SIERRA BANCORP
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
BSRR$41.42-1.3%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 2024-05-06.
0001558370-24-006762
Item 2. Management’s Discussion & Analysis of Financial Condition & Results of OperationsForward-Looking StatementsCritical Accounting PoliciesOverview of the Results of Operations and Financial ConditionEarnings PerformanceNet Interest Income and Net Interest MarginProvision for Credit Losses on LoansNoninterest Income and Noninterest ExpenseProvision for Income TaxesEarning AssetsInvestmentsLoan PortfolioNonperforming AssetsAllowance for Credit Losses on LoansOff-Balance Sheet ArrangementsOther AssetsDepositsOther Interest-Bearing LiabilitiesNoninterest-Bearing LiabilitiesLiquidity and Market Risk ManagementCapital ResourcesCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-05.
0001558370-24-010762
Item 2. Management’s Discussion & Analysis of Financial Condition & Results of OperationsForward-Looking StatementsCritical Accounting PoliciesOverview of the Results of Operations and Financial ConditionEarnings PerformanceNet Interest Income and Net Interest MarginProvision for Credit Losses on LoansNoninterest Income and Noninterest ExpenseProvision for Income TaxesEarning AssetsInvestmentsLoan PortfolioNonperforming AssetsAllowance for Credit Losses on LoansOff-Balance Sheet ArrangementsOther AssetsDepositsOther Interest-Bearing LiabilitiesNoninterest-Bearing LiabilitiesLiquidity and Market Risk ManagementCapital ResourcesThe 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 148 previous paragraphs and 154 current paragraphs.
74 unchanged; 56 reworded; 21 added; 13 removed; 5 previous and 3 current paragraphs rearranged.
Tables are not compared: 55 previous and 67 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 (21)
Current report
Second Quarter 2024 compared to Second Quarter 2023
Current report
First Half 2024 compared to First Half 2023
Current report
Net income for the first half of 2024 was $19.6 million, or $1.35 per diluted share, compared to $18.7 million, or $1.26 per diluted share for the same period in 2023. The Company’s annualized return on average equity was 11.52% and annualized return on average assets was 1.10% for the six months ended June 30, 2024, compared to a return on equity of 12.30% and return on assets of 1.02% for the six months ended June 30, 2023. The primary drivers behind the variance in year-to-date net income are as follows:
Current report
warehouse, new credit extended, including new fundings on non-mortgage warehouse lines of credit, was $75.3 million YTD 2024 vs $89.6 million YTD 2023.
Current report
Net interest income was $30.2 million for the second quarter of 2024, a $1.9 million increase, or 7% over the second quarter of 2023, and increased $2.4 million, or 4%, to $58.9 million for the first six months of 2024 relative to the same period in 2023. This increase in interest income for the quarterly comparison was due primarily to an increase in interest income on loans of $4.2 million, augmented by a $0.8 million decrease in interest expense due to the reduction in borrowed funds facilitated by a balance sheet restructuring, partially offset by a related decline in interest income on investments of $1.6 million, or 10%, due to the sale of low yielding investments.
Current report
For the second quarter of 2024, although the balance of average interest-earning assets was $106.2 million lower, the yield was 71 basis points higher as compared to the same period in 2023. There was a 23 basis point increase in the cost of our interest-bearing liabilities for the same period, which offset some of the higher yields on the asset side.
Current report
Net interest income for the comparative year-to-date periods increased $2.4 million, due to the strategic decision to change the mix on interest earning assets, selling off lower yielding bonds in the fourth quarter of 2023 and first quarter of 2024, moderated by an increase in interest rates paid on interest-bearing liabilities. There was a $112.5 million, or 6%, increase in average loan balances yielding 41 basis points higher for the same period, while average investment balances decreased $229.1 million, yielding 69 basis points higher for the same period. Average interest-bearing liabilities decreased $83.7 million, mostly in borrowed funds. The cost of interest-bearing liabilities was 41 basis points higher for the comparative periods. The favorable net impact of the mix and rate change was a 23 basis point increase in our net interest margin for the six-months ending June 30, 2024 as compared to the same period in 2023.
Current report
Interest expense was $13.3 million for the second quarter of 2024, an increase of $0.8 million, relative to the second quarter of 2023. For the first six months of 2024, compared to the first six months of 2023, interest expense increased $3.7 million, to $25.6 million. The increase in interest expense is primarily attributable to an increase in interest rates paid on certain time deposits, and a shift in deposits to higher interest rate accounts partially offset by lower balances on other borrowings. There was an unfavorable shift in the deposit mix in the second quarter of 2024 as compared to the same period in 2023
Current report
due to increased demand from customers for higher rates. Higher cost customer time deposits increased by $23.0 million, and wholesale brokered deposits increased by $129.3 million, while lower cost and noninterest bearing deposits decreased by $181.4 million. A $128.9 million decrease in borrowed funds mitigated some of the unfavorable shift for the quarterly comparison. For the first half of 2024, as compared to the same period in 2023, customer time deposits increased $61.6 million, and wholesale brokered deposits increased $85.9 million, while borrowed funds decreased $88.7 million, and other deposits decreased $218.7 million.
Current report
Our net interest margin was 3.69% for the second quarter of 2024, and 3.39% for the second quarter of 2023, an increase of 30 basis points, and 3.66% for the first half of 2024, as compared to 3.43% for the first half of 2023, an increase of 23 basis points. While the yield of interest-earning assets increased 71 basis points for the second quarter of 2024, the cost of interest-bearing liabilities increased 23 basis points for the same period of comparison. The average balance of interest-earning assets decreased $106.2 million, while the decrease in interest-bearing liabilities was $86.0 million for the same period. The decrease in higher cost borrowed funds over the increase in yield on interest-earning assets improved the net interest margin in the second quarter of 2024 over the same period in 2023.
Current report
For the year-to-date comparison the increase in net interest margin of 23 basis points comes from an increase in yield on interest-earning assets of 50 basis points partially offset by an increase in interest rates paid on interest-bearing liabilities of 41 basis points. The increase in yield on interest earning assets is over a much larger volume base than of interest-bearing liabilities reflecting the positive change in the net interest margin for the first half of 2024.
Current report
and brokered deposits. The Company’s net interest margin for the second quarter of 2024 was 3.69%, as compared to 3.39% for the second quarter of 2023.
Current report
The volume variance calculated for the first six months of 2024 relative to the first six months of 2023 reflects a favorable variance of $1.0 million, a favorable rate variance of $2.4 million, and an unfavorable mix variance of $0.9 million. There were increases in loan balances for a favorable volume variance of $5.3 million which was mostly offset by a $4.6 million decrease in investments, due to the balance sheet restructure in 2023. There was a $2.8 million decrease in borrowed funds, partially offset by a $2.6 million increase in interest-bearing deposits. There was a positive rate variance on interest earning assets of $5.6 million for the first six months of 2024 partially offset by a $3.2 million rate increase in interest earning liabilities. The Company’s net interest margin for the first half of 2024 was 3.66%, as compared to 3.43% in the first half of 2023.
Current report
a year-to-date provision for credit losses on loans of $1.0 million in 2024, as compared to $0.3 million in the same period for 2023. The Company's $0.8 million increase in the provision for credit losses on loans in the second quarter of 2024, as compared to the second quarter of 2023, and the $0.7 million year to date increase in the provision for credit losses on loans, compared to the same period in 2023, was primarily due to the impact of $2.9 million in net charge-offs in the first six months of 2024, with only $0.4 million in net charge-offs for the first six months of 2023. The increase in net charge-offs in the second quarter of 2024 was primarily related to a single office building which was subsequently foreclosed upon and sold.
Current report
Total noninterest income decreased by $0.4 million, or 5%, for the quarter ended June 30, 2024, as compared to the same quarter in 2023 and increased $1.6 million, or 11% for the comparable year-to-date periods. The quarterly comparison decrease primarily resulted from a $0.4 million non-recurring bond sale gain in 2023. The year-to-date increase reflects a $2.9 million loss on the sale of investment securities in 2024, offset by a $3.8 million gain on the sale/leaseback of bank owned branch locations. There were $0.5 million in life insurance proceeds in 2023, with no like amount in 2024. These favorable variances to the year-to-date comparisons were augmented by a $1.2 million increase in the value of separate account corporate-owned life insurance assets tied to non-qualified deferred compensation plans.
Current report
The Company maintains a non-qualified deferred compensation plan for officers and directors, which allows the participant to defer a portion of their earnings tax-free. Participants are allowed to choose different hypothetical investment alternatives to determine their individualized return on their deferred compensation. The Company has chosen to offset the cost of this liability with a Corporate Owned Life Insurance Policy (“COLI”) which is funded based on deferral elections from the participants. Although the COLI is not directly tied to the deferred compensation plan, the COLI is invested in similar fund types as those selected by the participants. There is some inefficiency in net earnings of the COLI asset as compared to the deferred compensation liability created by the cost of insurance, differences in balances, and differences in individual fund performance. During the second quarter, and first six-months of 2024, earnings from the COLI was $0.3 million, and $1.3 million, respectively while additional expense from the related deferred compensation liability was $0.3 million, and $1.4 million, respectively. Most of such expense is reported as Professional Fees under Directors Fees as such expense is related to deferral of past directors’ fees. Specifically, $0.3 million for the quarterly comparison, and $1.2 million for the year-to-date comparison, respectively, is reflected as directors’ fees as part of the overall Professional Fees expense line item. The tax benefit of having tax-free earnings with tax-deductible expense was $0.2 million during the second quarter of 2024, and $0.8 million for the first six-months of 2024.
Current report
Service charges on customer deposit account income decreased by $0.5 million, or 9%, to $6.2 million in the second quarter of 2024 as compared to the second quarter of 2023 and $0.8 million higher, or 8%, in the first six months of 2024, as compared to the same period in 2023. These increases in the quarterly and year-to-date comparisons are primarily a result of higher interchange and ATM fees, along with increased service charges on analysis accounts.
Current report
Total noninterest expense favorably declined by $0.3 million, or 1%, in the second quarter of 2024 relative to the second quarter of 2023, but increased by $1.3 million, or 3%, in the first six months of 2024 as compared to the first six months of 2023.
Current report
Salaries and benefits were $0.1 million, or 1%, lower in the second quarter of 2024 as compared to the second quarter of 2023 and were $0.3 million, or 1% higher for the first six months of 2024, compared to the same period in 2023. The reason for the decrease in the quarterly comparison is due to a strategic decision to improve operational efficiencies. The increase in the year-over-year comparison is primarily due to increases related to annual performance evaluations. Overall full-time equivalent employees were 501 at June 30, 2024, as compared to 489 at December 31, 2023, and 502 at June 30, 2023. Included in full-time equivalent employees at June 30, 2024 were 18 summer interns and temporary employees.
Current report
Other noninterest expense decreased $0.9 million, or 11%, for the second quarter 2024, as compared to the second quarter in 2023, and decreased $0.4 million, or 3% for the first half of 2024 as compared to the same period in 2023. FDIC assessment costs decreased $0.2 million for the quarterly comparisons, but were flat for the year-to-date comparison. Deferred compensation expense for directors decreased $0.1 million for the quarterly comparison but increased $0.9 million for the year-to-date comparison, which is linked to the changes in life insurance income as described in detail above. There were decreases in debit card processing and ATM network costs of $0.6 million for both the quarterly and year-to-date comparisons due to a branding change from Mastercard to Visa and the subsequent conversion costs related to that change. Additionally, we incurred a $0.3 million loss that is reflected in noninterest expense during the second quarter of 2023 with no such like event in 2024. For the year-to-date comparison there was also elevated foreclosed assets costs for the first half of 2023, as compared to the same period in 2024, due to the foreclosure and subsequent sale of one large credit in the first quarter of 2023.
Current report
As indicated in the loan roll forward table below, new credit extended for the second quarter of 2024, increased $5.3 million, and increased $3.3 million year-to-date 2024, over the same period in 2023. Loan growth, excluding mortgage warehouse lines, has been slower in 2024 due to competitive pressures in our market and lower loan demand in the current interest rate environment. The increase of $70.5 million in mortgage warehouse line utilization, was due in part to a $186.0 million increase in mortgage warehouse commitments for the first half of 2024, and subsequent utilization of those lines.
Removed paragraphs (13)
Previous report
First Quarter 2024 compared to First Quarter 2023
Previous report
Net interest income was $28.7 million for the first quarter of 2024 an increase of $0.6 million, or 2%, as compared to the first quarter of 2023. For the first quarter of 2024 as compared to the same quarter in 2023, the $3.5 million improvement in interest income is due primarily to a $56.8 million increase in average loan balances, as well as a 39 basis point increase in yield. However, this was partially offset by a $3.0 million increase in interest expense due to the movement of deposits from lower cost transaction accounts to higher cost time deposits including wholesale brokered deposits. Deposit costs increased 82 basis points in the first quarter of 2024 as compared to the same quarter in 2023, while there was a 35 basis points decrease in the cost borrowed funds. The net impact of the mix and rate change was a 15 basis point increase in our net interest margin for the quarterly comparison.
Previous report
Interest expense was $12.2 million for the first quarter of 2024, an increase of $3.0 million, or 32% from the same period in 2023. The unfavorable change in the quarterly comparison was primarily due an increase in rates paid on customer variable rate Certificates of Deposits. The rate on the variable account is tied to a spread to the Wall Street Journal Prime Rate and varies from Prime minus 600 basis points to Prime minus 375 basis points. During the twelve-month period from March 31, 2023, to March 31, 2024, the Prime rate increased 50 basis points.
Previous report
Our net interest margin was 3.62% for the first quarter of 2024, as compared to 3.47% for the quarter ending March 31, 2023. While the yield on interest-earning assets increased 55 basis points for the first quarter of 2024 as compared to the same period in 2023, the cost of interest-bearing liabilities increased 61 basis points for the same period of comparison. Since the change in rate on interest-bearing assets is applied to a larger base than that of interest-bearing liabilities, the result is favorable to the net interest margin even though the increase on the interest-earning asset side is six basis points lower than the increase on the interest bearing liability side.
Previous report
The Company’s net interest margin for the first quarter of 2024 was 3.62%, as compared to 3.47% for the first quarter of 2023.
Previous report
Interest expense was $12.2 million for the first quarter of 2024, an increase of $3.0 million, or 32% from the same period in 2023. The unfavorable variance in the quarterly comparison was primarily due an increase in rates paid on customer variable rate Certificates of Deposits. The rate on the variable account is tied to a spread to the Wall Street Journal Prime Rate and varies from Prime minus 600 basis points to Prime minus 375 basis points. During the twelve-month period from March 31, 2023, to March 31, 2024, the Prime rate increased 50 basis points.
Previous report
Total noninterest income increased by $2.0 million, or 31%, in the first quarter of 2024 as compared to the same quarter in 2023. The variance was due to a $3.8 million gain on the sale of branch properties that were a part of our sale/leaseback transaction, a $1.0 million increase in BOLI income, a $0.3 million increase in service charges and fees on deposit accounts partially offset by a $2.9 million loss on the sale of lower yielding bonds that were part of a balance sheet restructure.
Previous report
BOLI income increased by $1.0 million for the first quarter of 2024 as compared to the first quarter of 2023. The variance is due mostly to fluctuations in underlying values of assets in the separate account BOLI policies that are designed to have similar assets to those in the deferred compensation plans. Thus, the higher values in BOLI policies are offset by higher deferred compensation expense reflected primarily in director fees expense. At March 31, 2024, there was $41.9 million in traditional BOLI policies and $11.0 million in separate account BOLI policies associated with the deferred compensation plans.
Previous report
Total noninterest expense increased $1.5 million, or 7%, compared to the first quarter of 2023. The primary driver of higher expense in the first quarter of 2024 is deferred directors’ fees as part of the Company’s deferred compensation plan. The higher deferred compensation expense was offset by higher bank-owned life insurance income.
Previous report
Salaries and Benefits were $0.4 million, or 3%, higher in the first quarter of 2024 as compared to the first quarter of 2023. The reason for this increase is primarily due to several factors, including merit increases for employees due to annual performance evaluations during the first quarter of 2024, higher payroll taxes in the first quarter. There were 487 full-time equivalent employees at March 31, 2024, as compared to 500 at March 31, 2023.
Previous report
Other noninterest expense increased $0.5 million, or 6%, in the first quarter of 2024 as compared to the first quarter of 2023. The primary reason for the negative variance was increased directors deferred compensation expense which is linked to the fluctuation in BOLI income and increased FDIC assessment costs, although lower foreclosed asset operating costs and lower advertising expenses in mitigated some of this negative variance.
Previous report
management receives financial information from a third-party service in order to monitor the underlying issuer’s financial stability. In addition, management performs annual reviews of the underlying municipal issuers financial statements in order to evaluate stability and repayment capacity and has noted no concerns with any of the bonds in the Company’s State and Local portfolio. As of both March 31, 2024 or December 31, 2023 management concluded that no allowance for credit losses was warranted on any of the Company’s municipal securities and the unrealized loss position of each of the securities reflected fluctuations in market conditions, primarily interest rates, since the time of purchase.
Previous report
As indicated in the loan rollforward below, new credit extended for the first quarter of 2024 decreased $17.6 million over the same period in 2023 but increased $8.3 million for the linked quarter comparisons. For the first three months ended 2024 we had $30.8 million in loan paydowns and maturities, along with a $24.9 million decrease in line of credit utilization, counterbalanced by an $87.6 million increase in mortgage warehouse utilization.
Reworded paragraphs (56)
Previous wording
First quarter 2024 net income was $9.3 million, a $0.6 million increase or 7%, from the first quarter of 2023 and $0.64 per diluted share in the first quarter of 2024 as compared to $0.58 per diluted share in the first quarter of 2023. The Company’s annualized return on average equity was 11.09% and annualized return on average assets was 1.06% for the
Current wording
Second quarter 2024 net income was $10.3 million, a $0.3 million increase or 3%, from the second quarter of 2023 and $0.71 per diluted share in the second quarter of 2024 as compared to $0.67 per diluted share in the second quarter of 2023. The Company’s annualized return on average equity was 11.95% and annualized return on average assets was 1.14% for
Previous wording
quarter ended March 31, 2024, compared to 11.53% and 0.97%, respectively, for the same quarter in 2023. The primary drivers behind the variance in first quarter net income are as follows:
Current wording
the quarter ended June 30, 2024, compared to 13.06% and 1.07%, respectively, for the same quarter in 2023. The primary drivers behind the increase in second quarter net income are as follows:
Previous wording
The Company’s assets totaled $3.6 billion at March 31, 2024, a decrease of $176.7 million, or 5.0% from December 31, 2023. The following provides a summary of key balance sheet changes during the first three months of 2024:
Current wording
The Company’s assets totaled $3.7 billion at June 30, 2024, a decrease of $48.6 million, or 1.0% from December 31, 2023. The following provides a summary of key balance sheet changes during the first six months of 2024:
Previous wording
The Company had $1.5 billion in adjustable and variable rate loans and $563.6 million in floating rate collateralized loan obligations, as compared to $332.3 million in floating rate CDs and $35.7 million in floating rate trust preferred securities at March 31, 2024. The adjustable rate loans have repricing frequencies ranging from 30-days to 10-years. Of the $1.5 billion in adjustable and variable rate loans, $471.8 million of such adjustable and variable rate loans reprice in the next twelve months.
Current wording
The Company had $1.5 billion in adjustable and variable rate loans and $519.9 million in floating rate bonds, as compared to $316.6 million in floating rate CDs and $35.7 million in floating rate trust preferred securities at June 30, 2024. The adjustable-rate loans have repricing frequencies ranging from 30-days to 10-years. Of the $1.5 billion in adjustable and variable rate loans, $610.7 million of such adjustable and variable rate loans reprice in the next twelve months.
Previous wording
The volume variance calculated for the first quarter of 2024 relative to the first quarter of 2023 was an unfavorable $0.2 million; this is primarily from an unfavorable volume variance of $0.6 million in interest-bearing liabilities, as the average balance of time deposits increased $143.3 million from the comparative quarter. There was a favorable rate variance of $1.7 million from the comparative quarter since the weighted average yield on interest-earning assets more than offset the increase in the average yield unfavorable variance on interest-bearing liabilities. There was an unfavorable mix variance of $0.9 million primarily from the sale of bonds with lower yields that has yet to be deployed into higher yielding assets.
Current wording
The volume variance calculated for the second quarter of 2024 relative to the second quarter of 2023 was a favorable $2.0 million; this is primarily from a favorable loan volume variance of $4.0 million augmented by a favorable reduction in other borrowed funds. There was a favorable rate variance of $0.8 million from the comparative quarter since the weighted average yield on interest-earning assets more than offset the increase in the average yield unfavorable variance on interest-bearing liabilities. There was an unfavorable mix variance of $0.9 million primarily from the sale of bonds with lower yields that has yet to be deployed into higher yielding assets combined with higher interest rates paid on customer time
Previous wording
At March 31, 2024, approximately 13% of our total portfolio, or $276.0 million, consists of variable rate loans. At March 31, 2024, our outstanding fixed rate loans represented 32% of our loan portfolio. The remaining 55% of our loan portfolio at March 31, 2024, consists of adjustable-rate loans; 63% of these loans (approximately $1.2 billion) will not have the ability to reprice for at least another 3 years. Our adjustable rate loans have maturities up to 25 years and are generally adjustable every five years after the initial adjustment, which can vary from 5 to 10 years to initial adjustment. Approximately $165.8 million of these adjustable-rate loans have the ability to reprice in 2024, which is expected to have a positive impact on earnings.
Current wording
At June 30, 2024, approximately 15% of our total portfolio, or $342.7 million, consists of variable rate loans. At June 30, 2024, our outstanding fixed rate loans represented 31% of our loan portfolio. The remaining 54% of our loan portfolio at June 30, 2024, consists of adjustable-rate loans; 30% of these loans (approximately $355.0 million) will not have the ability to reprice for at least another 3 years. Our adjustable-rate loans have maturities up to 25 years and are generally adjustable every five years after the initial adjustment, which can vary from 5 to 10 years to initial adjustment. Approximately $170.9 million of these adjustable-rate loans have the ability to reprice in 2024, which is expected to have a positive impact on earnings as most of these adjustable-rate loans were made when rates were lower.
Previous wording
Interest earning cash balances for the quarterly comparisons have increased, which had a positive impact on our net interest margin since cash balances have yielded 5.75%. Average interest earning cash and due from banks was $17.0 million, an increase of $11.7 million for the first quarter of 2024 as compared to the same period last year.
Current wording
Interest earning cash balances for the quarter and year-to-date comparisons have increased and have a positive impact on our net interest margin since cash balances have been earning approximately 5.5%. Average cash and due from banks was $43.4 million, an increase of $26.4 million for the second quarter of 2024 as compared to the same period last year, and was $9.8 million higher for the first half of 2024 as compared to the same period in 2023.
Previous wording
Overall average investment securities decreased by $195.2 million for the first quarter of March 31, 2024, as compared to March 31, 2023, from the sale of lower yielding bonds from a strategic securities transaction, the proceeds of which were used to paydown higher cost borrowings. The overall investment portfolio had a tax-equivalent yield of 5.48% at March 31, 2024, with an average life of 5.85 years and average effective duration of 0.6 years for available-for-sale securities. Approximately $563.6 million of the investment securities reprice every 90 days and $54.7million are subordinated debt with an initial fixed rate period of 5 years and floating thereafter.
Current wording
Overall average investment securities decreased by $282.6 million for the second quarter of June 30, 2024, as compared to June 30, 2023, and decreased by $239.0 million for the first half of 2024, from the sale of lower yielding bonds from a strategic securities transaction, the proceeds of which were used to paydown higher cost borrowings. The overall investment portfolio had a tax-equivalent yield of 5.43% at June 30, 2024, with an average life of 6.08 years and average effective duration of 0.8 years for available-for-sale securities. Approximately $519.9 million of the investment securities reprice every 90 days and $49.3 million are subordinated debt with an initial fixed rate period of 5 years and floating thereafter.
Previous wording
Average noninterest-bearing demand deposits decreased $80.4 million or 8% for the first quarter of 2024 as compared to the first quarter of 2023.
Current wording
Interest expense was $13.3 million for the second quarter of 2024, an increase of $0.8 million, relative to the second quarter of 2023. For the first six months of 2024, compared to the first six months of 2023, interest expense increased $3.7 million, to $25.6 million. The increase in interest expense is primarily attributable to an increase in interest rates paid on certain time deposits, and a shift in deposits to higher interest rate accounts partially offset by lower balances on other borrowings. There was an unfavorable shift in the deposit mix in the second quarter of 2024 as compared to the same period in 2023 due to increased demand from customers for higher rates. Higher cost customer time deposits increased by $23.0 million, and wholesale brokered deposits increased by $129.3 million, while lower cost and noninterest bearing deposits decreased by $181.4 million. Mitigating some of the unfavorable shift there was also a $128.9 million decrease in borrowed funds for the quarterly comparison. For the first half of 2024, as compared to the same period in 2023, customer time deposits increased $61.6 million, and wholesale brokered deposits increased $85.9 million, while borrowed funds decreased $88.7 million, and other deposits decreased $218.7 million. Average noninterest-bearing demand deposits decreased $72.1 million or 7% for the second quarter of 2024 as compared to the second quarter of 2023 and decreased $76.2 million or 7% for the first half of 2024 as compared to the first half of 2023.
Previous wording
Credit risk is inherent in the business of making loans. The Company sets aside an allowance for credit losses on loans, a contra-asset account, through periodic charges to earnings which are reflected in the income statement as the provision for credit losses on loans. The Company recorded a provision for credit losses of $0.1 million in the first quarter of 2024, as compared to $0.3 million in the first quarter of 2023. The decrease in provision in the first quarter of 2024 as compared to the same quarter in 2023 was a result of reduced quantitative reserves from an improved economic forecast coupled with lower loan balances in most categories. Some of the calculated reserve reduction was offset by higher net loan charge-offs; however the overall reserve for credit losses was $0.05 million higher at March 31, 2024, as compared to March 31, 2023.
Current wording
Credit risk is inherent in the business of making loans. The Company sets aside an allowance for credit losses on loans, a contra-asset account, through periodic charges to earnings which are reflected in the income statement as the provision for credit losses on loans. Specifically identifiable and quantifiable loan losses are immediately charged off against the allowance, with subsequent recoveries reflected as an increase to the allowance. The Company recorded a provision for credit losses of $0.9 million in the second quarter of 2024, as compared to $0.1 million in the second quarter of 2023, and
Previous wording
The Company’s policies for monitoring the adequacy of the allowance, determining loan balances that should be charged off, and other detailed information with regard to changes in the allowance are discussed in Note 10 to the consolidated financial statements, and below, under “Allowance for Credit Losses.” The process utilized to establish an appropriate
Current wording
The Company’s policies for monitoring the adequacy of the allowance, determining loan balances that should be charged off, and other detailed information with regard to changes in the allowance are discussed in Note 10 to the consolidated financial statements, and below, under “Allowance for Credit Losses.” The process utilized to establish an appropriate credit allowance for losses on loans can result in a high degree of variability in the Company’s credit loss provision, and consequently in our net earnings.
Previous wording
The following table provides details on the Company’s noninterest income and noninterest expense for the three and nine-month periods ended March 31, 2024, and 2023:
Current wording
The following table provides details on the Company’s noninterest income and noninterest expense for the three and six-month periods ended June 30, 2024, and 2023:
Previous wording
In the “other” category of noninterest income there was a $0.3 million decrease in the first quarter of 2024 as compared to the first quarter of 2023. The quarterly comparison was negatively impacted by a decrease in life insurance proceeds and a decrease in OREO rental income, as all OREO properties were sold.
Current wording
In the “other” category of noninterest income there was a $0.4 million decrease in the second quarter of 2024 as compared to the second quarter of 2023, and a $0.7 million decrease in the first six months of 2024 as compared to the same period in 2023. The quarterly comparison was negatively impacted by a decrease in life insurance proceeds and a decrease in limited partnership income. The year-to-date comparison was also negatively impacted by a decrease in life insurance proceeds as well as a decrease in OREO rental income, as all OREO properties were sold.
Previous wording
Occupancy expense was up $0.7 million for the first quarter of 2024 as compared to the same quarter last year. The reason for the increase is mostly due to increased rent expense from the sale/leaseback transaction in December 2023.
Current wording
Occupancy expenses increased by $0.7 million, and $1.4 million for the second quarter, and the first half of 2024 as compared to the same periods in 2023. The reason for the increases in both comparisons is due to increased rent expense from the sale/leaseback transactions in the fourth quarter of 2023, and first quarter of 2024.
Previous wording
The Company sets aside a provision for income taxes on a monthly basis. The amount of that provision is determined by first applying the Company’s statutory income tax rates to estimated taxable income, which is pre-tax book income adjusted for permanent differences, and then subtracting available tax credits. Permanent differences include but are not limited to tax-exempt interest income, BOLI income, and certain book expenses that are not allowed as tax deductions. Our tax credits consist primarily of those generated by investments in low-income housing tax credit funds. The Company's provision for income taxes was 26.3% of pre-tax income in the first quarter of 2024 relative to 23.6% in the first quarter of 2023. The change in the effective tax rate for the quarter ended March 31, 2024, as compared to the same quarter in 2023 was due to tax credits and tax-exempt income representing a smaller percentage of total taxable income.
Current wording
The Company sets aside a provision for income taxes on a monthly basis. The amount of that provision is determined by first applying the Company’s statutory income tax rates to estimated taxable income, which is pre-tax book income adjusted for permanent differences, and then subtracting available tax credits. Permanent differences include but are not limited to tax-exempt interest income, BOLI income, and certain book expenses that are not allowed as tax deductions. Our tax credits consist primarily of those generated by investments in low-income housing tax credit funds. The Company's provision for income taxes was 27.8% of pre-tax income in the second quarter of 2024 relative to 26.2% in the second quarter of 2023, and 27.1% of pre-tax income for the first half of 2024 relative to 25.0% for the same period in 2023. The increase in effective tax rate for both the quarterly and year-to-date comparisons is due to the tax credits and tax-exempt income representing a smaller percentage of total taxable income.
Previous wording
The Company’s interest-earning assets are comprised of loans and investments, including overnight investments and surplus balances held in interest-earning accounts in our Federal Reserve Bank account. The composition, growth characteristics, and credit quality of both of those components are significant determinants of the Company’s financial condition. Investments are analyzed in the section immediately below, while the loan portfolio and other factors affecting earning assets are discussed in the sections following investments.
Current wording
The Company’s interest-earning assets are comprised of loans and investments, including overnight investments and surplus balances held in interest-earning accounts in our FRB account. The composition, growth characteristics, and credit quality of both of those components are significant determinants of the Company’s financial condition. Investments are analyzed in the section immediately below, while the loan portfolio and other factors affecting earning assets are discussed in the sections following investments.
Previous wording
The Company’s investments may at any given time consist of debt securities and marketable equity securities (together, the “investment portfolio”), investments in the time deposits of other banks, surplus interest-earning balances in our Federal Reserve Bank account, and overnight fed funds sold. The Company’s investments can serve several purposes, including the following: 1) they can provide liquidity for potential funding needs; 2) they provide a source of pledged assets for securing public deposits, bankruptcy deposits and certain borrowed funds which require collateral; 3) they constitute a large base of assets with structural characteristics that can be changed more readily than loan or deposit portfolios, as might be required for interest rate risk management purposes; 4) they are another interest-earning option for the placement of surplus funds when loan demand is light; and 5) they can provide partially tax exempt income.
Current wording
The Company’s investments may at any given time consist of debt securities and marketable equity securities (together, the “investment portfolio”), investments in the time deposits of other banks, surplus interest-earning balances in our FRB account, and overnight fed funds sold. The Company’s investments can serve several purposes, including the following: 1) they can provide liquidity for potential funding needs; 2) they provide a source of pledged assets for securing public deposits, bankruptcy deposits and certain borrowed funds which require collateral; 3) they constitute a large base of assets with structural characteristics that can be changed more readily than loan or deposit portfolios, as might be required for interest rate risk management purposes; 4) they are another interest-earning option for the placement of surplus funds when loan demand is light; and 5) they can provide partially tax exempt income.
Previous wording
The investment portfolio is reflected on the balance sheet as investment securities and totaled $1.1 billion, or 30% of total assets at March 31, 2024, and $1.3 billion, or 36% of total assets at December 31, 2023. The increase was due to the sale of bonds from the strategic securities transaction. The bonds sold had an average book yield of 2.61% and were used to paydown borrowed funds at an average rate of 5.52%.
Current wording
The investment portfolio is reflected on the balance sheet as investment securities and totaled $1.0 billion, or 28% of total assets at June 30, 2024, and $1.3 billion, or 36% of total assets at December 31, 2023. The decrease was due to the sale of bonds from the strategic securities transaction. The bonds sold had an average book yield of 2.61% and were used to paydown borrowed funds at an average rate of 5.52%.
Previous wording
The Company carries “available for sale” investments at their fair market values and “held to maturity” investments at amortized cost net of allowance for credit losses. We currently have the intent and ability to hold our investment securities to maturity, but the securities are all marketable. The expected effective duration was 0.6 years for available-for-sale investments and 6.0 years for held-to-maturity investments at March 31, 2024, as compared to 1.6 years for available-for-sale investments and 6.7 years for held-to-maturity investments at December 31, 2023.
Current wording
The Company carries “available for sale” investments at their fair market values and “held to maturity” investments at amortized cost, net of allowance for credit losses. We currently have the intent and ability to hold our investment securities to maturity, but the securities are all marketable. The expected effective duration was 0.8 years for available-for-sale
Previous wording
Investment securities that were pledged as collateral for borrowings and/or potential borrowings from the Federal Home Loan Bank and the Federal Reserve Bank, customer repurchase agreements, and other purposes as required or permitted by law totaled $492.5 million at March 31, 2024, and $543.9 million at December 31, 2023, leaving $555.8 million in unpledged debt securities at March 31, 2024, and $793.0 million at December 31, 2023. Securities that were pledged in excess of actual pledging needs and were thus available for liquidity purposes, if needed, totaled $316.9 million at March 31, 2024, and $383.0 million at December 31, 2023.
Current wording
Investment securities that were pledged as collateral for borrowings and/or potential borrowings from the FHLB and the FRB, customer repurchase agreements, and other purposes as required or permitted by law totaled $495.9 million at June 30, 2024, and $543.9 million at December 31, 2023, leaving $533.8 million in unpledged debt securities at June 30, 2024, and $793.0 million at December 31, 2023. Securities that were pledged in excess of actual pledging needs and were thus available for liquidity purposes, if needed, totaled $272.9 million at June, 2024, and $383.0 million at December 31, 2023.
Previous wording
Gross loans at $2.2 billion, increased $66.8 million or 3% during the first three months of 2024. There was an $87.6 million increase in mortgage warehouse line utilization, offset by unfavorable loan variances in all other loan categories, the largest of which were a $12.8 million decrease in other commercial loans and $5.6 million decrease in residential real estate.
Current wording
Gross loans at $2.2 billion, increased $144.4 million or 7% during the first six months of 2024. There was a $158.1 million favorable change in mortgage warehouse lines, a $13.5 million increase in agricultural real estate loans, offset by unfavorable loan variances in all other loan categories, the largest of which was a $27.0 million decrease in other non-agricultural real estate loans.
Previous wording
Over the past several years, the Company has strategically focused on reducing concentrations in commercial real estate, especially amongst areas management deemed to be higher risk such as construction, office real estate, and hospitality. At March 31, 2024, the total regulatory CRE concentration ratio of total CRE over Tier 1 Capital plus allowance was 248%. Further, the overall level of construction and land development lending had declined to 1% of regulatory capital plus allowance for credit losses at March 31, 2024. At March 31, 2024, our non-owner occupied commercial real estate includes $304 million of retail; $155 million of warehouse/industrial, $186 million of office; and $182 million of hospitality. Approximately 5% of the office real estate matures in less than two years.
Current wording
Over the past several years, the Company has strategically focused on reducing concentrations in commercial real estate, especially amongst areas management deemed to be higher risk such as construction, office real estate, and hospitality. At June 30, 2024, the total regulatory CRE concentration ratio of total CRE over Tier 1 Capital plus allowance was 241% as compared to 243% at December 31, 2023 and 243% at June 30, 2023. Further, the overall level of construction and land development lending had declined to 1% of regulatory capital plus allowance for credit losses at June 30, 2024. At June 30, 2024, our non-owner occupied commercial real estate includes $303 million of retail; $152 million of warehouse/industrial; $177 million of office; and $181 million of hospitality. Approximately 5% of the office real estate matures in less than two years.
Previous wording
Line utilization, unused commitments, excluding mortgage warehouse and overdraft lines, were $234.4 million at March 31, 2024, compared to $203.6 million at December 31, 2023. Total utilization excluding mortgage warehouse and overdraft lines was 58% at March 31, 2024, compared to 53% at December 31, 2023. Mortgage warehouse utilization was 50% at March 31, 2024, compared to 36% at December 31, 2023. The increase in mortgage warehouse utilization during the first quarter of 2024 was due to new customers in the mortgage warehouse product that ramped up their utilization.
Current wording
Unused commitments, excluding mortgage warehouse and overdraft lines, were $247.1 million at June 30, 2024, compared to $203.6 million at December 31, 2023. Total utilization excluding mortgage warehouse and overdraft lines was 57% at June 30, 2024, compared to 62% at December 31, 2023. Mortgage warehouse utilization increased to 54% at June 30, 2024, compared to 36% at December 31, 2023. The increase in mortgage warehouse utilization during the first half of 2024 was due to $186.0 million in new mortgage warehouse lines and subsequent utilization of those lines.
Previous wording
It should be noted that the mortgage warehouse lines were moved to repurchase agreement lines that provide stronger credit protection to the Company, as well as more favorable regulatory capital treatment as these repurchase lines are not considered off-balance sheet commitments.
Current wording
It should be noted that the mortgage warehouse lines were moved to repurchase agreement lines in 2022 and 2023. The repurchase agreement structure provides stronger credit protection to the Company, as well as more favorable regulatory capital treatment as these repurchase lines are not considered off-balance sheet commitments as they are unconditionally cancellable.
Previous wording
Nonperforming assets are comprised of loans for which the Company is no longer accruing interest, in addition to foreclosed assets which is primarily OREO, but can include other foreclosed assets.
Current wording
Nonperforming assets currently is comprised of loans for which the Company is no longer accruing interest, but can include OREO and other foreclosed assets.
Previous wording
Total nonperforming assets, comprised of non-accrual loans and foreclosed assets, increased by $6.2 million, or 78%, during the first quarter of 2024. The increase resulted from an increase in non-accrual loans, primarily as a result of one dairy industry real estate secured loan. This loan was written down by $0.4 million and no further allowance for credit losses was deemed necessary on this loan. The Company's ratio of nonperforming assets to loans plus foreclosed assets increased to 0.66% at March 31, 2024, from 0.38% at December 31, 2023, due primarily to the one dairy loan previously mentioned. All of the Company's nonperforming assets are individually evaluated for credit loss quarterly and management believes the established allowance for credit loss on such loans is appropriate.
Current wording
Total nonperforming assets, comprised of non-accrual loans, decreased by $1.5 million, or 19%, during the first half of 2024, due to the foreclosure and subsequent sale of one commercial real estate loan. The balance of nonaccrual loans at June 30, 2024 is primarily one nonperforming dairy loan classified as farmland. The Company's ratio of nonperforming assets to loans plus foreclosed assets decreased to 0.29% at June 30, 2024, from 0.38% at December 31, 2023. All of the Company's nonperforming assets are individually evaluated for credit loss quarterly and management believes the established allowance for credit loss on such loans is appropriate.
Previous wording
The Company had $0.8 million in loans past due 30-89 days at March 31, 2024. This is a decrease of $1.3 million over the balance at December 31, 2023. All of these past due loans are under management supervision and every effort is being taken to assist the borrowers and manage credit risk in this regard.
Current wording
The Company had $3.2 million in loans past due 30-89 days at June 30, 2024. This is an increase of $2.9 million over the balance at December 31, 2023. All of these past due loans are under management supervision and every effort is being taken to assist the borrowers and manage credit risk in this regard.
Previous wording
The Company's allowance for credit losses on loans was $23.1 million at March 31, 2024, and $23.5 million at December 31, 2023. The allowance was 1.07% of total loans at March 31, 2024, and 1.12% of total loans at December 31, 2023. Management's detailed analysis indicates that the Company's allowance for credit losses on loan should be sufficient to cover credit losses for the life of the loans outstanding as of March 31, 2024, but no assurance can be given that the Company will not experience substantial future losses relative to the size of the credit loss allowance for loans. A separate allowance of $0.8 million for potential credit losses inherent in unused commitments is included in other liabilities at March 31, 2024, down $0.1 million from December 31, 2023.
Current wording
individually evaluated for expected credit losses. Management's detailed analysis indicates that the Company's allowance for credit losses on loans should be sufficient to cover credit losses for the life of the loans outstanding as of June 30, 2024, but no assurance can be given that the Company will not experience substantial future losses relative to the size of the credit loss allowance for loans. A separate allowance of $0.5 million for potential credit losses inherent in unused commitments is included in other liabilities at June 30, 2024, unchanged from December 31, 2023.
Previous wording
The Company’s allowance for credit losses on loans at March 31, 2024 represents Management’s best estimate of expected losses in the loan portfolio as of that date, but no assurance can be given that the Company will not experience substantial
Current wording
The Company’s allowance for credit losses on loans at June 30, 2024 represents Management’s best estimate of expected losses in the loan portfolio as of that date, but no assurance can be given that the Company will not experience substantial losses relative to the size of the allowance. Furthermore, fluctuations in credit quality, changes in economic conditions, updated accounting or regulatory requirements, and/or other factors could induce us to augment or reduce the allowance.
Previous wording
The Company maintains commitments to extend credit in the normal course of business, as long as there are no violations of conditions established in the outstanding contractual arrangements. It is unlikely that all unused commitments will ultimately be drawn down. Unused commitments to extend credit, which included standby letters of credit, totaled $440.9 million at March 31, 2024, and $408.1 million at December 31, 2023, representing approximately 21% of gross loans outstanding at March 31, 2024, and 20% at December 31, 2023. Included in unused commitments are mortgage warehouse lines which are mostly in the form of repurchase lines and are unconditionally cancellable. Unused commitments on mortgage warehouse lines were $206.4 million at March 31, 2024, and $204.5 million at December 31, 2023, while utilization was 50% and 36% respectively.
Current wording
million at June 30, 2024, and $487.1 million at December 31, 2023, representing approximately 25% of gross loans outstanding at June 30, 2024, and 23% at December 31, 2023. Included in unused commitments are mortgage warehouse lines which are mostly in the form of repurchase lines and are unconditionally cancellable. Unused commitments on mortgage warehouse lines were $232.4 million at June 30, 2024, and $204.5 million at December 31, 2023, while utilization was 54% and 36% respectively.
Previous wording
The increase in utilization during the first quarter of 2024 was due to new customers in the mortgage warehouse product that ramped up their utilization. Unused commitments exclusive of mortgage warehouse lines and overdraft lines of credit, have increased $30.9 million or 15% for the first three months of 2024 and are due to an increase in new lines of credit. The Company also had undrawn letters of credit issued to customers totaling $4.8 million at March 31, 2024, and $5.0 million at December 31, 2023. The effect on the Company’s revenues, expenses, cash flows and liquidity from the unused portion of commitments to provide credit cannot be reasonably predicted because there is no guarantee that the lines of credit will ever be used. However, the “Liquidity” section in this Form 10-Q outlines resources available to draw upon should we be required to fund a significant portion of unused commitments.
Current wording
The increase in utilization during the first half of 2024 was due to new customers in the mortgage warehouse product that ramped up their utilization. Unused commitments exclusive of mortgage warehouse lines and overdraft lines of credit, have increased $43.6 million or 21% for the first six months of 2024 and are due to an increase in new lines of credit and higher utilization on existing lines of credit. The Company also had undrawn letters of credit issued to customers totaling $5.3 million at June 30, 2024, and $5.0 million at December 31, 2023. The effect on the Company’s revenues, expenses, cash flows and liquidity from the unused portion of commitments to provide credit cannot be reasonably predicted because there is no guarantee that the lines of credit will ever be used. However, the “Liquidity” section in this Form 10-Q outlines resources available to draw upon should we be required to fund a significant portion of unused commitments.
Previous wording
In addition to unused commitments to provide credit, the Company is utilizing a $125 million letter of credit issued by the Federal Home Loan Bank on the Company’s behalf as security for certain local agency deposits which totaled $72.4 million at March 31, 2024. That letter of credit is backed by loans that are pledged to the FHLB by the Company. For more information on the Company’s off-balance sheet arrangements, see Note 7 to the consolidated financial statements located elsewhere herein.
Current wording
In addition to unused commitments to provide credit, the Company is utilizing a $125 million letter of credit issued by the FHLB on the Company’s behalf as security for certain local agency deposits which totaled $95.0 million at June 30, 2024. That letter of credit is backed by loans that are pledged to the FHLB by the Company. For more information on the Company’s off-balance sheet arrangements, see Note 7 to the consolidated financial statements located elsewhere herein.
Previous wording
Interest-earning cash balances were discussed above in the “Investments” section, but the Company also maintains a certain level of cash on hand in the normal course of business as well as non-earning deposits at other financial institutions. Our balance of cash and due from banks depends on the timing of collection of outstanding cash items (checks), the amount of cash held at our branches, and our reserve requirement among other things, and it is subject to significant fluctuations in the normal course of business. While cash flows are normally predictable within limits, those limits are fairly broad and the Company manages its short-term cash position through the utilization of overnight loans to, and borrowings from, correspondent banks, including the Federal Reserve Bank and the Federal Home Loan Bank. Should a large “short” overnight position persist for any length of time, the Company typically raises money through focused retail deposit gathering efforts or by adding brokered time deposits. If a “long” position is prevalent, we could let brokered deposits or other wholesale borrowings roll off as they mature, or we might invest excess liquidity into investments or loans, subject to the bank’s risk tolerances. The Company’s balance of non-earning cash and due from banks was $70.9 million at March 31, 2024, relative to $73.7 million at December 31, 2023.
Current wording
Interest-earning cash balances were discussed above in the “Investments” section, but the Company also maintains a certain level of cash on hand in the normal course of business as well as non-earning deposits at other financial institutions. Our balance of cash and due from banks depends on the timing of collection of outstanding cash items (checks), the amount of cash held at our branches, and our reserve requirement among other things, and it is subject to significant fluctuations in the normal course of business. While cash flows are normally predictable within limits, those limits are fairly broad and the Company manages its short-term cash position through the utilization of overnight loans to, and borrowings from, correspondent banks, including the FRB and the FHLB. Should a large “short” overnight position persist for any length of time, the Company typically raises money through focused retail deposit gathering efforts or by adding brokered time deposits. If a “long” position is prevalent, we could let brokered deposits or other wholesale borrowings roll off as they mature, or we might invest excess liquidity into investments or loans, subject to the Company’s risk tolerances. The Company’s balance of non-earning cash and due from banks was $96.0 million at June 30, 2024, relative to $73.7 million at December 31, 2023.
Previous wording
Net premises and equipment decreased by $0.8 million during the first three months of 2024, to $16.1 million. This decline was a result of the sale/leaseback of two bank-owned branch locations at a gain of $3.8 million.
Current wording
Net premises and equipment decreased by $0.9 million during the first half of 2024, to $16.0 million. This decline was a result of the sale/leaseback of two bank-owned branch locations in the first quarter of 2024.
Previous wording
Goodwill was $27.4 million at March 31, 2024, unchanged during the first three months of 2024. Goodwill is tested for impairment annually, unless events and circumstances exist which indicate that an impairment test should be performed. The annual goodwill impairment test was last performed on October 1, 2023, and it was determined that no impairment existed. Management continues to evaluate whether or not a triggering event occurs, or circumstances change that would more likely than not reduce the fair value of the Company below its carrying amount before the next annual test in 2024.
Current wording
Goodwill was $27.4 million at June 30, 2024, unchanged during the first half of 2024. Goodwill is tested for impairment annually, unless events and circumstances exist which indicate that an impairment test should be performed. The annual goodwill impairment test was last performed on October 1, 2023, and it was determined that no impairment existed. Management continues to evaluate whether or not a triggering event occurs, or circumstances change that would more likely than not reduce the fair value of the Company below its carrying amount before the next annual test in 2024.
Previous wording
Bank-owned life insurance, with a balance of $53.0 million at March 31, 2024, is discussed in detail above in the “Noninterest Income and Noninterest Expense” section.
Current wording
Bank-owned life insurance, with a balance of $53.4 million at June 30, 2024, is discussed in detail above in the “Noninterest Income and Noninterest Expense” section.
Previous wording
Deposit balances grew by $85.8 million, or 3%, during the first three months of 2024 to $2.9 billion at March 31, 2024. Core non-maturity deposits decreased $56.7 million, or 3%, for the first three months of 2024, while customer time deposits increased by $5.9 million, or 1% due mostly to an increase in variable rate CD accounts by existing customers seeking higher interest rates on their deposits. Brokered deposits increased $136.6 million during the first three months of 2024, or 101%. This was a strategic decision to take advantage of preferential pricing over other forms of borrowed funds. Overall noninterest-bearing deposits as a percent of total deposits decreased to 34.0% at March 31, 2024, compared to 37.0% at December 31, 2023.
Current wording
Deposit balances grew by $181.2 million, or 7%, during the first half of 2024 to $2.9 billion at June 30, 2024. Core non-maturity deposits decreased $41.4 million, or 2%, for the first half of 2024, while customer time deposits increased by $11.0 million, or 2% due mostly to an increase in variable rate CD accounts by existing customers seeking higher interest rates on their deposits. Brokered deposits increased $211.6 million during the first half of 2024, or 157%. This was a strategic decision to fund increased usage on mortgage warehouse lines. Overall noninterest-bearing deposits as a percent of total deposits decreased to 33.5% at June, 2024, compared to 37.0% at December 31, 2023.
Previous wording
Overall uninsured deposits are estimated to be approximately $784.4 million, or 28% of total deposit balances, excluding public agency deposits that are subject to collateralization through a letter of credit issued by the FHLB. In addition, uninsured deposits of the bank’s customers are eligible for FDIC pass-through insurance if the customer opens an IntraFi Insured Cash Sweep account or a reciprocal time deposit through the Certificate of Deposit Account Registry System (CDARS). IntraFi allows for up to $150 million of combined pass-through FDIC insurance which would more than cover each of the Bank’s deposit customers if such customer desired to have such pass-through insurance. The Bank maintains a diversified deposit base with no significant customer concentrations and does not bank any cryptocurrency companies. At March 31, 2024, the Company had approximately 121,000 accounts and the 25 largest deposit balance customers had balances of less than 13% of overall deposits*.*
Current wording
Overall uninsured deposits are estimated to be approximately $805.4 million, or 27% of total deposit balances, excluding public agency deposits that are subject to collateralization through a letter of credit issued by the FHLB. In addition, uninsured deposits of the Company’s customers are eligible for FDIC pass-through insurance if the customer opens an IntraFi Insured Cash Sweep account or a reciprocal time deposit through the Certificate of Deposit Account Registry System (CDARS). IntraFi allows for up to $250 million of combined pass-through FDIC insurance which would more than cover each of the Company’s deposit customers if such customer desired to have such pass-through insurance. The Company maintains a diversified deposit base with no significant customer concentrations and does not bank any cryptocurrency companies. At June 30, 2024, the Company had approximately 121,000 accounts and the 25 largest deposit balance customers had balances of less than 14% of overall deposits*.*
Previous wording
and fed funds purchased on unsecured lines to support liquidity needs created by seasonal deposit flows, to temporarily satisfy funding needs from increased loan demand, and for other short-term purposes. The FHLB line consists of both a secured and unsecured component. The secured component depends on the level of pledged collateral.
Current wording
The Company’s non-deposit borrowings may, at any given time, include fed funds purchased from correspondent banks, borrowings from the FHLB, advances from the FRB, securities sold under agreements to repurchase, subordinated notes and/or junior subordinated debentures. The Company uses short-term FHLB advances and fed funds purchased on unsecured lines to support liquidity needs created by seasonal deposit flows, to temporarily satisfy funding needs from increased loan demand, and for other short-term purposes. The FHLB line consists of both a secured and unsecured component. The secured component depends on the level of pledged collateral.
Previous wording
Total non-deposit interest-bearing liabilities decreased by $265.7 million, during the first three months of 2024 primarily due to a decrease in overnight fed funds and short term FHLB borrowings. This was a result of a balance sheet restructure in which bonds with a book yield of 2.61% were sold to pay off higher cost borrowed funds at an average rate of 5.52%.
Current wording
Total non-deposit interest-bearing liabilities decreased by $239.5 million, during the first half of 2024 primarily due to a decrease in overnight fed funds and short term FHLB borrowings. This was a result of a balance sheet restructure in which bonds with a book yield of 2.61% were sold to pay off higher cost borrowed funds at an average rate of 5.52%.
Showing the first 40 of 56 pairs. Open the source sections for the rest.
Rearranged current paragraphs (3)
Current report — wording carried from elsewhere
investments and 6.0 years for held-to-maturity investments at June 30, 2024, as compared to 1.4 years for available-for-sale investments and 5.9 years for held-to-maturity investments at December 31, 2023.
Current report — wording carried from elsewhere
The Company's allowance for credit losses on loans was $21.6 million at June 30, 2024, and $23.5 million at December 31, 2023. The allowance was 0.97% of total loans at June 30, 2024, and 1.12% of total loans at December 31, 2023. The decreased allowance for credit losses on loans was primarily due to a $1.6 million reduction in the allowance on loans
Current report — wording carried from elsewhere
The Company maintains commitments to extend credit in the normal course of business, as long as there are no violations of conditions established in the outstanding contractual arrangements. It is unlikely that all unused commitments will ultimately be drawn down. Unused commitments to extend credit, which included standby letters of credit, totaled $554.2
Rearranged previous paragraphs (5)
Previous report — wording carried elsewhere
Total capital of $345.1 million at March 31, 2024, reflects an increase of $7.0 million, or 2%, compared to December 31, 2023. The increase in equity during the first quarter of 2024 is due to net income of $9.3 million, offset by a $3.4 million dividend paid to shareholders, $3.3 million in share repurchases and a $4.1 million favorable swing in other comprehensive income due principally to changes in investment securities’ fair value. The remaining difference is related to equity compensation recognized during the quarter.
Previous report — wording carried elsewhere
Specifically identifiable and quantifiable loan losses are immediately charged off against the allowance, with subsequent recoveries reflected as an increase to the allowance. The Company recorded net loan charge-offs of $0.5 million in the first quarter of 2024 as compared to $0.2 million for the first quarter of 2023. The Company's $0.2 million decrease in the provision for credit losses on loans in the first quarter of 2024 as compared to the first quarter of 2023 was primarily due to the impact of reduced net loan charge-offs in the first quarter of 2023.
Previous report — wording carried elsewhere
credit allowance for losses on loans can result in a high degree of variability in the Company’s credit loss provision, and consequently in our net earnings.
Previous report — wording carried elsewhere
losses relative to the size of the allowance. Furthermore, fluctuations in credit quality, changes in economic conditions, updated accounting or regulatory requirements, and/or other factors could induce us to augment or reduce the allowance.
Previous report — wording carried elsewhere
The Company’s non-deposit borrowings may, at any given time, include fed funds purchased from correspondent banks, borrowings from the Federal Home Loan Bank, advances from the Federal Reserve Bank, securities sold under agreements to repurchase, subordinated notes and/or junior subordinated debentures. The Company uses short-term FHLB advances