Catalyst Bancorp Inc

Previous 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.

Current wording

Management’s Discussion and Analysis of Financial Condition and Results of Operations at September 30, 2024 and for the three and nine months ended September 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 and six months ended June 30, 2024:

Current wording

The following is an overview of financial results for the three and nine months ended September 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 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.

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 September 30, 2024, the Company’s net deferred tax asset totaled $1.4 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 September 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 $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”).

Current wording

Total Assets. Total assets increased $9.7 million, or 3.6%, to $280.6 million at September 30, 2024 from $270.9 million at December 31, 2023. The increase was primarily due to an increase in cash as a result of additional borrowings under the Bank Term Funding Program (“BTFP”).

Previous 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.

Current wording

Allowance for Credit Losses. At September 30, 2024, the allowance for loan losses totaled $2.4 million, or 1.46% of total loans, compared to 1.47% of total loans at December 31, 2023. The allowance for credit losses on unfunded commitments totaled $231,000, down $26,000 from December 31, 2023. The provision for credit losses, inclusive of the provision for unfunded commitments, for the nine months ended September 30, 2024 totaled $531,000 and was largely attributable to commercial loan growth.

Previous 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.

Current wording

Investment Securities*.* Total investment securities were $45.6 million at September 30, 2024, down $38.4 million, or 45.7%, compared to $84.0 million at December 31, 2023. Net unrealized losses on securities available-for-sale totaled $3.4 million at September 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 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.

Current wording

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 six-month period ending September 30, 2024, the Company re-deployed a portion of the sales proceeds by purchasing $7.9 million of fixed-rate government-sponsored mortgage-backed securities.

Previous 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.

Current wording

The ratio of the Company’s total loans to total deposits was 99.1% and 87.5% as of September 30, 2024 and December 31, 2023, respectively.

Previous 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.

Current wording

Total public fund deposits amounted to $21.0 million, or 13% of total deposits, at September 30, 2024, compared to $23.3 million, or 14% of total deposits, at December 31, 2023. At September 30, 2024, approximately 74% 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 $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.

Current wording

Our total uninsured deposits (that is deposits in excess of the FDIC’s insurance limit), inclusive of public funds, were approximately $40.2 million at September 30, 2024 and $44.6 million at December 31, 2023. Total uninsured non-public fund deposits were approximately $23.6 million and $26.3 million at September 30, 2024 and December 31, 2023, respectively. At September 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 $14.4 million or $19.0 million of a custodial letter of credit granted by the Federal Home Loan Bank of Dallas.

Previous 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.

Current wording

Borrowings*.*Total borrowings at September 30, 2024 were $29.5 million, up $10.1 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 September 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 $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.

Current wording

Other borrowings outstanding consisted of FHLB advances totaling $9.5 million at September 30, 2024 and $9.4 million at December 31, 2023. Deferred prepayment penalties on our FHLB advances totaled $487,000 and $622,000 at September 30, 2024 and December 31, 2023, respectively.

Previous 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.

Current wording

Shareholders’ Equity. Shareholders’ equity totaled $81.7 million, or 29.1% of total assets, at September 30, 2024, down $2.9 million, or 3.4%, from $84.6 million, or 31.2% of total assets, at December 31, 2023. During the nine months ended September 30, 2024, shareholders’ equity decreased by $4.3 million due to the Company’s repurchases of its common stock. The Company’s net loss of $3.7 million for the nine months ended September 30, 2024 was offset by other comprehensive income of $4.6 million, which was the result of the change in unrealized losses on available-for-sale investment securities during the first nine months of 2024.

Previous 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.

Current wording

The Company repurchased 362,199 shares of its common stock at an average cost per share of $11.98 during the nine months ended September 30, 2024. Under the May 2024 Repurchase Plan, 93,127 shares of the Company’s common stock were available for repurchase at September 30, 2024. Since the announcement of our first share repurchase plan on January 26, 2023 and through September 30, 2024, the Company has repurchased a total of 890,873 shares of its common stock, or approximately 17% of the common shares originally issued, at an average cost per share of $11.96.

Previous wording

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 wording

General. For the three months ended September 30, 2024, the Company reported net income of $447,000, compared to net income of $151,000 for the three months ended September 30, 2023. Net interest income was up $584,000, or 30.0%, for the three months ended September 30, 2024, compared to the same period in 2023. The provision for credit losses totaled $337,000 for the three months ended September 30, 2024, compared to zero provision for the same period in 2023. Non-interest income was up $314,000, or 102.6%, for the three months ended September 30, 2024, compared to the same period in 2023. Non-interest income for the 2024 period included grant income of $280,000 due to a Bank Enterprise Award (“BEA”) Program grant from the Community Development Financial Institution (“CDFI”) Fund. Non-interest expense for the three months ended September 30, 2024 was up $179,000, or 8.6%, compared to the same period in 2023.

Previous wording

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 wording

Interest Income. Total interest income increased $1.2 million, or 48.7%, to $3.7 million for the three months ended September 30, 2024, compared to the same period in 2023. Interest income on loans and other interest-earning assets were up $865,000 and $485,000, respectively, for the three months ended September 30, 2024, compared to the same period in 2023. These increases were partially offset by a decrease in interest income on investment securities of $148,000 for the three months ended September 30, 2024, compared to the same period in 2023.

Previous 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.

Current wording

The average loan yield was 6.70% for the three months ended September 30, 2024, up from 5.45% for the same period in 2023. Average loans were $161.4 million for the three months ended September 30, 2024, up $26.6 million, or 19.7%, compared to the same period in 2023. At September 30, 2024, approximately 50% of our total loans have adjustable rates and approximately 51% 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 1.91% 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.

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 2.11% for the three months ended September 30, 2024, up 47 basis points compared to the same period 2023 primarily due to investment securities purchased during 2024.

Previous 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.

Current wording

Interest Expense. Total interest expense increased $618,000, or 118.6%, to $1.1 million for the three months ended September 30, 2024, compared to $521,000 for the same period in 2023. Interest expense on deposits was $830,000 during the three months ended September 30, 2024, up $378,000, or 83.6%, compared to the same period in 2023. The average rate paid on interest-bearing deposits was 2.34% during the three months ended September 30, 2024, up 100 basis points compared to the same period in 2023. Interest expense on borrowings increased by $240,000 during the three months ended September 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 $2.4 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.

Current wording

Net Interest Income. Net interest income was $2.5 million for the three months ended September 30, 2024, up $584,000, or 30.0%, compared to 2023. Our interest rate spread was 2.94% and 2.46% for the three months ended September 30, 2024 and 2023, respectively. Our net interest margin was 3.86% and 3.09% for the three months ended September 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 $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.

Current wording

Provision for Credit Losses. The total provision for credit losses on loans and unfunded commitments was $337,000 for the three months ended September 30, 2024, compared to zero provision for the same period in 2023. In 2024, the provision for credit losses was largely attributable to commercial loan growth.

Previous wording

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 wording

ATM and debit card expense totaled $24,000 for the three months ended September 30, 2024, down $44,000, or 64.7%, compared to the same period in 2023. During the first three months of 2024, the Company upgraded to a new core processing system which largely contributed to reductions in debit card processing costs during the three months ended September 30, 2024.

Previous wording

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 wording

Income Tax Expense. The Company reported income tax expense of $108,000 for the three months ended September 30, 2024 compared to $22,000 for the three months ended September 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.

Previous wording

Comparison of Results of Operations for the Six Months Ended June 30, 2024 and 2023.

Current wording

Comparison of Results of Operations for the Nine Months Ended September 30, 2024 and 2023.

Previous 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.

Current wording

General. For the nine months ended September 30, 2024, the Company reported a net loss of $3.7 million, compared to net income of $219,000 for the nine months ended September 30, 2023. Net interest income was up $1.3 million, or 22.8%, for the nine months ended September 30, 2024, compared to the same period in 2023. The provision for credit losses totaled $531,000 for the nine months ended September 30, 2024, compared to zero provision for the same period in 2023. Non-interest income was down $5.1 million for the nine

Previous 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.

Current wording

Interest Income. Total interest income increased $3.3 million, or 46.7%, to $10.4 million for the nine months ended September 30, 2024, compared to the same period in 2023. Interest income on loans and other interest-earning assets were up $2.1 million and $1.6 million, respectively. These increases were partially offset by a $453,000 decrease in interest income on investment securities.

Previous wording

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 wording

The average loan yield was 6.42% for the nine months ended September 30, 2024, up from 5.16% for the same period in 2023. Average loans were $152.1 million for the nine months ended September 30, 2024, up $18.1 million, or 13.5%, compared to the same period in 2023.

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

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 1.88% for the nine months ended September 30, 2024, up 23 basis points compared to the same period in 2023 primarily due to investment securities purchased during 2024.

Previous wording

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.

Current wording

Interest Expense. Total interest expense increased $2.0 million, or 152.7%, to $3.3 million for the nine months ended September 30, 2024, compared to $1.3 million for the same period in 2023. Interest expense on deposits was $2.4 million during the nine months ended September 30, 2024, up $1.3 million, or 117.0%, compared to the same period in 2023. The average rate paid on interest-bearing deposits was 2.20% during the nine months ended September 30, 2024, up 114 basis points compared to the same period in 2023. Interest expense on borrowings increased by $703,000 during the nine months ended September 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 $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 wording

Net Interest Income. Net interest income was $7.1 million for the nine months ended September 30, 2024, up $1.3 million, or 22.8%, compared to 2023. Our interest rate spread was 2.68% and 2.54% for the nine months ended September 30, 2024 and 2023, respectively. Our net interest margin was 3.56% and 3.04% for the nine months ended September 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 $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.

Current wording

Provision for Credit Losses. The total provision for credit losses on loans and unfunded commitments was $531,000 for the nine months ended September 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 loans.

Previous 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.

Current wording

Non-interest Income*.*Non-interest income for the nine months ended September 30, 2024 was down $5.1 million compared to $917,000 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 $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.

Current wording

Non-interest Expense. Non-interest expense totaled $7.1 million for the nine months ended September 30, 2024, up $662,000, or 10.3%, compared to the same period in 2023. Non-interest expense for the nine months ended September 30, 2024 includes $531,000 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. Data processing and communication expense was up $495,000, or 73.3%, for the nine months ended September 30, 2024 compared to the same period in 2023.

Previous 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.

Current wording

Income Tax Expense. The Company reported an income tax benefit of $1.0 million for the nine months ended September 30, 2024, compared to income tax expense of $2,000 for the nine months ended September 30, 2023. 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

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.

Current wording

At September 30, 2024, our borrowed funds consisted of a $20 million BTFP advance and FHLB advances with a total net carrying value of $9.5 million. The table below summarizes our unused and available liquidity sources as of September 30, 2024.

Previous 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.

Current wording

The Company also has a $25.0 million custodial letter of credit outstanding from the FHLB as of September 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. At September 30, 2024, the Company used $19.0 million of the FHLB custodial letter of credit to collateralize public fund deposits.

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 six months ended June 30, 2024 included:

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 nine months ended September 30, 2024 included: