Third Century Bancorp (“Company”) (OTCPINK: TDCB), the holding company for Mutual Savings Bank (“Bank”) announced it had net income of $297,000 for the quarter ended December 31, 2018, or $0.25 per basic and diluted share, compared to net income of $1,000 for the quarter ended December 31, 2017, or $0.01 per basic and diluted share. The increase in net income for the fourth quarter 2018 compared to the same period in 2017 was primarily driven by a $173,000 income tax charge in 2017 due to the revaluation of the Company's net deferred tax assets required by the Tax Cuts and Jobs Act (“Tax Act”). The Tax Act lowered the corporate tax rate from 34% to 21%, which lowered the Company’s provision for federal income taxes in 2018 and in future years. The Tax Act was signed into law during the fourth quarter of 2017 and generally accepted accounting principles requires that the impact of the provisions of the Tax Act be accounted for in the period of enactment. As such, the Company was required to write down the value of its net deferred tax assets as of December 31, 2017, to reflect the reduction in the corporate tax rate. For the year ended December 31, 2018, the Company recorded net income of $1,019,000, or $0.86 per basic and diluted share, compared to net income of $560,000 for the year ended December 31, 2017, or $0.47 per basic and diluted share. The increase in net income for 2018 as compared to 2017 was primarily due to the $638,000 increase in net interest income.
Mutual Savings Bank President and CEO David A. Coffey stated, “We are very pleased to announce this record level of earnings to our shareholders. Our growth is due to the continued emphasis of providing quality customer service and offering products and services that keep us relevant to our customers and areas we serve. As a community bank, we focus on quality loan and deposit relationships to help our customers achieve their goals. This record year of earnings positions us well as we look into the future and could not have been possible without every member of our team working together.”
For the quarter ended December 31, 2018, net income increased $296,000, or 296.00%, to $297,000 as compared to $1,000 for the same period in the prior year. The increase in net income for the three-month period ended December 31, 2018 was primarily a result of the $173,000 income tax charge related to the revaluation of the Company's deferred tax assets in the same quarter in 2017. Along with this decrease in income tax expense in the fourth quarter of 2018 was a $154,000, or 12.42%, increase in net interest income, which was achieved through an increase in interest income of $249,000, or 17.55%, partially offset by a $95,000, or 53.07%, increase in interest expense in the quarter ended December 31, 2018 as compared to the same quarter in the prior year. 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.
The increase in net interest income for the quarter ended December 31, 2018 was partially offset by a $31,000 increase in provision for loan losses compared to the same period in 2017 due to higher levels of loan growth.
The increase in net income for the three month period ended December 31, 2018 was also impacted by a $37,000 decrease in noninterest income, a $66,000 decrease in noninterest expense and a $144,000 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 December 31, 2018 as compared to the prior year period. The decrease in noninterest expense for the quarter ended December 31, 2018 compared to the same period in the prior year was primarily due to decreases in overhead expenses. Income tax expense also decreased due to a decrease in the effective income tax rate to 22.86% for the quarter ended December 31, 2018 from 28.27% for the same quarter in the prior year as a result of the Tax Act.
For the year ended December 31, 2018, net income increased $459,000, or 81.96%, to $1,019,000 from $560,000 for the year ended December 31, 2017. The increase in net income for the year ended December 31, 2018 was primarily due to an increase in net interest income of $638,000, or 12.71%, to $5.7 million for the year ended December 31, 2018 from $5.0 million for the year ended December 31, 2017. The increase in net interest income for the year ended December 31, 2018 was due to a $951,000, or 16.94%, increase in interest income partially offset by a $313,000, or 52.43%, increase in interest expense as compared to the prior year. 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.
The increase in net interest income for the year ended December 31, 2018 was partially offset by a $121,000 increase in the provision for loan losses compared to 2017. The increase in provision for loan losses was primarily driven by loan growth and credit quality factors, including net loan charge-offs of $7,000 during the year ended December 31, 2018 compared to net loan charge-offs of $267,000 for 2017.
The increase in net income for the year ended December 31, 2018 was also impacted by a $35,000 increase in noninterest income, a $297,000 increase in noninterest expense and a $204,000 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 year ended December 31, 2018 as compared to the prior year. The increase in noninterest expense for the year ended December 31, 2018 compared to the prior year was primarily due to increases in wages and benefits. The decrease in income tax expense was due to the income tax charge related to the revaluation of the Company's deferred tax assets in 2017 and due to a decrease in the effective income tax rate to 22.31% for the year ended December 31, 2018 from 31.35% for the prior year as a result of the Tax Act.
Total assets increased $8.1 million to $159.1 million at December 31, 2018 from $151.0 million at December 31, 2017, an increase of 5.36%. The increase was primarily due to a $9.0 million, or 7.54%, increase in net loans, primarily funded by a $11.4 million, or 10.09%, increase in total deposits. Federal Home Loan advances were $17.5 million at December 31, 2018 as compared to $21.5 million at December 31, 2017. At December 31, 2018, the weighted average rate of all Federal Home Loan Bank advances was 1.55% compared to 1.44% at December 31, 2017, and the weighted average maturity was 4.2 years at December 31, 2018 compared to 4.3 years at December 31, 2017.
The allowance for loan losses increased by $236,000, or 21.38%, to $1.3 million at December 31, 2018 compared to $1.1 million at December 31, 2017. The increase was due to the provision for loan losses of $243,000, and partially offset by net loan charge-offs of $7,000 during the year ended December 31, 2018. The allowance for loan losses totaled 1.03% of total loans as of December 31, 2018. Nonperforming loans totaled $0 or 0.00% of total loans as of December 31, 2018.
Stockholders’ equity was $16.3 million at December 31, 2018, up from $15.9 million at December 31, 2017. Stockholders’ equity increased by $595,000 during the year ended December 31, 2018 as a result of net income of $1,019,000, partially offset by the increase in net unrealized loss of $129,000 of our available-for-sale securities due to the increase in market interest rates and cash dividends paid of $296,000. Equity as a percentage of assets decreased to 10.36% at December 31, 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 Senior Life 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 December 31, | At December 31, | |||||||
2018 | 2017 | |||||||
| Selected Consolidated Financial Condition Data: | (Dollars in thousands, except per share data) | |||||||
| Total Assets | $ | 159,077 | $ | 150,988 | ||||
| Loans receivable-net of allowance for loan losses of $1,338 and $1,102 | 128,311 | 119,311 | ||||||
| Loans held for sale | 838 | 76 | ||||||
| Cash and cash equivalents | 3,055 | 8,319 | ||||||
| Interest-earning time deposits in other banks | 496 | 1,984 | ||||||
| Investment securities | 18,084 | 13,544 | ||||||
| Deposits | 124,740 | 113,300 | ||||||
| FHLB advances and other borrowings | 17,500 | 21,500 | ||||||
| Interest payable and other liabilities | 356 | 303 | ||||||
| Stockholders’ equity-net | 16,480 | 15,885 | ||||||
| Equity to assets ratio at year end | 10.36 | % | 10.52 | % | ||||
| Non-performing loans to total loans | 0.00 | 0.89 | ||||||
Allowance for loan losses to total loans outstanding | 1.03 | 0.91 | ||||||
| Allowance for loan losses to non-performing loans | N/A | 103.37 | ||||||
| Number of full service offices | 5 | 5 | ||||||
| Tangible book value per share | $ | 13.96 | $ | 13.46 | ||||
| Market closing price at end of quarter | $ | 10.75 | $ | 12.80 | ||||
| Price-to-tangible book value | 77.01 | % | 95.10 | % | ||||
For the Three Months Ended December 31, | ||||||||
2018 | 2017 | |||||||
(Dollars In Thousands, except Share Data) | ||||||||
| Selected Consolidated Earnings Data: | ||||||||
| Total interest income | $ | 1,668 | $ | 1,419 | ||||
| Total interest expense | 274 | 179 | ||||||
| Net interest income | 1,394 | 1,240 | ||||||
| Provision for losses on loans | 61 | 30 | ||||||
|
Net interest income after provision for losses
on loans | 1,333 | 1,210 | ||||||
| Noninterest income | 294 | 331 | ||||||
| Noninterest expense | 1,242 | 1,308 | ||||||
| Income tax expense | 88 | 232 | ||||||
| Net income | $ | 297 | $ | 1 | ||||
| Earnings per basic and diluted share | $ | 0.25 | $ | 0.01 | ||||
| Selected Financial Ratios and Other Data: | ||||||||
| Interest rate spread during period | 3.53 | % | 3.37 | % | ||||
| Net yield on interest-earning assets | 4.33 | 3.90 | ||||||
| Noninterest expense, annualized, to average assets | 3.12 | 3.43 | ||||||
| Return on average assets | 0.75 | 0.00 | ||||||
| Return on average equity | 6.29 | 0.03 | ||||||
| Average equity to assets | 10.40 | 10.48 | ||||||
Average interest-earning assets to average interest-bearing liabilities | 109.25 | 109.78 | ||||||
Net loan chargeoffs/(recoveries) to average total loans outstanding | (0.01 | ) | 0.00 | |||||
| Effective income tax rate | 22.86 | 28.27 | ||||||
For the Years Ended December 31, | ||||||||
2018 | 2017 | |||||||
| (Dollars in thousands, except per share data) | ||||||||
| Selected Consolidated Earnings Data: | ||||||||
| Total interest and dividend income | $ | 6,566 | $ | 5,615 | ||||
| Total interest expense | 910 | 597 | ||||||
| Net interest income | 5,656 | 5,018 | ||||||
| Provision for losses on loans | 243 | 122 | ||||||
Net interest income after provision for losses on loans | 5,413 | 4,896 | ||||||
| Noninterest income | 859 | 824 | ||||||
| Noninterest expense | 4,960 | 4,663 | ||||||
| Income tax expense | 293 | 497 | ||||||
| Net income | 1,019 | 560 | ||||||
| Earnings per share basic | $ | 0.86 | $ | 0.47 | ||||
| Earnings per share diluted | $ | 0.86 | $ | 0.47 | ||||
| Selected Financial Ratios and Other Data: | ||||||||
| Interest rate spread during year | 3.61 | % | 3.58 | % | ||||
| Net yield on interest-earning assets | 4.27 | 4.04 | ||||||
| Noninterest expense to average assets | 3.17 | 3.30 | ||||||
| Return on average assets | 0.65 | 0.39 | ||||||
| Return on average equity | 7.21 | 3.52 | ||||||
| Average equity to average assets | 10.36 | 11.00 | ||||||
Average interest-earning assets to average interest-bearing liabilities | 109.52 | 110.07 | ||||||
Net charge-offs/(recoveries) to average total loans outstanding | 0.01 | 0.23 | ||||||
| Effective income tax rate | 22.31 | 31.35 | ||||||
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Contacts:
Ryan Cook, Senior Vice
President and CFO
Tel. 317-736-7151 Fax 317-736-1726
