TECTONIC FINANCI(TECTP) - 2023 Q2 - Quarterly Report

Financial Performance - Net income available to common shareholders decreased by $1.7 million, or 38.6%, to $2.6 million for Q2 2023 compared to Q2 2022[169] - Earnings per diluted common share were $0.36 for Q2 2023, down from $0.59 in Q2 2022[169] - For the six months ended June 30, 2023, net income available to common shareholders decreased by $1.3 million, or 15.6%, to $7.0 million compared to the same period in 2022[169] - The decrease in net income for Q2 2023 was primarily due to decreases in non-interest income and increases in the provision for credit losses and non-interest expense[169] - Income before taxes for the three and six months ended June 30, 2023 decreased by $730,000, or 23.3%, and $707,000, or 11.8%, respectively, compared to the same periods in the prior year[223] Asset and Equity Growth - Total assets increased by $9.5 million, or 1.6%, to $622.0 million as of June 30, 2023, from $612.5 million as of December 31, 2022[172] - Shareholders' equity increased by $5.2 million, or 5.4%, to $101.7 million as of June 30, 2023, from $96.5 million as of December 31, 2022[173] - Total loans excluding allowance for credit losses increased by $15.4 million to $465.7 million at June 30, 2023, compared to $450.3 million at December 31, 2022[234] - Total deposits rose by $5.0 million, or 1.0%, to $498.0 million as of June 30, 2023, compared to $493.0 million at the end of 2022[253] Interest Income and Margin - Net interest income increased by $235,000, or 3.6%, from $6.6 million for the three months ended June 30, 2022, to $6.9 million for the three months ended June 30, 2023[178] - Net interest margin decreased by 30 basis points from 5.03% for the three months ended June 30, 2022, to 4.73% for the three months ended June 30, 2023[178] - The average yield on interest-earning assets increased by 208 basis points from 5.72% for the three months ended June 30, 2022, to 7.80% for the three months ended June 30, 2023[179] - The average interest rate paid on interest-bearing liabilities increased by 322 basis points from 0.98% for the three months ended June 30, 2022, to 4.20% for the three months ended June 30, 2023[180] Credit Losses and Provisions - The company recorded an increase of $1.4 million to the allowance for credit losses for loans upon adopting the CECL methodology[168] - The provision for credit losses totaled $691,000 for the three months ended June 30, 2023, compared to no provision for the same period in the prior year[219] - The allowance for credit losses increased by $1.4 million due to the adoption of the CECL methodology, totaling $6,138,000 as of June 30, 2023[247] - The net charge-offs for the three months ended June 30, 2023, were $452,000, compared to $119,000 in the same period of 2022[249] Non-Interest Income and Expenses - Total non-interest income for the three months ended June 30, 2023, decreased by $1.2 million, or 11.1%, compared to the same period in the prior year[194] - Total non-interest expense increased by $424,000, or 3.8%, for the three months and by $1.1 million, or 5.1%, for the six months ended June 30, 2023, compared to the same periods in the prior year[203] - Non-interest income for the three and six months ended June 30, 2023 decreased by $1.2 million, or 11.7%, and $1.1 million, or 5.4%, respectively, primarily due to a decrease in brokerage income totaling $1.8 million and $2.4 million[224] Loan Composition and Quality - SBA loans comprised 56.6% of total loans at June 30, 2023, totaling $263.4 million, compared to 57.4% at December 31, 2022[234] - Non-performing assets decreased to $2,134,000 (0.34% of total assets) as of June 30, 2023, down from $2,804,000 (0.45%) as of December 31, 2022[239] - The composition of loans includes SBA 7(a) guaranteed loans at $161,340,000 (34.6% of total loans), which increased from $149,374,000 (33.2%)[235] Capital Adequacy and Ratios - The Company met all capital adequacy requirements as of June 30, 2023, and was classified as "well-capitalized" under applicable regulations[259] - Tier 1 Capital to Average Assets ratio improved to 13.62% as of June 30, 2023, compared to 13.27% at the end of 2022[261] - The ratio of allowance for loans to end of period loans improved to 1.32% as of June 30, 2023, compared to 0.99% in the previous year[249] Interest Rate Sensitivity and Projections - A 200 basis point increase in interest rates is projected to result in a 10.78% increase in net interest income over a 12-month horizon[280] - A 100 basis point increase in interest rates is projected to result in a 5.39% increase in net interest income over a 12-month horizon[280] - The Company has established a measurement system for monitoring the net interest rate sensitivity position, which is managed by the Bank's Asset Liability Committee[276]