TERRE HAUTE, Ind., April 25, 2023 (GLOBE NEWSWIRE) — 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. McHargue
Chief Financial Officer
P: 812-238-6334
E: 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 | ||||||
