FB Financial Corp
For the period ended Mar 31, 2025. Filed May 5, 2025.
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.
Mar 31, 2025 · Filed May 5, 2025
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 2024-09-30; filed 2024-11-04.
0001649749-24-000199
Item 2. Management’s discussion and analysis of financial condition and results of operationsCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-05-05.
0001649749-25-000128
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 222 previous paragraphs and 206 current paragraphs.
111 unchanged; 54 reworded; 39 added; 51 removed; 6 previous and 2 current paragraphs rearranged.
Tables are not compared: 37 previous and 32 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 (39)
Current report
Three months ended March 31, 2025 compared to three months ended March 31, 2024
Current report
Provision for credit losses of $2.3 million was recognized for the three months ended March 31, 2025 and $0.8 million for the period ended March 31, 2024. The increase was primarily due to charge-off activity and increases in unfunded commitments.
Current report
Noninterest income for the three months ended March 31, 2025 increased by $15.1 million to $23.0 million, compared to $8.0 million for the three months ended March 31, 2024. The increase was primarily driven by the recognition of a $16.2 million net loss on investment securities stemming from the sale of $207.9 million of AFS debt securities during the three months ended March 31, 2024. Refer to the section “Other earning assets” for additional information on the sale of the AFS debt securities.
Current report
Noninterest expense increased to $79.5 million for the three months ended March 31, 2025, compared with $72.4 million for the three months ended March 31, 2024. The increase in noninterest expense is due to increases in salaries, commissions and employee benefits of $3.7 million, advertising of $1.3 million and other noninterest expense of $1.9 million, including a $1.0 million increase in technology and platform fees and a franchise tax benefit of $0.2 million recognized during the three months ended March 31, 2024.
Current report
The Banking segment contributed $47.3 million of income before taxes for the current period as compared to $32.6 million for the previous period. Net interest income totaled $105.8 million during the three months ended March 31, 2025 compared to $98.5 million during the previous period. Provisions for credit losses on loans HFI and unfunded loan commitments resulted in $2.2 million of provision expense during the current period as compared to $0.8 million during the previous period. The Banking segment recorded noninterest income of $10.7 million in the current period as compared to a $4.8 million loss in the previous period. This increase was mainly attributable to a net loss on investment securities of $16.2 million from the sale of $207.9 million AFS debt securities during the previous period. Noninterest expense increased to $66.9 million for the current period compared to $60.2 million for the for the previous period due primarily to an increase in salaries and benefits, advertising, technology and platform fees, merger and integration costs and a minor franchise tax benefit recognized in the previous period.
Current report
The Mortgage segment contributed $1.5 million of income before taxes for the current period, as compared to $1.6 million of income before taxes in the prior period. Net interest income was $1.9 million for the current period and $1.0 million for the prior period. Provisions for credit losses on loans HFI and unfunded loan commitments resulted in provision expense of $0.1 million during the current period compared to a reversal of $0.1 million of provision expense during the prior period. Mortgage banking income remained relatively stable between periods at $12.4 million and $12.6 million in the current and prior periods, respectively.
Current report
Noninterest expense for the current and prior periods were $12.6 million and $12.2 million, respectively. This increase is reflective of an increase in allocated support and overhead expenses.
Current report
Net interest income is the principle component of our earnings and represents the difference, or spread, between interest and fee income generated from earning assets and the interest expense paid on deposits and borrowed funds. Net interest income and margin are shaped by fluctuations in interest rates as well as changes in volume and mix of earning assets and interest-bearing liabilities.
Current report
During the three months ended March 31, 2025, the U.S. Treasury yield curve fell in intermediate and longer-term maturities given uncertainty around tariffs and economic growth. In contrast, during the three months ended March 31, 2024, the U.S. Treasury yield curve remained inverted, reflecting tighter monetary policy and higher short-term interest rates. The Federal Funds Target Rate range was 4.25% - 4.50% and 5.25% - 5.50% as of March 31, 2025 and March 31, 2024, respectively.
Current report
Net interest income increased $8.2 million to $108.4 million for the three months ended March 31, 2025 as compared to $100.2 million for the three months ended March 31, 2024. Net interest margin was 3.55% for the three months ended March 31, 2025 compared to 3.42% for the three months ended March 31, 2024. The increases in net interest income and net interest margin were primarily driven by decreases in interest expense paid on interest-bearing deposits and increases in interest income on investment securities and interest-bearing deposits with other financial institutions.
Current report
Interest income recognized on loans HFI decreased $2.8 million to $152.2 million for the three months ended March 31, 2025 from $155.0 million for the three months ended March 31, 2024. This decrease was attributable to a decline in the overall yield on loans HFI, partially offset by an increase in average balances. The yield on loans HFI decreased 23 basis points to 6.41% for the three months ended March 31, 2025 from 6.64% for the three months ended March 31, 2024.
Current report
Interest income on investment securities increased $4.8 million to $15.9 million for the three months ended March 31, 2025 from $11.1 million for the three months ended March 31, 2024. The increase was attributable to the increase in yield on these investments from the recent portfolio restructuring transactions. The yield on investment securities was 3.76% for the three months ended March 31, 2025, an increase of 105 basis points from 2.71% for the three months ended March 31, 2024.
Current report
Interest income on deposits with other financial institutions increased $1.8 million to $8.9 million for the three months ended March 31, 2025 from $7.1 million for the three months ended March 31, 2024. This increase is primarily volume driven as average balances increased to $811.2 million for the three months ended March 31, 2025 from $530.4 million for the three months ended March 31, 2024.
Current report
Interest expense was $72.1 million for the three months ended March 31, 2025, a decrease of $4.6 million as compared to $76.6 million for the three months ended March 31, 2024. The decrease was largely attributed to a decline in the rate paid on interest-bearing deposit accounts, partially offset by increases in average balances on interest-bearing deposit accounts.
Current report
Interest expense on interest-bearing deposit accounts totaled $70.2 million for the three months ended March 31, 2025, a $2.4 million decrease from the $72.6 million recognized for the three months ended March 31, 2024. The decline in interest expense on interest-bearing deposit accounts was led by declines in money market and customer time deposits which decreased $3.2 million and $1.4 million, respectively, for the three months ended March 31, 2025 as compared to the same period in the previous year. Offsetting these declines in interest expense within interest-bearing deposit accounts, we experienced an increase in interest expense from brokered time deposits, which increased $3.0 million for the three months ended March 31, 2025 to the same period in the previous year, due to an increase in the average balances outstanding as we took advantage of favorable relative terms available and issued brokered deposits towards the end of 2024. The average rate paid on interest-bearing deposits was 3.13% for the three months ended March 31, 2025 compared to 3.49% for the three months ended March 31, 2024.
Current report
Interest expense recognized on other borrowings decreased $1.6 million to $6 thousand for the three months ended March 31, 2025 due to the repayment of the Bank Term Funding Program which was paid off towards the end of 2024.
Current report
Noninterest income amounted to $23.0 million for the three months ended March 31, 2025, an increase of $15.1 million, as compared to $8.0 million for the three months ended March 31, 2024. Excluding the recognition of the $16.2 million of net loss from investment securities sales recognized during the three months ended March 31, 2024, noninterest income declined $1.2 million.
Current report
The increase in total noninterest income was driven by the net loss from investment securities during the three months ended March 31, 2024, offset by a net loss on sales or write-downs of premises and equipment, other real estate owned and other assets.
Current report
Service charges on deposit accounts include overdraft fees, account analysis fees and other customer transaction-related service charges. Service charges on deposit accounts increased $0.3 million during the three months ended March 31, 2025 to $3.5 million as compared to $3.1 million during the three months ended March 31, 2024.
Current report
ATM and interchange fees represent income related to customers' utilization of their debit cards and interchange income. ATM and interchange fees were $2.7 million for the three months ended March 31, 2025, compared to $2.9 million for the three months ended March 31, 2024.
Current report
Net loss from investment securities was $16 thousand for the three months ended March 31, 2025 compared to a net loss of $16.2 million for the three months ended March 31, 2024. The net gain from investment securities during the three months ended March 31, 2025 stemmed from gains on called AFS debt securities while the net loss in the prior year primarily related to the sale of $207.9 million of AFS debt securities during that period.
Current report
Net loss on sales or write-downs of premises and equipment, other real estate owned and other assets was $0.6 million for the three months ended March 31, 2025 compared to a net gain of $0.6 million for the three months ended March 31, 2024. The loss on sales or write-downs of premises and equipment, other real estate owned and other assets during the three months ended March 31, 2025 is primarily due to a $0.5 million decrease in gain on disposal of fixed assets and a loss of $0.5 million on sale of other real estate owned.
Current report
Other income is comprised of income recognized that does not typically fit into one of the other noninterest income categories and includes components such as BOLI income, swap fees, and equity investments income. Other income decreased $0.4 million to $1.3 million during the three months ended March 31, 2025 as compared to $1.7 million during the three months ended March 31, 2024. This decrease was primarily related to a $0.5 million loss associated with our proportionate share of loss of our equity method investment during the three months ended March 31, 2025.
Current report
Noninterest expense increased by $7.1 million, or 10%, during the three months ended March 31, 2025 to $79.5 million as compared to $72.4 million in the three months ended March 31, 2024. The increase in noninterest expense was attributable to increases in salaries and employee benefits, advertising, merger and integration costs and other noninterest expense.
Current report
Occupancy and equipment expense includes occupancy, depreciation and equipment expense. Occupancy and equipment expense of $6.6 million was recognized for both the three months ended March 31, 2025 and 2024.
Current report
Data processing is comprised of all third-party core operating system and processing charges as well as payroll processing. Data processing fees were $2.3 million for the three months ended March 31, 2025, compared to $2.4 million for the three months ended March 31, 2024.
Current report
Legal and professional fees represent fees incurred for the various support functions, which includes legal, consulting, outsourcing and other professional related fees. Legal and professional fees were $2.0 million and $1.9 million for the three months ended March 31, 2025 and 2024, respectively.
Current report
Amortization of core deposit and other intangibles were $0.7 million for the three months ended March 31, 2025, compared to $0.8 million for the three months ended March 31, 2024.
Current report
Merger and integration costs were $0.4 million for the three months ended March 31, 2025 associated with the recently announced and proposed merger with Southern States Bancshares, Inc.
Current report
We also maintain an allowance for credit losses on unfunded commitments in other liabilities, which increased to $6.5 million as of March 31, 2025 from $6.1 million as of December 31, 2024 due to a $25.5 million increase in unfunded loan commitments during the period. Notably, construction unfunded loan commitments increased during the three months ended March 31, 2025 due to reduced utilization on existing revolving lines and a seasonal increase in new projects.
Current report
Total deposits were $11.20 billion and $11.21 billion as of March 31, 2025 and December 31, 2024, respectively.
Current report
Noninterest-bearing deposits at March 31, 2025 and December 31, 2024 were $2.16 billion and $2.12 billion, respectively which include mortgage escrow deposits which increased to $94.0 million as of March 31, 2025 from $69.0 million as of December 31, 2024.
Current report
Our interest-bearing deposits were $9.04 billion and $9.09 billion at March 31, 2025 and December 31, 2024, respectively.
Current report
Interest-bearing checking deposits decreased to $2.78 billion at March 31, 2025 as compared to $2.91 billion at December 31, 2024. The decrease was a result of management's effort to manage down higher cost deposits.
Current report
Money market and savings deposits accounts increased by $144.4 million from December 31, 2024 primarily due to seasonal factors.
Current report
Customer time deposits decreased by $16.4 million from December 31, 2024 which was largely driven by management's decision not to renew certain maturing deposits given the change in market interest rates.
Current report
Additionally, brokered and internet time deposits decreased by $54.7 million to $414.4 million as of March 31, 2025 compared to December 31, 2024 as a result of brokered deposits being paid down.
Current report
During the three months ended March 31, 2025, there were no AFS debt securities sold and we purchased $103.7 million of AFS debt securities. Maturities, prepayments and calls of AFS debt securities totaled $74.9 million for the three months ended March 31, 2025.
Current report
During the three months ended March 31, 2024, we sold $207.9 million of AFS debt securities. The sales contributed to a pre-tax loss on securities of $16.2 million. We primarily sold agency collateralized mortgage obligations, agency mortgage-backed securities, U.S. Treasury and municipal securities. We reinvested the proceeds from the sales primarily into U.S. government agency AFS debt securities in order increase the effective yield of our portfolio. Including the reinvestment of these proceeds, we purchased $281.6 million of AFS debt securities during the three months ended March 31, 2024 and had maturities, prepayments and calls of AFS debt securities which totaled $66.6 million.
Removed paragraphs (51)
Previous report
Noninterest income for the three months ended September 30, 2024 decreased by $24.5 million to a loss of $16.5 million, compared to $8.0 million for the three months ended September 30, 2023. The decrease was primarily the result of management’s election to sell $318.6 million of AFS debt securities, which resulted in a $40.2 million net loss on investment securities during the three months ended September 30, 2024 compared to a $14.2 million net loss on investment securities primarily related to the sale of $76.6 million of AFS debt securities during the three months ended September 30, 2023. Refer to the section “Other earnings assets” for additional information on the sale of the AFS debt securities.
Previous report
Noninterest expense decreased to $76.2 million for the three months ended September 30, 2024, compared with $83.0 million for the three months ended September 30, 2023. The decrease in noninterest expense is due to decreases in salaries, commissions and employee benefits of $7.0 million primarily related to the Company’s efficiency and scalability initiatives and updated methodology of deferrals for loan fees and loan origination expenses.
Previous report
Our net income decreased during the nine months ended September 30, 2024 to $78.2 million from $90.9 million for the nine months ended September 30, 2023. Diluted earnings per common share were $1.67 and $1.94 for the nine months ended September 30, 2024 and 2023, respectively. Our net income represented a ROAA of 0.83% and 0.95% for the nine months ended September 30, 2024 and 2023, respectively, and a ROAE of 7.02% and 8.86% for the same periods. Our ROATCE for the nine months ended September 30, 2024 and 2023 were 8.45% and 10.9%, 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 report
During the nine months ended September 30, 2024, our net interest income increased to $308.1 million from $306.1 million for the nine months ended September 30, 2023. Our net interest margin, on a tax-equivalent basis, increased to 3.51% for the nine months ended September 30, 2024 as compared to 3.44% for the nine months ended September 30, 2023. The increase in net interest margin was primarily driven by higher interest rates mostly offset by our volume of interest-earnings assets decreasing compared to an increase in our interest-bearing liabilities.
Previous report
Noninterest income for the nine months ended September 30, 2024 decreased by $38.1 million to $17.1 million, down from $55.2 million for the nine months ended September 30, 2023. The decrease in noninterest income was primarily due to a $56.4 million net loss on investment securities related to the sale of $526.4 million of AFS debt securities during the nine months ended September 30, 2024 compared to a $14.2 million net loss on investment securities primarily related to the sale of $76.6 million of AFS debt securities during the nine months ended September 30, 2023. Refer to the section “Other earnings assets” for additional information on the sale of the AFS debt securities. The decrease was partially offset by a $2.1 million increase in investment services and trust income and a $2.1 million cash life insurance benefit during the nine months ended September 30, 2024.
Previous report
Noninterest expense decreased to $223.7 million for the nine months ended September 30, 2024, compared with $244.7 million for the nine months ended September 30, 2023. The decrease in noninterest expense is due to decreases in salaries, commissions and employee benefits of $16.9 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 advertising, legal and professional expenses and franchise tax expense.
Previous report
Income before taxes from the Banking segment decreased for the three months ended September 30, 2024 to $10.8 million, compared to $23.4 million for the three months ended September 30, 2023. Net interest income increased by $5.0 million to $104.3 million during the three months ended September 30, 2024 compared to $99.4 million during the three months ended September 30, 2023. Provisions for credit losses on loans HFI and unfunded loan commitments resulted in $1.9 million of provision expense during the three months ended September 30, 2024 compared to $3.3 million during the three months ended September 30, 2023. The Banking segment recorded a noninterest loss of $28.4 million in the three months ended September 30, 2024 compared to a $4.0 million loss in the three months ended September 30, 2023. This decrease includes a net loss on investment securities of $40.2 million associated with the sale of $318.6 million AFS debt securities during the three months ended September 30, 2024 compared to a $14.2 million net loss on investment securities primarily related to the sale of $76.6 million of AFS debt securities during the three months ended September 30, 2023. Noninterest expense decreased to $63.3 million for three months ended September 30, 2024 compared to $68.7 million for the three months ended September 30, 2023 due primarily to a decrease in salaries associated with our efficiency and scalability initiatives and updated methodology of deferrals for loan fees and loan origination expenses.
Previous report
Income before taxes from the Banking segment decreased for the nine months ended September 30, 2024 to $93.2 million, compared to $116.4 million for the nine months ended September 30, 2023. Net interest income increased by $2.6 million to $304.0 million during the nine months ended September 30, 2024 compared to $301.4 million during the nine months ended September 30, 2023. Provisions for credit losses on loans HFI and unfunded loan commitments resulted in $5.1 million of provision expense during the nine months ended September 30, 2024 compared to $2.3 million during the nine months ended September 30, 2023. The Banking segment recorded a noninterest loss of $19.7 million in the nine months ended September 30, 2024 as compared to income of $18.9 million in the nine months ended September 30, 2023. This decrease includes a net loss on investment securities of $56.4 million associated with the sale of $526.4 million AFS debt securities during the nine months ended September 30, 2024 compared with a net loss on investment securities of $14.2 million as noted above for the nine months ended September 30, 2023. Noninterest expense decreased to
Previous report
$186.0 million for nine months ended September 30, 2024 compared to $201.7 million for the nine months ended September 30, 2023 due to decreases in salaries, advertising, legal and professional fees and franchise tax expense.
Previous report
Noninterest expense for the three months ended September 30, 2024 and 2023 was $12.9 million and $14.3 million, respectively. This decrease is reflective of a decrease in salaries and employee benefits associated with our efficiency and scalability initiatives.
Previous report
Activity in our Mortgage segment resulted in a pre-tax net contribution of $3.3 million for the nine months ended September 30, 2024 compared to a $2.0 million pre-tax net loss for the nine months ended September 30, 2023. Net interest income was $4.1 million for the nine months ended September 30, 2024 compared to $4.7 million for the nine months ended September 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 nine months ended September 30, 2024 compared to a reversal of $0.1 million of provision expense during the nine months ended September 30, 2023. Mortgage banking income decreased $0.3 million to $36.0 million during the nine months ended September 30, 2024 compared to $36.3 million for the nine months ended September 30, 2023.
Previous report
Noninterest expense for the nine months ended September 30, 2024 and 2023 was $37.8 million and $43.1 million, respectively. This decrease is reflective of a decrease in salaries and employee benefits associated with our efficiency and scalability initiatives.
Previous report
Net interest income is the most significant component of our earnings, generally comprising over 50% of our total revenues in a given period. Net interest income and margin are shaped by many factors, primarily the volume, term structure and mix of earning assets, funding mechanisms, and interest rate fluctuations. Other factors include accretion or amortization of discounts or premiums on purchased loans, prepayment risk on mortgage and investment–related assets, and the composition and maturity of earning assets and interest-bearing liabilities. Loans typically generate more interest income than investment securities with similar maturities. Funding from client deposits generally costs less than wholesale funding sources. Factors such as general economic activity, Federal Reserve monetary policy, and price volatility of competing alternative investments, can also exert significant influence on our ability to optimize the mix of assets and funding, net interest income and margin.
Previous report
During the three and nine months ended September 30, 2024, the U.S. Treasury yield curve continued its path towards normalization and became less inverted as long-term note and bond rates decreased at a slower pace than shorter-term note rates. The curve remained inverted as of September 30, 2024, which is in contrast to the more normalized upward sloping U.S. Treasury yield curve exhibited during the three and nine months ended September 30, 2023. The Federal Funds Target Rate range was 4.75% - 5.00% and 5.25% - 5.50% as of September 30, 2024 and December 31, 2023, respectively. During the Federal Open Market Committee’s September 18, 2024 meeting, the federal funds rate was lowered 50 basis points, which was the first rate change since July 2023.
Previous report
Net interest income increased to $106.6 million for the three months ended September 30, 2024 as compared to $101.8 million for the three months ended September 30, 2023. The change in net interest income was driven by a $11.5 million increase in interest income partially offset by an increase in interest expense of $6.6 million. Further discussion of the changes to interest income and expense are discussed below.
Previous report
Interest income was $186.2 million for the three months ended September 30, 2024, compared to $174.7 million for the three months ended September 30, 2023, an increase of $11.5 million, which was primarily driven by an increase in yields and somewhat by an increase in volume of loans HFI and taxable investment securities.
Previous report
Interest income on loans HFI increased $4.7 million to $157.8 million for the three months ended September 30, 2024 from $153.0 million for the three months ended September 30, 2023 primarily due to higher yields with a secondary driver of increased volume. The yield on loans HFI was 6.70% for the three months ended September 30, 2024, up 16 basis points from the three months ended September 30, 2023.
Previous report
(1) Includes tax equivalent adjustment using combined marginal tax rate of 26.06%.
Previous report
Interest income on taxable investment securities increased $7.5 million to $13.9 million for the three months ended September 30, 2024 from $6.4 million for the three months ended September 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 nine months of 2024 to higher yielding U.S. government agency and mortgage-backed securities. The yield on taxable investment securities increased 184 basis points to 3.73% for the three months ended September 30, 2024 compared to 1.89% for the three months ended September 30, 2023.
Previous report
More broadly, total cost of interest-bearing deposits was 3.58% for the three months ended September 30, 2024 compared to 3.33% for the three months ended September 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.
Previous report
Net interest income was relatively flat for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023, increasing $1.4 million to $310.1 million from $308.6 million. Increases in interest income of $35.1 million were largely offset by increases in interest expense of $33.6 million for the nine months ended September 30, 2024 compared to the prior period. The increase in interest income for the current year period was driven by an increase in yields on average earning assets incrementally offset by decreases in the average volume of interest-bearing deposits with other financial institutions. The increase in interest expense was primarily driven increases in the rate paid on interest-bearing liabilities.
Previous report
Interest income on loans HFI increased $26.0 million to $466.9 million for the nine months ended September 30, 2024 from $440.9 million for the nine months ended September 30, 2023 due primarily to increasing yields. The average yield on loans HFI increased by 37 basis points period-over-period to 6.68% for the nine months ended September 30, 2024 from 6.31% for the nine months ended September 30, 2023.
Previous report
Interest income on taxable investment securities increased $15.6 million to $35.0 million for the nine months ended September 30, 2024 from $19.4 million for the nine months ended September 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 and third quarters of 2024 to higher yielding U.S. government agency securities and mortgage-backed securities. The yield on taxable investment securities increased 133 basis points to 3.22% for the nine months ended September 30, 2024 compared to 1.89% for the nine months ended September 30, 2023.
Previous report
Interest income on interest-bearing deposits with other financial institutions decreased to $23.2 million for the nine months ended September 30, 2024 from $28.5 million for the nine months ended September 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 $187.0 million to $573.9 million for the nine months ended September 30, 2024 from $760.9 million for the nine months ended September 30, 2023. The yield on interest-bearing deposits with other financial institutions increased 41 basis points to 5.41% for the nine months ended September 30, 2024 compared to 5.00% for the nine months ended September 30, 2023.
Previous report
Interest expense was $231.0 million for the nine months ended September 30, 2024, an increase of $33.6 million as compared to $197.4 million for the nine months ended September 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 $22.6 million to $112.0 million for the nine months ended September 30, 2024 compared to $89.5 million for the nine months ended September 30, 2023. Interest expense on customer time deposits increased $9.6 million to $41.4 million for the nine months ended September 30, 2024 from $31.8 million for the nine months ended September 30, 2023. The average rate on money market deposits increased 53 basis points to 3.93% for the nine months ended September 30, 2024 from 3.40% for the nine months ended September 30, 2023. The average rate on customer time deposits increased 99 basis points to 3.96% for the nine months ended September 30, 2024 from 2.97% for the nine months ended September 30, 2023. Total cost of interest-bearing deposits was 3.53% for the nine months ended September 30, 2024 compared to 2.97% for the nine months ended September 30, 2023.
Previous report
The average balance of other borrowings increased $127.9 million to $129.4 million for the nine months ended September 30, 2024 compared to $1.5 million for the nine months ended September 30, 2023. As a result, interest expense on other borrowings increased to $4.7 million for the nine months ended September 30, 2024 compared to $23 thousand for the nine months ended September 30, 2023. The yield on other borrowings increased 275 basis points to 4.83% for the nine months ended September 30, 2024 compared to 2.08% for the nine months ended September 30, 2023. The increase is due primarily of borrowings from the Bank Term Funding Program, which was paid-off at the end of this quarter. Refer to the section “Borrowings” for additional information on the BTFP.
Previous report
Yield/rate and volume analysis
Previous report
We recognized a provision for credit losses on loans HFI of $1.9 million and $6.0 million for the three months ended September 30, 2024 and 2023, respectively. The decrease in our provision for credit losses on loans HFI during the three months ended September 30, 2024 was primarily due to reductions in balances outstanding for construction loans offset by growth in other classes of financing receivable in our loan portfolio. For the three months ended September 30, 2023, the decrease in the provision for credit losses on loans HFI was driven by decreased loan growth in our loans HFI combined with the economic variables signaling a possible recession in our forward-looking model partially offset by an increase in the provision for credit losses on loans HFI due to a single commercial and industrial relationship moving to nonaccrual status during the three months ended September 30, 2023.
Previous report
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 provision expense for credit losses on unfunded commitments of $0.1 million and a reversal of provision expense of $3.2 million for the three months ended September 30, 2024 and 2023, respectively. The reversal is due to a $9.3 million decrease in our unfunded commitments during the three months ended September 30, 2024, including a $6.7 million decrease in our construction portfolio. Commitments increased in commercial and industrial and residential real estate line of credit portfolios offset by reductions in construction and commercial real estate.
Previous report
Noninterest income amounted to a $16.5 million loss for the three months ended September 30, 2024, a decrease of $24.5 million, or 305%, as compared to income of $8.0 million for the three months ended September 30, 2023. The decrease in noninterest income was driven by the net loss from investment securities.
Previous report
Net loss from investment securities was $40.2 million and $14.2 million for the three months ended September 30, 2024 and 2023, respectively. The net loss from investment securities during the three months ended September 30, 2024 is the result of management’s election to sell $318.6 million of AFS debt securities to reinvest the proceeds of the sale into higher yielding AFS debt securities compared to a $14.2 million net loss on investment securities primarily related to the sale of $76.6 million of AFS debt securities during the three months ended September 30, 2023. Refer to the section “Other earnings assets” for additional information on the sale of the AFS debt securities.
Previous report
Noninterest income amounted to $17.1 million for the nine months ended September 30, 2024, a decrease of $38.1 million, or 69%, as compared to $55.2 million for the nine months ended September 30, 2023. The decrease in noninterest income was driven by the net loss from investment securities, offset by increases in investment services and trust income and BOLI income recognized in other noninterest income.
Previous report
Net loss from investment securities was $56.4 million for the nine months ended September 30, 2024 compared to a net loss of $14.2 million for the nine months ended September 30, 2023. The net loss from investment securities during the nine months ended September 30, 2024 is the result of management’s election to sell $526.4 million of AFS debt securities to reinvest the proceeds into higher yielding AFS securities compared to a $14.2 million net loss on investment securities primarily related to the sale of $76.6 million of AFS debt securities during the nine months ended September 30, 2023. Refer to the section “Other earning assets” for additional information on the sale of the AFS debt securities.
Previous report
Other income increased $1.3 million to $8.8 million during the nine months ended September 30, 2024 as compared to $7.5 million during the nine months ended September 30, 2023. This increase was primarily related to a $2.1 million increase in BOLI income resulting from a cash life insurance benefit during the nine months ended September 30, 2024 offset by a $0.9 million gain during the nine months ended September 30, 2023 associated with the change in fair value of the commercial loans held for sale portfolio that was exited during the year ended December 31, 2023.
Previous report
Noninterest expense decreased by $6.8 million, or 8%, during the three months ended September 30, 2024 to $76.2 million as compared to $83.0 million in the three months ended September 30, 2023. The decrease in noninterest expense was attributable to a decrease in salaries, commissions and employee benefits.
Previous report
Noninterest expense decreased by $21.0 million, or 9%, during the nine months ended September 30, 2024 to $223.7 million as compared to $244.7 million in the nine months ended September 30, 2023. The decrease in noninterest expense was attributable to a decrease in salaries, commissions and employee benefits, legal and professional fees, advertising expense, and franchise tax expense recognized in other noninterest expense offset slightly by a FDIC special assessment expense.
Previous report
Salaries, commissions and employee benefits expense is the largest component of noninterest expense. For the nine months ended September 30, 2024, salaries, commissions and employee benefits expense decreased $16.9 million, or 11%, to $138.4 million as compared to $155.3 million for the nine months ended September 30, 2023. This change was attributable to the impact of the Company’s efficiency and scalability initiatives, as well as a $7.8 million decrease from the Company applying an updated deferral methodology for loan fees and loan origination expenses.
Previous report
Legal and professional fees decreased by $1.3 million during the nine months ended September 30, 2024 to $5.8 million as compared to $7.1 million during the nine months ended September 30, 2023. The decrease was primarily driven by the completion of internal projects in the prior year.
Previous report
We also maintain an allowance for credit losses on unfunded commitments, which decreased to $6.0 million as of September 30, 2024 from $8.8 million as of December 31, 2023 due to a 6.26% or $181.3 million decrease in unfunded loan commitments during the period. Notably, there was a $215.7 million decrease in unfunded loan commitments in our construction segment, which resulted in a $2.7 million decrease in required ACL related to unfunded construction commitments. Our unfunded commitments in our construction loan category decreased as a result of management's concentrated effort to reduce commitments in specific categories judged to be inherently higher risk considering the current and projected economic conditions. The decrease in ACL related to unfunded construction commitment was primarily offset by increases in our ACL related to unfunded commercial and industrial and residential line of credit commitments.
Previous report
Total deposits were $10.98 billion and $10.55 billion as of September 30, 2024 and December 31, 2023, respectively. Noninterest-bearing deposits at September 30, 2024 and December 31, 2023 were $2.23 billion and $2.22 billion, respectively, while interest-bearing deposits were $8.75 billion and $8.33 billion at September 30, 2024 and December 31, 2023, respectively.
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Reworded paragraphs (54)
Previous wording
The following is a discussion of our financial condition as of September 30, 2024 and December 31, 2023, and our results of operations for the three and nine months ended September 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.
Current wording
The following is a discussion of our financial condition as of March 31, 2025 and December 31, 2024, and our results of operations for the three months ended March 31, 2025 and 2024, 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, 2024, that was filed with the SEC on February 25, 2025, and with the accompanying unaudited notes to the condensed consolidated financial statements set forth in this Report.
Previous wording
Certain statements contained in this Report that are not historical in nature may be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, without limitation, statements regarding the Company’s future plans, results, strategies, and expectations, including expectations around changing economic markets. These statements can generally be identified by the use of the words and phrases “may,” “will,” “should,” “could,” “would,” “goal,” “plan,” “potential,” “estimate,” “project,” “believe,” “intend,” “anticipate,” “expect,” “target,” “aim,” “predict,” “continue,” “seek,” and other variations of such words and phrases and similar expressions. These forward-looking statements are not historical facts, and are based upon management’s current expectations, estimates, and projections, many of which, by their nature, are inherently uncertain and beyond the Company’s control. The inclusion of these forward-looking statements should not be regarded as a representation by the Company or any other person that such expectations, estimates, and projections will be achieved. Accordingly, the Company cautions shareholders and investors that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions, and uncertainties that are difficult to predict. Actual results may prove to be materially different from the results expressed or implied by the forward-looking statements. A number of factors could cause actual results to differ materially from those contemplated by the forward-looking statements including, without limitation, (1) current and future economic conditions, including the effects of inflation, interest rate fluctuations, changes in the economy or global supply chain, supply-demand imbalances affecting local real estate prices, and high unemployment rates in the local or regional economies in which the Company operates and/or the US economy generally, (2) changes in government interest rate policies and its impact on the Company’s business, net interest margin, and mortgage operations, (3) any continuation of the recent turmoil in the banking industry, including the associated impact to the Company and other financial institutions of any regulatory changes or other mitigation efforts taken by government agencies in response, (4) increased competition for deposits, (5) the Company’s ability to effectively manage problem credits, (6) any deterioration in commercial real estate market fundamentals, (7) the Company’s ability to identify potential candidates for, consummate, and achieve synergies from, potential future acquisitions, (8) the Company’s ability to successfully execute its various business strategies, (9) changes in state and federal legislation, regulations or policies applicable to banks and other financial service providers, including legislative developments, (10) the effectiveness of the C…
Excerpt shortened here; the source contains the full paragraph.
Current wording
Certain statements contained in this Report that are not historical in nature may be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, without limitation, statements regarding the Company’s future plans, results, strategies, and expectations, including expectations around changing economic markets and statements regarding the proposed merger of Southern States Bancshares, Inc. (“Southern States”) with the Company (the “Proposed Merger”) and expectations with regard to the benefits of the Proposed Merger. These statements can generally be identified by the use of the words and phrases “may,” “will,” “should,” “could,” “would,” “goal,” “plan,” “potential,” “estimate,” “project,” “believe,” “intend,” “anticipate,” “expect,” “target,” “aim,” “predict,” “continue,” “seek,” and other variations of such words and phrases and similar expressions. These forward-looking statements are not historical facts, and are based upon management’s current expectations, estimates, and projections, many of which, by their nature, are inherently uncertain and beyond the Company’s control. The inclusion of these forward-looking statements should not be regarded as a representation by the Company or any other person that such expectations, estimates, and projections will be achieved. Accordingly, the Company cautions shareholders and investors that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions, and uncertainties that are difficult to predict. Actual results may prove to be materially different from the results expressed or implied by the forward-looking statements. A number of factors could cause actual results to differ materially from those contemplated by the forward-looking statements including, without limitation, (1) current and future economic conditions, including the effects of inflation, interest rate fluctuations, changes in the economy or global supply chain, supply-demand imbalances affecting local real estate prices, and high unemployment rates in the local or regional economies in which the Company operates and/or the US economy generally, (2) changes or the lack of changes in government interest rate policies and the associated impact on the Company’s business, net interest margin, and mortgage operations, (3) increased competition for deposits, (4) changes in the quality or composition of the Company’s loan or investment portfolios, including adverse developments in borrower industries or in the repayment ability of individual borrowers or issuers of investment securities, or the impact of interest rates on the value of our investment securities portfolio, (5) any deterioration in commercial real estate market fundamentals, (6) risks associated with the Proposed Merger, including (a) the risk that the cost savings and any revenue synergies from the Proposed Merger is less than or di…
Excerpt shortened here; the source contains the full paragraph.
Previous wording
Our financial statements are prepared in accordance with GAAP and general practices within the banking industry. Within our financial statements, certain financial information contains approximate measurements of financial effects of transactions and impacts at the consolidated balance sheet dates and our results of operations for the reporting periods. We monitor the status of proposed and newly issued accounting standards to evaluate the impact on our financial condition and results of operations. Our accounting policies, including the impact of any newly issued accounting standards if applicable, are discussed in further detail in Note 1, “Basis of presentation,” in the notes to our consolidated financial statements in our Annual Report.
Current wording
Our financial statements are prepared in accordance with GAAP and general practices within the banking industry. Within our financial statements, certain financial information contains approximate measurements of financial effects of transactions and impacts at the consolidated balance sheet dates and our results of operations for the reporting periods. We monitor the status of proposed and newly issued accounting standards to evaluate the impact on our financial condition and results of operations. Our accounting policies, including the impact of any newly issued accounting standards if applicable, are discussed in further detail in Note 1, “Basis of presentation and summary of significant accounting policies,” in the notes to our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2024.
Previous wording
(4)Includes $30,537, $22,074 and $21,229 of optional rights to repurchase delinquent GNMA loans as of September 30, 2024, September 30, 2023 and December 31, 2023, respectively.
Current wording
(4)Includes $27.2 million, $20.9 million and $31.4 million of optional rights to repurchase delinquent GNMA loans as of March 31, 2025, March 31, 2024 and December 31, 2024, respectively.
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 September 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.
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, Alabama, Kentucky, North Carolina and North Georgia. As of March 31, 2025, our footprint included 77 full-service branches serving markets across Tennessee, including Nashville, Chattanooga (including North Georgia), Knoxville, Memphis, and Jackson in addition to Bowling Green, Kentucky, and Birmingham, Florence and Huntsville, Alabama. Additionally, our banking services extend to community markets throughout our footprint. 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 September 30, 2024 to $10.2 million from $19.2 million for the three months ended September 30, 2023. Diluted earnings per common share were $0.22 and $0.41 for the three months ended September 30, 2024 and 2023, respectively. Our net income represented a ROAA of 0.32% and 0.61% for the three months ended September 30, 2024 and 2023, respectively, and a ROAE of 2.67% and 5.46% for the same periods. Our ROATCE for the three months ended September 30, 2024 and 2023 were 3.19% and 6.67%, 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 March 31, 2025 to $39.4 million from $28.0 million for the three months ended March 31, 2024. Diluted earnings per common share were $0.84 and $0.59 for the three months ended March 31, 2025 and 2024, respectively. Our net income represented a ROAA of 1.21% and 0.89% for the three months ended March 31, 2025 and 2024, respectively, and a ROAE of 10.1% and 7.70% for the same periods. Our ROATCE for the three months ended March 31, 2025 and 2024 were 11.9% and 9.29%, 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 September 30, 2024, our net interest income increased to $106.0 million compared with $100.9 million in the three months ended September 30, 2023. Our net interest margin, on a tax-equivalent basis, increased to 3.55% for the three months ended September 30, 2024 as compared to 3.42% for the three months ended September 30, 2023. The increase in net interest margin was primarily driven by higher rates for loans HFI and taxable AFS debt securities offset by a smaller increase in the volume of interest-earnings assets compared to interest-bearing liabilities.
Current wording
Net interest income increased to $107.6 million for the three months ended March 31, 2025 compared with $99.5 million for the three months ended March 31, 2024. Net interest income for the three months ended March 31, 2025 reflected our efforts to balance the growth of our asset and deposit bases while managing the impact of interest rates. Our net interest margin, on a tax-equivalent basis, increased to 3.55% for the three months ended March 31, 2025 as compared to 3.42% for the three months ended March 31, 2024.
Previous wording
Interest expense was $79.6 million for the three months ended September 30, 2024, an increase of $6.6 million as compared to the three months ended September 30, 2023. The increase in interest expense was driven equally by an increase in the average balance of interest-bearing liabilities which increased interest expense $3.6 million and an increase in the rate paid on interest-bearing liabilities which increased interest expense $3.0 million over the comparative time period. Increases in average balances of interest-bearing liabilities were led by brokered and internet time deposits of $140.0 million for the three months ended September 30, 2024 due to the issuance of brokered deposits as we took advantage of favorable relative terms available during the quarter. Notable contributors to the increase in interest expense are attributable to the rate paid on interest-bearing liabilities, including money market and customer time deposits, which increased $2.7 million and $1.6 million, respectively, from the three months ended September 30, 2023. These increases were most significantly influenced by increases in rates paid on these balances. The average rate on money market deposits increased 15 basis points to 3.93% for the three months ended September 30, 2024 from 3.78% for the three months ended September 30, 2023. The average rate on customer time deposits increased 60 basis points to 3.97% for the three months ended September 30, 2024 from 3.37% for the three months ended September 30, 2023.
Current wording
Three months ended March 31, 2025 compared to the three months ended March 31, 2024
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 and nine months ended September 30, 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 months ended March 31, 2025 and 2024.
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 $2.0 million and $2.5 million for nine months ended September 30, 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 $0.8 million and $0.7 million for three months ended March 31, 2025 and 2024, respectively.
Previous wording
(3)Includes average net unrealized losses on investment securities available for sale of $181.9 million and $222.5 million for the nine months ended September 30, 2024 and 2023, respectively.
Current wording
(3)Includes average net unrealized losses on investment securities available for sale of $132.3 million and $194.1 million for the three months ended March 31, 2025 and 2024, 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 $22.3 million and $21.1 million for the nine months ended September 30, 2024 and 2023, respectively.
Current wording
(4)Includes average of optional rights to repurchase government guaranteed GNMA mortgage loans previously sold that meet certain defined delinquency criteria of $30.7 million and $20.8 million for the three months ended March 31, 2025 and 2024, respectively.
Previous wording
The tables below present the components of the changes in net interest income for the nine months ended September 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 wording
The tables below present the components of the changes in net interest income for the three months ended March 31, 2025 and 2024. 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 $2.0 million and $2.5 million for the nine months ended September 30, 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 $0.8 million and $0.7 million for the three months ended March 31, 2025 and 2024, respectively.
Previous wording
The provision for credit losses charged to operating expense is an amount which, in the judgment of management, is necessary to maintain the allowance for credit losses at an appropriate level under the current expected credit loss model. The determination of the amount of the allowance is complex and involves a high degree of judgment and subjectivity. Refer to Note 1, “Basis of presentation” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 for a detailed discussion regarding ACL methodology.
Current wording
The provision for credit losses charged to operating expense is an amount which, in the judgment of management, is necessary to maintain the allowance for credit losses at an appropriate level under the current expected credit loss model. The determination of the amount of the allowance is complex and involves a high degree of judgment and subjectivity. Refer to Note 1, “Basis of presentation and summary of significant accounting policies” in the Company's Annual Report on Form 10-K for the year ended December 31, 2024 for a detailed discussion regarding ACL methodology.
Previous wording
Our allowance for credit losses calculation as of September 30, 2024 resulted from management’s best estimate of losses over the life of loans and unfunded commitments in our portfolio in accordance with the CECL approach. Our calculation included forecasts for projected slower GDP growth over the next two to three years and expected elevated unemployment levels. We also considered the current global economic environment, including continued pressures on supply chains (and more specifically, oil and energy) and increased uncertainty due to geopolitical turmoil and its impact on the U.S. economy. These factors may continue to lead to increased volatility in forecasted macroeconomic variables, a key input to our calculated level of allowance for credit losses.
Current wording
Our allowance for credit losses calculation as of March 31, 2025 resulted from management’s best estimate of losses over the life of loans and unfunded commitments in our portfolio in accordance with the CECL approach. Our calculation as of March 31, 2025 included economic forecasts for unemployment, gross domestic product, as well as other macroeconomic events which may impact our loan portfolio, such as supply chain concerns, global conflicts and possible tariffs. These factors may continue to lead to increased volatility in forecasted macroeconomic variables, a key input to our calculated level of allowance for credit losses.
Previous wording
We recognized a provision for credit losses on loans HFI for the nine months ended September 30, 2024 and 2023 of $7.6 million and $13.6 million, respectively. The current period provision on loans HFI is due to growth in loan balances for most loan categories offset by significant decreases in construction lending. For the nine months ended September 30, 2023, the increase in the provision for credit losses on loans HFI was driven by a single commercial and industrial relationship moving to nonaccrual status during the period and the deteriorating economic forecasts.
Current wording
We recognized a provision for credit losses on loans HFI for both the three months ended March 31, 2025 and 2024 of $1.9 million. The current period provision on loans HFI is due to growth in loan balances in most categories and charge-off activity offset by notable decreases in multi-family and construction lending and slight improvement in economic forecasts. For the three months ended March 31, 2024, the provision on loans HFI was impacted by projected deterioration in the CRE portfolio which was adjusted qualitatively.
Previous wording
We recorded a reversal of provision for credit losses on unfunded commitments of $2.7 million and $11.4 million for the nine months ended September 30, 2024 and 2023, respectively. The reversal of provision for credit losses on unfunded commitments for the nine months ended September 30, 2024 and 2023 is primarily due to management's concentrated effort to reduce unfunded loan commitments during the periods indicated including a $215.7 million and a $716.8 million decrease in our construction category as these projects primarily moved to permanent financing for the nine months ended nine months ended September 30, 2024 and 2023, respectively. Decreases in commitment balances for construction and commercial real estate were offset by increases in commercial and industrial and residential segments. This resulted in a $2.7 million and $11.4 million decrease in required ACL related to the unfunded commitments for the nine months ended September 30, 2024 and 2023, respectively.
Current wording
We recorded a provision for credit losses on unfunded commitments of $0.4 million and a reversal of $1.1 million for the three months ended March 31, 2025 and 2024, respectively. For the three months ended March 31, 2025, the increase in provision for credit losses on unfunded commitments was driven by an increase in outstanding construction commitments partially offset by a broader decrease of outstanding commitment balances across other categories from year end balances. The increase in construction unfunded commitments was attributable to reduced utilization of existing construction lines which caused an increase in the available commitment in these relationships. The reversal of provision for credit losses on unfunded commitments for the three months ended March 31, 2024 is primarily due to management's concentrated effort to reduce unfunded loan commitments during the period including a $135.3 million decrease in our construction category as these projects moved to permanent financing for the three months ended March 31, 2024. As such, this resulted in a $1.0 million decrease in required ACL related to the unfunded commitments in our construction portfolio for the three months ended March 31, 2024.
Previous wording
During the three months ended September 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 three months ended September 30, 2024 or 2023.
Current wording
During the three months ended March 31, 2025 and 2024, 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, 2025 and 2024.
Previous wording
Activity in our Mortgage segment resulted in a pre-tax net contribution of $0.6 million for the three months ended September 30, 2024 compared to a $0.2 million pre-tax net loss for the three months ended September 30, 2023. Net interest income was $1.7 million for the three months ended September 30, 2024 and $1.6 million for the three months ended September 30, 2023. Provisions for credit losses on loans HFI and unfunded loan commitments resulted in provision expense of $0.1 million during the three months ended September 30, 2024 compared to a reversal of $0.4 million of provision expense during the three months ended September 30, 2023. Mortgage banking income decreased $0.4 million to $11.6 million during the three months ended September 30, 2024 compared to $12.0 million for the three months ended September 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. 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
Mortgage banking income includes origination fees, gains and losses on the sale of mortgage loans, changes in fair value of mortgage loans and related derivatives, as well as mortgage servicing income, which includes the change in fair value of MSRs and related derivatives. Mortgage banking income was $12.4 million for the three months ended March 31, 2025, a decrease of $0.2 million compared to the prior period.
Previous wording
Investment services and trust income increased $2.1 million during the nine months ended September 30, 2024 to $10.3 million as compared to $8.2 million during the nine months ended September 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 wording
Investment services and trust income is comprised of wealth management fees and trust and insurance income. This caption increased $0.5 million during the three months ended March 31, 2025 to $3.7 million as compared to $3.2 million during the three months ended March 31, 2024. The increase is primarily attributable to fees earned from higher assets under management stemming from existing account growth.
Previous wording
Salaries, commissions and employee benefits expense is the largest component of noninterest expense and is comprised of salaries and wages in addition to other employee benefit costs. During the three months ended September 30, 2024, salaries and employee benefits expense decreased $7.0 million, or 13%, to $47.5 million as compared to $54.5 million for the three months ended September 30, 2023. This change was attributable to the impact of 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.
Current wording
Salaries, commissions and employee benefits expense is comprised of salaries and wages in addition to other employee benefit costs and represents the largest component of noninterest expense. For the three months ended March 31, 2025, salaries, commissions and employee benefits expense increased $3.7 million, or 8%, to $48.4 million as compared to $44.6 million for the three months ended March 31, 2024. This change was driven by an increase in the overall headcount of the organization, increases in the benefit costs, as well as higher performance-based compensation attributable to positive 2024 financial results.
Previous wording
Advertising expense includes expenses related to sponsorships, advertising, marketing, customer relations and business development, and public relations. During the nine months ended September 30, 2024, advertising expense decreased $1.3 million to $5.0 million compared to $6.3 million during the nine months ended September 30, 2023. This decrease was primarily attributable to marketing rebate activity with partners earned through higher transaction volumes during the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023.
Current wording
Advertising includes expenses related to sponsorships, advertising, marketing, customer relations and business development and public relations. During the three months ended March 31, 2025, advertising expense increased $1.3 million to $2.5 million compared to $1.2 million during the three months ended March 31, 2024. This increase was primarily attributable to customer marketing campaigns during three months ended March 31, 2025 combined with favorable, volume based marketing rebate activity recorded in the prior year period.
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 $2.3 million during the nine months ended September 30, 2024 to $45.5 million compared to $47.9 million during the nine months ended September 30, 2023. The decrease was primarily related to a $3.1 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 increased $1.9 million during the three months ended March 31, 2025 to $16.8 million compared to $14.9 million during the three months ended March 31, 2024. The increase was primarily related to technology and platform fee increases, as well as a minor franchise tax benefit recognized in the prior year period.
Previous wording
Our efficiency ratio was 85.1% and 68.8% for the three and nine months ended September 30, 2024, respectively, and 76.2% and 67.7% for the three and nine months ended September 30, 2023, respectively. Our core efficiency ratio, on a tax-equivalent basis, was 58.4% and 58.2% for the three and nine months ended September 30, 2024, respectively, and 63.1% and 63.3% the three and nine months ended September 30, 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 60.9% and 67.4% for the three months ended March 31, 2025 and 2024, respectively. Our adjusted efficiency ratio, on a tax-equivalent basis, was 59.9% and 58.1% for the three months ended March 31, 2025 and 2024, respectively. 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 $1.2 million and $4.0 million for the three months ended September 30, 2024 and 2023, respectively, and $18.4 million and $23.5 million for the nine months ended September 30, 2024 and 2023, respectively. This represents effective tax rates of 10.3% and 17.2% for the three months ended September 30, 2024 and 2023, respectively, and 19.1% and 20.6% for the nine months ended September 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. 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 $9.5 million and $6.3 million for the three months ended March 31, 2025 and 2024, respectively. This represents effective tax rates of 19.4% and 18.4% for the three months ended March 31, 2025 and 2024, respectively. The primary differences from the enacted Federal rates are applicable state income taxes and certain expenses that are not deductible, reduced for non-taxable income. 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 73.4% and 74.6% of our total assets at September 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. However, we are also party to loan syndications and participations from other banks (collectively, “participated loans”). As of September 30, 2024 and December 31, 2023, loans HFI included approximately $224.9 million and $254.6 million, respectively, related to participated loans.
Current wording
Our loans HFI portfolio is our most significant earning asset, comprising 74.4% and 73.0% of our total assets at March 31, 2025 and December 31, 2024, 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. However, we also participate in loan syndications and participations from other banks (collectively, “participated loans”). As of March 31, 2025 and December 31, 2024, loans HFI included approximately $215.9 million and $177.6 million, respectively, related to participated loans.
Previous wording
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 September 30, 2024 and 2023, we sold $7.5 million and $14.5 million in loan participations, respectively. During the nine months ended September 30, 2024 and 2023, we sold $24.5 million and $30.8 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
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, 2025 and 2024, we sold $1.1 million and $8.0 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 September 30, 2024 and December 31, 2023, we had $127.3 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 $0.1 million and $0.3 million for the three months ended September 30, 2024 and 2023, respectively. Accrued interest receivable written off as an adjustment to interest income amounted to $0.5 million and $0.7 million for the nine months ended September 30, 2024 and 2023, respectively. Additionally, we had net interest recoveries on nonperforming assets previously charged off of $0.1 million and $0.6 million for the three months ended September 30, 2024 and 2023, respectively, and $1.1 million and $1.0 million for the nine months ended September 30, 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 March 31, 2025 and December 31, 2024, we had $110.4 million and $121.9 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 $0.3 million and $0.2 million for the three months ended March 31, 2025 and 2024, respectively. Additionally, we had net interest recoveries on nonperforming assets previously charged off of $0.6 million and $0.3 million for the three months ended March 31, 2025 and 2024, respectively.
Previous wording
Nonperforming loans HFI increased by $29.9 million to $90.8 million as of September 30, 2024 compared to $60.9 million as of December 31, 2023. The increase in nonperforming loans primarily occurred in our 1-4 family mortgage residential real estate and construction portfolios.
Current wording
Nonperforming loans HFI decreased by $6.5 million to $77.2 million as of March 31, 2025 compared to $83.7 million as of December 31, 2024. The decrease in nonperforming loans primarily occurred in our 1-to-4 family mortgage residential real estate, commercial and industrial and construction portfolios.
Previous wording
As of September 30, 2024 and December 31, 2023, we had $30.5 million and $21.2 million, respectively, of delinquent GNMA optional repurchase loans previously sold included on our consolidated balance sheets in loans held for sale. These are considered nonperforming assets as we do not earn any interest on the unexercised option to repurchase these loans.
Current wording
As of March 31, 2025 and December 31, 2024, we had $27.2 million and $31.4 million, respectively, of delinquent GNMA optional repurchase loans previously sold included on our consolidated balance sheets in loans held for sale. These are considered nonperforming assets as we do not earn any interest on the unexercised option to repurchase these loans.
Previous wording
As of both September 30, 2024 and December 31, 2023, other real estate owned included $0.1 million of excess land and facilities held for sale resulting from our prior acquisitions. Other repossessed assets also included other repossessed non-real estate amounting to $2.2 million and $1.1 million as of September 30, 2024 and December 31, 2023, respectively.
Current wording
As of both March 31, 2025 and December 31, 2024, other real estate owned included $0.1 million of excess land and facilities held for sale resulting from our prior acquisitions. Other repossessed assets also included other repossessed non-real estate amounting to $2.8 million and $2.4 million as of March 31, 2025 and December 31, 2024, respectively.
Previous wording
We have evaluated our loans HFI classified as nonperforming and believe all nonperforming loans have been adequately reserved for in the allowance for credit losses on loans HFI as of September 30, 2024 and December 31, 2023. Management also continually monitors past due loans for potential credit quality deterioration. Loans not considered nonperforming include loans 30-89 days past due that continue to accrue interest amounting to $40.5 million at September 30, 2024 as compared to $47.0 million at December 31, 2023. The decrease from December 31, 2023 to September 30, 2024 primarily occurred within our construction and commercial real estate non-owner occupied portfolios.
Current wording
We have evaluated our loans HFI classified as nonperforming and believe all nonperforming loans have been adequately reserved for in the allowance for credit losses on loans HFI as of March 31, 2025 and December 31, 2024. Management also continually monitors past due loans for potential credit quality deterioration. Loans not considered nonperforming include loans 30-89 days past due that continue to accrue interest amounting to $41.9 million at March 31, 2025 as compared to $47.9 million at December 31, 2024. The decrease from December 31, 2024 to March 31, 2025 primarily occurred within our 1-to-4 family mortgage residential real estate, commercial real estate owner occupied and construction portfolios offset with an increase in our commercial and industrial portfolio.
Previous wording
We calculate our expected credit loss using a lifetime loss rate methodology. We utilize probability-weighted forecasts, which consider multiple macroeconomic variables from Moody’s that are applicable to each type of loan. See Note 1, “Basis of presentation,” in the notes to our consolidated financial statements in our Annual Report that was filed with the SEC on February 27, 2024 for additional information regarding our methodology.
Current wording
We calculate our expected credit loss using a lifetime loss rate methodology. We utilize probability-weighted forecasts, which consider multiple macroeconomic variables that are applicable to each type of loan. See Note 1, “Basis of presentation and summary of significant accounting policies,” in the notes to our consolidated financial statements in our Annual Report that was filed with the SEC on February 25, 2025 for additional information regarding our methodology.
Previous wording
The ACL on loans HFI was $156.3 million and $150.3 million and represented 1.65% and 1.60% of loans HFI as of September 30, 2024 and December 31, 2023, respectively. For further information related to the change in the ACL refer to “Provision for credit losses” section herein and Note 3, “Loans and allowance for credit losses on loans HFI” in the notes to our consolidated financial statements.
Current wording
The ACL on loans HFI was $150.5 million and $151.9 million and represented 1.54% and 1.58% of loans HFI as of March 31, 2025 and December 31, 2024, respectively. For further information related to the change in the ACL refer to “Provision for credit losses” section herein and Note 3, “Loans and allowance for credit losses on loans HFI” in the notes to our consolidated financial statements.
Previous wording
For the three months ended September 30, 2024, we experienced net charge-offs of $0.7 million, or 0.03% of average loans HFI, compared to net charge-offs of $0.6 million, or 0.02% for the three months ended September 30, 2023. For both the nine months ended September 30, 2024 and 2023, we experienced net charge-offs of $1.7 million, or 0.02% of average loans HFI. Our ratio of total nonperforming loans HFI as a percentage of total loans HFI increased by 31 basis points to 0.96% as of September 30, 2024 compared to December 31, 2023.
Current wording
For the three months ended March 31, 2025, we experienced net charge-offs of $3.3 million, or 0.14% of average loans HFI, compared to net charge-offs of $0.5 million, or 0.02% for the three months ended March 31, 2024. The increase was driven by a $2.8 million full charge-off of a single commercial and industrial relationship during the three months ended March 31, 2025. Our ratio of total nonperforming loans HFI as a percentage of total loans HFI decreased by 8 basis points to 0.79% as of March 31, 2025 compared to December 31, 2024. See above within this section for further information related to this decrease.
Previous wording
Management has made an effort to reduce exposure to construction lending during three and nine months ended September 30, 2024. The reduction in construction balances and related allowance offset some of the additional allowance needed related to growth in other loan segments.
Current wording
Management has made a concerted effort to reduce exposure to construction lending. The reduction in construction balances and the corresponding allowance reduction offset some of the additional allowance needed related to growth in other loan segments.
Previous wording
Mortgage loans held for sale consisted of $72.6 million of residential real estate mortgage loans in the process of being sold to third-party private investors or government sponsored agencies and $30.5 million of GNMA optional repurchase loans. This compares to $46.6 million of residential real estate mortgage loans in the process of being sold to third-party private investors or government sponsored agencies and $21.2 million of GNMA optional repurchase loans as of December 31, 2023.
Current wording
Mortgage loans held for sale consisted of $145.6 million of residential real estate mortgage loans in the process of being sold to third-party private investors or government sponsored agencies and $27.2 million of GNMA optional repurchase loans. This compares to $95.4 million of residential real estate mortgage loans in the process of being sold to third-party private investors or government sponsored agencies and $31.4 million of GNMA optional repurchase loans as of December 31, 2024.
Previous wording
Our deposits from municipal and governmental entities, also known as public funds, decreased by $184.6 million during the period within the interest-bearing checking category. The decrease in public funds was due to management’s decision to not renew certain maturing public deposits due to rising costs of these deposits.
Current wording
Partially offsetting the decrease in interest-bearing checking was our deposits from municipal and governmental entities, also known as public funds, which increased by $82.8 million during the period. The increase in public funds was largely due to seasonal inflows.
Previous wording
As a result of the changing interest rate environment and the shift in our deposit composition, we have experienced an increase in our cost of interest-bearing deposits and a decrease in our total deposits. Average deposit balances by type, together with the average rates per period are reflected in the average balance sheet amounts, interest paid, and rate analysis tables included in this management’s discussion and analysis under the subheading “Results of operations” discussion.
Current wording
We have experienced a decrease in our cost of interest-bearing deposits due to a decrease in the interest rate environment. Average deposit balances by type, together with the average rates per period are reflected in the average balance sheet amounts, interest paid, and rate analysis tables included in this management’s discussion and analysis under the subheading “Results of operations” discussion.
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Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
The Company qualifies all forward-looking statements by these cautionary statements.
Current report — wording carried from elsewhere
Three months ended March 31, 2025 compared to the three months ended March 31, 2024
Rearranged previous paragraphs (6)
Previous report — wording carried elsewhere
The components of mortgage banking income for the nine months ended September 30, 2024 and 2023 were as follows:
Previous report — wording carried elsewhere
The table below presents the components of the changes in net interest income for the three months ended September 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 report — wording carried elsewhere
The components of our loan yield for the nine months ended September 30, 2024 and 2023 were as follows:
Previous report — wording carried elsewhere
Average balance and interest yield/rate analysis
Previous report — wording carried 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.
Previous report — wording carried elsewhere
During the nine months ended September 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 nine months ended September 30, 2024 and 2023.