Third Century Bancorp Releases Earnings for the Quarter and Year Ended December 31, 2023

(OTCPINK: TDCB) - Third Century Bancorp (“Company”), the holding company for Mutual Savings Bank (“Bank”), announced it recorded unaudited net income of $252,000 for the quarter ended December 31, 2023, or $0.22 per basic and diluted share, compared to net income of $536,000 for the quarter ended December 31, 2022, or $0.46 per basic diluted share. In addition, the Company recorded net income of $1,018,000 for the year ended December 31, 2023, or $0.88 per basic and diluted share, compared to net income of $2,116,000 for the year ended December 31, 2022, or $1.83 per basic and $1.82 per diluted share.

“Two primary factors impacted our earnings for the year. First, higher funding costs. Due to the movement in the Fed Funds rate and market competitive deposit rates, the costs of funding our quality loan growth was significant. Second, due to higher residential mortgage loan interest rates, our non-interest income continued to run below our desired levels. Higher rates led to low levels of residential loan originations causing residential loan sales on the secondary market to be non-existent. Our loan quality remains strong as we had no non-performing loans at December 31, 2023 ,” stated David A. Coffey, President and CEO. Coffey continued, “As we move into 2024, we are focusing on our strength of building quality broad relationships with our customers to help us shift our funding mix back to a retail funding mix. In addition, we will continue to focus on finding ways to be a more efficient financial institution.” Coffey concluded, “We have a talented team and are focused on providing quality banking products and services to our customers. In 2024, we will strive to find ways to make our stockholders, customers, and community proud of our performance.”

For the quarter ended December 31, 2023, net income decreased $284,000, or 52.99%, to $252,000 as compared to $536,000 for the same period in the prior year. The decrease in net income for the three-month period ended December 31, 2023 was driven primarily as a result of the $280,000, or 12.52% decline in net interest income. Net interest income decreased due to an increase in total interest expense of $1,027,000, or 151.03%, to $1,707,000 for the three-month period ended December 31, 2023 as compared to $680,000 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 increase in total interest expense was an increase in total interest income of $747,000, or 25.62% to $3,663,000 for the three-month period ended December 31, 2023 compared to $2,916,000 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 $107,000, or 6.0%, to $1,889,000 for the quarter ended December 31, 2023 as compared to $1,782,000 for the same period in the prior year. Non-interest income increased by $26,000, or 15.95%, to $189,000 for the quarter ended December 31, 2023 as compared to $163,000 for the same period in the prior year. The increase in non-interest expense occurred due to a combination of higher fraud expenses and increased fees for deposit insurance.

For the year ended December 31, 2023, net income decreased $1,098,000, or 51.89%, to $1,018,000 as compared to $2,116,000 for the year ended December 31, 2022. The decrease in net income for the year ended December 31, 2023, was driven primarily by the decline in net interest income as a result of an increase in non-interest expense. Net interest income decreased by $461,000, or 5.47%, to $7,970,000 for the year ended December 31, 2023, as compared to $8,431,000 for the prior year. Net interest income decreased due to an increase in total interest expense of $4,079,000, or 262.82%, to $5,631,000 for the year ended December 31, 2023, as compared to $1,552,000 for 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 increase in total interest expense was an increase in total interest income of $3,618,000, or 36.24%, to $13,601,000 for the year ended December 31, 2023 as compared to $9,983,000 for 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 as compared to 2022. Non-interest income decreased by $145,000, or 11.27%, to $1,142,000 for the year ended December 31, 2023 as compared to $1,287,000 for 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 $612,000, or 8.32%, to $7,965,000 for the year ended December 31, 2023 as compared to $7,353,000 for the prior year. The increase in non-interest expenses was primarily driven by increases in personnel and data processing expenses, which increased by $147,000 or 3.46% and $119,000 or 18.62% respectively, compared to the prior year.

The allowance for credit losses increased by $1,081,000, or 55.68%, to $3.0 million 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 1.51% of total loans as of December 31, 2023, compared to 1.13% of total loans as of December 31, 2022. Nonperforming loans totaled $0 as of December 31, 2023 as compared to $52,000 or 0.03% of total loans as of the end of December 31, 2022.

Total assets increased $32.4 million to $312.9 million at December 31, 2023 from $280.5 million at December 31, 2022, an increase of 11.6%. The increase was primarily due to a $25.1 million, or 14.6%, increase in loans held-for-investment to $196.7 million at December 31, 2023, primarily funded by a $24.6 million, or 112.8%, increase in FHLB advances. Total deposits were $246.1 million at December 31, 2023, up from $240.1 million as of December 31, 2022. At December 31, 2023, the weighted average rate of all FHLB advances was 3.73% compared to 4.29% at December 31, 2022, and the weighted average maturity was 3.6 years at December 31, 2023 compared to 0.1 years at December 31, 2022.

Stockholders’ equity was $9.5 million at December 31, 2023, up from $6.0 million at September 30, 2023 and $8.0 million at December 31, 2022. Stockholders’ equity increased largely due to a decrease in net unrealized loss of $1,626,000 during the year ended December 31, 2023 as a result of the increase in the fair value of our available- for-sale-securities due to the temporary improvement in the forward rate curve compared to our portfolio at year end. 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 $808,000 adjustment to retained earnings for the CECL adjustment, net income of $1,018,000, dividends of $416,000, stock repurchases of $20,000 and the net settlement of stock awards of $10,000. Average equity as a percentage of assets decreased to 2.74% at December 31, 2023 compared to 3.33% 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.

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