First Financial Corp's Risk Management Practices & Future Outlook
Mar 8th 2023, 8:47 pm
Part 1: Performance Analysis First Financial Corporation has reported a decrease in its allowance for credit losses (ACL) and allowance for unfunded commitments of $8.5 million and $0.9 million, respectively, for the year ended December 31, 2022, compared to the prior year period. The decrease was driven by model recalibration during the first quarter of 2022, shorter delay periods, lower qualitative factors and improved portfolio performance. The ACL and allowance for unfunded commitments stood at $39.8 million and $2.1 million, respectively, at December 31, 2022, reflecting acceptable risk management practices by the company's management. However, the performance of the company is dependent on changes in the financial condition of individual borrowers, economic conditions, historical loss experience, and the condition of the various markets in which collateral may be sold. The company also reported that securities available-for-sale are carried at fair value, and the valuation is based on monthly market values obtained from a third party. Equity securities without readily determinable fair values are carried at cost. The approach indicates the company’s commitment to transparency and adhering to appropriate valuation mechanisms. Part 2: Forward-looking Analysis According to the CEO, Norman L. Lowery, the financial performance of First Financial Corporation has remained stable despite the volatility posed by the COVID-19 pandemic. The company's mortgage and wealth management divisions have continued to report robust performance. The CEO further stated that the company has weathered past economic crises, and its flexible and elastic business model is well-positioned to navigate any future uncertainties. Industry trends are crucial determinants of the company's future performance. The company is positioned in the financial services industry, which continues to see robust growth, although intense competition prevails. To maintain its competitive position, the company's management will need to leverage digital technologies to improve customer service delivery, cost efficiencies, and expand its customer base. In summary, the First Financial Corporation has reported a reduction in its ACL and allowance for unfunded commitments in 2022, reflecting acceptable risk management practices. The company's stance on securities valuation indicates a commitment to transparency and appropriate valuation mechanisms. Despite the volatility posed by the COVID-19 pandemic, the company's financial performance has remained stable. The competitive financial services industry calls on the company to leverage digital technologies to improve customer service delivery and expand its customer base.