TriBancshares(TCBK) - 2025 Q1 - Quarterly Results

Financial Highlights Executive Commentary Management highlighted solid Q1 2025 loan and deposit growth and an 'Outstanding' CRA rating despite margin contraction from prior rate cuts - The company achieved solid loan and deposit growth in a challenging economic environment and received an 'Outstanding' CRA rating[2] - Net interest margin and income slightly decreased as the impact of previous rate cuts affected floating-rate assets[3] - Management expects earning asset yields to increase and funding costs to decrease going forward[3] Selected Financial Highlights The company reported lower Q1 2025 net income and EPS, a slightly compressed net interest margin, and mixed balance sheet and credit quality indicators Q1 2025 Key Performance Indicators | Metric | Q1 2025 | Trailing Quarter (Q4 2024) | Change | | :--- | :--- | :--- | :--- | | Net Income | $26.4 million | $29.0 million | -$2.6 million | | Diluted EPS | $0.80 | $0.88 | -$0.08 | | Net Interest Margin (FTE) | 3.73% | 3.76% | -3 bps | | Return on Average Assets (ROA) | 1.09% | 1.19% | -10 bps | | Return on Average Equity (ROE) | 8.54% | 9.30% | -76 bps | | Provision for Credit Losses | $3.7 million | $1.7 million | +$2.0 million | - Loan balances increased by $52.3 million (3.1% annualized) from the trailing quarter[5] - Deposit balances grew by $117.8 million (5.8% annualized) from the trailing quarter[5] - The allowance for credit losses (ACL) to total loans increased to 1.88% from 1.85% in the trailing quarter, and non-performing assets to total assets rose to 0.59% from 0.48%[6] Financial Performance Operating Results and Performance Ratios Net income and EPS declined both sequentially and year-over-year in Q1 2025, driven by lower net interest income and a higher provision for credit losses Q1 2025 Income Statement vs. Trailing Quarter (Q4 2024) | (in thousands) | Q1 2025 | Q4 2024 | % Change | | :--- | :--- | :--- | :--- | | Net Interest Income | $82,542 | $84,090 | (1.8)% | | Provision for Credit Losses | $3,728 | $1,702 | 119.0% | | Noninterest Income | $16,073 | $16,275 | (1.2)% | | Noninterest Expense | $59,585 | $59,775 | (0.3)% | | Net Income | $26,363 | $29,034 | (9.2)% | | Diluted EPS | $0.80 | $0.88 | (9.1)% | Q1 2025 Income Statement vs. Prior Year (Q1 2024) | (in thousands) | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | Net Interest Income | $82,542 | $82,736 | (0.2)% | | Provision for Credit Losses | $3,728 | $4,305 | (13.4)% | | Noninterest Income | $16,073 | $15,771 | 1.9% | | Noninterest Expense | $59,585 | $56,504 | 5.5% | | Net Income | $26,363 | $27,749 | (5.0)% | | Diluted EPS | $0.80 | $0.83 | (3.6)% | Net Interest Income and Net Interest Margin Q1 2025 net interest income and margin decreased sequentially due to lower loan income, though the margin improved slightly from the prior year Net Interest Income and Margin (FTE) - QoQ Change | Metric | Q1 2025 | Q4 2024 | Change | | :--- | :--- | :--- | :--- | | Net Interest Income (FTE) | $82.8M | $84.4M | -$1.6M | | Net Interest Margin (FTE) | 3.73% | 3.76% | -3 bps | | Yield on Loans | 5.71% | 5.78% | -7 bps | | Cost of Interest-Bearing Deposits | 2.06% | 2.15% | -9 bps | - The decrease in net interest income was mainly caused by a $2.8 million decline in interest income, led by a $2.3 million reduction in loan income due to the impact of rate cuts on variable rate loans[21] - Year-over-year, the cost of interest-bearing deposits increased by 23 basis points, and the average balance of noninterest-bearing deposits decreased by $132.0 million[22] - The ratio of average noninterest-bearing deposits to total average deposits declined to 30.7% in Q1 2025, down from 31.8% in Q4 2024 and 33.8% in Q1 2024[23] Non-interest Income Non-interest income was nearly flat sequentially but increased year-over-year, influenced by a one-time loss on securities sales and gains from life insurance proceeds - Sequentially, non-interest income decreased by $0.2 million, primarily due to a $1.1 million loss on the sale of investment securities, offset by $1.2 million in other income from life insurance proceeds[34] - Year-over-year, non-interest income increased by $0.3 million, driven by a $0.4 million (31.9%) increase in asset management and commission income[35] Non-interest Income Breakdown (in thousands) | Category | Q1 2025 | Q4 2024 | Q1 2024 | | :--- | :--- | :--- | :--- | | Total service charges and fees | $12,678 | $13,115 | $12,637 | | (Loss) gain on sale of investment securities | $(1,146) | $— | $— | | Asset management and commission income | $1,488 | $1,584 | $1,128 | | Other income | $1,439 | $108 | $497 | | Total non-interest income | $16,073 | $16,275 | $15,771 | Non-interest Expense Non-interest expense remained stable sequentially but rose year-over-year, primarily due to higher salaries and benefits from merit increases and strategic hiring - Compared to the trailing quarter, total non-interest expense decreased slightly by $0.2 million as a $1.5 million rise in salaries and benefits was offset by reductions in other expense lines[36] - Compared to the prior year, total non-interest expense increased by $3.1 million (5.5%), mainly due to a $2.6 million increase in salaries and benefits from merit increases and strategic hiring[38] Non-interest Expense Breakdown (in thousands) | Category | Q1 2025 | Q4 2024 | Q1 2024 | | :--- | :--- | :--- | :--- | | Salaries and benefits expense | $36,855 | $35,326 | $34,304 | | Total other non-interest expense | $22,730 | $24,449 | $22,200 | | Total non-interest expense | $59,585 | $59,775 | $56,504 | Balance Sheet and Capital Balance Sheet Overview The balance sheet shows modest loan growth, an improved loan-to-deposit ratio, and an increase in shareholders' equity and book value per share - Total loans were $6.8 billion, up 0.3% YoY and 3.1% annualized QoQ[9] - The loan-to-deposit ratio was 83.1% at quarter-end, compared to 85.1% a year prior[9] - Shareholders' equity grew by $34.6 million in the quarter, driven by net income and a decrease in AOCI losses, partially offset by dividends and share repurchases[10] Book Value Per Share | Metric | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Book Value Per Share | $38.17 | $37.03 | | Tangible Book Value Per Share (Non-GAAP) | $28.73 | $27.60 | Balance Sheet Changes Total assets grew from the prior quarter driven by deposit and loan growth, while year-over-year asset levels remained flat as investment decreases offset deposit increases Trailing Quarter Balance Sheet Change (Annualized %) | (in thousands) | March 31, 2025 | Dec 31, 2024 | Annualized % Change | | :--- | :--- | :--- | :--- | | Total Assets | $9,819,599 | $9,673,728 | 6.0% | | Total Loans | $6,820,774 | $6,768,523 | 3.1% | | Total Investments | $1,979,116 | $2,036,610 | (11.3)% | | Total Deposits | $8,205,332 | $8,087,576 | 5.8% | Year-Over-Year Balance Sheet Change | (in thousands) | March 31, 2025 | March 31, 2024 | % Change | | :--- | :--- | :--- | :--- | | Total Assets | $9,819,599 | $9,813,767 | 0.1% | | Total Loans | $6,820,774 | $6,800,695 | 0.3% | | Total Investments | $1,979,116 | $2,221,555 | (10.9)% | | Total Deposits | $8,205,332 | $7,987,658 | 2.7% | | Total other borrowings | $91,706 | $392,409 | (76.6)% | Credit Quality Asset Quality and Credit Loss Provisioning Credit quality metrics weakened in Q1 2025, with a higher provision for credit losses, an increased ACL ratio, and a rise in non-performing and classified loans - The provision for credit losses was $3.7 million, compared to $1.7 million in Q4 2024 and $4.3 million in Q1 2024, with the increase mainly due to higher reserves on individually evaluated loans[25][26] Key Credit Quality Ratios | Metric | Mar 31, 2025 | Dec 31, 2024 | Mar 31, 2024 | | :--- | :--- | :--- | :--- | | ACL to Total Loans | 1.88% | 1.85% | 1.83% | | Non-performing Assets to Total Assets | 0.59% | 0.48% | 0.37% | | Classified Loans to Total Loans | 1.94% | 1.74% | 1.12% | - Non-performing loans increased to $54.9 million from $44.1 million in the trailing quarter[29] - Management noted that while general economic indicators are improving, uncertainties related to inflation, monetary policy, and geopolitical risks warrant maintaining a robust reserve level[28] Other Information Provision for Income Taxes The company's effective tax rate for Q1 2025 was 25.3%, remaining below the statutory rate due to non-taxable revenues and tax credits Effective Tax Rate Comparison | Period | Effective Tax Rate | | :--- | :--- | | Q1 2025 | 25.3% | | Q4 2024 | 25.3% | | Q1 2024 | 26.4% | Forward-Looking Statements The report includes cautionary language regarding forward-looking statements, highlighting various risks that could affect future performance - The report identifies numerous risks that could impact future results, such as economic volatility, interest rate changes, regulatory impacts, credit quality deterioration, and cybersecurity incidents[42] Appendix: Financial Data and Non-GAAP Reconciliation The appendix contains detailed five-quarter financial data and reconciles GAAP to non-GAAP measures like tangible book value and pre-provision returns - Presents condensed consolidated financial data for the five quarters ending March 31, 2025[43][44] - Provides reconciliations for non-GAAP financial measures, including tangible common equity, tangible book value per share, and pre-tax pre-provision returns[45][47]