FVCBankcorp, Inc.
For the period ended Dec 31, 2024. Filed Mar 20, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Mar 20, 2025
FVCB$16.25-0.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-03-21.
0001675644-24-000036
Item 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-03-20.
0001675644-25-000035
Item 7. 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 167 previous paragraphs and 157 current paragraphs.
60 unchanged; 69 reworded; 28 added; 38 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 20 previous and 20 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 (28)
Current report
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Current report
Allowance for Credit Losses - Loans
Current report
•Total assets increased to $2.20 billion compared to $2.19 billion at December 31, 2024 and 2023, respectively, an increase of $8.4 million.
Current report
•The provision for credit losses totaled $6 thousand in 2024, compared to a provision for credit losses totaling $132 thousand in 2023. The decrease in the provision for credit losses in 2024 was the result of the decline in our real estate concentration qualitative factor, which reduced the qualitative portion of the ACL during 2024.
Current report
•Noninterest expense was $35.8 million and $36.7 million for the years ended December 31, 2024 and 2023, respectively, a decrease of $842 thousand, or 2%. This decrease was primarily a result of a decrease in salaries and benefits expense through reduced staffing associated with process improvements through our investment in technology.
Current report
Selected Financial Data
Current report
Results of Operations— Years Ended December 31, 2024 and December 31, 2023
Current report
Net interest income for the year ended December 31, 2024 was $55.6 million compared to $54.4 million for the year ended December 31, 2023, an increase of $1.2 million, or 2%. The increase in net interest income is primarily due to an increase in loan interest income, as we have actively managed our maturing commercial real estate loan portfolio and further diversified our loan mix toward commercial & industrial loans, which generally earn higher yields, along with the repricing of our variable rate loan portfolio and new loan originations. Additionally, our yield on earning assets increased partially as a result of the balance sheet repositionings we completed during 2023.
Current report
Average interest-earning assets decreased $64.2 million, or 3%, to $2.12 billion at December 31, 2024 compared to $2.19 billion at December 31, 2023. This decrease 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 $79.0 million. Total interest income increased $6.7 million, or 6%, to $113.3 million for the year ended December 31, 2024 compared to $106.6 million for the year ended December 31, 2023. Average rate significantly improved interest income during 2024, as rate contributed $5.9 million in interest income.
Current report
We recorded provision for credit losses totaling $6 thousand and $132 thousand for the years ended December 31, 2024 and 2023, respectively. The allowance for credit losses was $18.1 million and $18.9 million at December 31, 2024 and 2023, respectively. Our allowance for credit losses on loans as a percent of total loans, net of deferred fees and costs, was 0.97% and 1.03% at December 31, 2024 and 2023, respectively.
Current report
Years Ended December 31,2024 and 2023
Current report
We recorded income from our minority membership interest in ACM totaling $376 thousand for the year ended December 31, 2024, compared to a loss of $1.1 million for same period of 2023.
Current report
Fee income from loans was $185 thousand for the year ended December 31, 2024, compared to $388 thousand for the same period of 2023, a result of decreased loan swap fee income. Service charges on deposits were $1.1 million for the year ended December 31, 2024, compared to $1.0 million for the same period of 2023, an increase of $98 thousand, or 10%. Income from BOLI decreased to $397 thousand for the year ended December 31, 2024 compared to $1.5 million for same period of 2023, the decrease being a result of surrendering our BOLI policies during the first quarter of 2024.
Current report
For the year ended December 31, 2024 and 2023, the provision for income taxes was $7.2 million and $410 thousand, respectively. The provision for income taxes for the year ended December 31, 2024 includes additional statutory income tax expense of $1.6 million and tax penalties of $722 thousand related to the above mentioned surrender of our BOLI policies. Our effective tax rate, excluding the additional income taxes and penalties associated with our BOLI surrender, for December 31, 2024 was 22.0%. For the year ended December 31, 2023, our effective tax rate was 9.7%, which was reduced as a result of the losses recorded on the sale of investment securities available-for-sale during 2023.
Current report
At December 31, 2023, we downgraded an owner-occupied commercial real estate loan totaling $19.9 million to substandard due to concerns regarding the financial condition of this borrower’s parent company. During the third quarter ended September 30, 2024, the parent company closed on long term financing, strengthening its overall financial condition. As a result, we upgraded this loan to a pass rating.
Current report
We recorded net charge-offs of $840 thousand and $375 thousand for the years ended December 31, 2024, and 2023, respectively. Net charge-offs to average loans were 0.04% and 0.02% for the years ended December 31, 2024 and 2023, respectively. The increase in net charge-offs for the year ended December 31, 2024 is a result of two loan relationships that were individually evaluated and for which reserves had been established for the shortfall of the related collateral. Each loan relationship had specific circumstances that are not indicative of any systemic issues within the Company’s loan portfolio.
Current report
Nonperforming Loans and Assets
Current report
The following table provides further stratification of these and additional classes of commercial real estate and construction loans at December 31, 2024 (dollars in thousands).
Current report
Average Deposit Balances
Current report
Total deposits increased $25.3 million, or 1%, to $1.87 billion at December 31, 2024 from $1.85 billion at December 31, 2023. Noninterest-bearing deposits were $365.7 million at December 31, 2024, or 19.5% of total deposits. At December 31, 2024, core deposits, which exclude wholesale deposits, increased $20.7 million from December 31, 2023. Interest checking increased $47.3 million, or 8%, to $623.8 million at December 31, 2024 compared to $576.5 million at December 31, 2023. Savings and money market deposits increased $62.6 million, or 20%, to $383.1 million at December 31, 2024 compared to $320.5 million at December 31, 2023. Time deposits decreased $58.2 million, or 19%, to $248.2 million at December 31, 2024 from $306.3 million at December 31, 2023, as time deposits that were originated during 2023 with a weighted average rate of 4.81% matured during 2024.
Current report
Other borrowed funds, which are comprised only of FHLB advances, were $50.0 million at December 31, 2024 compared to $85.0 million at December 31, 2023, a decrease of $35.0 million, or 41%. Subordinated debt, net of unamortized issuance costs, totaled $18.7 million and $19.6 million at December 31, 2024 and 2023, respectively. At December 31, 2024 and December 31, 2023, we did not have any federal funds purchased. Our FHLB advances have pay-fixed/receive-floating interest rate swaps to reduce our funding costs, and as such, the weighted average rate of these FHLB advances are 3.60% and 3.21% at December 31, 2024 and 2023, respectively.
Current report
Total wholesale funding (which includes wholesale deposits and FHLB advances) decreased $30.4 million, or 9%, during 2024 to $299.9 million from $330.3 million at December 31, 2023.
Current report
Shareholders' equity at December 31, 2024 was $235.4 million, an increase of $18.2 million, compared to $217.1 million at December 31, 2023. Net income recorded for the year ended December 31, 2024 contributed $15.1 million to the increase in shareholders' equity. Accumulated other comprehensive loss decreased $894 thousand for the year ended December 31, 2024, primarily due to gains recognized from other comprehensive income related to our cash flow hedges.
Current report
At December 31, 2024 and December 31, 2023
Current report
At December 31, 2024 and December 31, 2023
Current report
Secondary Liquidity Available and In Use
Current report
(1) The Bank has pledged a portion of the commercial real estate and residential loan portfolio to the FHLB to secure the line of credit. The Bank has obtained a letter of credit of $80 million to secure public funds.
Current report
(2) The Bank has pledged a portion of the commercial and industrial loan portfolio to the FRB to secure the line of the credit.
Removed paragraphs (38)
Previous report
On December 15, 2022, the Company announced that the Board of Directors approved a five-for-four split of the Company's common stock in the form of a 25% stock dividend for shareholders of record on January 9, 2023, payable on January 31, 2023. Earnings per share and all other per share information reflected herein have been adjusted for the five-for-four split of the Company's common stock for comparative purposes.
Previous report
Allowance for Credit Losses - Loans & Unfunded Commitments
Previous report
Financial instruments include off-balance sheet credit instruments such as commitments to make loans and commercial letters of credit issued to meet customer financing needs. Our exposure to credit loss in the event of nonperformance by the other party to the financial instrument for off-balance sheet loan commitments is represented by the contractual amount of those instruments. Such financial instruments are recorded when they are funded. We record a reserve for unfunded commitments on off-balance sheet credit exposures through a charge to provision for credit loss expense in our Consolidated Statement of Income. The reserve for unfunded commitments is estimated by call report code segmentation as of the valuation date under the CECL model using the same methodologies as portfolio loans taking utilization rates into consideration. The reserve for unfunded commitments is reflected as a liability on our Consolidated Statement of Condition.
Previous report
Collateral Dependent Financial Assets
Previous report
Loans that do not share risk characteristics are evaluated on an individual basis. For collateral dependent financial assets where we have determined that foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and we expect repayment of the financial asset to be provided substantially through the sale of the collateral, the ACL is measured based on the difference between the fair value of the collateral and the amortized cost basis of the asset as of the measurement date. When repayment is expected to be from the operation of the collateral, expected credit losses are calculated as the amount by which the amortized cost basis of the financial asset exceeds the net present value from the operation of the collateral. When repayment is expected to be from the sale of the collateral, expected credit losses are calculated as the amount by which the amortized cost basis of the financial asset exceeds the fair value of the underlying collateral less estimated cost to sell. The ACL may be zero if the fair value of the collateral at the measurement date exceeds the amortized cost basis of the financial asset.
Previous report
Allowance for Credit Losses - Securities
Previous report
We evaluate our available-for-sale and held-to-maturity debt securities portfolios for expected credit losses as of the valuation date under ASC 326. For available-for-sale debt securities in an unrealized loss position, we first assess whether we intend to sell, or if it is more likely than not that we will be required to sell, the security before recovery of our amortized cost basis. If either criterion is met, the security’s amortized cost basis is written down to fair value through income during the current period. For available-for-sale debt securities that do not meet the aforementioned criteria, we evaluate whether the decline in fair value has resulted from credit losses or other driving factors. If our assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security is compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, an ACL is recorded for the credit loss (which represents the difference between the expected cash flows and amortized cost basis), limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an ACL is recognized in other comprehensive income.
Previous report
The entire amount of an impairment loss is recognized in earnings only when: (1) we intend to sell the security; or (2) it is more likely than not that we will have to sell the security before recovery of our amortized cost basis; or (3) we do not expect to recover the entire amortized cost basis of the security. In all other situations, only the portion of the impairment loss representing the credit loss must be recognized in earnings, with the remaining portion being recognized in shareholders' equity as comprehensive income, net of deferred taxes.
Previous report
Changes in the ACL are recorded as a provision for (or reversal of) credit losses. Losses are charged against the ACL when we believe the uncollectibility of an available-for-sale security is confirmed or when either of the criteria regarding intent or requirement to sell is met. Any impairment not recorded through an ACL is recognized in other comprehensive income as a noncredit-related impairment.
Previous report
As part of our estimation process, we have made a policy election to exclude accrued interest from the amortized cost basis of available-for-sale debt securities and report accrued interest separately in other assets in the Consolidated Statement of Condition. Available-for-sale debt securities are placed on nonaccrual status when we no longer expect to receive all contractual amounts due, which is generally at 90 days past due. Accrued interest receivable is reversed against interest income when a security is placed on nonaccrual status. Accordingly, we do not recognize an ACL against accrued interest receivable. This approach is consistent with our nonaccrual policy implemented for our loan portfolio.
Previous report
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 December 31, 2023, 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.
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Fair Value Measurements
Previous report
We determine the fair values of financial instruments based on the fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value. Our investment securities available-for-sale are recorded at fair value using reliable and unbiased evaluations by an industry-wide valuation service. This service uses evaluated pricing models that vary based on asset class and include available trade, bid, and other market information. Generally, the methodology includes broker quotes, proprietary models, vast descriptive terms and conditions databases, as well as extensive quality control programs. Depending on the availability of observable inputs and prices, different valuation models could produce materially different fair value estimates. The values presented may not represent future fair values and may not be realizable.
Previous report
•Total assets decreased to $2.19 billion compared to $2.34 billion at December 31, 2023 and 2022, respectively, a decrease of $153.8 million, or 7%. The decrease in total assets is primarily attributable toour strategic balance sheet management which focused on repositioning the balance sheet through two investment securities restructurings and reducing our reliance on wholesale funding to limit funding costs.
Previous report
•The provision for credit losses for 2023 totaled $0.1 million compared to a provision for credit losses totaling $2.6 million in 2022. The provision for credit losses for 2023 was a reflection of the credit quality of the loan portfolio and the decrease in total loans for the 2023 period.
Previous report
•Noninterest expense was $36.7 million and $34.5 million for the years ended December 31, 2023 and 2022, respectively. The increase of $2.2 million, or 6%, was primarily a result of increases in internet banking, software expense and state franchise taxes, which are more fully discussed below under "Results of Operations".
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(1)Amounts for all periods include the effect of a 5-for-4 stock split declared on December 15, 2022.
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(2)The average yields for investment securities are reported on a fully taxable-equivalent basis at a rate of 22% for 2023 and 21% for 2022.
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(2)The average yields for investment securities are reported on a fully taxable-equivalent basis at a rate of 22% for 2023 and 21% for 2022.
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Net interest income, on a tax equivalent basis, is a financial measure that we believe provides a more accurate picture of the interest margin for comparative purposes. To derive our net interest margin on a tax equivalent basis, net interest income is adjusted to reflect tax-exempt income on an equivalent before tax basis with a corresponding increase in income tax expense. For purposes of this calculation, we use our federal and state statutory tax rates for the periods presented. This measure ensures comparability of net interest income arising from taxable and tax-exempt sources.
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The following table provides a reconciliation of our GAAP net interest income to our tax equivalent net interest income.
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Supplemental Financial Data and Reconciliations to GAAP Financial Measures
Previous report
Net interest income for the year ended December 31, 2023 was $54.4 million on a fully taxable-equivalent basis, compared to $65.3 million for the year ended December 31, 2022, a decrease of $10.9 million, or 17%. 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. We have been disciplined in our approach to rising interest rates, which has resulted in a cycle-to-date beta (calculated comparing the change in deposit interest rates from March 31, 2022 to December 31, 2023, including non-interest bearing deposits and excluding wholesale deposits) of approximately 42% since the Federal Reserve enacted its contractionary monetary policy through the increase of short-term interest rates to combat inflation.
Previous report
Average interest-earning assets increased by 7% to $2.19 billion at December 31, 2023 compared to $2.04 billion at December 31, 2022, which resulted in an increase in total interest income on a tax equivalent basis of $25.9 million, to $106.6 million for the year ended December 31, 2023 compared to $80.7 million for the year ended December 31, 2022. Both average volume and rate significantly impacted interest income during 2023, with volume contributing an additional $8.7 million in interest income and rate contributing an additional $17.3 million in interest income when compared to the prior year.
Previous report
As a result of the adoption of CECL, reserves for credit losses increased $3.7 million and consisted of increases to the allowance for credit losses on loans as well as an increase in reserves for unfunded commitments (referred to as combined ACL herein). For the year ended December 31, 2023, subsequent to the aforementioned adoption, we recorded a provision for credit losses of $132 thousand for the year ended December 31, 2023 compared to $2.6 million for the year ended December 31, 2022. The allowance for credit losses at December 31, 2023 was $18.9 million compared to $16.0 million at December 31, 2022. Our allowance for credit loss ratio as a percent of total loans, net of deferred fees and costs, for December 31, 2023 and 2022 was 1.03% and 1.02%, respectively.
Previous report
Fee income from loans was $388 thousand for the year ended December 31, 2023, compared to $232 thousand for the same period of 2022. Service charges on deposits and other fee income was$1.5 million for the year ended December 31, 2023, compared to $1.4 million for the same period of 2022. Loan swap fees for the year ended December 31, 2023 totaled $187 thousand compared to none for the same period of December 31, 2022. Income from BOLI increased 21% to $1.5 million for the year ended December 31, 2023 as compared to $1.2 million for the year ended December 31, 2022, primarily due to the purchase of $15 million in additional BOLI during the second quarter of 2022.
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During the fourth quarter of 2023, we reduced our future occupancy expense through a reduction in office space. We wrote-off two leases totaling $273 thousand to reduce excess office space and to consolidate two branch locations in
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Montgomery County, Maryland. We also reduced staffing which resulted in severance costs of $184 thousand for the year ended December 31, 2023. These initiatives reduce operating expenses in 2024 by over $1.0 million.
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We recorded a provision for income tax expense of $410 thousand for the year ended December 31, 2023, compared to $6.0 million for the year ended December 31, 2022. Our effective tax rate for December 31, 2023 was 9.7%, compared to 19.4% for 2022. Our effective tax rates for 2023 and 2022 are less than our combined federal and state statutory rate of 22.5% because of discrete tax benefits recorded as a result of nonqualified option exercises during the aforementioned periods.
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Additionally, during the first quarter of 2023, we fixed $150 million of our wholesale funding through the execution of pay-fixed/receive-floating interest rate swaps. The interest rate swaps have a weighted average rate of 3.50%, have a maturity of five years, and are designated against a mix of FHLB advances and brokered certificates of deposits. Classified as cash flow hedges, the market value fluctuations will not impact future earnings, but will impact accumulated other comprehensive income.
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At December 31, 2023
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Nonperforming Assets
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Average Deposit Balance
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Total deposits increased $15.1 million, or 1%, to $1.85 billion at December 31, 2023 from $1.83 billion at December 31, 2022. Noninterest-bearing deposits were $396.7 million at December 31, 2023, or 21% of total deposits. At December 31, 2023, core deposits, which exclude wholesale deposits, increased $17.9 million from December 31, 2022, or 1%. Time deposits (which exclude wholesale deposits) increased $45.9 million, or 18%, to $306.3 million at December 31, 2023 from December 31, 2022, and were 19% of core deposits, representing new and existing customer deposits as customers were looking to fix interest rates on their deposit balances.
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At December 31, 2023
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Other borrowed funds, which include federal funds purchased, FHLB advances, and our subordinated notes, were$104.6 millionat December 31, 2023, and $284.6 million at December 31, 2022. For December 31, 2023 and 2022, we had $85.0 million and $235.0 million, respectively, in FHLB advances. The decrease in FHLB advances was primarily a result of the aforementioned paydown from the proceeds of the sale of available-for-sale investment securities during 2023. These FHLB advances are fixed at a weighted average rate of 3.21% as we have executed $85.0 million in pay-fixed/receive-floating interest rate swaps to reduce funding costs. Subordinated debt, net of unamortized issuance costs, totaled $19.6 million at each of December 31, 2023 and 2022. For December 31, 2023 and 2022, we had $0 and $30.0 million federal funds purchased, respectively.
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Stockholders' equity at December 31, 2023 was$217.1 million, an increase of $14.7 million, compared to $202.4 million at December 31, 2022. The increase in stockholders' equity was attributable to a decrease in accumulated other comprehensive loss of $12.4 million, which was primarily related to the sale of available-for-sale investment securities and an improvement in the market value of the investment securities portfolio, and net income recorded for the year ended
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December 31, 2023 totaling $3.8 million. Retained earnings decreased $2.8 million primarily as a result of the adoption of CECL on January 1, 2023.
Reworded paragraphs (69)
Previous wording
On August 31, 2021, we announced that the Bank made an investment in 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 ACM for $20.4 million to obtain a 28% 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
Net interest income is our primary source of revenue. We define revenue as net interest income plus non-interest income. We manage our balance sheet and interest rate risk exposure to maximize, and concurrently stabilize, net interest income. We do this by monitoring our liquidity position and the spread between the interest rates earned on interest-earning assets and the interest rates paid on interest-bearing liabilities. We attempt to minimize our exposure to interest rate risk, but are unable to eliminate it entirely. In addition to managing interest rate risk, we also analyze our loan portfolio for exposure to credit risk. Loan defaults and foreclosures are inherent risks in the banking industry, and we attempt to limit our exposure to these risks by carefully underwriting and then monitoring our extensions of credit. In addition to net interest income, non-interest income is a complementary source of revenue for us and includes, among other things, service charges on deposits and loans, income from minority membership interest in ACM, merchant services fee income, insurance commission income, income from bank owned life insurance ("BOLI"), and gains and losses on sales of investment securities available-for-sale.
Current wording
Net interest income is our primary source of revenue. We define revenue as net interest income plus noninterest income. We manage our balance sheet and interest rate risk exposure to maximize, and concurrently stabilize, net interest income. We do this by monitoring our liquidity position and the spread between the interest rates earned on interest-earning assets and the interest rates paid on interest-bearing liabilities. We attempt to minimize our exposure to interest rate risk, but are unable to eliminate it entirely. In addition to managing interest rate risk, we also analyze our loan portfolio for exposure to credit risk. Loan defaults and foreclosures are inherent risks in the banking industry, and we attempt to limit our exposure to these risks by carefully underwriting and then monitoring our extensions of credit. In addition to net interest income, noninterest income is a complementary source of revenue for us and includes, among other things, service charges on deposits and loans, income from minority membership interest in ACM, merchant services fee income, insurance commission income, income from bank owned life insurance ("BOLI"), and gains and losses on sales of investment securities available-for-sale.
Previous wording
The accounting policies we view as critical are those relating to judgments, assumptions and estimates regarding the determination of the allowance for credit losses - loans & reserve for unfunded commitments, allowance for credit losses - securities, and fair value measurements.
Current wording
The accounting policies we view as critical are those relating to judgments, assumptions, and estimates regarding the determination of the allowance for credit losses on our loan portfolio.
Previous wording
We maintain the allowance for credit losses ("ACL") at a level that represents management’s best estimate of expected losses in our loan portfolio. We adopted the provisions of the CECL accounting standard as of January 1, 2023 in accordance with the required implementation date and recorded the impact of the adoption to retained earnings, net of deferred income taxes, as required by the standard. Prior to the adoption of CECL, we utilized an incurred loss model to derive our best estimate of the ACL.
Current wording
We maintain the allowance for credit losses ("ACL") at a level that represents management’s best estimate of expected losses in our loan portfolio.
Previous wording
Accounting Standards Codification ("ASC") 326 requires that an estimate of CECL be immediately recognized and reevaluated over the contractual life of the financial asset. The ACL is a valuation account that is deducted from the amortized cost basis of loans to present the net amount expected to be collected on the loan portfolio. Loans, or portions thereof, are charged off against the ACL when they are deemed uncollectible. Expected recoveries are recorded to the extent they do not exceed the aggregate of amounts previously and expected to be charged-off.
Current wording
Accounting Standards Codification ("ASC") 326 requires that an estimate of expected credit losses be immediately recognized and reevaluated over the contractual life of the financial asset. The ACL is a valuation account that is deducted from the amortized cost basis of loans to present the net amount expected to be collected on the loan portfolio. Loans, or portions thereof, are charged off against the ACL when they are deemed uncollectible. Recoveries are recorded to the extent they do not exceed the aggregate of amounts previously charged-off.
Previous wording
Reserves on loans that do not share risk characteristics are evaluated on an individual basis. Nonaccrual loans are specifically reviewed for loss potential and when deemed appropriate are assigned a reserve based on an individual evaluation. The remainder of the portfolio, representing all loans not evaluated individually for impairment, is segmented based on call report code and processed through a cash flow valuation model. In particular, loan-level probability of default ("PD") and severity (also referred to as loss given default ("LGD")) is applied to derive a baseline expected loss as of the valuation date. These expected default and severity rates, which are regression-derived and based on peer historical loan-level performance data, are calibrated to incorporate our reasonable and supportable forecast of future losses as well as any necessary qualitative adjustments.
Current wording
Reserves on loans that do not share risk characteristics are evaluated on an individual basis. Nonaccrual loans are specifically reviewed for loss potential and when deemed appropriate are assigned a reserve based on an individual evaluation. The remainder of the portfolio, representing all loans not evaluated individually, is segmented based on call report code and processed through a non-discounted cash flow valuation model. In particular, loan-level probability of default ("PD") and severity (also referred to as loss given default ("LGD")) is applied to derive a baseline expected loss as of the valuation date. These expected default and severity rates, which are regression-derived and based on peer historical loan-level performance data, are calibrated to incorporate our reasonable and supportable forecast of future losses as well as any necessary qualitative adjustments.
Previous wording
While our methodology in establishing the ACL attributes portions of a combined reserve to multiple elements, we believe that the combined allowance of credit losses (which is inclusive of the reserve for unfunded commitments) represents the most appropriate coverage metric for loss absorption purposes.
Current wording
While our methodology in establishing the ACL attributes portions of a combined reserve to multiple elements, we believe that the combined allowance for credit losses (which is inclusive of the reserve for unfunded commitments) represents the most appropriate coverage metric for loss absorption purposes.
Previous wording
Our methodology utilized in the estimation of the ACL, which is performed at least quarterly, is designed to be dynamic and responsive to changes in our loan portfolio credit quality, composition, and forecasted economic conditions. The review of the reasonableness and appropriateness of the ACL is reviewed by the ACL Committee for approval as of the valuation date. Additionally, information is provided to the Board of Directors on a quarterly basis along with our consolidated financial statements.
Current wording
The determination of the appropriate level of the ACL on loans inherently involves a high degree of subjectivity and requires us to make significant judgments concerning credit risks and trends using quantitative and qualitative information, as well as reasonable and supportable forecasts of future economic conditions, all of which may undergo frequent and significant changes. Changes in conditions, including unforeseen events, changes in asset-specific risk characteristics, and other economic factors, both within and outside our control, may indicate the need for an increase or decrease in the ACL on loans. While we make every effort to utilize the best information available in making our assessment of the ACL estimate, the estimation process is inherently challenging as potential changes in any one factor or input may occur at different rates and/or impact pools of loans in different ways. Further, changes in factors and inputs may also be directionally inconsistent, such that improvement in one factor may offset deterioration in others. Our methodology utilized in the estimation of the ACL, which is performed at least quarterly, is designed to be dynamic and responsive to changes in our loan portfolio credit quality, composition, and forecasted economic conditions. The review of the reasonableness and appropriateness of the ACL is reviewed by the ACL Committee for approval as of the valuation date. Additionally, information is provided to the Board of Directors on a quarterly basis along with our consolidated financial statements.
Previous wording
Credit losses are an inherent part of our business and, although we believe the methodologies for determining the ACL and the current level of the allowance and reserve on unfunded commitments are appropriate, it is possible that there may be unidentified losses in the portfolio at any particular time that may become evident at a future date pursuant to additional internal analysis or regulatory comment. Additional provisions for such losses, if necessary, would be recorded, and would negatively impact earnings.
Current wording
Credit losses are an inherent part of our business and, although we believe the methodologies for determining the ACL and the current level of the allowance are appropriate, it is possible that there may be unidentified losses in the portfolio at any particular time that may become evident at a future date pursuant to additional internal analysis or regulatory comment. Additional provisions for such losses, if necessary, would be recorded, and would negatively impact earnings.
Previous wording
For the years ended December 31, 2023 and 2022, we focused on organic growth, capitalizing on new customer relationships we obtained through centers of influence and portfolio cultivation.
Current wording
For the years ended December 31, 2024 and 2023, we continued our focus on organic growth, capitalizing on new customer relationships we obtained through centers of influence and portfolio cultivation.
Previous wording
•Total loans, net of deferred fees, decreased $11.9 million, or 1%, from December 31, 2022 to December 31, 2023. Asset quality remains sound with nonperforming loans and loans past due 90 days or more as a percentage of total assets of 0.08%at December 31, 2023, compared to 0.19% at December 31, 2022.
Current wording
•Total loans, net of deferred fees, increased $41.7 million, or 2%, from December 31, 2023 to December 31, 2024. Asset quality remains sound with nonperforming loans and loans past due 90 days or more as a percentage of total assets of 0.58% at December 31, 2024, compared to 0.08% at December 31, 2023.
Previous wording
•Total deposits increased $15.1 million or 1%, from December 31, 2022 to December 31, 2023. Noninterest-bearing deposits were $396.7 million at December 31, 2023, or 21.5% of total deposits. At December 31, 2023, core deposits, which exclude wholesale deposits, increased $17.9 million from December 31, 2022, or 1%.
Current wording
•Total deposits increased $25.3 million or 1%, from December 31, 2023 to December 31, 2024. Noninterest-bearing deposits were $365.7 million at December 31, 2024, or 19.5% of total deposits. At December 31, 2024, core deposits, which exclude wholesale deposits, increased $20.7 million from December 31, 2023, or 1%.
Previous wording
•Net income totaling $3.8 million was recorded for the year ended December 31, 2023 compared to $25.0 million for 2022. The year ended December 31, 2023 results include after-tax losses of $12.2 million for the first quarter 2023 and fourth quarter 2023 securities repositionings. Core bank operating earnings, which excludes the securities sales and other nonrecurring items discussed more fully below under "Results of Operations", for the year ended December 31, 2023 was $16.3 million. For a reconciliation of this non-GAAP information which excludes the effect of these non-recurring items, please refer to the table below.
Current wording
•Net income was $15.1 million for the year ended December 31, 2024 compared to $3.8 million for 2023. During 2024, we surrendered $48.0 million in BOLI policies, which resulted in a nonrecurring increase of $2.4 million to our tax provisioning related to the loss of the tax favored status of prior appreciation. For the year ended December 31, 2023, net income included after-tax losses totaling $12.2 million related to the sale of $101.7 million in book value available-for-sale investment securities and nonrecurring noninterest expense totaling $457 thousand related to office space reductions and severance costs. Commercial bank operating earnings (non-GAAP), which excludes the securities sales and other nonrecurring items discussed more fully below under "Results of Operations", for the year ended December 31, 2024 and 2023 was $17.4 million and $16.3 million, respectively. For a reconciliation of this non-GAAP information which excludes the effect of these non-recurring items, please refer to the table below.
Previous wording
•Net interest income decreased $10.8 million, or 17%, to $54.4 million for the year ended December 31, 2023 compared to the year ended December 31, 2022. Interest income on loans increased $24.7 million and interest expense on deposits increased $34.9 million for 2023, compared to 2022. Net interest margin for 2023 was 2.49% compared to 3.19% for 2022.
Current wording
•Net interest income increased $1.2 million, or 2%, to $55.6 million for the year ended December 31, 2024 compared to the year ended December 31, 2023. Interest income on loans increased $8.3 million and interest expense on deposits increased $5.9 million for 2024 compared to 2023. Net interest margin for 2024 was 2.62% compared to 2.49% for 2023, an increase of 13 basis points, or 5%.
Previous wording
•Noninterest income for 2023 decreased to a loss of $13.4 million compared to income of $2.8 million for 2022. This decrease was primarily driven bythe loss related to the sales of available-for-sale securities during 2023.
Current wording
•Noninterest income for 2024 increased to $2.5 million compared to loss of $13.4 million for 2023. This increase was primarily driven by the loss related to the sales of available-for-sale securities during 2023.
Previous wording
(2)Non-GAAP: Tangible book value is calculated as total stockholders' equity, less goodwill and other intangible assets, divided by common shares outstanding.
Current wording
(1)Non-GAAP: Tangible book value is calculated as total stockholders' equity, less goodwill and other intangible assets, divided by common shares outstanding.
Previous wording
(3)Net interest margin is calculated as net interest income divided by total average earning assets.
Current wording
(2)Net interest margin is calculated as net interest income divided by total average earning assets.
Previous wording
(4)Efficiency ratio is calculated as total non-interest expense divided by the total of net interest income and non-interest income.
Current wording
(3)Efficiency ratio is calculated as total noninterest expense divided by the total of net interest income and noninterest income.
Previous wording
We recorded net income of $3.8 million, or $0.21 per diluted common share, for the year ended December 31, 2023, compared to net income of $25.0 million, or $1.35 per diluted common share for the year ended December 31, 2022. Our 2023 results were impacted by a decrease in net interest income, primarily due to the increase in our funding costs during 2023. In addition, we completed two balance sheet repositionings where we sold $102.5 million in book value available-for-sale investment securities, which resulted in after-tax losses of $12.2 million. Commercial bank operating earnings (non-GAAP), which exclude these securities losses and other nonrecurring expense items that were recorded during 2023 and 2022, were $16.3 million and $25.1 million, respectively. Diluted commercial bank operating earnings per share (non-GAAP) for the year ended December 31, 2023 and 2022 were $0.90 and $1.36, respectively.
Current wording
We recorded net income of $15.1 million, or $0.82 per diluted common share, for the year ended December 31, 2024, compared to net income of $3.8 million, or $0.21 per diluted common share for the year ended December 31, 2023. Net income for 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. The net proceeds of the BOLI surrender were reinvested in our loan portoflio. For the year ended December 31, 2023, net income included after-tax losses totaling $12.2 million related to the sale of $102.5 million in book value available-for-sale investment securities. Commercial bank operating earnings (non-GAAP), which exclude the taxes associated with the BOLI surrender, securities losses, and other nonrecurring expense items that were recorded during 2024 and 2023, were $17.4 million and $16.3 million, respectively. Diluted commercial bank operating earnings per share (non-GAAP) for the year ended December 31, 2024 and 2023 were $0.95 and $0.90, respectively.
Previous wording
Net interest income decreased $10.8 million to $54.4 million for the year ended December 31, 2023, compared to $65.2 million for the year ended December 31, 2022. For the year ended December 31, 2023, we recorded a provision for credit losses of $132 thousand compared to $2.6 million for the year ended December 31, 2022. The provision for credit losses was primarily impacted by net loan growth for both 2023 and 2022. We reported noninterest income as a loss of $13.4 million for the year ended December 31, 2023, compared to noninterest income of $2.8 million for 2022, a decrease of $16.2 million, which was primarily driven by the losses recorded on the sale of available-for-sale securities totaling $15.6 million for the year ended December 31, 2023.
Current wording
Net interest income increased $1.2 million to $55.6 million for the year ended December 31, 2024, compared to $54.4 million for the year ended December 31, 2023. For the year ended December 31, 2024, we recorded a provision for credit losses of $6 thousand compared to $132 thousand for the year ended December 31, 2023. We reported noninterest income of $2.5 million for the year ended December 31, 2024, compared to a loss of $13.4 million for 2023, which was primarily driven by the losses recorded on the sale of available-for-sale securities totaling $15.6 million for the year ended December 31, 2023.
Previous wording
Noninterest expense was $36.7 million and $34.5 million for the years ended December 31, 2023 and 2022, respectively, an increase of $2.2 million, or 6%. The increase in noninterest expense was primarily a result of an increases in internet banking and software expense and FDIC insurance fees. Included in noninterest expense for the year ended December 31, 2023 was $457 thousand related to office space reductions and severance costs. Excluding these nonrecurring expenses, noninterest expense for the year ended December 31, 2023 increased $1.7 million, or 5%, year-over year.
Current wording
Noninterest expense was $35.8 million and $36.7 million for the years ended December 31, 2024 and 2023, respectively, a decrease of $842 thousand, or 2%. The decrease in noninterest expense was primarily a result of a decrease in salaries and benefits expense, which decreased $1.9 million, a result of reduced staffing and process improvements through technology investments. Included in noninterest expense for the year ended December 31, 2023 was $457 thousand related to office space reductions and severance costs.
Previous wording
The return on average assets for the years ended December 31, 2023 and 2022 was 0.17% and 1.18%, respectively. The return on average equity for the years ended December 31, 2023 and 2022 was 1.82% and 12.34%, respectively. The return on average assets for the years ended December 31, 2023 and 2022 based on operating earnings (a non-GAAP metric) was 0.72% and 1.18%, respectively. The return on average equity for the years ended December 31, 2023 and 2022 based on core bank operating earnings (non-GAAP) was 7.78% and 12.39%, respectively. See the above table for a reconciliation of GAAP net income to core bank operating earnings (non-GAAP).
Current wording
The return on average assets for the years ended December 31, 2024 and 2023 was 0.69% and 0.17%, respectively. The return on average equity for the years ended December 31, 2024 and 2023 was 6.64% and 1.82%, respectively. The return on average assets for the years ended December 31, 2024 and 2023 based on commercial bank operating earnings (non-GAAP) was 0.80% and 0.72%, respectively. The return on average equity for the years ended December 31, 2024 and 2023 based on commercial bank operating earnings (non-GAAP) was 7.69% and 7.78%, respectively. See the above table for a reconciliation of GAAP net income to commercial bank operating earnings (non-GAAP).
Previous wording
The following table presents average balance sheet information, interest income, interest expense and the corresponding average yields earned and rates paid for the years ended December 31, 2023 and 2022.
Current wording
The following table presents average balance information, interest income, interest expense and the corresponding average yields earned and rates paid for the years ended December 31, 2024 and 2023.
Previous wording
Average Balance Sheets and Interest Rates on Interest-Earning Assets and Interest-Bearing Liabilities
Current wording
Average Balances and Interest Rates on Interest-Earning Assets and Interest-Bearing Liabilities
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 years presented. Net loan fees and late charges included in interest income on loans totaled $2.1 million and $3.0 million for the years ended December 31, 2023 and 2022, respectively.
Current wording
(1)Nonaccrual 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 $1.9 million and$2.1 million for the year ended December 31, 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 level of net interest income is affected primarily by variations in the volume and mix of these assets and liabilities, as well as changes in interest rates. The following table shows the effect that these factors had on the interest earned from our interest-earning assets and interest incurred on our interest-bearing liabilities for the years ended December 31, 2023 and 2022.
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 years ended December 31, 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 years presented.
Current wording
(1)Nonaccrual 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 years presented.
Previous wording
Our net interest margin, on a tax equivalent basis, for the years ended December 31, 2023 and 2022 was 2.49% and 3.19%, respectively. The decrease in our net interest margin was primarily a result of the previously mentioned increased rate environment during 2023, as our cost of funds increased more than our yield on earning assets during the year. The yield on interest-earning assets increased 93 basis points to 4.88% for the year ended December 31, 2023, compared to 3.95% for the same period of 2022, a result of the increased rate environment during 2023. Offsetting the increase in yields on earning assets was a 213 basis point increase in the cost of interest-bearing liabilities, which was primarily attributable to the repricing of our interest-bearing deposits to higher interest rates during 2023. Cost of deposits (which includes noninterest-bearing deposits) was 2.47% for the year ended December 31, 2023 compared to 0.69% for the same period of 2022. Cost of other borrowed funds increased 101 basis points to 3.77% for the year ended December 31, 2023 compared to 2.76% for the year ended December 31, 2022.
Current wording
Our net interest margin for the years ended December 31, 2024 and 2023 was 2.62% and 2.49%, respectively. The increase in our net interest margin was primarily a result of the increased rate environment, which improved our yields on earning assets during 2024. The yield on interest-earning assets increased 46 basis points to 5.34% for the year ended December 31, 2024, compared to 4.88% for the same period of 2023, a result of the increased rate environment during 2024 and our balance sheet repositionings from 2023. Our cost of funds increased 44 basis points to 3.00% for the year ended December 31, 2024, from 2.56% for the year ended December 31, 2023, which was primarily attributable to the repricing of our interest-bearing deposits to higher interest rates during 2024. Cost of deposits (which includes noninterest-bearing deposits) was 2.92% for the year ended December 31, 2024 compared to 2.47% for the same period of 2023. Cost of other borrowed funds increased 60 basis points to 4.37% for the year ended December 31, 2024 compared to 3.77% for the year ended December 31, 2023.
Previous wording
Average loans receivable increased $230.2 million to $1.85 billion for the year ended December 31, 2023, compared to $1.62 billion for the year ended December 31, 2022. The yield on average loans increased 77 basis points to 5.32% for the year ended December 31, 2023. The increase in average rate of loans receivable contributed $14.7 million to interest income while the increase in average loan volume contributed $10.1 million to interest income. Average balances of nonperforming loans, which consist of nonaccrual loans, are included in the net interest margin calculation and did not have a material impact on our net interest margin in 2023 and 2022.
Current wording
Average loans receivable increased $21.2 million to $1.87 billion for the year ended December 31, 2024, compared to $1.85 billion for the year ended December 31, 2023. The yield on average loans increased 39 basis points to 5.71% for the year ended December 31, 2024. The increase in the average rate of loans receivable contributed $5.6 million to interest income while the increase in average loan volume contributed $2.7 million to interest income. Average balances of nonperforming loans, which consist of nonaccrual loans, are included in the net interest margin calculation and did not have a material impact on our net interest margin in 2024 and 2023.
Previous wording
Average investment securities decreased $64.6 million to $287.5 million for the year ended December 31, 2023, compared to $352.1 million for the year ended December 31, 2022. The decrease in average investment securities was primarily a result of repositioning the investment portfolio with the sale of $102.5 million in book value available-for-sale investment securities during 2023. The yield on average investment securities increased 14 basis points to 1.95% for the year ended December 31, 2023, primarily as a result of the sale of lower yielding securities relative to the average yield of the securities portfolio.
Current wording
Average investment securities decreased $79.0 million to $208.4 million for the year ended December 31, 2024, compared to $287.5 million for the year ended December 31, 2023. The decrease in average investment securities was primarily a result of repositioning the investment portfolio with the sale of $102.5 million in book value available-for-sale investment securities during 2023. The yield on average investment securities increased 14 basis points to 2.09% for the year ended December 31, 2024, primarily as a result of the sale of lower yielding securities in 2023 relative to the average yield of the securities portfolio.
Previous wording
Average interest-earning deposits at other financial institutions, consisting primarily of excess cash reserves maintained at the Federal Reserve, decreased $23.8 million to $50.7 million for the year ended December 31, 2023, compared to $74.5 million for the year ended December 31, 2022. The decrease in average interest-earning deposits at other financial institutions was primarily a result of our deployment of excess liquidity during 2023 to reduce the Bank's reliance on wholesale funding. The yield on average interest-earning deposits increased 429 basis points to 5.21% for the year ended December 31, 2023.
Current wording
Average interest-earning deposits at other financial institutions, consisting primarily of excess cash reserves maintained at the Federal Reserve, decreased $6.3 million to $44.4 million for the year ended December 31, 2024, compared to $50.7 million for the year ended December 31, 2023. The yield on average interest-earning deposits decreased 4 basis points to 5.17% for the year ended December 31, 2024, primarily as a result of the Federal Reserve's Federal Open Market Committee ("FOMC") decision to begin decreasing its targeted federal funds rate in September 2024.
Previous wording
Total average interest-bearing liabilities increased $215.2 million to $1.61 billion at December 31, 2023 compared to $1.40 billion at December 31, 2022, which resulted in an increase in interest expense of $36.8 million to $52.2 million for the year ended December 31, 2023 compared to $15.4 million for the year ended December 31, 2022. Average rate significantly impacted interest expense during 2023, as average volume only contributed an additional $4.9 million in interest expense while average rate increases contributed an additional $31.9 million in interest expense compared to the prior year.
Current wording
Total average interest-bearing liabilities decreased $56.6 million to $1.55 billion at December 31, 2024 compared to $1.61 billion at December 31, 2023. Conversely, interest expense increased $5.5 million to $57.7 million for the year ended December 31, 2024 compared to $52.2 million for the year ended December 31, 2023. The increase in the average rate significantly impacted interest expense during 2024, as average volume decreased interest expense $3.2 million while average rate increases contributed $8.7 million in interest expense.
Previous wording
Total average interest-bearing deposits increased $183.4 million to $1.49 billion at December 31, 2023 compared to $1.31 billion at December 31, 2022, which resulted in an increase in interest expense on deposits of $34.9 million to $47.3 million for the year ended December 31, 2023 compared to $12.5 million for the year ended December 31, 2022. Average noninterest-bearing deposits decreased $76.0 million, or 15%, to $425.9 million at December 31, 2023, compared to $502.0 million at December 31, 2022. During 2023, competition for deposits along with higher interest rates resulted in customers' movement of excess funds from noninterest-bearing into interest-bearing deposit products. Average interest checking deposits decreased $143.2 million to $581.7 million as of December 31, 2023 compared to $724.9 million as of December 31, 2022. Average time deposits increased $145.6 million to $349.3 million as of December 31, 2023 compared to $203.7 million at December 31, 2022, as customers preferred to fix a portion of their funds at higher interest rates. Average wholesale deposits increased $242.0 million to $303.5 million as of December 31, 2023 compared to $61.5 million as of December 31, 2022.
Current wording
Total average interest-bearing deposits decreased $34.5 million to $1.45 billion at December 31, 2024 compared to $1.49 billion at December 31, 2023. Interest expense on deposits increased $5.9 million to $53.2 million for the year ended December 31, 2024 compared to $47.3 million for the year ended December 31, 2023, primarily a result of the increase in the cost of interest-bearing deposits, which increased 48 basis points to 3.66% for the year ended December 31, 2024, compared to 3.18% for the year ended December 31, 2023. Average noninterest-bearing deposits decreased $57.3 million, or 13%, to $368.6 million at December 31, 2024, compared to $425.9 million at December 31, 2023. Competition for deposits along with higher interest rates resulted in customers' movement of excess funds from noninterest-bearing into interest-bearing deposit products. Average interest checking deposits decreased $10.2 million to $571.4 million as of December 31, 2024 compared to $581.7 million as of December 31, 2023. Average savings and money market deposits increased $89.6 million to $344.3 million as of December 31, 2024 compared to $254.7 million as of December 31, 2023. Average time deposits decreased $74.0 million to $275.3 million as of December 31, 2024 compared to $349.3 million at December 31, 2023, as time deposits that were originated during 2023 with a weighted average rate of 4.81% matured during 2024. Average wholesale deposits decreased $39.8 million to $263.7 million as of December 31, 2024 compared to $303.5 million as of December 31, 2023.
Previous wording
Average other borrowed funds increased $31.8 million to $102.1 million for the year ended December 31, 2023, compared to $70.3 million for the year ended December 31, 2022. Interest expense on other borrowed funds increased $1.9 million for the year ended December 31, 2023 to $3.8 million compared to $1.9 million for the same period of 2022.
Current wording
Average other borrowed funds decreased $22.2 million to $79.9 million for the year ended December 31, 2024, compared to $102.1 million for the year ended December 31, 2023. Interest expense on other borrowed funds decreased $352 thousand for the year ended December 31, 2024 to $3.5 million compared to $3.8 million for the same period of 2023.
Previous wording
Our policy is to maintain the ACL at a level that represents our best estimate of expected losses in the loan portfolio as of the valuation date. Both the amount of the provision and the level of the allowance for credit losses are impacted by many factors, including general and industry-specific economic conditions, actual and expected credit losses, historical trends and specific conditions of individual borrowers. We adopted CECL as of January 1, 2023 in accordance with the required implementation date and recorded the impact of the adoption to retained earnings, net of deferred income taxes, as required by the standard. Note that prior to the adoption of CECL, we utilized an incurred loss model to derive our best estimate of the ACL.
Current wording
Our policy is to maintain the ACL at a level that represents our best estimate of expected losses in the loan portfolio as of the valuation date. Both the amount of the provision and the level of the allowance for credit losses are impacted by many factors, including general and industry-specific economic conditions, actual and expected credit losses, historical trends and specific conditions of individual borrowers.
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. Credit quality metrics improved for the year ended December 31, 2023 as nonperforming loans and loans 90 days or more past due totaled $1.8 million, or 0.08% of total assets, compared to $4.5 million, or 0.19%, of total assets at December 31, 2022. Watchlist credits increased to $28.8 million at December 31, 2023, an increase of $14.3 million from December 31, 2022, as we proactively manage the credit quality of our loan portfolio, including reducing our commercial real estate concentrations, which has resulted in limited credit losses over our history. We had no other real estate owned at December 31, 2023. We recorded net charge-offs of $375 thousand during the year ended December 31, 2023 and net charge-offs of $418 thousand for same period of 2022.
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 December 31, 2024 totaled $12.9 million, or 0.58% 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 December 31, 2024 and 2023, respectively. We recorded net charge-offs of $839 thousand and $375 thousand for the years ended December 31, 2024 and December 31, 2023, respectively.
Previous wording
The following table provides detail for non-interest income for the years ended December 31, 2023 and 2022.
Current wording
The following table provides detail for noninterest incomefor the years ended December 31, 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. Noninterest income was recorded as a loss for the year ended December 31, 2023 totaling $13.4 million compared to income of $2.8 million for same period in 2022. During 2023, we recorded$15.6 million in losses for the sale of $102.5 million in book value available-for-sale investment securities. We also recorded a loss from minority membership interest, primarily from our investment in ACM, totaling $1.1 million for the year ended December 31, 2023, compared a loss of $33 thousand for the year ended December 31, 2022.
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. For the year ended December 31, 2024, we recorded noninterest income of $2.5 million compared to a loss of $13.4 million for same period of 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 $36.7 million and $34.5 million for the years ended December 31, 2023 and 2022.
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 $35.8 million and $36.7 million for the years ended December 31, 2024 and 2023, respectively.
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