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Enterprise Financial Reports First Quarter 2024 Results
Highlights
Earnings - Net income in the first quarter 2024 was $40.4 million, a decrease of $4.1 million and $15.3 million compared to the linked and prior year quarters, respectively. Earnings per share ("EPS") was $1.05 per diluted common share for the first quarter 2024, compared to $1.16 and $1.46 per diluted common share for the linked and prior year quarters, respectively. Adjusted diluted earnings per share(1) was $1.07 for the first quarter 2024, compared to $1.21 for the linked quarter. Pre-provision net revenue ("PPNR")(1) - PPNR of $57.4 million in the first quarter 2024 decreased $18.4 million and $17.6 million from the linked and prior year quarters, respectively. The decrease from the linked quarter was primarily due to a decrease in net interest income due to one less day in the current quarter and an increase in interest expense, a decrease in tax credit income that is typically highest in the fourth quarter of each year, and an increase in compensation and benefits from the annual payroll tax and vacation reset, along with merit increases. The decrease compared to the prior year quarter was primarily due to the higher interest rate environment that increased deposit interest expense and the cost of variable deposit services charges, which are influenced by current market rates. Net interest income and net interest margin ("NIM") - Net interest income of $137.7 million for the first quarter 2024 decreased $3.0 million and $1.8 million from the linked and prior year quarters, respectively. NIM was 4.13% for the first quarter 2024, compared to 4.23% and 4.71% for the linked and prior year quarters, respectively. The total cost of deposits of 2.13% for the first quarter 2024 increased 10 basis points and 121 basis points from the linked and prior year quarters, respectively. Compared to the linked quarter, net interest income declined due to one less day in the current quarter and higher deposit interest expense, partially offset by higher average loan and investment balances. Noninterest income - Noninterest income of $12.2 million for the first quarter 2024 decreased $13.3 million and $4.7 million from the linked and prior year quarters, respectively. The decline from the linked and prior year quarters was primarily due to a decrease in tax credit income on lower activity and an increase in market interest rates that reduced the fair value of certain tax credits. Noninterest expense - Noninterest expense of $93.5 million for the first quarter 2024 increased $0.9 million and $12.5 million from the linked and prior year quarters, respectively. The increase from the linked quarter was primarily driven by employee compensation, partially offset by a decrease in the FDIC special assessment and variable deposit servicing costs. The increase from the prior year quarter was primarily due to variable deposit servicing costs and employee compensation. Loans - Loans totaled $11.0 billion at March 31, 2024, an increase of $144.4 million, or 5.3% on an annualized basis, from the linked quarter and an increase of $1.0 billion from the prior year quarter. Average loans totaled $10.9 billion for the quarter ended March 31, 2024, compared to $10.7 billion and $9.8 billion for the linked and prior year quarters, respectively. Asset quality - The allowance for credit losses to total loans was 1.23% at March 31, 2024, compared to 1.24% at December 31, 2023 and 1.38% at March 31, 2023. The ratio of nonperforming assets to total assets was 0.30% at March 31, 2024, compared to 0.34% and 0.09% at December 31, 2023 and March 31, 2023, respectively. The provision for credit losses recorded in the first quarter 2024 was $5.8 million, compared to $18.1 million and $4.2 million for the linked and prior year quarters, respectively. Deposits - Total deposits increased $77.3 million from December 31, 2023 to $12.3 billion at March 31, 2024, including a $176.2 million increase in brokered certificates of deposit. Average deposits were $12.2 billion for both the current and linked quarters and $10.9 billion for the prior year quarter. At March 31, 2024, noninterest-bearing deposit accounts totaled $3.8 billion, or 31.1% of total deposits, and the loan to deposit ratio was 90.0%. Liquidity - The Company's total available on- and off-balance-sheet liquidity was approximately $5.6 billion at March 31, 2024. On-balance-sheet liquidity consisted of cash of $369.4 million and $1.1 billion in unpledged investment securities at March 31, 2024. Off-balance-sheet liquidity consisted of $1.3 billion available through the Federal Home Loan Bank, $2.6 billion available through the Federal Reserve and $120.0 million through correspondent bank lines. The Company also has an unused $25.0 million revolving line of credit and maintains a shelf registration allowing for the issuance of various forms of equity and debt securities. Capital - Total shareholders' equity was $1.7 billion and the tangible common equity to tangible assets ratio(2) was 9.01% at March 31, 2024, compared to 8.96% at December 31, 2023. Enterprise Bank & Trust remains "well-capitalized," with a common equity tier 1 ratio of 12.1% and a total risk-based capital ratio of 13.2% at March 31, 2024. The Company's common equity tier 1 ratio and total risk-based capital ratio were 11.4% and 14.3%, respectively, at March 31, 2024. The Company's board of directors approved a quarterly dividend of $0.26 per common share, payable on June 28, 2024 to shareholders of record as of June 14, 2024. The board of directors also declared a cash dividend of $12.50 per share of Series A Preferred Stock (or $0.3125 per depositary share) representing a 5% per annum rate for the period commencing (and including) March 15, 2024 to (but excluding) June 15, 2024. The dividend will be payable on June 15, 2024 and will be paid on June 17, 2024 to holders of record of Series A Preferred Stock as of June 3, 2024.
Net Interest Income and NIM
Average Balance Sheets
The following table presents, for the periods indicated, certain information related to the Company's average interest-earning assets and interest-bearing liabilities, as well as the corresponding average interest rates earned and paid, all on a tax-equivalent basis.
Quarter ended
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March 31, 2024 December 31, 2023 March 31, 2023
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($ in thousands) Average Interest Average Average Interest Average Average Interest Average
Balance Income/ Yield/ Balance Income/ Yield/ Balance Income/ Yield/
Expense Rate Expense Rate Expense Rate
--------------------------------------------------------------- ------------------------------ ------------------------------ ------------------------------ ---------------------------------- ---------------------------------- ---------------------------------- ------------------------------ ------------------------------ ------------------------------
Assets
Interest-earning assets:
$ 10,927,932 $ 186,703 6.87 % $ 10,685,961 $ 184,982 6.87 % $ 9,795,045 $ 152,762 6.33 %
Loans(1, 2)
2,400,571 19,491 3.27 2,276,915 18,385 3.20 2,288,451 17,117 3.03
Securities(2)
268,068 3,569 5.35 420,762 5,631 5.31 106,254 1,195 4.56
Interest-earning deposits
-------------------- ---------- -------------------- ---------- -------------------- -------------- -------------------- -------------- -------------------- ---------- -------------------- ----------
Total interest-earning assets 13,596,571 209,763 6.20 13,383,638 208,998 6.20 12,189,750 171,074 5.69
Noninterest-earning assets 959,548 949,166 941,445
-------------------- ---------- -------------------- -------------- -------------------- ----------
Total assets $ 14,556,119 $ 14,332,804 $ 13,131,195
==================== ========== ==================== ============== ==================== ==========
Liabilities and Shareholders' Equity
Interest-bearing liabilities:
$ 2,924,276 $ 18,612 2.56 % $ 2,844,847 $ 17,248 2.41 % $ 2,201,910 $ 5,907 1.09 %
Interest-bearing demand accounts
3,401,802 31,357 3.71 3,342,979 30,579 3.63 2,826,836 15,471 2.22
Money market accounts
587,113 303 0.21 609,645 268 0.17 732,256 230 0.13
Savings accounts
1,341,990 14,201 4.26 1,373,808 14,241 4.11 670,521 3,053 1.85
Certificates of deposit
-------------------- ---------- -------------------- ---------- -------------------- -------------- -------------------- -------------- -------------------- ---------- -------------------- ----------
Total interest-bearing deposits 8,255,181 64,473 3.14 8,171,279 62,336 3.03 6,431,523 24,661 1.56
Subordinated debentures and notes 156,046 2,484 6.40 155,907 2,475 6.30 155,497 2,409 6.28
FHLB advances 73,791 1,029 5.61 -- -- -- 110,928 1,332 4.87
Securities sold under agreements to repurchase 204,898 1,804 3.54 150,827 1,226 3.22 215,604 749 1.41
Other borrowings 42,736 205 1.93 49,013 314 2.54 53,885 353 2.66
-------------------- ---------- -------------------- ---------- -------------------- -------------- -------------------- -------------- -------------------- ---------- -------------------- ----------
Total interest-bearing liabilities 8,732,652 69,995 3.22 8,527,026 66,351 3.09 6,967,437 29,504 1.72
-------------------- ---------- -------------------- -------------- -------------------- ----------
Noninterest-bearing liabilities:
3,925,522 3,992,067 4,481,966
Demand deposits
159,247 160,829 113,341
Other liabilities
-------------------- ---------- -------------------- -------------- -------------------- ----------
Total liabilities 12,817,421 12,679,922 11,562,744
Shareholders' equity 1,738,698 1,652,882 1,568,451
-------------------- ---------- -------------------- -------------- -------------------- ----------
Total liabilities and shareholders' equity $ 14,556,119 $ 14,332,804 $ 13,131,195
==================== ========== ==================== ============== ==================== ==========
Total net interest income $ 139,768 $ 142,647 $ 141,570
==================== ========== ==================== ============== ==================== ==========
Net interest margin 4.13 % 4.23 % 4.71 %
--------------------------------------------------------------- ------------------------------ -------------------- ------------------------------ -------------------- ---------- -------------------- -------------------- ---------------------------------- -------------------- ---------------------------------- -------------------- -------------- -------------------- -------------------- ------------------------------ -------------------- ------------------------------ -------------------- ---------- --------------------
(1) Average balances include nonaccrual loans. Interest income includes loan fees of $2.4 million, $3.1 million, and $3.7 million for the three months ended March 31, 2024, December 31, 2023, and March 31, 2023, respectively.
Net interest income for the first quarter 2024 was $137.7 million, a decrease of $3.0 million and $1.8 million from the linked and prior year quarters, respectively. Net interest income on a tax equivalent basis was $139.8 million, $142.6 million and $141.6 million for the current, linked and prior year quarters, respectively. The decrease from the linked quarter was primarily due to the impact of competitive deposit pricing, continued remixing into higher cost deposit categories and an increase in wholesale borrowings. The decrease from the prior year quarter reflects higher interest expense on the deposit portfolio, as lagged deposit rates have increased, partially offset by the benefit of higher market interest rates on interest-earning assets and organic growth.
Interest income increased $0.6 million during the first quarter 2024. Interest on loans benefited from a $242.0 million increase in average loan balances compared to the linked quarter. The average interest rate of new loan originations in the first quarter 2024 was 7.84%. Interest on cash accounts decreased $2.1 million from the linked quarter due to a decline in average balances, while interest on securities increased $1.0 million due to an increase in both the average balance and yield due to the reinvestment of cash flows from the portfolio.
Interest expense increased $3.6 million in the first quarter 2024 primarily due to a $2.1 million increase in deposit interest expense and a $1.5 million increase in interest expense on borrowings. The increase in deposit interest expense reflects a shift in the deposit mix from demand deposits to interest-bearing deposits, particularly money market accounts and interest-bearing demand accounts, as well as higher rates paid on deposits. The average cost of interest-bearing deposits was 3.14%, an increase of 11 basis points compared to the linked quarter. The total cost of deposits, including noninterest-bearing demand accounts, was 2.13% during the first quarter 2024, compared to 2.03% in the linked quarter. The increase in interest expense on other borrowings was primarily due to higher average borrowings to fund net loan growth.
NIM, on a tax equivalent basis, was 4.13% in the first quarter 2024, a decrease of 10 basis points from the linked quarter and a decrease of 58 basis points from the prior year quarter. NIM in the first quarter 2024 was impacted by a $62.5 million improvement in the average unrealized loss on the investment portfolio, which reduced NIM by two basis points when compared to the linked quarter. For the month of March 2024, the loan portfolio yield was 6.89% and the cost of total deposits was 2.17%.
Investments
Quarter ended
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March 31, 2024 December 31, 2023 March 31, 2023
-------------------------------------------------------------------------------- -------------------------------------------------------------------------------- --------------------------------------------------------------------------------
($ in thousands) Carrying Net Carrying Net Carrying Net
Value Unrealized Value Unrealized Value Unrealized
Loss Loss Loss
------------------------ ----------------------------- ------------------------------- ----------------------------- ------------------------------- ----------------------------- -------------------------------
Available-for-sale (AFS) $ 1,611,883 $ (165,586 ) $ 1,618,273 $ (150,861 ) $ 1,555,109 $ (161,572 )
Held-to-maturity (HTM) 758,017 (63,593 ) 750,434 (54,572 ) 720,694 (65,013 )
-------------------- --------- -------------------- -------- --- -------------------- --------- -------------------- -------- --- -------------------- --------- -------------------- -------- ---
Total $ 2,369,900 $ (229,179 ) $ 2,368,707 $ (205,433 ) $ 2,275,803 $ (226,585 )
==================== ========= ==================== ======== === ==================== ========= ==================== ======== === ==================== ========= ==================== ======== ===
Investment securities totaled $2.4 billion at March 31, 2024, an increase of $1.2 million from the linked quarter. Investment purchases in the first quarter 2024 had a weighted average, tax equivalent yield of 5.21%. The tangible common equity to tangible assets ratio adjusted for unrealized losses on held-to-maturity securities(3) was 8.68% at March 31, 2024, compared to 8.67% at December 31, 2023.
Loans
The following table presents total loans for the most recent five quarters:
At
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($ in thousands) March 31, December 31, September 30, June 30, March 31,
2024 2023 2023 2023 2023
------------------------------------------- -------------------------------------------------- -------------------- -------------------------------------------------- -------------------------------------------------- -------------------------------------------------- --------------------------------------------------
C&I $ 2,263,817 $ 2,186,203 $ 2,020,303 $ 2,029,370 $ 2,005,539
CRE investor owned 2,280,990 2,291,660 2,260,220 2,290,701 2,239,932
CRE owner occupied 1,279,929 1,262,264 1,255,885 1,208,675 1,173,985
SBA loans* 1,274,780 1,281,632 1,309,497 1,327,667 1,315,732
Sponsor finance* 865,180 872,264 888,000 879,491 677,529
Life insurance premium financing* 1,003,597 956,162 928,486 912,274 859,910
Tax credits* 718,383 734,594 683,580 609,137 547,513
Residential real estate 354,615 359,957 364,618 354,588 348,726
Construction and land development 726,742 670,567 639,555 599,375 590,509
Other 260,459 268,815 266,676 301,345 252,543
-------------------- ---------- -------------------- -------------------- ---------- -------------------- -------------------- ---------- -------------------- -------------------- ---------- -------------------- -------------------- ---------- --------------------
$ 11,028,492 $ 10,884,118 $ 10,616,820 $ 10,512,623 $ 10,011,918
Total loans
==================== ========== ==================== ==================== ========== ==================== ==================== ========== ==================== ==================== ========== ==================== ==================== ========== ====================
Quarterly loan yield 6.87 % 6.87 % 6.80 % 6.64 % 6.33 %
Variable interest rate loans to total loans 61 % 61 % 61 % 62 % 63 %
------------------------------------------- -------------------- ---------- -------------------- -------------------- -------------------- ---------- -------------------- -------------------- -------------------- ---------- -------------------- -------------------- -------------------- ---------- -------------------- -------------------- -------------------- ---------- --------------------
Loans totaled $11.0 billion at March 31, 2024, increasing $144.4 million, compared to the linked quarter. During the current quarter, C&I loans increased $77.6 million, construction loans increased $56.2 million and specialty loans increased $17.3 million, primarily due to growth in life insurance premium finance loans. Loan sales of $23.1 million mitigated growth in the SBA category during the current quarter. Average line utilization was approximately 44% for the quarter ended March 31, 2024, compared to 42% for the linked and prior year quarters.
Asset Quality
The following table presents the categories of nonperforming assets and related ratios for the most recent five quarters:
At
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($ in thousands) March 31, December 31, September 30, June 30, March 31,
2024 2023 2023 2023 2023
------------------------------------------ ---------------------------------------------- ---------------------------------------------- ---------------------------------------------- ------------------------------------------------------ ----------------------------------------------
Nonperforming loans* $ 35,642 $ 43,728 $ 48,932 $ 16,112 $ 11,972
Other 8,466 5,736 6,933 -- 250
-------------------- ------ -------------------- -------------------- ------ -------------------- -------------------- ------ -------------------- -------------------- -------------- -------------------- -------------------- ------ --------------------
Nonperforming assets* $ 44,108 $ 49,464 $ 55,865 $ 16,112 $ 12,222
==================== ====== ==================== ==================== ====== ==================== ==================== ====== ==================== ==================== ============== ==================== ==================== ====== ====================
Nonperforming loans to total loans 0.32 % 0.40 % 0.46 % 0.15 % 0.12 %
Nonperforming assets to total assets 0.30 % 0.34 % 0.40 % 0.12 % 0.09 %
Allowance for credit losses to total loans 1.23 % 1.24 % 1.34 % 1.34 % 1.38 %
Quarterly net charge-offs (recoveries) $ 5,864 $ 28,479 $ 6,856 $ 2,973 $ (264 )
Nonperforming assets decreased $5.4 million during the first quarter 2024 and increased $31.9 million from the prior year quarter. The decrease in nonperforming assets in the current quarter was driven primarily by gross charge-offs of $6.7 million, including $4.8 million on two relationships that moved to nonperforming status in the fourth quarter 2023. Included in that amount was $3.4 million related to the Agricultural relationship that was disclosed in the fourth quarter 2023 and has now been fully charged-off. The increase in nonperforming assets from the prior year quarter was primarily due to a $26.4 million increase in real estate loans and an $8.2 million increase in OREO and other repossessed assets, partially offset by a $2.8 million decrease in C&I loans. Annualized net charge-offs totaled 22 basis points of average loans in the first quarter 2024, compared to 106 basis points in the linked quarter and a net recovery of 1 basis point in the prior year quarter.
The provision for credit losses totaled $5.8 million in the first quarter 2024, compared to $18.1 million and $4.2 million in the linked and prior year quarters, respectively. The provision for credit losses in the first quarter 2024 was primarily related to net charge-offs and updates to qualitative factors used in the allowance calculation. The decrease in the provision for credit losses from the linked quarter is commensurate to the decrease in charge-offs from the linked quarter.
The allowance for credit losses to total loans was 1.23% at March 31, 2024, compared to 1.24% and 1.38% at December 31, 2023 and March 31, 2023, respectively.
Deposits
The following table presents deposits broken out by type for the most recent five quarters:
At
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($ in thousands) March 31, December 31, September 30, June 30, March 31,
2024 2023 2023 2023 2023
---------------------------------------------- -------------------------------------------------- -------------------- -------------------------------------------------- -------------------- -------------------------------------------------- -------------------------------------------------- --------------------------------------------------
Noninterest-bearing demand accounts $ 3,805,334 $ 3,958,743 $ 3,852,486 $ 3,880,561 $ 4,192,523
Interest-bearing demand accounts 2,956,282 2,950,259 2,749,598 2,629,339 2,395,901
Money market and savings accounts 4,006,702 3,994,455 3,837,145 3,577,856 3,672,539
Brokered certificates of deposit 659,005 482,759 695,551 893,808 369,505
Other certificates of deposit 826,378 790,155 775,127 638,296 524,168
-------------------- ---------- -------------------- -------------------- ---------- -------------------- -------------------- -------------------- ---------- -------------------- -------------------- ---------- -------------------- -------------------- ---------- --------------------
$ 12,253,701 $ 12,176,371 $ 11,909,907 $ 11,619,860 $ 11,154,636
Total deposit portfolio
==================== ========== ==================== ==================== ========== ==================== ==================== ========== ==================== ==================== ========== ==================== ==================== ========== ====================
Noninterest-bearing deposits to total deposits 31.1 % 32.5 % 32.3 % 33.4 % 37.6 %
Total deposits at March 31, 2024 were $12.3 billion, an increase of $77.3 million and $1.1 billion from the linked and prior year quarters, respectively. Excluding brokered certificates of deposits, total deposits declined $98.9 million and increased $809.6 million, from the linked and prior year quarters, respectively. The decrease in demand accounts in the first quarter 2024 was primarily related to normal, seasonal deposit outflows. Reciprocal deposits, which are placed through third party programs to provide FDIC insurance on larger deposit relationships, totaled $1.1 billion at March 31, 2024, compared to $1.2 billion at December 31, 2023.
Total estimated insured deposits(4), which includes collateralized deposits, reciprocal accounts and accounts that qualify for pass-through insurance, totaled $8.7 billion, or 71% of total deposits, at March 31, 2024, compared to $8.3 billion, or 69% of total deposits, at December 31, 2023.
Noninterest Income
The following table presents a comparative summary of the major components of noninterest income for the periods indicated:
Linked quarter comparison Prior year comparison
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Quarter ended Quarter ended
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($ in thousands) March 31, December 31, Increase March 31, Increase
2024 2023 (decrease) 2023 (decrease)
--------------------------- ---------------------------------------------- -------------------------- ------------------------------------------------------------------------- -------------------------- ------------------------------------------------------------------------
Deposit service charges $ 4,423 $ 4,334 $ 89 2 % $ 4,128 $ 295 7 %
Wealth management revenue 2,544 2,428 116 5 % 2,516 28 1 %
Card services revenue 2,412 2,666 (254 ) (10 )% 2,338 74 3 %
Tax credit income (loss) (2,190 ) 9,688 (11,878 ) (123 )% 1,813 (4,003 ) (221 )%
Other income 4,969 6,336 (1,367 ) (22 )% 6,103 (1,134 ) (19 )%
-------------------- ------ -------------------- -------------------- ------ -------------------- ------- -------------------- -------------------- ------ -------------------- ------ --------------------
$ 12,158 $ 25,452 $ (13,294 ) (52 )% $ 16,898 $ (4,740 ) (28 )%
Total noninterest income
==================== ====== ==================== ==================== ====== ==================== ======= ==================== ==== == ==================== ====== ==================== ====== ==================== ==== ==
Total noninterest income was $12.2 million for the first quarter 2024, a decrease of $13.3 million from the linked quarter and a decrease of $4.7 million from the prior year quarter. The decrease from the linked and prior year quarters was primarily due to a decrease in tax credit income. Tax credit income is typically highest in the fourth quarter of each year and will vary in other periods based on transaction volumes and fair value changes on credits carried at fair value.
The following table presents a comparative summary of the major components of other income for the periods indicated:
Linked quarter comparison Prior year comparison
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Quarter ended Quarter ended
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($ in thousands) March 31, December 31, Increase March 31, Increase
2024 2023 (decrease) 2023 (decrease)
--------------------------------- ------------------------- ---------------------------------- ----------------------------------------------------------------------- ------------------------- -----------------------------------------------------------------------
Gain on SBA loan sales $ 1,415 $ -- $ 1,415 100 % $ 501 $ 914 182 %
BOLI 864 1,279 (415 ) (32 )% 791 73 9 %
Community development investments 585 1,027 (442 ) (43 )% 595 (10 ) (2 )%
Private equity fund distributions 162 725 (563 ) (78 )% 1,749 (1,587 ) (91 )%
Servicing fees 287 774 (487 ) (63 )% 512 (225 ) (44 )%
Swap fees 45 163 (118 ) (72 )% 250 (205 ) (82 )%
Miscellaneous income 1,611 2,368 (757 ) (32 )% 1,705 (94 ) (6 )%
-------------------- ----- -------------------- -------------- -------------------- ------ -------------------- -------------------- ----- -------------------- ------ --------------------
$ 4,969 $ 6,336 $ (1,367 ) (22 )% $ 6,103 $ (1,134 ) (19 )%
Total other income
==================== ===== ==================== ============== ==================== ====== ==================== === == ==================== ===== ==================== ====== ==================== === ==
The decrease in other income from the linked quarter was primarily driven by lower community development and private equity distributions, BOLI income and servicing fees. Community development and private equity distributions are not consistent sources of income and fluctuate based on distributions from the underlying funds. BOLI income in the linked quarter included a policy benefit payment that did not recur. Servicing fee income fluctuates based on prepayment experience and changes to the discount rate used in the valuation of the servicing rights. These decreases were partially offset by a $1.4 million gain on the sale of SBA loans in the first quarter 2024.
Noninterest Expense
The following table presents a comparative summary of the major components of noninterest expense for the periods indicated:
Linked quarter comparison Prior year comparison
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Quarter ended Quarter ended
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($ in thousands) March 31, December 31, Increase March 31, Increase
2024 2023 (decrease) 2023 (decrease)
---------------------------------- --------- -------------- ------------------------------------------- -------------- ---------------------------------
Employee compensation and benefits $ 45,262 $ 39,651 $ 5,611 14 % $ 42,503 $ 2,759 6 %
Deposit costs 20,277 21,606 (1,329) (6) % 12,720 7,557 59 %
Occupancy 4,326 4,313 13 -- % 4,061 265 7 %
FDIC special assessment 625 2,412 (1,787) (74) % -- 625 100 %
Core conversion expense 350 -- 350 100 % -- 350 100 %
Other expense 22,661 24,621 (1,960) (8) % 21,699 962 4 %
--------- -------------- ------- -------------- --------
$ 93,501 $ 92,603 $ 898 1 % $ 80,983 $ 12,518 15 %
Total noninterest expense
========= ============== ======= ================ ============== ======== =====
Employee compensation and benefits increased $5.6 million from the linked quarter primarily due to the annual reset of payroll taxes and vacation, along with annual merit increases that became effective March 1, 2024. The FDIC special assessment of $0.6 million and $2.4 million in the current and linked quarters, respectively, is an assessment from the FDIC to recover estimated losses in the Deposit Insurance Fund related to bank failures in 2023. The assessment may change in future periods as the FDIC updates its loss estimates. Deposit costs relate to certain specialized deposit businesses that receive an earnings credit allowance for deposit related expenses that are impacted by interest rates and average balances. Deposit costs decreased $1.3 million from the linked quarter primarily due to the expiration of certain allowances that were not used.
The increase in noninterest expense of $12.5 million from the prior year quarter was primarily due to an increase in the associate base, merit increases throughout 2023 and 2024, and an increase in variable deposit costs due to higher earnings credit rates and average balances.
For the first quarter 2024, the Company's core efficiency ratio(5) was 60.2%, compared to 53.1% for the linked quarter and 50.5% for the prior year quarter.
Income Taxes
The Company's effective tax rate was 20.2%, compared to 19.8% and 21.8% in the linked and prior year quarters, respectively. The increase in the effective tax rate from the linked quarter was driven by a state apportionment adjustment that lowered the effective tax rate in the linked quarter, while the decrease from the prior year quarter was driven by tax credit opportunities the Company has deployed as part of its tax planning strategy.
Capital
The following table presents the Company's total equity and various capital ratios for the most recent five quarters:
At
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($ in thousands) March 31, December 31, September 30, June 30, March 31,
2024 2023 2023 2023 2023
---------------------------------------------------- ------------------------------------------------- ------------------------------------------------- ------------------------------------------------- ------------------------------------------------- -------------------------------------------------
Shareholders' equity $ 1,731,725 $ 1,716,068 $ 1,611,880 $ 1,618,233 $ 1,592,820
Total risk-based capital to risk-weighted assets 14.3 % 14.2 % 14.1 % 14.1 % 14.3 %
Tier 1 capital to risk weighted assets 12.8 % 12.7 % 12.6 % 12.5 % 12.6 %
Common equity tier 1 capital to risk-weighted assets 11.4 % 11.3 % 11.2 % 11.1 % 11.2 %
Leverage ratio 11.0 % 11.0 % 10.9 % 11.0 % 11.1 %
*Capital ratios for the current quarter are preliminary and subject to, among other things, completion and filing of the Company's regulatory reports and ongoing regulatory review.
Total equity was $1.7 billion at March 31, 2024, an increase of $15.7 million from the linked quarter. The Company's tangible common book value per share was $34.21 at March 31, 2024, compared to $33.85 and $30.55 at December 31, 2023 and March 31, 2023, respectively.
The Company's regulatory capital ratios continue to exceed the "well-capitalized" regulatory benchmark. Capital ratios for the current quarter are subject to, among other things, completion and filing of the Company's regulatory reports and ongoing regulatory review.
________________________________ (1)ROATCE, tangible common equity to tangible assets, tangible book value per share, adjusted diluted earnings per share and PPNR are non-GAAP measures. Please refer to discussion and reconciliation of these measures in the accompanying financial tables. (2) Tangible common equity to tangible assets ratio is a non-GAAP measure. Please refer to discussion and reconciliation of this measure in the accompanying financial tables. (3) The tangible common equity to tangible assets ratio adjusted for unrealized losses on held-to-maturity securities is a non-GAAP measure. Refer to discussion and reconciliation of this measure in the accompanying financial tables. (4) Estimated insured deposits is a non-GAAP measure. Refer to discussion and reconciliation of this measure in the accompanying financial tables.
Use of Non-GAAP Financial Measures
The Company's accounting and reporting policies conform to generally accepted accounting principles in the United States ("GAAP") and the prevailing practices in the banking industry. However, the Company provides other financial measures, such as tangible common equity, PPNR, ROATCE, core efficiency ratio, the tangible common equity ratio, tangible book value per common share, estimated insured deposits and adjusted diluted earnings per share, in this release that are considered "non-GAAP financial measures." Generally, a non-GAAP financial measure is a numerical measure of a company's financial performance, financial position, or cash flows that excl