FVCBankcorp Inc

Previous wording

The following presents management’s discussion and analysis of our consolidated financial condition at June 30, 2024 and December 31, 2023 and the results of our operations for the three and six months ended June 30, 2024 and 2023. This discussion should be read in conjunction with our unaudited consolidated financial statements and the notes thereto appearing elsewhere in this report and the audited consolidated financial statements and the notes to consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023. Results of operations for the three and six month periods ended June 30, 2024 are not necessarily indicative of the results of operations for the balance of 2024, or for any other period. In addition to historical information, this discussion contains forward-looking statements that involve risks, uncertainties and assumptions that could cause results to differ materially from management’s expectations.

Current wording

The following presents management’s discussion and analysis of our consolidated financial condition at September 30, 2024 and December 31, 2023 and the results of our operations for the three and nine months ended September 30, 2024 and 2023. This discussion should be read in conjunction with our unaudited consolidated financial statements and the notes thereto appearing elsewhere in this report and the audited consolidated financial statements and the notes to consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023. Results of operations for the three and nine month periods ended September 30, 2024 are not necessarily indicative of the results of operations for the balance of 2024, or for any other period. In addition to historical information, this discussion contains forward-looking statements that involve risks, uncertainties and assumptions that could cause results to differ materially from management’s expectations.

Previous wording

On August 31, 2021, we announced that the Bank made an investment in Atlantic Coast Mortgage, LLC ("ACM") for $20.4 million to obtain a 28.7% ownership interest in ACM. The Bank provides a warehouse lending facility to ACM, which includes a construction-to-permanent financing line, and has developed portfolio mortgage products to diversify our held to investment loan portfolio.

Current wording

On August 31, 2021, we announced that the Bank made an investment in Atlantic Coast Mortgage, LLC ("ACM") for $20.4 million to obtain a 28.7% ownership interest in ACM. The Bank provides a warehouse lending facility to ACM, which includes a construction-to-permanent financing line, and has developed portfolio mortgage products to diversify our held for investment loan portfolio.

Previous wording

We separately evaluate our held-to-maturity investment securities for any credit losses. If we determine that a security indicates evidence of deteriorated credit quality, the security is individually-evaluated and a discounted cash flow analysis is performed and compared to the amortized cost basis. As of June 30, 2024, we had one security classified as held-to-maturity with an amortized cost basis of $264 thousand with the remainder of the securities portfolio held as available-for-sale.

Current wording

We separately evaluate our held-to-maturity investment securities for any credit losses. If we determine that a security indicates evidence of deteriorated credit quality, the security is individually-evaluated and a discounted cash flow analysis is performed and compared to the amortized cost basis. As of September 30, 2024, wehad one security classified as held-to-maturity with an amortized cost basis of $265 thousand with the remainder of the securities portfolio held as available-for-sale.

Previous wording

Results of Operations— Three and Six Months Ended June 30, 2024 and 2023

Current wording

Results of Operations— Three and Nine Months Ended September 30, 2024 and 2023

Previous wording

The annualized return on average assets for the three months ended June 30, 2024 and 2023 was 0.77% and 0.73%, respectively. The annualized return on average equity for the three months ended June 30, 2024 and 2023 was 7.42% and 8.17%, respectively.

Current wording

The annualized return on average assets for the three months ended September 30, 2024 and 2023 was 0.85% and 0.70%, respectively. The annualized return on average equity for the three months ended September 30, 2024 and 2023 was 8.15% and 7.57%, respectively.

Previous wording

For the six months ended June 30, 2024, we recorded net income of $5.5 million, or $0.30 diluted earnings per share, compared to net income of $4.9 million, or $0.27 diluted earnings per share for the six months ended June 30, 2023. Net income for the six months ended June 30, 2024 includes the surrender of certain BOLI policies with an aggregate cash surrender value of $48.0 million. Upon the surrender, we received a cash payout and were required to accrue additional income tax on the appreciation of those policies which had previously been treated as tax-exempt income. This resulted in additional statutory income tax expense of $1.6 million and tax penalties of $722 thousand. The tax penalties related to the surrender of the BOLI were recorded in income tax expense. Additionally, net income for the six months ended June 30, 2023 included sales of available-for-sale investment securities, which resulted in a pre-tax loss totaling $4.6 million.

Current wording

For the nine months ended September 30, 2024, we recorded net income of $10.2 million, or $0.55 diluted earnings per share, compared to net income of $8.9 million, or $0.49 diluted earnings per share for the nine months ended September 30, 2023. Net income for the nine months ended September 30, 2024 includes the surrender of certain BOLI policies with an aggregate cash surrender value of $48.0 million. Upon the surrender, we received a cash payout and were required to accrue additional income tax on the appreciation of those policies which had previously been treated as tax-exempt income. This resulted in additional statutory income tax expense of $1.6 million and tax penalties of $722 thousand. The tax penalties related to the surrender of the BOLI were recorded in income tax expense. Additionally, net income for the nine months ended September 30, 2023 included losses on the sale of available-for-sale investment securities totaling $4.6 million.

Previous wording

Net interest income for the six months ended June 30, 2024 was $26.5 million, compared to $28.4 million for the same period in 2023, a decrease of $1.9 million, or 7%. Provision for credit losses for the six months ended June 30, 2024 was$206 thousand, compared to$860 thousand for the same period of 2023. Non-interest income was $1.3 million compared to a loss of $3.7 million for the six months ended June 30, 2024 and 2023, respectively. Noninterest expense was $17.6 million and $18.2 million for the six months ended June 30, 2024 and 2023, respectively, a decrease of $592 thousand, or 3%.

Current wording

Net interest income for the nine months ended September 30, 2024 was $40.7 million, compared to $41.7 million for the same period in 2023, a decrease of $1.1 million, or 3%. Provision for credit losses for the nine months ended September 30, 2024 was $6 thousand, compared to $132 thousand for the same period of 2023. Non-interest income was $2.1 million compared to a loss of $3.5 million for the nine months ended September 30, 2024 and 2023, respectively. Noninterest expense was $26.8 million and $27.3 million for the nine months ended September 30, 2024 and 2023, respectively, a decrease of $444 thousand, or 2%.

Previous wording

Commercial bank operating earnings, which exclude the nonrecurring taxes on the surrender of our BOLI policies recorded during the first quarter of 2024 and the after-tax losses on the sale of investment securities available-for-sale recorded during the first quarter 2023, for the three months ended June 30, 2024 and June 30, 2023 were each $4.2 million. For the six months ended June 30, 2024 and June 30, 2023, commercial bank operating earnings were $7.9 million and $8.4 million, respectively.

Current wording

Commercial bank operating earnings, which exclude the nonrecurring taxes on the surrender of our BOLI policies recorded during the first quarter of 2024 and the after-tax losses on the sale of investment securities available-for-sale recorded during the first quarter 2023, for the three months ended September 30, 2024 and September 30, 2023 were $4.7 million and $4.0 million, respectively. For the nine months ended September 30, 2024 and September 30, 2023, commercial bank operating earnings were $12.6 million and $12.5 million, respectively.

Previous wording

Diluted commercial bank operating earnings per share for the three months ended June 30, 2024 and June 30, 2023 were each $0.23. For the six months ended June 30, 2024 and 2023, diluted commercial bank operating earnings per share were $0.43 and $0.46, respectively.

Current wording

Diluted commercial bank operating earnings per share for the three months ended September 30, 2024 and September 30, 2023 were each $0.25 and $0.22, respectively. For the nine months ended September 30, 2024 and 2023, diluted commercial bank operating earnings per share were $0.68 and $0.69, respectively.

Previous wording

(1)Non-accrual loans are included in average balances and do not have a material effect on the average yield. Interest income on non-accruing loans was not material for the quarters presented. Net loan fees and late charges included in interest income on loans totaled $388 thousand and $422 thousand for the quarters ended June 30, 2024 and 2023, respectively.

Current wording

(1)Non-accrual loans are included in average balances and do not have a material effect on the average yield. Interest income on non-accruing loans was not material for the quarters presented. Net loan fees and late charges included in interest income on loans totaled $448 thousand and $612 thousand for the quarters ended September 30, 2024 and 2023, respectively.

Previous wording

(3)The average balances for investment securities includes restricted stock.

Current wording

(2)The average balances for investment securities includes restricted stock.

Previous wording

Average earning assets decreased $100.2 million to $2.12 billion during the second quarter of 2024 as compared to $2.22 billion for the same period of 2023, which was primarily related to the sales of investment securities available-for-sale that were completed during 2023, decreasing the average balances of our investment securities by $77.4 million.

Current wording

Average earning assets decreased $72.8 million to $2.14 billion during the third quarter of 2024 as compared to $2.21 billion for the same period of 2023, which was primarily related to the sales of investment securities available-for-sale that were completed during the first and fourth quarters of 2023, decreasing the average balances of our investment securities by $76.4 million.

Previous wording

Interest income for the three months ended June 30, 2024 increased $769 thousand, or 3%, to $28.0 million from $27.2 million for the three months ended June 30, 2023. Loan interest income during the second quarter of 2024 increased $1.5 million, or 6%, as compared to the year ago quarter due to both an increase in loan volume and an increase in yields earned on the loan portfolio. The year ago 2023 quarter included recovered loan interest of $338 thousand from an impaired loan that was fully recovered. Income from investment securities decreased $259 thousand for the three months ended June 30, 2024 compared to the same period of 2023, primarily as a result of the sales of investment securities executed during 2023. Interest income from deposits at other financial institutions decreased $443 thousand to $401 thousand for the second quarter of 2024 as compared to the second quarter of 2023, which was primarily due to lower average balances.

Current wording

Interest income for the three months ended September 30, 2024 increased $1.8 million, or 7%, to $29.2 million, from $27.4 million for the three months ended September 30, 2023. Loan interest income during the third quarter of 2024 increased $2.1 million, or 8%, as compared to the year ago quarter due to both an increase in loan volume and an increase in yields earned on the loan portfolio. Income from investment securities decreased $258 thousand for the three months ended September 30, 2024 compared to the same period of 2023, primarily as a result of the aforementioned sales of investment securities executed during 2023. Interest income from deposits at other financial institutions decreased $74 thousand to $802 thousand for the third quarter of 2024 as compared to the third quarter of 2023, which was primarily due to lower average balances.

Previous wording

Average interest-bearing deposits decreased $127.3 million to $1.42 billion for the three months ended June 30, 2024 compared to $1.55 billion for the three months ended June 30, 2023, primarily as a result of a decrease in wholesale deposits. Average wholesale deposits decreased $127.3 million to $249.8 million for the three months ended June 30, 2024 compared to $377.1 million for the same period in 2023. Average non-interest-bearing deposits decreased $76.0 million to $378.3 million for the three months ended June 30, 2024 compared to $454.3 million for the same period in 2023. Average other borrowed funds, which primarily include federal funds purchased and advances from the Federal Home Loan Bank of Atlanta ("FHLB"), increased $42.6 million to$99.8 million for the three months ended June 30, 2024 compared to $57.2 million for the three months ended June 30, 2023.

Current wording

Average interest-bearing deposits decreased $111.2 million to $1.50 billion for the three months ended September 30, 2024 compared to $1.61 billion for the three months ended September 30, 2023, primarily as a result of a decrease in wholesale deposits. Average wholesale deposits decreased $116.8 million to $249.9 million for the three months ended September 30, 2024 compared to $366.7 million for the same period in 2023. Average non-interest-bearing deposits decreased $67.2 million to $358.6 million for the three months ended September 30, 2024 compared to $425.8 million for the same period in 2023. Average other borrowed funds, which primarily include federal funds purchased and advances from the Federal Home Loan Bank of Atlanta ("FHLB"), increased $47.9 million to $57.0 million for the three months ended September 30, 2024 compared to $9.1 million for the three months ended September 30, 2023.

Previous wording

Interest expense for the three months ended June 30, 2024 increased $1.5 million to $14.3 million, or 12%, from $12.8 million for the three months ended June 30, 2023. Deposit interest expense for the second quarter of 2024 increased $882 thousand compared to the year ago quarter primarily as a result of increased interest rates on interest-bearing deposits. Interest expense on other borrowed funds increased $604 thousand for the three months ended June 30, 2024 compared to the same period in 2023.

Current wording

Interest expense for the three months ended September 30, 2024 increased $926 thousand to $15.0 million, or 7%, from $14.1 million for the three months ended September 30, 2023. Deposit interest expense for the third quarter of 2024 increased $400 thousand compared to the year ago quarter primarily as a result of increased interest rates on interest-bearing deposits. Interest expense on other borrowed funds increased $528 thousand for the three months ended September 30, 2024 compared to the same period in 2023.

Previous wording

Our net interest margin, on a tax equivalent basis, for the three months ended June 30, 2024 and 2023 was 2.59% and 2.60%, respectively. The yield on interest-earning assets increased 38 basis points to 5.27% for the three months ended June 30, 2024, compared to 4.89% for the same period of 2023. The average yield of the loan portfolio for the three months ended June 30, 2024 and 2023 was 5.62% and 5.35%, respectively, an increase of 27 basis points. The cost of interest-bearing deposits increased 54 basis points to 3.65% for the three months ended June 30, 2024, compared to 3.11% for the same period of 2023, which was primarily attributable to the repricing of our interest-bearing deposits due to higher interest rates. Cost of deposits (which includes non-interest-bearing deposits) was 2.88% for the three months ended June 30, 2024 compared to 2.41% for the three months ended June 30, 2023. Cost of other borrowed funds increased 80 basis points to 4.63% for the three months ended June 30, 2024 compared to 3.83% for the three months ended June 30, 2023.

Current wording

Our net interest margin, on a tax equivalent basis, for the three months ended September 30, 2024 and 2023 was 2.64% and 2.39%, respectively, an increase of 25 basis points, or 10%. The yield on interest-earning assets increased 51 basis points to 5.46% for the three months ended September 30, 2024, compared to 4.95% for the same period of 2023. The average yield of the loan portfolio for the three months ended September 30, 2024 and 2023 was 5.83% and 5.40%, respectively, an increase of 43 basis points. The cost of interest-bearing deposits increased 37 basis points to 3.77% for the three months ended September 30, 2024, compared to 3.40% for the same period of 2023, which was primarily attributable to the repricing of our interest-bearing deposits due to higher interest rates. Cost of deposits (which includes non-interest-bearing deposits) was 3.04% for the three months ended September 30, 2024 compared to 2.69% for the three months ended September 30, 2023. Cost of other borrowed funds increased to 3.93% for the three months ended September 30, 2024 compared to 1.53% for the three months ended September 30, 2023.

Previous wording

The following table presents average balance information, interest income, interest expense and the corresponding average yields earned and rates paid for the six months ended June 30, 2024 and 2023.

Current wording

The following table presents average balance information, interest income, interest expense and the corresponding average yields earned and rates paid for the nine months ended September 30, 2024 and 2023.

Previous wording

(1)Non-accrual loans are included in average balances and do not have a material effect on the average yield. Interest income on non-accruing loans was not material for the periods presented. Net loan fees and late charges included in interest income on loans totaled $792 thousand and $921 thousand for the six months ended June 30, 2024 and 2023, respectively.

Current wording

(1)Non-accrual loans are included in average balances and do not have a material effect on the average yield. Interest income on non-accruing loans was not material for the periods presented. Net loan fees and late charges included in interest income on loans totaled $1.2 million and $1.5 million for the nine months ended September 30, 2024 and 2023, respectively.

Previous wording

(3)The average balances for investment securities includes restricted stock.

Current wording

(2)The average balances for investment securities includes restricted stock.

Previous wording

The following table shows the effect of variations in the volume and mix of our assets and liabilities, as well as the changes in interest rates had on the interest earned from our interest-earning assets and interest incurred on our interest-bearing liabilities for the six months ended June 30, 2024.

Current wording

The following table shows the effect of variations in the volume and mix of our assets and liabilities, as well as the changes in interest rates had on the interest earned from our interest-earning assets and interest incurred on our interest-bearing liabilities for the nine months ended September 30, 2024.

Previous wording

(2)The average yields for investment securities are reported on a fully taxable-equivalent basis at arate of 22%for June 30, 2024 and June 30, 2023.

Current wording

(2)The average yields for investment securities are reported on a fully taxable-equivalent basis at a rate of 22% for September 30, 2024 and September 30, 2023.

Previous wording

Net interest income totaled $13.7 million, a decrease of $717 thousand, or 5%, for the three months ended June 30, 2024, compared to June 30, 2023. The decrease in net interest income is primarily due to an increase in funding costs, which have increased precipitously as a result of Federal Reserve monetary policy, coupled with the need to meet intense competition from market area banks, brokerages, other financial institutions and the U.S. Treasury.

Current wording

Net interest income for the nine months ended September 30, 2024 and September 30, 2023, was $40.7 million and $41.7 million, respectively, a decrease of $1.1 million, or 3%. The decrease in net interest income is primarily due to an increase in funding costs, which have increased precipitously as a result of Federal Reserve monetary policy, coupled with the need to meet intense competition from market area banks, brokerages, other financial institutions, and the U.S. Treasury.

Previous wording

Average earning assets decreased $100.7 million to $2.10 billion during the six months ended June 30, 2024 as compared to $2.20 billion for the same period of 2023, which is primarily related to our sales of investment securities available-for-sale completed during 2023.

Current wording

Average earning assets decreased $91.4 million, to $2.12 billion, during the nine months ended September 30, 2024 as compared to $2.21 billion for the same period of 2023, which is primarily related to our sales of investment securities available-for-sale completed during 2023.

Previous wording

Interest income for the six months ended June 30, 2024 increased $2.3 million to $54.8 million from $52.5 million for the six months ended June 30, 2023. Loan interest income during the first half of 2024 increased $3.4 million as compared to the year ago six month period primarily as a result of the increase in yields earned on the loan portfolio. Income from investment securities decreased $754 thousand for the six months ended June 30, 2024 compared to the same period of 2023, primarily as a result of the sales of investment securities executed during 2023. Income from deposits at other financial institutions decreased $373 thousand year-over-year, as excess liquidity was used to fund loan originations and paydown costly wholesale fundings.

Current wording

Interest income for the nine months ended September 30, 2024 increased $4.1 million to $84.0 million from $80.0 million for the nine months ended September 30, 2023. Loan interest income for the nine months ended September 30, 2024 increased $5.5 million as compared to the same nine month period of 2023, primarily as a result of the increase in yields earned on the loan portfolio. Income from investment securities decreased $1.0 million for the nine months ended September 30, 2024 compared to the same period of 2023, primarily as a result of the sales of investment securities executed during 2023. Income from deposits at other financial institutions decreased $447 thousand year-over-year, as excess liquidity was used to fund loan originations and paydown costly wholesale fundings.

Previous wording

Total average interest-bearing deposits decreased $43.7 million to $1.41 billion for the six months ended June 30, 2024 compared to $1.46 billion for the six months ended June 30, 2023. Average noninterest-bearing deposits decreased $58.0 million to $379.2 million for the six months ended June 30, 2024 compared to $437.2 million for the same period of 2023. Average wholesale deposits decreased $37.1 million to $277.6 million for the six months ended June 30, 2024 compared to $314.7 million for the same period in 2023. Average other borrowed funds, which include federal funds purchased and FHLB advances, decreased $40.0 million to $103.8 million at June 30, 2024 compared to $143.7 million at June 30, 2023.

Current wording

Total average interest-bearing deposits increased $66.5 million to $1.44 billion for the nine months ended September 30, 2024 compared to $1.51 billion for the nine months ended September 30, 2023. Average noninterest-bearing deposits decreased $61.0 million to $372.3 million for the nine months ended September 30, 2024 compared to $433.3 million for the same period of 2023. Average wholesale deposits decreased $63.9 million to $268.3 million for the nine months ended September 30, 2024 compared to $332.2 million for the same period in 2023. Average other borrowed funds, which include federal funds purchased and FHLB advances, decreased $10.3 million to $88.1 million for the nine months ended September 30, 2024, compared to $98.4 million for the same period of 2023.

Previous wording

Interest expense for the six months ended June 30, 2024 increased $4.2 million to $28.3 million from $24.1 million for the six months ended June 30, 2023. Deposit interest expense for the year-to-date period of 2024 increased $4.6 million compared to the year ago six month period primarily as a result of increased interest rates paid on deposits.

Current wording

Interest expense for the nine months ended September 30, 2024 increased $5.1 million to $43.4 million from $38.2 million for the nine months ended September 30, 2023. Deposit interest expense for the year-to-date period of 2024 increased $5.0 million compared to the year ago nine month period primarily as a result of increased interest rates paid on deposits.

Previous wording

Our net interest margin, on a tax equivalent basis, for the six months ended June 30, 2024 and 2023 was 2.53% and 2.60% respectively. The decrease in our net interest margin was primarily a result of the increase in the cost of our interest-bearing liabilities during 2024 compared to 2023, a result of the increased interest rate environment. The yield on interest-earning assets increased 44 basis points to 5.21% for the six months ended June 30, 2024, compared to 4.77% for the same period of 2023. The average yield of the loan portfolio for the six month periods ended June 30, 2024 and 2023 was 5.56% and 5.23%, respectively, an increase of 33 basis points. The cost of interest-bearing deposits increased 74 basis points to 3.62% for the six months ended June 30, 2024, compared to 2.88% for the same period of 2023, which was primarily attributable to the repricing of our interest-bearing deposits due to higher interest rates. Cost of deposits (which includes noninterest-bearing deposits) was 2.84% for the six months ended June 30, 2024 compared to 2.20% for the same six month period of 2023. Cost of other borrowed funds increased 65 basis points to 4.62% for the six months ended June 30, 2024 compared to 3.97% for the six months ended June 30, 2023.

Current wording

Our net interest margin for the nine months ended September 30, 2024 and 2023 was 2.57% and 2.53% respectively. The increase in net interest margin is a result of continued improvement in the yields earned on our loan portfolio and our management to control funding costs. The yield on interest-earning assets increased 46 basis points to 5.29% for the nine months ended September 30, 2024, compared to 4.83% for the same period of 2023. The average yield of the loan portfolio for the nine month periods ended September 30, 2024 and 2023 was 5.65% and 5.29%, respectively, an increase of 36 basis points. The cost of interest-bearing deposits increased 60 basis points to 3.67% for the nine months ended September 30, 2024, compared to 3.07% for the same period of 2023, which was primarily attributable to the repricing of our interest-bearing deposits due to higher interest rates. Cost of deposits (which includes noninterest-bearing deposits) was 2.92% for the nine months ended September 30, 2024 compared to 2.38% for the same nine month period of 2023. Cost of other borrowed funds increased 58 basis points to 4.47% for the nine months ended September 30, 2024 compared to 3.89% for the nine months ended September 30, 2023.

Previous wording

We recorded a provision for credit losses of $206 thousand for each of the three and six months ended June 30, 2024 compared to $618 thousand and $860 thousand for the three and six months ended June 30, 2023. The allowance for credit losses was $19.2 million and $18.9 million at June 30, 2024 and at December 31, 2023, respectively. Our allowance for credit losses on loans as a percent of total loans, net of deferred fees and costs, was 1.02% at both June 30, 2024 and December 31, 2023.

Current wording

We recorded a release of provision for credit losses totaling $200 thousand and $729 thousand for the three months ended September 30, 2024 and 2023, respectively. For the nine months ended September 30, 2024 and 2023, provision for credit losses totaled $6 thousand and $132 thousand, respectively. The allowance for credit losses was $19.1 million and $18.9 million at September 30, 2024 and at December 31, 2023, respectively. Our allowance for credit losses on loans as a percent of total loans, net of deferred fees and costs, was 1.02 and 1.03% at September 30, 2024 and December 31, 2023, respectively.

Previous wording

We lend to well-established and relationship-driven borrowers which has contributed to our track record of low historical credit losses. We continue to maintain our disciplined credit guidelines during the current rate environment. We proactively monitor the impact of interest rates on our adjustable loans as the industry navigates through this economic cycle of increased inflation and higher interest rates. Nonperforming loans for the three months ended June 30, 2024 totaled $3.2 million, or 0.13% of total assets, compared to $1.8 million, or 0.08%, of total assets at December 31, 2023. We had no other real estate owned at June 30, 2024 and at December 31, 2023. We recorded net recoveries of $5 thousand during the second quarter of 2024 compared to net charge-offs of $356 thousand for same period of 2023. For the six months ended June 30, 2024 and 2023, we recorded net recoveries of $35 thousand and net charge-offs of $333 thousand, respectively.

Current wording

We lend to well-established and relationship-driven borrowers which has contributed to our track record of low historical credit losses. We continue to maintain our disciplined credit guidelines during the current rate environment. We proactively monitor the impact of interest rates on our adjustable loans as the industry navigates through this economic cycle of increased inflation and higher interest rates. Nonperforming loans at September 30, 2024 totaled $3.6 million, or 0.16% of total assets, compared to $1.8 million, or 0.08%, of total assets at December 31, 2023. We had no other real estate owned at September 30, 2024 and at December 31, 2023. We recorded net recoveries of $63 thousand during the third quarter of 2024 compared to net recoveries of $7 thousand for same period of 2023. For the nine months ended September 30, 2024 and 2023, we recorded net recoveries of $98 thousand and net charge-offs of $326 thousand, respectively.

Previous wording

The following table provides detail for noninterest incomefor the three and six months ended June 30, 2024 and 2023.

Current wording

The following table provides detail for noninterest incomefor the three and nine months ended September 30, 2024 and 2023.

Previous wording

Noninterest income includes service charges on deposits and loans, loan swap fee income, income from our membership interest in ACM and other investments, income from our BOLI policies, and other fee income, and continues to supplement our operating results. Non-interest income was $871 thousand for the three months ended June 30, 2024 compared to $891 thousand for same period of 2023. For the six months ended June 30, 2024, we recorded noninterest income of $1.3 million compared to a loss of $3.7 million for same period of 2023.

Current wording

Noninterest income includes service charges on deposits and loans, loan swap fee income, income from our membership interest in ACM and other investments, income from our BOLI policies, and other fee income, and continues to supplement our operating results. Non-interest income was $815 thousand for the three months ended September 30, 2024 compared to $225 thousand for same period of 2023. For the nine months ended September 30, 2024, we recorded noninterest income of $2.1 million compared to a loss of $3.5 million for same period of 2023.

Previous wording

We recorded income from our minority membership interest in ACM, totaling $351 thousand and $148 thousand for the three and six months ended June 30, 2024, compared to income of $20 thousand and loss of $781 thousand for the three and six months ended June 30, 2023.

Current wording

We recorded income from our minority membership interest in ACM, totaling $278 thousand and $426 thousand for the three and nine months ended September 30, 2024, compared to a loss of $650 thousand and a loss of $1.4 million for the three and nine months ended September 30, 2023.

Previous wording

Fee income from loans was $38 thousand for the three months ended June 30, 2024, compared to $169 thousand for the same period of 2023, which included income from back-to-back loan swap transactions entered into during the second quarter of 2023. Service charges on deposits was $278 thousand for the three months ended June 30, 2024, compared to $232 thousand for the same period of 2023. Income from BOLI decreased to $66 thousand for the three months ended June 30, 2024 as compared to $362 thousand for the three months ended June 30, 2023, a result of surrendering our BOLI policies during the first quarter of 2024.

Current wording

Fee income from loans was $54 thousand for the three months ended September 30, 2024, compared to $107 thousand for the same period of 2023, which included income from back-to-back loan swap transactions entered into during 2023. Service charges on deposits were $301 thousand for the three months ended September 30, 2024, compared to $284 thousand for the same period of 2023. Income from BOLI decreased to $70 thousand for the three months ended September 30, 2024 as compared to $373 thousand for the three months ended September 30, 2023, a result of surrendering our BOLI policies during the first quarter of 2024.

Previous wording

Fee income from loans was $87 thousand for the six months ended June 30, 2024, compared to $246 thousand for the same period of 2023. Service charges on deposits was $539 thousand for the six months ended June 30, 2024, compared to $447 thousand for the same period of 2023, an increase of $93 thousand, or 21%. Income from BOLI decreased to $256 thousand for the six months ended June 30, 2024 as compared to $694 thousand for the six months ended June 30, 2023, a result of surrendering our BOLI policies during the first quarter of 2024.

Current wording

September 30, 2024, compared to $731 thousand for the same period of 2023, an increase of $110 thousand, or 15%. Income from BOLI decreased to $326 thousand for the nine months ended September 30, 2024 as compared to $1.1 million for the nine months ended September 30, 2023, a result of surrendering our BOLI policies during the first quarter of 2024.

Previous wording

The following table reflects the components of noninterest expense for the three and six months ended June 30, 2024 and 2023.

Current wording

The following table reflects the components of noninterest expense for the three and nine months ended September 30, 2024 and 2023.

Previous wording

Noninterest expense includes, among other things, salaries and benefits, occupancy and equipment costs, professional fees, data processing, insurance and miscellaneous expenses. Noninterest expense was $9.0 million and $9.2 million for the three months ended June 30, 2024 and 2023, respectively.

Current wording

Noninterest expense includes, among other things, salaries and benefits, occupancy and equipment costs, professional fees, data processing, insurance and miscellaneous expenses. Noninterest expense was $9.2 million and $9.0 million for the three months ended September 30, 2024 and 2023, respectively.

Previous wording

Salaries and benefits expense decreased $402 thousand to $4.7 million for the three months ended June 30, 2024 compared to $5.1 million for the same period in 2023, a result of reduced staffing through process improvement resulting from the use of improved technologies. Occupancy expense decreased by $95 thousand, primarily as a result of the office space reduction efforts that were completed during the fourth quarter of 2023. These decreases were partially offset by an increase in internet banking and software expense of $147 thousand for the three months ended June 30, 2024 to $730 thousand, as compared to $583 thousand for the same period in 2023, a result of the implementation of enhanced customer software solutions. In addition, loan related expenses increased $107 thousand for the three months ended June 30, 2024 compared to the same period in 2023, a result of recovered loan legal expenses recorded during 2023.

Current wording

Salaries and benefits expense decreased $415 thousand to $4.9 million for the three months ended September 30, 2024 compared to $5.3 million for the same period in 2023, a result of reduced staffing through process improvement resulting from the use of improved technologies. Occupancy expense decreased by $82 thousand, primarily as a result of the office space reduction efforts that were completed during the fourth quarter of 2023. These decreases were partially offset by an increase in internet banking and software expense of $46 thousand for the three months ended September 30, 2024 to $706 thousand, as compared to $660 thousand for the same period in 2023, a result of the implementation of enhanced customer software solutions. In addition, loan related expenses increased $430 thousand for the three months ended September 30, 2024 compared to the same period in 2023, a result of recovered loan legal expenses recorded during 2023.

Previous wording

Noninterest expense was $17.6 million and $18.2 million for the six months ended June 30, 2024 and 2023, respectively. Salaries and benefits expense decreased $886 thousand to $9.2 million for the six months ended June 30, 2024 compared to $10.1 million for the same period in 2023, which was primarily related to reduced staffing for the six months ended June 30, 2024 compared to the same period of 2023. Occupancy expense decreased by $201 thousand for the six months ended June 30, 2024 as compared to the same period of 2023, which was primarily related to the office space reduction initiatives that were completed during the fourth quarter of 2023. These decreases were partially offset by an increase in internet banking and software expense of $280 thousand for the six months ended June 30, 2024 to $1.4 million, compared to $1.1 million for the same period in 2023, a result of the implementation of enhanced customer software solutions during 2023. Lastly, Federal Deposit Insurance Corporation ("FDIC") insurance premium expense increased

Current wording

Noninterest expense was $26.8 million and $27.3 million for the nine months ended September 30, 2024 and 2023, respectively. Salaries and benefits expense decreased $1.3 million to $14.1 million for the nine months ended September 30, 2024 compared to $15.4 million for the same period in 2023, which was primarily related to reduced staffing for the nine months ended September 30, 2024 compared to the same period of 2023. Occupancy expense decreased by $283 thousand for the nine months ended September 30, 2024 as compared to the same period of 2023, which was primarily related to the office space reduction initiatives that were completed during the fourth quarter of 2023. These decreases were partially offset by an increase in internet banking and software expense of $326 thousand for the nine months ended September 30, 2024 to $2.1 million, compared to $1.8 million for the same period in 2023, a result of the implementation of enhanced customer software solutions during 2023.

Previous wording

We recorded a provision for income tax expense of $1.2 million for each of the three months ended June 30, 2024 and June 30, 2023. The effective tax rate for the three months ended June 30, 2024 and 2023 was 22.2% and 22.4%, respectively.

Current wording

We recorded a provision for income tax expense of $1.4 million and $1.2 million for the three months ended September 30, 2024 and 2023, respectively. The effective tax rate for the three months ended September 30, 2024 and 2023 was 22.6% and 22.9%, respectively.

Previous wording

For the six months ended June 30, 2024 and 2023, provision for income taxes was $4.4 million and $739 thousand, respectively. Provision for income taxes for the six months ended June 30, 2024 includes $2.4 million in taxes and penalties related to the surrender of our BOLI policies. Provision for income taxes for the six months ended June 30, 2023 were decreased as a result of the losses recorded on the sale of investment securities available-for-sale during 2023.

Current wording

For the nine months ended September 30, 2024 and 2023, the provision for income taxes was $5.8 million and $1.9 million, respectively. The provision for income taxes for the nine months ended September 30, 2024 includes $2.4 million in taxes and penalties related to the surrender of our BOLI policies. The provision for income taxes for the nine months ended September 30, 2023 was reduced as a result of the losses recorded on the sale of investment securities available-for-sale during 2023.