TECTONIC FINANCI(US:TECTP)2023-11-14 18:01Financial Performance - Net income available to common shareholders decreased by $292,000, or 6.6%, to $3.8 million for Q3 2023 compared to Q3 2022[165]. - Earnings per diluted common share were $0.52 for Q3 2023, down from $0.56 in Q3 2022[165]. - For the nine months ended September 30, 2023, net income available to common shareholders decreased by $1.6 million, or 13.0%, to $10.7 million compared to the same period in 2022[165]. - Annual return on average assets was 2.62% for Q3 2023, down from 2.98% in Q3 2022[166]. - Annual return on average equity was 16.22% for Q3 2023, compared to 19.27% for the same period in the prior year[166]. Credit Losses and Allowances - The company recorded an increase of $1.4 million to the allowance for credit losses for loans upon adopting the CECL methodology[164]. - The company recognized a cumulative effect reduction to retained earnings totaling $1.3 million due to the adoption of the CECL methodology[164]. - Increases in non-interest expense and provision for credit losses contributed to the decrease in net income for the nine months ended September 30, 2023[165]. - The provision for credit losses for the nine months ended September 30, 2023, was $732,000, compared to $477,000 for the same period in 2022[190]. - The allowance for credit losses is calculated based on the CECL methodology, reflecting management's best estimate of expected credit losses[240]. Assets and Equity - Total assets increased by $16.8 million, or 2.7%, to $629.3 million as of September 30, 2023, from $612.5 million as of December 31, 2022[168]. - Shareholders' equity rose by $8.4 million, or 8.7%, to $104.9 million as of September 30, 2023, from $96.5 million as of December 31, 2022[169]. Interest Income and Expenses - Net interest income decreased by $426,000, or 6.1%, from $7.0 million for the three months ended September 30, 2022, to $6.6 million for the three months ended September 30, 2023[174]. - The average volume of interest-earning assets increased by $39.8 million, or 7.3%, from $548.4 million for the three months ended September 30, 2022, to $588.4 million for the three months ended September 30, 2023[176]. - The average yield on interest-earning assets increased by 165 basis points from 6.23% for the three months ended September 30, 2022, to 7.88% for the three months ended September 30, 2023[176]. - The average interest rate paid on interest-bearing liabilities increased by 301 basis points from 1.68% for the three months ended September 30, 2022, to 4.69% for the three months ended September 30, 2023[177]. - Net interest margin for the nine months ended September 30, 2023, was 4.58%, a decrease of 45 basis points from 5.03% for the same period in 2022[179]. Non-Interest Income - Total non-interest income for the three months ended September 30, 2023, increased by $491,000, or 5.1%, compared to the same period in the prior year[192]. - Trust income for the three and nine months ended September 30, 2023 increased by $194,000, or 13.2%, and $140,000, or 3.0%, respectively, compared to the same periods in the prior year, driven by net inflows of $658 million in assets[193]. - Advisory income for the three and nine months ended September 30, 2023 increased by $326,000, or 9.8%, and $554,000, or 5.4%, respectively, due to net asset inflows and market appreciation of $595 million[195]. - Brokerage income for the three and nine months ended September 30, 2023 decreased by $444,000, or 18.3%, and $2.8 million, or 33.1%, respectively, primarily due to decreased trading activity and economic uncertainty[196]. Non-Interest Expenses - Total non-interest expense for the three and nine months ended September 30, 2023 increased by $542,000, or 5.0%, and $1.7 million, or 5.1%, respectively, due to fluctuations in salaries and related employee benefits[202]. - Salaries and employee benefits for the three and nine months ended September 30, 2023 decreased by $103,000, or 1.3%, and increased by $64,000, or 0.3%, respectively, compared to the same periods in the prior year[203]. - Occupancy and equipment expenses for the three and nine months ended September 30, 2023 increased by $105,000, or 26.6%, and $180,000, or 14.2%, respectively, due to higher rent and maintenance costs[204]. - Professional fees rose by $69,000, or 23.2%, for the three months and $377,000, or 35.9%, for the nine months ended September 30, 2023, primarily due to increases in consulting fees related to robotic process automation and collections efforts on past due loans[208]. Loans and Deposits - Total loans increased by $28.9 million to $479.2 million as of September 30, 2023, compared to $450.3 million at December 31, 2022[234]. - The total loan portfolio includes various categories, with SBA 7(a) guaranteed loans making up 34.7% of total loans as of September 30, 2023[235]. - Total deposits rose by $7.6 million, or 1.0%, to $500.6 million as of September 30, 2023, from $493.0 million as of December 31, 2022[252]. - Non-interest-bearing deposits accounted for 19.1% of total deposits as of September 30, 2023, down from 22.0% in 2022[252]. Capital and Liquidity - The Company met all capital adequacy requirements as of September 30, 2023, and was classified as "well-capitalized" under applicable regulations[258]. - Tier 1 Capital to Average Assets ratio improved to 13.96% as of September 30, 2023, compared to 13.27% as of December 31, 2022[260]. - The Company believes it has adequate liquidity to meet its obligations despite potential economic challenges[267].