The Company’s tier 1 leverage ratio was 9.29% at the end of the first quarter, an increase of 10 basis points from December 31, 2024 and 28 basis points above its level one year earlier. The increase in the Tier 1 leverage ratio in comparison to December 31, 2024 was the result of ending shareholders’ equity, excluding intangibles and other comprehensive income or loss items, increasing 2.0%, primarily as a result of net earnings retention, while average assets, excluding intangibles and the market value adjustment on available-for-sale investment securities, increased a lesser 0.9%, primarily due to an increase in cash equivalent balances driven by net deposit inflows. The Tier 1 leverage ratio also increased compared to the prior year’s first quarter as shareholders’ equity, excluding intangibles and other comprehensive income or loss items, increased 7.4% as the impact of net earnings retention outweighed share repurchases, while average assets, excluding intangibles and the market value adjustment, increased a lesser 4.1% primarily due to organic loan growth, investment purchases and an increase in cash equivalent balances driven by net funding inflows.
The shareholders’ equity-to-assets ratio was 10.94% at the end of the first quarter of 2025 compared to 10.76% at December 31, 2024 and 10.45% at March 31, 2024. The tangible equity-to-tangible assets ratio, a non-GAAP measure, of 6.15% increased 0.32 percentage points from December 31, 2024 and increased 0.83 percentage points versus March 31, 2024 (see Table 14 for Reconciliation of Quarterly GAAP to Non-GAAP Measures). The increase in the tangible equity-to-tangible assets ratio, a non-GAAP measure, from one year prior was driven by a $180.4 million, or 22.6%, increase in tangible equity, a non-GAAP measure, as the decrease in accumulated other comprehensive loss related to the investment securities portfolio and net earnings retention outweighed the impact of share repurchases between the periods, while tangible assets, a non-GAAP measure, increased $908.9 million, or 6.1%, due primarily to the interest-earning asset growth described above. The increase in the tangible equity-to-tangible assets ratio, a non-GAAP measure, from December 31, 2024 was driven by a $72.4 million, or 8.0%, increase in tangible equity, a non-GAAP measure, due mainly to a decrease in accumulated other comprehensive loss related to the investment securities portfolio and net earnings retention, while tangible assets, a non-GAAP measure, increased $379.4 million, or 2.4%, primarily due to an increase in cash equivalent balances driven by net deposit inflows.
Liquidity
Liquidity risk is a measure of the Company’s ability to raise cash when needed at a reasonable cost and minimize any loss. The Company maintains appropriate liquidity levels in both normal operating conditions as well as stressed environments. The Company must be capable of meeting all obligations to its customers at any time and, therefore, the active management of its liquidity position remains an important management objective. The Bank has appointed the Asset Liability Committee (“ALCO”) to manage liquidity risk using policy guidelines and limits on indicators of potential liquidity risk. The indicators are monitored using a scorecard with three risk level limits. These risk indicators measure core liquidity and funding needs, capital at risk, and change in available funding sources. The risk indicators are monitored using such metrics as the core basic surplus ratio, unencumbered securities to average assets, free loan collateral to average assets, loans to deposits, deposits to total funding and borrowings to total funding ratios.
Given the uncertain nature of the Company’s customers’ demands, as well as the Company’s desire to take advantage of earnings enhancement opportunities, the Company must have adequate sources of on and off-balance sheet funds available that can be utilized when needed. Accordingly, in addition to the liquidity provided by balance sheet cash flows, liquidity must be supplemented with additional sources such as borrowings from the FHLB and the FRB and credit lines from correspondent banks. Other funding alternatives may also be appropriate from time to time, including wholesale and retail repurchase agreements, large certificates of deposit and the brokered CD market. The primary sources of funds are deposits, which totaled $13.89 billion at March 31, 2025. The primary sources of non-deposit funds are customer repurchase agreements and FHLB and FRB overnight advances and term borrowings. At March 31, 2025, there were $266.6 million of customer repurchase agreements, no overnight borrowings, and $586.9 million of FHLB term borrowings outstanding.
The Company’s primary sources of available liquidity include unrestricted cash and cash equivalents, borrowing capacity at the FHLB and FRB, as well as net unpledged investment securities that could be sold, subject to market conditions, or used to collateralize additional funding. Table 13 below details the available sources of liquidity at March 31, 2025. In addition, there was $75.0 million available in unsecured lines of credit with correspondent banks at March 31, 2025. The Company’s sources of immediately available liquidity of $5.94 billion as of March 31, 2025 represent approximately 254% of the Company’s estimated uninsured deposits (deposits in excess of FDIC limits), net of collateralized and intercompany deposits (“net estimated uninsured deposits”), estimated to be approximately $2.34 billion.
