HOME BANCSHARES INC
For the period ended Jun 30, 2024. Filed Aug 2, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 2, 2024
HOMB$29.86-0.7%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-03.
0001331520-24-000126
Item 2. : Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-02.
0001331520-24-000164
Item 2. : Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 235 previous paragraphs and 258 current paragraphs.
126 unchanged; 76 reworded; 46 added; 19 removed; 14 previous and 10 current paragraphs rearranged.
Tables are not compared: 23 previous and 29 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (46)
Current report
Our net income decreased $3.7 million, or 3.6%, to $101.5 million for the three-month period ended June 30, 2024, from $105.3 million for the same period in 2023. On a diluted earnings per share basis, our earnings were $0.51 per share for the three-month period ended June 30, 2024 compared to $0.52 per share for the three-month period ended June 30, 2023. The Company recorded $8.0 million in credit loss expense for the quarter ended June 30, 2024. During the three months ended June 30, 2024, the Company recorded $2.3 million in Federal Deposit Insurance Corporation ("FDIC") special assessment expense, a $274,000 decrease in the fair value of marketable securities and a $2.0 million deferred tax asset write-down, which was partially offset by a $2.1 million gain on sale of a building in our Texas region.
Current report
Total interest income increased by $37.7 million, or 13.0%, and non-interest expense decreased $3.1 million, or 2.7%. This was offset by a $33.5 million, or 40.8% increase in total interest expense and a $6.7 million, or 13.6%, decrease in non-interest income. These fluctuations are primarily due to the high interest rate environment. The increase in interest income resulted from a $31.2 million, or 12.8%, increase in loan interest income and an $8.8 million, or 236.9%, increase in interest income on deposits at other banks, which was partially offset by a $2.3 million, or 5.5%, decrease in investment interest income. The decrease in non-interest expense was due to a decrease of $4.1 million, or 6.4%, in salaries and employee benefits and a decrease of $515,000, or 3.5%, in occupancy and equipment expense, and an decrease of $216,000, or 2.4%, in data processing expense, which was partially offset by an increase of $1.7 million, or 6.3%, in other operating expenses. The increase in interest expense was primarily due to a $25.6 million, or 36.5%, increase in interest on deposits, a $7.7 million, or 116.1%, increase in interest on FHLB and other borrowed funds and a $242,000, or 21.6%, increase in interest on securities sold under agreements to repurchase. The decrease in non-interest income was primarily due to an $8.5 million, or 56.0%, decrease in other income, a $1.1 million, or 135.0%, decrease in the fair value adjustment for marketable securities and a $1.1 million, or 9.2%, decrease in other service charges and fees, which was partially offset by a $1.6 million, or 61.4%, increase in mortgage lending income and a $1.1 million, or 123.77%, increase in gain on sale of branches, equipment and other assets, net.
Current report
Our net interest margin decreased from 4.33% for the six-month period ended June 30, 2023 to 4.20% for the six-month period ended June 30, 2024. The yield on interest earning assets was 6.47% and 5.88% for the three months ended June 30, 2024 and 2023, respectively, as average interest earning assets increased from $19.82 billion to $20.12 billion. The increase in average interest earning assets is primarily due to a $492.9 million increase in average interest-bearing balances due from banks, a $201.8 million increase in average loans receivable and a $1.8 million increase in average federal funds sold, partially offset by a $396.0 million decrease in average investment securities. During the six-month period ended June 30, 2024, the Company held excess liquidity of approximately $500.0 million which was dilutive to the net interest margin by 10 basis points. For the six months ended June 30, 2024 and 2023, we recognized $4.6 million and $5.8 million, respectively, in total net accretion for acquired loans and deposits. The reduction in accretion was dilutive to the net interest margin by one basis point. We recognized $2.8 million in event income for the six-months ended June 30, 2024 compared to $3.4 million for the six-months ended June 30, 2023.
Current report
Our efficiency ratio was 43.69% for the six months ended June 30, 2024, compared to 44.39% for the same period in 2023. For the second quarter of 2024, our efficiency ratio, as adjusted (non-GAAP), was 43.50%, compared to 44.12% reported for the second quarter of 2023. (See Table 25 for the non-GAAP tabular reconciliation).
Current report
•1-4 family construction
Current report
•All other construction
Current report
•1-4 family senior liens
Current report
•Multifamily
Current report
•Commercial & industrial, agricultural, non-depository financial institutions, purchase/carry securities, other
Current report
•Consumer auto
Current report
•Other consumer
Current report
•Management has a reasonable expectation at the reporting date that restructured loans made to borrowers experiencing financial difficulty will be executed with an individual borrower.
Current report
•The extension or renewal options are included in the original or modified contract at the reporting date and are not unconditionally cancellable by the Company.
Current report
For the three and six months ended June 30, 2024 and 2023
Current report
Our net income decreased $3.7 million, or 3.6%, to $101.5 million for the three-month period ended June 30, 2024, from $105.3 million for the same period in 2023. On a diluted earnings per share basis, our earnings were $0.51 per share for the three-month period ended June 30, 2024 compared to $0.52 per share for the three-month period ended June 30, 2023. The Company recorded $8.0 million in credit loss expense for the quarter ended June 30, 2024. During the three months ended June 30, 2024, the Company recorded $2.3 million in FDIC special assessment expense, a $274,000 decrease in the fair value of marketable securities and a $2.0 million deferred tax asset write-down, which was partially offset by a $2.1 million gain on sale of a building in our Texas region.
Current report
Our net income decreased $6.6 million, or 3.17%, to $201.6 million for the six-month period ended June 30, 2024, from $208.2 million for the same period in 2023. On a diluted earnings per share basis, our earnings were $1.00 per share for the six-month period ended June 30, 2024 compared to $1.02 per share for the six-month period ended June 30, 2023. The Company recorded $12.5 million in credit loss expense for the six-month period ended June 30, 2024. This consisted of a $13.5 million provision for credit losses on loans and a reversal of $1.0 million provision for unfunded commitments. During the six months ended June 30, 2024, the Company recorded a $2.1 million gain on sale of building from our Texas region, a $729,000 increase in the fair value of marketable securities and $162,000 in BOLI death benefits, partially offset by $2.3 million of FDIC special assessment and a $2.0 million deferred tax asset write-down.
Current report
Our net interest margin decreased from 4.33% for the six-month period ended June 30, 2023 to 4.20% for the six-month period ended June 30, 2024. The yield on interest earning assets was 6.47% and 5.88% for the three months ended June 30, 2024 and 2023, respectively, as average interest earning assets increased from $19.82 billion to $20.12 billion. The increase in average interest earning assets is primarily due to a $492.9 million increase in average interest-bearing balances due from banks, a $201.8 million increase in average loans receivable and a $1.8 million increase in average federal funds sold, partially offset by a $396.0 million decrease in average investment securities. During the six-month period ended June 30, 2024, the Company held excess liquidity of approximately $500.0 million which was dilutive to the net interest margin by 10 basis points. For the six months ended June 30, 2024 and 2023, we recognized $4.6 million and $5.8 million, respectively, in total net accretion for acquired loans and deposits. The reduction in accretion was dilutive to the net interest margin by one basis point. We recognized $2.8 million in event income for the six-months ended June 30, 2024 compared to $3.4 million for the six-months ended June 30, 2023.
Current report
Non-interest income decreased $6.7 million, or 13.6%, to $42.8 million for the three months ended June 30, 2024 from $49.5 million for the same period in 2023. The primary factors that resulted in this decrease were the decreases in other service charges and fees, fair value adjustment for marketable securities and other income, which was partially offset by increases in mortgage lending income and the gain on sale of branches, equipment and other assets, net.
Current report
•The $483,000 increase in service charges on deposit accounts is primarily related to an increase in overdraft fees.
Current report
•The $670,000 increase in trust fees is primarily related to increases in IRA fees and retirement fees.
Current report
•The $1.1 million increase in gain on sale of branches, equipment and other assets, net is primarily due to the sale of a building from our Texas region.
Current report
Additional details for the six months ended June 30, 2024 on some of the more significant changes are as follows:
Current report
•The $871,000 increase in trust fees is primarily related to increases in IRA fees, retirement fees and other fees.
Current report
•The $1.1 million increase in gain on sale of branches, equipment and other assets, net is primarily due to the sale of a building from our Texas region.
Current report
•The $515,000 decrease in occupancy and equipment expense is primarily due to decreased lease, utility and maintenance expenses.
Current report
•The $338,000 decrease in amortization of intangibles is due to the core deposit intangible ("CDI") from the acquisition of Liberty Bank being fully amortized in 2023.
Current report
•The $2.3 million increase in FDIC and state assessment expense is primarily due to the remaining portion of the FDIC special assessment expense being incurred during the second quarter of 2024. The FDIC special assessment was levied in order to recover the losses to the Deposit Insurance Fund associated with protecting uninsured depositors following the closures of Silicon Valley Bank and Signature Bank.
Current report
•The $666,000 decrease in other professional fees is primarily due to cost saving measures following the acquisition of Happy.
Current report
Non-interest expense decreased $6.2 million, or 2.7%, to $224.7 million for the six months ended June 30, 2024 from $230.9 million for the same period in 2023. The primary factors that resulted in this decrease were the decrease in salaries and employee benefits, occupancy and equipment expense, advertising expense, amortization of intangibles, electronic banking expense and other professional fees, which were partially offset by an increase in FDIC and state assessment, legal and accounting expense and other expense.
Current report
Additional details for the six months ended June 30, 2024 on some of the more significant changes are as follows:
Current report
•The $916,000 decrease in occupancy and equipment expense is primarily due to lease, utility and maintenance expenses.
Current report
•The $675,000 decrease in amortization of intangibles is primarily due to the CDI from the acquisition of Liberty Bank being fully amortized in 2023.
Current report
•The $437,000 decrease in electronic banking expense is primarily due to a decrease in debit card processing fees and interchange network expenses.
Current report
•The $2.1 million increase in FDIC and state assessment expense is primarily due to the remaining portion of the FDIC special assessment expense being incurred during the second quarter of 2024.
Current report
•The $714,000 decrease in other professional fees is primarily due to cost saving measures following the acquisition of Happy.
Current report
•The $1.4 million increase in other expense is primarily due to an increase in OREO expense and miscellaneous loan costs, partially offset by decreases in travel expenses, insurance claims paid and other losses.
Current report
Table 9 presents the composition of the funded and unfunded balances of our CRE portfolio by loan type, as of June 30, 2024 and December 31, 2023, and their respective percentages of our total CRE portfolio.
Current report
Table 9: CRE Loan Concentrations
Current report
Table 10 presents the composition of our CRE loan portfolio by the ten largest geographical locations of the collateral as of June 30, 2024 and December 31, 2023.
Current report
Table 10: Geographical Locations of CRE Loans
Showing the first 40 of 46 passages. Open the source sections for the rest.
Removed paragraphs (19)
Previous report
Our net income decreased $2.9 million, or 2.8%, to $100.1 million for the three-month period ended March 31, 2024, from $103.0 million for the same period in 2023. On a diluted earnings per share basis, our earnings were $0.50 per share for the three-month period ended March 31, 2024 compared to $0.51 per share for the three-month period ended March 31, 2023. The Company recorded $4.5 million in credit loss expense for the quarter ended March 31, 2024. This consisted of a $5.5 million provision for credit losses on loans and a reversal of $1.0 million provision for unfunded commitments. During the three months ended March 31, 2024, the Company recorded $162,000 in bank owned life insurance ("BOLI") death benefits and a $1.0 million increase in the fair value of marketable securities.
Previous report
Loans. Management estimates the allowance balance using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency level, or term as well as for changes in environmental conditions, such as changes in the national unemployment rate, gross domestic product, national retail sales index, housing price indices and rental vacancy rate index.
Previous report
Acquired loans. In accordance with ASC 326, the Company records both a discount and an allowance for credit losses on acquired loans. This is commonly referred to as "double accounting" or "double count".
Previous report
•Other consumer - SPF
Previous report
The Company uses the DCF method to estimate expected losses for all of the Company’s loan pools. These pools are as follows: construction & land development; other commercial real estate; residential real estate; commercial & industrial; and consumer & other. The loan portfolio pools were selected in order to generally align with the loan categories specified in the quarterly call reports required to be filed with the Federal Financial Institutions Examination Council. For each of these loan pools, the Company generates cash flow projections at the instrument level wherein payment expectations are adjusted for estimated prepayment speed, curtailments, time to recovery, probability of default, and loss given default. The modeling of expected prepayment speeds, curtailment rates, and time to recovery are based on historical internal data. The Company uses regression analysis of historical internal and peer data to determine suitable loss drivers to utilize when modeling lifetime probability of default and loss given default. This analysis also determines how expected probability of default and loss given default will react to forecasted levels of the loss drivers.
Previous report
For all DCF models, management has determined that four quarters represents a reasonable and supportable forecast period and reverts to a historical loss rate over four quarters on a straight-line basis. Management leverages economic projections from a reputable and independent third party to inform its loss driver forecasts over the four-quarter forecast period. Other internal and external indicators of economic forecasts are also considered by management when developing the forecast metrics.
Previous report
Management estimates the allowance balance using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency level, or term as well as for changes in environmental conditions, such as changes in the national unemployment rate, gross domestic product, national retail sales index, housing price indices and rental vacancy rate index.
Previous report
•Owner occupies commercial real estate
Previous report
•Other consumer - SPF
Previous report
The combination of adjustments for credit expectations (default and loss) and time expectations prepayment, curtailment, and time to recovery) produces an expected cash flow stream at the instrument level. Instrument effective yield is calculated, net of the impacts of prepayment assumptions, and the instrument expected cash flows are then discounted at that effective yield to produce an instrument-level net present value of expected cash flows (“NPV”). An allowance for credit loss is established for the difference between the instrument’s NPV and amortized cost basis.
Previous report
The allowance for credit losses for each segment is measured through the use of the discounted cash flow method. Loans evaluated individually that are considered to be impaired are not included in the collective evaluation. For those loans that are classified as impaired, an allowance is established when the discounted cash flows, collateral value or observable market price of the impaired loan is lower than the carrying value of that loan. For loans for which a specific reserve is not recorded, an allowance is recorded based on the loss rate for the respective pool within the collective evaluation if a specific reserve is not recorded.
Previous report
Loans considered to be collateral dependent, according to ASC 326, are loans for which, based on current information and events, it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreement. The aggregate amount of collateral shortfall on such loans is utilized in evaluating the adequacy of the allowance for credit losses and amount of provisions thereto. Losses on collateral dependent loans are charged against the allowance for credit losses when in the process of collection, it appears likely that such losses will be realized. The accrual of interest on collateral dependent loans is discontinued when, in management’s opinion the collection of interest is doubtful or generally when loans are 90 days or more past due. When accrual of interest is discontinued, all unpaid accrued interest is reversed. Interest income is subsequently recognized only to the extent cash payments are received in excess of principal due. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.
Previous report
Specific Allocations. As a general rule, if a specific allocation is warranted, it is the result of a credit loss analysis of a previously classified credit or relationship. Typically, when it becomes evident through the payment history or a financial statement review that a loan or relationship is no longer supported by the cash flows of the asset and/or borrower and has become collateral dependent, we will use appraisals or other collateral analysis to determine if a specific allocation is needed. The amount or likelihood of loss on this credit may not yet be evident, so a charge-off would not be prudent. However, if the analysis indicates that a specific allocation is needed, then a specific allocation will be determined for this loan. This analysis is performed each quarter in connection with the preparation of the analysis of the adequacy of the allowance for credit losses, and if necessary, adjustments are made to the specific allocation provided for a particular loan.
Previous report
For collateral dependent loans, we do not consider an appraisal outdated simply due to the passage of time. However, if an appraisal is older than 13 months and if market or other conditions have deteriorated and we believe that the current market value of the property is not within approximately 20% of the appraised value, we will consider the appraisal outdated and order either a new appraisal or an internal valuation report for the credit loss analysis. The recognition of any provision or related charge-off on a collateral dependent loan is either through annual credit analysis or, many times, when the relationship becomes delinquent. If the borrower is not current, we will update our credit and cash flow analysis to determine the borrower's repayment ability. If we determine this ability does not exist and it appears that the collection of the entire principal and interest is not likely, then the loan could be placed on non-accrual status. In any case, loans are classified as non-accrual no later than 105 days past due. If the loan requires a quarterly credit loss analysis, this analysis is completed in conjunction with the completion of the analysis of the adequacy of the allowance for credit losses. Any exposure identified through the credit loss analysis is shown as a specific reserve. If it is determined that a new appraisal or internal validation report is required, it is ordered and will be taken into consideration during completion of the next credit loss analysis.
Previous report
In estimating the net realizable value of the collateral, management may deem it appropriate to discount the appraisal based on the applicable circumstances. In such case, the amount charged off may result in loan principal outstanding being below fair value as presented in the appraisal.
Previous report
Between the receipt of the original appraisal and the updated appraisal, we monitor the loan's repayment history. If the loan is $3.0 million or greater or the total loan relationship is $5.0 million or greater, our policy requires an annual credit review. Our policy requires financial statements from the borrowers and guarantors at least annually. In addition, we calculate the global repayment ability of the borrower/guarantors at least annually.
Previous report
As a general rule, when it becomes evident that the full principal and accrued interest of a loan may not be collected, or by law at 105 days past due, we will reflect that loan as non-performing. It will remain non-performing until it performs in a manner that it is reasonable to expect that we will collect the full principal and accrued interest.
Previous report
When the amount or likelihood of a loss on a loan has been determined, a charge-off should be taken in the period it is determined. If a partial charge-off occurs, the quarterly credit loss analysis will determine if the loan is still collateral dependent, and thus continues to require a specific allocation.
Previous report
The Company evaluates all securities quarterly to determine if any securities in a loss position require a provision for credit losses in accordance with ASC 326. The Company first assesses whether it intends to sell or if it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income. For securities that do not meet this criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, the Company considers the extent to which fair value is less than amortized cost, changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has been recorded through an allowance for credit losses is recognized in other comprehensive income. Changes in the allowance for credit losses are recorded as provision for (or reversal of) credit loss expense. Losses are charged against the allowance when management believes the uncollectability of a security is confirmed or when either of the criteria regarding intent or requirement to sell is met.
Reworded paragraphs (76)
Previous wording
We are a bank holding company headquartered in Conway, Arkansas, offering a broad array of financial services through our wholly-owned bank subsidiary, Centennial Bank (sometimes referred to as “Centennial” or the “Bank”). As of March 31, 2024, we had, on a consolidated basis, total assets of $22.84 billion, loans receivable, net of allowance for credit losses of $14.22 billion, total deposits of $16.87 billion, and stockholders’ equity of $3.81 billion.
Current wording
We are a bank holding company headquartered in Conway, Arkansas, offering a broad array of financial services through our wholly-owned bank subsidiary, Centennial Bank (sometimes referred to as “Centennial” or the “Bank”). As of June 30, 2024, we had, on a consolidated basis, total assets of $22.92 billion, loans receivable, net of allowance for credit losses of $14.49 billion, total deposits of $16.96 billion, and stockholders’ equity of $3.86 billion.
Previous wording
Our net interest margin decreased from 4.37% for the three-month period ended March 31, 2023 to 4.13% for the three-month period ended March 31, 2024. The yield on interest earning assets was 6.38% and 5.79% for the three months ended March 31, 2024 and 2023, respectively, while average interest earning assets decreased from $20.06 billion to $20.03 billion. The decrease in average interest earning assets is primarily due to a $425.9 million decrease in average investment securities, partially offset by $375.4 million increase in average interest-bearing balances due from banks, a $13.4 million increase in average loans receivable and a $4.5 million increase in average federal funds sold. During the first quarter of 2024, the Company held excess liquidity of approximately $500.0 million which was dilutive to the net interest margin by 10 basis points. For the three months ended March 31, 2024 and 2023, we recognized $2.8 million and $3.2 million, respectively, in total net accretion for acquired loans and deposits. The reduction in accretion was dilutive to the net interest margin by one basis point. We recognized $1.1 million in event income for the three-months ended March 31, 2024 compared to $2.1 million for the three-months ended March 31, 2023. The decrease in event income was dilutive to the net interest margin by two basis points. The remaining decrease in the net interest margin was due to an increase in interest expense resulting from an increase in average interest-bearing liabilities at higher interest rates primarily as a result of the high interest rate environment.
Current wording
Our net interest margin decreased from 4.28% for the three-month period ended June 30, 2023 to 4.27% for the three-month period ended June 30, 2024. The yield on interest earning assets was 6.56% and 5.96% for the three months ended June 30, 2024 and 2023, respectively, while average interest earning assets increased from $19.58 billion to $20.21 billion. The increase in average interest earning assets is primarily due to a $609.9 million increase in average interest-bearing balances due from banks and a $388.9 million increase in average loans receivable, partially offset by a $368.3 million decrease in average investment securities. During the second quarter of 2024, the Company held excess liquidity of approximately $500.0 million which was dilutive to the net interest margin by 10 basis points. For the three months ended June 30, 2024 and 2023, we recognized $1.9 million and $2.7 million, respectively, in total net accretion for acquired loans and deposits. The reduction in accretion was dilutive to the net interest margin by one basis point. We recognized $1.7 million in event income for the three-months ended June 30, 2024 compared to $1.3 million for the three-months ended June 30, 2023. The remaining increase in the net interest margin was due to an increase in interest income resulting from an increase in average interest-bearing assets at higher interest rates primarily as a result of the high interest rate environment.
Previous wording
Our efficiency ratio was 44.22% for the three months ended March 31, 2024, compared to 44.80% for the same period in 2023. For the first quarter of 2024, our efficiency ratio, as adjusted (non-GAAP), was 44.43%, compared to 43.42% reported for the first quarter of 2023. (See Table 23 for the non-GAAP tabular reconciliation).
Current wording
Our efficiency ratio was 43.17% for the three months ended June 30, 2024, compared to 44.00% for the same period in 2023. For the second quarter of 2024, our efficiency ratio, as adjusted (non-GAAP), was 42.59%, compared to 44.83% reported for the second quarter of 2023. (See Table 25 for the non-GAAP tabular reconciliation).
Previous wording
Our annualized return on average assets was 1.78% for the three months ended March 31, 2024, compared to 1.84% for the same period in 2023. (See Table 20 for the related non-GAAP financial measures and tabular reconciliation). Our annualized return on average common equity was 10.64% and 11.70% for the three months ended March 31, 2024, and 2023, respectively. (See Table 21 for the related non-GAAP financial measures and tabular reconciliation).
Current wording
Our annualized return on average assets was 1.79% for the three months ended June 30, 2024, compared to 1.90% for the same period in 2023. (See Table 22 for the related non-GAAP financial measures and tabular reconciliation). Our annualized return on average common equity was 10.73% and 11.63% for the three months ended June 30, 2024, and 2023, respectively. (See Table 23 for the related non-GAAP financial measures and tabular reconciliation).
Previous wording
Our net income decreased $2.9 million, or 2.8%, to $100.1 million for the three-month period ended March 31, 2024, from $103.0 million for the same period in 2023. On a diluted earnings per share basis, our earnings were $0.50 per share for the three-month period ended March 31, 2024 compared to $0.51 per share for the three-month period ended March 31, 2023. The Company recorded $4.5 million in credit loss expense for the quarter ended March 31, 2024. This consisted of a $5.5 million provision for credit losses on loans and a reversal of $1.0 million provision for unfunded commitments. During the three months ended March 31, 2024, the Company recorded $162,000 in bank owned life insurance ("BOLI") death benefits and a $1.0 million increase in the fair value of marketable securities.
Current wording
Our net income decreased $6.6 million, or 3.17%, to $201.6 million for the six-month period ended June 30, 2024, from $208.2 million for the same period in 2023. On a diluted earnings per share basis, our earnings were $1.00 per share for the six-month period ended June 30, 2024 compared to $1.02 per share for the six-month period ended June 30, 2023. The Company recorded $12.5 million in credit loss expense for the six-month period ended June 30, 2024. This consisted of a $13.5 million provision for credit losses on loans and a reversal of $1.0 million provision for unfunded commitments. During the six months ended June 30, 2024, the Company recorded a $2.1 million gain on sale of building from our Texas region, a $729,000 increase in the fair value of marketable securities and $162,000 in bank owned life insurance ("BOLI") death benefits, partially offset by $2.3 million of FDIC special assessment and a $2.0 million deferred tax asset write-down.
Previous wording
Total interest expense increased by $42.0 million, or 59.7%. This was partially offset by a $32.0 million, or 11.2%, increase in total interest income, a $7.6 million, or 22.3%, increase in non-interest income and a $3.1 million, or 2.7%, decrease in non-interest expense. These fluctuations are primarily due to the high interest rate environment. The increase in interest expense was primarily due to a $33.4 million, or 56.4%, increase in interest on deposits, an $8.1 million, or 130.6%, increase in interest on FHLB and other borrowed funds and a $536,000, or 61.8%, increase in interest on securities sold under agreements to repurchase. The increase in interest income resulted from a $28.3 million, or 11.9%, increase in loan interest income and a $5.8 million, or 124.7%, increase in interest income on deposits at other banks, partially offset by a $2.2 million, or 5.1%, decrease in investment income. The increase in non-interest income was primarily due to a $12.4 million, or 108.8%, increase in the fair value adjustment for marketable securities and a $987,000, or 38.4%, increase in mortgage lending income, which was partially offset by a $4.5 million, or 37.7%, decrease in other income and a $1.7 million, or 14.2%, decrease in other service charges and fees. The decrease in non-interest expense was due to a decrease of $3.6 million, or 5.6%, in salaries and employee benefits and a decrease of $401,000, or 2.7%, in occupancy and equipment expense, partially offset by an increase of $654,000, or 2.5%, in other operating expenses and an increase of $179,000, or 2.0%, in data processing expense. Income tax expense increased by $331,000, or 1.1%, during the quarter due to an increase in the income tax rate.
Current wording
Total interest expense increased by $75.5 million, or 49.5%. This was partially offset by a $69.6 million, or 12.1%, increase in total interest income, a $900,000, or 1.1%, increase in non-interest income and a $6.2 million, or 2.7%, decrease in non-interest expense. These fluctuations are primarily due to the high interest rate environment. The increase in interest expense was primarily due to a $59.0 million, or 45.6%, increase in interest on deposits, a $15.7 million, or 123.1%, increase in interest on FHLB and other borrowed funds and a $778,000, or 39.1%, increase in interest on securities sold under agreements to repurchase. The increase in interest income resulted from a $59.5 million, or 12.4%, increase in loan interest income and a $14.7 million, or 174.4%, increase in interest income on deposits at other banks, partially offset by a $4.5 million, or 5.3%, decrease in investment income. The increase in non-interest income was primarily due to an $11.4 million, or 106.9%, increase in the fair value adjustment for marketable securities, a $2.6 million, or 50.0%, increase in mortgage lending income, and a $1.1 million, or 121.2%, increase in gain on sale of branches, equipment and other assets, net, which was partially offset by a $13.0 million, or 48.0%, decrease in other income and a $2.8 million, or 11.7%, decrease in other service charges and fees. The decrease in non-interest expense was due to a decrease of $7.7 million, or 6.0%, in salaries and employee benefits and a decrease of $916,000, or 3.1%, in occupancy and equipment expense, which was partially offset by an increase of $2.4 million, or 4.4%, in other operating expenses.
Previous wording
Our total assets as of March 31, 2024 increased $179.1 million to $22.84 billion from $22.66 billion reported as of December 31, 2023. Cash and cash equivalents increased $175.0 million for the three months ended March 31, 2024. Our loan portfolio balance increased to $14.51 billion as of March 31, 2024 from $14.42 billion at December 31, 2023. The increase in loans was primarily due to $81.5 million of organic loan growth from our Centennial Commercial Finance Group ("CFG") franchise and $7.4 million of organic loan growth in our remaining footprint. These increases were partially offset by a $108.4 million decrease in investment securities resulting from paydowns and maturities during the first three months of 2024. Total deposits increased $78.4 million to $16.87 billion as of March 31, 2024 from $16.79 billion as of December 31, 2023. Stockholders’ equity increased $20.3 million to $3.81 billion as of March 31, 2024, compared to $3.79 billion as of December 31, 2023. The $20.3 million increase in stockholders’ equity is primarily associated with the $100.1 million in net income for the three months ended March 31, 2024, partially offset by the $36.2 million of shareholder dividends paid, the $22.4 million in other comprehensive loss and stock repurchases of $24.0 million in 2024.
Current wording
Our total assets as of June 30, 2024 increased $263.2 million to $22.92 billion from $22.66 billion reported as of December 31, 2023. Cash and cash equivalents increased $58.5 million for the six months ended June 30, 2024. Our loan portfolio balance increased to $14.78 billion as of June 30, 2024 from $14.42 billion at December 31, 2023. The increase in loans was primarily due to $218.8 million of organic loan growth in our community banking footprint and $137.9 million of organic loan growth from our Centennial Commercial Finance Group ("CFG") franchise. These increases were partially offset by a $166.4 million decrease in investment securities resulting from paydowns and maturities during the first six months of 2024. Total deposits increased $168.1 million to $16.96 billion as of June 30, 2024 from $16.79 billion as of December 31, 2023. Stockholders’ equity increased $64.4 million to $3.86 billion as of June 30, 2024, compared to $3.79 billion as of December 31, 2023. The $64.4 million increase in stockholders’ equity is primarily associated with the $201.6 million in net income for the six months ended June 30, 2024, partially offset by the $72.3 million of shareholder dividends paid, stock repurchases of $56.6 million and the $12.7 million in other comprehensive loss.
Previous wording
Our non-performing loans were $80.0 million, or 0.55% of total loans as of March 31, 2024, compared to $64.1 million, or 0.44% of total loans, as of December 31, 2023. The allowance for credit losses as a percentage of non-performing loans decreased to 362.94% as of March 31, 2024, from 449.66% as of December 31, 2023. Non-performing loans from our Arkansas franchise were $17.6 million at March 31, 2024 compared to $15.4 million as of December 31, 2023. Non-performing loans from our Florida franchise were $10.6 million at March 31, 2024 compared to $9.3 million as of December 31, 2023. Non-performing loans from our Texas franchise were $44.7 million at March 31, 2024 compared to $33.5 million as of December 31, 2023. Non-performing loans from our Alabama franchise were $408,000 at March 31, 2024 compared to $413,000 as of December 31, 2023. Non-performing loans from our Shore Premier Finance ("SPF") franchise were $3.9 million at March 31, 2024 compared to $2.8 million as of December 31, 2023. Non-performing loans from our Centennial CFG franchise were $2.8 million at March 31, 2024 compared to $2.7 million as of December 31, 2023.
Current wording
Our non-performing loans were $86.3 million, or 0.58% of total loans as of June 30, 2024, compared to $64.1 million, or 0.44% of total loans, as of December 31, 2023. The allowance for credit losses as a percentage of non-performing loans decreased to 342.66% as of June 30, 2024, from 449.66% as of December 31, 2023. Non-performing loans from our Arkansas franchise were $16.2 million at June 30, 2024 compared to $15.4 million as of December 31, 2023. Non-performing loans from our Florida franchise were $39.1 million at June 30, 2024 compared to $9.3 million as of December 31, 2023. Non-performing loans from our Texas franchise were $24.7 million at June 30, 2024 compared to $33.5 million as of December 31, 2023. Non-performing loans from our Alabama franchise were $399,000 at June 30, 2024 compared to $413,000 as of December 31, 2023. Non-performing loans from our Shore Premier Finance ("SPF") franchise were $3.2 million at June 30, 2024 compared to $2.8 million as of December 31, 2023. Non-performing loans from our Centennial CFG franchise were $2.8 million at June 30, 2024 compared to $2.7 million as of December 31, 2023.
Previous wording
As of March 31, 2024, our non-performing assets increased to $110.7 million, or 0.48% of total assets, from $95.4 million, or 0.42% of total assets, as of December 31, 2023. Non-performing assets from our Arkansas franchise were $17.9 million at March 31, 2024 compared to $15.5 million as of December 31, 2023. Non-performing assets from our Florida franchise were $17.9 million at March 31, 2024 compared to $17.3 million as of December 31, 2023. Non-performing assets from our Texas franchise were $45.0 million at March 31, 2024 compared to $33.8 million as of December 31, 2023. Non-performing assets from our Alabama franchise were $408,000 at March 31, 2024 compared to $413,000 as of December 31, 2023. Non-performing assets from our SPF franchise were $3.9 million at March 31, 2024 compared to $2.8 million as of December 31, 2023. Non-performing assets from our Centennial CFG franchise were $25.5 million at March 31, 2024 compared to $25.6 million as of December 31, 2023.
Current wording
As of June 30, 2024, our non-performing assets increased to $127.8 million, or 0.56% of total assets, from $95.4 million, or 0.42% of total assets, as of December 31, 2023. Non-performing assets from our Arkansas franchise were $16.3 million at June 30, 2024 compared to $15.5 million as of December 31, 2023. Non-performing assets from our Florida franchise were $46.6 million at June 30, 2024 compared to $17.3 million as of December 31, 2023. Non-performing assets from our Texas franchise were $35.8 million at June 30, 2024 compared to $33.8 million as of December 31, 2023. Non-performing assets from our Alabama franchise were $399,000 at June 30, 2024 compared to $413,000 as of December 31, 2023. Non-performing assets from our SPF franchise were $3.2 million at June 30, 2024 compared to $2.8 million as of December 31, 2023. Non-performing assets from our Centennial CFG franchise were $25.5 million at June 30, 2024 compared to $25.6 million as of December 31, 2023.
Previous wording
The $2.8 million balance of non-accrual loans for our Centennial CFG Capital Markets Group consists of two loans that are assessed for credit risk by the Federal Reserve under the Shared National Credit Program. The loans are not current on either principal or interest, and we have reversed any interest that had accrued subsequent to the non-accrual date designated by the Federal Reserve. Any interest payments that are received will be applied to the principal balance. In addition, the $22.8 million balance of foreclosed assets held for sale for our Centennial CFG Property Finance Group consists of an office building located in California. This represents the largest component of the Company's $30.7 million in foreclosed assets held for sale.
Current wording
The $2.8 million balance of non-accrual loans for our Centennial CFG Capital Markets Group consists of two loans that are assessed for credit risk by the Federal Reserve under the Shared National Credit Program. The loans are not current on either principal or interest, and we have reversed any interest that had accrued subsequent to the non-accrual date designated by the Federal Reserve. Any interest payments that are received will be applied to the principal balance. In addition, the $22.8 million balance of foreclosed assets held for sale for our Centennial CFG Property Finance Group consists of an office building located in California. This represents the largest component of the Company's $41.3 million in foreclosed assets held for sale.
Previous wording
Management estimates the allowance balance using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency level, or term as well as for changes in environmental conditions, such as changes in the national unemployment rate, gross domestic product, rental vacancy rate, housing price indices and rental vacancy rate index.
Current wording
Management estimates the allowance balance using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency level, or term as well as for changes in environmental conditions, such as changes in the national unemployment rate, gross domestic product, rental vacancy rate, housing price index and rental vacancy rate index.
Previous wording
The allowance for credit losses is measured based on call report segment as these types of loan exhibit similar risk characteristics. The identified loan segments are as follows:
Current wording
The allowance for credit losses is measured based on call report segment as these types of loans exhibit similar risk characteristics. The identified loan segments are as follows:
Previous wording
•1-4 family revolving HELOC & junior liens
Current wording
•1-4 family revolving home equity lines of credit (“HELOC”) & junior liens
Previous wording
•Owner occupied commercial real estate
Current wording
•Non-owner occupied commercial real estate
Previous wording
Allowance for Credit Losses on Off-Balance Sheet Credit Exposures: The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit unless that obligation is unconditionally cancellable by the Company. The allowance for credit losses on off-balance sheet credit exposures is adjusted as a provision for credit loss expense. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life.
Current wording
Allowance for Credit Losses on Off-Balance Sheet Credit Exposures. The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit unless that obligation is unconditionally cancellable by the Company. The allowance for credit losses on off-balance sheet credit exposures is adjusted as a provision for or reversal of credit loss expense. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life.
Previous wording
Our net interest margin decreased from 4.37% for the three-month period ended March 31, 2023 to 4.13% for the three-month period ended March 31, 2024. The yield on interest earning assets was 6.38% and 5.79% for the three months ended March 31, 2024 and 2023, respectively, while average interest earning assets decreased from $20.06 billion to $20.03 billion. The decrease in average interest earning assets is primarily due to a $425.9 million decrease in average investment securities, partially offset by $375.4 million increase in average interest-bearing balances due from banks, a $13.4 million increase in average loans receivable and a $4.5 million increase in average federal funds sold. During the first quarter of 2024, the Company held excess liquidity of approximately $500.0 million which was dilutive to the net interest margin by 10 basis points. For the three months ended March 31, 2024 and 2023, we recognized $2.8 million and $3.2 million, respectively, in total net accretion for acquired loans and deposits. The reduction in accretion was dilutive to the net interest margin by one basis point. We recognized $1.1 million in event income for the three-months ended March 31, 2024 compared to $2.1 million for the three-months ended March 31, 2023. The decrease in event income was dilutive to the net interest margin by two basis points. The remaining decrease in the net interest margin was due to an increase in interest expense resulting from an increase in average interest-bearing liabilities at higher interest rates primarily as a result of the high interest rate environment.
Current wording
Our net interest margin decreased from 4.28% for the three-month period ended June 30, 2023 to 4.27% for the three-month period ended June 30, 2024. The yield on interest earning assets was 6.56% and 5.96% for the three months ended June 30, 2024 and 2023, respectively, while average interest earning assets increased from $19.58 billion to $20.21 billion. The increase in average interest earning assets is primarily due to a $609.9 million increase in average interest-bearing balances due from banks and a $388.9 million increase in average loans receivable, partially offset by a $368.3 million decrease in average investment securities. During the second quarter of 2024, the Company held excess liquidity of approximately $500.0 million which was dilutive to the net interest margin by 10 basis points. For the three months ended June 30, 2024 and 2023, we recognized $1.9 million and $2.7 million, respectively, in total net accretion for acquired loans and deposits. The reduction in accretion was dilutive to the net interest margin by one basis point. We recognized $1.7 million in event income for the three-months ended June 30, 2024 compared to $1.3 million for the three-months ended June 30, 2023. The remaining increase in the net interest margin was due to an increase in interest income resulting from an increase in average interest-bearing assets at higher interest rates primarily as a result of the high interest rate environment.
Previous wording
Net interest income on a fully taxable equivalent basis decreased $10.7 million, or 5.0%, to $205.5 million for the three-month period ended March 31, 2024, from $216.2 million for the same period in 2023. This decrease in net interest income for the three-month period ended March 31, 2024 was the result of a $42.0 million increase in interest expense, partially offset by a $31.2 million increase in interest income, on a fully taxable equivalent basis. The $42.0 million increase in interest expense is primarily the result of the high interest rate environment. The higher rates on interest bearing liabilities resulted in an increase in interest expense of approximately $33.9 million, in addition to an increase in average interest bearing liabilities that increased interest expense by approximately $8.1 million. The $31.2 million increase in interest income was also primarily the result of the high interest rate environment. The higher yield on earning assets resulted in an increase in interest income of approximately $30.1 million, in addition to an increase of $1.1 million in interest income due to the change in average interest earning asset balances.
Current wording
Net interest income on a fully taxable equivalent basis increased $5.3 million, or 2.5%, to $214.5 million for the three-month period ended June 30, 2024, from $209.1 million for the same period in 2023. This increase in net interest income for the three-month period ended June 30, 2024 was the result of a $38.8 million increase in interest income, which was partially offset by a $33.5 million increase in interest expense, on a fully taxable equivalent basis. The $38.8 million increase in interest income was primarily the result of the high interest rate environment. The higher yield on earning assets resulted in an increase in interest income of approximately $27.2 million, in addition to an increase of $11.6 million in interest income due to the change in average interest earning asset balances. The $33.5 million increase in interest expense is also primarily the result of the high interest rate environment. The higher rates on interest bearing liabilities resulted in an increase in interest expense of approximately $22.8 million, in addition to an increase in average interest bearing liabilities which increased interest expense by approximately $10.7 million.
Previous wording
Tables 2 and 3 reflect an analysis of net interest income on a fully taxable equivalent basis for the three months ended March 31, 2024 and 2023, as well as changes in fully taxable equivalent net interest margin for the three months ended March 31, 2024 compared to the same period in 2023.
Current wording
Tables 2 and 3 reflect an analysis of net interest income on a fully taxable equivalent basis for the three and six months ended June 30, 2024 and 2023, as well as changes in the fully taxable equivalent net interest margin for the three and six months ended June 30, 2024 compared to the same period in 2023.
Previous wording
Table 4 shows, for each major category of earning assets and interest-bearing liabilities, the average amount outstanding, the interest income or expense on that amount and the average rate earned or expensed for the three months ended March 31, 2024 and 2023, respectively. The table also shows the average rate earned on all earning assets, the average rate expensed on all interest-bearing liabilities, the net interest spread and the net interest margin for the same periods. The analysis is presented on a fully taxable equivalent basis. Non-accrual loans were included in average loans for the purpose of calculating the rate earned on total loans.
Current wording
Table 4 shows, for each major category of earning assets and interest-bearing liabilities, the average amount outstanding, the interest income or expense on that amount and the average rate earned or expensed for the three and six months ended June 30, 2024 and 2023, respectively. The table also shows the average rate earned on all earning assets, the average rate expensed on all interest-bearing liabilities, the net interest spread and the net interest margin for the same periods. The analysis is presented on a fully taxable equivalent basis. Non-accrual loans were included in average loans for the purpose of calculating the rate earned on total loans.
Previous wording
Table 5 shows changes in interest income and interest expense resulting from changes in volume and changes in interest rates for the three months ended March 31, 2024 compared to the same period in 2023, on a fully taxable basis. The changes in interest rate and volume have been allocated to changes in average volume and changes in average rates, in proportion to the relationship of absolute dollar amounts of the changes in rates and volume.
Current wording
Table 5 shows changes in interest income and interest expense resulting from changes in volume and changes in interest rates for the three and six months ended June 30, 2024 compared to the same period in 2023, on a fully taxable basis. The changes in interest rate and volume have been allocated to changes in average volume and changes in average rates, in proportion to the relationship of absolute dollar amounts of the changes in rates and volume.
Previous wording
Credit Loss Expense: During the three months ended March 31, 2024, the Company recorded a $5.5 million provision for credit losses on loans, no provision for credit losses on investment securities and a reversal of $1.0 million provision for unfunded commitments.
Current wording
Credit Loss Expense: During the three months ended June 30, 2024, the Company recorded an $8.0 million provision for credit losses on loans. However, the Company determined no additional provision, or reversal of provision, was necessary for unfunded commitments as the current level of the reserve was considered adequate. During the six months ended June 30, 2024, the Company recorded a $13.5 million provision for credit losses on loans, no provision for credit losses on investment securities and a reversal of $1.0 million provision for unfunded commitments.
Previous wording
Net charge-offs to average total loans was 0.10% for both the three months ended March 31, 2024 and 2023.
Current wording
Net charge-offs to average total loans was 0.07% and 0.11% for the three months ended June 30, 2024 and 2023, respectively, and net charge-offs to average total loans was 0.08% and 0.11% for the six months ended June 30, 2024 and 2023, respectively.
Previous wording
During the three months ended March 31, 2024, the Company determined the $2.5 million allowance for credit losses on the AFS portfolio and the $2.0 million allowance for credit losses on the HTM portfolio were adequate. Therefore, no additional provision was considered necessary.
Current wording
During both the three and six months ended June 30, 2024, the Company determined the $2.5 million allowance for credit losses on the AFS portfolio and the $2.0 million allowance for credit losses on the HTM portfolio were adequate. Therefore, no additional provision was considered necessary.
Previous wording
Total non-interest income was $41.8 million for the three months ended March 31, 2024, compared to $34.2 million for the same period in 2023. Our recurring non-interest income includes service charges on deposit accounts, other service charges and fees, trust fees, mortgage lending income, insurance commissions, increase in cash value of life insurance, fair value adjustment for marketable securities and dividends.
Current wording
Total non-interest income was $42.8 million and $84.6 million for the three and six months ended June 30, 2024, compared to $49.5 million and $83.7 million for the same period in 2023. Our recurring non-interest income includes service charges on deposit accounts, other service charges and fees, trust fees, mortgage lending income, insurance commissions, increase in cash value of life insurance, fair value adjustment for marketable securities and dividends.
Previous wording
Table 6 measures the various components of our non-interest income for the three months ended March 31, 2024 and 2023.
Current wording
Table 6 measures the various components of our non-interest income for the three and six months ended June 30, 2024 and 2023.
Previous wording
•The $1.7 million decrease in other service charges and fees is primarily related to decreases in Centennial CFG property finance loan fees.
Current wording
•The $1.1 million decrease in other service charges and fees is primarily related to decreases in Centennial CFG property finance loan fees and Mastercard income and incentives.
Previous wording
•The $987,000 increase in mortgage lending income is primarily related to an increase in volume of secondary market loans from the lower volume of loans during 2023.
Current wording
•The $1.6 million increase in mortgage lending income is primarily related to an increase in volume of secondary market loans from the lower volume of loans during 2023.
Previous wording
•The $4.5 million decrease in other income is primarily due to a $2.9 million reduction of income for equity method investments and a $3.8 million decrease in recoveries on historic losses, partially offset by a $1.3 million increase in rental income for other real estate owned ("OREO"), a $579,000 increase in investment brokerage fee income and a $358,000 increase in miscellaneous income.
Current wording
•The $8.5 million decrease in other income is primarily due to a $7.0 million reduction in income for equity method investments, a $2.8 million reduction in BOLI death benefit income and a $398,000 decrease in recoveries on historic losses, partially offset by an $852,000 increase in rental income from other real estate owned ("OREO") and a $689,000 increase in investment brokerage fee income.
Previous wording
Non-interest income increased $7.6 million, or 22.3%, to $41.8 million for the three months ended March 31, 2024 from $34.2 million for the same period in 2023. The primary factors that resulted in this increase were the increase in fair value adjustment for marketable securities and the increase in mortgage lending income, which was partially offset by decreases in other service charges and fees and other income.
Current wording
Non-interest income increased $900,000, or 1.1%, to $84.6 million for the six months ended June 30, 2024 from $83.7 million for the same period in 2023. The primary factors that resulted in this increase were the increases in fair value adjustment for marketable securities, trust fees, mortgage lending income and the gain on sale of branches, equipment and other assets, net, which was partially offset by decreases in other service charges and fees and other income.
Previous wording
•The $12.4 million increase in the fair value adjustment for marketable securities is due to the changes in the fair value of marketable securities held by the Company.
Current wording
•The $11.4 million increase in the fair value adjustment for marketable securities is due to the changes in the fair value of marketable securities held by the Company.
Previous wording
Non-interest expense primarily consists of salaries and employee benefits, occupancy and equipment, data processing, and other expenses such as advertising, merger and acquisition expenses, amortization of intangibles, electronic banking expense, FDIC and state assessment, insurance, legal and accounting fees and other professional fees.
Current wording
Non-interest expense primarily consists of salaries and employee benefits, occupancy and equipment, data processing, and other expenses such as advertising, amortization of intangibles, electronic banking expense, FDIC and state assessment, insurance, legal and accounting fees, other professional fees and other expenses.
Previous wording
Table 7 below sets forth a summary of non-interest expense for the three months ended March 31, 2024 and 2023.
Current wording
Table 7 below sets forth a summary of non-interest expense for the three and six months ended June 30, 2024 and 2023.
Previous wording
Non-interest expense decreased $3.1 million, or 2.7%, to $111.5 million for the three months ended March 31, 2024 from $114.6 million for the same period in 2023. The primary factor that resulted in this decrease was the decrease in salaries and employee benefits and advertising expense, partially offset by an increase in other expense and legal and accounting expense.
Current wording
Non-interest expense decreased $3.1 million, or 2.7%, to $113.2 million for the three months ended June 30, 2024 from $116.3 million for the same period in 2023. The primary factors that resulted in this decrease were the decrease in salaries and employee benefits, occupancy and equipment expense, advertising expense, amortization of intangibles and other professional fees, which were partially offset by an increase in FDIC and state assessment expense, other expense and legal and accounting expense.
Previous wording
•The $3.6 million decrease in salaries and employee benefits expense is primarily due to the Company's project to reduce the size of its workforce and a decrease in deferred loan costs.
Current wording
•The $4.1 million decrease in salaries and employee benefits expense is primarily due to the Company's project to reduce the size of its workforce and a decrease in deferred loan costs.
Previous wording
•The $577,000 decrease in advertising expense is primarily due to decreased volume of advertising.
Current wording
•The $406,000 decrease in advertising expense is primarily due to a decreased volume of advertising.
Previous wording
•The $993,000 increase in legal and accounting expense is primarily due to ongoing legal matters.
Current wording
•The $1.2 million increase in legal and accounting expense is primarily due to ongoing legal matters.
Previous wording
•The $1.0 million increase in other expense is primarily due to an increase in OREO expense.
Current wording
•The $468,000 million increase in other expense is primarily due to an increase in OREO expense, partially offset by decreases in travel expenses, insurance claims paid and other losses.
Previous wording
Income tax expense increased $331,000, or 1.1%, to $30.3 million for the three-month period ended March 31, 2024, from $30.0 million for the same period in 2023. The effective income tax rate was 23.22% for the three months ended March 31, 2024, compared to 22.54% for the same periods in 2023. The marginal tax rate was 24.989% and 24.6735% for 2024 and 2023, respectively.
Current wording
Income tax expense increased $265,000, or 0.8%, to $31.9 million for the three-month period ended June 30, 2024, from $31.6 million for the same period in 2023. Income tax expense increased $596,000, or 1.0%, to $62.2 million for the six-month period ended June 30, 2024, from $61.6 million for the same period in 2023. The effective income tax rate was 23.90% and 23.56% for the three and six months ended June 30, 2024, respectively, compared to 23.10% and 22.82% for the same periods in 2023, respectively. The marginal tax rate was 24.989% and 24.6735% for 2024 and 2023, respectively.
Previous wording
Our total assets as of March 31, 2024 increased $179.1 million to $22.84 billion from $22.66 billion reported as of December 31, 2023. Cash and cash equivalents increased $175.0 million for the three months ended March 31, 2024. Our loan portfolio balance increased to $14.51 billion as of March 31, 2024 from $14.42 billion at December 31, 2023. The increase in loans was primarily due to $81.5 million of organic loan growth from our Centennial Commercial Finance Group ("CFG") franchise and $7.4 million of organic loan growth in our remaining footprint. These increases were partially offset by a $108.4 million decrease in investment securities resulting from paydowns and maturities during the first three months of 2024. Total deposits increased $78.4 million to $16.87 billion as of March 31, 2024 from $16.79 billion as of December 31, 2023. Stockholders’ equity increased $20.3 million to $3.81 billion as of March 31, 2024, compared to $3.79 billion as of December 31, 2023. The $20.3 million increase in stockholders’ equity is primarily associated with the $100.1 million in net income for the three months ended March 31, 2024, partially offset by the $36.2 million of shareholder dividends paid, the $22.4 million in other comprehensive loss and stock repurchases of $24.0 million in 2024.
Current wording
Our total assets as of June 30, 2024 increased $263.2 million to $22.92 billion from $22.66 billion reported as of December 31, 2023. Cash and cash equivalents increased $58.5 million for the six months ended June 30, 2024. Our loan portfolio balance increased to $14.78 billion as of June 30, 2024 from $14.42 billion at December 31, 2023. The increase in loans was primarily due to $218.8 million of organic loan growth in our community banking footprint and $137.9 million of organic loan growth from our Centennial CFG franchise. These increases were partially offset by a $166.4 million decrease in investment securities resulting from paydowns and maturities during the first six months of 2024. Total deposits increased $168.1 million to $16.96 billion as of June 30, 2024 from $16.79 billion as of December 31, 2023. Stockholders’ equity increased $64.4 million to $3.86 billion as of June 30, 2024, compared to $3.79 billion as of December 31, 2023. The $64.4 million increase in stockholders’ equity is primarily associated with the $201.6 million in net income for the six months ended June 30, 2024, partially offset by the $72.3 million of shareholder dividends paid, stock repurchases of $56.6 million and the $12.7 million in other comprehensive loss.
Previous wording
Our loan portfolio averaged $14.49 billion and $14.47 billion during the three months ended March 31, 2024 and 2023, respectively. Loans receivable were $14.51 billion and $14.42 billion as of March 31, 2024 and December 31, 2023, respectively.
Current wording
Our loan portfolio averaged $14.65 billion and $14.26 billion during the three months ended June 30, 2024 and 2023, respectively. Our loan portfolio averaged $14.57 billion and $14.37 billion during the six months ended June 30, 2024 and 2023, respectively. Loans receivable were $14.78 billion and $14.42 billion as of June 30, 2024 and December 31, 2023, respectively.
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Current report — wording carried from elsewhere
Results of Operations for the Six Months Ended June 30, 2024 and 2023
Current report — wording carried from elsewhere
Our annualized return on average assets was 1.78% for the six months ended June 30, 2024, compared to 1.87% for the same period in 2023. (See Table 22 for the related non-GAAP financial measures and tabular reconciliation). Our annualized return on average common equity was 10.69% and 11.66% for the six months ended June 30, 2024, and 2023, respectively. (See Table 23 for the related non-GAAP financial measures and tabular reconciliation).
Current report — wording carried from elsewhere
Net interest income on a fully taxable equivalent basis decreased $5.4 million, or 1.3%, to $419.9 million for the six-month period ended June 30, 2024, from $425.4 million for the same period in 2023. This decrease in net interest income for the six-month period ended June 30, 2024 was the result of a $75.5 million increase in interest expense, which was partially offset by a $70.0 million increase in interest income, on a fully taxable equivalent basis. The $75.5 million increase in interest expense is primarily the result of the high interest rate environment. The higher rates on interest bearing liabilities resulted in an increase in interest expense of approximately $56.7 million, in addition to an increase in average interest bearing liabilities which increased interest expense by approximately $18.8 million. The $70.0 million increase in interest income was also primarily the result of the high interest rate environment. The higher yield on earning assets resulted in an increase in interest income of approximately $57.5 million, in addition to an increase of $12.6 million in interest income due to the change in average interest earning asset balances.
Current report — wording carried from elsewhere
•The $1.1 million decrease in the fair value adjustment for marketable securities is due to the changes in the fair value of marketable securities held by the Company.
Current report — wording carried from elsewhere
•The $2.8 million decrease in other service charges and fees is primarily related to decreases in Centennial CFG property finance loan fees and Mastercard income, partially offset by an increase in merchant service income.
Current report — wording carried from elsewhere
•The $2.6 million increase in mortgage lending income is primarily related to an increase in volume of secondary market loans from the lower volume of loans during 2023.
Current report — wording carried from elsewhere
•The $13.0 million decrease in other income is primarily due to a $9.9 million reduction of income for equity method investments, a $2.8 million reduction in BOLI death benefit income and a $4.2 million decrease in recoveries on historic losses, partially offset by a $2.1 million increase in rental income from OREO, a $1.3 million increase in investment brokerage fee income and a $372,000 increase in miscellaneous income.
Current report — wording carried from elsewhere
•The $7.7 million decrease in salaries and employee benefits expense is primarily due to the Company's project to reduce the size of its workforce and a decrease in deferred loan costs.
Current report — wording carried from elsewhere
•The $983,000 decrease in advertising expense is primarily due to a decreased volume of advertising.
Current report — wording carried from elsewhere
•The $2.2 million increase in legal and accounting expense is primarily due to ongoing legal matters.
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Previous report — wording carried elsewhere
For the three months ended March 31, 2024 and 2023
Previous report — wording carried elsewhere
The allowance for credit losses for each segment is measured through the use of the discounted cash flow method. Loans evaluated individually that are considered to be collateral dependent are not included in the collective evaluation. For these loans, where the Company has determined that foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and the Company expects repayment of the loan to be provided substantially through the operation or sale of the collateral, the allowance for credit losses is measured based on the difference between the fair value of the collateral, net of estimated costs to sell, and the amortized cost basis of the loan as of the measurement date. When repayment is expected to be from the operation of the collateral, expected credit losses are calculated as the amount by which the amortized cost basis of the loan exceeds the present value of expected cash flows from the operation of the collateral. The allowance for credit losses may be zero if the fair value of the collateral at the measurement date exceeds the amortized cost basis of the loan, net of estimated costs to sell. For individually analyzed loans which are not considered to be collateral dependent, an allowance is recorded based on the loss rate for the respective pool within the collective evaluation.
Previous report — wording carried elsewhere
Investments – Available-for-sale: The Company evaluates all securities quarterly to determine if any securities in a loss position require a provision for credit losses in accordance with ASC 326, Measurement of Credit Losses on Financial Instruments. The Company first assesses whether it intends to sell or if it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income. For securities that do not meet this criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, the Company considers the extent to which fair value is less than amortized cost, and changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income. Changes in the allowance for credit losses are recorded as provision for (or reversal of) credit loss expense. Losses are charged against the allowance when management believes the uncollectability of a security is confirmed or when either of the criteria regarding intent or requirement to sell is met.
Previous report — wording carried elsewhere
Investments – Held-to-Maturity. The Company evaluates all securities quarterly to determine if any securities in a loss position require a provision for credit losses in accordance with ASC 326. The Company measures expected credit losses on HTM securities on a collective basis by major security type, with each type sharing similar risk characteristics. The estimate of expected credit losses considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. The Company has made the election to exclude accrued interest receivable on HTM securities from the estimate of credit losses and report accrued interest separately on the consolidated balance sheets. Changes in the allowance for credit losses are recorded as provision for (or reversal of) credit loss expense. Losses are charged against the allowance when management believes the uncollectability of a security is confirmed.
Previous report — wording carried elsewhere
Overview. The allowance for credit losses on loans receivable is a valuation account that is deducted from the loan’s amortized cost basis to present the net amount expected to be collected on the loans. Loans are charged off against the allowance when management believes the uncollectability of a loan balance is confirmed. Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off.
Previous report — wording carried elsewhere
Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayments when appropriate. The contractual term excludes expected extensions, renewals and modifications unless either of the following applies:
Previous report — wording carried elsewhere
Management qualitatively adjusts model results for risk factors ("Q-Factors") that are not considered within our modeling processes but are nonetheless relevant in assessing the expected credit losses within our loan pools. These Q-Factors and other qualitative adjustments may increase or decrease management's estimate of expected credit losses by a calculated percentage or amount based upon the estimated level of risk. The various risks that may be considered in making Q-Factor and other qualitative adjustments include, among other things, the impact of (i) changes in lending policies, procedures and strategies; (ii) changes in nature and volume of the portfolio; (iii) staff experience; (iv) changes in volume and trends in classified loans, delinquencies and nonaccruals; (v) concentration risk; (vi) trends in underlying collateral values; (vii) external factors such as competition, legal and regulatory environment; (viii) changes in the quality of the loan review system; and (ix) economic conditions.
Previous report — wording carried elsewhere
Loans are placed on non-accrual status when management believes that the borrower’s financial condition, after giving consideration to economic and business conditions and collection efforts, is such that collection of interest is doubtful, or generally when loans are 90 days or more past due. Loans are charged against the allowance for credit losses when management believes that the collectability of the principal is unlikely. Accrued interest related to non-accrual loans is generally charged against the allowance for credit losses when accrued in prior years and reversed from interest income if accrued in the current year. Interest income on non-accrual loans may be recognized to the extent cash payments are received, although the majority of payments received are usually applied to principal. Non-accrual loans are generally returned to accrual status when principal and interest payments are less than 90 days past due, the customer has made required payments for at least six months, and we reasonably expect to collect all principal and interest.
Previous report — wording carried elsewhere
Acquisition Accounting and Acquired Loans. We account for our acquisitions under FASB ASC Topic 805, Business Combinations, which requires the use of the acquisition method of accounting. All identifiable assets acquired, including loans, are recorded at fair value. In accordance with ASC 326, the Company records both a discount and an allowance for credit losses on acquired loans. All purchased loans are recorded at fair value in accordance with the fair value methodology prescribed in FASB ASC Topic 820, Fair Value Measurements. The fair value estimates associated with the loans include estimates related to expected prepayments and the amount and timing of undiscounted expected principal, interest and other cash flows.
Previous report — wording carried elsewhere
Purchased loans that have experienced more than insignificant credit deterioration since origination are PCD loans. An allowance for credit losses is determined using the same methodology as other loans. For PCD loans not individually analyzed for impairment, the Company develops separate PCD models for each loan segment. The initial allowance for credit losses determined on a collective basis is allocated to individual loans. The sum of the loan’s purchase price and allowance for credit losses becomes its initial amortized cost basis. The difference between the initial amortized cost basis and the par value of the loan is a non-credit discount or premium, which is amortized into interest income over the life of the loan. Subsequent changes to the allowance for credit losses are recorded through the provision for credit losses.
Previous report — wording carried elsewhere
Allowance for Credit Losses on Off-Balance Sheet Credit Exposures. The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit unless that obligation is unconditionally cancellable by the Company. The allowance for credit losses on off-balance sheet credit exposures is adjusted as a provision for credit loss expense. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life.
Previous report — wording carried elsewhere
The Company had $105.3 million and $94.9 million in impaired loans (which includes loans individually analyzed for credit losses for which a specific reserve has been recorded, non-accrual loans, loans past due 90 days or more and restructured loans made to borrowers experiencing financial difficulty) for the periods ended March 31, 2024 and December 31, 2023, respectively.
Previous report — wording carried elsewhere
On January 18, 2022, the Company completed an underwritten public offering of the 2032 Notes in aggregate principal amount of $300.0 million. The 2032 Notes are unsecured, subordinated debt obligations of the Company and will mature on January 30, 2032. The Company may, beginning with the interest payment date of January 30, 2027, and on any interest payment date thereafter, redeem the 2032 Notes, in whole or in part, subject to prior approval of the Federal Reserve if then required, at a redemption price equal to 100% of the principal amount of the 2032 Notes to be redeemed plus accrued and unpaid interest to but excluding the date of redemption. The Company may also redeem the 2032 Notes at any time, including prior to January 30, 2027, at the Company’s option, in whole but not in part, subject to prior approval of the Federal Reserve if then required, if certain events occur that could impact the Company’s ability to deduct interest payable on the 2032 Notes for U.S. federal income tax purposes or preclude the 2032 Notes from being recognized as Tier 2 capital for regulatory capital purposes, or if the Company is required to register as an investment company under the Investment Company Act of 1940, as amended. In each case, the redemption would be at a redemption price equal to 100% of the principal amount of the 2032 Notes plus any accrued and unpaid interest to, but excluding, the redemption date.
Previous report — wording carried elsewhere
On April 1, 2022, the Company acquired $140.0 million in aggregate principal amount of 5.500% Fixed-to-Floating Rate Subordinated Notes due 2030 from Happy, and the Company recorded approximately $144.4 million which included fair value adjustments. The 2030 Notes are unsecured, subordinated debt obligations of the Company and will mature on July 31, 2030. The Company may, beginning with the interest payment date of July 31, 2025, and on any interest payment date thereafter, redeem the 2030 Notes, in whole or in part, subject to prior approval of the Federal Reserve if then required, at a redemption price equal to 100% of the principal amount of the 2030 Notes to be redeemed plus accrued and unpaid interest to but excluding the date of redemption. The Company may also redeem the 2030 Notes at any time, including prior to July 31, 2025, at the Company’s option, in whole but not in part, subject to prior approval of the Federal Reserve if then required, if certain events occur that could impact the Company’s ability to deduct interest payable on the 2030 Notes for U.S. federal income tax purposes or preclude the 2030 Notes from being recognized as Tier 2 capital for regulatory capital purposes, or if the Company is required to register as an investment company under the Investment Company Act of 1940, as amended. In each case, the redemption would be at a redemption price equal to 100% of the principal amount of the 2030 Notes plus any accrued and unpaid interest to, but excluding, the redemption.