TECTONIC FINANCI(TECTP) - 2024 Q1 - Quarterly Report

Financial Performance - Net income available to common shareholders decreased by $1.6 million, or 37.2%, to $2.7 million for the three months ended March 31, 2024, compared to $4.3 million for the same period in 2023[159]. - Earnings per diluted common share were $0.37 for the three months ended March 31, 2024, down from $0.59 for the same period in 2023[159]. - For the three months ended March 31, 2024, consolidated revenue was $17,600,000, a decrease of 0.8% from $17,744,000 in the same period of 2023[200]. - Income before taxes for the Banking segment decreased by $2,200,000, or 55.1%, to $1,804,000 compared to the prior year[201]. - Income before taxes for the Other Financial Services segment increased by $736,000, or 25.4%, to $3,636,000, attributed to an increase in non-interest income[206]. Assets and Liabilities - Total assets increased by $100.3 million, or 14.8%, to $777.6 million as of March 31, 2024, from $677.3 million as of December 31, 2023[161]. - Cash and cash equivalents increased by $67.8 million, contributing to the total asset growth[161]. - Total loans increased by $37.3 million to $538.4 million as of March 31, 2024, compared to $501.1 million at December 31, 2023[216]. - Total deposits increased by $94.0 million, or 17.8%, to $620.9 million as of March 31, 2024, compared to $526.9 million as of December 31, 2023[235]. Equity and Capital - Shareholders' equity increased by $1.6 million, or 1.5%, to $108.5 million as of March 31, 2024, from $106.9 million as of December 31, 2023[162]. - The Company met all capital adequacy requirements as of March 31, 2024, and was classified as "well-capitalized" under applicable regulations[241]. - Tier 1 Capital to Average Assets ratio was 12.39% as of March 31, 2024, down from 13.97% as of December 31, 2023[243]. Income and Expenses - The company recorded an increase of $1.1 million in non-interest expense and an $839,000 increase in the provision for credit losses for the three months ended March 31, 2024[159]. - Total non-interest income decreased by $203,000, or 1.9%, to $10.498 million in Q1 2024 compared to Q1 2023[178]. - Total non-interest expense increased by $1.1 million, or 9.5%, for the three months ended March 31, 2024, primarily due to increases in salaries and employee benefits[187]. - Salaries and employee benefits increased by $779,000, or 9.9%, for the three months ended March 31, 2024, mainly due to increases in staff headcount and related payroll expenses[188]. Credit Losses and Provisions - The company adopted the current expected credit loss (CECL) methodology, resulting in a $1.4 million increase to the allowance for credit losses for loans[158]. - Provision for credit losses totaled $917,000 for Q1 2024, compared to $78,000 in Q1 2023, reflecting increased loan volume and economic outlook[176]. - The allowance for credit losses is calculated based on the CECL methodology, reflecting management's best estimate of expected credit losses[222]. - As of March 31, 2024, the total allowance for credit losses was $6,730,000, representing a 6.7% increase from $6,308,000 as of December 31, 2023[230]. Interest Income and Margin - Net interest income increased by $59,000, or 0.8%, from $7.0 million for the three months ended March 31, 2023, to $7.1 million for the same period in 2024[168]. - Net interest margin decreased from 4.58% in Q1 2023 to 4.13% in Q1 2024, a decline of 45 basis points[168]. - The average yield on interest-earning assets increased by 123 basis points from 7.09% in Q1 2023 to 8.32% in Q1 2024, with loans yielding 9.24% in Q1 2024, up 129 basis points[170]. Market and Economic Conditions - A simulated increase of 200 basis points in interest rates would result in a 10.85% increase in net interest income over a 12-month horizon[262]. - Inflation generally increases the costs of funds and operating overhead, affecting the performance of the financial institution more significantly than general levels of inflation[264]. - The Company believes it has adequate liquidity to meet its obligations despite potential economic challenges[250].