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

(OTCPINK: TDCB) – Third Century Bancorp (“Company”), the holding company for Mutual Savings Bank (“Bank”), announced it recorded net income of $271,000 for the quarter ended September 30, 2023, or $0.23 per basic and diluted share, compared to net income of $639,000 for the quarter ended September 30, 2022, or $0.55 per basic and $0.54 per diluted share.

“Community banking is seeing some of the most challenging times in years. Regulatory and competitive pressures, particularly for deposits, have characterized the banking landscape. The impact of these challenging times is reflected in our current earnings report,” stated David A. Coffey, President and CEO. Coffey continued, “A primary issue all community banks continue to face is the rising interest rate environment. This created challenges early in the year and they remain today as our cost of funds has continued to squeeze our net interest margin.” Coffey noted, “Due to the decline of 1-4 family residential mortgage loan sales and its related impact on our non-interest income, we are continuing to focus on providing our services in more efficient ways. Our new Stones Crossing branch is an example of such thinking. Efficient staffing levels and technology that helps us offer leading edge banking to our customers.” Coffey concluded, “As we move into the final quarter of 2023, we will continue to find ways to become a more efficient bank without sacrificing our service levels our customers have come to expect.”

For the quarter ended September 30, 2023, net income decreased $368,000, or 57.59%, to $271,000 as compared to $639,000 for the same period in the prior year. The decrease in net income for the three-month period ended September 30, 2023 was driven primarily as a result of the $202,000, or 11.17% increase in non-interest expense and the $161,000, or 7.58% decline in net interest income. Net interest income decreased due to an increase in total interest expense of $1,147,000, or 300.26%, to $1,529,000 for the three-month period ended September 30, 2023 as compared to $382,000 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 decline in net interest income was an increase in total interest income of 39.35% to $3,492,000 for the three-month period ended September 30, 2023 compared to $2,506,000 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 $202,000, or 11.17%, to $2,010,000 for the quarter ended September 30, 2023 as compared to $1,808,000 for the same period in the prior year. Non-interest income decreased by $79,000, or 18.59%, to $346,000 for the quarter ended September 30, 2023 as compared to $425,000 for the same period in the prior year. The increase in non-interest expense occurred due to a combination of higher personnel expenses and increased fees for services from vendors. Non-interest income reductions, over the prior year period, were due to lower levels of 1-4 family loan origination service fees from sales to the secondary market.

For the nine-months ended September 30, 2023, net income decreased $814,000, or 51.52%, to $766,000 as compared to $1,580,000 for the nine-months ended September 30, 2022. The decrease in net income for the nine-month period ended September 30, 2023 was driven primarily as a result of an increase in non-interest expense and the decline in net interest income. Net interest income decreased by $280,000, or 4.80%, to $5,553,000 for the nine months ended September 30, 2023, as compared to $5,833,000 for the same period in the prior year. Net interest income decreased due to an increase in total interest expense of $3,052,000, or 350.00%, to $3,924,000 for the nine-months ended September 30, 2023, as compared to $872,000 for the same period in 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 decline in net interest income was an increase in total interest income of $2,772,000, or 41.34%, to $9,477,000 for the nine-months ended September 30, 2023 as compared to $6,705,000 for the same period of 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 than 2022. Non-interest income decreased by $72,000, or 4.85%, to $1,414,000 for the nine-months ended September 30, 2023 as compared to $1,486,000 for the same period of 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 $505,000, or 9.06%, to $6,076,000 for the nine-months ended September 30, 2023 as compared to $5,571,000 for the same period of the prior year. The increase in non-interest expenses was primarily driven by increases in personnel expense. Personnel-related expenses increased by $277,000, or 8.25%, compared to the same period the prior year.

The allowance for credit losses increased by $1,006,000, or 51.83%, 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 1.54% of total loans as of September 30, 2023, compared to 1.13% of total loans as of December 31, 2022. Nonperforming loans totaled $0 as of September 30, 2023 as compared to $52,000 or 0.03% of total loans as of the end of December 31, 2022.

Total assets increased $18.8 million to $299.3 million at September 30, 2023 from $280.5 million at December 31, 2022, an increase of 6.7%. The increase was primarily due to a $20.3 million, or 11.9%, increase in loans held-for-investment to $192.0 million at September 30, 2023, primarily funded by a $29.7 million, or 135.8%, increase in FHLB Advances. Total deposits were $230.5 million at September 30, 2023, down from $240.1 million as of December 31, 2022. At September 30, 2023, the weighted average rate of all FHLB advances was 3.76% compared to 4.29% at December 31, 2022, and the weighted average maturity was 3.5 years at September 30, 2023 compared to 0.1 years at December 31, 2022.

Stockholders’ equity was $6.0 million at September 30, 2023, down from $8.6 million at June 30, 2023, and down from $8.0 million at December 31, 2022. Stockholders’ equity decreased largely due to an increase in net unrealized loss of $1,600,000 during the nine-months ended September 30, 2023 as a result of the decrease in the fair value of our available-for-sale- securities due to the increase in market interest rates. 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 $736,000 adjustment to retained earnings for the CECL adjustment, dividends of $116,000, stock repurchases of $20,000 and the net settlement of stock awards of $10,000. Average equity as a percentage of assets decreased to 2.73% at September 30, 2023 compared to 2.86% 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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