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Third Century Bancorp Releases Earnings for the Quarter Ended June 30, 2023

(OTCPINK: TDCB) - Third Century Bancorp (“Company”), the holding company for Mutual Savings Bank (“Bank”), announced it recorded net income of $175,000 for the quarter ended June 30, 2023, or $0.15 per basic and diluted share, compared to net income of $574,000 for the quarter ended June 30, 2022, or $0.50 per basic and $0.49 per diluted share.

“While our net income declined in the second quarter due to the rising interest rate environment, we continued to have solid growth in higher yielding loans,” stated David A. Coffey, President and CEO. “Even though funding costs have increased, this will put us in good position when this rate environment changes. Even in a tough rate environment, we are pursuing our mission, which is: Make dreams come true. Surpass expectations. Be the first choice for financial needs.” Coffey concluded, “As I have stated before, this current economic cycle is challenging for all financial institutions due to the yield curve. However, we continue to manage our business and seek customer relationship opportunities that will allow us to remain a strong community bank in the communities we serve.”

For the quarter ended June 30, 2023, net income decreased $399,000, or 69.51%, to $175,000 as compared to $574,000 for the same period in the prior year. The decrease in net income for the three-month period ended June 30, 2023 was driven primarily as a result of the $254,000, or 44.64%, decrease in non-interest income as compared to the same period in the prior year and an increase in non-interest expense of $162,000 or 8.50%, as compared to the same period in the prior year. The decrease in non-interest income was due to a decrease in gains on the sale of one-to-four-family residential mortgage loans sold to Freddie Mac of $62,000, or 68.55% for the quarter ended June 30, 2023 as compared to the same period in the prior year. The increase in non-interest expense was due to an increase of $63,000, or 5.38%, in personnel expenses for the quarter ended June 30, 2023 as compared to the same period in the prior year. The increase in non-interest expense and decrease in non-interest income was partially offset by an increase of $55,000, or 2.81%, in net interest income for the quarter ended June 30, 2023 as compared to the same period in the prior year. The increase in net interest income was supported by a $1.1 million, or 50.36% increase in interest income, which was offset by an increase of $1.1 million or 373.96%, in interest expense for the quarter ended June 30, 2023 as compared to the same period in the prior year. The increase in interest income was a result of higher average yields, as well as increases in average assets largely due to an increase in the average balance of loans held for investment. Increases in interest expense were the result of higher average balances on interest-bearing deposits, FHLB advances, and subordinated notes, along with increases in average rates paid on interest-bearing liabilities primarily as a result of significant increases in market rates following the historically low interest rate environment. In addition, the provision for credit losses increased $146,000, or 100.00%, for the quarter ended June 30, 2023 as compared to the same period in the prior year. The increase was due to loan growth. The decrease in net income was also partially offset by a $108,000, or 225.00%, decrease in income tax expense as compared to the same period in the prior year as a result of the decrease in income before income tax expense.

For the six-months ended June 30, 2023, net income decreased $447,000, or 47.5%, to $494,000 as compared to $941,000 for the six-months ended June 30, 2022. The decrease in net income for the six-month period ended June 30, 2023 was driven primarily as a result of the $454,000, or 42.79%, decrease in non-interest income as compared to the same six-month period in the prior year. The decrease in non-interest income was driven primarily by a $166,000, or 87.22%, decrease in gains on the sale of one-to-four-family residential mortgage loans sold to Freddie Mac as compared to the same six-month period in the prior year. Net income was also impacted by a $303,000, or 8.05%, increase in non-interest expense as compared to the same six-month period in the prior year. The increase in non-interest expense for the six-month period ended June 30, 2023 was driven primarily by a $182,000, or 8.01%, increase in personnel expenses as compared to the same six-month period in the prior year. The increase in non-interest expense and decrease in non-interest income was partially offset by an increase of $341,000, or 9.19%, in net interest income for the six-months ended June 30, 2023 as compared to the same period in the prior year. The increase in net interest income was supported by a $2.2 million, or 53.47% increase in interest income, which was offset by an increase of $1.9 million or 388.57%, in interest expense for the six-months ended June 30, 2023 as compared to the same period in the prior year. The increase in interest income was a result of higher average yields, as well as increases in average assets largely due to an increase in the average balance of loans held for investment. Increases in interest expense were the result of higher average balances on interest-bearing deposits, FHLB advances, and subordinated notes, along with increases in average rates paid on interest-bearing liabilities primarily as a result of significant increases in market rates following the historically low interest rate environment. In addition, the provision for credit losses increased $176,000, or 100.00%, for the six-month period ended June 30, 2023 as compared to the same six-month period in the prior year. The increase was due to loan growth.

The increase in net income for the six-months ended June 30, 2023 was also partially supported by a $145,000 decrease in income tax expense as compared to the same period in the prior year. The decrease in income tax expense was due to a decrease in income before income tax expense for the six-months ended June 30, 2023 as compared to the same period in the prior year.

Total assets increased $25.7 million to $306.2 million at June 30, 2023 from $280.5 million at December 31, 2022, an increase of 9.16%. The increase was primarily due to a $16.7 million, or 9.73%, increase in loans held-for-investment to $188.3 million at June 30, 2023, primarily funded by a $27.6 million, or 126.6%, increase in FHLB Advances. Total deposits were $237.7 million at June 30, 2023, down slightly from $240.1 million as of December 31, 2022. At June 30, 2023, the weighted average rate of all FHLB advances was 3.69% compared to 4.29% at December 31, 2022, and the weighted average maturity was 4.0 years at June 30, 2023 compared to 0.1 years at December 31, 2022.

The allowance for credit losses increased by $963,000, or 49.61%, to $2.9 million at June 30, 2023 from $1.9 million at December 31, 2022. The increase was primarily due to the initial adjustment from the previous incurred loss model to the current expected credit loss model (CECL) at January 1, 2023. The allowance for credit losses totaled 1.54% of total loans as of June 30, 2023 as compared to 1.13% of total loans as of December 31, 2022. Nonperforming loans totaled $0 as of June 30, 2023 as compared to $52,000 or 0.03%, of total loans as of December 31, 2022.

Stockholders’ equity was $8.6 million at June 30, 2023, up from $8.0 million at December 31, 2022. Stockholders’ equity increased by $556,000 during the six-months ended June 30, 2023 as a result of a decrease in net unrealized loss of $934,000 on available-for-sale securities due to improved market expectations. The available-for-sale securities are investments in government sponsored mortgage backed securities as well as investments in municipal bonds, which provide cash flow for business purposes. Due to the available sources of liquidity, there is no plan to sell securities at a loss. However, we are actively monitoring the market rates for opportunities to redeploy these investments. The increase in stockholders’ equity was also offset by a $763,000 adjustment to retained earnings from the initial CECL adjustment, dividends of $241,000 and stock awards of $17,000 and the net settlement of stock awards of $10,000. Equity as a percentage of assets decreased to 2.80% at June 30, 2023 compared to 2.86% at December 31, 2022.

The Company did not repurchase any shares during the quarter ended June 30, 2023 pursuant to the Company’s stock repurchase program. At June 30, 2023, 25,578 shares of common stock remain available for future repurchase by the Company through the stock repurchase program.

Founded in 1890, Mutual Savings Bank is a full-service financial institution based in Johnson County, Indiana. In addition to its main office at 80 East Jefferson Street, Franklin, Indiana, the Bank operates branches in Franklin at 1124 North Main Street, Trafalgar and Greenwood, Indiana.

This press release contains certain forward-looking statements that are based on assumptions and may describe future plans, strategies and expectations of the Company. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include words like “believe,” “expect,” “anticipate,” “estimate” and “intend” or future or conditional verbs such as “will,” “would,” “should,” “could” or “may.” Certain factors that could cause actual results to differ materially from expected results include inflation, changes in the interest rate environment, changes in general economic conditions, the COVID-19 pandemic, legislative and regulatory changes that adversely affect the business of the Company and the Bank, and changes in the securities markets. Except as required by law, the Company does not undertake any obligation to update any forward-looking statements to reflect changes in belief, expectations or events.

Condensed Consolidated Statements of Income
(Unaudited)
In thousands, except per share data
 
Three Months Ended Six Months Ended

June 30,

March 31,

June 30,

June 30,

June 30,

2023

2023

2022

2023

2022

Selected Consolidated Earnings Data:
Total Interest Income

$

3,380

$

3,064

$

2,248

$

6,444

$

4,199

Total Interest Expense

 

1,365

 

1,029

 

288

 

2,394

 

490

Net Interest Income

 

2,015

 

2,035

 

1,960

 

4,050

 

3,709

Provision for Losses on Loans

 

146

 

30

 

-

 

176

 

-

Net Interest Income after Provision for Losses on Loans

 

1,869

 

2,005

 

1,960

 

3,874

 

3,709

Non-Interest Income

 

315

 

292

 

569

 

607

 

1,061

Non-Interest Expense

 

2,069

 

1,997

 

1,907

 

4,066

 

3,763

Income Tax Expense

 

(60)

 

(19)

 

48

 

(79)

 

66

Net Income

$

175

$

319

$

574

$

494

$

941

 
Earnings Per Share - basic

$

0.15

$

0.27

$

0.50

$

0.42

$

0.81

Earnings Per Share - diluted

$

0.15

$

0.27

$

0.49

$

0.42

$

0.81

Condensed Consolidated Balance Sheet
(Unaudited)
In thousands, except per share data
 

June 30,

December 31,

June 30,

2023

2022

2022

Selected Consolidated Balance Sheet Data:
Assets
Cash and Due from Banks

$

16,019

$

3,747

$

6,849

Investment Securities, Available-for-Sale, at Fair Value

 

80,848

 

85,571

 

85,353

Investment Securities, Held-to-Maturity

 

2,950

 

3,000

 

-

Loans Held-for-Sale

 

-

 

-

 

237

Loans Held-for-Investment

 

188,319

 

171,619

 

166,117

Allowance for Credit Losses

 

2,904

 

1,941

 

1,879

Net Loans

 

185,415

 

169,678

 

164,475

Accrued Interest Receivable

 

1,347

 

1,370

 

617

Other Assets

 

19,619

 

17,130

 

15,428

Total Assets

$

306,198

$

280,496

$

272,722

 
Liabilities
Noninterest-Bearing Deposits

$

43,167

$

44,631

$

44,662

Interest-Bearing Deposits

 

194,502

 

195,518

 

191,583

Total Deposits

 

237,669

 

240,149

 

236,245

FHLB Advances

 

49,500

 

21,845

 

17,486

Subordinated Notes, Net of Issuances Costs

 

9,744

 

9,731

 

9,717

Accrued Interest Payable

 

445

 

231

 

190

Accrued Expenses and Other Liabilities

 

261

 

517

 

408

Total Liabilities

 

297,619

 

272,473

 

264,046

Stockholders' Equity
Common Stock

 

11,457

 

11,440

 

11,424

Retained Earnings

 

10,124

 

10,519

 

9,690

Accumulated Other Comprehensive Income/(Loss)

 

(13,002)

 

(13,936)

 

(12,438)

Total Stockholders' Equity

 

8,579

 

8,023

 

8,676

Total Liabilities and Stockholders' Equity

$

306,198

$

280,496

$

272,722

Three Months Ended Six Months Ended
dollar figures are in thousands, except per share data

June 30,

March 31,

June 30,

June 30,

June 30,

2023

2023

2022

2023

2022

Selected Financial Ratios and Other Data (Unaudited):
Interest Rate Spread During Period

 

2.46%

 

2.50%

 

2.80%

 

2.50%

 

2.77%

Net Yield on Interest-Earning Assets

 

4.72%

 

4.31%

 

3.35%

 

4.55%

 

3.26%

Non-Interest Expense, Annualized, to Average Assets

 

2.81%

 

3.03%

 

2.81%

 

2.84%

 

2.86%

Return on Average Assets, Annualized

 

0.24%

 

0.48%

 

0.85%

 

0.34%

 

0.72%

Return on Average Equity, Annualized

 

8.49%

 

15.53%

 

11.31%

 

11.17%

 

9.09%

Average Equity to Assets

 

2.80%

 

3.11%

 

7.48%

 

3.08%

 

7.86%

 
Average Loans

$

186,542

$

178,599

$

160,977

$

182,593

$

153,721

Average Securities

 

84,335

 

86,497

 

98,897

 

86,855

 

93,195

Average Other Interest-Earning Assets

 

15,743

 

18,970

 

8,263

 

13,872

 

10,755

Total Average Interest-Earning Assets

 

286,620

 

284,066

 

268,137

 

283,320

 

257,671

Average Total Assets

 

294,192

 

264,016

 

271,358

 

286,660

 

263,206

 
Average Noninterest-Bearing Deposits

$

43,472

$

43,442

$

41,023

$

43,457

$

42,448

Average Interest-Bearing Deposits

 

191,787

 

198,726

 

193,410

 

195,237

 

186,218

Average Total Deposits

 

235,259

 

242,168

 

234,433

 

238,694

 

228,666

Average Wholesale Funding

 

49,693

 

27,964

 

16,068

 

38,755

 

12,639

Average Interest-Bearing Liabilities

 

241,480

 

226,690

 

209,478

 

233,992

 

198,857

 
Average Interest-Earnings Assets to Average Interest-Bearings Liabilities

 

118.69%

 

125.31%

 

128.00%

 

121.08%

 

129.58%

Non-Performing Loans to Total Loans

 

0.00%

 

0.00%

 

0.03%

 

0.00%

 

0.03%

Allowance for Credit Losses to Total Loans Outstanding

 

1.54%

 

1.53%

 

1.13%

 

1.54%

 

1.13%

Allowance for Credit Losses to Non-Performing Loans

 

-

 

-

 

4084.78%

 

-

 

4084.78%

Net Loan Chargeoffs/(Recoveries) to Average Total Loans Outstanding

 

0.00%

 

0.00%

 

0.00%

 

0.00%

 

0.00%

Effective Income Tax Rate

 

-52.17%

 

-6.33%

 

7.72%

 

-19.04%

 

6.55%

Tangible Book Value Per Share

$

7.21

$

7.30

$

7.43

$

7.21

$

7.53

Market Closing Price at the End of Quarter

$

7.55

$

9.30

$

13.92

$

7.55

$

13.92

Price-to-Tangible Book Value

 

104.68%

 

127.44%

 

187.42%

 

104.68%

 

184.76%

 

Contacts

David A. Coffey, President and CEO

Ryan W. Cook, Senior Vice President and CFO

Tel. 317-736-7151 Fax 317-736-1726

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