PATRIOT NATIONAL BANCORP INC

Previous wording

The preparation of consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and to disclose contingent assets and liabilities. Actual results could differ from those estimates. Management has identified the accounting for the allowance for loan and lease losses, the analysis and valuation of its investment securities, the valuation of deferred tax assets, the impairment of goodwill, the valuation of derivatives, and the valuation of servicing assets as certain of the Company’s most critical accounting policies and estimates in that they are important to the portrayal of the Company’s financial condition and results of operations. They require management’s most subjective and complex judgment as a result of the need to make estimates about the effect of matters that are inherently uncertain. Refer to the 2023 Form 10-K for additional information.

Current wording

The preparation of consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and to disclose contingent assets and liabilities. Actual results could differ from those estimates. Management has identified the accounting for the allowance for credit losses, the analysis and valuation of its investment securities, the valuation of deferred tax assets, the valuation of derivatives, and the valuation of servicing assets as certain of the Company’s most critical accounting policies and estimates in that they are important to the portrayal of the Company’s financial condition and results of operations. They require management’s most subjective and complex judgment as a result of the need to make estimates about the effect of matters that are inherently uncertain. Refer to the 2023 Form 10-K for additional information.

Previous wording

The Company reported net loss of $299,000 ($0.08 basic and diluted loss per share) for the quarter ended March 31, 2024, compared to a net loss of $699,000 ($(0.18) basic and diluted loss per share) for the quarter ended March 31, 2023.

Current wording

The Company reported net loss of $3.1 million ($0.77 basic and diluted loss per share) for the quarter ended June 30, 2024, compared to a net loss of $615,000 ($0.16 basic and diluted loss per share) for the quarter ended June 30, 2023.

Previous wording

Total assets decreased $20.2 million to $1.07 billion as of March 31, 2024, compared to $1.09 billion at December 31, 2023, primarily due to the decline in loans receivable of $38.5 million as of March 31, 2024.

Current wording

Total assets decreased $54.4 million to $1.04 billion as of June 30, 2024, compared to $1.09 billion at December 31, 2023, primarily due to the decline in loans receivable of $72.6 million as of June 30, 2024.

Previous wording

Cash, cash equivalents and restricted cash increased from $66.5 million at December 31, 2023 to $92.8 million at March 31, 2024. The increase in three months ended March 31, 2024 reflects the intention to boost balance sheet liquidity.

Current wording

Cash, cash equivalents and restricted cash increased from $66.5 million at December 31, 2023 to $93.7 million at June 30, 2024. The increase in 2024 reflects the intention to boost balance sheet liquidity.

Previous wording

Total investments decreased by $1.6 million, from $93.6 million at December 31, 2023 to $92.0 million at March 31, 2024. The decrease in the three months ended March 31, 2024 was primarily attributable to sale and repayment of available-for-sale securities totaling $3.3 million, which was partially offset by an increase in purchase of available-for-sale securities of $2.3 million. During the three months ended March 31, 2024, the Bank sold available-for-sale securities of $2.3 million and recognized a net loss of $24,000.

Current wording

Total investments decreased by $2.5 million, from $93.6 million at December 31, 2023 to $91.1 million at June 30, 2024. The decrease in the six months ended June 30, 2024 was primarily attributable to sale and repayment of available-for-sale securities totaling $4.3 million, which was partially offset by an increase in purchase of available-for-sale securities of $2.3 million. During the six months ended June 30, 2024, the Bank sold available-for-sale securities of $2.3 million and recognized a net loss of $24,000.

Previous wording

The Company’s loan portfolio decreased $38.5 million, from $848.9 million at December 31, 2023 to $810.3 million at March 31, 2024. The Company has continued the trend of restricting loan growth and allowing loans to pay down as the balance sheet is reduced in order to strengthen capital ratios.

Current wording

The Company’s loan portfolio decreased $72.6 million, from $848.9 million at December 31, 2023 to $776.3 million at June 30, 2024. The Company has continued the trend of restricting loan growth and allowing loans to pay down as the balance sheet is reduced in order to strengthen capital ratios.

Previous wording

SBA loans held for investment were included in the commercial real estate loans and commercial and industrial loan classifications above. As of March 31, 2024 and December 31, 2023, SBA loans included in the commercial and industrial loans were $16.7 million and $17.1 million, respectively. SBA loans included in the commercial real estate loans were $18.4 million and $12.9 million, respectively.

Current wording

SBA loans held for investment were included in the commercial real estate loans and commercial and industrial loan classifications above. As of June 30, 2024 and December 31, 2023, SBA loans included in the commercial and industrial loans were $13.0 million and $17.1 million, respectively. SBA loans included in the commercial real estate loans were $18.8 million and $12.9 million, respectively.

Previous wording

At March 31, 2024, the net loan to deposit ratio was 92.7% and the net loan to total assets ratio was 74.2%. At December 31, 2023, these ratios were 99.1% and 76.2%, respectively.

Current wording

At June 30, 2024, the net loan to deposit ratio was 95.1% and the net loan to total assets ratio was 73.3%. At December 31, 2023, these ratios were 99.1% and 76.2%, respectively.

Previous wording

Allowance for Credit Losses

Current wording

Allowance for Credit Losses on Loans

Previous wording

The allowance for credit losses on loans was $13.8 million as of March 31, 2024, compared to allowance for credit losses of $15.9 million as of December 31, 2023. The decrease in allowance was mainly due to reduction in loan balances and the recognition of charge-offs on the unsecured consumer loan portfolio. Based upon the overall assessment and evaluation of the loan portfolio at March 31, 2024, management believes $13.8 million in the allowance for credit losses, which represented 1.70% of gross loans outstanding, is adequate under prevailing economic conditions to absorb existing losses in the loan portfolio.

Current wording

The allowance for credit losses on loans was $15.0 million as of June 30, 2024, compared to $15.9 million as of December 31, 2023. The decrease in allowance was mainly due to reduction in loan balances and the recognition of charge-offs on the unsecured consumer loan portfolio. Based upon the overall assessment and evaluation of the loan portfolio at June 30, 2024, management believes $15.0 million in the allowance for credit losses, which represented 1.93% of gross loans outstanding, is adequate under prevailing economic conditions to absorb existing losses in the loan portfolio.

Previous wording

The following table provides detail of activity in the allowance for credit losses for the three months ended March 31, 2024 and 2023:

Current wording

The following table provides detail of activity in the allowance for credit losses on loans for the three and six months ended June 30, 2024 and 2023:

Previous wording

The following table provides an allocation of allowance for credit losses by portfolio segment:

Current wording

The following table provides an allocation of allowance for credit losses on loans by portfolio segment:

Previous wording

As of March 31, 2024, the $19.1 million of non-accrual loans were individually evaluated for impairment, and a specific reserve of $3.3 million was established for them. For collateral dependent loans, the Bank has obtained appraisal reports from independent licensed appraisal firms and discounted those values based on the Bank’s experience selling OREO properties and for estimated selling costs to determine estimated impairment. For cash flow dependent loans, the Bank determined the reserve based on the present value of expected future cash flows discounted at the loan's effective interest rate.

Current wording

As of June 30, 2024, the $37.4 million of non-accrual loans were individually evaluated for impairment, and a specific reserve of $5.7 million was established for them. For collateral dependent loans, the Bank has obtained appraisal reports from independent licensed appraisal firms and discounted those values based on the Bank’s experience selling OREO properties and for estimated selling costs to determine estimated impairment. For cash flow dependent loans, the Bank determined the reserve based on the present value of expected future cash flows discounted at the loan's effective interest rate.

Previous wording

SBA loans held for sale totaled $1.3 million and $9.9 million as of March 31, 2024 and December 31, 2023, respectively. SBA loans held for sale represent the guaranteed portion of SBA loans and are reflected at the lower of aggregate cost or market value. SBA loans held for sale at March 31, 2024 consisted of $1.3 million SBA commercial real estate loans. SBA loans held for sale at December 31, 2023, consisted of $3.5 million SBA commercial and industrial loans and $6.4 million SBA commercial real estate loans, respectively.

Current wording

SBA loans held for sale totaled $4.4 million and $9.9 million as of June 30, 2024 and December 31, 2023, respectively. SBA loans held for sale represent the guaranteed portion of SBA loans and are reflected at the lower of aggregate cost or market value. SBA loans held for sale at June 30, 2024 consisted of $4.4 million SBA commercial and industrial loans. SBA loans held for sale at December 31, 2023, consisted of $3.5 million SBA commercial and industrial loans and $6.4 million SBA commercial real estate loans, respectively.

Previous wording

As of March 31, 2024, the credit card loans held for sale from Digital Payments division totaled $12.8 million. The credit card loans expected to be held for no longer than three days before being sold. The credit card receivable are fully cash-secured by deposits at Patriot. The credit card loans are sold to the third party as a whole loan sale transaction, priced at Par, thus there is no servicing asset or gain or loss on sale.

Current wording

As of June 30, 2024, the credit card loans held for sale from Digital Payments division totaled $8.4 million. The credit card loans expected to be held for no longer than three days before being sold. The credit card receivable are fully cash-secured by deposits at Patriot. The credit card loans are sold to the third party as a whole loan sale transaction, priced at Par, thus there is no servicing asset or gain or loss on sale.

Previous wording

Deferred tax assets were $24.2 million and $24.1 million at March 31, 2024 and December 31, 2023, respectively. Deferred tax assets consist predominately of state net operating losses, capitalized costs and allowances for credit losses.

Current wording

Deferred tax assets were $25.1 million and $24.1 million at June 30, 2024 and December 31, 2023, respectively. Deferred tax assets consist predominately of state net operating losses, capitalized costs and allowances for credit losses.

Previous wording

The effective tax provision rate for the three months ended March 31, 2024 was 28.3%, compared to the effective tax benefit rate of (26.9)% for the three months ended March 31, 2023. The Company’s effective rates for both periods was affected by state taxes and non-deductible expenses.

Current wording

The effective tax benefit rate for the three and six months ended June 30, 2024 was (23.07)% and (20.25)%, compared to the effective tax benefit rate of (27.30)% and (27.08)% for the three and six months ended June 30, 2023. The Company’s effective rates for both periods was affected by state taxes and non-deductible expenses.

Previous wording

Total borrowings were $161.1 million and $201.1 million as of March 31, 2024 and December 31, 2023, respectively. Borrowings consist primarily of FHLB advances, an FRB borrowing, senior notes, subordinated notes, junior subordinated debentures and a note payable. The senior notes, subordinated notes and junior subordinated debentures contain affirmative covenants that require the Company to maintain its and its subsidiaries’ legal entity and tax status, pay its income tax obligations on a timely basis, and comply with SEC and FDIC reporting requirements.

Current wording

Total borrowings were $187.0 million and $201.1 million as of June 30, 2024 and December 31, 2023, respectively. Borrowings consist primarily of FHLB advances, senior notes, subordinated notes, junior subordinated debentures and a note payable. The senior notes, subordinated notes and junior subordinated debentures contain affirmative covenants that require the Company to maintain its and its subsidiaries’ legal entity and tax status, pay its income tax obligations on a timely basis, and comply with SEC and FDIC reporting requirements.

Previous wording

FHLB-B advances are structured to facilitate the Bank’s management of its balance sheet and liquidity requirements. Outstanding advances from the FHLB-B decreased from $101.0 million at December 31, 2023 to $61.0 million at March 31, 2024.

Current wording

FHLB-B advances are structured to facilitate the Bank’s management of its balance sheet and liquidity requirements. Outstanding advances from the FHLB-B decreased from $101.0 million at December 31, 2023 to $87.9 million at June 30, 2024.

Previous wording

At March 31, 2024, the FHLB-B advances bore fixed rates of interest ranging from 2.40% to 5.52% with remaining maturities ranging from 1 day to 5 months, and have a weighted average interest rate of 4.01%.

Current wording

At June 30, 2024, the FHLB-B advances bore fixed rates of interest ranging from 2.40% to 5.54% with maturities ranging from 1 day to 2 months, 16 days, and have a weighted average interest rate of 4.49%.

Previous wording

At March 31, 2024, collateral for FHLB-B borrowings consisted of a mixture of real estate loans and securities with book value of $248.8 million. Remaining unused borrowing capacity under this line totaled $98.1 million at March 31, 2024.

Current wording

At June 30, 2024, collateral for FHLB-B borrowings consisted of a mixture of real estate loans and securities with book value of $235.9 million. Remaining unused borrowing capacity under this line totaled $27.9 million at June 30, 2024.

Previous wording

In addition, Patriot has a $2.0 million revolving line of credit with the FHLB-B. For the three months ended March 31, 2024 and 2023, no funds had been borrowed under the line of credit.

Current wording

In addition, Patriot has a $2.0 million revolving line of credit with the FHLB-B. For the three and six months ended June 30, 2024 and 2023, no funds had been borrowed under the line of credit.

Previous wording

There was no outstanding balance under the agreements at March 31, 2024 and December 31, 2023. Interest expense incurred for the three months ended March 31, 2024 and March 31, 2023 was $2,000 and $63,000, respectively.

Current wording

There was no outstanding balance under the agreements at June 30, 2024 and December 31, 2023. Interest expense incurred for the three and six months ended June 30, 2024 was $0 and $2,000, respectively. For three and six months ended June 30, 2023, interest expense incurred was $54,000 and $117,000, respectively.

Previous wording

The Federal Reserve Bank of New York (“FRBNY”) accepts loan pledges from qualifying depository institutions to secure borrowings from the Discount Window. Patriot has pledged eligible loans as collateral to support its borrowing capacity at the FRBNY. As of March 31, 2024, the book value of the pledged loans totaled $15.1 million, with a collateral value of $11.4 million. No funds were borrowed from the Discount Window under the FRBNY's Borrower-in-Custody ('BIC") program and no interest expense was incurred for the three months ended March 31, 2024 and March 31, 2023.

Current wording

The Federal Reserve Bank of New York (“FRBNY”) accepts loan pledges from qualifying depository institutions to secure borrowings from the Discount Window. Patriot has pledged eligible loans as collateral to support its borrowing capacity at the FRBNY. As of June 30, 2024, the book value of the pledged loans totaled $14.3 million, with a collateral value of $10.5 million. No funds were borrowed from the Discount Window under the FRBNY's Borrower-in-Custody ('BIC") program, and no interest expense was incurred for the three and six months ended June 30, 2024. For the three and six months ended June 30, 2023, a total of $12.0 million was borrowed, and interest expense incurred was $5,000.

Previous wording

In July 2023, the Bank established a collateralized funding line of $73.8 million at par value under the Federal Reserve's temporary Bank Term Funding Program ("BTFP"). The program provided additional funding to eligible depository institutions, assuring they can meet the needs of all their depositors. The program served as an additional source of liquidity against high-quality securities, eliminating the need of an institution to quickly sell those securities in times of stress. The line allowed for a fixed rate borrowing at market rates, for up to one year, with repayment permitted at any time without penalty. The BTFP ceased allowing any new advances after March 11, 2024. As of March 31, 2024, the collateral value of the pledged securities was $70.5 million. Patriot borrowed a total of $70.0 million under the BTFP. Interest expense incurred for the three months ended March 31, 2024 was $853,000. No Interest expense was incurred for the three months ended March 31, 2023.

Current wording

In July 2023, the Bank established a collateralized funding line of $73.8 million at par value under the Federal Reserve's newly established Bank Term Funding Program ("BTFP"). The program provided additional funding to eligible depository institutions, assuring they can meet the needs of all their depositors. The program served as an additional source of liquidity against high-quality securities, eliminating the need of an institution to quickly sell those securities in times of stress. The line allowed for a fixed rate borrowing at market rates, for up to one year, with repayment permitted at any time without penalty. The BTFP ceased allowing any new advances after March 11, 2024. As of June 30, 2024, the collateral value of the pledged securities was $69.9 million. Patriot borrowed a total of $69.0 million under the BTFP. Interest expense incurred for the three and six months ended June 30, 2024 was $852,000 and $1.7 million, respectively. No interest expense was incurred for the three and six months ended June 30, 2023.

Previous wording

On December 21, 2022, the Company completed an issuance and sale of $12 million in aggregate principal amount of 8.50% fixed rate senior notes due January 15, 2026 (“2022 Senior Notes”). In connection with the issuance of the 2022 Senior Notes, the Company incurred $360,000 of costs, which are being amortized over the term of the 2022 Senior Notes to recognize a constant rate of interest expense. At March 31, 2024 and December 31, 2023, $243,000 and $277,000 of unamortized debt issuance costs were deducted from the face amount of the 2022 Subordinated Notes included in the Consolidated Balance Sheet, respectively.

Current wording

On December 21, 2022, the Company completed an issuance and sale of $12 million in aggregate principal amount of 8.50% fixed rate senior notes due January 15, 2026 (“2022 Senior Notes”). In connection with the issuance of the 2022 Senior Notes, the Company incurred $326,000 of costs, which are being amortized over the term of the 2022 Senior Notes to recognize a constant rate of interest expense. At June 30, 2024 and December 31, 2023, $208,000 and $277,000 of unamortized debt issuance costs were deducted from the face amount of the 2022 Subordinated Notes included in the Consolidated Balance Sheet, respectively.

Previous wording

The Subordinated Notes initially bear interest at 6.25% per annum, from and including June 29, 2018, to but excluding, June 30, 2023, payable semi-annually in arrears. From and including June 30, 2023, until but excluding June 30, 2028 or an early redemption date, the interest rate shall reset quarterly to an interest rate per annum equal to the then current three-month LIBOR, which was replaced by SOFR in 2023 (but not less than zero) plus 332.5 basis points, payable quarterly in arrears. The Company may, at its option, beginning on June 30, 2023 and on any scheduled interest payment date thereafter, redeem the Subordinated Notes.

Current wording

The Subordinated Notes initially bore interest at 6.25% per annum, from and including June 29, 2018, to but excluding, June 30, 2023, payable semi-annually in arrears. From and including June 30, 2023, until but excluding June 30, 2028 or an early redemption date, the interest rate shall reset quarterly to an interest rate per annum equal to the then current three-month LIBOR, which was replaced by SOFR in 2023 (but not less than zero) plus 332.5 basis points, payable quarterly in arrears. The Company may, at its option, beginning on June 30, 2023 and on any scheduled interest payment date thereafter, redeem the Subordinated Notes.

Previous wording

In connection with the issuance of the Subordinated Notes, the Company incurred $291,000 of debt issuance costs, which are being amortized over the term of the Subordinated Notes to recognize a constant rate of interest expense. At March 31, 2024 and December 31, 2023, $124,000 and $131,000 of unamortized debt issuance costs were deducted from the face amount of the Subordinated Notes included in the Consolidated Balance Sheet, respectively.

Current wording

In connection with the issuance of the Subordinated Notes, the Company incurred $291,000 of debt issuance costs, which are being amortized over the term of the Subordinated Notes to recognize a constant rate of interest expense. At June 30, 2024 and December 31, 2023, $117,000 and $131,000 of unamortized debt issuance costs were deducted from the face amount of the Subordinated Notes included in the consolidated balance sheet, respectively.

Previous wording

Trust preferred securities currently qualify for up to 25% of the Company’s Tier 1 Capital, with the excess qualifying as Tier 2 Capital.

Current wording

Trust preferred securities currently qualify for up to 25% of the Company’s Tier I Capital, with the excess qualifying as Tier 2 Capital.

Previous wording

The junior subordinated debentures bear interest at three-month SOFR plus 3.15% and mature on March 26, 2033, at which time the principal amount borrowed will be due. The placement fee of $240,000 is amortized and included as a component of the periodic interest expense on the junior subordinated debentures, in order to produce a constant rate of interest expense. As of March 31, 2024 and December 31, 2023, the unamortized placement fee deducted from the face amount of the junior subordinated debt owed to the unconsolidated trust amounted to $109,000 and $111,000, respectively, and accrued interest on the junior subordinated debentures was $12,000 and $12,000, respectively.

Current wording

The junior subordinated debentures bear interest at three-month SOFR plus 3.15% and mature on March 26, 2033, at which time the principal amount borrowed will be due. The placement fee of $240,000 is amortized and included as a component of the periodic interest expense on the junior subordinated debentures, in order to produce a constant rate of interest expense. As of June 30, 2024 and December 31, 2023, the unamortized placement fee deducted from the face amount of the junior subordinated debt owed to the unconsolidated trust amounted to $106,000 and $111,000, respectively, and accrued interest on the junior subordinated debentures was $10,000 and $12,000, respectively.

Previous wording

In September 2015, the Bank purchased the property in which its Fairfield, Connecticut branch is located for approximately $2.0 million, a property it had been leasing until that date. The purchase price was primarily satisfied by issuing the seller a $2.0 million, nine-year, promissory note bearing interest at a fixed rate of 1.75% per annum. As of March 31, 2024 and December 31, 2023, the note had a balance outstanding of $323,000 and $376,000, respectively. The note matures in August 2024 and requires a balloon payment of approximately $234,000 at that time. The note is secured by a first Mortgage Deed and Security Agreement on the purchased property.

Current wording

In September 2015, the Bank purchased the property in which its Fairfield, Connecticut branch is located for approximately $2.0 million, a property it had been leasing until that date. The purchase price was primarily satisfied by issuing the seller a $2.0 million, nine-year, promissory note bearing interest at a fixed rate of 1.75% per annum. As of June 30, 2024 and December 31, 2023, the note had a balance outstanding of $270,000 and $376,000, respectively. The note matures in August 2024 and requires a balloon payment of approximately $234,000 at that time. The note is secured by a first Mortgage Deed and Security Agreement on the purchased property.

Previous wording

As of March 31, 2024, Patriot has two interest rate swaps (“swaps”). One swaps is with a loan customer to provide a facility to mitigate the fluctuations in the variable rate on the respective loan. The other swaps is with an outside third party. The customer interest rate swaps is matched in offsetting terms to the third party interest rate swaps. The swaps are reported at fair value in other assets or other liabilities on the consolidated balance sheets. Patriot’s swaps are derivatives, but are not designated as hedging instruments, thus any net gain or loss resulting from changes in the fair value is recognized in other noninterest income. The Company recognized no gain on the swaps for the three months ended March 31, 2024 and 2023.

Current wording

As of June 30, 2024, Patriot has two interest rate swaps (“swaps”). One swap is with a loan customer to provide a facility to mitigate the fluctuations in the variable rate on the respective loan. The other swap is with an outside third party. The customer interest rate swap is matched in offsetting terms to the third party interest rate swap. The swaps are reported at fair value in other assets or other liabilities on the consolidated balance sheets. Patriot’s swaps are derivatives, but are not designated as hedging instruments, thus any net gain or loss resulting from changes in the fair value is recognized in other noninterest income. The Company recognized no gain on the swaps for the three and six months ended June 30, 2024 and 2023.

Previous wording

Equity decreased $746,000, from $44.4 million at December 31, 2023 to $43.6 million at March 31, 2024, primarily due to a net loss of $299,000 for the three months ended March 31, 2024, and a net unrealized holding loss for investment portfolio of $471,000.

Current wording

Equity decreased $3.9 million, from $44.4 million at December 31, 2023 to $40.5 million at June 30, 2024, primarily due to a net loss of $3.4 million for the six months ended June 30, 2024, and a net unrealized holding loss for investment portfolio of $541,000.

Previous wording

The Company’s off-balance sheet commitments primarily consist of commitments to lend of $98.9 million and $92.5 million as of March 31, 2024 and December 31, 2023, respectively.

Current wording

The Company’s off-balance sheet commitments primarily consist of commitments to lend of $103.9 million and $92.5 million as of June 30, 2024 and December 31, 2023, respectively.

Previous wording

The following tables present daily average balance sheets, interest income, interest expense and the corresponding yields earned and rates paid for the three months ended March 31, 2024 and 2023:

Current wording

The following tables present daily average balance sheets, interest income, interest expense and the corresponding yields earned and rates paid for the three and six months ended June 30, 2024 and 2023:

Previous wording

The following table presents the change in interest-earning assets and interest-bearing liabilities by major category and the related change in the interest income earned and interest expense incurred thereon attributable to the change in transactional volume in the financial instruments and the rates of interest applicable thereto, comparing the three months ended March 31, 2024 and 2023.

Current wording

The following table presents the change in interest-earning assets and interest-bearing liabilities by major category and the related change in the interest income earned and interest expense incurred thereon attributable to the change in transactional volume in the financial instruments and the rates of interest applicable thereto, comparing the three and six months ended June 30, 2024 and 2023.

Previous wording

For the three months ended March 31, 2024, interest income and dividend income was $14.0 million, which increased $355,000 as compared to $13.6 million for the quarter ended March 31, 2023. Total interest expense was $8.6 million for the three months ended March 31, 2024, which increased $3.0 million as compared to $5.6 million for the three months ended March 31, 2023. Net interest income decreased $2.6 million from $8.0 million for the three months ended March 31, 2023 to $5.4 million for the three months ended March 31, 2024. The decline in 2024 reflects a lower loan balance and narrower net interest margin due to higher deposit costs.

Current wording

For the three months ended June 30, 2024, interest income and dividend income was $13.2 million, which decreased $2.1 million as compared to $15.3 million for the quarter ended June 30, 2023. Total interest expense was $8.2 million for the three months ended June 30, 2024, which increased $598,000 as compared to $7.6 million for the three months ended June 30, 2023. Net interest income decreased $2.7 million from $7.7 million for the three months ended June 30, 2023 to $5.0 million for the three months ended June 30, 2024. The decline in 2024 reflects a lower loan balance and narrower net interest margin due to higher deposit costs.

Previous wording

The net interest margin was 2.20% for the three months ended March 31, 2024, compared with 3.29% for the three months ended March 31, 2023. The decline in interest margins was primarily associated with an increase in the cost of deposits and other borrowings due to the significant rise in market interest rates, only partially mitigated by the rise in variable rate interest earning assets. The decline in net interest margin also reflected the lowering of loan balances during a period of rising interest rates.

Current wording

The net interest margin was 2.14% for the quarter ended June 30, 2024, compared with 2.96% for the quarter ended June 30, 2023. For the six months ended June 30, 2024 and 2023, the net interest margin was 2.17% and 3.12%, respectively. The decline in interest margins for the three and six months ended June 30, 2024 compared to the same periods in 2023, was primarily associated with an increase in the cost of deposits and other borrowings due to the significant rise in market interest rates and a decline in loan interest income due to the declining loan balance and the increase in nonaccrual loans., partially mitigated by the rise in variable rate interest earning assets.

Previous wording

Non-interest income for the three months ended March 31, 2024 was $2.25 million, compared to $835,000 for the three months ended March 31, 2023. The increase was primarily attributable to higher non-interest income from the Bank's Digital Payments division.

Current wording

Non-interest income for the three months ended June 30, 2024 was $2.1 million, compared to $829,000 for the three months ended June 30, 2023. For the six months ended June 30, 2024 and 2023, non-interest income was $4.3 million and $1.7 million, respectively. The increase was primarily attributable to higher non-interest income from the Bank's Digital Payments division.

Previous wording

Non-interest expense for the three months ended March 31, 2024 decreased to $7.2 million, compared to $7.6 million for the three months ended March 31, 2023.

Current wording

Non-interest expense for the three months ended June 30, 2024 decreased to $8.0 million, compared to $8.1 million for the three months ended June 30, 2023. Non-interest expense for the six months ended June 30, 2024 was $15.2 million, compared to $15.6 million for the six months ended June 30, 2023.