Third Century Bancorp Announces Record Earnings for Quarter Ended September 30, 2018

FRANKLIN, Ind. –(BUSINESS WIRE)

Third Century Bancorp (“Company”)(OTCPINK:TDCB), the holding company for Mutual Savings Bank (“Bank”) announced a record level of net income of $272,000 for the quarter ended September 30, 2018, or $0.23 per basic and diluted share, compared to net income of $219,000 for the quarter ended September 30, 2017, or $0.19 per basic and diluted share. The improvement in net income was primarily driven by an increase of $151,000 in net interest income. For the nine months ended September 30, 2018, the Company recorded net income of $721,000, or $0.61 per basic and diluted share, compared to net income of $559,000 for the nine months ended September 30, 2017, or $0.47 per basic and diluted share. The improvement in net income for the 2018 nine-month period was primarily due to a $491,000 increase in net interest income.

David A. Coffey, President and CEO said, “This level of earnings is important for our Bank as it reflects the effort from a focused group of bankers, not only striving to provide a fair return to shareholders, but working to help our customers achieve their goals. Equally important is that earnings have been achieved by focusing on solid banking fundamentals.”

For the quarter ended September 30, 2018, net income increased $53,000, or 24.01%, to $272,000 as compared to $219,000 for the same period in the prior year. The increase in net income for the three-month period ended September 30, 2018 was primarily a result of a $151,000 increase in net interest income, which was achieved through an increase in interest income of $233,000, partially offset by a $82,000 increase in interest expense. The increase in interest income was due to an increase in the average yield on interest-earning assets, along with higher average loan balances. The increase in interest expense was primarily due to higher average balances of interest-bearing liabilities and a higher average rate paid on interest-bearing liabilities, primarily deposits due to the rising interest rate environment.

The increase in net interest income for the quarter ended September 30, 2018 was partially offset by a $32,000 increase in provision for loan losses compared to the same period in 2017. The increase in provision for loan losses was primarily driven by growth of the loan portfolio as well as credit quality factors. Changes to the allowance included net loan recoveries of $3,000 during the quarter ended September 30, 2018 compared to no loan charge offs for the same period in 2017.

The increase in net income for the three-month period ended September 30, 2018 was also impacted by a $5,000 decrease in noninterest income, a $94,000 increase in noninterest expense and a $32,000 decrease in income tax expense. The decrease in noninterest income was due to decreases in gains on sales of loans, trust income, and deposit fee and service charge income for the three-month period ended September 30, 2018 as compared to the prior year period. The increase in noninterest expense for the quarter ended September 30, 2018 compared to the same period in the prior year was primarily due to increases in wages and benefits, advertising expenses, data processing expenses, as well as additional loan production expenses. Net income was also benefited by a decrease in tax expense from lower effective tax rates in 2018 as a result of the Tax Cuts and Jobs Act (“Tax Act”) which lowered the corporate federal tax rate from 35% to 21%.

For the nine-month period ended September 30, 2018, net income increased $162,000 or 29.06% to $721,000 from $559,000 for the nine-month period ended September 30, 2017. The increase in net income for the nine-month period ended September 30, 2018 was primarily due to an increase in net interest income of $491,000 or 14.12% to $3,965,000 from $3,475,000 for the nine-month period ended September 30, 2017. The increase in net interest income for the nine-month period ended September 30, 2018 was due to a $711,000 or 18.26% increase in interest income, partially offset by a $220,000 or 52.65% increase in interest expense. The increase in interest income was due to an increase in the average yield on interest-earning assets, along with higher average loan balances. The increase in interest expense was primarily due to higher average balances of interest-bearing liabilities and a higher average rate paid on interest-bearing liabilities, primarily deposits due to the rising interest rate environment.

The increase in net interest income for the nine-months ended September 30, 2018 was partially offset by a $91,000 increase in provision for loan losses compared to the same period in 2017. The increase in provision for loan losses was primarily driven by growth in the loan portfolio and credit quality factors. Changes to the allowance included net loan charge offs of $9,000 during the nine months ended September 30, 2018 compared to net loan charge offs of $258,000 for the same period in 2017.

The increase in net income for the nine-month period ended September 30, 2018 was also impacted by a $40,000 increase in noninterest income, a $338,000 increase in noninterest expense and a $61,000 decrease in income tax expense. The increase in noninterest income was due to increases in gains on sales of loans, trust income, and deposit fee and service charge income for the nine-month period ended September 30, 2018 as compared to the same period in the prior year. The increase in noninterest expense for the nine months ended September 30, 2018 compared to the same period in the prior year was primarily due to increases in wages and benefits, advertising expenses, data processing expenses, as well as additional loan production expenses. Net income was also benefited by decreases in tax expense from lower effective tax rates in 2018 as a result of the Tax Act.

Total assets increased $6.8 million to $157.8 million at September 30, 2018 from $151.0 million at December 31, 2017, an increase of 4.5%. The increase was primarily due to a $9.6 million or 8.1% increase in loans, primarily funded by a $9.1 million or 8.0% increase in total deposits, less a decrease of $3.0 million or 13.9% in FHLB advances. At September 30, 2018, the weighted average rate of all Federal Home Loan Bank advances was 1.58% compared to 1.44% at December 31, 2017, and the weighted average maturity shortened slightly to 4.2 years at September 30, 2018 compared to 4.3 years at December 31, 2017.

The allowance for loan losses increased by $174,000 or 15.79% to $1,276,000 at September 30, 2018 compared to $1,102,000 at December 31, 2017. The increase was the result of provision for loan losses of $183,000 during the nine months ended September 30, 2018 and was partially offset by net loan charge offs of $9,000. The allowance for loan losses totaled 3,269.23% of non-performing loans and 0.98% of total loans as of September 30, 2018. Nonperforming loans totaled $39,000 or 0.03% of total loans as of September 30, 2018.

Stockholders’ equity increased to $16.1 million at September 30, 2018 from $15.9 million at December 31, 2017. Stockholders’ equity increased by $245,000 during the nine-month period ended September 30, 2018 due to net income of $721,000, which was partially offset by cash dividends paid of $212,000 and unrealized losses on available-for-sale securities of $264,000 due to increases in market interest rates. Equity as a percentage of assets decreased to 10.22% at September 30, 2018 compared to 10.52% at December 31, 2017.

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 and the Otterbein Franklin SeniorLife Community, as well as in Nineveh and Trafalgar, 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 changes in the interest rate environment, changes in general economic conditions, 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.

   
Selected Consolidated Financial Data
(unaudited)
 
At September 30, At December 31,

2018

2017

Selected Consolidated Financial Condition Data: (Dollars in thousands, except per share data)
Total Assets $ 157,833 $ 150,988
Loans receivable-net of allowance for loan losses of $1,275 and $1,102 128,932 119,311
Loans held for sale 0 76
Cash and cash equivalents 2,597 8,319
Interest-earning time deposits in other banks 496 1,984
Investment securities 18,772 13,544
Deposits 122,393 113,300
FHLB advances and other borrowings 18,500 21,500
Interest payable and other liabilities 798 303
Stockholders’ equity-net 16,131 15,885
 
Equity to assets ratio at quarter end 10.22 % 10.52 %
Non-performing loans to total loans 0.03 0.89

Allowance for loan losses to total loans outstanding

0.98 0.91
Allowance for loan losses to non-performing loans 3,269.23 103.37
Number of full service offices 5 5
Tangible book value per share $ 13.67 $ 13.46
Market closing price at end of quarter $ 13.75 $ 12.80
Price-to-tangible book value 100.61 % 95.10 %
 
For the Three Months Ended September 30,

2018

2017

(Dollars In Thousands, Except Share Data)
Selected Consolidated Earnings Data:
Total interest income $ 1,620 $ 1,387
Total interest expense   240     159  
Net interest income 1,380 1,229
Provision for losses on loans   61     29  

Net interest income after provision for losses on loans

1,318 1,199
Noninterest income 325 330
Noninterest expense 1,290 1,196
Income tax expense   81     113  
Net income $ 272   $ 219  
Earnings per basic and diluted share $ 0.23 $ 0.19
 
Selected Financial Ratios and Other Data:
Interest rate spread during period 3.54 % 3.51 %
Net yield on interest-earning assets 4.27 4.00
Noninterest expense, annualized, to average assets 3.28 3.34
Return on average assets (annualized) 0.70 0.60
Return on average equity (annualized) 6.69 5.51
Average equity to assets 10.45 10.81

Average interest-earning assets to average interest-bearing liabilities

105.36 109.27

Net charge-offs/(recoveries) to average total loans outstanding

(0.01 ) 0.00
Effective income tax rate 22.88 34.04
 
For the Nine Months Ended September 30,

2018

2017

(Dollars in thousands, except per share data)
Selected Consolidated Earnings Data:
Total interest income $ 4,604 $ 3,893
Total interest expense   639     419  
Net interest income 3,965 3,475
Provision for losses on loans   183     92  

Net interest income after provision for losses on loans

3,783 3,383
Noninterest income 943 903
Noninterest expense 3,799 3,461
Income tax expense   205     266  
Net income $ 721   $ 559  
Earnings per basic and diluted share $ 0.61 $ 0.47
 
Selected Financial Ratios and Other Data:
Interest rate spread during period 3.72 % 3.44 %
Net yield on interest-earning assets 4.31 3.89
Noninterest expense to average assets 3.22 3.34
Return on average assets (annualized) 0.64 0.53
Return on average equity (annualized) 5.98 4.70
Average equity to average assets 10.57 11.19

Average interest-earning assets to average interest-bearing liabilities

109.38 109.55

Net charge-offs/(recoveries) to average total loans outstanding

0.01 0.22
Effective income tax rate 22.14 32.24
 

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

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