Yahoo Finance Financial Institutions Inc (FISI) Q1 2024 Earnings Call Transcript Highlights: Navigating ...
Net Income: Q1 2024 net income available to common shareholders was $1.7 million, or $0.11 per diluted share.
Earnings Per Share (EPS): Excluding fraud-related expenses, EPS would have been $1.12.
Return on Average Assets (ROA): Annualized ROA was 0.13%, excluding fraud impact it would have been 1.14%.
Efficiency Ratio: Reported at approximately 106%, would have been around 69% without fraud expenses.
Net Interest Income: $40.1 million for Q1 2024, up $196,000 from Q4 2023.
Deposit Growth: Increased by $183.8 million or 3.5% from year-end 2023.
Loan Portfolio: Total loan balances were relatively flat, down $20 million or 0.5% from end of 2023.
Noninterest Income: Totaled $10.9 million in Q1 2024, down $4.5 million from the previous quarter.
Noninterest Expense: Excluding fraud-related costs, would have been flat compared to the previous quarter.
Credit Quality: Nonperforming loans to total loans were 0.60% at the end of Q1 2024.
Effective Tax Rate: Was 14.7% for the quarter.
Tangible Common Equity (TCE) Ratio: Reported at 5.72% at the end of Q1 2024.
Release Date: April 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q & A Highlights
Q: With regards to the provision reversal this quarter, what would be the harm in maintaining a higher loan loss reserve, especially given current credit trends? A: Martin Birmingham, President and CEO, explained that the industry is facing dissonance regarding reserve releases. The CECL models were built during a period of very low interest rates, which did not anticipate the rapid rate increases or the credit events now occurring. The company is considering additional factors that could predict future credit losses more accurately. CFO W. Jack Plants added that the current coverage ratio is adequate based on the portfolio's performance and recent improvements in delinquencies.
Q: Is there concern that if rates stay higher for longer, the indirect portfolio could experience weakness? A: CFO W. Jack Plants acknowledged the potential for stress but noted improvements in the portfolio's performance. He explained that the recent charge-offs were due to loans from the pandemic period, and current delinquencies suggest upcoming performance improvements.
Q: What would need to happen for the company to hit the top end of the projected earnings range? A: CEO Martin Birmingham mentioned that achieving the top end of the guidance would depend on cash flow from the portfolio and modest loan growth. He highlighted that new commercial loans are coming in with higher yields, which should drive margin expansion. The company also anticipates a lower increase in deposit costs compared to last year.
Q: Is it fair to assume that the first quarter was the bottom for the net interest margin (NIM), and should we expect an inflection next quarter? A: CEO Martin Birmingham confirmed that the expectation is for NIM to improve, noting that there was a modest monthly increase in NIM during the first quarter.
Q: Can you provide more details on the impact of the fraud event and how it has affected the financials? A: CFO W. Jack Plants detailed that the fraud event led to significant noninterest expenses, including a $18.4 million charge-off and additional legal and consulting costs. Excluding these, non-interest expenses would have been consistent with the previous quarter.
Q: How does the sale of the insurance subsidiary impact the company's financial strategy? A: CEO Martin Birmingham explained that the sale was timely and at a strong value, enhancing the company's regulatory capital and allowing for reinvestment into the core banking business. This strategic move is expected to support net interest margin expansion and higher quality credit growth.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
