Financial Performance Overview

The Company reported a net loss of $61.3 million and net loss available to common stockholders of $65.6 million for the third quarter of 2024, compared to net income of $61.7 million and net income available to common stockholders of $57.4 million for the third quarter of 2023. For the nine months ended September 30, 2024, the Company reported net income of $6.5 million and net loss available to common stockholders of $6.5 million, compared to net income of $169.0 million and net income available to common stockholders of $156.1 million for the same period in 2023.

The decrease in net income was primarily due to a significant decrease in non-interest income, resulting from a $179.6 million loss on the sale of available-for-sale debt securities during the third quarter of 2024. This loss more than offset increases in net interest income and decreases in the provision for credit losses.

Revenue and Profit Trends

Net interest income increased during the three months ended September 30, 2024 compared to the same period in 2023, primarily due to growth in average earning assets and higher yields. However, net interest income decreased for the nine months ended September 30, 2024 compared to the same period in 2023, as the increase in the cost of interest-bearing deposits outpaced the increase in earning asset yields.

The net interest margin was 3.16% for the third quarter of 2024, up from 3.13% in the prior year quarter. For the nine months ended September 30, 2024, the net interest margin decreased to 3.07% from 3.25% in the same period of 2023. The decrease was primarily due to the effect of rising interest rates on the cost of interest-bearing deposits.

Non-interest income decreased significantly in both the third quarter and first nine months of 2024 compared to the prior year periods, driven by the $179.6 million loss on the sale of available-for-sale debt securities. This was partially offset by increases in investment banking and advisory fees.

Non-interest expense increased in both the third quarter and first nine months of 2024 compared to the prior year periods, primarily due to higher salaries and benefits, occupancy, and communications and technology expenses. The increases included $6.0 million in restructuring expenses.

Strengths and Weaknesses

Key strengths of the Company include:

• Diversified loan portfolio with growth across most segments, except commercial real estate
• Strong liquidity position with ample borrowing capacity and high levels of interest-bearing cash
• Disciplined expense management, though some increases in 2024 due to restructuring costs

Key weaknesses include:

• Significant loss on sale of available-for-sale debt securities, leading to net losses
• Compression of net interest margin due to rising deposit costs outpacing asset yield increases
• Elevated levels of non-performing assets and net charge-offs, though still manageable

Outlook and Future Prospects

The Company’s financial performance in 2024 has been negatively impacted by the significant loss on the sale of available-for-sale debt securities. However, the Company continues to grow its loan portfolio and maintain strong liquidity.

Looking ahead, the Company’s ability to manage its net interest margin and control expenses will be critical to returning to consistent profitability. The Company will need to carefully monitor credit quality and the macroeconomic environment, as rising interest rates could lead to further increases in non-performing assets and net charge-offs.

Overall, the Company faces near-term challenges but appears to have the fundamental strengths to navigate the current environment and position itself for improved financial performance in the future, assuming favorable economic conditions and successful execution of its strategic initiatives.