First munity Bancshares(US:FCBC)2023-05-04 16:00Financial Performance - Net income for the first quarter of 2023 was $11.78 million, a 23.83% increase from $9.52 million in the same quarter of 2022[134]. - Net interest income increased by $4.26 million to $29.41 million for the first three months of 2023, compared to $25.15 million for the same period in 2022[135]. - The annualized return on average assets was 1.55% for Q1 2023, up from 1.20% in Q1 2022, while the return on average common equity rose to 11.15% from 8.98%[135]. - The net interest margin for Q1 2023 was 4.35%, an increase of 80 basis points from 3.55% in Q1 2022[135]. - Noninterest income decreased by $611 thousand, or 6.65%, primarily due to a $394 thousand gain from the sale of bank-owned property reported in the previous year[145]. - Total noninterest expense increased by $827 thousand, or 4.14%, driven by a $516 thousand increase in service fees and $379 thousand in merger expenses related to the Surrey Bancorp acquisition[146]. - The effective tax rate increased to 23.69% in Q1 2023 from 23.27% in Q1 2022, with income tax expense rising by $773 thousand, or 26.79%[148]. - Total stockholders' equity increased by $9.75 million, or 2.31%, to $431.73 million as of March 31, 2023, driven by net income of $11.78 million and other comprehensive income of $2.49 million[181]. Loan and Asset Management - The Company's loan portfolio decreased by $11.3 million, or 0.47%, from year-end 2022, with the largest decreases in consumer non-real estate loans[135]. - Non-performing loans to total loans remained low at 0.65%, continuing a declining trend over the past four quarters[135]. - The allowance for credit losses to total loans was 1.29% as of March 31, 2023[135]. - Average loans increased by $193.76 million, with a yield increase of 14 basis points, resulting in a tax-effected increase in interest on loans of $3.00 million compared to 2022[141]. - Total loans held for investment as of March 31, 2023, decreased by $11.30 million, or 0.47%, compared to December 31, 2022, primarily due to declines in consumer real estate and consumer loans[157]. - Delinquent loans totaled $26.66 million as of March 31, 2023, a decrease of $3.02 million, or 10.18%, compared to $29.68 million at year-end 2022[164]. - Nonperforming assets decreased by $1.34 million, or 7.69%, from December 31, 2022, with nonaccrual loans increasing by $349 thousand, or 2.29%[163]. - Total consumer real estate loans decreased to $811.24 million, or 33.96% of total loans, from $820.55 million, or 34.19%, at year-end 2022[157]. - The commercial loans segment increased to $1.44 billion, or 60.28% of total loans, up from $1.43 billion, or 59.72%, at December 31, 2022[157]. Deposits and Liabilities - Average interest-bearing liabilities decreased by $137.52 million, or 7.20%, primarily due to a decrease in deposits, including a 21.82% drop in time deposits[143]. - As of March 31, 2023, total deposits decreased by $94.19 million, or 3.52%, compared to December 31, 2022, primarily due to a decrease in demand deposits by $48.87 million, or 5.60%[175]. - The average loan to deposit ratio increased to 91.96% from 80.19% in the same quarter of 2022[142]. Credit Losses and Risk Management - Provision for credit losses for loans was recorded at $1.97 million in Q1 2023, slightly up from $1.96 million in Q1 2022[144]. - The allowance for credit losses (ACL) as of March 31, 2023, was $30.79 million, or 1.29% of total loans, reflecting a decrease of $233 thousand from December 31, 2022[173]. - The Company recorded a recovery for credit losses on unfunded commitments of $232 thousand in Q1 2023, compared to a provision of $97 thousand in the same period of 2022[174]. - The liquidity risk management policy includes ongoing monitoring of potentially credit-sensitive liabilities and sources of liquidity to address funding crises[177]. Market and Operational Changes - The sensitivity of net interest income to a 200 basis point increase in interest rates would result in a decrease of $1.166 million, or 1.0%, as of March 31, 2023[187]. - The Company has developed a LIBOR transition plan in anticipation of the discontinuation of LIBOR settings after June 30, 2023, to manage potential impacts on its financial operations[191]. - As of March 31, 2023, the Company did not repurchase any common shares during the first quarter due to the acquisition of Surrey Bancorp, but anticipates resuming share repurchases soon[181].