John Marshall Bancorp Inc

Previous wording

This discussion and analysis contains financial information determined by methods other than in accordance with GAAP. Management believes that the supplemental non-GAAP information provides a better comparison of period-to-period operating performance. Additionally, the Company believes this information is utilized by regulators and market analysts to evaluate a company’s financial condition and therefore, such information is useful to investors. Non-GAAP measures used in this report consist of tax-equivalent net interest income and tax-equivalent net interest margin.

Current wording

This discussion and analysis contains financial information determined by methods other than in accordance with GAAP. Management believes that the supplemental non-GAAP information provides a better comparison of period-to-period operating performance. Additionally, the Company believes this information is utilized by regulators and market analysts to evaluate a company’s financial condition and therefore, such information is useful to investors. Non-GAAP measures used in this report consist of core net income, core non-interest income, core return on average assets (annualized), core return on average equity (annualized), core dilutive earnings per share, tax-equivalent net interest income and tax-equivalent net interest margin.

Previous wording

As of June 30, 2024, the Company had total consolidated assets of $2.27 billion, total loans net of unearned income of $1.83 billion, total deposits of $1.91 billion and total shareholders’ equity of $235.3 million.

Current wording

As of September 30, 2024, the Company had total consolidated assets of $2.27 billion, total loans net of unearned income of $1.82 billion, total deposits of $1.94 billion and total shareholders’ equity of $243.1 million.

Previous wording

The following table contains selected historical consolidated financial data as of the dates and for the periods shown. The selected balance sheet data as of June 30, 2024 and June 30, 2023 and the selected income statement data for the three and six months ended June 30, 2024 and June 30, 2023 have been derived from our consolidated financial statements.

Current wording

The following table contains selected historical consolidated financial data as of the dates and for the periods shown. The selected balance sheet data as of September 30, 2024 and September 30, 2023 and the selected income statement data for the three and nine months ended September 30, 2024 and September 30, 2023 have been derived from our consolidated financial statements.

Previous wording

Net interest income for the six months ended June 30, 2024 decreased $2.7 million or 10.0% compared to the same period of 2023, driven primarily by the increase in costs of interest-bearing liabilities outpacing the increase in yield on interest-earning assets.

Current wording

Net interest income for the nine months ended September 30, 2024 decreased $1.5 million or 3.8% compared to the same period of 2023, driven primarily by the increase in costs of interest-bearing liabilities outpacing the increase in yield on interest-earning assets.

Previous wording

The Company recorded a $1.1 million recovery of credit losses for the six months ended June 30, 2024 compared to a $1.6 million recovery of credit losses for the six month ended June 30, 2023. Additional discussion of the provision for credit losses is included below under the headingProvision for Credit Losses.

Current wording

The Company recorded a $0.7 million recovery of credit losses for the nine months ended September 30, 2024 compared to a $2.5 million recovery of credit losses for the nine month ended September 30, 2023. Additional discussion of the provision for credit losses is included below under the headingProvision for Credit Losses.

Previous wording

Non-interest expense increased $232 thousand or 1.5% during the six months ended June 30, 2024 compared to the same period in 2023. The increase was primarily due to non-recurring professional fees and directors costs totaling $138 thousand incurred during the first quarter of 2024 in connection with a strategic opportunity that was explored during the three months ended March 31, 2024 that ultimately did not materialize. The remaining $93 thousand increase was due to increases in data processing expense and professional fees primarily related to increased contract costs due to annual increases and increased volume based charges. These increases were partially offset by a decrease in salaries and employee benefits expense due to changes in staffing and a reduction in incentive compensation accruals when compared to the same period of the prior year. Incentive compensation accruals can fluctuate materially from quarter to quarter, based upon the Company’s financial performance and conditions measured against, among other evaluation criteria, our strategic plan and budget. At the end of each year, the ultimate determination of the incentive compensation is approved by the Board of Directors.

Current wording

Non-interest expense increased $602 thousand or 2.6% during the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. The increase was primarily due to a $322 thousand non-recurring reversal of a litigation reserve during the third quarter of 2023 and previously disclosed non-recurring expenses totaling $138 thousand incurred during the first quarter of 2024. The first quarter 2024 non-recurring expenses were incurred in connection with a strategic opportunity that was explored and ultimately did not materialize. Excluding the effects of the $322 thousand reversal in 2023 and non-recurring expenses totaling $138 thousand incurred during 2024, non-interest expense increased $142 thousand or 0.6% during the adjusted nine months ended September 30, 2024 when compared to adjusted nine months ended September 30, 2023. The increase was primarily due to increases in professional fees and data processing expense, partially offset by lower salaries and employee benefit expense. The increase in professional fees was due to increased contract costs and services. The increase in data processing fees was primarily due to contractual increases and volume based activity. The decrease in salaries and employee benefits was due to lower incentive accruals and higher direct loan origination costs when compared to the same period of the prior year, partially offset by higher deferred compensation expense as result of mark-to-market fluctuations on the Company’s nonqualified deferred compensation plan (“NQDC”).

Previous wording

The ROAA for the three months ended June 30, 2024 and June 30, 2023 was 0.70% and 0.77%, respectively. The ROAE for the three

Current wording

The ROAA for the nine months ended September 30, 2024 and September 30, 2023 was 0.73% and 0.04%, respectively. Core ROAA (Non-GAAP), defined as average assets divided by the annualized core net income (Non-GAAP) by the average assets, for the nine months ended September 30, 2023 was 0.87%. The ROAE for the nine months ended September 30, 2024 and September 30, 2023 was 6.97% and 0.40%, respectively. Core ROAE (Non-GAAP), defined as average equity divided by the annualized net income by the average equity, for the nine months ended September 30, 2023 was 9.25%.

Previous wording

The following table presents the average balance for each principal balance sheet category, and the amount of interest income or expense associated with that category, as well as corresponding average yields earned and rates paid for the six months ended June 30, 2024 and June 30, 2023.

Current wording

The following table presents the average balance for each principal balance sheet category, and the amount of interest income or expense associated with that category, as well as corresponding average yields earned and rates paid for the nine months ended September 30, 2024 and September 30, 2023.

Previous wording

Tax-equivalent net interest margin as presented above is calculated by dividing tax-equivalent net interest income by total average earning assets. Net interest income, on a tax-equivalent basis, is a financial measure that the Company believes provides a more accurate picture of the interest margin for comparative purposes. Tax-equivalent net interest income is calculated by adding the tax benefit on certain securities and loans, whose interest is tax-exempt, to total interest income then subtracting total interest expense. The following table, “Tax-Equivalent Net Interest Income,” reconciles net interest income to tax-equivalent net interest income, which is a non-GAAP measure.

Current wording

Tax-equivalent net interest margin as presented above is calculated by dividing tax-equivalent net interest income by total average earning assets. Net interest income, on a tax-equivalent basis, is a financial measure that the Company believes provides a more accurate picture of the interest margin for comparative purposes. Tax-equivalent net interest income is calculated by adding the tax benefit on

Previous wording

Net interest income decreased $2.7 million or 10.0% on a fully tax-equivalent basis for the six months ended June 30, 2024, compared to the six months ended June 30, 2023. The decrease in net interest income was driven by the increase in the costs of interest-bearing liabilities outpacing the increase in yield on interest-earning assets.

Current wording

Net interest income decreased $1.5 million or 4.0% on a fully tax-equivalent basis for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023. The decrease in net interest income was driven by the increase in the costs of interest-bearing liabilities outpacing the increase in yield on interest-earning assets.

Previous wording

On a fully tax-equivalent basis, the net interest margin was 2.15% for the six months ended June 30, 2024, compared to 2.33% for the six months ended June 30, 2023. The decrease in net interest margin was primarily due to an increase in the cost of interest-bearing liabilities, which more than offset the increase in yields on loans, investments, and interest-bearing deposits in other banks. The cost of interest-bearing liabilities was 3.81% for the six months ended June 30, 2024 compared to 2.63% for the six months ended June 30, 2023. The increase in the cost of interest-bearing liabilities was primarily due to a 117 basis points increase in the cost of interest-bearing deposits resulting from the repricing of the Company’s time deposits coupled with an increase in rates offered on money market, NOW and savings deposit accounts since the second quarter of 2023. The increase in the overall cost of interest-bearing liabilities in the first half of 2024 relative to the same period of the prior year is largely due to Federal Reserve Bank rate increases totaling 5.25% between March 2022 and July 2023.

Current wording

On a fully tax-equivalent basis, the net interest margin was 2.20% for the nine months ended September 30, 2024, compared to 2.24% for the nine months ended September 30, 2023. The decrease in net interest margin was primarily due to an increase in the cost of interest-bearing liabilities, which more than offset the increase in yields on loans, investments, and interest-bearing deposits in other banks. The cost of interest-bearing liabilities was 3.83% for the nine months ended September 30, 2024 compared to 2.89% for the nine months ended September 30, 2023. The increase in the cost of interest-bearing liabilities was primarily due to a 94 basis points increase in the cost of interest-bearing deposits resulting from the repricing of the Company’s time deposits coupled with an increase in rates offered on money market, NOW and savings deposit accounts since the third quarter of 2023. The increase in the overall cost of interest-bearing liabilities during the first three quarters of 2024 relative to the same period of the prior year is largely due to Federal Reserve Bank rate increases totaling 5.25% between March 2022 and July 2023.

Previous wording

The loan portfolio’s yield for the three months ended June 30, 2024 was 5.20% compared to 4.78% for the three months ended June 30, 2023. The increase of 42 basis points was primarily attributable to an increase in yield on the Company’s variable rate loans as a result of an increase in interest rates subsequent to June 30, 2023 coupled with a higher weighted average yield on loans originated since the second quarter of 2023.

Current wording

The loan portfolio’s yield for the nine months ended September 30, 2024 was 5.24% compared to 4.78% for the nine months ended September 30, 2023. The increase of 46 basis points was primarily attributable to an increase in yield on the Company’s variable rate loans as a result of an increase in interest rates subsequent to September 30, 2023 coupled with a higher weighted average yield on loans originated since the third quarter of 2023.

Previous wording

The yield on interest-bearing deposits due from banks for the six months ended June 30, 2024 was 5.53% compared to 4.96% for the six months ended June 30, 2023. The increase of 57 basis points was primarily due to a higher federal funds rate during the six months ended June 30, 2024 when compared to the same period of 2023.

Current wording

The yield on interest-bearing deposits due from banks for the nine months ended September 30, 2024 was 5.50% compared to 5.23% for the nine months ended September 30, 2023. The increase of 27 basis points was primarily due to a higher federal funds rate during the nine months ended September 30, 2024 when compared to the same period of 2023.

Previous wording

Interest income increased by $5.8 million or 12.0% to $53.8 million on a fully tax-equivalent basis for the six months ended June 30, 2024 compared to $48.0 million for the six months ended June 30, 2023, driven by both an increase in rates and volume on interest-earning assets. The increase in rate on interest-earning assets was primarily attributable to the Company’s loan portfolio. The increase in volume of average interest-earning assets was primarily attributable to interest-bearing deposits due from banks and the Company’s loan portfolio.

Current wording

Interest income increased by $7.9 million or 10.6% to $82.3 million on a fully tax-equivalent basis for the nine months ended September 30, 2024 compared to $74.4 million for the nine months ended September 30, 2023, driven by both an increase in rates and volume on interest-earning assets. The increase in rate on interest-earning assets was primarily attributable to the Company’s loan portfolio. The increase in volume of average interest-earning assets was primarily attributable to interest-bearing deposits due from banks and the Company’s loan portfolio.

Previous wording

Fully tax-equivalent interest income on loans increased by approximately $5.5 million as a result of an increase in rate and volume. Average loans increased $53.0 million between the six months ended June 30, 2024 and June 30, 2023, which was primarily attributable to origination volume in the investor real estate and residential loan portfolios subsequent to June 30, 2023.

Current wording

Fully tax-equivalent interest income on loans increased by approximately $7.9 million as a result of an increase in rate and volume. Average loans increased $44.5 million between the nine months ended September 30, 2024 and September 30, 2023, which was primarily attributable to origination volume in the investor real estate and residential loan portfolios subsequent to September 30, 2023. That was partially offset by loan payoffs in commercial owner-occupied real estate loans subsequent to September 30, 2023.

Previous wording

Fully tax-equivalent interest income on investment securities decreased by approximately $2.0 million primarily as a result of a decrease in volume. Average investment securities decreased approximately $189.1 million between the six months ended June 30, 2024 and June 30, 2023, primarily due to the sale of certain low-yielding investment securities in July 2023, and to a lesser extent, the amortization of securities.

Current wording

Fully tax-equivalent interest income on investment securities decreased by approximately $2.3 million primarily as a result of a decrease in volume. Average investment securities decreased approximately $145.7 million between the nine months ended September 30, 2024 and September 30, 2023, primarily due to the sale of certain low-yielding investment securities in July 2023, and to a lesser extent, the amortization of securities.

Previous wording

Interest income on interest-bearing deposits in other banks increased by $2.2 million as a result of an increase in volume. Average interest-bearing deposits in other banks increased approximately $70.9 million between the six months ended June 30, 2024 and June 30, 2023, primarily due to the redeployment of proceeds from the sale of certain low-yielding investment securities in July 2023 to other higher-yielding assets, including interest-bearing deposits in other banks.

Current wording

Interest income on interest-bearing deposits in other banks increased by $2.3 million as a result of an increase in volume. Average interest-bearing deposits in other banks increased approximately $50.0 million between the nine months ended September 30, 2024 and September 30, 2023, primarily due to the redeployment of proceeds from the sale of certain low-yielding investment securities in July 2023 to other higher-yielding assets, including interest-bearing deposits in other banks.

Previous wording

Interest expense increased by $8.5 million to $29.9 million for the six months ended June 30, 2024 compared to $21.4 million for the six months ended June 30, 2023, primarily due to an increase in rates on deposits and increase in volume on borrowings. The increase in rates on deposits was primarily a result of the repricing of the Company’s time deposits coupled with an increase in rates offered on deposit accounts subsequent to June 30, 2023 as a result of an increase in benchmark interest rates. The increase in volume on borrowings was primarily a result of the Company’s utilization of BTFP advances.

Current wording

Interest expense increased by $9.4 million to $45.2 million for the nine months ended September 30, 2024 compared to $35.7 million for the nine months ended September 30, 2023, primarily due to an increase in rates on deposits and increase in volume on borrowings. The increase in rates on deposits was primarily a result of the repricing of the Company’s time deposits coupled with an increase in rates offered on deposit accounts subsequent to September 30, 2023 as a result of an increase in benchmark interest rates. The increase in volume on borrowings was primarily a result of the Company’s utilization of BTFP advances.

Previous wording

The Company recorded a $1.1 million recovery of provision for credit losses for the six months ended June 30, 2024 compared to a $1.6 million recovery of provision for credit losses for the six months ended June 30, 2023. The recovery of provision for credit losses for the current period that is directly attributable to the funded loan portfolio was $1.1 million.

Current wording

The Company recorded a $0.7 million recovery of provision for credit losses for the nine months ended September 30, 2024 compared to a $2.5 million recovery of provision for credit losses for the nine months ended September 30, 2023. The recovery of and provision for credit losses for the current period that is directly attributable to the funded and unfunded loan portfolio was $(1.1) million and $0.4 million, respectively.

Previous wording

The recovery of provision for credit losses during the three months ended June 30, 2024 was primarily a result of changes in the composition of the loan portfolio, improved economic forecasts used in the quantitative portion of the model and an assessment of management’s considerations of qualitative factors combined with the continued strong credit performance of our loan portfolio segments. See “Asset Quality” below for additional information on the credit quality of the loan portfolio.

Current wording

The recovery of provision for credit losses during the nine months ended September 30, 2024 was primarily a result of changes in the Company’s loss driver analysis, resulting from a periodic review of our assumptions. The review resulted in a higher modeled probability of default, changes in prepayment and curtailment rates, and an assessment of management’s considerations of existing economic versus historical conditions combined with the continued strong credit performance of our loan portfolio segments. See “Asset Quality” below for additional information on the credit quality of the loan portfolio.

Previous wording

The following table summarizes non-interest expense for the six months ended June 30, 2024 and June 30, 2023.

Current wording

The following table summarizes non-interest expense for the nine months ended September 30, 2024 and September 30, 2023.

Previous wording

Non-interest expense increased $232 thousand or 1.5% for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. The increase in non-interest expense was primarily due to non-recurring expenses totaling $138 thousand incurred during the first quarter of 2024 in connection with a strategic opportunity that was explored and ultimately did not materialize. The remaining $93 thousand increase was due to increases in data processing expense and professional fees, partially offset by lower salaries and employee benefit expense. The decrease in salaries and employee benefits was due to lower deferred compensation expense, lower incentive accruals, and higher direct loan origination costs when compared to the same period of the prior year. Salaries and employee benefit expense is reduced to account for the portion of salary costs incurred to originate a loan and are subsequently amortized into income to match the costs incurred with the economic benefit derived from originating a loan.

Current wording

Non-interest expense increased $602 thousand or 2.6% during the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. The increase was primarily due to a $322 thousand non-recurring reversal of a litigation reserve during the third quarter of 2023 and previously disclosed non-recurring expenses totaling $138 thousand incurred during the first quarter of 2024. The first quarter 2024 non-recurring expenses were incurred in connection with a strategic opportunity that was explored and ultimately did not materialize. Excluding the effects of the $322 thousand reversal in 2023 and non-recurring expenses totaling $138 thousand incurred during 2024, non-interest expense increased $142 thousand or 0.6% during the adjusted nine months ended September 30, 2024 when compared to adjusted nine months ended September 30, 2023. The increase was primarily due to increases in professional fees and data processing expense, partially offset by lower salaries and employee benefit expense. The increase in professional fees was due to increased contract costs and services. The increase in data processing fees was primarily due to contractual increases and volume based activity. The decrease in salaries and employee benefits was due to lower incentive accruals and higher direct loan origination costs when compared to the same period of the prior year, partially offset by higher deferred compensation expense as result of mark-to-market fluctuations on the Company’s NQDC.

Previous wording

Net interest income for the three months ended June 30, 2024 increased $72 thousand or 0.6% compared to the three months ended June 30, 2023, driven primarily by the increase in yield on interest-earning assets outpacing the increase in costs of interest-bearing liabilities coupled with the decrease in overall funding balances.

Current wording

Net interest income for the three months ended September 30, 2024 increased $1.2 million or 9.8% compared to the three months ended September 30, 2023, driven primarily by the increase in yield on interest-earning assets outpacing the increase in costs of interest-bearing liabilities coupled with the decrease in overall funding balances.

Previous wording

The Company recorded a $292 thousand recovery of provision for credit losses for the three months ended June 30, 2024 compared to a recovery of provision for credit losses of $868 thousand for the three months ended June 30, 2023. Additional discussion of the provision for credit losses is included below under the headingProvision for Credit Losses.

Current wording

The Company recorded a $400 thousand provision for credit losses for the three months ended September 30, 2024 compared to a recovery of provision for credit losses of $829 thousand for the three months ended September 30, 2023. Additional discussion of the provision for credit losses is included below under the headingProvision for Credit Losses.

Previous wording

Non-interest income decreased $130 thousand during the three months ended June 30, 2024 compared to the three months ended June 30, 2023. A portion of this decrease was due to a decrease in BOLI income of $101 thousand due to the surrender of all BOLI policies in July 2023 and a decrease of $48 thousand due to unfavorable variances associated with mark-to-market adjustments on investments related to the Company’s NQDC when compared to the second quarter of 2023. Excluding the effects from the Company’s BOLI policy surrender and mark-to market adjustments on the Company’s NQDC, non-interest income was $520 thousand for the second quarter of 2024 compared to $501 thousand for the second quarter of 2023. During the three months ended June 30, 2024, gains recorded on the sale of the guaranteed portion of SBA 7(a) loans increased $193 thousand due to increased sale activity. This increase in non-interest income was partially offset by lower service charges and fees of $149 thousand due to lower penalty fee income recognized on the early withdrawal of certificates of deposit.

Current wording

Non-interest income was $617 thousand for the third quarter of 2024 compared to a loss of $16.8 million for the third quarter of 2023. Core non-interest income (Non-GAAP), defined as reported non-interest income excluding the $17.1 million loss stemming from the bond sale portion of the Restructuring, was $299 thousand for the third quarter 2023. The increase in non-interest income compared to core non-interest income (Non-GAAP) of $318 thousand was primarily attributable to an increase of $199 thousand due to favorable mark-to-market adjustments on investments related to the Company’s NQDC and a $133 thousand increase in gains recorded on the sale of the guaranteed portion of SBA 7(a) loans due to increased sale activity. These increases were partially offset by a decrease in BOLI income of $23 thousand due to the surrender of all BOLI policies in July 2023.

Previous wording

Non-interest expense increased $78 thousand or 1.0% during the three months ended June 30, 2024 compared to the three months ended June 30, 2023. The increase was primarily due to increases in data processing expense and professional fees, partially offset by lower FDIC insurance expense and lower salaries and employee benefit expense. The increase in data processing fees was primarily due to contractual increases and volume based activity. The increase in professional fees was due to increased contract costs. The decrease in salaries and employee benefits was due to lower deferred compensation expense, lower incentive accruals, and higher direct loan origination costs when compared to the same period of the prior year. Salaries and employee benefit expense is reduced to account for the portion of salary costs incurred to originate a loan and are subsequently amortized into income to match the costs incurred with the economic benefit derived from originating a loan. The decrease in FDIC insurance expense was the result of a lower assessment base. The Company continues to analyze cost savings opportunities on existing leases and material contracts.

Current wording

Non-interest expense increased $371 thousand or 4.8% during the three months ended September 30, 2024 compared to the three months ended September 30, 2023 primarily due to a $322 thousand non-recurring reversal of a litigation reserve during the third quarter of 2023. Excluding the effects of the $322 thousand reversal in 2023, non-interest expense increased $49 thousand or 0.6% during the third quarter of 2024 when compared to adjusted third quarter of 2023. The increase was primarily due to increases in professional fees and data processing expense, partially offset by lower salaries and employee benefit expense. The increase in professional fees was due to increased contract costs and services. The increase in data processing fees was primarily due to contractual increases and volume based activity. The decrease in salaries and employee benefits was due to lower incentive accruals and higher direct loan origination costs when compared to the same period of the prior year, partially offset by higher deferred compensation expense as result of mark-to-market fluctuations on the Company’s NQDC. The Company continues to analyze cost savings opportunities on existing leases and material contracts.

Previous wording

Net interest income increased $72 thousand or 0.6% on a fully tax-equivalent basis for the three months ended June 30, 2024, compared to the three months ended June 30, 2023, driven primarily by the increase in yield on and volume of interest-earning assets outpacing the increase in costs of interest-bearing liabilities coupled with the decrease in overall funding balances..

Current wording

Net interest income increased $1.2 million or 9.8% on a fully tax-equivalent basis for the three months ended September 30, 2024, compared to the three months ended September 30, 2023, driven primarily by the increase in yield on and volume of interest-earning assets outpacing the increase in costs of interest-bearing liabilities coupled with the decrease in overall funding balances.

Previous wording

On a fully tax-equivalent basis, the net interest margin was 2.19% for the three months ended June 30, 2024, compared to 2.10% for the three months ended June 30, 2023. The increase in net interest margin was primarily due to an increase in yields on the Company’s interest-earning assets and reduction in volume of time deposits.

Current wording

On a fully tax-equivalent basis, the net interest margin was 2.30% for the three months ended September 30, 2024, compared to 2.08% for the three months ended September 30, 2023. The increase in net interest margin was primarily due to an increase in yields on the Company’s interest-earning assets and reduction in volume of time deposits.

Previous wording

The loan portfolio’s yield for the six months ended June 30, 2024 was 5.19% compared to 4.73% for the six months ended June 30, 2023. The increase of 46 basis points was primarily attributable to an increase in yield on the Company’s variable rate loans as a result of an increase in interest rates subsequent to June 30, 2023 coupled with a higher weighted average yield on loans originated since the first half of 2023.

Current wording

The loan portfolio’s yield for the three months ended September 30, 2024 was 5.33% compared to 4.87% for the three months ended September 30, 2023. The increase of 46 basis points was primarily attributable to an increase in yield on the Company’s variable rate loans as a result of an elevated interest rates subsequent to September 30, 2023 coupled with a higher weighted average yield on loans originated since the third quarter of 2023.

Previous wording

The yield on interest-bearing deposits due from banks for the three months ended June 30, 2024 was 5.53% compared to 5.15% for the three months ended June 30, 2023. The increase of 38 basis points was primarily due to a higher average balance during the three months ended June 30, 2024 when compared to the same period of 2023.

Current wording

The yield on interest-bearing deposits due from banks for the three months ended September 30, 2024 was 5.46% compared to 5.43% for the three months ended September 30, 2023. The increase of 3 basis points was primarily due to a higher average balance during the three months ended September 30, 2024 when compared to the same period of 2023.

Previous wording

shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The net column represents the sum of the prior columns. For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated to volume.

Current wording

The following table presents the effects of changing rates and volumes on tax-equivalent net interest income for the periods indicated. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The net column represents the sum of the prior columns. For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated to volume.

Previous wording

(2) The Company did not have any loans on nonaccrual as of June 30, 2024 or June 30, 2023.

Current wording

(2) The Company did not have any loans on nonaccrual as of September 30, 2024 or 30, 2023.

Previous wording

Interest income increased by $2.3 million or 9.4% to $26.8 million on a fully tax-equivalent basis for the three months ended June 30, 2024 compared to $24.5 million for the three months ended June 30, 2023, driven by both an increase in rates and volume on interest earning assets. The increase in rates on interest-earning assets was primarily attributable to the Company’s loan portfolio. The increase in volume of average interest-earning assets was primarily attributable to interest-bearing deposits due from banks and the Company’s loan portfolio.

Current wording

Interest income increased by $2.2 million or 8.1% to $28.5 million on a fully tax-equivalent basis for the three months ended September 30, 2024 compared to $26.3 million for the three months ended September 30, 2023, driven by both an increase in rates and volume on interest earning assets. The increase in rates on interest-earning assets was primarily attributable to the Company’s loan portfolio. The increase in volume of average interest-earning assets was primarily attributable to the Company’s loan portfolio and interest-bearing deposits due from banks.

Previous wording

Fully tax-equivalent interest income on loans increased by approximately $2.3 million as a result of volume and an increase in rates. Average loans increased $42.9 million between the three months ended June 30, 2024 and the three months ended June 30, 2023, which was primarily attributable to origination volume in the investor real estate and residential loan portfolios subsequent to June 30, 2023.

Current wording

Fully tax-equivalent interest income on loans increased by approximately $2.4 million as a result of volume and an increase in rates. Average loans increased $27.8 million between the three months ended September 30, 2024 and the three months ended September 30, 2023, which was primarily attributable to origination volume in the investor real estate and residential loan portfolios subsequent to September 30, 2023.

Previous wording

Fully tax-equivalent interest income on investment securities decreased by approximately $941 thousand primarily as a result of a decrease in volume. Average investment securities decreased approximately $185.8 million between the three months ended June 30, 2024 and June 30, 2023 primarily due to the sale of certain low-yielding investment securities in July 2023, and to a lesser extent, the amortization of securities.

Current wording

Fully tax-equivalent interest income on investment securities decreased by approximately $349 thousand primarily as a result of a decrease in volume. Average investment securities decreased approximately $61.1 million between the three months ended September 30, 2024 and September 30, 2023 primarily due to the sale of certain low-yielding investment securities in July 2023, and to a lesser extent, the amortization of securities.

Previous wording

Interest income on interest-bearing deposits in other banks increased by $919 thousand as a result of an increase in volume. Average interest-bearing deposits in other banks increased approximately $60.5 million between the three months ended June 30, 2024 and June 30, 2023. The increase in interest-bearing deposits in other banks was primarily due to the redeployment of proceeds from the sale of certain low-yielding investment securities in July 2023 to other higher-yielding assets, including interest-bearing deposits in other banks. The increase in rates on loans, investment securities, and interest-bearing deposits in other banks was primarily attributable to an increase in benchmark interest rates since June 30, 2023.

Current wording

Interest income on interest-bearing deposits in other banks increased by $132 thousand as a result of an increase in volume. Average interest-bearing deposits in other banks increased approximately $9.1 million between the three months ended September 30, 2024 and September 30, 2023. The increase in interest-bearing deposits in other banks was primarily due to a decrease in investments.

Previous wording

Interest expense increased by $2.3 million to $14.7 million for the three months ended June 30, 2024 compared to $12.4 million for the three months ended June 30, 2023, primarily due to an increase in rates on deposits and increase in volume on borrowings. The increase in rates on deposits was primarily a result of the repricing of the Company’s time deposits coupled with an increase in rates offered on deposit accounts subsequent to June 30, 2023 as a result of an increase in benchmark interest rates. The increase in borrowings was primarily a result of the Company’s BTFP advances.

Current wording

Interest expense increased by $1.0 million to $15.2 million for the three months ended September 30, 2024 compared to $14.2 million for the three months ended September 30, 2023, primarily due to an increase in rates on deposits and increase in volume on borrowings. The increase in rates on deposits was primarily a result of the repricing of the Company’s time deposits coupled with an increase in rates offered on deposit accounts subsequent to September 30, 2023 as a result of an increase in benchmark interest rates. The increase in borrowings was primarily a result of the Company’s FHLB advances.

Previous wording

The Company recorded a $292 thousand recovery of provision for credit losses for the three months ended June 30, 2024 compared to a $868 thousand recovery of provision for credit losses for the three months ended June 30, 2023. The recovery of provision for credit losses for the current period that is directly attributable to the funded loan portfolio was $239 thousand.

Current wording

The Company recorded a $400 thousand provision for credit losses for the three months ended September 30, 2024 compared to a $829 thousand recovery of provision for credit losses for the three months ended September 30, 2023. The provision for credit losses for the current period that is directly attributable to the funded and unfunded loan portfolios was $48 thousand and $352 thousand, respectively.

Previous wording

The recovery of provision for credit losses during the six months ended June 30, 2024 was primarilya result of changes in the composition of the loan portfolio, improved economic forecasts used in the quantitative portion of the model and an assessment of management’s considerations of qualitative factors combined with the continued strong credit performance of our loan portfolio segments. See “Asset Quality” below for additional information on the credit quality of the loan portfolio.

Current wording

The provision for credit losses during the three months ended September 30, 2024 was primarily a result of changes in the Company’s loss driver analysis, resulting from a periodic review of our assumptions. The review resulted in a higher modeled probability of default, changes in prepayment and curtailment rates, and an assessment of management’s considerations of existing economic versus historical conditions combined with the continued strong credit performance of our loan portfolio segments. See “Asset Quality” below for additional information on the credit quality of the loan portfolio.

Previous wording

Non-interest income decreased $130 thousand during the three months ended June 30, 2024 compared to the same period in 2023. A portion of this decrease was due to a decrease in BOLI income of $101 thousand due to the surrender of all BOLI policies in July 2023 and a decrease of $48 thousand due to unfavorable variances associated with mark-to-market adjustments on investments related to the Company’s NQDC. In addition, the Company recorded lower service charges and fees of $149 thousand due to lower penalty fee income recognized on the early withdrawal of certificates of deposit. These decreases were partially offset by a $193 thousand increase in gains recorded on the sale of the guaranteed portion of SBA 7(a) loans due to increased sale activity.

Current wording

Non-interest income was $617 thousand for the third quarter of 2024 compared to a loss of $16.8 million for the third quarter of 2023. Core non-interest income (Non-GAAP) was $299 thousand for the third quarter 2023. The increase in non-interest income compared to core non-interest income (Non-GAAP) of $318 thousand was primarily attributable to an increase of $199 thousand due to favorable mark-to-market adjustments on investments related to the Company’s NQDC and a $133 thousand increase in gains recorded on the sale of the guaranteed portion of SBA 7(a) loans due to increased sale activity. These increases were partially offset by a decrease in BOLI income of $23 thousand due to the surrender of all BOLI policies in July 2023.