Catalyst Bancorp Inc
For the period ended Jun 30, 2024. Filed Aug 13, 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 13, 2024
CLST$17.50-2.2%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 2024-05-15.
0001558370-24-008243
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-13.
0001558370-24-012040
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 68 previous paragraphs and 80 current paragraphs.
34 unchanged; 30 reworded; 9 added; 4 removed; 0 previous and 7 current paragraphs rearranged.
Tables are not compared: 50 previous and 60 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 (9)
Current report
Additionally, as discussed in detail in Note 1 to the Company’s financial statements reported in this Quarterly Report on Form 10-Q, during June of 2024, the Bank became aware of interest owed by it to a deposit customer that was not properly accrued or paid by the Bank during the period beginning August 1, 2022 and ending March 31, 2024. Accordingly, management revised the prior period financial statements, related disclosures and supplemental information presented in this filing to correct the misstatement. The Company will also revise previously reported financial information for these immaterial errors in its future filings, as applicable. The information in this Item 2 and throughout this Quarterly Report on Form 10-Q has been adjusted to reflect these revisions as described in Note 1 to the Company’s financial statements of this Quarterly Report on Form 10-Q.
Current report
Our loan growth has largely been the result of our re-focused business strategy. Since 2021, we have been targeting small- to mid-sized businesses and business professionals in our market areas while continuing to serve our traditional customer base. The following table presents certain major segments of our commercial real estate, construction and land, and commercial and industrial loan balances as of the dates indicated.
Current report
General. For the three months ended June 30, 2024, the Company reported net income of $527,000, compared to net income of $16,000 for the three months ended June 30, 2023. Net interest income was up $574,000, or 30.6%, for the three months ended June 30, 2024, compared to the same period in 2023. The provision for credit losses totaled $99,000 for the three months ended June 30, 2024, compared to no provision for the same period in 2023. Non-interest income was up $49,000, or 15.5%, for the three months ended June 30, 2024, compared to the same period in 2023. Non-interest expense for the three months ended June 30, 2024 was down $123,000, or 5.6%, compared the same period in 2023.
Current report
Non-interest Income*.*Non-interest income for the three months ended June 30, 2024 totaled $366,000, up $49,000 or 15.5% compared to the same period in 2023. Non-interest income for the three months ended June 30, 2024 includes $46,000 related to insurance proceeds received due to storm damage.
Current report
Non-interest Expense. Non-interest expense totaled $2.1 million for the three months ended June 30, 2024, down $123,000, or 5.6%, compared to the three months ended June 30, 2023. During the first three months of 2024, the Company upgraded to a new core processing system which largely contributed to reductions in data processing and communication expenses and ATM and debit card expenses during the three months ended June 30, 2024.
Current report
Data processing and communication expense totaled $133,000 for the three months ended June 30, 2024, down $87,000 or 39.5% compared to the same period in 2023. ATM and debit card expense totaled $36,000 for the three months ended June 30, 2024, down $25,000 or 41.0% compared to the same period in 2023.
Current report
The average loan yield was 6.27% for the six months ended June 30, 2024, up from 5.01% for the same period in 2023. Average loans were $147.3 million for the six months ended June 30, 2024, up $13.8 million, or 10.3%, compared to the same period in 2023.
Current report
portfolio was 1.79% for the six months ended June 30, 2024, up 14 basis points compared to the same period in 2023 primarily due to investment securities purchased during the three months ended June 30, 2024.
Current report
Interest Expense. Total interest expense increased $1.4 million, or 175.6%, to $2.1 million for the six months ended June 30, 2024, compared to $776,000 for the same period in 2023. Interest expense on deposits was $1.5 million during the six months ended June 30, 2024, up $900,000, or 140.6%, compared to the same period in 2023. The average rate paid on interest-bearing deposits was 2.14% during the six months ended June 30, 2024, up 121 basis points compared to the same period in 2023. Interest expense on borrowings increased by $463,000 during the six months ended June 30, 2024 compared to the same period in 2023 mainly due to interest expense on BTFP advances.
Removed paragraphs (4)
Previous report
During the three months ended March 31, 2024, strong construction loan growth was offset primarily by net declines in our commercial and industrial and residential loan portfolios. Construction loan growth was largely driven by multi-family residential development and additional fundings on several existing construction loans.
Previous report
The following table summarizes the composition of our construction and land loan balances and commitments, including the related undisbursed amounts for construction projects in process as of March 31, 2024.
Previous report
Based on total commitment and contractual maturity date, the weighted average term to maturity of our construction and land loan portfolio is approximately 11 months as of March 31, 2024.
Previous report
On May 2, 2024, The Company announced that its Board of Directors approved the Company’s fourth share repurchase plan (the “May 2024 Repurchase Plan”). Under the May 2024 Repurchase Plan, the Company may purchase up to 227,000 shares, or approximately 5%, of the Company’s outstanding shares of common stock.
Reworded paragraphs (30)
Previous wording
Management’s Discussion and Analysis of Financial Condition and Results of Operations at March 31, 2024 and for the three months ended March 31, 2024 and 2023 is intended to assist in understanding our financial condition and results of operations. The information contained in this section should be read in conjunction with the unaudited consolidated financial statements of the Company and the notes thereto appearing in Part I, Item 1, of this Quarterly Report on Form 10-Q as well as the business and financial information included in the Company’s Annual Report on Form 10-K filed with the SEC for the year ended December 31, 2023.
Current wording
Management’s Discussion and Analysis of Financial Condition and Results of Operations at June 30, 2024 and for the three and six months ended June 30, 2024 and 2023 is intended to assist in understanding our financial condition and results of operations. The information contained in this section should be read in conjunction with the unaudited consolidated financial statements of the Company and the notes thereto appearing in Part I, Item 1, of this Quarterly Report on Form 10-Q as well as the business and financial information included in the Company’s Annual Report on Form 10-K filed with the SEC for the year ended December 31, 2023.
Previous wording
The following is an overview of financial results for the three months ended March 31, 2024:
Current wording
The following is an overview of financial results for the three and six months ended June 30, 2024:
Previous wording
During the three months ended March 31, 2024, the measurement of the Company’s deferred income tax assets and liabilities was identified as a critical accounting estimate. Deferred income tax assets and liabilities are determined based on the tax effects of the temporary differences between the book and tax bases of the various assets and liabilities and gives current recognition to changes in tax rates and laws. At March 31, 2024, the Company’s net deferred tax asset totaled $1.8 million and is included in other assets on the statement of financial condition. According to Subtopic 740-10 of the Accounting Standards Codification (“ASC 740-10”), the measurement of deferred tax assets is reduced, if necessary, by the amount of any tax benefits that, based on available evidence, are not expected to be realized. At March 31, 2024, the Company has not recorded a valuation allowance for its deferred tax assets. Realizing our deferred tax assets principally depends upon our achieving projected future taxable income. We may change our judgments regarding future profitability due to future market conditions and other factors. We may adjust our deferred tax asset balances if our judgments change, which may impact total income tax expense in future periods.
Current wording
During the three months ended March 31, 2024, the measurement of the Company’s deferred income tax assets and liabilities was identified as a critical accounting estimate. Deferred income tax assets and liabilities are determined based on the tax effects of the temporary differences between the book and tax bases of the various assets and liabilities and gives current recognition to changes in tax rates and laws. At June 30, 2024, the Company’s net deferred tax asset totaled $1.7 million and is included in other assets on the statement of financial condition. According to Subtopic 740-10 of the Accounting Standards Codification (“ASC 740-10”), the measurement of deferred tax assets is reduced, if necessary, by the amount of any tax benefits that, based on available evidence, are not expected to be realized. At June 30, 2024, the Company has not recorded a valuation allowance for its deferred tax assets. Realizing our deferred tax assets principally depends upon our achieving projected future taxable income. We may change our judgments regarding future profitability due to future market conditions and other factors. We may adjust our deferred tax asset balances if our judgments change, which may impact total income tax expense in future periods.
Previous wording
Total Assets. Total assets increased $11.1 million, or 4.1%, to $282.0 million at March 31, 2024 from $270.9 million at December 31, 2023. The increase was primarily due to additional borrowings under the Bank Term Funding Program (“BTFP”).
Current wording
Total Assets. Total assets increased $24.4 million, or 9.0%, to $295.3 million at June 30, 2024 from $270.9 million at December 31, 2023. The increase was primarily due to an increase in cash as a result of deposit growth and additional borrowings under the Bank Term Funding Program (“BTFP”).
Previous wording
Allowance for Credit Losses. At March 31, 2024, the allowance for loan losses totaled $2.1 million, or 1.44% of total loans, compared to 1.47% of total loans at December 31, 2023. The allowance for credit losses on unfunded commitments totaled $310,000, up $53,000 from December 31, 2023. The provision for credit losses, inclusive of the provision for unfunded commitments, for the first quarter of 2024 totaled $95,000 and was largely attributable to growth in total construction loan commitments.
Current wording
Allowance for Credit Losses. At June 30, 2024, the allowance for loan losses totaled $2.2 million, or 1.45% of total loans, compared to 1.47% of total loans at December 31, 2023. The allowance for credit losses on unfunded commitments totaled $224,000, down $33,000 from December 31, 2023. The provision for credit losses, inclusive of the provision for unfunded commitments, for the six months ended June 30, 2024 totaled $194,000 and was largely attributable to commercial loan growth and the allowance for credit losses on individually evaluated residential loans.
Previous wording
Non-performing loans totaling $275,000 as of December 31, 2023 were paid-off or returned to accrual status during the three months ended March 31, 2024.
Current wording
Non-performing loans totaling $275,000 as of December 31, 2023 were paid-off or returned to accrual status during the six months ended June 30, 2024.
Previous wording
Investment Securities*.* Total investment securities were $39.0 million at March 31, 2024, down $45.0 million, or 53.6%, compared to $84.0 million at December 31, 2023. Net unrealized losses on securities available-for-sale totaled $4.6 million at March 31, 2024, compared to $9.2 million at December 31, 2023. Unrealized losses on available-for-sale securities relate principally to increases in market interest rates for similar securities. Our investment securities portfolio consists primarily of debt obligations issued by the U.S. government and government agencies and government-sponsored mortgage-backed securities.
Current wording
Investment Securities*.* Total investment securities were $43.2 million at June 30, 2024, down $40.8 million, or 48.6%, compared to $84.0 million at December 31, 2023. Net unrealized losses on securities available-for-sale totaled $4.6 million at June 30, 2024, compared to $9.2 million at December 31, 2023. Unrealized losses on available-for-sale securities relate principally to increases in market interest rates for similar securities. Our investment securities portfolio consists primarily of debt obligations issued by the U.S. government and government agencies and government-sponsored mortgage-backed securities.
Previous wording
The Company has not purchased investment securities since the fourth quarter of 2022. During the three months ended March 31, 2024, the Company sold 50 available-for-sale investment securities for a total pre-tax loss of $5.5 million. Proceeds from the sales totaled $42.6 million, inclusive of accrued interest.
Current wording
The Company did not purchase investment securities during the year ended December 31, 2023. During the three months ended March 31, 2024, the Company sold 50 available-for-sale investment securities for a total pre-tax loss of $5.5 million. Proceeds from the sales totaled $42.6 million, inclusive of accrued interest. During the three months ended June 30, 2024, the Company re-deployed a portion of the sales proceeds by purchasing $4.9 million of fixed-rate government-sponsored mortgage-backed securities.
Previous wording
The ratio of the Company’s total loans to total deposits was 84.6% and 87.5% as of March 31, 2024 and December 31, 2023, respectively.
Current wording
The ratio of the Company’s total loans to total deposits was 85.1% and 87.5% as of June 30, 2024 and December 31, 2023, respectively.
Previous wording
Total public fund deposits amounted to $22.7 million, or 13% of total deposits, at March 31, 2024, compared to $23.3 million, or 14% of total deposits, at December 31, 2023. At March 31, 2024, approximately 78% of our total public fund deposits consisted of non-interest-bearing and interest-bearing demand deposits from municipalities within our market.
Current wording
Total public fund deposits amounted to $31.2 million, or 17% of total deposits, at June 30, 2024, compared to $23.3 million, or 14% of total deposits, at December 31, 2023. At June 30, 2024, approximately 84% of our total public fund deposits consisted of non-interest-bearing and interest-bearing demand deposits from municipalities within our market.
Previous wording
Our total uninsured deposits (that is deposits in excess of the FDIC’s insurance limit), inclusive of public funds, were approximately $41.7 million at March 31, 2024 and $44.6 million at December 31, 2023. Total uninsured non-public funds deposits were approximately $23.9 million and $26.3 million at March 31, 2024 and December 31, 2023, respectively. At March 31, 2024, the full amount of our public fund deposits in excess of the FDIC’s insurance limit were secured by either pledged investment securities of $23.0 million or $34.0 million of a custodial letter of credit granted by the Federal Home Loan Bank of Dallas.
Current wording
Our total uninsured deposits (that is deposits in excess of the FDIC’s insurance limit), inclusive of public funds, were approximately $52.7 million at June 30, 2024 and $44.6 million at December 31, 2023. Total uninsured non-public funds deposits were approximately $26.1 million and $26.3 million at June 30, 2024 and December 31, 2023, respectively. At June 30, 2024, the full amount of our public fund deposits in excess of the FDIC’s insurance limit were secured by either pledged investment securities of $3.8 million or $34.0 million of a custodial letter of credit granted by the Federal Home Loan Bank of Dallas.
Previous wording
Borrowings*.*Total borrowings at March 31, 2024 were $29.4 million, up $10.0 million from December 31, 2023. During the three months ended March 31, 2024, the Bank increased its borrowings from the Federal Reserve Bank of Atlanta through the BTFP. At March 31, 2024, the Bank had one $20.0 million BTFP advance outstanding with a contractual interest rate of 4.76% and a maturity date of January 15, 2025.
Current wording
Borrowings*.*Total borrowings at June 30, 2024 were $30.3 million, up $10.9 million from December 31, 2023. During the first three months of 2024, the Bank increased its borrowings from the Federal Reserve Bank of Atlanta through the BTFP. At June 30, 2024, the Bank had one $20.0 million BTFP advance outstanding with a contractual interest rate of 4.76% and a maturity date of January 15, 2025.
Previous wording
Other borrowings outstanding consisted of FHLB advances totaling $9.4 million at March 31, 2024 and December 31, 2023. Deferred prepayment penalties on our FHLB advances totaled $577,000 and $622,000 at March 31, 2024 and December 31, 2023, respectively.
Current wording
Other borrowings outstanding consisted of FHLB advances totaling $10.3 million at June 30, 2024 and $9.4 million at December 31, 2023. Deferred prepayment penalties on our FHLB advances totaled $532,000 and $622,000 at June 30, 2024 and December 31, 2023, respectively.
Previous wording
Shareholders’ Equity. Shareholders’ equity totaled $81.4 million, or 28.8% of total assets, at March 31, 2024, down $3.3 million, or 3.9%, from $84.7 million, or 31.2% of total assets, at December 31, 2023. During the first three months of 2024, shareholders’ equity decreased by $2.5 million due to the Company’s repurchases of its common stock.
Current wording
Shareholders’ Equity. Shareholders’ equity totaled $81.0 million, or 27.4% of total assets, at June 30, 2024, down $3.5 million, or 4.2%, from $84.6 million, or 31.2% of total assets, at December 31, 2023. During the six months ended June 30, 2024, shareholders’ equity decreased by $3.4 million due to the Company’s repurchases of its common stock. The Company’s net loss of $4.2 million for the six months ended June 30, 2024 was partially offset by other comprehensive income of $3.6 million, which was the result of the change in unrealized losses on available-for-sale investment securities during the first six months of 2024.
Previous wording
The Company repurchased 202,997 shares of its common stock at an average cost per share of $12.12 during the three months ended March 31, 2024 under its November 2023 Repurchase Plan. At March 31, 2024, the Company had common shares outstanding of 4,558,329 and 25,329 of those shares were available for repurchase under the November 2023 Repurchase Plan. The Company completed the November 2023 Repurchase Plan in April 2024.
Current wording
The Company repurchased 282,799 shares of its common stock at an average cost per share of $12.05 during the six months ended June 30, 2024. Under the May 2024 Repurchase Plan, 172,527 shares of the Company’s common stock were available for repurchase at June 30, 2024. Since the announcement of our first share repurchase plan on January 26, 2023 and through June 30, 2024, the Company has repurchased a total of 811,473 shares of its common stock, or approximately 15% of the common shares originally issued, at an average cost per share of $11.98.
Previous wording
The average loan yield was 6.17% for the three months ended March 31, 2024, up from 4.94% for the same period in 2023. Average loans were $144.4 million for the three months ended March 31, 2024, up $10.6 million, or 8.0%, compared to the same period in 2023. At March 31, 2024, approximately 52% of our total loans have adjustable rates and approximately 49% of total loans are scheduled to re-price or mature during the next 12 months.
Current wording
The average loan yield was 6.38% for the three months ended June 30, 2024, up from 5.09% for the same period in 2023. Average loans were $150.3 million for the three months ended June 30, 2024, up $16.9 million, or 12.6%, compared to the same period in 2023. At June 30, 2024, approximately 50% of our total loans have adjustable rates and approximately 47% of total loans are scheduled to re-price or mature during the next 12 months.
Previous wording
The decrease in interest income on investment securities was primarily due to the decrease in the average balance of total investment securities due to the sales executed during the three months ended March 31, 2024. The average rate earned on our investment securities portfolio was 1.72% for the three months ended March 31, 2024, up six basis points compared to the same period 2023.
Current wording
The decrease in interest income on investment securities was primarily due to the decrease in the average balance of total investment securities due to the sales executed during the three months ended March 31, 2024. The average rate earned on our investment securities portfolio was 1.91% for the three months ended June 30, 2024, up 26 basis points compared to the same period 2023 primarily due to investment securities purchased during the three months ended June 30, 2024.
Previous wording
Interest income on other interest-earning assets, consisting primarily of interest-earning cash and deposits at other financial institutions, increased mainly due to the re-investment of proceeds from investment securities sales.
Current wording
Interest income on other interest-earning assets, consisting primarily of interest-earning cash and deposits at other financial institutions, increased mainly due to the re-investment of proceeds from investment securities sales executed during the first three months of 2024.
Previous wording
Interest Expense. Total interest expense increased $746,000, or 247.8%, to $1.0 million for the three months ended March 31, 2024, compared to $301,000 for the same period in 2023. Interest expense on deposits was $754,000 during the three months ended March 31, 2024, up $521,000, or 223.6%, compared to the same period in 2023. The average rate paid on interest-bearing deposits was 2.07% during the three months ended March 31, 2024, up 141 basis points compared to the same period in 2023. Interest expense on borrowings increased by $225,000 during the three months ended March 31, 2024 compared to the same period in 2023 due to interest expense on BTFP advances.
Current wording
Interest Expense. Total interest expense increased $629,000, or 140.4%, to $1.1 million for the three months ended June 30, 2024, compared to $448,000 for the same period in 2023. Interest expense on deposits was $771,000 during the three months ended June 30, 2024, up $391,000, or 102.9%, compared to the same period in 2023. The average rate paid on interest-bearing deposits was 2.16% during the three months ended June 30, 2024, up 103 basis points compared to the same period in 2023. Interest expense on borrowings increased by $238,000 during the three months ended June 30, 2024 compared to the same period in 2023 mainly due to interest expense on BTFP advances.
Previous wording
Net Interest Income. Net interest income was $2.1 million for the three months ended March 31, 2024, up $142,000, or 7.2%, compared to 2023. Our interest rate spread was 2.29% and 2.77% for the three months ended March 31, 2024 and 2023, respectively. Our net interest margin was 3.15% and 3.10% for the three months ended March 31, 2024 and 2023, respectively. The increase in net interest margin and net interest income over the comparable periods was primarily the result of increased yields on our interest-earning assets, partially offset by the rising cost of interest-bearing liabilities.
Current wording
Net Interest Income. Net interest income was $2.4 million for the three months ended June 30, 2024, up $574,000, or 30.6%, compared to 2023. Our interest rate spread was 2.85% and 2.44% for the three months ended June 30, 2024 and 2023, respectively. Our net interest margin was 3.72% and 2.97% for the three months ended June 30, 2024 and 2023, respectively. The increase in net interest margin and net interest income over the comparable periods was primarily the result of increased yields on our interest-earning assets, partially offset by the rising cost of interest-bearing liabilities.
Previous wording
Provision for Credit Losses. The total provision for credit losses on loans and unfunded commitments was $95,000 for the three months ended March 31, 2024, compared to no provision for the same period in 2023. In 2024, the provision for credit losses was largely attributable togrowth in total construction loan commitments.
Current wording
Provision for Credit Losses. The total provision for credit losses on loans and unfunded commitments was $99,000 for the three months ended June 30, 2024, compared to no provision for the same period in 2023. In 2024, the provision for credit losses was largely attributable to commercial loan growth and an increase in the allowance for credit losses on individually evaluated residential loans.
Previous wording
General. For the three months ended March 31, 2024, the Company reported a net loss of $4.7 million, compared to net income of $73,000 for the three months ended March 31, 2023. Net interest income was up $142,000, or 7.2%, for the three months ended March 31, 2024, compared to the same period in 2023. The provision for credit losses totaled $95,000 for the three months ended March 31, 2024, compared to no provision for the same period in 2023. Non-interest income was down $5.5 million for the three months ended March 31, 2024, compared to the same period in 2023, primarily due to losses on the sales of investment securities. Total non-interest expense for the three months ended March 31, 2024 was up $606,000, or 27.7%, from the same period in 2023 primarily due to expenses related to the Company’s upgrade to a new core processing system.
Current wording
General. For the six months ended June 30, 2024, the Company reported a net loss of $4.2 million, compared to net income of $68,000 for the six months ended June 30, 2023. Net interest income was up $728,000, or 19.1%, for the six months ended June 30, 2024, compared to the same period in 2023. The provision for credit losses totaled $194,000 for the six months ended June 30, 2024, compared to no provision for the same period in 2023. Non-interest income was down $5.4 million for the six months ended June 30, 2024, compared to the same period in 2023, primarily due to losses on the sales of investment securities. Non-interest expense for the six months ended June 30, 2024 was up $483,000, or 11.0%, compared to the same period in 2023, primarily due to expenses associated with the Company’s upgrade to a new core processing system.
Previous wording
Interest Income. Total interest income increased $888,000, or 39.2%, to $3.2 million for the three months ended March 31, 2024, compared to the same period in 2023. Interest income on loans and other interest-earning assets were up $585,000 and $405,000, respectively. These increases were partially offset by a decrease in interest income on investment securities of $102,000.
Current wording
Interest Income. Total interest income increased $2.1 million, or 45.6%, to $6.7 million for the six months ended June 30, 2024, compared to the same period in 2023. Interest income on loans and other interest-earning assets were up $1.3 million and $1.1 million, respectively. These increases were partially offset by a decrease in interest income on investment securities of $305,000.
Previous wording
Non-interest Income*.*Non-interest income for the three months ended March 31, 2024 was down $5.5 million compared to $294,000 for the same period in 2023. Non-interest income for 2024 includes the $5.5 million loss on the sales of investment securities discussed previously.
Current wording
Non-interest Income*.*Non-interest income for the six months ended June 30, 2024 was down $5.4 million compared to $611,000 for the same period in 2023. Non-interest income for 2024 includes the $5.5 million loss on the sales of investment securities discussed previously.
Previous wording
Non-interest Expense. Non-interest expense totaled $2.8 million for the three months ended March 31, 2024, up $606,000, or 27.7%, compared to the three months ended March 31, 2023. During the three months ended March 31, 2024, the Company upgraded to a new core processing system and incurred $560,000 of data conversion and other associated expenses. Most of these costs are included in data processing and communication expense, which was up $567,000 for the three months ended March 31, 2024 compared to the same period in 2023. The Company estimates annual savings of greater than $200,000 due to the upgrade to our new core processing system.
Current wording
Non-interest Expense. Non-interest expense totaled $4.9 million for the six months ended June 30, 2024, up $483,000, or 11.0%, compared to the same period in 2023. Non-interest expense for the six months ended June 30, 2024 includes $539,000 of data conversion and other associated expenses related to the Company’s upgrade to a new core processing system, which occurred during the first three months of 2024. Most of these costs are included in data processing and communication expense and are not expected to reoccur in future periods. Data processing and communication expense was up $480,000, or 107.4%, for the six months ended June 30, 2024 compared to the same period in 2023.
Previous wording
Income Tax Expense. The Company reported an income tax benefit of $1.3 million for the three months ended March 31, 2024 compared to income tax expense of $2,000 for the three months ended March 31, 2023. The change in income taxes over the comparable prior period was largely due the loss on sales of investment securities in 2024.
Current wording
Income Tax Expense. The Company reported an income tax benefit of $1.1 million and $20,000 for the six months ended June 30, 2024 and 2023, respectively. The change in income taxes over the comparable prior period was largely due to the loss on sales of investment securities in 2024.
Previous wording
Liquidity describes our ability to meet the financial obligations that arise in the ordinary course of business. Liquidity is primarily needed to meet the borrowing and deposit withdrawal requirements of our customers and to fund current and planned expenditures. Our primary sources of funds are deposits, principal and interest payments on loans and securities, and proceeds from maturities of securities. We also have the ability to borrow from the FHLB, Federal Reserve Bank of Atlanta, and our primary correspondent bank.
Current wording
Liquidity describes our ability to meet the financial obligations that arise in the ordinary course of business. Liquidity is primarily needed to meet the borrowing and deposit withdrawal requirements of our customers and to fund current and planned expenditures. Our primary sources of funds are deposits, principal and interest payments on loans and securities, and proceeds from maturities or sales of securities. We also have the ability to borrow from the FHLB, Federal Reserve Bank of Atlanta, and our primary correspondent bank.
Previous wording
At March 31, 2024, our borrowed funds consisted of a $20 million BTFP advance and FHLB advances with a carrying value of $9.4 million. The table below summarizes our unused and available liquidity sources as of March 31, 2024.
Current wording
At June 30, 2024, our borrowed funds consisted of a $20 million BTFP advance and FHLB advances with a total net carrying value of $10.3 million. The table below summarizes our unused and available liquidity sources as of June 30, 2024.
Previous wording
The Company also has a $40.0 million custodial letter of credit outstanding from the FHLB as of March 31, 2024, which is included in the calculation of our available capacity with the FHLB. The Company can allocate portions of this letter of credit to collateralize certain deposit balances in excess of the FDIC’s insurance limit as an alternative to pledging investment securities for the same purpose. During the three months ended March 31, 2024, the Company used $34.0 million of this letter of credit to collateralize public fund deposits as we executed the investment securities sales discussed previously.
Current wording
The Company also has a $40.0 million custodial letter of credit outstanding from the FHLB as of June 30, 2024, which is included in the calculation of our available capacity with the FHLB indicated above. The Company can allocate portions of this letter of credit to collateralize certain deposit balances in excess of the FDIC’s insurance limit as an alternative to pledging investment securities for the same purpose. During the three months ended March 31, 2024, the Company used $34.0 million of this letter of credit to collateralize public fund deposits as we executed the investment securities sales discussed previously. The usage of the letter of credit was unchanged as of June 30, 2024.
Previous wording
Our cash flows are comprised of three primary classifications: cash flows from operating activities, investing activities, and financing activities. The most significant uses and sources of cash flows during the three months ended March 31, 2024 included: $44.1 million in proceeds from maturities, paydowns, and sales of investment securities, $10.0 million in proceeds from BTFP advances, $4.0 million of inflows from growth in total deposits and $2.5 million in outflows for the repurchase of the Company’s common stock.
Current wording
Our cash flows are comprised of three primary classifications: cash flows from operating activities, investing activities, and financing activities. The most significant uses and sources of cash flows during the six months ended June 30, 2024 included:
Rearranged current paragraphs (7)
Current report — wording carried from elsewhere
Interest Income. Total interest income increased $1.2 million, or 51.8%, to $3.5 million for the three months ended June 30, 2024, compared to the same period in 2023. Interest income on loans and other interest-earning assets were up $692,000 and $714,000, respectively, for the three months ended June 30, 2024, compared to the same period in 2023. These increases were partially offset by a decrease in interest income on investment securities of $203,000 for the three months ended June 30, 2024, compared to the same period in 2023.
Current report — wording carried from elsewhere
Income Tax Expense. The Company reported an income tax expense of $120,000 for the three months ended June 30, 2024 compared to an income tax benefit of $16,000 for the three months ended June 30, 2023. The change in income taxes over the comparable prior period was largely due to the change in taxable earnings over the comparable periods.
Current report — wording carried from elsewhere
Comparison of Results of Operations for the Six Months Ended June 30, 2024 and 2023.
Current report — wording carried from elsewhere
The decrease in interest income on investment securities was primarily due to the decrease in the average balance of total investment securities due to the sales executed during the three months ended March 31, 2024. The average rate earned on our investment securities
Current report — wording carried from elsewhere
Interest income on other interest-earning assets, consisting primarily of interest-earning cash and deposits at other financial institutions, increased mainly due to the re-investment of proceeds from investment securities sales executed during the first three months of 2024.
Current report — wording carried from elsewhere
Net Interest Income. Net interest income was $4.5 million for the six months ended June 30, 2024, up $728,000, or 19.1%, compared to 2023. Our interest rate spread was 2.55% and 2.57% for the six months ended June 30, 2024 and 2023, respectively. Our net interest margin was 3.42% and 3.01% for the six months ended June 30, 2024 and 2023, respectively. The increase in net interest margin and net interest income over the comparable periods was primarily the result of increased yields on our interest-earning assets, partially offset by the rising cost of interest-bearing liabilities.
Current report — wording carried from elsewhere
Provision for Credit Losses. The total provision for credit losses on loans and unfunded commitments was $194,000 for the six months ended June 30, 2024, compared to no provision for the same period in 2023. In 2024, the provision for credit losses was largely attributable to commercial loan growth and an increase in the allowance for credit losses on individually evaluated residential loans.