FB Financial Corp
For the period ended Jun 30, 2024. Filed Aug 5, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 5, 2024
FBK$54.17-0.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-06.
0001649749-24-000119
Item 2. Management’s discussion and analysis of financial condition and results of operationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-05.
0001649749-24-000170
Item 2. Management’s discussion and analysis of financial condition and results of operationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 185 previous paragraphs and 216 current paragraphs.
112 unchanged; 66 reworded; 26 added; 6 removed; 1 previous and 12 current paragraphs rearranged.
Tables are not compared: 32 previous and 37 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (26)
Current report
Financial highlights
Current report
The following table presents certain selected historical consolidated income statement and balance sheet data and key performance indicators and other measures as of the dates or for the periods indicated. Our historical results for any prior period are not necessarily indicative of results to be expected in any future period.
Current report
Tangible book value per common share and tangible common equity to tangible assets
Current report
Tangible book value per common share and tangible common equity to tangible assets are non-GAAP measures that exclude the impact of goodwill and other intangibles used by management to evaluate capital adequacy. Because intangible assets, such as goodwill and other intangibles, vary extensively from company to company, we believe that the presentation of this information allows investors to more easily compare our capital position to other companies. The most directly comparable financial measure calculated in accordance with GAAP is book value per common share and our total shareholders’ equity to total assets.
Current report
The following table presents, as of the dates set forth below, tangible common equity compared with total common shareholders' equity, tangible book value per common share compared with our book value per common share and common equity to tangible assets compared to total common shareholders' equity to total assets:
Current report
Noninterest income for the three months ended June 30, 2024 increased by $1.8 million to $25.6 million, up from $23.8 million for the three months ended June 30, 2023. The increase was primarily due to a $2.1 million cash life insurance benefit during the three months ended June 30, 2024.
Current report
Our net income decreased during the six months ended June 30, 2024 to $67.9 million from $71.7 million for the six months ended June 30, 2023. Diluted earnings per common share were $1.45 and $1.53 for the six months ended June 30, 2024 and 2023, respectively. Our net income represented a ROAA of 1.09% and 1.13% for the six months ended June 30, 2024 and 2023, respectively, and a ROAE of 9.31% and 10.6% for the same periods. Our ROATCE for the six months ended June 30, 2024 and 2023 were 11.2% and 13.1%, respectively. See “GAAP reconciliation and management explanation of non-GAAP financial measures” in this Report for a discussion of tangible common equity and return on average tangible common equity.
Current report
During the six months ended June 30, 2024, our net interest income decreased to $202.1 million from $205.2 million for the six months ended June 30, 2023. Our net interest margin, on a tax-equivalent basis, increased to 3.49% for the six months ended June 30, 2024 as compared to 3.45% for the six months ended June 30, 2023. The increase in net interest margin was primarily driven by higher interest rates, which impacted both interest-earnings assets and interest-bearing liabilities, partially offset by a decrease in volume of our interest-earnings assets.
Current report
Income before taxes from the Banking segment increased for the three months ended June 30, 2024 to $50.2 million, compared to $46.3 million for the three months ended June 30, 2023. Net interest income increased by $1.6 million to $101.5 million during the three months ended June 30, 2024 compared to $99.9 million during the three months ended June 30, 2023. Provisions for credit losses on loans HFI and unfunded loan commitments resulted in $2.4 million of provision expense during the three months ended June 30, 2024 compared to a reversal of $1.1 million of provision expense during the three months ended June 30, 2023. Noninterest income increased to $13.5 million in the three months ended June 30, 2024 as compared to $11.5 million in the three months ended June 30, 2023 due to a $2.1 million cash life insurance benefit during the three months ended June 30, 2024. Noninterest expense decreased to $62.3 million for three months ended June 30, 2024 compared to $66.2 million for the three months ended June 30, 2023 due primarily to a decrease in salaries associated with our efficiency and scalability initiatives.
Current report
Activity in our Mortgage segment resulted in a pre-tax net contribution of $2.2 million for the six months ended June 30, 2024 compared to a $1.9 million pre-tax net loss for the six months ended June 30, 2023. Net interest income was $1.9 million for the six months ended June 30, 2024 compared to $3.0 million for the six months ended June 30, 2023. Provisions for credit losses on loans HFI and unfunded loan commitments resulted in a reversal of $0.3 million of provision expense during the six months ended June 30, 2024 compared to $0.4 million of provision expense during the six months ended June 30, 2023. Mortgage banking income increased $0.2 million to $24.5 million during the six months ended June 30, 2024 compared to $24.3 million for the six months ended June 30, 2023.
Current report
Noninterest expense for the six months ended June 30, 2024 and 2023 was $24.8 million and $28.8 million, respectively. This decrease is reflective of a decrease in salaries associated with our efficiency and scalability initiatives.
Current report
Net interest income increased to $103.3 million for the three months ended June 30, 2024 as compared to $102.4 million for the three months ended June 30, 2023. The change in net interest income was driven by a $7.0 million increase in interest income mostly offset by an increase in interest expense of $6.2 million. Further discussion of the changes to interest income and expense are discussed below.
Current report
Interest income was $178.1 million for the three months ended June 30, 2024, compared to $171.0 million for the three months ended June 30, 2023, an increase of $7.0 million, which was primarily driven by an increase in yields on loans HFI and taxable investment securities, partially offset by a decrease in average interest-bearing deposits with other financial institutions and loans HFI.
Current report
Interest income on loans HFI increased $5.8 million to $154.2 million for the three months ended June 30, 2024 from $148.4 million for the three months ended June 30, 2023 primarily due to higher yields. The yield on loans HFI was 6.70% for the three months ended June 30, 2024, up 36 basis points from the three months ended June 30, 2023.
Current report
(1) Includes tax equivalent adjustment using combined marginal tax rate of 26.06%.
Current report
Interest expense was $74.8 million for the three months ended June 30, 2024, an increase of $6.2 million as compared to the three months ended June 30, 2023. The primary driver was an increase in interest expense on interest-bearing deposit accounts stemming from an increase in the rate paid on those balances. Interest expense on money market and customer time deposits increased during the period by $6.8 million and $3.2 million, respectively, from the three months ended June 30, 2023. These increases were most significantly influenced by increases in rates paid on these average balances. The average rate on money market deposits increased 50 basis points to 3.93% for the three months ended June 30, 2024 from 3.43% for the three months ended June 30, 2023. The average rate on customer time deposits increased 100 basis points to 4.00% for the three months ended June 30, 2024 from 3.00% for the three months ended June 30, 2023. Total cost of interest-bearing deposits was 3.52% for the three months ended June 30, 2024 compared to 3.06% for the three months ended June 30, 2023. As interest rates on deposits increase, we tend to experience some movement between deposit types as customers seek higher interest rates and shift from noninterest-bearing deposit accounts to interest-bearing deposit products.
Current report
Yield/rate and volume analysis
Current report
We recognized a provision for credit losses on loans HFI of $3.9 million and $2.6 million for the three months ended June 30, 2024 and 2023, respectively. The increase in our provision for credit losses on loans HFI during the three months ended June 30, 2024 was primarily due to increases in specific reserves for individually evaluated relationships offset by reductions in reserves for construction loans. The reduction for construction loans is primarily due to reduction in balances outstanding for the portfolio. For the three months ended June 30, 2023, the decrease in the provision for credit losses on loans HFI was driven by slowed loan growth in our loans HFI combined with the economic variables signaling a possible recession in our forward-looking model.
Current report
Other income increased $2.1 million to $4.6 million during the three months ended June 30, 2024 as compared to $2.5 million during the three months ended June 30, 2023. This increase is primarily related to a $2.1 million cash life insurance benefit during the three months ended June 30, 2024.
Current report
Noninterest income amounted to $33.6 million for the six months ended June 30, 2024, a decrease of $13.6 million, or 29%, as compared to $47.2 million for the six months ended June 30, 2023. Changes in selected components of noninterest income in the above table are discussed below.
Current report
Investment services and trust income increased $1.5 million during the six months ended June 30, 2024 to $6.6 million as compared to $5.2 million during the six months ended June 30, 2023. The increase is primarily attributable to fees earned from higher assets under management stemming from market value improvement and existing account growth, as well as customer acquisition efforts through a mix of financial advisors joining the Company bringing new business and the addition of new accounts by the financial advisors already at the Company.
Current report
Noninterest expense decreased by $6.2 million during the three months ended June 30, 2024 to $75.1 million as compared to $81.3 million in the three months ended June 30, 2023. Changes in selected components of noninterest expense in the above table are discussed below.
Current report
Noninterest expense decreased by $14.2 million during the six months ended June 30, 2024 to $147.5 million as compared to $161.7 million in the six months ended June 30, 2023. Changes in selected components of noninterest expense in the above table are discussed below.
Current report
Legal and professional expense decreased by $1.4 million during the six months ended June 30, 2024 to $3.9 million as compared to $5.3 million during the six months ended June 30, 2023. The decrease was primarily driven by the completion of internal projects in the prior year.
Current report
Customer time deposits decreased by $125.9 million from December 31, 2023 which was largely driven by three large depositor relationship customers shifting deposits away from the bank for higher yields; however, each of the customers still maintain a relationship with us.
Current report
Uninsured deposits are defined as the portion of deposit accounts in U.S. offices that exceed the FDIC insurance limit and amounts in any other uninsured investment or deposit account that are classified as deposits and are not subject to any federal or state deposit insurance regimes. Collateralized deposits are included within our total uninsured deposits.
Removed paragraphs (6)
Previous report
The volume of our interest-earning assets decreased compared to an increase in our interest-bearing liabilities which resulted in our NIM, on a tax-equivalent basis, decreasing to 3.42% for the three months ended March 31, 2024 from 3.51% for the three months ended March 31, 2023. The shift in volume was partially offset by the effect of interest rates rising faster within our interest-earning assets compared to our interest-bearing liabilities.
Previous report
Other income decreased $1.8 million to $1.7 million during the three months ended March 31, 2024 as compared to $3.6 million during the three months ended March 31, 2023. This decrease is primarily related to a $0.9 million gain associated with the change in fair value of the commercial loans held for sale portfolio during the three months ended March 31, 2023. No such gain or loss was recorded during the three months ended March 31, 2024 as the final relationship was exited during the year ended December 31, 2023. Additionally, swap fees decreased $0.4 million during the three months ended March 31, 2024 compared to the three months ended March 31, 2023 primarily due to fewer swap trades in the current year due most notably to the conversion to SOFR during the three months ended March 31, 2023.
Previous report
Noninterest expense decreased by $8.0 million during the three months ended March 31, 2024 to $72.4 million as compared to $80.4 million in the three months ended March 31, 2023. Changes in selected components of noninterest expense in the above table are discussed below.
Previous report
Legal and professional expense decreased by $1.2 million during the three months ended March 31, 2024 to $1.9 million as compared to $3.1 million during the three months ended March 31, 2023. The decrease in legal and professional expenses was caused by decreases in consulting and other professional fees as these were increased during the three months ended March 31, 2023 due to internal projects.
Previous report
Additionally, brokered and internet time deposits decreased by $19.6 million to $131.2 million as of March 31, 2024 compared to December 31, 2023, which was a result of our balance sheet and liquidity management strategy in order to decrease our exposure to higher cost deposits.
Previous report
During the three months ended March 31, 2023, there were no sales of AFS debt securities. During the same period, we purchased $0.9 million of AFS debt securities. Maturities, prepayments and calls of securities totaled $26.8 million for the three months ended March 31, 2023.
Reworded paragraphs (66)
Previous wording
The following is a discussion of our financial condition as of March 31, 2024 and December 31, 2023, and our results of operations for the three months ended March 31, 2024 and 2023, and should be read in conjunction with our audited consolidated financial statements set forth in our Annual Report on Form 10-K for the year ended December 31, 2023, that was filed with the SEC on February 27, 2024, and with the accompanying unaudited notes to the condensed consolidated financial statements set forth in this Report.
Current wording
The following is a discussion of our financial condition as of June 30, 2024 and December 31, 2023, and our results of operations for the three and six months ended June 30, 2024 and 2023, and should be read in conjunction with our audited consolidated financial statements set forth in our Annual Report on Form 10-K for the year ended December 31, 2023, that was filed with the SEC on February 27, 2024, and with the accompanying unaudited notes to the condensed consolidated financial statements set forth in this Report.
Previous wording
(4)Includes $20,876, $20,528 and $21,229 of optional rights to repurchase delinquent GNMA loans as of March 31, 2024, March 31, 2023 and December 31, 2023, respectively.
Current wording
(4)Includes $22,354, $20,225 and $21,229 of optional rights to repurchase delinquent GNMA loans as of June 30, 2024, June 30, 2023 and December 31, 2023, respectively.
Previous wording
The non-GAAP financial measures that we discuss in this Report should not be considered in isolation or as a substitute for the most directly comparable or other financial measures calculated in accordance with GAAP. Moreover, the manner in which we calculate the non-GAAP financial measures that we discuss in our selected historical consolidated financial data may differ from that of other companies reporting measures with similar names. You should understand how such other banking organizations calculate their financial measures similar or with names similar to the non-GAAP financial measures we have discussed in our selected historical consolidated financial data when comparing such non-GAAP financial measures. The following reconciliation tables provide a more detailed analysis of these, and reconciliation for, each of non-GAAP financial measures.
Current wording
In accordance with the SEC's rules, we classify a financial measure as being a non-GAAP financial measure if that financial measure excludes or includes amounts, or is subject to adjustments that have the effect of excluding or including amounts, that are included or excluded, as the case may be, in the most directly comparable measure calculated and presented in accordance with GAAP as in effect from time to time in the United States in our consolidated statements of income, balance sheets or statements of cash flows. The non-GAAP financial measures that we discuss in this Report should not be considered in isolation or as a substitute for the most directly comparable or other financial measures calculated in accordance with GAAP. Moreover, the manner in which we calculate the non-GAAP financial measures that we discuss in our selected historical consolidated financial data may differ from that of other companies reporting measures with similar names. You should understand how such other banking organizations calculate their financial measures similar or with names similar to the non-GAAP financial measures we have discussed in our selected historical consolidated financial data when comparing such non-GAAP financial measures. The following reconciliation tables provide a more detailed analysis of these, and reconciliation for, each of non-GAAP financial measures.
Previous wording
Return on average tangible common equity is a non-GAAP measure that uses average shareholders' equity and excludes the impact of goodwill and other intangibles. This measurement is used by management to provide a depiction of the our profitability without being impacted by its intangible assets, as intangible assets are not directly managed to generate earnings. The following table presents, as of the dates set forth below, reconciliations of total average tangible common equity to average shareholders' equity and return on average tangible common equity to return on average shareholders' equity:
Current wording
Return on average tangible common equity is a non-GAAP measure that uses average shareholders' equity and excludes the impact of goodwill and other intangibles. This measurement is used by management to provide a depiction of our profitability without being impacted by intangible assets, as intangible assets are not directly managed to generate earnings. The most directly comparable financial measure calculated in accordance with GAAP is return on average common shareholders' equity.
Previous wording
We are a financial holding company headquartered in Nashville, Tennessee. We operate primarily through our wholly-owned subsidiary bank, FirstBank, and its subsidiaries. FirstBank provides a comprehensive suite of commercial and consumer banking services to clients in select markets in Tennessee, Kentucky, Alabama and North Georgia. As of March 31, 2024, our footprint included 76 full-service branches serving the following Tennessee Metropolitan Statistical Areas: Nashville, Chattanooga (including North Georgia), Knoxville, Memphis, and Jackson in addition to Bowling Green, Kentucky and Birmingham, Florence and Huntsville, Alabama. Our banking services extend to 17 community markets throughout Tennessee and North Georgia. FirstBank also provides retail mortgage banking services utilizing its bank branch network and mortgage banking offices strategically located throughout the southeastern United States.
Current wording
We are a financial holding company headquartered in Nashville, Tennessee. We operate primarily through our wholly-owned subsidiary bank, FirstBank, and its subsidiaries. FirstBank provides a comprehensive suite of commercial and consumer banking services to clients in select markets in Tennessee, Kentucky, Alabama and North Georgia. As of June 30, 2024, our footprint included 77 full-service branches serving the following Tennessee Metropolitan Statistical Areas: Nashville, Chattanooga (including North Georgia), Knoxville, Memphis, and Jackson in addition to Bowling Green, Kentucky and Birmingham, Florence and Huntsville, Alabama. Our banking services extend to 17 community markets throughout Tennessee and North Georgia. FirstBank also provides retail mortgage banking services utilizing its bank branch network and mortgage banking offices strategically located throughout the southeastern United States.
Previous wording
Our net income decreased during the three months ended March 31, 2024 to $28.0 million from $36.4 million for the three months ended March 31, 2023. Diluted earnings per common share were $0.59 and $0.78 for the three months ended March 31, 2024 and 2023, respectively. Our net income represented a ROAA of 0.89% and 1.15% for the three months ended March 31, 2024 and 2023, respectively, and a ROAE of 7.70% and 11.0% for the same periods. Our ROATCE for the three months ended March 31, 2024 and 2023 were 9.29% and 13.6%, respectively. See “GAAP reconciliation and management explanation of non-GAAP financial measures” in this Report for a discussion of tangible common equity and return on average tangible common equity.
Current wording
Our net income increased during the three months ended June 30, 2024 to $40.0 million from $35.3 million for the three months ended June 30, 2023. Diluted earnings per common share were $0.85 and $0.75 for the three months ended June 30, 2024 and 2023, respectively. Our net income represented a ROAA of 1.30% and 1.10% for the three months ended June 30, 2024 and 2023, respectively, and a ROAE of 10.9% and 10.3% for the same periods. Our ROATCE for the three months ended June 30, 2024 and 2023 were 13.1% and 12.6%, respectively. See “GAAP reconciliation and management explanation of non-GAAP financial measures” in this Report for a discussion of tangible common equity and return on average tangible common equity.
Previous wording
During the three months ended March 31, 2024, our net interest income decreased to $99.5 million compared with $103.7 million in the three months ended March 31, 2023. Our net interest margin, on a tax-equivalent basis, decreased to 3.42% for the three months ended March 31, 2024 as compared to 3.51% for the three months ended March 31, 2023. The decrease in net interest margin was primarily driven by our volume of interest-earnings assets decreasing compared to an increase in our interest-bearing liabilities partially offset by higher interest rates.
Current wording
During the three months ended June 30, 2024, our net interest income increased to $102.6 million compared with $101.5 million in the three months ended June 30, 2023. Our net interest margin, on a tax-equivalent basis, increased to 3.57% for the three months ended June 30, 2024 as compared to 3.40% for the three months ended June 30, 2023. The increase in net interest margin was primarily driven by higher interest rates mostly offset by the decreases in our volume of interest-earning assets and interest-bearing liabilities.
Previous wording
Noninterest income for the three months ended March 31, 2024 decreased by $15.4 million to $8.0 million, down from $23.3 million for the three months ended March 31, 2023. The decrease in noninterest income was primarily due to a $16.2 million net loss on investment securities primarily related to the sale of $207.9 million of available-for-sale securities. Refer to the section “Other earnings assets” for additional information on the sale of the available-for sale securities.
Current wording
Noninterest income for the six months ended June 30, 2024 decreased by $13.6 million to $33.6 million, down from $47.2 million for the six months ended June 30, 2023. The decrease in noninterest income was primarily due to a $16.2 million net loss on investment securities primarily related to the sale of $207.9 million of available-for-sale securities. Refer to the section “Other earnings assets” for additional information on the sale of the available-for sale securities. The decrease was partially offset by a $1.5 million increase in investment services and trust income during the six months ended June 30, 2024.
Previous wording
Noninterest expense decreased to $72.4 million for the three months ended March 31, 2024, compared with $80.4 million for the three months ended March 31, 2023. The decrease in noninterest expense is due to decreases in salaries, commissions and employee benefits of $4.2 million primarily related to the Company's efficiency and scalability initiatives and updated methodology of deferrals for loan fees and loan origination expenses. Additionally, the decrease is reflective of decreases in legal and professional expenses, advertising and franchise tax expense.
Current wording
Noninterest expense decreased to $147.5 million for the six months ended June 30, 2024, compared with $161.7 million for the six months ended June 30, 2023. The decrease in noninterest expense is due to decreases in salaries, commissions and employee benefits of $10.0 million primarily related to the Company's efficiency and scalability initiatives and updated methodology of deferrals for loan fees and loan origination expenses. Additionally, the decrease is reflective of decreases in legal and professional expenses, advertising and franchise tax expense.
Previous wording
We operate our business in two business segments: Banking and Mortgage. See Note 11, “Segment reporting” in the notes to our unaudited consolidated financial statements contained herein for a description of these business segments.
Current wording
We operate our business in two business segments: Banking and Mortgage. See Note 11, “Segment reporting” in the notes to our consolidated financial statements contained herein for a description of these business segments.
Previous wording
Income before taxes from the Banking segment decreased for the three months ended March 31, 2024 to $31.1 million, compared to $45.8 million for the three months ended March 31, 2023. Net interest income decreased by $4.2 million to $97.1 million during the three months ended March 31, 2024 compared to $101.3 million during the three months ended March 31, 2023. Provisions for credit losses on loans HFI and unfunded loan commitments resulted in $0.8 million of provision expense during the three months ended March 31, 2024 compared to $0.2 million during the three months ended March 31, 2023. Noninterest income decreased to a loss of $4.8 million in the three months ended March 31, 2024 as compared to income of $11.5 million in the three months ended March 31, 2023. Similar to the discussion above, the decrease includes a net loss on investment securities of $16.2 million primarily associated with the sale of $207.9 million available-for-sale securities during the three months ended March 31, 2024 compared with a net gain on investment securities of $0.1 million for the three months ended March 31, 2023. Noninterest expense decreased to $60.3 million for three months ended March 31, 2024 compared to $66.8 million for the three months ended March 31, 2023 due to decreases in salaries, legal and professional fees, advertising and franchise tax expense.
Current wording
Income before taxes from the Banking segment decreased for the six months ended June 30, 2024 to $82.9 million, compared to $93.1 million for the six months ended June 30, 2023. Net interest income decreased by $2.0 million to $200.2 million during the six months ended June 30, 2024 compared to $202.2 million during the six months ended June 30, 2023. Provisions for credit losses on loans HFI and unfunded loan commitments resulted in $3.3 million of provision expense during the six months ended June 30, 2024 compared to a reversal of $0.9 million of provision expense during the six months ended June 30, 2023. Noninterest income decreased to $8.7 million in the six months ended June 30, 2024 as compared to $23.0 million in the six months ended June 30, 2023. This decrease includes a net loss on investment securities of $16.2 million primarily associated with the sale of $207.9 million available-for-sale securities during the six months ended June 30, 2024 compared with a net gain on investment securities of $41 thousand for the six months ended June 30, 2023. Noninterest expense decreased to $122.7 million for six months ended June 30, 2024 compared to $133.0 million for the six months ended June 30, 2023 due to decreases in salaries, legal and professional fees, advertising and franchise tax expense.
Previous wording
Activity in our Mortgage segment resulted in a pre-tax net contribution of $3.1 million for the three months ended March 31, 2024 compared to $0.3 million for the three months ended March 31, 2023. Net interest income was $2.4 million for both the three months ended March 31, 2024 and 2023. Provisions for credit losses on loans HFI and unfunded loan commitments resulted in a reversal of $0.1 million of provision expense during the three months ended March 31, 2024 compared to $0.3 million of provision expense during the three months ended March 31, 2023. Mortgage banking income increased $0.5 million to $12.6 million during the three months ended March 31, 2024 compared to $12.1 million for the three months ended March 31, 2023. Mortgage banking income primarily includes origination fees and realized gains and losses on the sale of mortgage loans, unrealized change in fair value of mortgage loans and derivatives, and mortgage loan servicing fees, which includes the net change in fair value of MSRs and related derivatives. Mortgage banking income is initially driven by the recognition of interest rate lock commitments at fair value at inception of the IRLCs. This is subsequently adjusted for changes in the overall interest rate environment offset by derivative contracts entered into to mitigate the interest rate exposure. Upon sale of the loan, the net fair value gain is reclassified as a realized gain on sale.
Current wording
Activity in our Mortgage segment resulted in a pre-tax net contribution of $0.7 million for the three months ended June 30, 2024 compared to a $1.2 million pre-tax net loss for the three months ended June 30, 2023. Net interest income was $1.1 million for the three months ended June 30, 2024 and $1.6 million for the three months ended June 30, 2023. Provisions for credit losses on loans HFI and unfunded loan commitments resulted in a reversal of $0.2 million of provision expense during the three months ended June 30, 2024 compared to $0.1 million of provision expense during the three months ended June 30, 2023. Mortgage banking income decreased $0.3 million to $11.9 million during the three months ended June 30, 2024 compared to $12.2 million for the three months ended June 30, 2023. As noted below, mortgage banking income includes origination fees and realized gains and losses on the sale of mortgage loans, change in fair value of mortgage loans and derivatives, and mortgage loan servicing fees, which includes the net change in fair value of MSRs and related derivatives. Mortgage banking income is initially driven by the recognition of interest rate lock commitments at fair value at inception of the IRLCs. This is subsequently adjusted for changes in the overall interest rate environment offset by derivative contracts entered into to mitigate the interest rate exposure. Upon sale of the loan, the net fair value gain is reclassified as a realized gain on sale.
Previous wording
Noninterest expense for the three months ended March 31, 2024 and 2023 was $12.1 million and $13.7 million, respectively. This decrease is reflective of a decrease in salaries associated with our efficiency and scalability initiatives.
Current wording
Noninterest expense for the three months ended June 30, 2024 and 2023 was $12.8 million and $15.1 million, respectively. This decrease is reflective of a decrease in salaries associated with our efficiency and scalability initiatives.
Previous wording
Our tax-exempt income is converted to a tax-equivalent basis by adjusting for the combined federal and blended state statutory income tax rate of 26.06% for the three months ended March 31, 2024 and 2023.
Current wording
Our tax-exempt income is converted to a tax-equivalent basis by adjusting for the combined federal and blended state statutory income tax rate of 26.06% for the three and six months ended June 30, 2024 and 2023.
Previous wording
During the three months ended March 31, 2024, the U.S. Treasury yield curve became less inverted as long-term note and bond rates increased at a faster pace than shorter-term note rates. The curve remained inverted as of March 31, 2024, which is in contrast to the more normalized upward sloping U.S. Treasury yield curve exhibited during the three months ended March 31, 2023. The Federal Funds Target Rate range was 5.25% - 5.50% as of both March 31, 2024 and December 31, 2023. The target range for the federal funds rate has remained at 5.25% to 5.50% since the Federal Open Market Committee’s July 26, 2023 meeting.
Current wording
During the three and six months ended June 30, 2024, the U.S. Treasury yield curve became less inverted as long-term note and bond rates increased at a faster pace than shorter-term note rates. The curve remained inverted as of June 30, 2024, which is in contrast to the more normalized upward sloping U.S. Treasury yield curve exhibited during the three and six months ended June 30, 2023. The Federal Funds Target Rate range was 5.25% - 5.50% as of both June 30, 2024 and December 31, 2023. The target range for the federal funds rate has remained at 5.25% to 5.50% since the Federal Open Market Committee’s July 26, 2023 meeting.
Previous wording
Origination and other loan fees impacted our NIM by 5 basis points and 10 basis points for the three months ended March 31, 2024 and 2023, respectively. The decrease was due to an updated methodology for deferrals.
Current wording
Origination and other loan fees impacted our NIM by 4 basis points and 13 basis points for the three months ended June 30, 2024 and 2023, respectively. The decrease was primarily due to an updated methodology for deferrals.
Previous wording
Interest income on taxable investment securities increased $2.5 million to $9.1 million for the three months ended March 31, 2024 from $6.6 million for the three months ended March 31, 2023 due to the reinvestment of proceeds from the sale of AFS debt securities that were sold during the second half of 2023 to higher yielding U.S. government agency securities. The yield on taxable investment securities increased 72 basis points to 2.62% for the three months ended March 31, 2024 compared to 1.90% for the three months ended March 31, 2023.
Current wording
Interest income on taxable investment securities increased $5.5 million to $12.0 million for the three months ended June 30, 2024 from $6.5 million for the three months ended June 30, 2023 due to the reinvestment of proceeds from the sale of AFS debt securities that were sold during the second half of 2023 and first quarter of 2024 to higher yielding U.S. government agency securities. The yield on taxable investment securities increased 140 basis points to 3.29% for the three months ended June 30, 2024 compared to 1.89% for the three months ended June 30, 2023.
Previous wording
On a tax-equivalent basis, net interest income decreased $4.3 million to $100.2 million for the three months ended March 31, 2024 as compared to $104.5 million for the three months ended March 31, 2023. Interest income, on a tax-equivalent basis, was $176.8 million for the three months ended March 31, 2024, compared to $160.3 million for the three months ended March 31, 2023, an increase of $16.5 million, which was primarily driven by increases in interest rates on loans HFI, taxable investment securities and interest-bearing deposits with other financial institutions, partially offset by a decrease in average interest-bearing deposits with other financial institutions. Total interest income represents an increase in yield on interest-earning assets to 6.03% for the three months ended March 31, 2024 compared with 5.38% for the three months ended March 31, 2023.
Current wording
Net interest income decreased $3.4 million to $203.5 million for the six months ended June 30, 2024 as compared to $206.9 million for the six months ended June 30, 2023. The change in net interest income was driven by an increase in interest income of $23.6 million, driven largely by an increase in yields on average earning assets, more than offset by an increase in interest expense of $27.0 million, stemming from an increase in the rates on the average interest-bearing liabilities. Interest income was $354.9 million for the six months ended June 30, 2024 compared to $331.3 million for the six months ended June 30, 2023. This increase was primarily driven by increases in yields on loans HFI and taxable investment securities, partially offset by a decrease in average interest-bearing deposits with other financial institutions. Total interest income represents an increase in yield on interest-earning assets to 6.09% for the six months ended June 30, 2024 compared with 5.53% for the six months ended June 30, 2023.
Previous wording
Interest income on loans HFI, on a tax-equivalent basis, increased $15.5 million to $155.0 million for the three months ended March 31, 2024 from $139.5 million for the three months ended March 31, 2023 due primarily to increasing interest rates. The average yield on loans HFI increased by 59 basis points period-over-period to 6.64% for the three months ended March 31, 2024 from 6.05% for the three months ended March 31, 2023. Our estimated contractual loan interest yield was 6.55% in the three months ended March 31, 2024 compared with 5.90% in the three months ended March 31, 2023.
Current wording
Interest income on loans HFI increased $21.3 million to $309.2 million for the six months ended June 30, 2024 from $287.9 million for the six months ended June 30, 2023 due primarily to increasing yields. The average yield on loans HFI increased by 47 basis points period-over-period to 6.67% for the six months ended June 30, 2024 from 6.20% for the six months ended June 30, 2023.
Previous wording
Interest income on interest-bearing deposits with other financial institutions decreased to $7.1 million for the three months ended March 31, 2024 from $8.0 million for the three months ended March 31, 2023 due to a decrease in volume of interest-bearing deposits with other financial institutions partially offset by higher interest rates. The average balance of interest-bearing deposits with other financial institutions decreased $198.2 million to $530.4 million for the three months ended March 31, 2024 from $728.6 million for the three months ended March 31, 2023. The yield on interest-bearing deposits with other financial institutions increased 90 basis points to 5.36% for the three months ended March 31, 2024 compared to 4.46% for the three months ended March 31, 2023.
Current wording
Interest income on interest-bearing deposits with other financial institutions decreased to $13.7 million for the six months ended June 30, 2024 from $18.8 million for the six months ended June 30, 2023 due to a decrease in volume of interest-bearing deposits with other financial institutions partially offset by higher yields. The average balance of interest-bearing deposits with other financial institutions decreased $284.3 million to $509.3 million for the six months ended June 30, 2024 from $793.6 million for the six months ended June 30, 2023. The yield on interest-bearing deposits with other financial institutions increased 62 basis points to 5.41% for the six months ended June 30, 2024 compared to 4.79% for the six months ended June 30, 2023.
Previous wording
Interest expense was $76.6 million for the three months ended March 31, 2024, an increase of $20.8 million as compared to $55.8 million for the three months ended March 31, 2023. The increase was largely attributed to a rise in interest rates in interest-bearing deposit accounts, and specifically on money market and customer time deposit products. Interest expense on money market deposits increased $13.1 million to $37.6 million for the three months ended March 31, 2024 compared to $24.5 million for the three months ended March 31, 2023. Interest expense on customer time deposits increased $4.9 million to $14.1 million for the three months ended March 31, 2024 from $9.2 million for the three months ended March 31, 2023. The average rate on money market deposits increased 98 basis points from 2.95% for the three months ended March 31, 2023 to 3.93% for the three months ended March 31, 2024. The average rate on customer time deposits increased 136 basis points from 2.54% for the three months ended March 31, 2023 to 3.90% for the three months ended March 31, 2024. Total cost of interest-bearing deposits was 3.49% for the three months ended March 31, 2024 compared to 2.53% for the three months ended March 31, 2023.
Current wording
Interest expense was $151.4 million for the six months ended June 30, 2024, an increase of $27.0 million as compared to $124.5 million for the six months ended June 30, 2023. The increase was largely attributed to a rise in the rate paid on interest-bearing deposit accounts, most notably, on money market and customer time deposit products. Interest expense on money market deposits increased $19.9 million to $74.5 million for the six months ended June 30, 2024 compared to $54.6 million for the six months ended June 30, 2023. Interest expense on customer time deposits increased $8.1 million to $27.9 million for the six months ended June 30, 2024 from $19.9 million for the six months ended June 30, 2023. The average rate on money market deposits increased 74 basis points to 3.93% for the six months ended June 30, 2024 from 3.19% for the six months ended June 30, 2023. The average rate on customer time deposits increased 118 basis points to 3.95% for the six months ended June 30, 2024 from 2.77% for the six months ended June 30, 2023. Total cost of interest-bearing deposits was 3.51% for the six months ended June 30, 2024 compared to 2.80% for the six months ended June 30, 2023.
Previous wording
The average balance of other borrowings increased $129.6 million to $131.3 million for the three months ended March 31, 2024 compared to $1.7 million for the three months ended March 31, 2023. As a result, interest expense on other borrowings increased to 4.83% for the three months ended March 31, 2024 compared to for the three months ended March 31, 2023. The increase is due primarily of borrowings from the Bank Term Funding Program. Refer to the section “Borrowings” for additional information on the BTFP.
Current wording
The average balance of other borrowings increased $129.8 million to $131.3 million for the six months ended June 30, 2024 compared to $1.5 million for the six months ended June 30, 2023. As a result, interest expense on other borrowings increased to $3.1 million for the six months ended June 30, 2024 compared to $16 thousand for the six months ended June 30, 2023. The yield on other borrowings increased 271 basis points to 4.81% for the six months ended June 30, 2024 compared to 2.10% for the six months ended June 30, 2023. The increase is due primarily of borrowings from the Bank Term Funding Program. Refer to the section “Borrowings” for additional information on the BTFP.
Previous wording
(2)Interest income includes the effects of taxable-equivalent adjustments using a U.S. federal income tax rate and, where applicable, state income tax to increase tax-exempt interest income to a tax-equivalent basis. The net tax-equivalent adjustment amounts included in income were $0.7 million and $0.8 million for three months ended March 31, 2024 and 2023, respectively.
Current wording
(2)Interest income includes the effects of taxable-equivalent adjustments using a U.S. federal income tax rate and, where applicable, state income tax to increase tax-exempt interest income to a tax-equivalent basis. The net tax-equivalent adjustment amounts included in income were $1.3 million and $1.7 million for six months ended June 30, 2024 and 2023, respectively.
Previous wording
(3)Includes average net unrealized losses on investment securities available for sale of $194.1 million and $222.8 million for the three months ended March 31, 2024 and 2023, respectively.
Current wording
(3)Includes average net unrealized losses on investment securities available for sale of $196.1 million and $217.4 million for the six months ended June 30, 2024 and 2023, respectively.
Previous wording
(4)Includes average of optional rights to repurchase government guaranteed GNMA mortgage loans previously sold that have become past due greater than 90 days of $20.8 million and $23.2 million for the three months ended March 31, 2024 and 2023, respectively.
Current wording
(4)Includes average of optional rights to repurchase government guaranteed GNMA mortgage loans previously sold that have become past due greater than 90 days of $20.8 million and $21.7 million for the six months ended June 30, 2024 and 2023, respectively.
Previous wording
The tables below present the components of the changes in net interest income for the three months ended March 31, 2024 and 2023. For each major category of interest-earning assets and interest-bearing liabilities, information is provided with respect to changes due to average volume and changes due to interest rates, with the changes in both volume and interest rates allocated to these two categories based on the proportionate absolute changes in each category.
Current wording
The tables below present the components of the changes in net interest income for the six months ended June 30, 2024 and 2023. For each major category of interest-earning assets and interest-bearing liabilities, information is provided with respect to changes due to average volume and changes due to interest rates, with the changes in both volume and interest rates allocated to these two categories based on the proportionate absolute changes in each category.
Previous wording
(2)Interest income includes the effects of the tax-equivalent adjustments to increase tax-exempt interest income to a tax-equivalent basis. The net taxable-equivalent adjustment amounts included was $0.7 million and $0.8 million for the three months ended March 31, 2024 and 2023, respectively.
Current wording
(2)Interest income includes the effects of the tax-equivalent adjustments to increase tax-exempt interest income to a tax-equivalent basis. The net taxable-equivalent adjustment amounts included was $1.3 million and $1.7 million for the six months ended June 30, 2024 and 2023, respectively.
Previous wording
We also estimate expected credit losses on off-balance sheet loan commitments that are not accounted for as derivatives. When applying the CECL methodology to estimate expected credit loss, we consider the likelihood that funding will occur, the contractual period of exposure to credit loss, the risk of loss, historical loss experience, and current conditions along with expectations of future economic conditions. For the three months ended March 31, 2024, we recorded a reversal of provision for credit losses on unfunded commitments of $1.1 million compared to $4.5 million during the three months ended March 31, 2023. The reversal of provision for credit losses on unfunded commitments for the three months ended March 31, 2024 and 2023 is primarily due to management's concentrated effort to reduce unfunded loan commitments during the periods indicated including a $135.3 million and a $298.8 million decrease in our construction category as these projects moved to permanent financing for the three months ended March 31, 2024 and 2023. As such, this resulted in a $1.0 million and $4.5 million decrease in required ACL related to the unfunded commitments in our construction portfolio for the three months ended March 31, 2024 and 2023.
Current wording
We also estimate expected credit losses on off-balance sheet loan commitments that are not accounted for as derivatives. When applying the CECL methodology to estimate expected credit loss, we consider the likelihood that funding will occur, the contractual period of exposure to credit loss, the risk of loss, historical loss experience, and current conditions along with expectations of future economic conditions. We recorded a reversal of provision for credit losses on unfunded commitments of $1.7 million and $3.7 million for the three months ended June 30, 2024 and 2023, respectively. The reversal is due to a $37.6 million decrease in our unfunded commitments during the three months ended June 30, 2024, including a $73.8 million decrease in our construction portfolio.
Previous wording
We recognized a provision for credit losses on loans HFI for the three months ended March 31, 2024 and 2023 of $1.9 million and $5.0 million, respectively. The current period provision on loans HFI resulted from management’s best estimate of losses over the life of loans in our portfolio in accordance with the CECL approach and was impacted by projected deterioration in the CRE portfolio which was adjusted qualitatively. For the three months ended March 31, 2023, the increase in the provision for credit losses on loans HFI was driven by an increase in loans HFI outstanding period-over-period and the increased possibility of a future recession and inflationary pressures.
Current wording
We recognized a provision for credit losses on loans HFI for the six months ended June 30, 2024 and 2023 of $5.8 million and $7.6 million, respectively. The current period provision on loans HFI resulted from management’s best estimate of losses over the life of loans in our portfolio in accordance with the CECL approach and was impacted by projected deterioration in the CRE portfolio which was adjusted qualitatively. For the six months ended June 30, 2023, the increase in the provision for credit losses on loans HFI was driven by an increase in loans HFI outstanding period-over-period and the increased possibility of a future recession and inflationary pressures.
Previous wording
During the three months ended March 31, 2024 and 2023, it was determined that all AFS debt securities that experienced a decline in fair value below amortized cost basis were due to noncredit-related factors. Therefore, there was no provision for credit losses recognized on AFS debt securities during the three months ended March 31, 2024 or 2023.
Current wording
During the six months ended June 30, 2024 and 2023, it was determined that all AFS debt securities that experienced a decline in fair value below amortized cost basis were due to noncredit-related factors. Therefore, there was no provision for credit losses recognized on AFS debt securities during the six months ended June 30, 2024 or 2023.
Previous wording
Noninterest income amounted to $8.0 million for the three months ended March 31, 2024, a decrease of $15.4 million, or 66%, as compared to $23.3 million for the three months ended March 31, 2023. Changes in selected components of noninterest income in the above table are discussed below.
Current wording
Noninterest income amounted to $25.6 million for the three months ended June 30, 2024, an increase of $1.8 million, or 8%, as compared to $23.8 million for the three months ended June 30, 2023. Changes in selected components of noninterest income in the above table are discussed below.
Previous wording
Net loss from investment securities was $16.2 million for the three months ended March 31, 2024 compared to a $0.1 million net gain for the three months ended March 31, 2023. The net loss from investment securities during the three months ended March 31, 2024 is the result of management's election to sell $207.9 million of AFS debt securities to reinvest the proceeds into higher yielding AFS securities. Refer to the section “Other earning assets” for additional information on the sale of the AFS debt securities.
Current wording
Net loss from investment securities was $16.2 million for the six months ended June 30, 2024 compared to a net gain of $41 thousand for the six months ended June 30, 2023. The net loss from investment securities during the six months ended June 30, 2024 is the result of management's election to sell $207.9 million of AFS debt securities to reinvest the proceeds into higher yielding AFS securities. Refer to the section “Other earning assets” for additional information on the sale of the AFS debt securities.
Previous wording
Salaries, commissions and employee benefits expense was the largest component of noninterest expense representing 62% and 61% of total noninterest expense for the three months ended March 31, 2024 and 2023, respectively. For the three months ended March 31, 2024, salaries, commissions and employee benefits expense decreased $4.2 million, or 9%, to $44.6 million as compared to $48.8 million for the three months ended March 31, 2023. This change was attributable to a $2.5 million decrease stemming from the Company's efficiency and scalability initiatives, as well as a $2.1 million decrease from the Company applying an updated deferral methodology for loan fees and loan origination expenses.
Current wording
Salaries, commissions and employee benefits expense was the largest component of noninterest expense representing 62% of total noninterest expense for both the six months ended June 30, 2024 and 2023. For the six months ended June 30, 2024, salaries, commissions and employee benefits expense decreased $10.0 million, or 10%, to $90.8 million as compared to $100.8 million for the six months ended June 30, 2023. This change was attributable to a decrease stemming from the Company's efficiency and scalability initiatives, as well as a $5.0 million decrease from the Company applying an updated deferral methodology for loan fees and loan origination expenses.
Previous wording
Advertising expense includes expenses related to sponsorships, advertising, marketing, customer relations and business development, and public relations. During the three months ended March 31, 2024, advertising expense decreased $1.0 million to $1.2 million compared to $2.1 million during the three months ended March 31, 2023. This decrease is primarily attributable to marketing rebate activity with partners earned through higher transaction volumes during the three months ended March 31, 2024 compared to the three months ended March 31, 2023.
Current wording
Advertising expense includes expenses related to sponsorships, advertising, marketing, customer relations and business development, and public relations. During the six months ended June 30, 2024, advertising expense decreased $1.1 million to $3.0 million compared to $4.1 million during the six months ended June 30, 2023. This decrease is primarily attributable to marketing rebate activity with partners earned through higher transaction volumes during the six months ended June 30, 2024 compared to the six months ended June 30, 2023.
Previous wording
Other noninterest expense primarily includes mortgage servicing expenses, regulatory fees and deposit insurance assessments, software license and maintenance fees and various other miscellaneous expenses. Other noninterest expense decreased $2.5 million during the three months ended March 31, 2024 to $14.9 million compared to $17.4 million during the three months ended March 31, 2023. The decrease was primarily related to a $2.8 million decrease in franchise tax expense which was partially offset by $0.5 million expense related to the FDIC special assessment.
Current wording
Other noninterest expense primarily includes mortgage servicing expenses, regulatory fees and deposit insurance assessments, software license and maintenance fees and various other miscellaneous expenses. Other noninterest expense decreased $2.3 million during the six months ended June 30, 2024 to $30.6 million compared to $32.9 million during the six months ended June 30, 2023. The decrease was primarily related to a $2.6 million decrease in franchise tax expense which was partially offset by $0.5 million expense related to the FDIC special assessment.
Previous wording
Our efficiency ratio was 67.4% and 63.3% for the three months ended March 31, 2024 and 2023, respectively. Our core efficiency ratio, on a tax-equivalent basis, was 58.1% and 63.4% for the three months ended March 31, 2024 and 2023, respectively. See “GAAP reconciliation and management explanation of non-GAAP financial measures” in this Report for a discussion of the core efficiency ratio.
Current wording
Our efficiency ratio was 58.6% and 62.6% for the three and six months ended June 30, 2024, respectively, and 64.8% and 64.1% for the three and six months ended June 30, 2023, respectively. Our adjusted efficiency ratio, on a tax-equivalent basis, was 58.3% and 58.2% for the three and six months ended June 30, 2024, respectively, and 63.5% for both the three and six months ended June 30, 2023. See “GAAP reconciliation and management explanation of non-GAAP financial measures” in this Report for a discussion of the adjusted efficiency ratio.
Previous wording
Income tax expense was $6.3 million and $9.7 million for the three months ended March 31, 2024 and 2023, respectively. This represents effective tax rates of 18.4% and 21.0% for the three months ended March 31, 2024 and 2023, respectively. The primary differences from the enacted rates are applicable state income taxes and certain expenses that are not deductible reduced for non-taxable income and additional deductions for equity-based compensation upon vesting of restricted stock units. Refer to Note 7 “Income taxes” in the notes to the consolidated financial statements for additional information regarding the Company's income tax expense and effective tax rates.
Current wording
Income tax expense was $10.9 million and $9.8 million for the three months ended June 30, 2024 and 2023, respectively, and $17.2 million and $19.5 million for the six months ended June 30, 2024 and 2023, respectively. This represents effective tax rates of 21.4% and 21.8% for the three months ended June 30, 2024 and 2023, respectively, and 20.2% and 21.4% for the six months ended June 30, 2024 and 2023, respectively. The primary differences from the enacted rates are applicable state income taxes and certain expenses that are not deductible, reduced for non-taxable income and deductions for equity-based compensation upon vesting of restricted stock units. Refer to Note 7 “Income taxes” in the notes to the consolidated financial statements for additional information regarding the Company's income tax expense and effective tax rates.
Previous wording
Our loans HFI portfolio is our most significant earning asset, comprising 74% and 75% of our total assets at March 31, 2024 and December 31, 2023, respectively. Our strategy is to grow our loan portfolio by originating quality commercial and consumer type loans that comply with our credit policies and that produce revenues consistent with our financial objectives. Our overall lending approach is primarily focused on providing credit to our customers directly in the markets we serve, but we are also party to loan syndications and participations from other banks (collectively, “participated loans”). As of March 31, 2024 and December 31, 2023, loans held for investment included approximately $217.1 million and $254.6 million, respectively, related to participated loans. We also sell loan participations to unaffiliated third-parties as part of our credit risk management and balance sheet management strategy. During the three months ended March 31, 2024 and 2023, we sold $8.0 million and $4.4 million in loan participations, respectively. All loans, whether or not we act as a participant, are underwritten to the same standards as all other loans we originate. We believe our loan portfolio is well-balanced, which provides us with the opportunity to grow while monitoring our loan concentrations.
Current wording
Our loans HFI portfolio is our most significant earning asset, comprising 74.3% and 74.6% of our total assets at June 30, 2024 and December 31, 2023, respectively. Our strategy is to grow our loan portfolio by originating quality commercial and consumer type loans that comply with our credit policies and that produce revenues consistent with our financial objectives. Our overall lending approach is primarily focused on providing credit to our customers directly in the markets we serve, but we are also party to loan syndications and participations from other banks (collectively, “participated loans”). As of June 30, 2024 and December 31, 2023, loans held for investment included approximately $237.9 million and $254.6 million, respectively, related to participated loans. We also sell loan participations to unaffiliated third-parties as part of our credit risk management and balance sheet management strategy. During the three months ended June 30, 2024 and 2023, we sold $9.0 million and $11.9 million in loan participations, respectively. During the six months ended June 30, 2024 and 2023, we sold $17.0 million and $16.3 million in loan participations, respectively. All loans, whether or not we act as a participant, are underwritten to the same standards as all other loans we originate. We believe our loan portfolio is well-balanced, which provides us with the opportunity to grow while monitoring our loan concentrations.
Previous wording
Our nonperforming assets consist of nonperforming loans, other real estate owned and other repossessed non-earning assets. As of March 31, 2024 and December 31, 2023, we had $94.1 million and $86.5 million, respectively, in nonperforming assets. Nonperforming loans are those on which the accrual of interest has stopped, as well as loans that are contractually 90 days past due on which interest continues to accrue. Accrued interest receivable written off as an adjustment to interest income amounted to $0.2 million for both the three months ended March 31, 2024 and 2023. Additionally, we had net interest recoveries on nonperforming assets previously charged off of $0.3 million and $0.2 million for the three months ended March 31, 2024 and 2023, respectively.
Current wording
Our nonperforming assets consist of nonperforming loans, other real estate owned and other repossessed non-earning assets. As of June 30, 2024 and December 31, 2023, we had $101.5 million and $86.5 million, respectively, in nonperforming assets. Nonperforming loans are those on which the accrual of interest has stopped, as well as loans that are contractually 90 days past due on which interest continues to accrue. Accrued interest receivable written off as an adjustment to interest income amounted to $0.2 million for both the three months ended June 30, 2024 and 2023. Accrued interest receivable written off as an adjustment to interest income amounted to $0.4 million and $0.3 million for the six months ended June 30, 2024 and 2023, respectively. Additionally, we had net interest recoveries on nonperforming assets previously charged off of $0.7 million and $0.2 million for the three months ended June 30, 2024 and 2023, respectively, and $1.0 million and $0.4 million for the six months ended June 30, 2024 and 2023, respectively.
Previous wording
Nonperforming loans HFI increased by $6.8 million to $67.8 million as of March 31, 2024 compared to $60.9 million as of December 31, 2023. The increase in nonperforming loans primarily occurred in our commercial and construction portfolios.
Current wording
Nonperforming loans HFI increased by $12.3 million to $73.2 million as of June 30, 2024 compared to $60.9 million as of December 31, 2023. The increase in nonperforming loans primarily occurred in our commercial real estate owner-occupied and construction portfolios.
Showing the first 40 of 66 pairs. Open the source sections for the rest.
Rearranged current paragraphs (12)
Current report — wording carried from elsewhere
The following table presents, as of the dates set forth below, reconciliations of total average tangible common equity to average shareholders' equity and return on average tangible common equity to return on average shareholders' equity:
Current report — wording carried from elsewhere
Noninterest expense decreased to $75.1 million for the three months ended June 30, 2024, compared with $81.3 million for the three months ended June 30, 2023. The decrease in noninterest expense is due to decreases in salaries, commissions and employee benefits of $5.8 million primarily related to the Company's efficiency and scalability initiatives and updated methodology of deferrals for loan fees and loan origination expenses.
Current report — wording carried from elsewhere
The components of mortgage banking income for the six months ended June 30, 2024 and 2023 were as follows:
Current report — wording carried from elsewhere
The table below presents the components of the changes in net interest income for the three months ended June 30, 2024 and 2023. For each major category of interest-earning assets and interest-bearing liabilities, information is provided with respect to changes due to average volume and changes due to interest rates, with the changes in both volume and interest rates allocated to these two categories based on the proportionate absolute changes in each category.
Current report — wording carried from elsewhere
The components of our loan yield for the six months ended June 30, 2024 and 2023 were as follows:
Current report — wording carried from elsewhere
Origination and other loan fees impacted our NIM by 5 basis points and 12 basis points for the six months ended June 30, 2024 and 2023, respectively. The decrease was primarily due to an updated methodology for deferrals.
Current report — wording carried from elsewhere
Interest income on taxable investment securities increased $8.0 million to $21.1 million for the six months ended June 30, 2024 from $13.1 million for the six months ended June 30, 2023 due to the reinvestment of proceeds from the sale of AFS debt securities that were sold during the second half of 2023 and first quarter of 2024 to higher yielding U.S. government agency securities. The yield on taxable investment securities increased 106 basis points to 2.96% for the six months ended June 30, 2024 compared to 1.90% for the six months ended June 30, 2023.
Current report — wording carried from elsewhere
Average balance and interest yield/rate analysis
Current report — wording carried from elsewhere
The table below shows the average balances, income and expense and yield and rates of each of our interest-earning assets and interest-bearing liabilities on a tax equivalent basis, if applicable, for the periods indicated.
Current report — wording carried from elsewhere
During the three months ended June 30, 2024 and 2023, it was determined that all AFS debt securities that experienced a decline in fair value below amortized were due to noncredit-related factors. Therefore, there was no provision for credit losses recognized on available-for-sale debt securities during the three months ended June 30, 2024 or 2023.
Current report — wording carried from elsewhere
We recorded a reversal of provision for credit losses on unfunded commitments of $2.8 million and $8.2 million for the six months ended June 30, 2024 and 2023, respectively. The reversal of provision for credit losses on unfunded commitments for the six months ended June 30, 2024 and 2023 is primarily due to management's concentrated effort to reduce unfunded loan commitments during the periods indicated including a $209.1 million and a $496.0 million decrease in our construction category as these projects moved to permanent financing for the six months ended June 30, 2024 and 2023, respectively. As such, this resulted in a $2.7 million and $8.1 million decrease in required ACL related to the unfunded commitments in our construction portfolio for the six months ended June 30, 2024 and 2023, respectively.
Current report — wording carried from elsewhere
Salaries, commissions and employee benefits expense is the largest component of noninterest expenses representing 62% and 64% of total noninterest expense in the three months ended June 30, 2024 and 2023, respectively. During the three months ended June 30, 2024, salaries and employee benefits expense decreased $5.8 million, or 11%, to $46.2 million as compared to $52.0 million for the three months ended June 30, 2023. This change was attributable to a decrease stemming from the Company's efficiency and scalability initiatives, as well as a $2.9 million decrease from the Company applying an updated deferral methodology for loan fees and loan origination expenses.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
In accordance with the SEC's rules, we classify a financial measure as being a non-GAAP financial measure if that financial measure excludes or includes amounts, or is subject to adjustments that have the effect of excluding or including amounts, that are included or excluded, as the case may be, in the most directly comparable measure calculated and presented in accordance with GAAP as in effect from time to time in the United States in our consolidated statements of income, balance sheets or statements of cash flows.