing from $10,883,000 to $10,934,000. The decrease was primarily due to a decrease in salaries and employee benefits, which was partially offset by an increase in occupancy and equipment and data processing expense. The decrease in salaries and employee benefits was primarily due to a decrease in full-time equivalent employees. The increase in occupancy and equipment and data processing expense was primarily due to increases in service contracts partially due to a full year of additional processing related to new branches acquired in the first quarter of 2023.

Previous wording

The following table sets forth other non-interest expenses by category for the three and six months ended June 30, 2024 and 2023.

Current wording

The following table sets forth other non-interest expenses by category for the three and nine months ended September 30, 2024 and 2023.

Previous wording

The Company’s tax rate, the Company’s income before taxes and the amount of tax relief provided by non-taxable earnings affect the Company’s provision for income taxes. Provision for income taxes decreased 12.6% for the six months ended June 30, 2024 from the same period in 2023, decreasing from $3,838,000 to $3,355,000, and decreased 3.9% for the three months ended June 30, 2024 from the same period in 2023, decreasing from $1,757,000 to $1,689,000. The decrease in provision for income taxes was primarily due to a decrease in pre-tax income. The effective tax rate was 27.8% and 27.6% for the six months ended June 30, 2024 and June 30, 2023, respectively. The effective tax rate was 27.6% and 27.8% for the three months ended June 30, 2024 and June 30, 2023, respectively.

Current wording

The Company’s tax rate, the Company’s income before taxes and the amount of tax relief provided by non-taxable earnings affect the Company’s provision for income taxes. Provision for income taxes increased 0.6% for the nine months ended September 30, 2024 from the same period in 2023, increasing from $5,486,000 to $5,517,000, and increased 31.2% for the three months ended September 30, 2024 from the same period in 2023, increasing from $1,648,000 to $2,162,000. The effective tax rate was 28.0% and 27.2% for the nine months ended September 30, 2024 and September 30, 2023, respectively. The effective tax rate was 28.3% and 26.3% for the three months ended September 30, 2024 and September 30, 2023, respectively.

Previous wording

Non-accrual loans amounted to $6,805,000 at June 30, 2024 and were comprised of seven commercial loans totaling $2,374,000, two agriculture loans totaling $2,572,000, four residential mortgage loans totaling $1,275,000 and three consumer loans totaling $584,000. Non-accrual loans amounted to $3,998,000 at December 31, 2023 and were comprised of two agriculture loans totaling $2,871,000, three residential mortgage loans totaling $424,000 and four consumer loans totaling $703,000.

Current wording

Non-accrual loans amounted to $4,015,000 at September 30, 2024 and were comprised of one commercial loan totaling $139,000, one commercial real estate loan totaling $466,000, two agriculture loans totaling $2,380,000, four residential mortgage loans totaling $469,000 and three consumer loans totaling $561,000. Non-accrual loans amounted to $3,998,000 at December 31, 2023 and were comprised of two agriculture loans totaling $2,871,000, three residential mortgage loans totaling $424,000 and four consumer loans totaling $703,000.

Previous wording

As the following table illustrates, total non-performing assets, net of guarantees of the State of California and U.S. Government, including its agencies and its government-sponsored agencies, decreased $1,529,000, or 18.4%, to $6,805,000 during the first six months of 2024. Non-performing assets, net of guarantees, represented 0.4% of total assets at June 30, 2024.

Current wording

As the following table illustrates, total non-performing assets, net of guarantees of the State of California and U.S. Government, including its agencies and its government-sponsored agencies, decreased $4,410,000, or 52.9%, to $3,924,000 during the first nine months of 2024. Non-performing assets, net of guarantees, represented 0.2% of total assets at September 30, 2024.

Previous wording

The Company had no loans that were 90 days or more past due and still accruing as of June 30, 2024. The Company had two loans totaling $4,336,000 that were 90 days or more past due and still accruing as of December 31, 2023.

Current wording

The Company had one loan totaling $48,000 that was 90 days or more past due and still accruing as of September 30, 2024. The Company had two loans totaling $4,336,000 that were 90 days or more past due and still accruing as of December 31, 2023.

Previous wording

Excluding the non-performing loans cited previously, loans totaling $19,411,000 and $12,327,000 were classified as substandard or doubtful loans, representing potential problem loans at June 30, 2024 and December 31, 2023, respectively. Management believes that the allowance for credit losses at June 30, 2024 and December 31, 2023 appropriately reflected expected credit losses in the loan portfolio at that date. The ratio of the allowance for credit losses to total loans at June 30, 2024 and December 31, 2023 was 1.60% and 1.55%, respectively.

Current wording

Excluding the non-performing loans, net of guaranteed loans cited previously, loans totaling $13,876,000 and $12,327,000 were classified as substandard or doubtful loans, representing potential problem loans at September 30, 2024 and December 31, 2023, respectively. Management believes that the allowance for credit losses at September 30, 2024 and December 31, 2023 appropriately reflected expected credit losses in the loan portfolio at that date. The ratio of the allowance for credit losses to total loans was 1.55% at each of the periods ended September 30, 2024 and December 31, 2023.

Previous wording

The following table summarizes the ACL of the Company during the six months ended June 30, 2024 and 2023, and for the year ended December 31, 2023:

Current wording

The following table summarizes the ACL of the Company during the nine months ended September 30, 2024 and 2023, and for the year ended December 31, 2023:

Previous wording

Approximately 38% and 37% of our deposits were uninsured as of June 30, 2024 and December 31, 2023, respectively.

Current wording

Approximately 40% and 37% of our deposits were uninsured as of September 30, 2024 and December 31, 2023, respectively.

Previous wording

Asset liquidity sources consist of the repayments and maturities of loans, selling of loans, short-term money market investments, maturities of securities and sales of securities from the available-for-sale portfolio. These activities are generally summarized as investing activities in the Condensed Consolidated Statement of Cash Flows. For the six months ended June 30, 2024, net liquidity provided by investing activities totaled $14,007,000.

Current wording

Asset liquidity sources consist of the repayments and maturities of loans, selling of loans, short-term money market investments, maturities of securities and sales of securities from the available-for-sale portfolio. These activities are generally summarized as investing activities in the Condensed Consolidated Statements of Cash Flows. For the nine months ended September 30, 2024, net liquidity used in investing activities totaled $35,296,000.

Previous wording

The Company’s available-for-sale investment securities plus cash and cash equivalents in excess of reserve requirements and certificates of deposit totaled $759,717,000 on June 30, 2024, which was 40.2% of assets at that date. This was an increase of $18,439,000 from $741,278,000 and 39.6% of assets as of December 31, 2023. The Company’s investment securities are generally shorter term in nature to provide ongoing cash flows for liquidity needs and/or reinvestment for interest rate risk management. On June 30, 2024, the effective duration of our investment securities was 3.10 with projected principal cashflow of $79,699,000 for the remainder of 2024 available for reinvestment or liquidity needs. The Company had no held-to-maturity securities as of June 30, 2024 and December 31, 2023.

Current wording

The Company’s available-for-sale investment securities plus cash and cash equivalents in excess of reserve requirements and certificates of deposit totaled $815,566,000 on September 30, 2024, which was 42.2% of assets at that date. This was an increase of $74,288,000 from $741,278,000 and 39.6% of assets as of December 31, 2023. The Company’s investment securities are generally shorter term in nature to provide ongoing cash flows for liquidity needs and/or reinvestment for interest rate risk management. On September 30, 2024, the effective duration of our investment securities was 3.06 with projected principal cashflow of $50,012,000 for the remainder of 2024 available for reinvestment or liquidity needs. The Company had no held-to-maturity securities as of September 30, 2024 and December 31, 2023.

Previous wording

Liquidity may also be impacted from liabilities through changes in deposits and borrowings outstanding. These activities are included under financing activities in the Condensed Consolidated Statement of Cash Flows. As of June 30, 2024, the Company had $0 in borrowings outstanding. For the six months ended June 30, 2024, net liquidity provided by financing activities totaled $13,369,000, primarily due to a net increase in deposits. While these sources of funds are expected to continue to provide significant amounts of funds in the future, their mix, as well as the possible use of other sources, will depend on future economic and market conditions.

Current wording

Liquidity may also be impacted from liabilities through changes in deposits and borrowings outstanding. These activities are included under financing activities in the Condensed Consolidated Statements of Cash Flows. As of September 30, 2024, the Company had $0 in borrowings outstanding. For the nine months ended September 30, 2024, net liquidity provided by financing activities totaled $36,796,000, primarily due to a net increase in deposits. While these sources of funds are expected to continue to provide significant amounts of funds in the future, their mix, as well as the possible use of other sources, will depend on future economic and market conditions.

Previous wording

Liquidity is also provided or used through the results of operating activities. For the six months ended June 30, 2024, operating activities provided cash of $5,196,000.

Current wording

Liquidity is also provided or used through the results of operating activities. For the nine months ended September 30, 2024, operating activities provided cash of $13,207,000.

Previous wording

Liquidity is measured by various ratios, in management’s opinion, the most common being the ratio of net loans to deposits (including loans held-for-sale). This ratio was 61.5% and 62.2% as of June 30, 2024 and December 31, 2023, respectively.

Current wording

Liquidity is measured by various ratios, in management’s opinion, the most common being the ratio of net loans to deposits (including loans held-for-sale). This ratio was 60.2% and 62.2% as of September 30, 2024 and December 31, 2023, respectively.

Previous wording

To meet unanticipated funding requirements, the Company maintains short-term unsecured lines of credit with other banks which totaled $132,000,000 at June 30, 2024. Additionally, the Company has a line of credit with the FHLB, with a remaining borrowing capacity at June 30, 2024 of $407,031,000; credit availability is subject to certain collateral requirements.

Current wording

To meet unanticipated funding requirements, the Company maintains short-term unsecured lines of credit with other banks which totaled $130,000,000 at September 30, 2024. Additionally, the Company has a line of credit with the FHLB, with a remaining borrowing capacity at September 30, 2024 of $394,192,000; credit availability is subject to certain collateral requirements.