Northwest Bancshares Inc
For the period ended Jun 30, 2024. Filed Aug 5, 2024.
View on SEC.govAbout this filing
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 5, 2024
NWBI$15.24-0.5%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.
0001471265-24-000074
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-05.
0001471265-24-000121
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 110 previous paragraphs and 132 current paragraphs.
81 unchanged; 28 reworded; 13 added; 1 removed; 0 previous and 10 current paragraphs rearranged.
Tables are not compared: 9 previous and 12 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 (13)
Current report
In November 2023, the FASB issued ASU 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures" to improve disclosure requirements, primarily through enhanced disclosures about significant segment expenses. This update requires that an entity that has a single reportable segment, such as the Company, to provide all the disclosures required by this update. The amendments in this update require annual and interim disclosures on significant segment expenses that are regularly provided to the chief operating decision maker to make operating decisions and to allocate resources. The amendments in this update are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. A public entity should apply the amendments in this update retrospectively to all prior periods presented in the consolidated financial statements with early adoption permitted. The Company is evaluating the accounting and disclosure requirements of ASU 2023-07 and does not expect them to have a material effect on the consolidated financial statements or disclosures.
Current report
Cash and cash equivalents increased by $106 million, or 87%, to $228 million at June 30, 2024, from $122 million at December 31, 2023. During the current period, the Company restructured its security portfolio by selling 15% of its investment securities as part of a previously announced securities portfolio restructure. The proceeds from the sale have not yet been fully re-invested, therefore contributing to the increase in cash.
Current report
The following chart provides a reconciliation of net income from the quarter ended June 30, 2023 to the the quarter ended June 30, 2024 (dollars in thousands):
Current report
For the six months ended June 30, 2024, net interest income (FTE) was $212 million, a decrease of $11 million, or 5% from the same period last year. Net interest margin decreased by 22 basis points. Similar to the quarterly fluctuations noted above, the decrease in net interest income (FTE) included increases in both interest expense and interest income driven by higher interest-bearing deposit costs and balances, partially offset by higher interest-earning asset yields and balances.
Current report
$31 million, or 142%, from the quarter ended June 30, 2023, and by $67 million, or 204% from the six months ended June 30, 2023, primarily attributable to increases in both the average yield and average balance of deposit accounts as we continued competitively positioning our deposit products.
Current report
Average Balance Sheet
Current report
(g)Average cost of deposits were 1.69% and 0.58%, respectively and average cost of Interest-bearing deposits were 2.15% and 0.78%, respectively.
Current report
Rate/Volume Analysis
Current report
The provision for credit losses decreased by $9 million, or 104%, from the quarter ended June 30, 2023. This decrease included a$4 million decrease in the provision for credit losses - loans, as well as a $5 million decrease in the provision for credit losses - unfunded commitments.
Current report
Compared to the six months ended June 30, 2023, the provision for credit losses decreased$11 million, or 78%. This decrease included a$4 million decrease in the provision for credit losses - loans, as well as a $6 million decrease in the provision for credit losses - unfunded commitments.
Current report
Noninterest income from the quarter ended June 30, 2024 showed a loss of $9 million, which was inclusive of a $39 million loss on sale of investment securities; excluding the loss on sale of securities net income grew by $1 million, or 3%, from the quarter ended June 30, 2023 and $5 million, or 9%, from the six months ended June 30, 2023. The increase from the six months ended June 30, 2023 was driven by service charges and fees and the gain on sale of SBA loans. Service charges and fees increased $3 million, or 11%, to $31 million for the six months ended June 30, 2024 from $28 million for the six months ended June 30, 2023 driven by commercial loan fees and deposit related fees based on customer activity in the current year. Additionally, the gain on the sale of SBA loans increased $1 million, or 110%, to $2 million for the six months ended June 30, 2024 from $1 million for the six months ended June 30, 2023 due to increased activity in the current year.
Current report
Noninterest expense increased $9 million, or 5%, to $182 million for the six months ended June 30, 2024 from $173 million for the six months ended June 30, 2023. This increase was primarily attributable to an increase in compensation and employee benefits expense of$11 million, or 11%, to $105 million for the six months ended June 30, 2024, from $94 million for the six months ended June 30, 2023 for the same reasons noted above related to the build-out of staffing over the past year. Partially offsetting this increase was a decrease in non-personnel expense related to a decline in merger, asset disposition and restructuring expense and marketing expenses. Merger, asset disposition and restructuring expense decreased $2 million, or 35%, to $3 million for the six months ended June 30, 2024, from $4 million for the six months ended June 30, 2023 due to the severance and fixed asset charges related to the branch optimization and personnel reductions during the prior year. Marketing expenses decreased by $1 million, or 21%, to $5 million for the six months ended June 30, 2024, from $6 million for the six months ended June 30, 2023 due primarily to the timing of deposit marketing campaigns.
Current report
The provision for income taxes decreased by$9 million from the quarter ended June 30, 2023 and$11 million from the six months ended June 30, 2023 primarily due to lower income before income taxes.
Removed paragraphs (1)
Previous report
Noninterest income increased by $4 million, or 17%, from the quarter ended March 31, 2023. This increase was primarily due to a $2 million, or 18%, increase in service charges and fees to $16 million for the quarter ended March 31, 2024 from $13 million for the quarter ended March 31, 2023 driven by commercial loan fees and deposit related fees based on customer activity in the current quarter as well as gain on sale of SBA loans and improvements in trust and other financial services income.
Reworded paragraphs (28)
Previous wording
In October 2023, the FASB issued ASU No. 2023-06, "Disclosure Improvements." This ASU includes amendments on several subtopics in the FASB Accounting Standards Codification ("Codification") to incorporate certain disclosures and presentation requirements currently residing in SEC Regulations S-X and S-K. The adoption of this ASU may lead to certain disclosure being relocated into the financial statements. The effective date for each amendment will be the date on which the SEC’s removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. These amendments are to be applied prospectively. If the SEC has not removed the applicable requirements from Regulation S-X or Regulation S-K by June 30, 2027, the pending content of the related amendment will be removed from the Codification and will not become effective for any entity. We do not believe this guidance will have a material impact on the Company's financial statements.
Current wording
In October 2023, the FASB issued ASU No. 2023-06, "Disclosure Improvements." This ASU includes amendments on several subtopics in the FASB Accounting Standards Codification ("Codification") to incorporate certain disclosures and presentation requirements currently residing in SEC Regulations S-X and S-K. The adoption of this ASU may lead to certain disclosures being relocated into the financial statements. The effective date for each amendment will be the date on which the SEC’s removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. These amendments are to be applied prospectively. If the SEC has not removed the applicable requirements from Regulation S-X or Regulation S-K by June 30, 2027, the pending content of the related amendment will be removed from the Codification and will not become effective for any entity. We do not believe this guidance will have a material impact on the Company's financial statements.
Previous wording
Total assets at March 31, 2024 were $14.5 billion, an increase of $91 million, or 1%, from $14.4 billion at December 31, 2023. This increase in assets was primarily driven by increases in loans receivable and marketable securities. A discussion of significant changes follows.
Current wording
Total assets at June 30, 2024 were $14.4 billion, a decrease of $34 million from December 31, 2023. This decrease in assets was primarily driven by decreases in personal banking loans receivable and marketable securities, partially offset by increases in cash and cash equivalents and commercial banking loans receivable. A discussion of significant changes follows.
Previous wording
Total marketable securities remained consistent at $1.9 billion at March 31, 2024, an increase of $37 million, or 2%, from December 31, 2023. Available-for-sale securities increased by $51 million, driven by securities purchases during the current period, while held-to-maturity securities decreased $14 million, driven by maturity and regular monthly cash flows.
Current wording
Total marketable securities decreased to $1.8 billion at June 30, 2024, a decrease of $45 million, or 2%, from December 31, 2023. Available-for-sale securities decreased by $14 million, driven by the securities sale noted above, while held-to-maturity securities decreased $31 million, driven by maturities and regular monthly cash flows.
Previous wording
Gross loans receivable increased by $86 million, or 1%, to $11.5 billion at March 31, 2024, from $11.4 billion at December 31, 2023. This increase was attributable to organic loan growth. Our commercial banking portfolio increased by $170 million, or 4%, to $4.8 billion at March 31, 2024, from $4.6 billion at December 31, 2023, primarily as a result of the new commercial lending verticals that we implemented during the prior year. Specifically, our commercial and industrial (C&I) loan portfolio increased by $116 million, or 7%. The increase in our total commercial banking was partially offset by a decrease in our personal banking loan portfolio by $84 million, or 1%, to $6.7 billion at March 31, 2024 from $6.8 billion at December 31, 2023. Cash flows from our personal banking portfolio were redirected to partially fund commercial banking growth.
Current wording
Gross loans receivable decreased by $60 million, or 1%, to $11.4 billion at June 30, 2024. Our personal banking loan portfolio decreased by $197 million, or 3%, to $6.6 billion at June 30, 2024 from $6.8 billion at December 31, 2023. Cash flows from our personal banking portfolio were partially redirected to fund commercial banking growth, which increased by $136 million, or 3%, to $4.8 billion at June 30, 2024, from $4.6 billion at December 31, 2023. This increase represents organic loan growth resulting from the new commercial lending verticals that we implemented during the prior year. Specifically, our commercial and industrial (C&I) loan portfolio increased by $83 million, or 5% compared to December 31, 2023.
Previous wording
Total deposits increased by $92 million, or 1%, to $12.1 billion at March 31, 2024 from $12.0 billion at December 31, 2023. This increase was driven by a $184 million, or 7%, increase in time deposits as we continued competitively positioning our deposit products, and a $51 million, or 2%, increase in savings deposits. Partially offsetting this increase was a decrease in demand deposit accounts by $127 million, or 2%, as customers shifted balances into higher yielding time deposit accounts.
Current wording
Total deposits increased by $107 million, or 1%, to $12.1 billion at June 30, 2024 from $12.0 billion at December 31, 2023. This increase was driven by a $223 million, or 9%, increase in time deposits as we continued competitively positioning our deposit products, and a $43 million, or 2%, increase in savings deposits. Partially offsetting this increase was a decrease in demand deposit accounts by $156 million, or 3%, as customers shifted balances into higher yielding time deposit accounts.
Previous wording
As of March 31, 2024, we had $449 million of brokered deposits, which made up 16% of our time deposits and 4.0% of our total deposit balance at year end. The balance carried an average all-in cost of 5.43% and an average original term of 12 months. These deposits were purchased through a registered broker, as part of an Asset/Liability Committee (“ALCO”) strategy to increase and diversify funding sources.
Current wording
As of June 30, 2024, we had $355 million of brokered deposits, which made up 13% of our time deposits and 3% of our total deposit balance at quarter end. The balance carried an average all-in cost of 5.37% and an average original term of 12 months. These deposits were purchased through a registered broker, as part of an Asset/Liability Committee (“ALCO”) strategy to increase and diversify funding sources.
Previous wording
In addition, at quarter end we had$527 million of deposits through our participation in the Intrafi Network Deposits and FIS Insured Deposit programs. These deposits are part of a reciprocal program that allows our depositors to receive expanded FDIC coverage by placing multiple interest-bearing demand accounts at other member banks and Northwest receives an equal amount of deposits from other member banks. The balance carried an average cost of 3.88%.
Current wording
In addition, at quarter end we had$537 million of deposits through our participation in the Intrafi Network Deposits and FIS Insured Deposit programs. These deposits are part of a reciprocal program that allows our depositors to receive expanded FDIC coverage by placing multiple interest-bearing demand accounts at other member banks and Northwest receives an equal amount of deposits from other member banks. The balance carried an average cost of 3.92%.
Previous wording
At March 31, 2024 and December 31, 2023, we had total deposits in excess of $250,000 (the limit for FDIC insurance) of $1.8 billion. At those dates, we had no deposits that were uninsured for any other reason. The following table presents details regarding the Company's uninsured deposits portfolio:
Current wording
At June 30, 2024 and December 31, 2023, we had total deposits in excess of $250,000 (the limit for FDIC insurance) of $1.9 billion and $1.8 billion respectively. At those dates, we had no deposits that were uninsured for any other reason. The following table presents details regarding the Company's uninsured deposits portfolio:
Previous wording
Our largest uninsured depositor, excluding intercompany and collateralized deposit accounts, had an aggregate uninsured deposit balance of $19 million, or 0.16% of total deposits, as of March 31, 2024. Our top ten largest uninsured depositors, excluding intercompany and collateralized deposit accounts, had an aggregate uninsured deposit balance of $103 million, or 0.85% of total deposits, as of March 31, 2024. The average uninsured deposit account balance, excluding intercompany and collateralized accounts, was $293,000 as of March 31, 2024.
Current wording
Our largest uninsured depositor, excluding intercompany and collateralized deposit accounts, had an aggregate uninsured deposit balance of $19.4 million, or 0.16% of total deposits, as of June 30, 2024. Our top ten largest uninsured depositors, excluding intercompany and collateralized deposit accounts, had an aggregate uninsured deposit balance of $102 million, or 0.84% of total deposits, as of June 30, 2024. The average uninsured deposit account balance, excluding intercompany and collateralized accounts, was $289,000 as of June 30, 2024.
Previous wording
Total shareholders’ equity remained steady at $1.6 billion, or $12.20 per share, at both March 31, 2024 and December 31, 2023, increasing by $1 million in the current quarter. This increase was the result of year-to-date earnings of $29 million, partially offset by $25 million of cash dividend payments for the quarter ended March 31, 2024, as well as a change in accumulated other comprehensive loss of $4 million, or 3%, primarily due to an increase in unrealized loss on our available-for-sale investment portfolio as a result of higher market interest rates.
Current wording
Total shareholders’ equity remained stable at $1.6 billion, or $12.23 per share, at June 30, 2024 compared to $12.20 per share at December 31, 2023, increasing by $5 million in the current quarter. This increase was the result of year-to-date earnings of $34 million as well as a change in accumulated other comprehensive loss of $19 million, or 13%, primarily due to an increase in realized losses on our available-for-sale investment portfolio as a result of the investment sales made during the period, partially offset by $51 million of cash dividend payments for the quarter ended June 30, 2024.
Previous wording
We are required to maintain a sufficient level of liquid assets, as determined by management and reviewed for adequacy by the FDIC and the Pennsylvania Department of Banking and Securities during their regular examinations. Northwest frequently monitors its liquidity position primarily using the ratio of unencumbered available-for-sale liquid assets as a percentage of deposits and borrowings (“liquidity ratio”). Northwest Bank’s liquidity ratio at March 31, 2024 was 9.77%. We adjust liquidity levels in order to meet funding needs for deposit outflows, payment of real estate taxes and insurance on mortgage loan escrow accounts, repayment of borrowings and loan commitments. At March 31, 2024, Northwest had $3.3 billion of additional borrowing capacity available with the FHLB, including $250 million on an overnight line of credit, which had a drawn balance of $56 million at March 31, 2024, as well as $264 million of borrowing capacity available with the Federal Reserve Bank and $105 million with two correspondent banks.
Current wording
We are required to maintain a sufficient level of liquid assets, as determined by management and reviewed for adequacy by the FDIC and the Pennsylvania Department of Banking and Securities during their regular examinations. Northwest frequently monitors its liquidity position primarily using the ratio of unencumbered available-for-sale liquid assets as a percentage of deposits and borrowings (“liquidity ratio”). Northwest Bank’s liquidity ratio at June 30, 2024 was 10.43%. We adjust liquidity levels in order to meet funding needs for deposit outflows, payment of real estate taxes and insurance on mortgage loan escrow accounts, repayment of borrowings and loan commitments. At June 30, 2024, Northwest had $3.4 billion of additional borrowing capacity available with the FHLB, including $250 million on an overnight line of credit, which had no balance as of June 30, 2024, as well as $404 million of borrowing capacity available with the Federal Reserve Bank and $105 million with two correspondent banks.
Previous wording
We paid $25 million in cash dividends during the quarters ended March 31, 2024 and 2023. The common stock dividend payout ratio (dividends declared per share divided by net income per diluted share) for March 31, 2024 and 2023 was 87.0% and 76.9% on dividends of $0.20 per share. On April 17, 2024, the Board of Directors declared a cash dividend of $0.20 per share payable on May 15, 2024 to shareholders of record as of May 2, 2024. This represents the 118 th consecutive quarter we have paid a cash dividend.
Current wording
We paid $25 million in cash dividends during the quarters ended June 30, 2024 and 2023. The common stock dividend payout ratio (dividends declared per share divided by net income per diluted share) for June 30, 2024 and 2023 was 500.0% and 76.9% on dividends of $0.20 per share. On July 18, 2024, the Board of Directors declared a cash dividend of $0.20 per share payable on August 14, 2024 to shareholders of record as of August 2, 2024. This represents the 119 th consecutive quarter we have paid a cash dividend.
Previous wording
We utilize a structured methodology each period when analyzing the adequacy of the allowance for credit losses and the related provision for credit losses, which the ACL Committee assesses regularly for appropriateness. As part of the analysis as of March 31, 2024, we considered the most recent economic conditions and forecasts available which incorporated the impact of material recent economic events. In addition, we considered the overall trends in asset quality, reserves on individually assessed loans, historical loss rates and collateral valuations. The ACL decreased by $346,000 to $125 million, or 1.09% of total loans at March 31, 2024 from $125 million, or 1.10% of total loans, at December 31, 2023. This decrease was primarily attributable to changes within our personal banking loan portfolio driven by improvements in economic forecasts, which was offset by growth within our commercial loan portfolio during the year.
Current wording
We utilize a structured methodology each period when analyzing the adequacy of the allowance for credit losses and the related provision for credit losses, which the ACL Committee assesses regularly for appropriateness. As part of the analysis as of June 30, 2024, we considered the most recent economic conditions and forecasts available which incorporated the impact of material recent economic events. In addition, we considered the overall trends in asset quality, reserves on individually assessed loans, historical loss rates and collateral valuations. The ACL decreased by $0.2 million to $125 million, or 1.10% of total loans at June 30, 2024. The overall coverage ratio remains consistent from December 31, 2023.
Previous wording
Total classified loans remain low with a slight increase to $229 million at March 31, 2024 from $218 million at December 31, 2023. This increase was primarily within our commercial portfolio.
Current wording
Total classified loans remain low at $257 million at June 30, 2024, an increase of $38 million compared to $218 million at December 31, 2023. This increase was primarily within our commercial real estate portfolio.
Previous wording
We also consider how the levels of nonaccrual loans and historical charge-offs have influenced the required amount of allowance for credit losses. Nonaccrual loans of $95 million at March 31, 2024, remained steady, increasing by $1 million, or 1%, from $94 million at December 31, 2023, or 0.83% of total loans receivable as of both period ends. As a percentage of average loans, annualized net charge-offs increased slightly to 0.16% for the quarter ended March 31, 2024 compared to 0.11% for the year ended December 31, 2023.
Current wording
We also consider how the levels of nonaccrual loans and historical charge-offs have influenced the required amount of allowance for credit losses. Nonaccrual loans of $102 million at June 30, 2024 increased by $8 million, or 8%, from $94 million at December 31, 2023, or 0.90% of total loans receivable as of June 30, 2024 and 0.83% of total loans receivable as of December 31, 2023. As a percentage of average loans, annualized net charge-offs remained low at 0.12% for the six months ended June 30, 2024 compared to 0.11% for the year ended December 31, 2023.
Previous wording
Net income for the quarter ended March 31, 2024 was $29 million, or $0.23 per diluted share, a decrease of $5 million, or 13%, from net income of $34 million, or $0.26 per diluted share, for the quarter ended March 31, 2023. The decrease in net income resulted primarily from a decrease in net interest income, partially offset by an increase in noninterest income. Net interest income decreased by $9 million, or 8%, and noninterest income increased $4 million, or 17%. Net income for the quarter ended March 31, 2024 represents annualized returns on average equity and average assets of 7.57% and 0.81%, respectively, compared to 9.11% and 0.97% for the same quarter last year. A further discussion of notable changes follows.
Current wording
Net income for the quarter ended June 30, 2024 was $5 million, or $0.04 per diluted share, a decrease of $28 million, or 86%, from net income of $33 million, or $0.26 per diluted share, for the quarter ended June 30, 2023. This decrease in net income resulted primarily from a $39 million, or 130%, decrease in noninterest income resulting from the investment sale made as part of the previously announced securities portfolio restructure. Additionally contributing to the decrease in net income was a decrease in net interest income of $2 million, or 2%, and an increase in noninterest expense of $7 million, or 8%, offset by a $9 million, or 89%, decrease in income tax expense. Net income for the quarter ended June 30, 2024 represents annualized returns on average equity and average assets of 1.24% and 0.13%, respectively, compared to 8.72% and 0.93% for the same quarter last year. A further discussion of notable changes follows.
Previous wording
Net interest income (FTE) was $104 million for the quarter ended March 31, 2024 and net interest margin was 3.10%. Compared to the same quarter of the prior year, net interest income (FTE) decreased $9 million and net interest margin decreased by 36 basis points. The decrease in net interest income (FTE) and the net interest margin reflects higher interest-bearing deposit costs and a shift in funding mix to higher cost deposits and borrowings due to the higher interest rate environment. Partly offsetting the decline in net interest income and the net interest margin were higher earning asset balances and yields.
Current wording
Net interest income (FTE) was $108 million for the quarter ended June 30, 2024 and net interest margin was 3.20%. Compared to the same quarter of the prior year, net interest income (FTE) decreased $2 million and net interest margin decreased by eight basis points. The decrease in net interest income (FTE) and the net interest margin were driven by an increase in interest expense resulting from higher interest-bearing deposit costs and a shift in funding mix to higher cost deposits due to the higher interest rate environment. Partly offsetting the increase in interest expense was an increase in interest income resulting from higher earning asset balances and yields.
Previous wording
Average loans receivable increased 4% from the quarter ended March 31, 2023 driven by commercial loans, which grew by $553 million, as we have continued to build-out our commercial lending verticals. Interest income on loans receivable increased by $26 million, or 21%, from the same quarter in prior year as the result of increases in both the average yield and the average balance on loans receivable. The average yield on loans receivable increased to 5.33% for the quarter ended March 31, 2024 due to the elevated market interest rates as well as a change in mix to higher yield loan products.
Current wording
Average loans receivable increased $303 million, or 3%, from the quarter ended June 30, 2023 driven by commercial loans, which grew by $444 million, as we have continued to build-out our commercial lending verticals, and commercial real estate loans, which grew by $187 million. These increases were offset partially by a $328 million decrease in personal banking loans. Interest income on loans receivable increased by $21 million, or 16%, from the same quarter in the prior year, and by $47 million, or 18%, from the same six-month period in the prior year, the result of increases in both the average yield and the average balance on loans receivable. The average yield on loans receivable increased due to the elevated market interest rates as well as a change in mix to higher yield loan products.
Previous wording
Average investments declined 11% from the first quarter of 2023 driven by the sale of investment securities during the prior year coupled with principal payments and maturities. Interest income on investment securities decreased by $1 million, or 8%, from the quarter ended March 31, 2023.
Current wording
Average investments declined 10% from the second quarter of 2023 driven by the sale of investment securities during the current period coupled with regular principal payments and maturities. Interest income on investment securities increased by $1 million, or 8%, from the quarter ended June 30, 2023, and remained relatively flat from the six months ended June 30, 2023 decreasing by 0.4% . The increase in the quarterly results is due to the increase in the average yield on investments to 2.13% for the quarter ended June 30, 2024, while the decrease in the year to date results is due to the decrease in the average balance of investments.
Previous wording
Average deposits grew 4% from the quarter ended March 31, 2023 driven by a $1.4 billion increase in our average time deposits due to customer preferences for this fixed maturity product type. This increase was partially offset by a decrease in money market balances as customers shifted balances into higher yielding time deposit accounts. Interest expense on deposits increased by $36 million primarily attributable to increases in the interest rates paid on deposit accounts as we continued competitively positioning our deposit products, as well as a change in mix to higher cost products.
Current wording
Average deposits grew 6% from the quarter ended June 30, 2023 driven by a $1.1 billion increase in our average time deposits due to customer preferences for this fixed maturity product type. This increase was partially offset by a $264 million decrease in money market balances as customers shifted balances into higher yielding time deposit accounts. Interest expense on deposits increased by
Previous wording
Compared to the quarter ended March 31, 2023, average borrowings saw a 37% reduction, primarily attributable to the strategic pay-down of wholesale borrowings. This decrease was made possible by a substantial increase in cash reserves, resulting from a notable rise in the average balance of deposits, which also decreased interest expense on borrowings by $2 million.
Current wording
Compared to the quarter ended June 30, 2023, average borrowings saw a 61% reduction, primarily attributable to the strategic pay-down of wholesale borrowings. This decrease was made possible by a substantial increase in cash reserves, resulting from the sale of investment securities noted above, as well as a notable rise in the average balance of deposits. The decrease in the average balance of borrowings resulted in a decrease in interest expense on borrowings by $6 million from the quarter ended June 30, 2023, and by $8 million from the six months ended June 30, 2023.
Previous wording
(g)Average cost of deposits were 1.61% and 0.40%, respectively, average cost of interest-bearing deposits were 2.06% and 0.54%, respectively .
Current wording
(g)Average cost of deposits were 1.76% and 0.77%, respectively, average cost of interest-bearing deposits were 2.24% and 1.02%, respectively .
Previous wording
(h)Annualized. Shown on a FTE basis. The FTE basis adjusts for the tax benefit of income on certain tax exempt loans and investments using the federal statutory rate applicable to each period presented. We believe this measure to be the preferred industry measurement of net interest income and provides relevant comparison between taxable and non-taxable amounts. GAAP basis yields were: loans — 5.30% and 4.61%, respectively; investment securities — 1.54% and 1.61%, respectively; interest-earning assets — 4.78% and 4.13%, respectively. GAAP basis net interest rate spreads were 2.49% and 3.17%, respectively; and GAAP basis net interest margins were 3.08% and 3.44%, respectively.
Current wording
(h)Annualized. Shown on a FTE basis. The FTE basis adjusts for the tax benefit of income on certain tax exempt loans and investments using the federal statutory rate applicable to each period presented. We believe this measure to be the preferred industry measurement of net interest income and provides relevant comparison between taxable and non-taxable amounts. GAAP basis yields were: loans — 5.45% and 4.81%, respectively; investment securities — 1.65% and 1.61%, respectively; interest-earning assets — 4.95% and 4.31%, respectively. GAAP basis net interest rate spreads were 2.55% and 2.84%, respectively; and GAAP basis net interest margins were 3.17% and 3.25%, respectively.
Previous wording
The provision for credit losses decreased by $2 million, or 31%, from the quarter ended March 31, 2023. This decrease included a$1 million decrease in the provision for credit losses - loans driven by changes in the economic forecasts reflected in our allowance for credit loss models, as well as a $1 million decrease in the provision for credit losses - unfunded commitments driven by the timing of origination and funding of commercial construction loans and lines of credit. Classified assets continue to remain low at $229 million, at March 31, 2024 from $209 million at March 31, 2023, or 2% of total loans as of both periods.
Current wording
The decreases in the provision for credit losses - loans noted above were driven by changes in the economic forecasts reflected in our allowance for credit loss models, and the decreases in the provision for credit losses - unfunded commitments were related to the timing of origination and funding of commercial construction loans and lines of credit.
Previous wording
(a) Other noninterest income includes the gain on sale of SBA loans, net gain on real estate owned, mortgage banking income, and other operating income. See the "Consolidated Statements of Income" in Item 1. Financial Statements of this report.
Current wording
(a) Other noninterest income includes the net gain on real estate owned, mortgage banking income, and other operating income. See the "Consolidated Statements of Income" in Item 1. Financial Statements of this report.
Previous wording
(a) Other noninterest expense includes office operations, collections expense, marketing expense, FDIC insurance expense, amortization of intangible assets, real estate owned expense, merger, asset disposition and restructuring expense, and other expenses. See the "Consolidated Statements of Income" in Item 1. Financial Statements of this report.
Current wording
(a) Other noninterest expense includes collections expense, marketing expense, FDIC insurance expense, amortization of intangible assets, real estate owned expense, merger, asset disposition and restructuring expense, and other expenses. See the "Consolidated Statements of Income" in Item 1. Financial Statements of this report.
Previous wording
Noninterest expense increased by $3 million, or 3%, from the quarter ended March 31, 2023. This increase was primarily attributable to an increase in compensation and employee benefits expense of$5 million, or 11%, to $52 million for the quarter ended March 31, 2024, from $47 million for the quarter ended March 31, 2023 driven primarily by the build out of the commercial business and related credit, risk management, and internal audit support functions. Partially offsetting this increase was a decrease in non-personnel expense related to a decline in merger, asset disposition and restructuring expense of $2 million, or 66%, as a result of the severance and fixed asset charges related to the branch optimization and personnel reduction incurred during the first quarter of the prior year.
Current wording
Noninterest expense increased by $7 million, or 8%, from the quarter ended June 30, 2023. This increase was primarily attributable to an increase in compensation and employee benefits expense of$6 million, or 12%, to $54 million for the quarter ended June 30, 2024, from $48 million for the quarter ended June 30, 2023 driven primarily by the build out of the commercial business and related credit, risk management, and internal audit support functions over the past year.
Previous wording
The provision for income taxes decreased by $1.7 million, or 17%, to $8.6 million for the quarter ended March 31, 2024 from $10.3 million for the quarter ended March 31, 2023. This decrease in income taxes was due primarily to a decrease in our income before taxes in the current year. We anticipate our effective tax rate to be between 22.0% and 24.0% for the year ending December 31, 2024.
Current wording
The provision for income taxes isprimarily driven by changes in our current period income before taxes. We anticipate our effective tax rate to be between 22.0% and 24.0% for the year ending December 31, 2024.
Rearranged current paragraphs (10)
Current report — wording carried from elsewhere
The following table sets forth certain information relating to the Company’s average balance sheet and reflects the average yield on interest-earning assets and average cost of interest-bearing liabilities for the periods indicated. Such yields and costs are derived by dividing income or expense by the average balance of assets or liabilities, respectively, for the periods presented. Average balances are calculated using daily averages.
Current report — wording carried from elsewhere
(a)Average gross loans includes loans held as available-for-sale and loans placed on nonaccrual status.
Current report — wording carried from elsewhere
(b)Interest income includes accretion/amortization of deferred loan fees/expenses, which were not material.
Current report — wording carried from elsewhere
(c)Average balances do not include the effect of unrealized gains or losses on securities held as available-for-sale.
Current report — wording carried from elsewhere
(d)Interest income on tax-free investment securities and tax-free loans are presented on a fully taxable equivalent (“FTE”) basis.
Current report — wording carried from elsewhere
(e)Average balances include the effect of unrealized gains or losses on securities held as available-for-sale.
Current report — wording carried from elsewhere
(f)Average balances include FHLB borrowings and collateralized borrowings.
Current report — wording carried from elsewhere
(h)Annualized. Shown on a FTE basis. The FTE basis adjusts for the tax benefit of income on certain tax exempt loans and investments using the federal statutory rate applicable to each period presented. We believe this measure to be the preferred industry measurement of net interest income and provides relevant comparison between taxable and non-taxable amounts. GAAP basis yields were: loans — 5.37% and 4.71%, respectively; investment securities — 1.59% and 1.61%, respectively; interest-earning assets — 4.86% and 4.22%, respectively. GAAP basis net interest rate spreads were 2.52% and 3.00%, respectively; and GAAP basis net interest margins were 3.12% and 3.34%, respectively.
Current report — wording carried from elsewhere
The following table represents the extent to which changes in interest rates and changes in the volume of interest-earning assets and interest-bearing liabilities have affected interest income and interest expense during the periods indicated. Information is provided in each category with respect to (i) changes attributable to changes in volume (changes in volume multiplied by prior rate), (ii) changes attributable to changes in rate (changes in rate multiplied by prior volume), and (iii) net change. Changes that cannot be attributed to either rate or volume have been allocated to both rate and volume.
Current report — wording carried from elsewhere
Classified assets continue to remain low at $257 million, at June 30, 2024 from $214 million at June 30, 2023, or 2% of total loans as of both periods.