First Financial Corporation (NASDAQ:THFF) today announced results
for the first quarter of 2023.
- Net income was $16.0 million
compared to the $20.9 million reported for the same period of 2022,
which included the proceeds of a legal settlement and pandemic
related reserve releases, both of which were non-recurring
events;
- Diluted net income per common share
of $1.33 compared to $1.67 for the same period of 2022;
- Return on average assets was 1.32%
compared to 1.63% for the three months ended March 31,
2022;
- Credit loss provision was $1.8
million compared to negative provision of $6.6 million for the
first quarter 2022; and
- Pre-tax, pre-provision net income
was $21.4 million compared to $19.7 million for the same period in
2022.1
1 Non-GAAP financial measure that Management believes is useful
for investors and management to understand pre-tax profitability
before giving effect to credit loss expense and to provide
additional perspective on the Corporation’s performance over time
as well as comparison to the Corporation’s peers and evaluating the
financial results of the Corporation – please refer to the Non
GAAP reconciliations contained in this release.
Average Total Loans
Average total loans for the first quarter of 2023 were $3.07
billion versus $2.78 billion for the comparable period in 2022, an
increase of $292 million or 10.5%. On a linked quarter basis,
average loans increased $53 million or 1.76% from $3.02 billion as
of December 31, 2022.
Total Loans Outstanding
Total loans outstanding as of March 31, 2023, were $3.08
billion compared to $2.80 billion as of March 31, 2022, an
increase of $275 million or 9.82%, primarily driven by increases in
Commercial Construction and Development, Commercial Real Estate,
and Consumer Auto loans. On a linked quarter basis, total loans
increased $12.6 million or 0.41% from $3.07 billion as of
December 31, 2022.
“We are pleased with our first quarter results, as we
experienced another quarter of loan growth and expansion of our net
interest margin, contributing to our eighth consecutive quarter of
net interest income growth. Our pre-tax, pre-provision net income
was at near record levels and expenses were well controlled,” said
Norman L. Lowery, Chairman and Chief Executive Officer. “With the
turbulent environment that arose in the financial services industry
towards the end of the quarter, our balance sheet remains strong,
our liquidity is stable, and our capital levels remain strong.”
Average Total Deposits
Average total deposits for the quarter ended March 31,
2023, were $4.25 billion versus $4.43 billion as of March 31,
2022.
Total Deposits
Total deposits were $4.17 billion as of March 31, 2023,
compared to $4.40 billion as of March 31, 2022. On a linked
quarter basis, total deposits decreased $203.5 million, or 4.66%
from $4.37 billion.
Shareholder Equity
Shareholder equity at March 31, 2023, was $505.5 million
compared to $525.4 million on March 31, 2022. The decrease
resulted in part from the return of $18.0 million of capital to
shareholders through the repurchase of 413,311 shares of the
Corporation’s common stock, as well as a $0.54 semi-annual dividend
and a $0.20 special dividend paid in the first quarter of 2023. The
possible repurchase of an additional 830,220 shares remain under
the current authorization. The decrease in equity is also
reflective of higher interest rates which affected the accumulated
other comprehensive income (“AOCI”) on investments available for
sale. AOCI decreased $55 million in comparison to March 31, 2022,
but increased $14 million in comparison to December 31, 2022.
Book Value Per Share
Book Value per share was $41.89 at March 31, 2023, compared
to $42.25 at March 31, 2022, partially driven by the
aforementioned return of capital to our shareholders. On a linked
quarter basis, the March 31, 2023 book value per share is a 6.21%
increase over the December 31, 2022 book value per share of
$39.44.
Tangible Common Equity to Tangible Asset
Ratio
The Corporation’s tangible common equity to tangible asset ratio
was 8.63% at March 31, 2023, compared to 8.65% at
March 31, 2022, partially driven by the aforementioned share
repurchases.
Net Interest Income
Net interest income for the first quarter of 2023 was $44.3
million, compared to $37.8 million reported for the same period of
2022, an increase of $6.5 million or 17.25%. Notwithstanding
increased funding costs and two fewer days in the quarter, on a
linked quarter basis net interest income increased $677 thousand or
1.55% from the quarter ended December 31, 2022.
Net Interest Margin
The net interest margin for the quarter ended March 31,
2023, was 3.96% compared to the 3.16% reported at March 31,
2022, an increase of 80 basis points or 25.32%. On a linked quarter
basis, the net interest margin increased 15 basis points from 3.81%
as of December 31, 2022. Loan yield increased 29 basis points
quarter over quarter, while the cost of interest-bearing deposits
increased 21 basis points.
Nonperforming Loans
Nonperforming loans as of March 31, 2023, were $12.1
million versus $8.4 million as of March 31, 2022. The ratio of
nonperforming loans to total loans and leases was 0.39% as of
March 31, 2023, versus 0.30% as of March 31, 2022.
Credit Loss Provision
The provision for credit losses for the three months ended
March 31, 2023, was $1.8 million, compared to negative
provision of $6.6 million for the first quarter 2022, which took
into account revised assumptions resulting in reserve releases
following pandemic period increases.
Net Charge-Offs
In the first quarter of 2023 net charge-offs were $2.0 million
compared to $1.2 million in the same period of 2022.
Allowance for Credit Losses
The Corporation’s allowance for credit losses as of
March 31, 2023, was $39.6 million compared to $40.5 million as
of March 31, 2022. The allowance for credit losses as
a percent of total loans was 1.29% as of March 31, 2023,
compared to 1.44% as of March 31, 2022. On a linked quarter
basis, the allowance for credit losses as a percent of total loans
decreased 1 basis point from 1.30% as of December 31, 2022.
Non-Interest Income
Non-interest income for the three months ended
March 31, 2023 and 2022 was $9.4 million and $13.7 million,
respectively. Non-interest income for the first quarter of 2022
included the aforementioned legal settlement of $4.0 million.
Non-Interest Expense
Non-interest expense for the three months ended
March 31, 2023, was $32.3 million compared to $31.3 million in
2022, reflecting strong expense control. This increase is inclusive
of an 83.88% increase in FDIC assessments from $428 thousand in the
first quarter of 2022 to $787 thousand for the same period in 2023.
Salaries increased $118 thousand or 0.91% to $13.1 million in the
first quarter of 2023 versus the same period in 2022 and includes a
$15 minimum hourly wage adopted in September 2022 as well as a 4.2%
merit increase for 2023.
Efficiency Ratio
The Corporation’s efficiency ratio was 58.73% for the quarter
ending March 31, 2023, versus 59.54% for the same period in
2022.
Income Taxes
Income tax expense for the three months ended
March 31, 2023, was $3.6 million versus $5.8 million for the
same period in 2022. The effective tax rate for 2023 was 18.42%
compared to 21.79% for 2022. Pretax income for the first quarter
2022 was significantly higher than pretax income for first quarter
2023. Since our permanent differences remained similar, income was
the driving factor for the decrease in effective tax rate.
About First Financial Corporation
First Financial Corporation (NASDAQ:THFF) is the holding company
for First Financial Bank N.A. First Financial Bank N.A., the fifth
oldest national bank in the United States, operates 71 banking
centers in Illinois, Indiana, Kentucky and Tennessee. Additional
information is available at www.first-online.bank.
Investor Contact:Rodger A. McHargueChief
Financial OfficerP: 812-238-6334E: rmchargue@first-online.com
|
|
Three Months Ended |
|
|
March 31, |
|
December 31, |
|
March 31, |
|
|
2023 |
|
2022 |
|
2022 |
END OF PERIOD
BALANCES |
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
$ |
4,866,821 |
|
|
$ |
4,989,281 |
|
|
$ |
5,081,794 |
|
Deposits |
|
$ |
4,165,398 |
|
|
$ |
4,368,871 |
|
|
$ |
4,395,190 |
|
Loans, including net deferred loan costs |
|
$ |
3,080,044 |
|
|
$ |
3,067,438 |
|
|
$ |
2,804,650 |
|
Allowance for Credit Losses |
|
$ |
39,620 |
|
|
$ |
39,779 |
|
|
$ |
40,516 |
|
Total Equity |
|
$ |
505,499 |
|
|
$ |
475,284 |
|
|
$ |
525,444 |
|
Tangible Common Equity(a) |
|
$ |
412,118 |
|
|
$ |
381,585 |
|
|
$ |
431,629 |
|
|
|
|
|
|
|
|
|
|
|
|
|
AVERAGE
BALANCES |
|
|
|
|
|
|
|
|
|
|
|
Total Assets |
|
$ |
4,851,484 |
|
|
$ |
4,930,611 |
|
|
$ |
5,149,642 |
|
Earning Assets |
|
$ |
4,613,126 |
|
|
$ |
4,690,594 |
|
|
$ |
4,927,680 |
|
Investments |
|
$ |
1,407,944 |
|
|
$ |
1,393,753 |
|
|
$ |
1,468,471 |
|
Loans |
|
$ |
3,068,716 |
|
|
$ |
3,015,903 |
|
|
$ |
2,777,168 |
|
Total Deposits |
|
$ |
4,252,161 |
|
|
$ |
4,383,505 |
|
|
$ |
4,427,806 |
|
Interest-Bearing Deposits |
|
$ |
3,407,590 |
|
|
$ |
3,509,416 |
|
|
$ |
3,525,766 |
|
Interest-Bearing Liabilities |
|
$ |
96,160 |
|
|
$ |
84,210 |
|
|
$ |
106,005 |
|
Total Equity |
|
$ |
487,834 |
|
|
$ |
438,767 |
|
|
$ |
565,123 |
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME STATEMENT
DATA |
|
|
|
|
|
|
|
|
|
|
|
Net Interest Income |
|
$ |
44,335 |
|
|
$ |
43,658 |
|
|
$ |
37,811 |
|
Net Interest Income Fully Tax Equivalent(b) |
|
$ |
45,654 |
|
|
$ |
44,724 |
|
|
$ |
38,908 |
|
Provision for Credit Losses |
|
$ |
1,800 |
|
|
$ |
2,725 |
|
|
$ |
(6,550 |
) |
Non-interest Income |
|
$ |
9,375 |
|
|
$ |
10,568 |
|
|
$ |
13,738 |
|
Non-interest Expense |
|
$ |
32,321 |
|
|
$ |
32,501 |
|
|
$ |
31,344 |
|
Net Income |
|
$ |
15,980 |
|
|
$ |
16,521 |
|
|
$ |
20,924 |
|
|
|
|
|
|
|
|
|
|
|
|
|
PER SHARE
DATA |
|
|
|
|
|
|
|
|
|
|
|
Basic and Diluted Net Income Per Common Share |
|
$ |
1.33 |
|
|
$ |
1.37 |
|
|
$ |
1.67 |
|
Cash Dividends Declared Per Common Share |
|
$ |
— |
|
|
$ |
0.74 |
|
|
$ |
— |
|
Book Value Per Common Share |
|
$ |
41.89 |
|
|
$ |
39.44 |
|
|
$ |
42.25 |
|
Tangible Book Value Per Common Share(c) |
|
$ |
34.16 |
|
|
$ |
28.67 |
|
|
$ |
34.71 |
|
Basic Weighted Average Common Shares Outstanding |
|
|
12,058 |
|
|
|
12,037 |
|
|
|
12,538 |
|
_______________________________(a) Tangible common equity is a
non-GAAP financial measure derived from GAAP-based amounts. We
calculate tangible common equity by excluding goodwill and other
intangible assets from shareholder’s equity.(b) Net interest income
fully tax equivalent is a non-GAAP financial measure derived from
GAAP-based amounts. We calculate net interest income fully tax
equivalent by adding back the tax equivalent factor of tax exempt
income to net interest income. We calculate the tax equivalent
factor of tax exempt income by dividing tax exempt income by the
net of tax rate of 75%.(c) Tangible book value per common share is
a non-GAAP financial measure derived from GAAP-based amounts. We
calculate the factor by dividing average tangible common equity by
average shares outstanding. We calculate average tangible common
equity by excluding average intangible assets from average
shareholder’s equity.
Key
Ratios |
|
Three Months Ended |
|
|
|
March 31, |
|
|
December 31, |
|
|
March 31, |
|
|
|
2023 |
|
|
2022 |
|
|
2022 |
|
Return on average assets |
|
1.32 |
% |
|
1.34 |
% |
|
1.63 |
% |
Return on average common
shareholder's equity |
|
13.10 |
% |
|
15.06 |
% |
|
14.81 |
% |
Efficiency ratio |
|
58.73 |
% |
|
58.78 |
% |
|
59.54 |
% |
Average equity to average
assets |
|
10.06 |
% |
|
8.90 |
% |
|
10.97 |
% |
Net interest margin(a) |
|
3.96 |
% |
|
3.81 |
% |
|
3.16 |
% |
Net charge-offs to average
loans and leases |
|
0.26 |
% |
|
0.32 |
% |
|
0.18 |
% |
Credit loss reserve to loans
and leases |
|
1.29 |
% |
|
1.30 |
% |
|
1.44 |
% |
Credit loss reserve to
nonperforming loans |
|
328.06 |
% |
|
414.36 |
% |
|
481.24 |
% |
Nonperforming loans to loans
and leases |
|
0.39 |
% |
|
0.31 |
% |
|
0.30 |
% |
Tier 1 leverage |
|
11.30 |
% |
|
10.78 |
% |
|
9.94 |
% |
Risk-based capital - Tier
1 |
|
14.27 |
% |
|
13.58 |
% |
|
14.46 |
% |
________________________________(a) Net interest margin is
calculated on a tax equivalent basis.
Asset
Quality |
|
Three Months Ended |
|
|
March 31, |
|
December 31, |
|
March 31, |
|
|
2023 |
|
2022 |
|
2022 |
Accruing loans and leases past due 30-89 days |
|
$ |
18,934 |
|
|
$ |
28,875 |
|
|
$ |
13,698 |
|
Accruing loans and leases past
due 90 days or more |
|
$ |
1,157 |
|
|
$ |
1,119 |
|
|
$ |
707 |
|
Nonaccrual loans and
leases |
|
$ |
10,920 |
|
|
$ |
8,481 |
|
|
$ |
7,712 |
|
Other real estate owned |
|
$ |
336 |
|
|
$ |
337 |
|
|
$ |
236 |
|
Nonperforming loans and other
real estate owned |
|
$ |
12,413 |
|
|
$ |
9,937 |
|
|
$ |
13,197 |
|
Total nonperforming
assets |
|
$ |
15,327 |
|
|
$ |
12,923 |
|
|
$ |
16,728 |
|
Gross charge-offs |
|
$ |
4,376 |
|
|
$ |
4,388 |
|
|
$ |
3,254 |
|
Recoveries |
|
$ |
2,417 |
|
|
$ |
1,947 |
|
|
$ |
2,015 |
|
Net
charge-offs/(recoveries) |
|
$ |
1,959 |
|
|
$ |
2,441 |
|
|
$ |
1,239 |
|
Non-GAAP
Reconciliations |
|
Three Months Ended March 31, |
|
|
2023 |
|
2022 |
($in thousands, except
EPS) |
|
|
|
|
|
|
|
Income before Income Taxes |
|
$ |
19,589 |
|
|
$ |
26,755 |
|
Provision for credit
losses |
|
|
1,800 |
|
|
|
(6,550 |
) |
Provision for unfunded
commitments |
|
|
— |
|
|
|
(500 |
) |
Pre-tax, Pre-provision
Income |
|
$ |
21,389 |
|
|
$ |
19,705 |
|
|
|
|
|
|
|
|
|
|
CONSOLIDATED BALANCE SHEETS(Dollar amounts in thousands, except per
share data) |
|
|
|
|
|
|
|
|
|
March 31, |
|
December 31, |
|
|
2023 |
|
2022 |
|
|
(unaudited) |
ASSETS |
|
|
|
|
|
|
Cash and due from banks |
|
$ |
82,621 |
|
|
$ |
222,517 |
|
Federal funds sold |
|
|
12,931 |
|
|
|
9,374 |
|
Securities
available-for-sale |
|
|
1,340,781 |
|
|
|
1,330,481 |
|
Loans: |
|
|
|
|
|
|
Commercial |
|
|
1,798,240 |
|
|
|
1,798,260 |
|
Residential |
|
|
675,978 |
|
|
|
673,464 |
|
Consumer |
|
|
598,299 |
|
|
|
588,539 |
|
|
|
|
3,072,517 |
|
|
|
3,060,263 |
|
(Less) plus: |
|
|
|
|
|
|
Net deferred loan costs |
|
|
7,527 |
|
|
|
7,175 |
|
Allowance for credit
losses |
|
|
(39,620 |
) |
|
|
(39,779 |
) |
|
|
|
3,040,424 |
|
|
|
3,027,659 |
|
Restricted stock |
|
|
15,384 |
|
|
|
15,378 |
|
Accrued interest
receivable |
|
|
20,402 |
|
|
|
21,288 |
|
Premises and equipment,
net |
|
|
68,158 |
|
|
|
66,147 |
|
Bank-owned life insurance |
|
|
116,117 |
|
|
|
115,704 |
|
Goodwill |
|
|
86,985 |
|
|
|
86,985 |
|
Other intangible assets |
|
|
6,396 |
|
|
|
6,714 |
|
Other real estate owned |
|
|
336 |
|
|
|
337 |
|
Other assets |
|
|
76,286 |
|
|
|
86,697 |
|
TOTAL ASSETS |
|
$ |
4,866,821 |
|
|
$ |
4,989,281 |
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’
EQUITY |
|
|
|
|
|
|
Deposits: |
|
|
|
|
|
|
Non-interest-bearing |
|
$ |
830,233 |
|
|
$ |
857,920 |
|
Interest-bearing: |
|
|
|
|
|
|
Certificates of deposit
exceeding the FDIC insurance limits |
|
|
58,476 |
|
|
|
50,608 |
|
Other interest-bearing
deposits |
|
|
3,276,689 |
|
|
|
3,460,343 |
|
|
|
|
4,165,398 |
|
|
|
4,368,871 |
|
Short-term borrowings |
|
|
108,584 |
|
|
|
70,875 |
|
FHLB advances |
|
|
34,585 |
|
|
|
9,589 |
|
Other liabilities |
|
|
52,755 |
|
|
|
64,653 |
|
TOTAL LIABILITIES |
|
|
4,361,322 |
|
|
|
4,513,988 |
|
|
|
|
|
|
|
|
Shareholders’ equity |
|
|
|
|
|
|
Common stock, $.125 stated
value per share; |
|
|
|
|
|
|
Authorized
shares-40,000,000 |
|
|
|
|
|
|
Issued shares-16,137,220 in
2023 and 16,114,992 in 2022 |
|
|
|
|
|
|
Outstanding shares-12,065,888
in 2023 and 12,051,964 in 2022 |
|
|
2,012 |
|
|
|
2,012 |
|
Additional paid-in
capital |
|
|
143,408 |
|
|
|
143,185 |
|
Retained earnings |
|
|
630,809 |
|
|
|
614,829 |
|
Accumulated other
comprehensive income/(loss) |
|
|
(125,589 |
) |
|
|
(139,974 |
) |
Less: Treasury shares at
cost-4,071,332 in 2023 and 4,063,028 in 2022 |
|
|
(145,141 |
) |
|
|
(144,759 |
) |
TOTAL SHAREHOLDERS’
EQUITY |
|
|
505,499 |
|
|
|
475,293 |
|
TOTAL LIABILITIES AND
SHAREHOLDERS’ EQUITY |
|
$ |
4,866,821 |
|
|
$ |
4,989,281 |
|
|
|
|
|
|
|
|
|
|
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME(Dollar
amounts in thousands, except per share data) |
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
March 31, |
|
|
2023 |
|
2022 |
|
|
|
|
|
|
|
|
INTEREST INCOME: |
|
|
|
|
|
|
|
Loans, including related fees |
|
$ |
44,595 |
|
|
$ |
32,357 |
|
Securities: |
|
|
|
|
|
|
|
Taxable |
|
|
6,236 |
|
|
|
4,583 |
|
Tax-exempt |
|
|
2,598 |
|
|
|
2,348 |
|
Other |
|
|
1,271 |
|
|
|
365 |
|
TOTAL INTEREST INCOME |
|
|
54,700 |
|
|
|
39,653 |
|
INTEREST EXPENSE: |
|
|
|
|
|
|
|
Deposits |
|
|
9,527 |
|
|
|
1,676 |
|
Short-term borrowings |
|
|
808 |
|
|
|
82 |
|
Other borrowings |
|
|
30 |
|
|
|
84 |
|
TOTAL INTEREST EXPENSE |
|
|
10,365 |
|
|
|
1,842 |
|
NET INTEREST INCOME |
|
|
44,335 |
|
|
|
37,811 |
|
Provision for credit
losses |
|
|
1,800 |
|
|
|
(6,550 |
) |
NET INTEREST INCOME AFTER
PROVISION |
|
|
|
|
|
|
|
FOR LOAN LOSSES |
|
|
42,535 |
|
|
|
44,361 |
|
NON-INTEREST INCOME: |
|
|
|
|
|
|
|
Trust and financial
services |
|
|
1,317 |
|
|
|
1,372 |
|
Service charges and fees on
deposit accounts |
|
|
6,818 |
|
|
|
6,654 |
|
Other service charges and
fees |
|
|
204 |
|
|
|
106 |
|
Securities gains (losses),
net |
|
|
— |
|
|
|
5 |
|
Interchange income |
|
|
47 |
|
|
|
118 |
|
Loan servicing fees |
|
|
285 |
|
|
|
359 |
|
Gain on sales of mortgage
loans |
|
|
180 |
|
|
|
662 |
|
Other |
|
|
524 |
|
|
|
4,462 |
|
TOTAL NON-INTEREST INCOME |
|
|
9,375 |
|
|
|
13,738 |
|
NON-INTEREST EXPENSE: |
|
|
|
|
|
|
|
Salaries and employee
benefits |
|
|
17,158 |
|
|
|
17,342 |
|
Occupancy expense |
|
|
2,599 |
|
|
|
2,522 |
|
Equipment expense |
|
|
3,299 |
|
|
|
2,907 |
|
FDIC Expense |
|
|
787 |
|
|
|
428 |
|
Other |
|
|
8,478 |
|
|
|
8,145 |
|
TOTAL NON-INTEREST
EXPENSE |
|
|
32,321 |
|
|
|
31,344 |
|
INCOME BEFORE INCOME
TAXES |
|
|
19,589 |
|
|
|
26,755 |
|
Provision for income
taxes |
|
|
3,609 |
|
|
|
5,831 |
|
NET INCOME |
|
|
15,980 |
|
|
|
20,924 |
|
OTHER COMPREHENSIVE INCOME
(LOSS) |
|
|
|
|
|
|
|
Change in unrealized
gains/(losses) on securities, net of reclassifications and
taxes |
|
|
14,238 |
|
|
|
(68,914 |
) |
Change in funded status of
post retirement benefits, net of taxes |
|
|
147 |
|
|
|
315 |
|
COMPREHENSIVE INCOME
(LOSS) |
|
$ |
30,365 |
|
|
$ |
(47,675 |
) |
PER SHARE DATA |
|
|
|
|
|
|
|
Basic and Diluted Earnings per
Share |
|
$ |
1.33 |
|
|
$ |
1.67 |
|
Weighted average number of
shares outstanding (in thousands) |
|
|
12,058 |
|
|
|
12,538 |
|
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