Financial Institutions (FISI) Q2 2024 earnings summary

Executive summary

• Net income for Q2 2024 reached $25.6M, up from $2.1M in Q1 2024 and $14.4M in Q2 2023, driven by a $13.5M pre-tax gain from the SDN Insurance Agency sale and recovery from a prior fraud event.

• Net income available to common shareholders was $25.3M ($1.62/diluted share), a record high, compared to $1.7M ($0.11/share) in Q1 2024 and $14.0M ($0.91/share) in Q2 2023.

• Adjusted net income, excluding the SDN sale and fraud event, was $14.9M ($0.96) in Q2 2024 vs. $17.3M ($1.12) in Q1 2024.

• Q1 2024 results were negatively impacted by an $18.4M pre-tax loss from a deposit-related fraud event; Q2 2024 included $371K in related professional expenses and a $143K recovery.

• Regulatory and tangible capital ratios expanded meaningfully both sequentially and year-over-year.

Financial highlights

• Net interest income was $41.2M, up $1.1M (2.8%) from Q1 2024, but down $1.1M from Q2 2023 due to higher funding costs.

• Net interest margin was 2.87%, up 9 bps from Q1 2024, but down from 2.99% in Q2 2023.

• Noninterest income was $24.0M, up $13.1M from Q1 2024 and $12.5M from Q2 2023, mainly due to the SDN sale.

• Noninterest expense was $33.0M, down $21.0M from Q1 2024 and $762K from Q2 2023, reflecting lower fraud-related charges and cost reductions post-insurance asset sale.

• Provision for credit losses was $2.0M, compared to a $5.5M benefit in Q1 2024 and a $3.2M provision in Q2 2023.

Outlook and guidance

• 2024 guidance: loan and deposit growth of 1%-3%, net interest margin of 2.85%-2.95%, and net charge-offs within 30-40 bps.

• Effective tax rate expected to be 11%-13% for 2024.

• Recurring quarterly noninterest income expected at $8.5-$9M and noninterest expense at $33-$34M.

• Management expects continued strong liquidity and capital positions, with $1.3B in available liquidity and over $1.0B in anticipated cash flow in the next 12 months.

• Guidance does not include any Fed rate cuts; margin expected to be neutral to initial cuts, with potential benefit if cuts are more aggressive in 2025.