NASHVILLE, Tenn., May 7, 2024 /PRNewswire/ -- InsCorp (OTCQX: IBTN) reported a net profit of $1,763,000, or $0.61 per share, in the first quarter of 2024 compared to $2,267,000, or $0.79 per share, in the fourth quarter of 2023 and respective levels of $2,050,000 and $0.71 for the first quarter of 2023. InsCorp generated a ROA of 1.06% and ROE of 9.5% in the first quarter of 2024 compared to 1.28% and 11.1%, respectively, in the first quarter of 2023.
InsCorp (PRNewsfoto/INSBANK)
Excluding gains and losses from hedging activities, operating EPS of $0.68 in the first quarter of 2024 was consistent with $0.69 in the year ago quarter. A higher tax rate in the first quarter of 2024 adversely affected EPS in the quarter by $0.10 compared to the fourth quarter of 2023 and by $0.01 compared to the first quarter of 2023. Excluding gains and losses from hedging activities, pretax income of $2.6 million in the first quarter of 2024 was 1% higher than the previous quarter and 1% lower than the year ago quarter. The mark-to-market pretax adjustment to interest rate floor contracts was ($252,000) in the first quarter of 2024 in contrast to $53,000 in the fourth quarter of 2023 and $66,000 in the first quarter of 2023, which reflected changes in the futures market for interest rates during the quarter. These hedging contracts remain as an insurance policy against an unexpected drop in rates.
As of March 31, 2024, construction and development loans decreased to approximately 77% of total capital and commercial real estate declined to 285% of capital, positioning the bank to take advantage of growth opportunities in the vibrant middle-Tennessee market. The decline in these ratios was due in part to payoffs and paydowns as well as growth in capital of 43% over the past three years, which exceeded the growth in non-farm, non-residential real estate of 28% over the same period. "While not apparent from a snapshot of quarter-end loan and deposit balances, our bankers were busy building and moving our pipelines forward," said Jim Rieniets, President & CEO of INSBANK. "Our business owner clients continue to adjust to the new norm of interest rates, as they have for the last two years. For many this means selling assets or re-deploying liquid assets into their enterprises, and this has the effect of imparting some volatility to the trajectory of our growth."
Like the fourth quarter of 2023, the bank continued to experience elevated pay-off activity in the first quarter of 2024, which restrained loan growth to 2.5% year-over-year and -2.4% on a linked-quarter annualized basis. Medquity, INSBANK's healthcare business, continues to provide solid growth and diversification given its national focus and reduced sensitivity to economic and real estate cycles; specifically, Medquity reported loan growth of 10% on a year-over-year basis and linked-quarter annualized basis to $206 million, lifting the segment's loans to 30% of total loans.
In the first quarter, bank-wide loan originations returned to a more seasonally typical pattern, as originations of $23 million compared to $48 million in the fourth quarter of 2023 and $26 million in the third quarter of 2023. The pipeline increased to $67 million as of March 31, 2024, compared to $53 million a quarter earlier. "With a business model emphasizing efficiencies, we remain bullish on opportunity in this environment, albeit with a cautious and steady hand," Rieniets continued. "In addition to budgeted growth, this year will see our company investing in more talent, pursuant to our plans for continued development of business lines such as healthcare and private banking, as well as new hires to accelerate leveraging technologies."
Revenue of $6,170,000 in the first quarter of 2024 declined 0.5% year-over-year, as a decline in net interest income of 3% to $5,593,000 in the quarter was mostly offset by noninterest income growth of 35% to $577,000 in the quarter. Expense growth of 3% to $3,559,000 primarily consisted of FDIC expense, as slight increases in personnel and occupancy expenses were mostly offset by a decrease in other expense.
The bank-level net interest margin of 2.94% in the first quarter compared to 3.26% in the fourth quarter of 2023 and 3.44% in the first quarter of 2023. Although the Company benefited from an increase in loan yields of 85 basis points on a year-over-year basis and of 7 basis points on a linked-quarter basis to 6.73% in the quarter, the cost of CDs increased 154 basis points on a year-over-year basis and 21 basis points on a linked-quarter basis to 4.65% in the first quarter. Also, a decrease in the mix of interest-bearing cash relative to investment securities adversely affected the margin in the quarter. Going forward, the net interest margin will likely reflect pressure for another quarter or so given the change in deposit mix favoring certificates of deposit and higher renewal rates on certificates of deposit. Given current interest rate expectations, these headwinds will be partially offset by improving loan yields.
Asset quality measures remain healthy, with net charge offs of 0.00% recorded during the quarter, which was unchanged compared to the fourth quarter and first quarter of 2023. The allowance for credit losses represented 1.37% of loans, which remained above peer. Loans 30-days past due represented 0.01% of loans, as of March 31, compared to 0.03% a quarter ago and 0.05% a year ago. Provision for credit losses totaled $25,000 in the quarter compared to $150,000 in the fourth quarter and $125,000 in the year ago quarter. The aggregate level of watch list loans continued to decline in the most recent quarter and has returned to pre-pandemic levels.
Relative to the prior year, nonperforming assets increased to 1.11% of loans versus 0.32% a year ago, which reflected a 93 basis point contribution from the migration of one real-estate secured credit from the bank's watch list. Virtually all nonperforming assets are real estate-secured, for which specific reserves are relatively low. "Our bank is known to have a robust CRE risk management program, and those portfolio analytics continue to demonstrate durability," said Rieniets. "Thus far in this cycle, the only observable sector in our portfolio experiencing stress is assisted living and memory care, where the pandemic reduced occupancy while increasing healthcare labor costs. Fortunately, both trends seem to be improving for operators in the sector, and this segment only accounts for 3.6% of our loan portfolio," Rieniets continued.
Measures of liquidity risk remain healthy, as on-balance sheet liquidity ended the quarter at approximately $110 million compared to $116 million a quarter ago and $86 million a year ago. Estimated uninsured deposits were approximately 21% of total deposits at quarter-end compared to 25% a year ago. Balance sheet liquidity and $120 million in reciprocal deposit capacity provide ample risk mitigation strategies.
Tangible book value increased 9.5%, or $2.13 per share, on a year-over-year basis, and 9.2% annualized, or $0.55 per share, on a linked-quarter basis to $24.48, as of March 31, 2024. IBTN's tangible common equity ratio increased to 8.52%, as of March 31, 2024, versus 8.23% a quarter ago and 8.20% a year earlier. Accumulated Other Comprehensive Income was ($1,005,000), or approximately 1.1% of bank-level tier-1 capital of $94,652,000. INSBANK remains well capitalized with a tier-1 leverage ratio of 11.55%, a common equity tier-1 capital ratio of 12.63%, and a total risk-based capital ratio of 13.86%. INSBANK's risk-based capital ratios increased by approximately 80 basis points on a year-over-year basis and by more than 30 basis points on a linked-quarter basis.
With continued growth and positive trajectory, the Company's board of directors recently approved the payment of a quarterly dividend. Shareholders of record on May 17, 2024, will receive a dividend of $0.10 per common share payable on June 7, 2024. The annualized quarterly dividend rate of $0.40 represents an increase in the annualized rate of 17.6% compared to dividends paid of $0.34 per share in 2023. "While we remain focused on deploying capital through organic growth of our community banking and healthcare focused businesses, we are pleased to provide an attractive cash dividend to our shareholders, too," Rieniets stated.
About INSBANK
Since 2000, INSBANK has offered its clients highly personalized service provided by experienced relationship managers, while positioning itself as an innovator, utilizing technologies to deliver those services efficiently and conveniently. In addition to its commercial focused operation, INSBANK operates three divisions, Medquity, TMA Medical Banking and Finworth. Medquity offers healthcare banking solutions to physicians, partnerships, and practices nationwide, while TMA Medical Banking provides banking services specifically to members of the Tennessee Medical Association. Finworth offers nationally available virtual private client services for interest bearing deposits. INSBANK is owned by InsCorp, Inc., a Tennessee bank holding company. The bank is headquartered in Nashville at 2106 Crestmoor Road and has an office in Brentwood at 5614 Franklin Pike Circle. For more information, please visit www.insbank.com.
