3
Discussion of Financial Condition
Earning Assets
Average earning
assets totaled $3.883 billion for the third quarter of 2024, a decrease of $51.9 million,
or 1.3%, from the second
quarter of 2024, and an increase of $59.4 million, or 1.6%, over the
fourth quarter of 2023.
The change for both prior periods was
driven by variances in deposit balances (see below –
Deposits
).
Compared to the second quarter of 2024, the change in the earning
asset mix reflected a $33.2 million decrease in loans HFI, a $11.
4
million decline in investment securities, and a $5.6 million
decrease increase in overnight funds sold.
Compared to the fourth quarter of 2023, the change in the earning asset mix
reflected a
$157.1 million increase in overnight funds that was partially offset
by a $17.7 million decrease in loans HFI, a $54.7 million
decrease in investment securities and a $25.2 million decline in loans
held for sale.
Average loans
HFI decreased $33.2 million, or 1.2%, from the second quarter of 2024
and decreased $17.7 million, or 0.7%, from
the fourth quarter of 2023.
Compared to the second quarter of 2024, the decrease was driven by
a $19.4 million decrease in
consumer loans (primarily indirect auto), commercial loans of $13.2
million, and commercial real estate loans of $7.7 million,
partially offset by a $7.4 million increase in residential real estate loans.
Compared to the fourth quarter of 2023, the decrease was
primarily attributable to a $54.5 million decrease in consumer loans
(primarily indirect auto) and commercial loans of $24.2 million
(primarily tax-exempt loans) that was partially offset by a $59.2
million increase in residential real estate loans.
Period end loans HFI decreased $7.1 million, or 0.3%, from the second quarter
of 2024
and decreased $50.8 million, or 1.9%, from
the fourth quarter of 2023.
Compared to the second quarter of 2024, the decline reflected a $20.9
million decrease in consumer
loans (primarily indirect auto), a $10.4 million decrease in commercial
loans,
and a $3.2 million decline in commercial real estate
loans, partially offset by a $10.9 million increase
in residential real estate loans and a $18.1 million increase in construction loans
.
The decrease from the fourth quarter of 2023 was primarily attributable
to a $57.7
million decrease in consumer loans (primarily
indirect auto),
a $30.6 million decline in commercial loans,
and a $5.5 million decrease in commercial real estate loans, partially
offset by a $22.2 million increase in residential real estate loans and
a $22.8 million increase in construction real estate loans.
Allowance for Credit Losses
At September 30, 2024, the allowance for credit losses for loans HFI totaled
$29.8 million compared to $29.2 million at June 30,
2024
and $29.9 million at December 31, 2023.
Activity within the allowance is provided on Page 9.
The increase in the allowance
over June 30, 2024 was primarily attributable to slightly higher forecasted
unemployment rate utilized in calculating loan loss rates
and loan grade migration (see above –
Provision for Credit Losses
).
Net loan charge-offs were 19 basis points
of average loans for
the third quarter of 2024 versus 18 basis points for the second quarter of 2024.
At September 30, 2024, the allowance represented
1.11% of loans HFI compared to 1.09% at June
30, 2024, and 1.10% at December 31, 2023.
Credit Quality
Nonperforming assets (nonaccrual loans and other real estate) totaled
$7.2 million at September 30, 2024 compared to $6.2 million
at June 30, 2024
and $6.2 million at December 31, 2023.
At September 30, 2024, nonperforming assets as a percent of total assets
equaled 0.17%, compared to 0.15% at June 30, 2024 and 0.15% at December
31, 2023.
Nonaccrual loans totaled $6.6 million at
September 30, 2024, a $1.1 million increase over June 30, 2024
and a $0.3 million increase over December 31, 2023.
Further,
classified loans totaled $25.5 million at September 30, 2024, a $0.1
million decrease from June 30, 2024
and a $3.3 million increase
over December 31, 2023.
Deposits
Average total
deposits were $3.572 billion for the third quarter of 2024, a decrease of $69.0 million,
or 1.9%, from the second
quarter of 2024 and an increase of $23.5 million, or 0.7%, over the fourth quarter
of 2023.
Compared to the second quarter of 2024,
the decrease was primarily attributable to lower NOW account balances
primarily due to the seasonal decline in our public fund
balances.
The increase over the fourth quarter of 2023 reflected growth in both money
market and certificate of deposit balances
which reflected a combination of balances migrating from savings and
noninterest bearing accounts,
in addition to receiving new
deposits from existing and new clients via various deposit strategies.
At September 30, 2024, total deposits were $3.579 billion, a decrease of $29.5
million, or 0.8%, from June 30, 2024, and a decrease
of $122.7 million, or 3.3%, from December 31, 2023.
The decrease from June 30, 2024 was primarily due to lower noninterest
bearing,
money market, and savings account balances.
The decrease from December 31, 2023 was primarily due to lower NOW
account balances, primarily due to the seasonal decline in our public funds,
partially offset by higher money market and certificate
of deposit balances from both new and existing clients.
Total public funds balances were $516.2
million at September 30, 2024,
$575.0 million at June 30, 2024, and $709.8 million at December 31, 2023.