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

FRANKLIN, Ind., July 28, 2023--(BUSINESS WIRE)--(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%

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Contacts

David A. Coffey, President and CEO
Ryan W. Cook, Senior Vice President and CFO
Tel. 317-736-7151 Fax 317-736-1726