FRANKLIN, Ind., November 02, 2023--(BUSINESS WIRE)--(OTCPINK: TDCB) – Third Century Bancorp ("Company"), the holding company for Mutual Savings Bank ("Bank"), announced it recorded net income of $271,000 for the quarter ended September 30, 2023, or $0.23 per basic and diluted share, compared to net income of $639,000 for the quarter ended September 30, 2022, or $0.55 per basic and $0.54 per diluted share.
"Community banking is seeing some of the most challenging times in years. Regulatory and competitive pressures, particularly for deposits, have characterized the banking landscape. The impact of these challenging times is reflected in our current earnings report," stated David A. Coffey, President and CEO. Coffey continued, "A primary issue all community banks continue to face is the rising interest rate environment. This created challenges early in the year and they remain today as our cost of funds has continued to squeeze our net interest margin." Coffey noted, "Due to the decline of 1-4 family residential mortgage loan sales and its related impact on our non-interest income, we are continuing to focus on providing our services in more efficient ways. Our new Stones Crossing branch is an example of such thinking. Efficient staffing levels and technology that helps us offer leading edge banking to our customers." Coffey concluded, "As we move into the final quarter of 2023, we will continue to find ways to become a more efficient bank without sacrificing our service levels our customers have come to expect."
For the quarter ended September 30, 2023, net income decreased $368,000, or 57.59%, to $271,000 as compared to $639,000 for the same period in the prior year. The decrease in net income for the three-month period ended September 30, 2023 was driven primarily as a result of the $202,000, or 11.17% increase in non-interest expense and the $161,000, or 7.58% decline in net interest income. Net interest income decreased due to an increase in total interest expense of $1,147,000, or 300.26%, to $1,529,000 for the three-month period ended September 30, 2023 as compared to $382,000 for the same period for the prior year. The increase in total interest expense was due to the increase in funding costs of both retail deposits and wholesale funding. Offsetting the decline in net interest income was an increase in total interest income of 39.35% to $3,492,000 for the three-month period ended September 30, 2023 compared to $2,506,000 for the same period for the prior year. The increase in total interest income was the result of higher average yields on interest earning assets and higher average loan balances. Non-interest expense increased by $202,000, or 11.17%, to $2,010,000 for the quarter ended September 30, 2023 as compared to $1,808,000 for the same period in the prior year. Non-interest income decreased by $79,000, or 18.59%, to $346,000 for the quarter ended September 30, 2023 as compared to $425,000 for the same period in the prior year. The increase in non-interest expense occurred due to a combination of higher personnel expenses and increased fees for services from vendors. Non-interest income reductions, over the prior year period, were due to lower levels of 1-4 family loan origination service fees from sales to the secondary market.
For the nine-months ended September 30, 2023, net income decreased $814,000, or 51.52%, to $766,000 as compared to $1,580,000 for the nine-months ended September 30, 2022. The decrease in net income for the nine-month period ended September 30, 2023 was driven primarily as a result of an increase in non-interest expense and the decline in net interest income. Net interest income decreased by $280,000, or 4.80%, to $5,553,000 for the nine months ended September 30, 2023, as compared to $5,833,000 for the same period in the prior year. Net interest income decreased due to an increase in total interest expense of $3,052,000, or 350.00%, to $3,924,000 for the nine-months ended September 30, 2023, as compared to $872,000 for the same period in the prior year. The increase in total interest expense was largely due to the increased costs of retaining retail deposits and higher balances of wholesale funding. Offsetting the decline in net interest income was an increase in total interest income of $2,772,000, or 41.34%, to $9,477,000 for the nine-months ended September 30, 2023 as compared to $6,705,000 for the same period of the prior year. The increase in the total interest income was due to the increased levels of average loans with higher average loan yields in 2023 than 2022. Non-interest income decreased by $72,000, or 4.85%, to $1,414,000 for the nine-months ended September 30, 2023 as compared to $1,486,000 for the same period of the prior year. The decrease was largely due to decreases in 1-4 family loan sales on the secondary market. Non-interest expense increased by $505,000, or 9.06%, to $6,076,000 for the nine-months ended September 30, 2023 as compared to $5,571,000 for the same period of the prior year. The increase in non-interest expenses was primarily driven by increases in personnel expense. Personnel-related expenses increased by $277,000, or 8.25%, compared to the same period the prior year.
The allowance for credit losses increased by $1,006,000, or 51.83%, from December 31, 2022. The increase was due to the transition from the incurred loss methodology model to the current expected credit loss (CECL) model. The allowance for credit losses totaled 1.54% of total loans as of September 30, 2023, compared to 1.13% of total loans as of December 31, 2022. Nonperforming loans totaled $0 as of September 30, 2023 as compared to $52,000 or 0.03% of total loans as of the end of December 31, 2022.
Total assets increased $18.8 million to $299.3 million at September 30, 2023 from $280.5 million at December 31, 2022, an increase of 6.7%. The increase was primarily due to a $20.3 million, or 11.9%, increase in loans held-for-investment to $192.0 million at September 30, 2023, primarily funded by a $29.7 million, or 135.8%, increase in FHLB Advances. Total deposits were $230.5 million at September 30, 2023, down from $240.1 million as of December 31, 2022. At September 30, 2023, the weighted average rate of all FHLB advances was 3.76% compared to 4.29% at December 31, 2022, and the weighted average maturity was 3.5 years at September 30, 2023 compared to 0.1 years at December 31, 2022.
Stockholders’ equity was $6.0 million at September 30, 2023, down from $8.6 million at June 30, 2023, and down from $8.0 million at December 31, 2022. Stockholders’ equity decreased largely due to an increase in net unrealized loss of $1,600,000 during the nine-months ended September 30, 2023 as a result of the decrease in the fair value of our available-for-sale- securities due to the increase in market interest rates. The available-for-sale securities are investments in government sponsored mortgage-backed securities as well as investments in municipal bonds, which provided cash flow for business purposes. Stockholders’ equity was also affected by the $736,000 adjustment to retained earnings for the CECL adjustment, dividends of $116,000, stock repurchases of $20,000 and the net settlement of stock awards of $10,000. Average equity as a percentage of assets decreased to 2.73% at September 30, 2023 compared to 2.86% at December 31, 2022.
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
Nine Months Ended
Sept 30,
June 30,
Sept 30,
Sept 30,
Sept 30,
2023
2023
2022
2023
2022
Selected Consolidated Earnings Data:
Total Interest Income
$
3,492
$
3,380
$
2,506
$
9,477
$
6,705
Total Interest Expense
1,529
1,365
382
3,924
872
Net Interest Income
1,963
2,015
2,124
5,553
5,833
Provision for Losses on Loans
35
146
30
211
30
Net Interest Income after Provision for Losses on Loans
1,928
1,869
2,094
5,342
5,803
Non-Interest Income
346
315
425
1,414
1,486
Non-Interest Expense
2,010
2,069
1,808
6,076
5,571
Income Tax Expense
(7
)
(60
)
72
(86
)
138
Net Income
$
271
$
175
$
639
$
766
$
1,580
Earnings Per Share - basic
$
0.23
$
0.15
$
0.55
$
0.66
$
1.34
Earnings Per Share - diluted
$
0.23
$
0.15
$
0.54
$
0.65
$
1.34
Condensed Consolidated Balance Sheet
(Unaudited)
In thousands, except per share data
September 30,
December 31,
September 30,
2023
2022
2022
Selected Consolidated Balance Sheet Data:
Assets
Cash and Due from Banks
$
8,068
$
3,747
$
5,620
Investment Securities, Available-for-Sale, at Fair Value
76,842
85,571
85,043
Investment Securities, Held-to-Maturity
2,950
3,000
-
Loans Held-for-Sale
-
-
232
Loans Held-for-Investment
191,968
171,619
165,201
Allowance for Credit Losses
2,947
1,941
1,909
Net Loans
189,021
169,678
163,524
Accrued Interest Receivable
1,298
1,370
1,066
Other Assets
21,083
17,130
16,819
Total Assets
$
299,262
$
280,496
$
272,072
Liabilities
Noninterest-Bearing Deposits
$
43,003
$
44,631
$
45,313
Interest-Bearing Deposits
187,492
195,518
200,304
Total Deposits
230,495
240,149
245,617
FHLB Advances
51,500
21,845
9,000
Subordinated Notes, Net of Issuances Costs
9,751
9,731
9,724
Accrued Interest Payable
364
231
78
Accrued Expenses and Other Liabilities
1,105
517
509
Total Liabilities
293,215
272,473
264,928
Stockholders' Equity
Common Stock
11,467
11,440
11,432
Retained Earnings
10,143
10,519
10,214
Accumulated Other Comprehensive Income/(Loss)
(15,563
)
(13,936
)
(14,502
)
Total Stockholders' Equity
6,047
8,023
7,144
Total Liabilities and Stockholders' Equity
$
299,262
$
280,496
$
272,072
Three Months Ended
Nine Months Ended
dollar figures are in thousands, except per share data
September 30,
June 30,
September 30,
September 30,
September 30,
2023
2023
2022
2023
2022
Selected Financial Ratios and Other Data (Unaudited):
Interest Rate Spread During Period
2.34
%
2.46
%
3.11
%
3.30
%
2.94
%
Net Yield on Interest-Earning Assets
4.78
%
4.72
%
3.82
%
6.58
%
3.50
%
Non-Interest Expense, Annualized, to Average Assets
2.66
%
2.81
%
2.68
%
4.16
%
2.84
%
Return on Average Assets, Annualized
0.36
%
0.24
%
0.95
%
0.52
%
0.80
%
Return on Average Equity, Annualized
13.15
%
8.52
%
12.59
%
17.33
%
13.33
%
Average Equity to Assets
2.73
%
2.79
%
7.52
%
3.03
%
6.03
%
Average Loans
$
189,897
$
186,542
$
167,005
$
185,054
$
158,198
Average Securities
82,795
84,335
86,080
87,603
87,196
Average Other Interest-Earning Assets
19,314
15,743
9,065
15,610
10,185
Total Average Interest-Earning Assets
292,006
286,620
262,150
288,267
255,579
Average Total Assets
302,142
294,192
269,872
291,877
261,829
Average Noninterest-Bearing Deposits
$
42,464
$
43,472
$
45,329
$
43,122
$
43,419
Average Interest-Bearing Deposits
190,553
191,787
197,642
193,659
190,068
Average Total Deposits
233,017
235,259
242,971
236,781
233,487
Average Wholesale Funding
59,670
49,693
17,937
45,804
17,424
Average Interest-Bearing Liabilities
250,223
241,480
215,579
239,463
207,492
Average Interest-Earnings Assets to Average Interest-Bearings Liabilities
116.70
%
118.69
%
121.60
%
120.38
%
123.18
%
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
%
1.54
%
1.15
%
1.54
%
1.15
%
Allowance for Credit Losses to Non-Performing Loans
-
-
3671.15
%
-
3671.15
%
Net Loan Chargeoffs/(Recoveries) to Average Total Loans Outstanding