Third Century Bancorp Releases Earnings for Quarter Ended and Year Ended December 31, 2017; Announces Quarterly Dividend

FRANKLIN, Ind.--()--Third Century Bancorp (“Company”) (OTCPINK:TDCB), the holding company for Mutual Savings Bank (“Bank”) announced it had net income of $1,000 for the quarter ended December 31, 2017, or $0.01 per basic and diluted share, compared to net income of $226,000 for the quarter ended December 31, 2016, or $0.18 per basic and diluted share. The decline in net income for the fourth quarter 2017 compared to the same period in 2016 was primarily driven by a $173,000 income tax charge 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 will lower the Company’s provision for federal income taxes 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, 2017, the Company recorded net income of $560,000, or $0.47 per basic and diluted share, compared to net income of $691,000 for the year ended December 31, 2016, or $0.55 per basic and diluted share. The decrease in net income for 2017 as compared to 2016 was primarily due to the $173,000 income tax charge related to the revaluation of the Company's deferred tax assets described above.

For the quarter ended December 31, 2017, net income decreased $225,000, or 99.56%, to $1,000 as compared to $226,000 for the same period in the prior year. The decrease in net income for the three-month period ended December 31, 2017 was primarily a result of the $173,000 income tax charge related to the revaluation of the Company's deferred tax assets. Offsetting this one-time non-recurring charge was a $155,000, or 14.29%, increase in net interest income, which was achieved through an increase in interest income of $209,000, or 17.27%, partially offset by a $54,000, or 43.05%, 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.

The increase in net interest income for the quarter ended December 31, 2017 was partially offset by a $26,000 increase in provision for loan losses compared to the same period in 2016 due to higher levels of loan growth.

The decrease in net income for the three month period ended December 31, 2017 was also impacted by a $64,000 decrease in noninterest income, a $168,000 increase in noninterest expense and a $122,000 increase 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, 2017 as compared to the prior year period. The increase in noninterest expense for the quarter ended December 31, 2017 compared to the same period in the prior year was primarily due to increases in wages and benefits as well as a write down related to a property that the Company holds for sale. The increase in income tax expense was due to the income tax charge related to the revaluation of the Company's deferred tax assets that took place in the quarter ended December 31, 2017 as compared to the same period in the prior year.

For the year ended December 31, 2017, net income decreased $131,000, or 19.00%, to $560,000 from $691,000 for the year ended December 31, 2016. The increase in net income for the year ended December 31, 2017 was primarily due to an increase in net interest income of $658,000, or 14.79%, to $5.0 million from $4.4 million for the year ended December 31, 2016. The increase in net interest income for the year ended December 31, 2017 was due to a $708,000, or 14.43%, increase in interest income partially offset by a $140,000, or 30.63%, 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.

The increase in net interest income for the year ended December 31, 2017 was partially offset by a $116,000 increase in the provision for loan losses compared to 2016. The increase in provision for loan losses was primarily driven by credit quality factors, including net loan charge-offs of $267,000 during the year ended December 31, 2017 compared to net loan recoveries of $3,000 for 2016.

The increase in net income for the year ended December 31, 2017 was also impacted by a $105,000 decrease in noninterest income, a $291,000 increase in noninterest expense and a $187,000 increase 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 year ended December 31, 2017 as compared to the prior year. The increase in noninterest expense for the year ended December 31, 2017 compared to the prior year was primarily due to increases in wages and benefits. The increase in income tax expense was due to the income tax charge related to the revaluation of the Company's deferred tax assets, as well as an increase in income before income tax for the year ended December 31, 2017 as compared to the prior year.

Total assets increased $15.1 million to $151.0 million at December 31, 2017 from $135.9 million at December 31, 2016, an increase of 11.04%. The increase was primarily due to a $9.6 million, or 8.73%, increase in net loans, primarily funded by a $14.9 million, or 15.25%, increase in total deposits. At December 31, 2017, the weighted average rate of all Federal Home Loan Bank advances was 1.44% compared to 1.35% at December 31, 2016, and the weighted average maturity was 4.3 years at December 31, 2017 compared to 3.5 years at December 31, 2016.

The allowance for loan losses decreased by $145,000, or 11.63%, to $1.1 million at December 31, 2017 compared to $1.2 million at December 31, 2016. The decline was due to net loan charge-offs of $267,000, partially offset by the provision for loan losses of $122,000 during the year ended December 31, 2017. The allowance for loan losses totaled 103.37% of non-performing loans and 0.91% of total loans as of December 31, 2017. Nonperforming loans totaled $1,066,000 or 0.88% of total loans as of December 31, 2017.

Stockholders’ equity was $15.9 million at December 31, 2017, up from $15.8 million at December 31, 2016. Stockholders’ equity increased by $99,000 during the year ended December 31, 2017 with net income of $560,000, partially offset by the repurchase of 17,202 shares of common stock at a total cost of $211,000 and cash dividends paid of $249,000. Equity as a percentage of assets decreased to 10.52% at December 31, 2017 compared to 11.61% at December 31, 2016.

On February 22, 2018 the Board of Directors declared a dividend of $0.06 per share for shareholders of record on March 15, 2018. The dividend payable date is April 2, 2018.

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,

2017

2016

Selected Consolidated Financial Condition Data: (Dollars in thousands, except per share data)

Total Assets

$ 150,988 $ 135,932
Loans receivable-net of allowance for loan losses of $1,102 and $1,247 119,311 109,731
Loans held for sale 76 143
Cash and cash equivalents 8,319 6,421
Interest-earning time deposits in other banks 1,984 2,728
Investment securities 13,544 8,945
Deposits 113,300 98,303
FHLB advances and other borrowings 21,500 21,500
Interest payable and other liabilities 303 343
Stockholders’ equity-net 15,885 15,786
 
Equity to assets ratio at year end 10.52 % 11.61 %
Non-performing loans to total loans 0.89 0.41

Allowance for loan losses to total loans outstanding

0.91 1.12
Allowance for loan losses to non-performing loans 103.37 273.72
Number of full service offices 5 5
Tangible book value per share $ 13.46 $ 13.02
Market closing price at end of quarter $ 12.80 $ 11.09
Price-to-tangible book value 95.10 % 85.18 %
 
   
For the Three Months Ended December 31,

2017

2016

(Dollars In Thousands, Except Share Data)

Selected Consolidated Earnings Data:
Total interest income $ 1,419 $ 1,210
Total interest expense   179     125  
Net interest income 1,240 1,085
Provision for losses on loans   30     4  

Net interest income after provision for losses on loans

1,210 1,081
Noninterest income 331 395
Noninterest expense 1,308 1,140
Income tax expense   232     110  
Net income $ 1   $ 226  
Earnings per basic and diluted share $ 0.00 $ 0.18
 
Selected Financial Ratios and Other Data:
Interest rate spread during period 3.37 % 3.38 %
Net yield on interest-earning assets 3.90 3.52
Noninterest expense, annualized, to average assets 3.43 3.28
Return on average assets 0.00 0.40
Return on average equity 0.03 3.26
Average equity to assets 10.48 12.53

Average interest-earning assets to average interest-bearing liabilities

 

109.78 138.78

Net loan chargeoffs/(recoveries) to average total loans outstanding

0.00 (0.00 )

Effective income tax rate

28.27 32.82
 
   
For the Years Ended December 31,

2017

2016

(Dollars in thousands, except per share data)
Selected Consolidated Earnings Data:
Total interest and dividend income $ 5,615 $ 4,907
Total interest expense   597     457  
Net interest income 5,018 4,450
Provision for losses on loans   122     6  

Net interest income after provision for losses on loans

4,896 4,444
Noninterest income 824 929
Noninterest expense 4,663 4,372
Income tax expense   497     310  

Net income

  560     691  
Earnings per share basic $ 0.47 $ 0.55
Earnings per share diluted $ 0.47 $ 0.55
 
Selected Financial Ratios and Other Data:
Interest rate spread during year 3.58 % 3.39 %
Net yield on interest-earning assets 4.04 3.52
Noninterest expense to average assets 3.30 3.29
Return on average assets 0.39 0.40
Return on average equity 3.52 3.64
Average equity to average assets 11.00 12.44

Average interest-earning assets to average interest-bearing liabilities

110.07 138.46

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

0.23 0.00
Effective income tax rate 31.35 30.97
 

Contacts

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

Contacts

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