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 other non-interest income components.

Revenue and Profit Trends

Net interest income increased during the third quarter of 2024 compared to the same period in 2023, driven by growth in average earning assets and higher yields. However, net interest income declined for the nine-month period ended September 30, 2024 compared to the prior year, as the increase in the cost of interest-bearing deposits outpaced the rise in earning asset yields.

The net interest margin was 3.16% in the third quarter of 2024, up from 3.13% in the prior year period, but declined to 3.07% for the nine months ended September 30, 2024 from 3.25% in the same period of 2023. This was primarily due to the impact of rising interest rates on the cost of deposits.

Non-interest income decreased significantly in both the quarterly and year-to-date periods, driven by the $179.6 million loss on the sale of available-for-sale debt securities. This more than offset increases in investment banking and advisory fees and other non-interest income.

Non-interest expense increased in both periods, primarily due to higher salaries and benefits, occupancy costs, and communications and technology expenses. The Company also incurred $6.0 million in restructuring costs during the first nine months of 2024.

Strengths and Weaknesses

The Company’s key strengths include:

• Diversified loan portfolio with growth across most segments, except commercial real estate
• Stable net interest margin, despite rising interest rates
• Strong liquidity position with ample borrowing capacity

The Company’s key weaknesses include:

• Significant loss on sale of securities, leading to net losses
• Rising non-interest expenses, outpacing revenue growth
• Declining return on average assets and average common equity

Outlook and Future Prospects

Looking ahead, the Company faces a challenging operating environment with the potential for continued pressure on profitability. The loss on the sale of securities and rising funding costs could continue to weigh on earnings, while non-interest expenses may remain elevated due to ongoing investments in technology and infrastructure.

However, the Company’s diversified loan portfolio, strong liquidity, and access to multiple funding sources provide some insulation against these headwinds. If the Company can effectively manage its expenses and continue growing its loan book, it may be able to return to profitability in the coming quarters.

Ultimately, the Company’s future prospects will depend on its ability to navigate the current interest rate and economic environment, while also executing on its strategic initiatives to drive sustainable growth and improve efficiency. Investors will be closely watching the Company’s progress in these areas.